I MANY INC - 10-Q Quarterly Report

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UNITED STATES

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 March 31, 2003

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)

399 Thornall Street

12th Floor

Edison, New Jersey 08837

(Address of principal executive offices)

(800) 832-0228

(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 May 5, 2003, 40,469,770 shares of the registrant’s common stock, $.0001 par value, were issued and outstanding.

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 above and elsewhere in this 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.

I-MANY, INC.

FORM 10-Q

TABLE OF CONTENTS

		PAGE
PART I.	UNAUDITED FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002	4

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002	5

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002	6

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	24

Item 2.	Changes in Securities and Use of Proceeds	24

Item 3.	Defaults upon Senior Securities	24

Item 4.	Submission of Matters to a Vote of Security Holders	24

Item 5.	Other Information	24

Item 6.	Exhibits and Reports on Form 8-K	24

	Signatures	25

	Certifications	26

	Exhibit Index	28

PART I. UNAUDITED FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

I-MANY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share-related amounts)

	March 31, 2003			December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents	$	33,018		$	35,979
Restricted cash		699			772
Accounts receivable, net of allowance		10,654			12,557
Prepaid expenses and other current assets		1,347			1,052

Total current assets		45,718			50,360
Property and equipment, net		3,019			3,438
Restricted cash		668			348
Other assets		295			292
Acquired intangible assets, net		6,166			6,828
Goodwill, net		23,298			23,298

Total assets	$	79,164		$	84,564

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,164		$	1,413
Accrued expenses		7,093			8,502
Deferred revenue		7,416			7,550
Current portion of capital lease obligations		616			433

Total current liabilities		17,289			17,898
Capital lease obligations, net of current portion		447			375
Other long-term liabilities		722			75

Total liabilities		18,458			18,348

Series A redeemable convertible preferred stock, $.01 value Authorized—1,700 shares Issued and outstanding—none		—			—
Stockholders’ equity:
Undesignated preferred stock, $.01 par value Authorized—5,000,000 shares; designated 1,700 shares Issued and outstanding—none		—			—
Common stock, $.0001 par value— Authorized—100,000,000 shares Issued and outstanding—40,381,431and 40,277,045 shares at March 31, 2003 and December 31, 2002, respectively		4			4
Additional paid-in capital		145,362			144,421
Deferred stock-based compensation		(35	)		(47	)
Stock subscription payable		—			142
Accumulated other comprehensive income		27			30
Accumulated deficit		(84,652	)		(78,334	)

Total stockholders’ equity		60,706			66,216

Total liabilities and stockholders’ equity	$	79,164		$	84,564

See notes to condensed consolidated financial statements.

I-MANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Three months ended March 31,
	2003			2002
Net revenues:
Product	$	4,871		$	8,525
Services		6,228			6,490

Total net revenues		11,099			15,015
Cost of revenues		3,705			3,547

Gross profit		7,394			11,468
Operating expenses:
Sales and marketing		5,137			5,286
Research and development		4,336			3,957
General and administrative		1,659			1,448
Depreciation		696			579
Amortization of other acquired intangible assets		662			1,043
In-process research and development		—			1,000
Restructuring and other charges		1,254			—

Total operating expenses		13,744			13,313

Loss from operations		(6,350	)		(1,845	)
Other income, net		32			35

Net loss	$	(6,318	)	$	(1,810	)

Basic and diluted net loss per common share	$	(0.16	)	$	(0.05	)

Weighted average shares outstanding		40,337			37,984

See notes to condensed consolidated financial statements.

I-MANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Three Months Ended March 31,
	2003			2002
Cash Flows from Operating Activities:
Net loss	$	(6,318	)	$	(1,810	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,358			1,620
In-process research and development		—			1,000
Accrued restructuring and other charges		1,254			—
Amortization of deferred stock-based compensation		12			12
Provision for bad debts		75			50
Noncash marketing expense related to issuance of warrant		795			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		1,825			(1,886	)
Prepaid expense and other current assets		(296	)		(241	)
Accounts payable		751			166
Accrued expenses and other liabilities		(1,911	)		(1,333	)
Deferred revenue		(134	)

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