-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KHr8rV9RqsouUkxcteieV6cr8xY5K9+7n0SQ6rugHTbDX6k2l0v+1DK+HBpKxDgD undRCGveoaCNVJVEQrQgng== /in/edgar/work/0000950135-00-005057/0000950135-00-005057.txt : 20001115 0000950135-00-005057.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950135-00-005057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLAIRE CORP CENTRAL INDEX KEY: 0001016139 STANDARD INDUSTRIAL CLASSIFICATION: [7372 ] IRS NUMBER: 411812820 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25265 FILM NUMBER: 765371 BUSINESS ADDRESS: STREET 1: ONE ALEWIFE CENTER 3RD FLOOR STREET 2: SUITE 552 CITY: CAMBRIDGE STATE: MA ZIP: 02140 BUSINESS PHONE: 6177612000 MAIL ADDRESS: STREET 1: FOLEY HOAG & ELIOT LLP STREET 2: ONE POST OFFICE SQUARE CITY: BOSTON STATE: MA ZIP: 02109 10-Q 1 b37182ace10-q.txt FORM 10-Q DATED 09/30/00 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NUMBER 0-25265 ------------------------ ALLAIRE CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 41-1830792 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 275 GROVE STREET, NEWTON, MASSACHUSETTS 02466 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(617) 219-2000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
TITLE OF CLASS SHARES OUTSTANDING AT NOVEMBER 13, 2000 -------------- --------------------------------------- Common Stock, $.01 par value.............................. 27,411,078
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ALLAIRE CORPORATION FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 TABLE OF CONTENTS
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet as of September 30, 2000 and December 31, 1999........................................... 3 Consolidated Statement of Operations for the Three and Nine Months Ended September 30, 2000 and 1999.................... 4 Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2000 and 1999........................... 5 Notes to Unaudited Consolidated Financial Statements........ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk........................................................ 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................... 16 Item 6. Exhibits and Reports on Form 8-K............................ 16 Signatures..................................................................... 17 Exhibit Index.................................................................. 18
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ALLAIRE CORPORATION CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED) ASSETS
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ Current assets: Cash and cash equivalents................................. $ 45,091 $106,624 Short-term investments.................................... 77,572 12,405 Investment in marketable securities....................... 2,785 -- Accounts receivable, net of allowance for doubtful accounts and returns of $1,055 and $701 at September 30, 2000 and December 31, 1999, respectively........... 16,395 7,926 Prepaid expenses and other current assets................. 2,469 1,028 -------- -------- Total current assets.............................. 144,312 127,983 Property and equipment, net............................... 17,600 4,948 Goodwill and other intangibles, net....................... 4,731 584 Other assets.............................................. 2,018 25 -------- -------- TOTAL ASSETS...................................... $168,661 $133,540 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of capital lease obligations.............. $ -- $ 159 Current portion of notes payable.......................... 631 488 Accounts payable.......................................... 8,597 3,358 Accrued expenses.......................................... 16,306 8,536 Accrued employee compensation and benefits................ 7,499 6,591 Deferred revenue.......................................... 28,963 11,937 -------- -------- Total current liabilities......................... 61,996 31,069 Notes payable............................................... 45 547 -------- -------- TOTAL LIABILITIES................................. 62,041 31,616 -------- -------- Stockholders' equity: Preferred stock, $.01 par value; Authorized: 5,000,000 shares at September 30, 2000 and December 31, 1999..... -- -- Common stock, $.01 par value; Authorized: 100,000,000 shares at September 30, 2000 and 35,000,000 shares at December 31, 1999 Issued and outstanding: 27,433,376 shares issued and 27,400,156 shares outstanding at September 30, 2000 and 26,849,532 issued and 26,816,312 outstanding at December 31, 1999...................................... 274 268 Additional paid-in capital................................ 142,659 139,050 Accumulated deficit....................................... (38,647) (36,746) Unrealized gain on marketable securities.................. 2,784 -- Deferred compensation..................................... (440) (638) Stock subscriptions receivable............................ (10) (10) -------- -------- Total stockholders' equity........................ 106,620 101,924 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $168,661 $133,540 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 3 4 ALLAIRE CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 2000 1999 2000 1999 ------- ------- ------- ------- REVENUE: Software license fees.......................... $23,038 $12,252 $73,844 $29,976 Services....................................... 6,279 2,813 15,398 6,861 ------- ------- ------- ------- Total revenue............................. 29,317 15,065 89,242 36,837 ------- ------- ------- ------- COST OF REVENUE: Software license fees.......................... 1,199 668 3,719 1,771 Services....................................... 6,041 2,040 15,398 5,340 ------- ------- ------- ------- Total cost of revenue..................... 7,240 2,708 19,117 7,111 ------- ------- ------- ------- GROSS PROFIT........................................ 22,077 12,357 70,125 29,726 ------- ------- ------- ------- OPERATING EXPENSES: Research and development....................... 7,296 3,367 17,180 8,731 Sales and marketing............................ 17,255 8,078 47,240 20,539 General and administrative..................... 4,560 1,685 11,821 4,728 Stock-based compensation....................... 62 66 185 199 Amortization of goodwill and other intangibles.................................. 319 -- 744 -- Merger costs................................... -- -- -- 2,700 ------- ------- ------- ------- Total operating expenses.................. 29,492 13,196 77,170 36,897 ------- ------- ------- ------- LOSS FROM OPERATIONS.............................. (7,415) (839) (7,045) (7,171) Interest income, net........................... 1,902 581 5,233 1,384 ------- ------- ------- ------- LOSS BEFORE INCOME TAXES.......................... (5,513) (258) (1,812) (5,787) Income tax provision (benefit)................. (836) -- 89 -- ------- ------- ------- ------- NET LOSS.......................................... $(4,677) $ (258) $(1,901) $(5,787) ------- ------- ------- ------- NET LOSS PER SHARE: Basic and diluted net loss per share........... $ (0.17) $ (0.01) $ (0.07) $ (0.27) Pro forma basic and diluted net loss per share........................................ (0.26) WEIGHTED AVERAGE SHARES: Shares used in computing basic and diluted net loss per share............................... 27,287 23,291 27,094 21,705 Shares used in computing pro forma basic and diluted net loss per share................... 22,324
The accompanying notes are an integral part of these consolidated financial statements. 4 5 ALLAIRE CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 2000 1999 --------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities: Net loss.................................................. $ (1,901) $(5,787) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization.......................... 4,691 1,806 Compensation expense relating to the issuance of equity instruments........................................... 185 199 Tax benefit from stock options exercised............... 31 -- Changes in assets and liabilities, net of effects from acquisitions: Accounts receivable.................................. (8,469) (3,194) Prepaid expenses and other current assets............ (1,441) (495) Other assets......................................... (214) (418) Accounts payable..................................... 5,239 (788) Accrued expenses..................................... 8,678 7,085 Deferred revenue..................................... 17,026 5,554 --------- ------- Total adjustments.................................... 25,726 9,749 --------- ------- Net cash provided by operating activities............ 23,825 3,962 --------- ------- Cash flows from investing activities: Purchases of short-term investments....................... (255,796) (55,554) Sales of short-term investments........................... 190,617 30,305 Purchase of Open Sesame................................... (5,125) -- Purchases of property and equipment....................... (16,133) (2,399) Investment in partners.................................... (2,000) -- --------- ------- Net cash used for investing activities............... (88,437) (27,648) --------- ------- Cash flows from financing activities: Principal payments on capital lease obligations........... (159) (252) Principal payments on promissory notes.................... -- (1,500) Principal payments on notes payable....................... (359) (1,453) Proceeds from sale of common stock, net of issuance costs.................................................. 3,597 54,659 Payment received on stock subscription receivable......... -- 16 --------- ------- Net cash provided by financing activities............ 3,079 51,470 --------- ------- Net increase (decrease) in cash and cash equivalents........ (61,533) 27,784 Cash and cash equivalents, beginning of period.............. 106,624 3,247 --------- ------- Cash and cash equivalents, end of period.................... $ 45,091 $31,031 --------- ------- SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid for income taxes................................ $ 89 $ -- Cash paid for interest.................................... $ 105 $ 278 SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: Unrealized gain on marketable securities.................. $ 2,784 $ -- Conversion of Series A convertible preferred stock to common stock........................................... -- 751 Conversion of redeemable convertible preferred stock to common stock........................................... -- 12,673 Issuance of common stock through public offering, net of issuance costs......................................... -- 58,090
The accompanying notes are an integral part of these consolidated financial statements. 5 6 ALLAIRE CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Allaire Corporation and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Allaire Corporation and its subsidiaries are collectively referred to as the "Company" or "Allaire." Certain 1999 amounts have been reclassified to conform to the 2000 method of presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all financial information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the financial condition of the Company as of the date of the interim balance sheet. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company's audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and the Company's Registration Statement on Form S-1 filed on September 30, 1999 (Registration No. 333-86563). Net Income (Loss) Per Share Net income (loss) per share is computed under SFAS No. 128, "Earnings Per Share." Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding, excluding shares of common stock subject to repurchase. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding, including potential common shares from conversion of stock options and warrants. Pro forma basic and diluted net income (loss) per share have been calculated assuming the conversion of all outstanding shares of preferred stock into common stock, as if the shares had converted immediately upon their issuance. As of September 30, 2000, options to purchase 8.2 million shares were outstanding but were not included in the computations of diluted EPS because they are antidilutive. 2. COMPREHENSIVE INCOME The components of comprehensive income (loss) are as follows (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------- ----------------- 2000 1999 2000 1999 ------- ----- ------- ------- Net loss................................................... $(4,677) $(258) $(1,901) $(5,787) Unrealized gain (loss) on marketable securities............ (4,341) -- 2,784 -- ------- ----- ------- ------- COMPREHENSIVE NET INCOME (LOSS)............................ $(9,018) $(258) $ 883 $(5,787) ======= ===== ======= =======
3. ACQUISITIONS In March 2000, Allaire acquired Open Sesame from Bowne Internet Solutions for a total purchase price of $5.1 million. Open Sesame is profiling and personalization technology that delivers personalized customer interaction capabilities. Allaire accounted for this acquisition as a purchase. The excess of the purchase price over identified tangible and intangible assets was considered goodwill. Goodwill and other intangibles are amortized over four years. Pro forma financial statements have not been disclosed due to immateriality. 6 7 ALLAIRE CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. ACCOUNTS RECEIVABLE In September 2000, Allaire entered into a one year non-recourse receivables purchase agreement with a bank. The agreement allows for the sale of domestic and foreign receivables, in an amount not to exceed $10.0 million at any one time. At September 30, 2000, accounts receivable in the consolidated balance sheet is net of $3.0 million received by Allaire under this agreement. The $3.0 million received was associated with distribution channel accounts receivable for which revenue had not been recognized as of September 30, 2000. Allaire's days sales outstanding was 50 days at September 30, 2000. If the receivables sold to the bank were included in the calculation, the days sales outstanding would have been 59 days. As of November 13, 2000, all of the accounts receivable sold to the bank have been paid. 5. SUBSEQUENT EVENT In October 2000, Allaire acquired the Kawa product from Tek-Tools, Inc. for a cash purchase price of $9.0 million. Kawa is an integrated development environment (IDE) for Java programming that delivers support for Enterprise JavaBeans development and remote debugging. Allaire will account for this acquisition as a purchase. Pro forma financial statements have not been disclosed due to immateriality. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects" and similar expressions are intended to identify forward-looking statements. The forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors set forth below in "Certain Factors that may Affect Future Results," that may cause the actual results, performance and achievements of Allaire to differ materially from those indicated by the forward-looking statements. ColdFusion is a U.S. registered trademark, and Allaire, Allaire Spectra, HomeSite and JRun are trademarks of Allaire Corporation. All other company names, brand names and product names are the property of their respective holder(s). OVERVIEW Allaire develops, markets and supports Web application servers, packaged applications and visual tools that enable the development and deployment of sophisticated e-business Web sites and applications. Allaire derives a majority of its revenue from its four primary products, Allaire Spectra, ColdFusion, JRun and HomeSite. Allaire's revenue is derived principally from license fees for software products and, to a lesser extent, fees for a range of services complementing these products, primarily training, consulting and technical support. Software license fees include sales of licenses for the then-current version of Allaire's products, product upgrades and subscriptions. Subscriptions entitle the customer to all new releases for a specific product during the subscription period, generally 12 to 24 months. Revenue from sales of licenses to use Allaire's software products and product upgrades is recognized upon delivery to customers, provided no significant post-delivery obligations or uncertainties remain and collection of the related receivable is probable. Revenue under arrangements where multiple products or services are sold together under one contract is allocated to each element based on their relative fair values, with these fair values being determined using the price charged when that element is sold separately. For agreements with specified upgrade rights, the revenue related to such upgrade rights is deferred until such time as the specified upgrade is delivered. Allaire provides most of its distributors with rights of return. An allowance for estimated future returns is recorded at the time revenue is recognized based on Allaire's historical experience. Revenue from subscription sales is recognized ratably over the term of the subscription period. Services revenue is recognized as services are rendered or ratably over the term of the service agreement. Allaire generates its software license revenue through direct sales of licenses to end users and through its indirect distribution channel. Direct revenue is generated by Allaire's direct sales force and via its Web site. The indirect distribution channel includes distributors, direct and original equipment manufacturer resellers, system integrators and Allaire Alliance members. Revenue generated by the indirect distribution channel accounted for 61% and 54% of total revenue for the three months ended September 30, 2000 and September 30, 1999, respectively. Revenue generated by the indirect distribution channel accounted for 62% and 51% of total revenue for the nine months ended September 30, 2000 and September 30, 1999, respectively. Allaire anticipates that revenue derived from the indirect distribution channel will continue to represent a significant percentage of total revenue. Allaire primarily derives its international revenue through its indirect distribution channel. International revenue outside of North America accounted for 20% and 15% of total revenue for the three months ended September 30, 2000 and September 30, 1999, respectively, and 19% and 14% of total revenue for the nine months ended September 30, 2000 and September 30, 1999, respectively. 8 9 RESULTS OF OPERATIONS REVENUE Total revenue increased 95% from $15.1 million for the three months ended September 30, 1999 to $29.3 million for the three months ended September 30, 2000. Total revenue increased 142% from $36.8 million for the nine months ended September 30, 1999 to $89.2 million for the nine months ended September 30, 2000. Software License Fees. Revenue from software license fees increased 88% from $12.3 million for the three months ended September 30, 1999 to $23.0 million for the three months ended September 30, 2000. Revenue from software license fees increased 146% from $30.0 million for the nine months ended September 30, 1999 to $73.8 million for the nine months ended September 30, 2000. The increase was primarily due to an increase in the number of licenses sold to use our Allaire Spectra, ColdFusion and JRun products. Allaire's first shipment of Allaire Spectra occurred in the fourth quarter of 1999. Increases in product prices associated with the release of new versions of Allaire's products in March 2000 also contributed to the growth in revenue. Services. Revenue from services increased 123% from $2.8 million for the three months ended September 30, 1999 to $6.3 million for the three months ended September 30, 2000. Revenue from services increased 124% from $6.9 million for the nine months ended September 30, 1999 to $15.4 million for the nine months ended September 30, 2000. The increase was primarily attributable to growth in consulting and training revenue resulting from an increase in Allaire's installed customer base. COST OF REVENUE Cost of Software License Fees. Cost of software license fees includes costs of product media duplication, manuals, packaging materials, licensed technology and fees paid to third party vendors and agents for order fulfillment. Cost of software license fees increased 79% from $668,000 for the three months ended September 30, 1999 to $1.2 million for the three months ended September 30, 2000. Cost of software license fees increased 110% from $1.8 million for the nine months ended September 30, 1999 to $3.7 million for the nine months ended September 30, 2000. The increase in absolute dollars was due to higher unit sales volume. Software license fees gross margins remained constant at 95% from the three months ended September 30, 1999 to the three months ended September 30, 2000. The improvement in software license fees gross margins from 94% for the nine months ended September 30, 1999 to 95% for the nine months ended September 30, 2000, was primarily attributable to economies of scale achieved with higher sales volume in 2000. Cost of Services. Cost of services consists primarily of personnel costs. Cost of services increased 196% from $2.0 million for the three months ended September 30, 1999 to $6.0 million for the three months ended September 30, 2000. The increase in absolute dollars resulted primarily from the hiring of additional employees and the use of independent contractors as trainers to support increased customer demand for training classes, consulting and technical support. The decline in services gross margins from 27% for the three months ended September 30, 1999 to 4% for the three months ended September 30, 2000 and from 22% for the nine months ended September 30, 1999 to 0% for the nine months ended September 30, 2000 was primarily attributable to the investment in additional consulting and technical support resources to support Allaire Spectra, Allaire's packaged e-business application product. Overall gross margins are primarily affected by the mix of products licensed, sales through direct versus indirect distribution channels, software license fees revenue versus services revenue, and international revenue versus domestic revenue. Allaire typically realizes higher gross margins on direct sales relative to indirect distribution channel sales and higher gross margins on software license fees relative to services revenue. As services revenue or revenue derived through indirect distribution channels increase as a percentage of total revenue, Allaire's gross margins may be adversely affected. 9 10 OPERATING EXPENSES Research and Development. Research and development expenses consist primarily of employee salaries, fees for outside consultants and related costs associated with the development of new products, the enhancement and localization of existing products, quality assurance and testing. Research and development expenses increased 117% from $3.4 million for the three months ended September 30, 1999 to $7.3 million for the three months ended September 30, 2000. Research and development expenses increased 97% from $8.7 million for the nine months ended September 30, 1999 to $17.2 million for the nine months ended September 30, 2000. The increase primarily resulted from salaries associated with newly hired development personnel, consulting fees and costs related to the localization of Allaire's products. Allaire anticipates that research and development expenses will continue to increase in absolute dollars. Sales and Marketing. Sales and marketing expenses consist primarily of employee salaries, commissions, and costs associated with marketing programs such as advertising, seminars, trade shows and new product launch activities. Sales and marketing expenses increased 114% from $8.1 million for the three months ended September 30, 1999 to $17.3 million for the three months ended September 30, 2000. Sales and marketing expenses increased 130% from $20.5 million for the nine months ended September 30, 1999 to $47.2 million for the nine months ended September 30, 2000. The increase was primarily attributable to costs associated with additional direct sales, pre-sales support and marketing personnel, and an increase in marketing programs, including advertising and promotions. Allaire anticipates that sales and marketing expenses will continue to increase in absolute dollars as it continues to expand its marketing programs and sales force to support its brand awareness, product launches, international expansion and increased focus on major account sales. General and Administrative. General and administrative expenses consist primarily of employee salaries and other personnel related costs for executive and financial personnel, as well as legal, accounting, recruiting and insurance costs. General and administrative expenses increased 171% from $1.7 million for the three months ended September 30, 1999 to $4.6 million for the three months ended September 30, 2000. General and administrative expenses increased 150% from $4.7 million for the nine months ended September 30, 1999 to $11.8 million for the nine months ended September 30, 2000. The increase was primarily attributable to salaries associated with newly hired personnel and related costs required to manage Allaire's growth and facilities expansion. Stock-based Compensation. The amount that the estimated fair market value of Allaire's common stock exceeds the exercise price of stock options on the date of grant is recorded as deferred compensation and amortized to stock-based compensation expense as the options vest. Allaire recognized $66,000 of stock-based compensation for the three months ended September 30, 1999 compared to $62,000 of stock based compensation for the three months ended September 30, 2000. Allaire recognized $199,000 of stock-based compensation for the nine months ended September 30, 1999 compared to $185,000 of stock based compensation for the nine months ended September 30, 2000. Amortization of Goodwill and Other Intangibles. The amortization of goodwill and other intangibles of $319,000 for the three months ended September 30, 2000 and $744,000 for the nine months ended September 30, 2000 related to the amortization of costs associated with the purchase of the Open Sesame technology from Bowne Internet Solutions in March 2000. Merger Costs. The merger costs of $2.7 million for the nine months ended September 30, 1999 relate to the mergers with Bright Tiger and Live Software. The costs include professional fees, facility closings, severance packages and related costs associated with these acquisitions. INTEREST INCOME, NET Interest income, net of interest expense, increased from $581,000 for the three months ended September 30, 1999 to $1.9 million for the three months ended September 30, 2000. Interest income, net of interest expense, increased from $1.4 million for the nine months ended September 30, 1999 to $5.2 million for the nine months ended September 30, 2000. The increase was due to interest income earned from the investment 10 11 of the net cash proceeds from Allaire's initial public offering in January 1999 and follow-on public offering in September 1999. PROVISION FOR INCOME TAXES Allaire's provision for income taxes resulted in a tax benefit of $836,000 for the three months ended September 30, 2000. This represents the reversal of a portion of the tax provision from previous quarters in 2000 due to the loss in the third quarter and expected pre-tax loss for fiscal year 2000. The decline in the effective tax rate is due to the loss incurred in the third quarter. The remaining tax provision of $89,000 for the nine months ended September 30, 2000 consists of state and foreign taxes. Consistent with prior quarters, the Company maintains a full valuation allowance against its deferred tax assets. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2000, Allaire had cash, cash equivalents and short-term investments of $122.7 million, up from $119.0 million at December 31, 1999. Cash provided by operating activities for the nine months ended September 30, 2000 was $23.8 million, primarily related to increases in accrued expenses and deferred revenue, offset by an increase in accounts receivable and a net loss of $1.9 million. Cash provided by operating activities for the nine months ended September 30, 1999 was $4.0 million, primarily related to increases in deferred revenue and accrued expenses, partially offset by a net loss of $5.8 million. Cash used for investing activities for the nine months ended September 30, 2000 was $88.4 million, primarily related to net purchases of short-term investments and property and equipment. Cash used by investing activities for the nine months ended September 30, 1999 was $27.6 million primarily related to the purchase of short term investments. Cash provided by financing activities for the nine months ended September 30, 2000 was $3.0 million, primarily due to common stock issuances. Cash provided by financing activities for the nine months ended September 30, 1999 was $51.5 million, primarily related to net proceeds from Allaire's initial public offering. As of September 30, 2000, Allaire's primary commitments consisted of obligations related to operating leases and $676,000 of notes payable. In March 2000, Allaire acquired Open Sesame from Bowne Internet Solutions for a total purchase price of $5.1 million. Allaire is party to a line of credit agreement which provides for borrowings of up to $12.5 million for working capital purposes and for the issuance of letters of credit. Amounts available under the line are determined based upon eligible accounts receivable. All borrowings and letters of credit are collateralized by substantially all of Allaire's assets and all borrowings bear interest at the bank's prime rate (9.50% as of September 30, 2000). As of September 30, 2000, letters of credit totaling $11.4 million had been issued against the line and $1.1 million was available for additional borrowings. The original terms of the line of credit require the maintenance of certain minimum financial ratios and conditions. The line of credit expires in November 2000. In September 2000, Allaire entered into a one year non-recourse receivables purchase agreement with a bank. The agreement allows for the sale of domestic and foreign receivables, in an amount not to exceed $10.0 million at any one time. The accounts receivable are sold at a discount to reflect a minimum period of 30 days at the bank's prime rate plus 1.25% (10.75%). At September 30, 2000, accounts receivable in the consolidated balance sheet is net of $3.0 million received by Allaire under this agreement. The $3.0 million received was associated with distribution channel accounts receivable for which revenue had not been recognized as of September 30, 2000. Allaire's days sales outstanding was 50 days at September 30, 2000. If the receivables sold to the bank were included in the calculation, the days sales outstanding would have been 59 days. As of November 13, 2000, all of the accounts receivable sold to the bank have been paid. Allaire may utilize this agreement, from time to time, to effectively manage its liquidity, cash and cash equivalents and short-term investment positions, and accounts receivable. 11 12 Allaire expects to experience significant growth in its operating expenses for the foreseeable future in order to execute its business plan, particularly research and development and sales and marketing expenses. As a result, Allaire anticipates that such operating expenses, as well as planned capital expenditures, will constitute a material use of its cash resources. In addition, Allaire may utilize cash resources to fund acquisitions or investments in complementary businesses, technologies or product lines. Allaire believes that its current cash and cash equivalents and short-term investments will be sufficient to meet its anticipated cash requirements for working capital and capital expenditures for the foreseeable future. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The new standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Allaire does not expect SFAS No. 133 to have a material affect on its financial position or results of operations. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS Allaire has substantial net losses and may not be profitable in the future. Allaire's limited operating history and the undeveloped nature of the market for Web development products make predicting future revenue and operating results difficult. Allaire has experienced substantial net losses in each fiscal year since its inception and, as of September 30, 2000, had an accumulated deficit of $38.6 million. These net losses and accumulated deficit resulted primarily from the significant costs incurred in the development of Allaire's products and in the preliminary establishment of its infrastructure. Although Allaire recorded a small profit for the quarters ended December 31, 1999, March 31, 2000 and June 30, 2000, it experienced a net loss for the quarter ended September 30, 2000. Allaire can give no assurances that it will be profitable in the future. Disappointing quarterly revenue and operating results could cause the price of Allaire's common stock to fall. Allaire's quarterly revenue may fluctuate for several reasons, including: - The market for Web application server and packaged e-business applications is in an early stage of development and it is therefore difficult to accurately predict customer demand; and - The sales cycle for Allaire's products and services varies substantially from customer to customer and, if Allaire's average sales price continues to increase as expected, it expects the sales cycle to lengthen. As a result, Allaire may have difficulty determining whether and when it will receive license revenue from a particular customer. In particular, Allaire has experienced a longer than expected sales cycle for Allaire Spectra. In addition, most of Allaire's expenses, such as employee compensation and rent, are relatively fixed. Allaire's expense levels are based, in part, on its expectations regarding future revenue increases. As a result, any shortfall in revenue in relation to Allaire's expectations could cause significant changes in its operating results from quarter to quarter and could result in quarterly losses. If our quarterly operating results fall below the expectations of investors or public market analysts, the price of Allaire's common stock could fall substantially. For example, the price of Allaire's common stock dropped substantially after it announced revenues and operating results for the quarter ended September 30, 2000 that were lower than expected. Allaire operates in highly competitive markets and may not be able to compete effectively. The Web application server and packaged e-business applications market is intensely competitive and rapidly changing. Many of Allaire's current and potential competitors have longer operating histories and substantially greater financial, technical, marketing, distribution and other resources than Allaire does and therefore may be able to respond more quickly than Allaire can to new or changing opportunities, technologies, standards or customer requirements. Because Allaire has adopted a mass-enterprise strategy with respect to its products, it competes with several different types of companies. Allaire competes with large web and database platform companies that offer a variety of software products, as well as a number of medium-sized and start-up companies that 12 13 have introduced or that are developing web application servers and packaged e-business applications. In the middle range of the market where product prices are significantly lower, Allaire competes primarily against Microsoft. Allaire expects that additional competitors will enter the market with competing products as the size and visibility of the market opportunity increases. Increased competition could result in pricing pressures, reduced margins or the failure of Allaire's products to achieve or maintain market acceptance. If, in the future, a competitor chooses to bundle a competing web application server or packaged e-business application with other products, the demand for Allaire's products might be substantially reduced. In addition, new technologies will likely increase the competitive pressures that Allaire faces. The development of competing technologies by market participants or the emergence of new industry standards may adversely affect Allaire's competitive position. As a result of these and other factors, Allaire may not be able to compete effectively with current or future competitors, which would have a material adverse effect on its business, operating results and financial condition. Allaire must continue to enhance its existing products and develop new products. In order to remain competitive, Allaire must continue to develop and introduce product enhancements and new products that increase its customers' ability to develop and deploy Web applications. If Allaire fails to develop and introduce new products and product enhancements successfully and on a timely basis, Allaire's revenues could decrease and it could fail to meet revenue projections. Future success will depend on Allaire's ability to market and sell Allaire Spectra successfully. Allaire expects that its future financial performance will depend in part on sales of Allaire Spectra. Allaire began commercial shipments of Allaire Spectra in December 1999. Market success of Allaire Spectra will depend on the market for packaged e-business applications and customer demand for the specific functionality of Allaire Spectra. If Allaire Spectra does not meet customer needs or expectations, for whatever reason, Allaire's reputation could be damaged, or it could be required to upgrade or enhance the product, which could be costly and time consuming. Allaire's failure to expand its sales force and distribution channels would adversely affect its revenue growth and financial condition. To increase its revenue, Allaire must increase the size of its sales force and the number of its indirect channel partners, including original equipment manufacturers, value-added resellers and systems integrators. A failure to do so could have a material adverse effect on Allaire's business, operating results and financial condition. There is intense competition for sales personnel in Allaire's business, and there can be no assurance that Allaire will be successful in attracting, integrating, motivating and retaining new sales personnel. Allaire's existing or future channel partners may choose to devote greater resources to marketing and supporting the products of other companies. In addition, Allaire will need to resolve potential conflicts among its sales force and channel partners. Allaire depends on a small number of distributors for a significant portion of its revenue. Allaire derives a substantial portion of its revenue from a small number of distributors. For the nine months ended September 30, 2000, revenue from Allaire's indirect distribution channel accounted for 62% of total revenue and one distributor, Ingram Micro, accounted for 33% of total revenue. For the year ended December 31, 1999, revenue from the indirect distribution channel accounted for 53% of Allaire's total revenue, and Ingram Micro accounted for 37% of total revenue. The loss of, or a reduction in orders from, Ingram Micro or any other significant distributor could have a material adverse effect on Allaire's business, operating results and financial condition. Allaire may experience lost or delayed sales as its sales cycle lengthens.A longer sales cycle reduces Allaire's ability to forecast revenue levels and may result in lost sales. Any delay or loss in sales of Allaire's products could have a material adverse effect on its business, operating results and financial condition, and could cause operating results to vary significantly from quarter to quarter. As Allaire increases its sales and marketing focus on larger sales to businesses and other large organizations, it expects that increased executive-level involvement of information technology officers and other senior managers of its customers will be required. Potential large sales may be delayed, or lost altogether, because Allaire will have to provide a more comprehensive education to prospective customers regarding the use and benefits of its products. Allaire's customers' purchase decisions may be subject to delays over which Allaire may have little or no control. 13 14 If Allaire is unable to continue licensing technology for its products from third parties, its product development efforts could be delayed. Allaire licenses technology that is incorporated into its products from third parties. The loss of access to this technology could result in delays in Allaire's development and introduction of new products or enhancements until equivalent or replacement technology could be accessed, if available, or developed internally, if feasible. These delays could have a material adverse effect on its business, operating results and financial condition. In light of the rapidly evolving nature of web technology and Allaire's strategy to pursue industry partnerships, Allaire believes that it will increasingly need to rely on technology from third party vendors, such as Microsoft, which may also be competitors. There can be no assurance that technology from others will continue to be available to Allaire on commercially reasonable terms, if at all. Allaire's business could be harmed if the Java programming language loses market acceptance or if Allaire is not able to continue using Java or Java-related technologies. Allaire's JRun Java application server is a clean room implementation designed to comply with Sun's Java 2 Platform, Enterprise Edition, or J2EE, Specifications. Using the JRun application server, Allaire's customers can build Java applications on the J2EE platform. Many of Allaire's next generation products are also expected to be based on Java. While a number of companies have introduced Web applications based on Java, Java could fall out of favor with computer programmers and software developers, and support of the Java programming language by Sun Microsystems or other companies could decline. Moreover, there can be no assurance that the J2EE standards will be widely adopted or that Allaire can continue to comply with Sun's J2EE specifications established from time to time. If support for Java or J2EE decreases or Allaire cannot continue to use Java or related Java technologies, or if Allaire is not able to comply with J2EE standards, Allaire could lose revenue opportunities and its business could be harmed. Allaire's failure to properly manage its growth could strain its resources and adversely affect its business. Allaire's failure to manage its rapid growth could have a material adverse effect on the quality of its products, its ability to retain key personnel and its business, operating results and financial condition. Allaire's revenue increased 142% for the nine months ended September 30, 2000 from the same period in 1999. The number of Allaire's employees increased from 93 at January 1, 1998 to 564 at September 30, 2000. To manage future growth effectively Allaire must maintain and enhance its financial and accounting systems and controls, integrate new personnel and manage expanded operations. Allaire's business could be adversely affected if its products fail to perform properly. Software products as complex as Allaire's may contain undetected errors or "bugs," which result in product failures or security breaches or otherwise fail to perform in accordance with customer expectations. Errors in certain Allaire products have been detected after the release of the product. The occurrence of errors could result in loss of or delay in revenue, loss of market share, failure to achieve market acceptance, diversion of development resources, injury to Allaire's reputation, or damage to its efforts to build brand awareness, any of which could have a material adverse effect on its business, operating results and financial condition. In addition, any failure in a customer's web application developed and deployed with Allaire's products could result in a claim for substantial damages against Allaire, regardless of Allaire's responsibility for the failure. Although Allaire maintains general liability insurance, including coverage for errors and omissions, there can be no assurance that its existing coverage will continue to be available on reasonable terms or will be available in amounts sufficient to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. Claims by other companies that Allaire infringes their copyrights or patents could adversely affect Allaire's financial condition. If any of Allaire's products violate third party proprietary rights, Allaire may be required to reengineer these products or seek to obtain licenses from third parties to continue to offer them. Any efforts to reengineer Allaire's products or obtain licenses on commercially reasonable terms may not be successful, and, in any case, would substantially increase costs and have a material adverse effect on Allaire's business, operating results and financial condition. Allaire does not conduct comprehensive patent searches to determine whether the technology used in its products infringes patents held by third parties. In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential when filed, with regard to similar technologies. 14 15 Although Allaire is generally indemnified against claims that third party technology that it licenses infringes the proprietary rights of others, this indemnification is not always available for all types of intellectual property rights (for example, patents may be excluded) and in some cases the scope of such indemnification is limited. Even if Allaire receives broad indemnification, third party indemnitors are not always well-capitalized and may not be able to indemnify Allaire in the event of infringement, resulting in substantial exposure to Allaire. There can be no assurance that infringement or invalidity claims arising from the incorporation of third party technology in Allaire's products, and claims for indemnification from customers resulting from these claims, will not be asserted or prosecuted against Allaire. These claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources in addition to potential product redevelopment costs and delays, all of which could materially adversely affect Allaire's business, operating results and financial condition. In addition, any claim of infringement could cause Allaire to incur substantial costs defending against the claim, even if the claim is invalid, and could distract Allaire's management from their business. A party making a claim also could secure a judgment that requires Allaire to pay substantial damages. A judgment could also include an injunction or other court order that could prevent Allaire from selling its products. Any of these events could have a material adverse effect on Allaire's business, operating results and financial condition. 15 16 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of September 30, 2000, Allaire was exposed to market risks which primarily include changes in U.S. interest rates. Allaire maintains a significant portion of its cash and cash equivalents and short-term investments in financial instruments with purchased maturities of 12 months or less. Allaire does not hold derivative financial instruments or equity securities in its investment portfolio. Allaire cash equivalents and short-term investments consist of high-quality corporate and government debt. These financial instruments are subject to interest rate risk and will decline in value if interest rates increase. Due to the short duration of these financial instruments, an immediate increase in interest rates would not have a material effect on Allaire's financial condition or results of operations. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On or after September 25, 2000, the Company and certain of its officers or directors were named as defendants in nine virtually identical lawsuits filed in the United States District Court for the District of Massachusetts: (i) Krakauer v. Allaire Corporation, Joseph J. Allaire, Jeremy Allaire, David A. Gerth and David J. Orfao, Civil Action No. 00-11972-WGY; (ii) Dargenzio v. Allaire Corporation, Joseph J. Allaire, Jeremy Allaire, David A. Gerth and David J. Orfao, Civil Action No. 00-11973-WGY; (iii) Gordon v. Allaire Corporation, Joseph J. Allaire, Jeremy Allaire, David A. Gerth and David J. Orfao, Civil Action No. 00-11974-WGY; (iv) Large v. Allaire Corporation, Joseph J. Allaire, Jeremy Allaire, David A. Gerth and David J. Orfao, Civil Action No. 00-11986-WGY; (v) DiMaggio v. Allaire Corporation, Joseph J. Allaire, Jeremy Allaire, David A. Gerth and David J. Orfao, Civil Action No. 00-11996-WGY; (vi) Knorr v. Allaire Corporation, Joseph J. Allaire, Jeremy Allaire, David A. Gerth and David J. Orfao, Civil Action No. 00-12014-WGY; (vii) Jarvis v. Allaire Corporation, Joseph J. Allaire, Jeremy Allaire, David A. Gerth and David J. Orfao, Civil Action No. 00-12016-WGY; (viii) Cordeiro v. Allaire Corporation, Joseph J. Allaire, Jeremy Allaire, David A. Gerth and David J. Orfao, Civil Action No. 00-12158-WGY; and (ix) Fisher v. Allaire Corporation, Joseph J. Allaire, Jeremy Allaire, David A. Gerth and David J. Orfao, Civil Action No. 00- 12182-WGY. The parties have agreed that: all of the cases should be consolidated; the defendants need not respond to the pending complaints; and that lead counsel to be approved by the Court shall file an amended complaint applicable to the consolidated actions. Each of the plaintiffs in each of the actions purport to bring their complaint on behalf of all purchasers of the Company's stock during an alleged class period (July 20, 2000 and September 18, 2000). The plaintiffs claim that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5, by virtue of statements plaintiffs claim are materially false or misleading. Plaintiffs seek damages, interest, costs, and attorneys' fees. The defendants intend to defend these claims vigorously. From time to time Allaire has been, and expects to continue to be, subject to legal proceedings and claims in the ordinary course of its business, including claims of alleged infringement of third party trademarks and other intellectual property rights by Allaire and its licensees. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Allaire is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition or results of operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS: Exhibit 10.1 Non-Recourse Receivables Purchase Agreement with Silicon Valley Bank, dated September 26, 2000 (filed herewith) Exhibit 11 Statement re: Computation of Unaudited Net Loss Per Share and Pro Forma Net Loss Per Share (filed herewith) Exhibit 27 Financial Data Schedule (filed herewith)
(b) REPORTS ON FORM 8-K The Company filed no reports on Form 8-K during the quarter ended September 30, 2000. 16 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALLAIRE CORPORATION By: /s/ DAVID A. GERTH ------------------------------------ DAVID A. GERTH VICE PRESIDENT, FINANCE AND OPERATIONS, TREASURER AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) Dated: November 13, 2000 17 18 EXHIBIT INDEX Exhibit 10.1 Non-recourse Receivables Purchase Agreement with Silicon Valley Bank, dated September 26, 2000 (filed herewith) Exhibit 11 Statement re: Computation of Unaudited Net Loss Per Share and Pro Forma Net Loss Per Share (filed herewith) Exhibit 27 Financial Data Schedule (filed herewith)
18 EX-10.1 2 b37182acex10-1.txt PURCHASE AGREEMENT DATE 09/26/00 1 EXHIBIT 10.1 SILICON VALLEY BANK 3003 Tasman Drive/HF 226 Santa Clara, CA 95054 (408) 654-1000 - Fax (408) 980-6410 This NON-RECOURSE RECEIVABLES PURCHASE AGREEMENT (the "Agreement"), dated as of September 26, 2000, is between SILICON VALLEY BANK, ("Buyer") and ALLAIRE CORPORATION, a Delaware corporation, ("Seller"), with its chief executive office at: Street Address: 275 Grove Street City: Newton County: State: Massachusetts Zip code: 02466 Fax: (617) 219-2151 1. DEFINITIONS. In this Agreement: 1.1 "Payment" is when Buyer has received payments equal to the Total Purchased Receivables. 1.2 "Purchased Receivables" is all accounts, receivables, chattel paper, instruments, contract rights, documents, general intangibles, letters of credit, drafts, bankers acceptances other rights to payment and all proceeds arising from the invoices and other agreements on the Schedule. 1.3 "Related Property" is all returned or rejected goods connected with the Purchased Receivables or books and records about the Purchased Receivables or returned or rejected goods; or proceeds from voluntary or involuntary dispositions, including insurance proceeds. 1.4 "Schedule" is the attached schedule showing the: Purchase Date, Due Date, Total Purchased Receivables, Discount Rate, Purchase Price, Administrative Fee and Interest Reserve amount. 2. PURCHASE AND SALE OF RECEIVABLES. 2.1 SALE AND PURCHASE. On the Purchase Date, Seller sells and Buyer buys Seller's right, title, and interest (but none of Sellers obligations) to payment from any person liable on a Purchased Receivable, ("Account Debtors"). Each purchase and sale is at Buyer's and Seller's discretion. Buyer will not (i) pay Seller an aggregate outstanding amount exceeding Ten Million Dollars ($10,000,000.00) or (ii) buy any Purchased Receivable after September 26, 2001 (the "Maturity Date"). Each purchase and sale will be on an assignment form acceptable to Buyer. 2.2 PAYMENT OF PURCHASE PRICE AND LATE PAYMENT. (a) Payment of Purchase Price. For each Purchased Receivable, Buyer will pay Seller, on the Purchase Date, the Purchase Price, less the Administrative Fee and legal fees (if any). (b) Late Payment. If Payment is made after the Due Date, as listed on the Schedule, then on the earlier of Payment or 90 days, Seller will also pay Buyer the product of the Discount Rate and the average daily balance of the unpaid Purchased Receivable multiplied by the 1 2 number of days between the scheduled payment date or the earlier of the date of actual payment or 90 days after the scheduled payment date, divided by 360. 2.3 Seller may not sell or convey any interest in Related Property without Buyer's prior written consent. Seller will sign UCC financing statements and any other instruments or documents to evidence, perfect or protect Buyer's interests in the Purchased Receivables and Related Property. Seller will deliver to Buyer all original instruments, chattel paper and documents about Purchased Receivables and Related Property. 3. COLLECTIONS, PAYMENTS AND REMITTANCES. 3.1 APPLICATION OF PAYMENTS. All payments for any Purchased Receivable, received by Seller or Buyer, are Buyer's property. 3.2 COLLECTION BY SELLER. (a) Buyer appoints Seller its attorney-in-fact to receive payments and enforce its rights and designates Seller it's assignee for collection. Seller will use diligence and commercially reasonable means to collect Purchased Receivables. Buyer may revoke these appointments at any time. (b) Seller will begin legal proceedings about Purchased Receivables in its name (as Buyer's assignee for collection or enforcement) or, with Buyer's prior written consent, in Buyer's name. Seller will not make Buyer party to any litigation or arbitration without Buyer's written consent. (c) Seller will hold in trust for and give Buyer: (i) all payments made by Account Debtors, and (ii) all instruments, chattel paper and other proceeds of the Purchased Receivables. (d) Unless an Event of Repurchase occurs and continues Seller will remit payments to Buyer on the last business day of each week ("Settlement Date") starting the week after the Purchase Date. On each Settlement Date Seller will deliver a report acceptable to Buyer of account activity (including dates and amounts of payments) and changes for each Purchased Receivable. 3.3 NO OBLIGATION TO TAKE ACTION. Buyer has a right, but no obligation, to perform Seller's obligations or to take action on any Purchased Receivable (including on defaulted Purchased Receivables). 4. NON-RECOURSE; REPURCHASE OBLIGATIONS. 4.1 NON-RECOURSE AND SELLER'S AGREEMENT TO REPURCHASE. Buyer acquires Purchased Receivables without recourse, except Seller will, at Buyer's option, repurchase from Buyer any Purchased Receivable for a purchase price equal to the unpaid portion of any Purchased Receivable: (a) For which there has been any breach of warranty, representation or covenant in this Agreement; or (b) For which the Account Debtor asserts any discount, allowance, return, dispute, defense, right of recoupment, right of return, warranty claim, or short payment. Seller will reimburse Buyer for Buyer's reasonable attorneys' and professional fees and expenses and all court costs for collecting Purchased Receivables and/or enforcing its rights under this Agreement. 4.2 PAYMENT TO BUYER. Seller will pay Buyer in immediately available funds. 5. REPRESENTATIONS, WARRANTIES AND COVENANTS. 2 3 5.1 PURCHASED RECEIVABLES - WARRANTIES, REPRESENTATIONS AND COVENANTS. Seller represents, warrants and covenants for each Purchased Receivable: (a) It is the owner with legal right to sell, transfer and assign it; (b) The correct amount is on the Schedule and to the knowledge of Seller is not disputed; (c) No payment is contingent on any obligation or contract, and it has fulfilled all its obligations as of the Purchase Date; (d) It is based on actual sale and delivery of goods and/or services rendered, due no later than its Due Date and owing to Seller, it is not past due or in default, has not been previously sold, assigned, transferred, or pledged, and is free of any liens, security interests and encumbrances; (e) To the knowledge of Seller there are no defenses, offsets, counterclaims or agreements in which the Account Debtor may claim any deduction or discount; (f) It reasonably believes no Account Debtor is insolvent as defined in the United States Bankruptcy Code ("US Code") or the California Uniform Commercial Code ("UCC") and to the knowledge of Seller no Account Debtor has filed or had filed against it a voluntary or involuntary petition for relief under the US Code.; and (g) No Account Debtor has objected to payment for or the quality or quantity of the subject of the Purchased Receivable. 5.2 ADDITIONAL WARRANTIES, REPRESENTATIONS AND COVENANTS. Seller represents, warrants and covenants: (a) Its name, form of organization, chief executive office, and the place where the records about all Purchased Receivables are kept is shown at the beginning of this Agreement and it will give Buyer at least 10 days prior written notice of changes to its name, organization, chief executive office or location of records. (b) It has not filed a voluntary petition or had filed against it an involuntary petition under the US Code and does not anticipate any filing; (c) If Payment of any Purchased Receivable does not occur by its Due Date then Seller will provide a written report, within 10 days, of the reasons for the delay. (d) While any Purchased Receivable is outstanding, Seller will give Buyer copies of all Forms 10-K, 10-Q and 8-K (or equivalents) within 5 days of its filing with the Securities and Exchange Commission. 6. ADJUSTMENTS. If any Account Debtor asserts a discount, allowance, return, offset, defense, warranty claim, or the like (an "Adjustment") Seller will promptly advise Buyer and, with Buyer's approval, resolve the dispute. Seller will resell any rejected, returned, or recovered personal property for Buyer, at Seller's expense, with the proceeds payable to Buyer. While Seller has returned goods that are Buyer's property, Seller will segregate and mark them "property of Silicon Valley Bank." Buyer owns the Purchased Receivables and until Payment has the right to take possession of any rejected, returned, or recovered personal property. 7. INDEMNIFICATION. 3 4 (a) If any Account Debtor is released from any payment obligation for any Purchased Receivable because of: (i) Seller's act or omission; or (ii) any of the documentation about the Purchased Receivables which results in termination of any part of the Account Debtor's obligation for the Purchased Receivables, then Seller will pay Buyer the lesser of the amount of the Purchased Receivable not payable or the unpaid portion of the Purchased Receivable. (b) Seller indemnifies and holds Buyer harmless from any taxes from this transaction (except Buyer's income taxes) and costs, expenses and reasonable attorney fees if Buyer promptly notifies it of any taxes of which Buyer has notice. 8. REPURCHASE EVENTS. Any of the following is an Event of Repurchase: (a) Seller fails to pay Buyer any amount when due under Section 2.2(b), 3.2(c), 3.2(d), 4.1, 7 or 10; (b) An involuntary lien, garnishment, attachment or the like is issued against or attaches to the Purchased Receivables or Related Property; and (c) Seller breaches a covenant, agreement, warranty, or representation in this Agreement and the breach is not cured to Buyer's satisfaction within 10 days after Buyer gives Seller oral or written notice. A breach that cannot be cured is an immediate default. 9. REPURCHASE OPTION. When an Event of Repurchase occurs Buyer shall have a right to require Seller to repurchase all of the affected Purchased Receivables for a purchase price equal to the amount(s) specified in Section 4.1. Buyer shall also have all rights and remedies under this Agreement and the law, including those of a secured party under the UCC, and the right to collect, dispose of, sell, lease or use all Purchased Receivables and Related Property. 10. FEES, COSTS AND EXPENSES. Immediately on demand Seller will pay all reasonable fees, costs and expenses (including attorney and professional fees) that Buyer incurs from (a) preparing, negotiating, administering and enforcing this Agreement or any other agreement, including amendments, waivers or consents, (b) litigation or disputes relating to the Purchased Receivables, the Related Property, this Agreement or any other agreement, (c) enforcing rights against Seller, (d) protecting or enforcing its title to the Purchased Receivables or its security interest in the Related Property, (e) collecting any amounts due from Seller or for a Purchased Receivable under a breach of Seller's representation, warranty or covenant and (f) any bankruptcy case or insolvency proceeding involving Seller. 11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER. The Commonwealth of Massachusetts law governs this Agreement. Seller and Buyer each submit to the exclusive jurisdiction of the Commonwealth of Massachusetts. SELLER AND BUYER EACH WAIVE ITS RIGHT TO A JURY TRIAL FROM ANY CAUSE OF ACTION RELATED TO AGREEMENT, INCLUDING CONTRACT, TORT, BREACH OF DUTY OR OTHER CLAIM. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 12. NOTICES. Notices or demands by either party about this Agreement must be in writing and personally delivered or sent by an overnight delivery service, by certified mail postage prepaid return receipt requested, or by FAX to the addresses below: Seller: Allaire Corporation 275 Grove Street Newton, Massachusetts 02466 Attn: Chief Financial Officer 4 5 FAX: (617) 761-2007 Buyer: Silicon Valley Bank 3003 Tasman Drive/HF 226 Santa Clara, CA 95054 Attn: Credit Manager FAX: (408) 980-6410 A party may change notice address by written notice to the other party. 13. GENERAL PROVISIONS. 13.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit of successors and permitted assigns of each party. Seller may not assign this Agreement or any rights under it without Buyer's prior written consent which may be granted or withheld in Buyer's discretion. Buyer may, without the consent of or notice to Seller, sell, transfer, or grant participation in any part of Buyer's obligations, rights or benefits under this Agreement. 13.2 INDEMNIFICATION. Seller will indemnify, defend and hold harmless Buyer and its officers, employees, and agents against: (a) obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by this Agreement; and (b) losses or expenses incurred, or paid by Seller from or consequential to transactions between Buyer and Seller (including reasonable attorneys fees and expenses), except for losses caused by Buyer's gross negligence or willful misconduct. 13.3 TIME OF ESSENCE. Time is of the essence for performance of all obligations in this Agreement. 13.4 SEVERABILITY OF PROVISION. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. 13.5 AMENDMENTS IN WRITING, INTEGRATION. All amendments to this Agreement must be in writing. This Agreement is the entire agreement about this subject matter and supersedes prior negotiations or agreements. 13.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts and when executed and delivered are one Agreement. 13.7 SURVIVAL. All covenants, representations and warranties made in this Agreement continue in full force while any Purchased Receivable amount remains outstanding. Seller's indemnification obligations survive until all statutes of limitations for actions that may be brought against Buyer have run. 13.8 CONFIDENTIAL INFORMATION. Buyer will use the same degree of care in handling Seller's confidential information that it uses for its own proprietary information, but may disclose information; (i) to its subsidiaries or affiliates in connection with their business with Seller, (ii) to prospective transferees or purchasers of any interest in the Agreement, (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with an examination or audit and (v) as it considers appropriate exercising the remedies under this Agreement. Confidential information does not include information that is either: (a) in the public domain or in Buyer's possession when disclosed, or becomes part of the public domain after disclosure to Buyer; or (b) disclosed to Buyer by a third party, if Buyer does not know that the third party is prohibited from disclosing the information. 5 6 SELLER: ALLAIRE CORPORATION, a Delaware corporation By /s/ David A. Gerth ------------------------------------- Title CFO ---------------------------------- BUYER: SILICON VALLEY BANK By /s/ Mike Field ------------------------------------- Title Senior Vice President ---------------------------------- 6 EX-11 3 b37182acex11.txt STATEMENT RE:COMPUTATION OF SHARES 1 ALLAIRE CORPORATION EXHIBIT 11 STATEMENT RE: COMPUTATION OF UNAUDITED NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 2000 1999 2000 1999 ------- ------- ------- ------- BASIC AND DILUTED: Net loss.......................................... $(4,677) $ (258) $(1,901) $(5,787) ------- ------- ------- ------- Weighted average common shares outstanding........ 27,287 23,291 27,094 21,705 ------- ------- ------- ------- Basic and diluted net loss per share.............. $ (0.17) $ (0.01) $ (0.07) $ (0.27) ======= ======= ======= =======
NINE MONTHS ENDED SEPTEMBER 30, 1999 ------------------ PRO FORMA BASIC AND DILUTED: Net loss.................................................. $(5,787) Pro forma weighted average common shares outstanding (1)................................................... 21,731 Shares attributable to the assumed conversion of convertible preferred stock upon closing of the initial public offering............................... 593 ------- Total pro forma weighted average shares........... 22,324 ------- Pro Forma basic and diluted net loss per share............ $ (0.26) =======
- --------------- (1) Includes outstanding common stock subject to repurchase under a stock restriction agreement which lapsed upon the consummation of the initial public offering in January 1999. EX-27 4 b37182acex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLAIRE CORPORATION FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 1 45,091 80,357 17,450 (1,055) 451 144,312 24,341 (6,741) 168,661 61,996 0 0 0 274 106,346 168,661 73,844 89,242 3,719 19,117 77,170 0 278 (1,812) 89 (1,901) (1,901) (1,901) (1,901) (1,901) (0.07) (0.07)
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