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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2002
 
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: 000-30883
 
 
I-MANY, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
     
01-0524931
(State or other jurisdiction of
incorporation or organization)
     
(I.R.S. Employer
Identification Number)
 
537 Congress Street
5th Floor
Portland, Maine 04101-3353
(Address of principal executive offices)
 
(207) 774-3244
(Registrant’s telephone number, including area code)
 
 
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  x  No  ¨
 
On November 11, 2002, 40,347,007 shares of the registrant’s common stock, $.0001 par value, were issued and outstanding.
 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Discussions containing forward-looking statements may be found in the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “—Certain Factors That May Affect Future Operating Results” as well as in the Form 10-Q generally. The Company uses words such as “believes,” “intends,” “expects,” “anticipates,” “plans,” “estimates,” “should,” “may,” “will,” “scheduled” and similar expressions to identify forward-looking statements. The Company uses these words to describe its present belief about future events relating to, among other things, its expected marketing plans, future hiring, expenditures and sources of revenue. This Form 10-Q may also contain third party estimates regarding the size and growth of our market, which also are forward-looking statements. Our forward-looking statements apply only as of the date of this Form 10-Q. The Company’s actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described elsewhere in the Form 10-Q.
 
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. The Company is under no duty to update any of the forward-looking statements after the date of this Form 10-Q to conform these statements to actual results or to changes in our expectations, other than as required by law.

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Table of Contents
 
I-MANY, INC.
 
FORM 10-Q
 
TABLE OF CONTENTS
 
         
Page
PART I.    FINANCIAL INFORMATION
     
Item 1.
   
Unaudited Condensed Consolidated Financial Statements
     
       
4
       
5
       
6
       
8
Item 2.
      
18
Item 3.
      
29
Item 4.
      
30
PART II    OTHER INFORMATION
     
Item 1.
      
30
Item 2.
      
30
Item 3.
      
30
Item 4.
      
31
Item 5.
      
31
Item 6.
      
31
       
31
       
32
       
34

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PART I.    FINANCIAL INFORMATION
 
ITEM 1.    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
I-MANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share-related information)
 
    
September 30,
2002
     
December 31,
2001
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
37,085
 
   
$
36,015
 
Accounts receivable, net of allowance
   
 
14,021
 
   
 
13,412
 
Prepaid expenses and other current assets
   
 
1,539
 
   
 
692
 
    
  
Total current assets
   
 
52,645
 
   
 
50,119
 
Property and equipment, net
   
 
3,876
 
   
 
4,709
 
Other assets
   
 
251
 
   
 
1,496
 
Goodwill and other purchased intangibles, net
   
 
44,165
 
   
 
34,814
 
    
  
Total assets
   
$
100,937
 
   
$
91,138
 
    
  
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
1,911
 
   
$
2,207
 
Accrued expenses
   
 
7,208
 
   
 
7,082
 
Deferred revenue
   
 
7,354
 
   
 
6,373
 
    
  
Total current liabilities
   
 
16,473
 
   
 
15,662
 
Capital lease obligations, net of current portion
   
 
42
 
   
 
105
 
Deferred rent
   
 
74
 
   
 
115
 
    
  
Total liabilities
   
 
16,589
 
   
 
15,882
 
    
  
Stockholders’ equity:
                  
Series A convertible preferred stock, $.01 par value
                  
Authorized—1,700 shares Issued and outstanding—none
   
 
—  
 
   
 
—  
 
Undesignated preferred stock, $.01 par value
                  
Authorized—4,998,300 shares Issued and outstanding—none
   
 
—  
 
   
 
—  
 
Common stock, $.0001 par value
                  
Authorized—100,000,000 shares Issued and outstanding—40,347,007 and 37,200,988 shares at September 30, 2002 and December 31, 2001, respectively
   
 
4
 
   
 
4
 
Additional paid-in capital
   
 
144,348
 
   
 
125,224
 
Deferred stock-based compensation
   
 
(59
)
   
 
(94
)
Stock subscription payable
   
 
—  
 
   
 
1,168
 
Accumulated other comprehensive income (loss)
   
 
10
 
   
 
(5
)
Accumulated deficit
   
 
(59,955
)
   
 
(51,041
)
    
  
Total stockholders’ equity
   
 
84,348
 
   
 
75,256
 
    
  
Total
   
$
100,937
 
   
$
91,138
 
    
  
 
See notes to condensed consolidated financial statements.

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I-MANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 
    
Three months ended September 30,
     
Nine months ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Net Revenues:
                                    
Product
   
$
7,863
 
   
$
7,627
 
   
$
24,452
 
   
$
21,966
 
Services
   
 
5,633
 
   
 
6,452
 
   
 
18,612
 
   
 
21,555
 
    
  
  
  
Total net revenues
   
 
13,496
 
   
 
14,079
 
   
 
43,064
 
   
 
43,521
 
Cost of revenues
   
 
3,490
 
   
 
3,733
 
   
 
11,148
 
   
 
13,366
 
    
  
  
  
Gross profit
   
 
10,006
 
   
 
10,346
 
   
 
31,916
 
   
 
30,155
 
    
  
  
  
Operating expenses:
                                    
Sales and marketing
   
 
5,559
 
   
 
4,684
 
   
 
16,184
 
   
 
16,413
 
Research and development
   
 
4,192
 
   
 
3,871
 
   
 
12,717
 
   
 
11,158
 
General and administrative
   
 
1,768
 
   
 
1,776
 
   
 
4,821
 
   
 
5,926
 
Depreciation
   
 
606
 
   
 
584
 
   
 
1,790
 
   
 
3,362
 
Amortization of goodwill and other intangible assets
   
 
1,340
 
   
 
2,028
 
   
 
3,723
 
   
 
4,599
 
In-process research and development
   
 
—  
 
   
 
2,700
 
   
 
1,000
 
   
 
3,700
 
Restructuring and other charges
   
 
780
 
   
 
3,045
 
   
 
780
 
   
 
3,045
 
    
  
  
  
Total operating expenses
   
 
14,245
 
   
 
18,688
 
   
 
41,015
 
   
 
48,203
 
    
  
  
  
Loss from operations
   
 
(4,239
)
   
 
(8,342
)
   
 
(9,099
)
   
 
(18,048
)
Other income, net
   
 
70
 
   
 
281
 
   
 
185
 
   
 
1,293
 
    
  
  
  
Net loss
   
$
(4,169
)
   
$
(8,061
)
   
$
(8,914
)
   
$
(16,755
)
    
  
  
  
Basic and diluted net loss per common share
   
$
(0.10
)
   
$
(0.23
)
   
$
(0.23
)
   
$
(0.49
)
    
  
  
  
Weighted average shares outstanding
   
 
40,344
 
   
 
35,815
 
   
 
39,549
 
   
 
34,400
 
    
  
  
  
 
See notes to condensed consolidated financial statements

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Table of Contents
 
I-MANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
    
Nine Months Ended
  
    
September 30,
  
    
2002
     
2001
  
Cash flows from operating activities:
                  
Net loss
   
$
(8,914
)
   
$
(16,755
)
Adjustments to reconcile net loss to cash used in operating activities:
                  
Depreciation and amortization
   
 
5,478
 
   
 
7,912
 
In-process research and development
   
 
1,000
 
   
 
3,700
 
Restructuring and other charges
   
 
780
 
   
 
2,385
 
Amortization of deferred stock-based compensation
   
 
35
 
   
 
48
 
Marketing expense related to issuance of warrant
   
 
20
 
   
 
800
 
Stock compensation expense
   
 
—  
 
   
 
24
 
Deferred rent
   
 
(41
)
   
 
—  
 
Changes in current assets and liabilities net of acquisitions:
                  
Accounts receivable
   
 
(597
)
   
 
2,214
 
Prepaid expense and other current assets
   
 
(793
)
   
 
(348
)
Accounts payable
   
 
(296
)
   
 
(837
)