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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR

FOR THE TRANSITION PERIOD FROM                                      to                                     

COMMISSION FILE NUMBER 000-30883

I-MANY, INC.

(Exact name of registrant as specified in its charter)

(207) 774-3244
(Registrant's telephone number, including area code)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        As of March 15, 2002, 39,008,933 shares of the registrant's common stock, $.0001 par value, were issued and outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant (based on the closing price for the common stock in the Nasdaq National Market on March 15, 2002) was approximately $238 million.

DOCUMENTS INCORPORATED BY REFERENCE

        The information called for by Part III is incorporated by reference to specified portions of the Registrant's definitive Proxy Statement to be issued in conjunction with the Registrant's 2002 Annual Meeting of Stockholders, which is expected to be filed not later than 120 days after the Registrant's fiscal year ended December 31, 2001.

I-MANY, INC.
FORM 10-K
DECEMBER 31, 2001

TABLE OF CONTENTS

PART I

        The information in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statement. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those discussed elsewhere in this report in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Certain Factors That May Affect Future Results" and the risks discussed in our other Securities and Exchange Commission ("SEC") filings.

ITEM 1. BUSINESS

Overview

        We provide software and related professional services that allow our clients to manage important aspects of their contract-based or trade agreement-based business-to-business relationships, including:

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Incentive budgeting, deal modeling and request for quotation/request for proposal ("RFQ/RFP") processing



•

Contract creation, repository and change notifications for complex supply-chains



•

Verification of compliance and accuracy of orders, shipments, invoices, rebates and payments to ensure error-free operations and proper performance-based incentives



•

Settlement and dispute capabilities to resolve payment discrepancies due to contracts, and



•

Evaluation of the effectiveness of contracts and business operations.

        Our clients include supply chain participants on both the "buy" side and "sell" side of business transactions across numerous vertical markets, including manufacturers, distributors, demand aggregators, retailers, business-to-business e-commerce exchanges and purchasers.

        Our primary products and services were originally developed to manage complex contract purchasing relationships in the healthcare industry. Over the past year, we have increased the percentage of business that occurs in industries outside healthcare from approximately 4% of revenues in 2000 to approximately 25% in 2001. Our products are currently used by more than 190 clients, including eight of the largest ten and 15 of the largest 20 pharmaceutical manufacturers, ranked according to 2000 annual healthcare revenues. Our clients also include leading companies from the consumer products, foodservice, disposables, consumer durables, industrial products, chemicals, apparel, telecommunications and other industries. Our clients include Bayer, Boehringer Ingelheim, Premier, Inc., Glaxo Smith Kline, Procter & Gamble, Frito-Lay, Handguards, Pepsi-Cola, Kellogg's, and ConAgra.

        We deliver our products through several means, primarily through software licensed for installation on our clients' computer systems and also software licensed on an application service provider basis, which we host on our servers as well as on servers hosted and supported by 3^rd party providers.

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Business Developments

        In 2001, we completed a series of acquisitions, including:

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On January 25, 2001, we acquired all of the outstanding capital stock of Vintage Software, Inc., which marketed a competing product to mid-market pharmaceutical companies.



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On March 2, 2001, we acquired all of the outstanding capital stock of Intersoft International, Inc., which marketed software to companies and brokers in the food service industry.



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On April 9, 2001, we acquired all of the outstanding capital stock of BCL Vision Ltd. (now named "I-many International Limited"), a provider of collection and dispute management software and services based in London, United Kingdom.



•

On August 16, 2001, the Company acquired, through a merger transaction, Provato, Inc., a provider of contract management and compliance solutions based in Oakland, California.

        In April 2001, we entered into a Marketing Alliance Agreement with Accenture LLP, pursuant to which Accenture has designated us as their preferred provider of automated contract management solutions and we have designated Accenture as our preferred business integration provider for our CARS suite of products.

        We have also licensed the rights to use and commercialize the intellectual property of other companies, and we have made a minority investment in a complementary technology company.

Industry Background

        Supply chain participants frequently use purchasing contracts and trade agreements to facilitate the purchase of goods and services. These contracts are agreements among supply chain participants, such as manufacturers, distributors, retailers, demand aggregators such as buying groups, and the end users of goods and services. These contracts allow buyers and sellers to budget, plan and manage funds and agree on prices, discounts and volume rebates. Training, maintenance and other non-price incentives can be based upon multiple factors, including:

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total volume of products purchased;



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overall sales of particular products;



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duration of the contract;



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number of parties to the contract;



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number of products covered by the contract; and



•

the purchaser's demographic characteristics.

        Other examples of contract attributes include a requirement for fulfilling shipments within prescribed time periods, advanced notifications, packaging and labeling requirements.

The Business-To-Business Marketplace

        We believe that the growth of business-to-business trade will be characterized by the increasing use of contract purchasing agreements between supply chain participants. In the consumer products, foodservice, disposables, consumer durables, industrial products, chemicals, apparel, telecommunications and other industries where complex purchase contracts exist, the process of determining the availability of incentives, compliance issues, availability of funds, non-price attribute specifications and other requirements under these contracts is often accomplished through the use of paper-based or legacy computer systems that are unsuitable for managing the volume and complexity of contract based

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purchasing. In addition, these industries employ pricing mechanisms such as chargebacks and rebates to adjust amounts paid by purchasers. Calculating, reconciling and distributing these chargebacks and rebates and other tasks associated with them often results in high administrative costs and disputes involving substantial amounts of money.

        Supply chain participants.    The business-to-business supply chain includes the following participants:

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Manufacturers of products that use business-to-business relationships, including contracts, to establish favorable prices, assure a reliable channel of distribution and offer incentives to achieve their sales and marketing goals;



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Distributors that purchase goods for resale according to the terms of the contracts negotiated between manufacturers and demand aggregators;



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Demand aggregators and other intermediaries representing groups of purchasers. Demand aggregators, such as group purchasing organizations in the healthcare industry and buying cooperatives in the consumer products and food service industries, aggregate their members' demand for products to obtain favorable pricing terms for them. Demand aggregators typically receive monthly fees from their members or receive a percentage of all transactions negotiated on their constituents' behalf;



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Purchasers and retailers of products that buy goods under contracts negotiated on their behalf by demand aggregators or other intermediaries; and



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Business-to-business e-commerce exchanges that allow supply chain participants to establish business relationships using the Internet.

        Complexity of contract purchasing.    In the industries we target, purchasing contracts typically contain pricing incentives and other mechanisms designed to meet the particular goals of the trading partners. The price of any particular product or service purchased under a typical contract may vary substantially, depending upon, among other things, external factors such as a manufacturer's market share and the purchaser's demographic characteristics, and highly specific factors such as the number of units of a particular product purchased during a specified time period. Contracts also allow buyers and sellers to budget, plan and manage funds and agree on prices, discounts and volume rebates. Training, maintenance and other non-price incentives can be based upon multiple factors. Other contract attributes include criteria such as a requirement for fulfilling shipments within prescribed time periods, advanced notifications, packaging and labeling requirements, and others.

        Contracts are often negotiated on behalf of a large number of purchasers and include pricing incentives, which often result in different prices for otherwise similarly-situated purchasers, based on the purchasers' achievement of, or failure to achieve, certain goals (usually volume-related) under the contract.

        While many purchase contract variations exist, several fundamental types of pricing mechanisms in purchase contracts are illustrative of the complexity involved. Specific examples include: chargebacks (also called "deviated billing," depending upon the industry), rebates and trade funds management. Chargebacks are generally used as an incentive tool in contracts between manufacturers and demand aggregators. Eligible members of a demand aggregator (meaning purchasers who are on a contract of the aggregator, such as a group purchasing organization or buying cooperative) order products either directly from the manufacturer or, more commonly, through a large distributor. When a product is ordered through a distributor, the distributor must sell the item at the contracted price—that is, the price negotiated between the manufacturer and the demand aggregator. Often, the manufacturer asks the distributor to sell to the member at a price below the price the distributor paid the manufacturer. In these cases, the distributor attempts to verify the eligibility of the member to receive the lower

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contract price and, if the purchaser is eligible, the distributor seeks to recover, or chargeback, from the manufacturer the difference between the distributor's cost and the lower contract price. Given the large volume of purchases under these contracts, constantly changing membership in demand aggregators, complicated eligibility requirements and disparate information systems involved, it is not uncommon for manufacturers, purchasers, demand aggregators, and distributors to calculate significantly different chargebacks, resulting in disputes among the parties.

        A second type of pricing mechanism is a rebate. Typically, rebate provisions entitle a purchaser to a return of a portion of the purchase price based on the volume of product purchased or increase in market share achieved. Rebate provisions are common in contracts between manufacturers and large volume purchasers. Manufacturers generally adopt this kind of agreement in order to further their marketing objectives. In order to determine rebates based on market share, the parties must refer to external market share data. As with chargeback contracts, the complicated task of administering rebate-based contracts often results in high administrative costs and disputes involving substantial amounts of money.

        Trade funds management gives companies, sales agents and other trading partners the ability to budget, plan and measure the success of trade promotions. Trade promotions are typical in the consumer products industry. One example of a trade promotion is the end-cap, or the display that appears at the end of an aisle in a grocery store. These end-caps are intended to increase sales volume, but the manufacturer must pay a premium for this space in the store. Manufacturers use sales volume to determine the success of each promotion of this type to achieve their sales and marketing goals. With real-time access to trade fund balances, promotions can be planned by volume or revenue with comparisons to previous years or other scenarios.

        Administrative demands of contract purchasing.    As a result of the intricacies of contract purchasing, the administration of purchase contracts can be difficult and expensive. Among other things, each participant in the supply chain must be able to:

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Target/plan trading partner relationships;



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Negotiate terms and conditions;



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Plan/monitor the impact of different pricing strategies;



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Transact or adjudicate transactions relative to the terms and conditions of the contract—often encompassing enormous volumes of data related to invoices, inventory, shipments and market share;



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Validate purchasers' eligibility for participation in specific contracts or parts of contracts including the time period in which the purchaser is on the contract, agreed-upon pricing mechanisms, trade funds, rebates and distributors' eligibility for chargebacks;



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Integrate pricing, inventory, market share and other data relevant to the contract with existing enterprise resource planning and other management systems;



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Settle disputes associated with contract and non-contract issues such as price discrepancies, non-compliance, misallocation of funds, level of earned incentives, and others; and



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Evaluate the performance of completed and in-process contracts based on the original intent of the agreement from the perspective of both buyers and sellers.

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I-Many's Solutions

        Complete offering of contract management capabilities.    We provide software and related professional services that allow our clients to manage important aspects of their contract-based or trade agreement-based business-to-business relationships, including:

•

Incentive budgeting, deal modeling and RFP/RFQ processing



•

Contract creation, repository and change notifications for complex supply-chains



•

Verification of compliance and accuracy of orders, shipments, invoices, rebates and payments to ensure error-free operations and proper performance-based incentives



•

Settlement and dispute capabilities to resolve payment discrepancies due to contracts, and



•

Evaluation of the effectiveness of contracts and business operations.

        Our clients include supply chain participants on both the "buy" side and "sell" side of business transactions across numerous vertical markets, including manufacturers, distributors, demand aggregators, retailers, public and private business-to-business e-commerce exchanges and purchasers.

        By providing this broad functionality, we eliminate the need for the users of our solutions to combine often incompatible software from multiple vendors, thereby decreasing costs and implementation time and enhancing reliability.

        Flexible product offerings.    We deliver our products through several means, including software licensed for installation on our clients' computer systems, software licensed on an application service provider basis which we host on our servers as well as on servers hosted and supported by third party providers.

Business Strategy

        Our objective is to become the leading provider of contract management solutions that enable companies to manage their business-to-business relationships more effectively. To achieve this objective, we are pursuing the following strategies:

        Target new vertical markets.    We have had success in providing contract management solutions to the healthcare and consumer products industries and intend to continue to penetrate these markets further. We also believe that the contract management solutions we provide are applicable in other vertical industries and we have sold or intend to sell these solutions into such industries as foodservice, disposables, consumer durables, industrial products, chemicals, apparel and telecommunications. It is our belief that virtually all industries are candidates for products that manage the contract lifecycle. We believe that our solutions are readily adaptable to these additional markets. For example, the percentage of revenue occurring in industries outside our initial core market of healthcare has risen from approximately 4% in 2000 to approximately 25% in 2001.

        Build upon our strength in the healthcare market.    We provide contract management solutions and services to many of the world's largest pharmaceutical and medical/surgical supply manufacturers, distributors, group purchasing organizations, and other healthcare companies. As a result of our experience in this market, we have acquired extensive industry knowledge of and experience with contracting practices and the relationships among healthcare industry participants. We believe that we have a reputation as a quality provider of complex contract management software and services and that we have and will continue to build upon that reputation and our extensive industry knowledge to offer additional services to our existing client base, and to attract new clients in the healthcare industry.

        Increase sales, marketing and support efforts.    We intend to increase our direct sales and support forces to facilitate our growth. We are seeking to promote the awareness of the I-many brand through

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an advertising and marketing campaign, including participation in trade shows and the placement of advertisements in key industry publications.

        Maintain a technological leadership position.    We seek constant feedback from our clients to understand their needs prior to, during, and post-implementation. We meet with our clients to identify their needs on an ongoing basis following implementation in focus group format. The feedback from these focus groups serves as a basis for product upgrades. We believe that, by closely partnering with and listening to our clients, we will continue to develop our products so that they deliver the highest value.

        Selectively pursue strategic acquisitions and alliances.    We have adopted a selective acquisition strategy as opportunities have arisen to complement our product offerings, extend our service capabilities and expand the features of our products. In addition, we intend to enter into strategic relationships as opportunities arise, to help us develop and market our products and services more effectively.

Products and Services

        Products.    The components and features of our products are designed to address particular business and process areas, which in combination we refer to as "Contract Management." To date, a significant portion of our revenues have been derived from the sale of software licenses to healthcare manufacturers, distributors, group purchasing organizations and other companies in healthcare and from the provision of related professional services, representing 96% of our revenues in 2000 and 75% of our revenues in 2001. In addition, one customer, Premier, Inc., accounted for approximately 29% and 12%, respectively, of our net revenues for the years 2000 and 2001. Our license fees are based on a number of factors, including the nature and number of modules being licensed, the number of users, the term of the license and the size of the client.

        The following is a list of our principal contract management and trade relationship management software products:

        Contract administration and reporting system/integrated system, or "CARS/IS,"    is a suite of software products that enables businesses to model the terms of their purchasing contracts, process data to determine pricing, evaluate contract performance, and manage the overall adjudication of rebates and chargebacks due under their contracts. CARS/IS allows users to manage a wide variety of contract pricing mechanisms, including rebates, chargebacks, and promotions.

        CARS/Medicaid    is a healthcare-specific, ready-to-install software solution that automates the management and clerical tasks of the federal Medicaid Drug Rebate Law. The system processes data and calculates rebates and payments for both federal and state rebate programs. CARS/Medicaid provides the capability to track and resolve disputes, and it is designed to assist users to comply with applicable federal and state government regulations.

        CARS/Analytics    provides sophisticated analyses and reporting across a spectrum of sales and contract management processes. CARS/Analytics uses the information generated by CARS/IS and third party information sources through a specific data application in CARS/IS to generate analyses and reports that are designed to enable users to determine the estimated profitability of contract business strategies and to examine key contract and sales performance measurements and trends.

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        Discount pricing system, or "DPS,"    is a contract management and rebate processing system for mid-market companies, allowing them to control product pricing, control deal incentives, manage end-user and prime vendor relationships, and forecast and report on all aspects of contract management and administration.

        Deduction management system, or "DMS,"    enables supply chain partners across industry and geographical boundaries to manage deductions reflected in their business-to-business invoices, including those arising as a result of inaccurate prices, quantities, products, damaged goods, promotional discounts or otherwise. DMS monitors chargebacks, write-offs, offsets to credit/promotions, and split deductions.

        Trade funds management system, or "TFMS,"    is an Internet-based solution designed to empower sales and marketing departments, along with remote sales agents, to create, distribute, manage, monitor, and track simultaneous campaigns and promotions across products, categories, accounts, and regions. By utilizing TFMS, updates are immediate, trade deal changes are live, brokers enter commitments on-line, and deductions can be cleared immediately. Key features of TFMS include account planning and forecasting; deal management and analysis; promotional planning and lift analysis; product/customer reporting; Internet communications to control budgeting, allocations, commitments, and settlement; and Internet-based triggering of payments via accounts payable request, credit memo, or deduction.

        Collection management system, or "CMS,"    integrates with accounts receivable systems to automate the cash-collection process, equipping companies to proactively manage account activity using a tailored, dispute-resolution workflow. It reduces profit-erosion by reducing the number and value of write offs, and by identifying and correcting the causes of delayed payments. Users can monitor invoice activity, payment trends and customer habits that trigger automatic notifications, tasks and follow-up actions. The system also measures its own performance by accumulating data to identify internal inefficiencies, collection effectiveness, collector performance metrics and customer profitability.

Professional Services

        Our professional services group provides consulting services, deployment services, educational services and customer support and consulting services. At December 31, 2001, this group comprised 109 employees. The group is augmented by outside consultants whom we have trained.

        Consulting services.    We work with our clients before, during and after installation of our solution to optimize the capabilities of our solutions. These services include project planning and management, business process analysis, technical services including integration with the clients' enterprise resource planning systems, and quality assurance.

        Deployment services.    Our deployment services include pre-installation planning, on-site installation, upgrade services, system testing, database administration support and professional service support.

        Educational services.    We offer training programs and business analysis services for those persons within the client organization responsible for using our solutions, such as contract administrators. In addition, we offer user group meetings to enable customers to learn about product directions and influence our future products.

        Customer support.    We offer comprehensive maintenance and support services, including telephone hotline service (available during business hours or, for additional fees, up to 24 hours a day, 7 days a week), documentation updates and new software releases.

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Customers

        We have more than 190 customers, approximately 40% of which are companies in the healthcare industry, including pharmaceutical and medical product companies, a group purchasing organization, wholesale distributors and managed care organizations. We also have sold our solutions to companies in other industries such as consumer products, foodservice, disposables, consumer durables, industrial products, chemicals, apparel, telecommunications and others. One customer, Premier, Inc., accounted for approximately 29% and 12%, respectively, of our net revenues for the years 2000 and 2001.

Sales and Marketing

        We market our software and services primarily through a direct sales force. As of December 31, 2001, our sales force consisted of a total of 80 employees, including 42 national account executives and 38 business consultants and sales support employees. We intend to continue to increase the size of our sales force as we seek to expand the market for our products and services. In addition, we are seeking to enhance the productivity of our direct sales force by hiring additional support personnel.

Technology and Product Development

        Since our inception, we have made substantial investments in product development. We believe that our future financial performance depends on our ability to maintain and enhance our current products and develop new products. Our research and development expenses were approximately $8.2 million in 1999, $12.8 million in 2000 and $14.8 million in 2001.

        As of December 31, 2001, we employed 128 people in our product development organization who are responsible for the design, development and release of our products. The group is organized into five disciplines: development, quality assurance, documentation, project management and project engineering. Members from each discipline form separate product teams to work closely with our sales, marketing, services, client and prospects organizations to better understand market needs and user requirements. Each product team also hosts a series of user focus groups and attends our user conference. When appropriate, we also use third parties to expand the capacity and technical expertise of our internal product development organization. Periodically, we have licensed third-party technology and we have acquired companies with products and technologies, which are complementary to our existing products. We believe this approach shortens our time to market without compromising our competitive position or product quality, and we plan to continue to draw on third-party resources as needed in the future.

Competition

        The contract management software market is subject to rapid change. Competitors vary in size and in the scope and breadth of the products and services offered. We encounter competition primarily from internal information systems departments of potential or current customers that develop custom software, software companies that target the contract management markets, professional services organizations and, to a lesser degree, Internet-based merchants offering products through on-line catalogs.

        We believe that the principal competitive factors affecting our market include product reputation, functionality, ease-of-use, ability to integrate with other products and technologies, quality, performance, price, customer service and support and the vendors' reputation. Although we believe that our products currently compete favorably with regard to such factors, we cannot assure you that we can maintain our competitive position against current and potential competitors. Increased competition may result in price reductions, less beneficial contract terms, reduced gross margins and loss of market share, any of which could materially and adversely affect our business, operating results and financial condition.

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        Many of our competitors and potential competitors have greater resources than we do, and may be able to respond more quickly and efficiently to new or emerging technologies, programming languages or standards, or to changes in customer requirements or preferences. Many of our competitors can devote greater managerial or financial resources than we can to develop, promote and distribute contract management software products and provide related consulting, training and support services. We cannot assure you that our current or future competitors will not develop products or services which may be superior in one or more respects to ours or which may gain greater market acceptance. Some of our competitors have established or may establish cooperative arrangements or strategic alliances among themselves or with third parties, thus enhancing their abilities to compete with us. It is likely that new competitors will emerge and rapidly acquire market share. We cannot assure you that we will be able to compete successfully against current or future competitors or that the competitive pressures faced by us will not materially and adversely affect our business, operating results and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Certain Factors That May Affect Future Results—We have many competitors and potential competitors and we may not be able to compete effectively."

Intellectual Property and Licenses

        We rely primarily on a combination of copyright, trademark and trade secrets laws, as well as confidentiality agreements to protect our proprietary rights. In addition, we have filed applications for patent protection with respect to certain aspects of our products. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain the use of information that we regard as proprietary. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States. We cannot assure investors that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology.

        We are not aware that any of our products infringe the proprietary rights of third parties. We cannot assure investors, however, that third parties will not claim infringement by us with respect to current or future products. We expect that software product developers will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Any such claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could have a material adverse effect upon our business, operating results and financial condition.

        From time to time, we license software from third parties for use with our products. We believe that no such license agreement to which we are presently a party is individually material and that if any such license agreement were to terminate for any reason, we would be able to obtain a license or otherwise acquire other comparable technology or software on terms and on a timetable that would not be materially adverse to us.

Employees

        As of December 31, 2001, we had a total of 373 employees, of whom 161 were based in Portland, Maine, 74 were based at our sales and marketing headquarters in Edison, New Jersey, 36 were based at our offices in Chicago, Illinois, 29 were based at our international headquarters in London, England and 73 worked at remote locations. Of the total, 128 were in research and development, 102 were in sales and marketing, 109 were in professional services, and 34 were in administration and finance. Our future performance depends in significant part upon the continued service of our key technical, sales and marketing and senior management personnel and our continuing ability to attract and retain highly qualified technical, sales and marketing and managerial personnel. Competition for such personnel is

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intense and we cannot assure you that we will be successful in attracting or retaining such personnel in the future. None of our employees is represented by a labor union or is subject to a collective bargaining agreement. We have not experienced any work stoppages and consider our relations with our employees to be good. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Certain Factors That May Affect Future Results—We rely significantly on certain key individuals and our business will suffer if we are unable to retain them."

Company Background

        I-many was originally incorporated in Massachusetts as Systems Consulting Company, Inc., or SCC, on June 5, 1989. On April 2, 1998, SCC Technologies, Inc., a Delaware corporation, was formed as a holding company and acquired all the stock of SCC. In January 2000, SCC Technologies, Inc. changed its name to I-many, Inc. and SCC merged into I-many, Inc.

ITEM 2. PROPERTIES

        Our development, customer support, administrative and operating offices are located in approximately 56,000 square feet of leased office space located in Portland, Maine under leases expiring in 2003. We also lease approximately 17,000 square feet of office space in Edison, New Jersey under leases expiring in 2003, with 6,000 square feet sublet to a third party and the remaining space used by executive, sales, marketing and consulting personnel. In addition, we lease approximately 20,000 square feet of office space in Chicago, Illinois under a lease expiring in 2009. Pursuant to our BCL Vision Ltd. acquisition, we lease approximately 42,000 square feet of office space in London, England under a lease expiring in 2011.

ITEM 3. LEGAL PROCEEDINGS

        We are not a party to any material pending litigation or other material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

        None.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

        The executive officers of I-many and other key employees and their ages as of December 31, 2001 are as follows:

        A. Leigh Powell has served as our president and chief executive officer since July 1999. From February 1998 to July 1999, Mr. Powell served as our vice president of marketing and as our chief operating officer. From January 1997 to February 1998, he served as vice president of business alliances for Think Systems/I2 Technologies, a supply-chain software company. From January 1996 to January 1997, Mr. Powell worked as a vice president for American Software, a supply-chain software company. From March 1985 to December 1995, Mr. Powell worked as a business consultant for Andersen Consulting, a management consulting firm. Mr. Powell received his M.B.A. and B.S. from Virginia Polytechnic Institute and State University.

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        Terrence M. Nicholson has served as our chief operating officer since August 1999. From February 1996 to August 1999, Mr. Nicholson served as executive director, worldwide sales and distribution systems, at Mallinckrodt, Inc, a manufacturer of medical devices. From February 1995 to February 1996, Mr. Nicholson served as program executive of NCR Corp., a manufacturer of datawarehouse and decision support systems. Mr. Nicholson received a M.S.C.E. from Rensselaer Polytechnic Institute and a B.S.E.E. from the University of Notre Dame.

        Timothy P. Curran has served as executive vice president of sales since July 2001. From July 1999 to July 2001, he served as executive vice president of corporate development since July 1999. From June 1998 to July 1999, Mr. Curran served as director, sales and marketing for our vertical markets line of business. From March 1997 to May 1998, Mr. Curran served as manager, internal consulting at EMC Corporation, a manufacturer of computer storage devices. Prior to March 1997, Mr. Curran was employed for eight years with Andersen Consulting, a management consulting firm, beginning as a staff consultant in Andersen's systems development practice and ending as a senior manager focusing on business process re-engineering and management consulting. Mr. Curran received an M.B.A. from the University of Chicago and a B.S. in chemical engineering from Case Western Reserve University.

        Kevin Collins has served as Chief Financial Officer since September 2001, after serving as vice president, finance since May 2001. From December 1999 to May 2001, Mr. Collins served as chief financial officer, treasurer and secretary for CommercialWare, Inc., a provider of software solutions to retailers. From September 1998 to December 1999, Mr. Collins was chief financial officer and principal of Little Harbor Capital, LLC, a boutique investment banking firm. From December 1994 to September 1998, he was controller and director of finance and business operations at Lightbridge, Inc., a publicly held wireless telecommunications software company. Mr. Collins holds a B.S. in Business Administration from Salem State College.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        Our common stock is traded on the Nasdaq National Market under the symbol "IMNY." Our initial public offering of stock took place on July 13, 2000 at $9.00 per share. The price range per share reflected in the table below is the highest and lowest sale price for our stock as reported by the Nasdaq National Market during each quarter the stock has been publicly traded. Our present policy is to retain earnings, if any, to finance future growth. We have never paid cash dividends and have no present intention to pay cash dividends. On February 28, 2002, the Company had 222 holders of record of its common stock.

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Commencing July 13, 2000.

        During the quarter ended December 31, 2001, we issued 16,486 shares of our unregistered common stock as additional purchase consideration, pursuant to our acquisitions of ChiCor Information Management, Inc. and Intersoft International, Inc. These shares were issued pursuant to an exemption from the Securities Act registration requirements set forth in Rule 506 under the Securities Act and, in the alternative, under Section 4(2) of the Securities Act of 1933.

        On November 21, 2001, we issued 137,363 shares of our unregistered common stock as payment for our license of certain technology from Ozro, Inc. These shares were issued pursuant to an exemption from the Securities Act registration requirements set forth in Rule 506 under the Securities Act and, in the alternative, under Section 4(2) of the Securities Act.

ITEM 6. SELECTED CONSOLIDATED CONDENSED FINANCIAL DATA

        The selected condensed financial data presented below as of and for each of the years in the five-year period ended December 31, 2001 are derived from our financial statements. The financial statements as of and for each of the years have been audited by Arthur Andersen LLP, independent public accountants. Historical results are not necessarily indicative of future results. The following selected financial data should be read in conjunction with "Management's Discussion and Analysis of

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Financial Condition and Results of Operations" and our financial statements and notes to those statements and other financial information included elsewhere in this report.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and related notes. In addition to historical information, the following discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated by such forward-looking statements due to various factors, including, but not limited to, those set forth under "Certain Factors That May Affect Future Results" and elsewhere in this report.

Overview

        We provide software and related professional services that allow our clients to more effectively manage their business-to-business relationships. Our products and services were originally developed to manage complex contract purchasing relationships in the healthcare industry. Our Contract Administration and Reporting System, or CARS, software suite is used by 8 of the 10 largest and 15 of the 20 largest pharmaceutical manufacturers, ranked according to 2000 annual healthcare revenues. We are seeking to expand our products and services to new vertical markets, particularly the consumer packaged goods and foodservice industries. Our acquisitions of Chi-Cor Information Management, Inc. (ChiCor) in November 2000 and Intersoft International, Inc. (Intersoft) in March 2001 have provided us with accepted products, customers and expertise in these new vertical markets. Also, our acquisition of BCL Vision Ltd. (BCL) (renamed I-many International Limited) in April 2001 has expanded our portfolio of software solutions, which we can market to customers within our currently-targeted and other vertical markets. Under the rules of purchase accounting, the acquired companies' revenues and results of operations have been included together with those of the Company from the actual dates of the acquisitions and materially affect the period-to-period comparisons of the Company's historical results of operations.

        We have generated revenues from both products and services. Product revenues, which had been principally comprised of software license fees generated from our CARS software suite and now include deductions and trade funds management products and cash and trade receivables management software pursuant to our acquisitions of ChiCor and BCL (now I-many International Limited), accounted for 42.8% of net revenues in 2000 and 53.5% of net revenues in 2001. Service revenues include maintenance and support fees directly related to our licensed software products, professional service fees derived from consulting, installation, business analysis and training services related to our software products and hosting fees. Service revenues accounted for 57.2% of net revenues in 2000 and 46.5% of net revenues in 2001.

        Software license revenues are attributable to the addition of new customers, and the expansion of existing customer relationships through licenses covering additional users, licenses of additional software products and license renewals. We recognize revenue in accordance with Statement of Position (SOP) No. 97-2, Software Revenue Recognition and SOP 98-9, Software Revenue Recognition, with Respect to Certain Arrangements. We generate revenues from licensing our software and providing professional services, training and maintenance and support services.

        We sell software, professional services, training and maintenance and support services. In multiple-element arrangements, we allocate the total fee to professional services, training and maintenance and support services based on the fair value of those elements, which is defined as the price charged when those elements are sold separately. The residual amount is then allocated to the software license fee.

        We recognize software license fees upon execution of a signed license agreement and delivery of the software, provided there are no significant post-delivery obligations, the payment is fixed or determinable and collection is probable. In cases where significant post-delivery obligations exist, such as customization or enhancements to the core software, we recognize the entire fee on a

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percentage-of-completion basis, and include the entire fee in product revenues. If an acceptance period is required, revenues are recognized upon customer acceptance. We provide for sales returns at the time of revenue recognition based on historical experience. To date, such returns have not been significant.

        Service revenues include professional services, training and maintenance and support services. Professional service revenues are recognized as the services are performed for time and materials contracts and using the percentage-of-completion method for fixed fee contracts. If conditions for acceptance exist, professional service revenues are recognized upon customer acceptance. For fixed fee professional service contracts, we provide for anticipated losses in the period in which the loss becomes known and can be reasonably estimated. To date, losses incurred on fixed fee contracts have not been significant. Training revenues are recognized as the services are provided. Maintenance and customer support fees are recognized ratably over the term of the maintenance contract, which is generally twelve months. When maintenance and support is included in the total license fee, we allocate a portion of the total fee to maintenance and support based upon the price paid by the customer to purchase maintenance and support in the second year.

        Payments received from customers at the inception of a maintenance period are treated as deferred service revenues and recognized ratably over the maintenance period. Payments received from customers in advance of product shipment or revenue recognition are treated as unearned product revenues and recognized when the product is shipped to the customer or when earned. Substantially all of the amounts included in cost of revenues represent direct costs related to the delivery of professional services, training and maintenance and customer support. To date, cost of product revenues have not been significant.

        We assess the realizability of long-lived assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. We review our long-lived assets for impairment as events and circumstances indicate the carrying amount of an asset may not be recoverable. We evaluate the realizability of our long-lived assets based on profitability and cash flow expectations for the related asset.

        Research and development costs are charged to operations as incurred. SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed, requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on our product development process, technological feasibility is established upon completion of a working model. Costs incurred by the Company between completion of the working model and the point at which the product is ready for general release have not been material. As such, all software development costs incurred to date have been expensed as incurred.

        We account for internal-use software, in accordance with SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. In accordance with this statement, costs incurred during the preliminary project stage and costs incurred for data conversion, training and maintenance are expensed as incurred. Once the preliminary project stage is completed, external direct costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the asset.

        SFAS No. 105, Disclosure of Information About Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, requires disclosure of any significant off-balance-sheet risk and concentrations of credit risk. We do not have any significant off-balance-sheet risk. Financial instruments that potentially expose the Company to concentrations of credit risk consist of cash equivalents and accounts receivable. Concentration of credit risk with respect to cash equivalents is limited because we place our investments in highly-rated financial institutions. Concentration of credit risk with respect to accounts receivable is limited to certain customers to whom

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we make substantial sales. To reduce risk, we routinely assess the financial strength of our customers and, as a consequence, believe that our accounts receivable credit risk exposure is limited. We maintain an allowance for potential credit losses but historically have not experienced any significant losses related to individual customers or groups of customers in any particular industry or geographic area.

        In accordance with SFAS No. 128, Earnings per Share, basic and diluted net income (loss) per share is computed by dividing the net income (loss) available to common stockholders for the period by the weighted average basic and diluted number of shares of common stock outstanding during the period. The calculation of basic weighted average shares outstanding excludes unvested restricted common stock that is subject to repurchase by the Company. For periods in which a net loss has been incurred, the calculation of diluted net loss per share excludes potential common stock, as their effect is antidilutive. Potential common stock includes (i) incremental shares of common stock issuable upon the exercise of outstanding stock options and warrants calculated using the treasury stock method; (ii) shares of common stock issuable upon the exchange or conversion of preferred stock and convertible debt calculated using the as-if-converted method; and (iii) unvested restricted common stock subject to repurchase by the Company. In accordance with the Securities and Exchange Commission's Staff Accounting Bulletin No. 98, Earnings per Share in an Initial Public Offering, we determined that there were no nominal issuances of common stock prior to the Company's initial public offering (IPO).

        After being profitable in both 1997 and 1998, we increased our spending significantly during 1999 and the first half of 2000, principally to increase the size of our sales and marketing workforce and for development and marketing expenses related to the development of our web-based initiatives. Our operating expenses (excluding restructuring charges and acquisition-related amortization and write-offs) have increased significantly since 1997, from $4.2 million for the 12 months ended December 31, 1997 to $48.1 million for the 12 months ended December 31, 2001. These increases are primarily due to additions to our staff, including through acquisitions, as we have expanded all aspects of our operations. We have grown from 46 employees as of December 31, 1996 to 373 employees at December 31, 2001.

Recent Events

        In the quarter ended December 31, 2001, we recorded a $1.7 million charge in connection with a restructuring of our operations and the impairment in value of goodwill related to our acquisition of Intersoft International, Inc. ("Intersoft"). The $1.7 million charge consisted of $368,000 in severance pay, $445,000 in facility closing and related costs, and a $895,000 write-off of goodwill related to the Intersoft acquisition.

        On February 20, 2002, we completed a private placement with investors (the "Purchasers"), pursuant to the terms of a Securities Purchase Agreement among us and the Purchasers (the "Purchase Agreement"). The private placement was exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) of such Act. The terms of this private placement were reported on a Form 8-K, which we filed with the Securities and Exchange Commission of February 28, 2002.

        At the closing, we issued 1,100,413 shares of common stock at a purchase price of $7.27 per share, aggregating $8,000,000, and 1,700 shares of a newly designated series of preferred stock, at a purchase price of $10,000 per share. The preferred stock has no dividends or coupon, no liquidation preference and no financial covenants.

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