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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Quarterly Period Ended September 30, 1999.

                                       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)

<TABLE>
<S>                                                 <C>
                  DELAWARE                                41-1830792
      (State or Other Jurisdiction of                  (I.R.S. Employer
       Incorporation or Organization)                Identification No.)

ONE ALEWIFE CENTER, CAMBRIDGE, MASSACHUSETTS                02140
  (Address of Principal Executive Offices)                (Zip Code)
</TABLE>

                                 (617) 761-2000
              (Registrant's Telephone Number, Including Area Code)

                                 NOT APPLICABLE
              (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:

<TABLE>
<CAPTION>
TITLE OF CLASS                                                SHARES OUTSTANDING AT NOVEMBER 5, 1999
--------------                                                --------------------------------------
<S>                                                           <C>
Common Stock, $.01 par value................................                13,094,391
</TABLE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                              ALLAIRE CORPORATION
                                   FORM 10-Q
               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
                               TABLE OF CONTENTS

<TABLE>
<S>        <C>                                                           <C>
PART I. FINANCIAL INFORMATION

  Item 1.  Financial Statements

           Condensed Consolidated Balance Sheet as of September 30,
           1999 and December 31, 1998..................................      2

           Consolidated Statement of Operations for the Three and Nine
           Months Ended September 30, 1999 and 1998....................      3

           Consolidated Statement of Cash Flows for the Nine Months
           Ended September 30, 1999 and 1998...........................      4

           Notes to Unaudited Consolidated Financial Statements........      5

  Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................      7

  Item 3.  Quantitative and Qualitative Disclosures about Market
           Risk........................................................     20

PART II. OTHER INFORMATION

  Item 2.  Changes in Securities and Use of Proceeds...................     21

  Item 6.  Exhibits and Reports on Form 8-K............................     21

  Signatures...........................................................     22

  Exhibit Index........................................................  22
</TABLE>
<PAGE>
                         PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS
                              ALLAIRE CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,   DECEMBER 31,
                                                                  1999            1998
                                                              -------------   ------------
<S>                                                           <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................    $ 31,031        $ 3,247
  Short-term investments....................................      25,745            496
  Accounts receivable, net of allowance for doubtful
    accounts and returns of $570 and $502 at September 30,
    1999 and December 31, 1998, respectively................       6,390          3,196
  Receivable from stock issuance............................      58,590             --
  Prepaid expenses and other current assets.................       1,589          1,094
                                                                --------        -------
    Total current assets....................................     123,345          8,033
  Property and equipment, net...............................       5,045          4,300
  Other assets, net.........................................         641            375
                                                                --------        -------
TOTAL ASSETS................................................    $129,031        $12,708
                                                                ========        =======

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
  STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Current portion of capital lease obligations..............    $    247        $   340
  Promissory notes..........................................          --          1,500
  Current portion of notes payable..........................         469          1,564
  Accounts payable..........................................       2,538          3,326
  Accrued expenses..........................................       8,262          3,963
  Accrued employee compensation and benefits................       5,524          2,238
  Deferred revenue..........................................      10,347          4,793
                                                                --------        -------
    Total current liabilities...............................      27,387         17,724
Capital lease obligations...................................          --            159
Notes payable...............................................         676          1,034
                                                                --------        -------
    Total liabilities.......................................      28,063         18,917
                                                                --------        -------
Redeemable convertible preferred stock $.01 par value;
  Authorized: none at September 30, 1999 and 3,183,506
  shares at December 31, 1998 Issued and outstanding: none
  at September 30, 1999 and 3,020,415 shares at December 31,
  1998......................................................          --         12,673
                                                                --------        -------
Stockholders' equity (deficit)
  Preferred stock, $.01 par value;
  Authorized: 5,000,000 shares at September 30, 1999 and
    none at December 31, 1998...............................          --             --
Series A convertible preferred stock, $.01 par value;
  Authorized: none at September 30, 1999 and 200,000 shares
  at December 31, 1998;
  Issued and outstanding: none at September 30, 1999 and
    88,463 shares at December 31, 1998......................          --            751
Common stock, $.01 par value;
  Authorized: 35,000,000 shares at September 30, 1999 and
    December 31, 1998 Issued and outstanding: 12,997,530
    shares issued and 12,980,920 shares outstanding at
    September 30, 1999 and 4,859,384 issued and 4,855,967
    outstanding at December 31, 1998........................         130             49
  Additional paid-in capital................................     138,550         12,364
  Accumulated deficit.......................................     (36,957)       (31,170)
  Deferred compensation.....................................        (745)          (850)
  Stock subscriptions receivable............................         (10)           (26)
                                                                --------        -------
  Total stockholders' equity (deficit)......................     100,968        (18,882)
                                                                --------        -------
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
  AND STOCKHOLDERS' EQUITY (DEFICIT)........................    $129,031        $12,708
                                                                ========        =======
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       2
<PAGE>
                              ALLAIRE CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED     NINE MONTHS ENDED
                                                             SEPTEMBER 30,         SEPTEMBER 30,
                                                          -------------------   -------------------
                                                            1999       1998       1999       1998
                                                          --------   --------   --------   --------
<S>                                                       <C>        <C>        <C>        <C>
REVENUE:
  Software license fees.................................  $12,252    $ 4,345    $29,976    $ 12,172
  Services..............................................    2,813      1,158      6,861       2,236
                                                          -------    -------    -------    --------
    Total revenue.......................................   15,065      5,503     36,837      14,408
                                                          -------    -------    -------    --------
COST OF REVENUE:
  Software license fees.................................      668        447      1,771       1,270
  Services..............................................    2,040      1,240      5,340       2,842
                                                          -------    -------    -------    --------
    Total cost of revenue...............................    2,708      1,687      7,111       4,112
                                                          -------    -------    -------    --------
GROSS PROFIT............................................   12,357      3,816     29,726      10,296
                                                          -------    -------    -------    --------
OPERATING EXPENSES:
  Research and development..............................    3,367      2,148      8,731       5,750
  Sales and marketing...................................    8,078      5,351     20,539      13,903
  General and administrative............................    1,685      1,159      4,728       3,321
  Stock-based compensation..............................       66         34        199         220
  Merger costs..........................................       --         --      2,700          --
                                                          -------    -------    -------    --------
    Total operating expenses............................   13,196      8,692     36,897      23,194
                                                          -------    -------    -------    --------
    LOSS FROM OPERATIONS................................     (839)    (4,876)    (7,171)    (12,898)
Interest income (expense), net..........................      581        (35)     1,384         101
                                                          -------    -------    -------    --------
NET LOSS................................................  $  (258)   $(4,911)   $(5,787)   $(12,797)
                                                          =======    =======    =======    ========
NET LOSS PER SHARE:
  Basic and diluted net loss per share..................  $ (0.02)   $ (1.31)   $ (0.53)   $  (3.70)
                                                          =======    =======    =======    ========
  Pro forma basic and diluted net loss per share........  $ (0.02)   $ (0.62)   $ (0.52)   $  (1.66)
                                                          =======    =======    =======    ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
  Shares used in computing basic and diluted net loss
    per share...........................................   11,645      3,745     10,852       3,461
                                                          =======    =======    =======    ========
  Shares used in computing pro forma basic and diluted
    net loss per share..................................   11,645      7,902     11,162       7,703
                                                          =======    =======    =======    ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       3
<PAGE>
                              ALLAIRE CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               NINE MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
  Net loss..................................................  $ (5,787)  $(12,797)
  Adjustments to reconcile net loss to net cash provided by
    (used for) operating activities:
    Depreciation and amortization...........................     1,806      1,315
    Compensation expense relating to the issuance of equity
      instruments...........................................       199        220
    Changes in assets and liabilities, net of effects from
      acquisitions:
      Accounts receivable...................................    (3,194)    (1,096)
      Prepaid expenses and other current assets.............      (495)      (431)
      Other assets..........................................      (418)      (279)
      Accounts payable......................................      (788)       198
      Accrued expenses......................................     7,085      2,867
      Deferred revenue......................................     5,554      1,773
                                                              --------   --------
      Total adjustments.....................................     9,749      4,567
                                                              --------   --------
      Net cash provided by (used for) operating
        activities..........................................     3,962     (8,230)
                                                              --------   --------
Cash flows from investing activities:
  Purchases of short-term investments.......................   (55,554)    (1,865)
  Sales of short-term investments...........................    30,305      6,283
  Purchases of property and equipment.......................    (2,399)    (1,895)
                                                              --------   --------
      Net cash (used for) provided by investing
        activities..........................................   (27,648)     2,523
                                                              --------   --------
Cash flows from financing activities:
  Proceeds from the issuance of notes payable...............        --      1,798
  Principal payments on capital lease obligations...........      (252)      (363)
  Principal payments on promissory notes....................    (1,500)        --
  Principal payments on notes payable.......................    (1,453)        --
  Proceeds from sale of common stock, net of issuance
    costs...................................................    54,659        502
  Proceeds from sale of convertible preferred stock, net of
    issuance costs..........................................        --          5
  Payment received on stock subscription receivable.........        16         --
                                                              --------   --------
      Net cash provided by financing activities.............    51,470      1,942
                                                              --------   --------
Net increase (decrease) in cash and cash equivalents........    27,784     (3,765)
Cash and cash equivalents, beginning of period..............     3,247      7,190
                                                              --------   --------
Cash and cash equivalents, end of period....................  $ 31,031   $  3,425
                                                              ========   ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
  Cash paid for interest....................................  $    278   $    170
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
  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         --
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       4
<PAGE>
                              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
1998 amounts have been reclassified to conform to the 1999 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, 1998 and the
Company's Registration Statement on Form S-1/A filed on September 15, 1999
(Registration No. 333-86563).

NET LOSS PER SHARE

    Net loss per share is computed under SFAS No. 128, "Earnings Per Share."
Basic net 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 loss per share does not differ from basic net loss per
share since potential common shares from conversion of preferred stock, stock
options and warrants and outstanding shares of common stock subject to
repurchase are anti-dilutive for all periods presented. Pro forma basic and
diluted net 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.

COMPREHENSIVE INCOME

    Effective January 1, 1998, Allaire adopted SFAS No. 130 "Reporting
Comprehensive Income." This statement requires that a full set of general
purpose financial statements be expanded to include the reporting of
"comprehensive income." Comprehensive income is comprised of two components, net
income and other comprehensive income. During the quarter and nine months ended
September 30, 1999 and 1998, Allaire had no items qualifying as other
comprehensive income; accordingly, the adoption of SFAS No. 130 had no impact on
Allaire's financial statements.

2. PUBLIC OFFERINGS

    In January 1999, Allaire sold 2,875,000 shares of its common stock through
an initial public offering. Net proceeds from the offering were approximately
$52.3 million after deducting the underwriting discount and other offering
expenses. At the time of the initial public offering, all of Allaire's
outstanding preferred stock automatically converted into 3,848,941 shares of
common stock.

    In September 1999, Allaire sold 1,000,000 shares of common stock and selling
stockholders sold 1,400,000 shares of common stock through a public offering.
The Company's net proceeds from the

                                       5
<PAGE>
                              ALLAIRE CORPORATION

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. PUBLIC OFFERINGS (CONTINUED)

offering were approximately $58.1 million after deducting the underwriting
discount and other offering expenses. Proceeds from the transaction were
received by Allaire in October 1999.

3. ACQUISITIONS

    On April 12, 1999, Allaire completed its acquisition of Bright Tiger
Technologies, Inc. ("Bright Tiger"). Bright Tiger develops and markets Web site
resource management software. In connection with the transaction, Allaire issued
288,583 shares of its common stock for all of the issued and outstanding equity
securities of Bright Tiger. On June 25, 1999, Allaire completed its acquisition
of Live Software, Inc. ("Live Software"). Live Software develops, markets and
supports server-side Java development and deployment technology. In connection
with the transaction, Allaire issued 528,376 shares of its common stock for all
of the issued and outstanding equity securities of Live Software. Allaire
recorded merger related costs of $2.7 million in the quarter ended June 30, 1999
primarily related to professional fees, facility closings, severance packages
and related costs associated with these acquisitions. These mergers were
accounted for as poolings of interests. Accordingly, Allaire's consolidated
financial statements have been restated to include the accounts and operations
of Bright Tiger and Live Software for all periods presented.

    Prior to these mergers, revenues and net income of the combined entities for
the three-month period ended March 31, 1999 and 1998 are presented in the
following table. Prior to these mergers during the quarter ended March 31, 1999,
the companies had intercompany sales of $40,000. The intercompany sales have
been eliminated and certain amounts in the merged companies' financial
statements were reclassified to conform to Allaire's presentations.

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31,
                                                              -----------------------------
PRO FORMA RESULTS                                                1999              1998
-----------------                                             -----------       -----------
                                                                       (UNAUDITED)
<S>                                                           <C>               <C>
Revenue:
  Allaire...................................................  $ 7,836,000       $ 4,032,000
  Bright Tiger..............................................      168,000            33,000
  Live Software.............................................      693,000            27,000
                                                              -----------       -----------
  Combined..................................................  $ 8,697,000       $ 4,092,000
Net Income (Loss):
  Allaire...................................................  $(1,684,000)      $(2,211,000)
  Bright Tiger..............................................   (1,199,000)       (1,849,000)
  Live Software.............................................      267,000            (5,000)
                                                              -----------       -----------
  Combined..................................................  $(2,616,000)      $(4,065,000)
</TABLE>

                                       6
<PAGE>
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 "Item 2a. Risk Factors,"
that may cause the actual results, performance and achievements of Allaire to
differ materially from those indicated by the forward-looking statements.

OVERVIEW

    Allaire develops, markets and supports Web application servers and related
software products that enable the development and deployment of sophisticated
e-business Web sites and applications. Allaire derives a majority of its revenue
from its three primary products, ColdFusion, JRun and HomeSite. In
November 1998, Allaire released versions 4.0 of its primary products, along with
the introduction of a new application server version, ColdFusion Enterprise
Server.

    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 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 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 Allaire's 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 54% and 43% of
total revenue for the quarters ended September 30, 1999 and 1998, respectively,
and 51% and 40% of total revenue for the nine months ended September 30, 1999
and 1998, 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 accounted for
15% and 13% of total revenue for the quarters ended September 30, 1999 and 1998,
respectively and 14% and 14% of total revenue for the nine months ended
September 30, 1999 and 1998, respectively.

    In April 1999, Allaire completed a merger with Bright Tiger by issuing
288,583 shares of Allaire common stock for all of the issued and outstanding
equity securities of Bright Tiger. Bright Tiger provides software designed to
enhance the performance, availability and manageability of large-scale Internet
sites and Web applications. Allaire had previously licensed technology from
Bright Tiger that was incorporated in certain Allaire ColdFusion products. In
June 1999, Allaire completed a merger with Live Software by

                                       7
<PAGE>
issuing 528,376 shares of Allaire common stock for all of the issued and
outstanding equity securities of Live Software. Live Software develops, markets
and supports server-side Java development and deployment technology. Live
Software's principal product, JRun, is a leading server-side Java development
and deployment engine. Allaire recorded merger related costs of $2.7 million in
the quarter ended June 30, 1999 primarily related to professional fees, facility
closings, severance packages and related costs associated with these
acquisitions. Allaire accounted for each of these acquisitions as a pooling of
interests.

    Allaire has experienced net losses in each fiscal period since its inception
and, as of September 30, 1999, had an accumulated deficit of $37.0 million. Such
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 Allaire's infrastructure. Allaire expects to increase its
expenditures in all areas in order to execute its business plan, particularly in
research and development and sales and marketing. The planned increase in sales
and marketing expense will primarily result from the hiring of additional sales
force personnel to focus on major account sales, and marketing programs to
increase brand awareness.

    Allaire's limited operating history and the undeveloped nature of the market
for Web development products make predicting future revenue difficult. Allaire's
expense levels are based, in part, on its expectations regarding future revenue
increases, and to a large extent such expenses are fixed, particularly in the
short term. There can be no assurance that Allaire's expectations regarding
future revenue are accurate. Moreover, Allaire may be unable to adjust spending
in a timely manner to compensate for any unexpected revenue shortfall.
Accordingly, any significant shortfall of revenue in relation to Allaire's
expectations would likely cause significant declines in Allaire's quarterly
operating results.

    Allaire is also increasing its sales and marketing efforts focused on larger
purchases by larger customers. Such transactions are generally more complex and
may increase the length of Allaire's average sales cycle. Allaire anticipates
that an increasing portion of its revenue could be derived from large orders, in
which case timing of receipt and fulfillment of any such orders could cause
fluctuations in Allaire's operating results, particularly on a quarterly basis.

    Due to the foregoing factors, Allaire's operating results are difficult to
forecast. Allaire believes that period-to-period comparisons of its historical
operating results are not meaningful and should not be relied upon as an
indication of future performance. Also, Allaire's operating results may fall
below its expectations or the expectations of securities analysts or investors
in some future quarter. In such event, the market price of Allaire's common
stock would likely be materially adversely affected.

RESULTS OF OPERATIONS

    REVENUE

    Total revenue increased 174% from $5.5 million for the quarter
September 30, 1998 to $15.1 million for the quarter ended September 30, 1999.
Total revenue increased 156% from $14.4 million for the nine months ended
September 30, 1998 to $36.8 million for the nine months ended September 30,
1999.

    SOFTWARE LICENSE FEES.  Revenue from software license fees increased 182%
from $4.3 million for the quarter ended September 30, 1998 to $12.3 million for
the quarter ended September 30, 1999. Revenue from software license fees
increased 146% from $12.2 million for the nine months ended September 30, 1998
to $30.0 million for the nine months ended September 30, 1999. This increase was
primarily due to an increase in the number of licenses sold to use Allaire's
ColdFusion and JRun products. Increases in product prices associated with the
release of new versions of Allaire's products during the fourth quarter of 1998
also contributed to the growth in revenue.

    SERVICES.  Revenue from services increased 143% from $1.2 million for the
quarter ended September 30, 1998 to $2.8 million for the quarter ended
September 30, 1999. Revenue from services increased 207% from $2.2 million for
the nine months ended September 30, 1998 to $6.9 million for the nine months

                                       8
<PAGE>
ended September 30, 1999. The increase was primarily attributable to growth in
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 49% from $447,000 for the quarter ended
September 30, 1998 to $668,000 for the quarter ended September 30, 1999. Cost of
software license fees increased 39% from $1.3 million for the nine months ended
September 30, 1998 to $1.8 million for the nine months ended September 30, 1999.
The increase in absolute dollars was due to higher unit sales volume. The
improvement in software license fees gross margins from 90% for the quarter
ended September 30, 1998 to 95% for the quarter ended September 30, 1999 and
from 90% for the nine months ended September 30, 1998 to 94% for the nine months
ended September 30, 1999 was primarily attributable to economies of scale
achieved with Allaire's higher sales volume.

    COST OF SERVICES.  Cost of services consists primarily of personnel costs.
Cost of services increased 65% from $1.2 million for the quarter ended
September 30, 1998 to $2.0 million for the quarter ended September 30, 1999.
Cost of services increased 88% from $2.8 million for the nine months ended
September 30, 1998 to $5.3 million for the nine months ended September 30, 1999.
The increase in absolute dollars resulted primarily from the hiring of
additional employees and the use of contract trainers to support increased
customer demand for training classes and technical support. Services gross
margins improved from (7)% for the quarter ended September 30, 1998 to 27% for
the quarter ended September 30, 1999 and from (27)% for the nine months ended
September 30, 1998 to 22% for the nine months ended September 30, 1999. The
improvement in services gross margins was primarily attributable to the
substantial growth in training revenue. Allaire anticipates that services gross
margins will decrease in the near term as Allaire invests in additional
resources to support Allaire Spectra, the Company's newly announced 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.

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 57% from $2.1 million for the quarter ended
September 30, 1998 to $3.4 million for the quarter ended September 30, 1999.
Research and development expenses increased 52% from $5.8 million for the nine
months ended September 30, 1998 to $8.7 million for the nine months ended
September 30, 1999. The increase primarily resulted from salaries associated
with newly hired development personnel and product development consulting costs.
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 trade shows, seminars, advertising and new product launch activities.
Sales and marketing expenses increased 51% from $5.4 million for the quarter
ended September 30, 1998 to $8.1 million for the quarter ended September 30,
1999. Sales and marketing expenses increased 48% from $13.9 million for the nine
months ended September 30, 1998 to $20.5 million for the nine months ended
September 30, 1999. The increase was primarily attributable to costs associated

                                       9
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with additional direct sales, pre-sales support and marketing personnel, and an
increase in marketing programs, including promotions and advertising. 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 and insurance costs.
General and administrative expenses increased 45% from $1.2 million for the
quarter ended September 30, 1998 to $1.7 million for the quarter ended
September 30, 1999. General and administrative expenses increased 42% from
$3.3 million for the nine months ended September 30, 1998 to $4.7 million for
the nine months ended September 30, 1999. The increase was primarily
attributable to salaries associated with newly hired personnel and related costs
required to manage Allaire's growth and facilities expansion. Allaire expects
that its general and administrative expenses will increase in absolute dollars
as it continues to expand its staffing to support expanded operations and
facilities, and incurs expenses relating to its responsibilities as a public
company.

    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 $220,000 of
stock-based compensation for the nine months ended September 30, 1998 compared
to $199,000 of stock based compensation for the nine months ended September 30,
1999. The decrease was primarily attributable to the grant of a fully vested
option with an exercise price substantially below fair market value during the
quarter ended March 31, 1998.

    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 (EXPENSE), NET.  Interest income, net of interest expense,
increased from $(35,000) for the quarter ended September 30, 1998 to $581,000
for the quarter ended September 30, 1999. Interest income, net of interest
expense, increased from $101,000 for the nine months ended September 30, 1998 to
$1.4 million for the nine months ended September 30, 1999. The increase was due
to interest income earned from the investment of the net cash proceeds from
Allaire's initial public offering in January 1999.

    PROVISION FOR INCOME TAXES.  Allaire has incurred significant operating
losses for all periods from inception through September 30, 1999. Allaire has
recorded a valuation allowance for the full amount of its net deferred tax
assets as the future realization of the tax benefit is not sufficiently assured.

LIQUIDITY AND CAPITAL RESOURCES

    In January 1999, Allaire sold 2,875,000 shares of its common stock through
an initial public offering. Net proceeds from the offering were approximately
$52.3 million after deducting the underwriting discount and other offering
expenses. In September 1999, Allaire sold 1,000,000 shares of common stock and
selling stockholders sold 1,400,000 shares of common stock through a public
offering. Allaire's net proceeds from the offering were approximately
$58.1 million after deducting the underwriting discount and other offering
expenses. Proceeds from this transaction were received by Allaire in
October 1999. Prior to these public offerings, Allaire had funded its operations
primarily through net cash proceeds from private placements of preferred stock.
At September 30, 1999, Allaire had cash, cash equivalents and short-term
investments of $56.8 million, up from $3.7 million at December 31, 1998.

    Cash provided by operating activities for the nine months ended
September 30, 1999 was $4.0 million, primarily relating to increases in accrued
expenses and deferred revenue, offset by a net loss of $5.8 million. Cash used
for operating activities for the nine months ended September 30, 1998 was
$8.2 million

                                       10
<PAGE>
primarily relating to a net loss of $12.8 million, partially offset by increases
in accrued expenses and deferred revenue.

    Cash used for investing activities for the nine months ended September 30,
1999 was $27.6 million, primarily relating to purchases of short-term
investments. Cash provided by investing activities for the nine months ended
September 30, 1998 was $2.5 million, primarily relating to sales of short-term
investments, partially offset by property and equipment purchases.

    Cash provided by financing activities for the nine months ended
September 30, 1999 was $51.5 million, primarily due to common stock issuances.
Cash provided by financing activities for the nine months ended September 30,
1998 was $1.9 million, primarily due to the issuance of notes payable.

    As of September 30, 1999, Allaire's primary commitments consisted of
obligations related to operating leases, $1.1 million of notes payable under
equipment lines and $247,000 of capital lease obligations.

    In April 1999, Allaire completed a merger with Bright Tiger by issuing
288,583 shares of Allaire common stock for all of the issued and outstanding
equity securities of Bright Tiger. In connection with the merger, Allaire
assumed and paid off Bright Tiger debt obligations totaling approximately
$2.6 million. In June 1999, Allaire completed a merger with Live Software by
issuing 528,376 shares of Allaire common stock for all of the issued and
outstanding equity securities of Live Software.

    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.

YEAR 2000 COMPLIANCE

    Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. The use of software and computer systems that are not Year
2000 compliant could result in system failures or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities. As a result, many companies' software and computer systems may need
to be upgraded or replaced in order to comply with Year 2000 requirements.
Because ColdFusion, Homesite and JRun do not involve data storage, the ability
of a Web application built with these products to comply with Year 2000
requirements is largely dependent on whether the database underlying the
application is Year 2000 compliant. If these products are connected to a
database that is not Year 2000 compliant, the information received by an
application may be incorrect. Although Allaire believes that the current
releases of its products are Year 2000 compliant, there can be no assurance that
Web applications developed using its products will comply with Year 2000
requirements.

    The purchasing patterns of customers or potential customers may be affected
by Year 2000 issues as companies expend significant resources to correct their
current systems for Year 2000 compliance. These expenditures may result in
reduced funds available for Web development activities, which could have a
material adverse effect on Allaire's business, operating results and financial
condition. Year 2000 complications may disrupt the operation, viability or
commercial acceptance of the Internet, which could have a material adverse
impact on Allaire's business, operating results and financial condition.

                                       11
<PAGE>
    With respect to Allaire's primary internal software systems, Allaire either
has received written confirmations from software vendors that the software it
installed is Year 2000 compliant or is in the process of installing available
software upgrades or remedying software to achieve Year 2000 compliance. Based
on the foregoing, Allaire currently has no reason to believe that its internal
software systems will not be Year 2000 compliant by December 31, 1999. To date,
Allaire has not incurred significant incremental costs in order to comply with
Year 2000 requirements and does not believe it will incur significant
incremental costs in the foreseeable future. However, there can be no assurance
that Year 2000 errors or defects will not be discovered in Allaire's internal
software systems and, if such errors or defects are discovered, there can be no
assurance that the defects or the costs of making such systems Year 2000
compliant will not have a material adverse effect on Allaire's business,
operating results and financial condition.

    Allaire relies on third party vendors which may not be Year 2000 compliant
for certain equipment and services. In addition, many of Allaire's distributors
are dependent on commercially available operating systems, which may be impacted
by Year 2000 complications. In the course of its Year 2000 review, Allaire has
contacted key vendors and distributors and received assurances of Year 2000
compliance from each. Failure of systems maintained by Allaire's vendors or
distributors to operate properly with regard to the Year 2000 and thereafter
could require Allaire to incur significant unanticipated expenses to remedy any
problems or replace affected vendors, could reduce Allaire's revenue from its
indirect distribution channel and could have a material adverse effect on
Allaire's business, operating results and financial condition.

ITEM 2A: RISK FACTORS

ALLAIRE HAS SUBSTANTIAL NET LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.

    Since Allaire began operations, it has incurred substantial net losses in
every fiscal period. Allaire cannot be certain when it will become profitable,
if at all. Failure to achieve profitability within the time frame expected by
investors may adversely affect the market price of Allaire's common stock. At
September 30, 1999, Allaire had an accumulated deficit of $37.0 million. Allaire
has generated relatively small amounts of revenue until recent fiscal quarters,
while increasing expenditures in all areas, particularly in sales and marketing
and research and development, in order to execute its business plan. Although
Allaire has experienced revenue growth in recent periods, the growth has been
off of a small base, and it is unlikely that the recent rate of growth is
sustainable.

DISAPPOINTING QUARTERLY REVENUE AND OPERATING RESULTS COULD CAUSE THE PRICE OF
  ALLAIRE'S COMMON STOCK TO FALL.

    Allaire's quarterly revenue and operating results are difficult to predict
and may fluctuate significantly from quarter to quarter. If Allaire's quarterly
revenue or operating results fall below the expectations of investors or public
market analysts, the price of its common stock could fall substantially.
Allaire's quarterly revenue may fluctuate for several reasons, including the
following:

    - the market for web application servers 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 its average sales price continues to
      increase as expected, Allaire expects the sales cycle to lengthen. As a
      result, Allaire has difficulty determining whether and when it will
      receive license revenue from a particular customer.

    In addition, because Allaire's revenue from training and consulting services
is largely correlated with its license revenue, a decline in license revenue
could also cause a decline in its services revenue in the same quarter or in
subsequent quarters. Other factors, many of which are outside Allaire's control,
could also cause variations in its quarterly revenue and operating results.

                                       12
<PAGE>
    Most of Allaire's expenses, such as employee compensation and rent, are
relatively fixed. Moreover, 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.

ALLAIRE'S LIMITED OPERATING HISTORY MAKES THE EVALUATION OF ITS BUSINESS AND
  PROSPECTS DIFFICULT.

    Allaire recorded its first revenue upon delivery of ColdFusion 1.5 to
customers in February 1996. Accordingly, Allaire has only a limited operating
history on which you can base your evaluation of its business and prospects. In
addition, Allaire's prospects must be considered in light of the risks and
uncertainties encountered by companies in an early stage of development in new
and rapidly evolving markets, particularly those markets which depend on the
Internet.

THE DEVELOPMENT OF A MARKET FOR ALLAIRE'S PRODUCTS IS UNCERTAIN.

    If the market for web application servers and packaged e-business
applications does not grow at a significant rate, Allaire's business, operating
results and financial condition will be materially adversely affected. Web
technology has been used widely for only a short time, and the market for web
application servers and packaged e-business applications is new and rapidly
evolving. As is typical for new and rapidly evolving industries, demand for
recently introduced products is highly uncertain.

ALLAIRE'S FUTURE SUCCESS WILL DEPEND ON ITS 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 announced the release of the beta test version
of Allaire Spectra on July 21, 1999 and plans to begin commercial shipments by
the end of 1999. Market acceptance of Allaire Spectra will depend on the market
for packaged e-business applications and customer demand for the specific
functionality of Allaire Spectra. Allaire cannot assure you that either will
occur. In addition, Allaire cannot assure you that Allaire Spectra will meet the
performance needs or expectations of its customers when shipped or that it will
be free of significant software defects or bugs. 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 BUSINESS WILL BE ADVERSELY AFFECTED IF THE INTERNET DOES NOT BECOME A
  VIABLE AND SUBSTANTIAL COMMERCIAL MEDIUM.

    Allaire's future success will depend upon the widespread adoption of the
Internet as a primary medium for commerce and other business applications. If
the Internet does not become a viable and substantial commercial medium,
Allaire's business, operating results and financial condition will be materially
adversely affected. The Internet has experienced, and is expected to continue to
experience, significant user and traffic growth. This growth has, at times,
caused user frustration with slow access and download times. The Internet
infrastructure may not be able to support the demands placed on it by continued
growth. Moreover, critical issues concerning the commercial use of the Internet,
such as security, reliability, cost, accessibility and quality of service,
remain unresolved and may negatively affect the growth of Internet use or the
attractiveness of commerce and business communication on the Internet. In
addition, the Internet could lose its viability due to delays in the development
or adoption of new standards and protocols to handle increased activity. As
commercial use of the Internet increases, federal, state and foreign agencies
could adopt regulations covering issues such as user privacy, content and
taxation of products and services. If enacted, government regulations could
limit the market for Allaire's products and services.

                                       13
<PAGE>
REGULATIONS OR CONSUMER CONCERNS REGARDING PRIVACY ON THE INTERNET COULD LIMIT
  MARKET ACCEPTANCE OF ALLAIRE SPECTRA.

    The personalization features of Allaire Spectra will allow Allaire's
customers to develop and maintain web user profiles to tailor content to
specific users. Profile development involves both data supplied by the user and
data derived from the user's web site behavior. Privacy concerns may cause users
to resist providing personal data or to avoid web sites that track user
behavior. In addition, legislative or regulatory requirements may heighten
consumer concerns if businesses must notify web site users that user profile
data may be used to direct product promotion and advertising to users. Other
countries and political entities, such as the European Economic Community, have
adopted such legislation or regulatory requirements. The United States may do so
in the future. If privacy legislation is enacted or consumer privacy concerns
limit the market acceptance of personalization software, Allaire's business,
financial condition and operating results could be harmed.

    Allaire Spectra uses cookies to track demographic information and user
preferences. A cookie is information keyed to a specific user that is stored on
a computer's hard drive, typically without the user's knowledge. Cookies are
generally removable by the user, although removal could affect the content
available on a particular site. A number of governmental bodies and commentators
in the United States and abroad have urged passage of laws limiting or
abolishing the use of cookies. If such laws are passed or if users begin to
delete or refuse cookies as a common practice, market demand for Allaire Spectra
could be reduced.

ALLAIRE COMPETES WITH MICROSOFT WHILE SIMULTANEOUSLY SUPPORTING MICROSOFT
  TECHNOLOGIES.

    Allaire currently competes with Microsoft in the market for web application
servers and related software products while simultaneously maintaining a working
relationship with Microsoft. Microsoft has a longer operating history, a larger
installed base of customers and substantially greater financial, distribution,
marketing and technical resources than Allaire. As a result, Allaire may not be
able to compete effectively with Microsoft now or in the future, and its
business, operating results and financial condition may be materially adversely
affected.

    Allaire expects that Microsoft's commitment to and presence in the web
application server and related software products market will substantially
increase competitive pressure in the market. Allaire believes that Microsoft
will continue to incorporate web application server technology into its
operating system software and certain of its server software offerings, possibly
at no additional cost to its users.

    Allaire believes that it must maintain a working relationship with Microsoft
to achieve success. Most of Allaire's customers use Microsoft-based operating
platforms, so it is critical to its success that its products be closely
integrated with Microsoft technologies. Notwithstanding Allaire's historical and
current support of the Microsoft platform, Microsoft may in the future promote
technologies and standards more directly competitive with or not compatible with
Allaire's technology.

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. In
the portion of the market with the highest product prices, Allaire competes with
large web and database platform companies that offer a variety of software
products. Allaire also competes with a number of medium-sized and start-up
companies that have introduced or that are developing web application servers
and packaged e-business applications. In the

                                       14
<PAGE>
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'S FAILURE TO EFFECTIVELY INTEGRATE THE BUSINESSES OF BRIGHT TIGER AND
  LIVE SOFTWARE MAY ADVERSELY AFFECT ITS BUSINESS.

    On April 12, 1999, Allaire merged with Bright Tiger Technologies, and on
June 25, 1999, Allaire merged with Live Software. A failure to effectively
integrate either of these businesses could have a material adverse effect on
Allaire's business, operating results and financial condition. There can be no
assurance that Allaire will be able to develop, market and sell the Bright Tiger
and Live Software products successfully. In addition, there can be no assurance
that Allaire will be able to retain personnel from these companies.

IF ALLAIRE ACQUIRES OTHER BUSINESSES, IT WILL BE SUBJECT TO RISKS THAT COULD
  ADVERSELY AFFECT ITS FINANCIAL CONDITION AND OPERATING RESULTS.

    From time to time, Allaire may pursue additional acquisitions to obtain
complementary products, services and technologies. An acquisition may not
produce the revenue, earnings or business synergies that Allaire anticipated,
and an acquired product, service or technology might not perform as expected. In
pursuing any acquisition, Allaire's management could spend a significant amount
of time and effort in identifying and completing the acquisition. If Allaire
completes an acquisition, it would probably have to devote a significant amount
of management resources to integrate the acquired business with Allaire's
existing business.

    To pay for an acquisition, Allaire might use its stock or cash.
Alternatively, Allaire might borrow money from a bank or other lender. If
Allaire uses its stock, Allaire stockholders would experience dilution of their
ownership interests. If Allaire uses cash or debt financing, its financial
liquidity will be reduced.

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.

                                       15
<PAGE>
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, 1999, revenue from the
indirect distribution channel accounted for 51% of Allaire's total revenue, and
one distributor, Ingram Micro, accounted for 37% of total revenue. For the nine
months ended September 30, 1998, revenue from Allaire's indirect distribution
channel accounted for 40% of total revenue and Ingram Micro accounted for 22% 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 expect 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, including budgeting
constraints, internal purchase approval review procedures and the inclusion or
exclusion of Allaire's products on customers' approved standards lists.

THE MARKET FOR ALLAIRE'S PRODUCTS IS RAPIDLY CHANGING, AND THE FAILURE OF
  ALLAIRE'S PRODUCTS TO CONTINUE TO SATISFY THE WEB DEVELOPER COMMUNITY WOULD
  ADVERSELY AFFECT OPERATING RESULTS.

    If Allaire's products do not continue to satisfy the web developer community
or otherwise fail to sustain sufficient market acceptance, Allaire's business,
operating results and financial condition would be materially adversely
affected. Allaire believes that a significant contributing factor to its initial
growth has been its ability to create and maintain strong relationships with the
community of web developers that initially adopted Allaire products. This
community of early adopters demands rapid improvements in the performance,
features and reliability of Allaire products, as well as a high level of
customer service. Due in part to the emerging nature of the web application
server and packaged e-business applications market and the substantial resources
available to many market participants, Allaire believes there is a time-limited
opportunity to achieve product adoption.

ALLAIRE'S EFFORTS TO DEVELOP BRAND AWARENESS MAY BE UNSUCCESSFUL, WHICH COULD
  LIMIT THE ABILITY TO ACQUIRE NEW CUSTOMERS AND GENERATE ONGOING REVENUE
  GROWTH.

    Allaire believes that developing and maintaining awareness of the "Allaire,"
"ColdFusion," "HomeSite," "JRun" and "Allaire Spectra" brand names is critical
to achieving widespread acceptance of its products. If Allaire fails to promote
and maintain its brands or incur significant related expenses, its business,
operating results and financial condition could be materially adversely
affected. To promote Allaire brands, Allaire may find it necessary to increase
its marketing budget or otherwise increase its financial commitment to creating
and maintaining brand awareness among potential customers. Although Allaire has
obtained a United States registration of the trademark "ColdFusion," it is aware
of other companies, including competitors, that use the word "Fusion" in their
marks alone or in combination with other words, and Allaire does not expect to
be able to prevent third party uses of the word "Fusion" for competing goods and
services. For example, NetObjects markets its principal products for designing,

                                       16
<PAGE>
building and updating web sites under the names "NetObjects Fusion" and
"NetObjects Team Fusion." Competitors that use marks that are similar to
Allaire's brand names may cause confusion among actual and potential customers,
which could prevent Allaire from achieving significant brand recognition.

TO BE COMPETITIVE, ALLAIRE MUST CONTINUE TO ENHANCE ITS EXISTING PRODUCTS AND
  DEVELOP NEW PRODUCTS.

    To be competitive, Allaire must develop and introduce product enhancements
and new products which increase its customers' ability to develop and deploy web
applications. In the past, Allaire has been forced to delay introduction of
several new products. If Allaire fails to develop and introduce new products and
enhancements successfully and on a timely basis, it could have a material
adverse effect on Allaire's business, operating results and financial condition.

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 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 156% for the nine months ended September 30, 1999 from the same period
in 1998. The number of Allaire's employees increased from 93 at January 1, 1998
to 241 at September 30, 1999. To manage future growth effectively Allaire must
maintain and enhance its financial and accounting systems and controls,
integrate new personnel and manage expanded operations.

IF ALLAIRE LOSES THE SERVICES OF JOSEPH ALLAIRE OR DAVID ORFAO, ITS BUSINESS
  WOULD SUFFER.

    Allaire's future success depends to a significant degree on the skills,
experience and efforts of Joseph J. Allaire, Allaire's founder, Chairman of the
Board, Chief Technology Officer and Executive Vice President, and David J.
Orfao, Allaire's President and Chief Executive Officer. The loss of the services
of Mr. Allaire or Mr. Orfao could have a material adverse effect on Allaire's
business, operating results and financial condition. Allaire also depends on the
ability of its executive officers and other members of senior management to work
effectively as a team. Allaire does not have employment agreements with any of
its executive officers, and Allaire does not have any key person life insurance
other than for Mr. Allaire and Mr. Orfao.

ALLAIRE MAY BE UNABLE TO HIRE AND RETAIN THE SKILLED PERSONNEL IT NEEDS TO
  SUCCEED.

    Qualified personnel are in great demand throughout the software industry.
Allaire's success depends in large part upon its ability to attract, train,
motivate and retain highly skilled employees, particularly sales and marketing
personnel, software engineers and other senior personnel. Allaire's failure to
attract and

                                       17
<PAGE>
retain the highly trained technical personnel that are integral to its direct
sales, product development, service and support teams may limit the rate at
which Allaire can generate sales and develop new products or product
enhancements. This could have a material adverse effect on its business,
operating results and financial condition.

ALLAIRE'S SUCCESS DEPENDS ON ITS ABILITY TO PROTECT ITS PROPRIETARY TECHNOLOGY.

    Allaire's success depends to a significant degree upon the protection of its
software and other proprietary technology. The unauthorized reproduction or
other misappropriation of Allaire's proprietary technology could enable third
parties to benefit from its technology without paying Allaire for it. This could
have a material adverse effect on Allaire's business, operating results and
financial condition.

    Although Allaire has taken steps to protect its proprietary technology, they
may be inadequate. Existing trade secret, copyright and trademark laws offer
only limited protection. In addition, Allaire relies in part on "shrinkwrap" and
"clickwrap" licenses that are not signed by the end user and, therefore, may be
unenforceable under the laws of certain jurisdictions. Moreover, the laws of
other countries in which Allaire markets its products may afford little or no
effective protection of its intellectual property.

    If Allaire's resort to legal proceedings to enforce its intellectual
property rights, the proceedings could be burdensome and expensive and could
involve a high degree of risk.

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 its products or seek to obtain licenses from third
parties to continue to offer its products. Any efforts to reengineer its
products or obtain licenses on commercially reasonable terms may not be
successful, and, in any case, would substantially increase Allaire's costs and
have a material adverse effect on its 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.

    Although Allaire is generally indemnified against claims that third party
technology that Allaire 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 its 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 its 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.

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<PAGE>
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 of
Allaire's 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.

ALLAIRE COULD INCUR SUBSTANTIAL COSTS AS A RESULT OF PRODUCT LIABILITY CLAIMS
  RELATING TO ITS CUSTOMERS' CRITICAL BUSINESS OPERATIONS.

    Many of the web applications developed and deployed with Allaire's products
are critical to the operations of its customers' businesses. Any failure in a
customer's web application 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.

ALLAIRE MAY BE AFFECTED BY UNEXPECTED YEAR 2000 PROBLEMS.

    Many existing computer systems and software products do not properly
recognize dates after December 31, 1999. This "Year 2000" problem could result
in miscalculations, data corruption, system failures or disruptions of
operations. Allaire is subject to potential Year 2000 problems affecting its
products, its internal systems and the systems of its vendors and distributors,
any of which could have a material adverse effect on its business, operating
results and financial condition.

    Because ColdFusion, Homesite and JRun do not involve data storage, the
ability of a web application built with these products to comply with Year 2000
requirements is largely dependent on whether the database underlying the
application is Year 2000 compliant. Therefore, there can be no assurance that
web applications developed using Allaire's products will comply with Year 2000
requirements. For example, if these products are connected to a database that is
not Year 2000 compliant, the information received by the application may be
incorrect.

    Some of Allaire's customers and potential customers have implemented
policies that prohibit or discourage changing their internal computer systems
until after January 1, 2000. Allaire's revenue may suffer if potential customers
delay the purchase of Allaire's products until after January 1, 2000. Purchasing
decisions may be delayed as potential customers halt development of their
internal computer systems or use their information technology budgets to address
Year 2000 issues. If Allaire's potential customers delay purchasing or
implementing Allaire products in preparation for the Year 2000 problem,
Allaire's business could be seriously harmed.

    In addition, there can be no assurance that Year 2000 errors or defects will
not be discovered in Allaire's internal software systems and, if such errors or
defects are discovered, there can be no assurance that the defects or the costs
of making such systems Year 2000 compliant will not be material.

    Year 2000 errors or defects in the internal systems maintained by Allaire's
vendors or distributors could require Allaire to incur significant unanticipated
expenses to remedy any problems or replace affected vendors and could reduce
Allaire's revenue from its indirect distribution channel.

                                       19
<PAGE>
ANTI-TAKEOVER PROVISIONS OF ALLAIRE'S CHARTER AND DELAWARE LAW COULD PREVENT OR
  DELAY A CHANGE OF CONTROL OF THE COMPANY.

    Allaire's corporate documents and Delaware law contain provisions that might
enable its management to resist a takeover of the company. These provisions
might discourage, delay or prevent a change in the control of the company or a
change in Allaire's management. These provisions could also discourage proxy
contests and make it more difficult for you and other stockholders to elect
directors and take other corporate actions. The existence of these provisions
could limit the price that investors might be willing to pay in the future for
shares of common stock.

THE PRICE OF ALLAIRE'S COMMON STOCK HAS BEEN AND MAY CONTINUE TO BE VOLATILE.

    The price of Allaire's common stock has been and may continue to be
volatile. The price of Allaire's common stock may fluctuate significantly in
response to a number of events and factors relating to the company, its
competitors and the market for its products, such as:

    - quarterly variations in Allaire's operating results;

    - announcements of new technological innovations or new products by Allaire
      or its competitors;

    - changes in financial estimates and recommendations by securities analysts;
      and

    - news relating to trends in Allaire's markets.

    In addition, the stock market in general, and the market prices for
Internet-related companies in particular, have experienced extreme volatility
that often has been unrelated to the operating performance of these companies.
These broad market and industry fluctuations may adversely affect the market
price of Allaire's common stock, regardless of its operating performance.
Recently, when the market price of a stock has been volatile, holders of that
stock have often instituted securities class action litigation against the
company that issued the stock. If any of Allaire's stockholders brought such a
lawsuit against Allaire, Allaire could incur substantial costs defending the
lawsuit. The lawsuit could also divert the time and attention of Allaire's
management.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

    As of September 30, 1999, Allaire is exposed to market risks which primarily
include changes in U.S. interest rates. Allaire maintains a significant portion
of its cash, cash equivalents and short-term investments in financial
instruments with purchased maturities of twelve months or less. Allaire does not
hold derivative financial instruments or equity securities in its investment
portfolio. Allaire's 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.

                                       20
<PAGE>
                           PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

    (d) Use of Proceeds

    The Company sold 2,875,000 shares of its common stock, pursuant to a
Registration Statement on Form S-1 (Registration No. 333-68639), which was
declared effective by the Securities and Exchange Commission on January 22, 1999
(the "Effective Date"). The managing underwriters of the offering were Credit
Suisse First Boston, Dain Rausher Wessels and Banc of America Securities LLC.
The aggregate gross proceeds of the offering were $57.5 million. The Company's
total expenses in connection with the offering were approximately $5.2 million,
of which approximately $4.0 million was for underwriting discounts and
commissions and approximately $1.2 million was for other expenses paid to
persons other than directors or officers of the Company or persons owning more
than 10 percent of any class of equity securities of Allaire. The Company's net
proceeds from the offering were approximately $52.3 million. From the Effective
Date through September 30, 1999, the Company used approximately $1.9 million of
the net proceeds primarily to fund operating losses and working capital
requirements. As of September 30, 1999, the Company had approximately
$50.4 million of net proceeds remaining, and pending use of the proceeds, the
Company intends to invest such proceeds primarily in high-quality corporate and
government debt.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) Exhibits:

<TABLE>
<S>         <C>
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)
</TABLE>

    (b) A report on Form 8-K was filed on September 3, 1999, regarding financial
       information for July 1999, disclosed to comply with pooling of interests
       requirements.

                                       21
<PAGE>
                                   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.

Dated: November 15, 1999

<TABLE>
<S>                                                    <C>  <C>
                                                       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)
</TABLE>

                                 EXHIBIT INDEX

<TABLE>
<S>         <C>

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)
</TABLE>

                                       22