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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 June 30, 2004

 

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)

 

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 July 27, 2004, 41,517,971 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 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.

 

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I-MANY, INC.

 

FORM 10-Q

 

TABLE OF CONTENTS

 

         PAGE

PART I.

   UNAUDITED FINANCIAL INFORMATION    4

Item 1.

   Condensed Consolidated Financial Statements    4
    Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003    4
    Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2004 and 2003    5
    Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003    6
    Notes to Condensed Consolidated Financial Statements    7

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations    16

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk    29

Item 4.

   Controls and Procedures    30

PART II.

   OTHER INFORMATION    31

Item 2.

   Changes in Securities and Use of Proceeds    31

Item 4.

   Submission of Matters to a Vote of Security Holders    31

Item 5.

   Other Information    31

Item 6.

   Exhibits and Reports on Form 8-K    32
    Signatures    33
    Index to Exhibits    34

 

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PART I. UNAUDITED FINANCIAL INFORMATION

 

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

 

I-MANY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share-related amounts)

 

    

June 30,

2004

    

December 31,

2003

  

ASSETS

                 

Current assets:

                 

Cash and cash equivalents

    $ 15,142     $ 21,864  

Restricted cash

      483       871  

Short-term investments

      5,040       2,019  

Accounts receivable, net of allowance

      8,994       10,057  

Prepaid expenses and other current assets

      979       819  
    
 

Total current assets

      30,638       35,630  

Property and equipment, net

      1,397       1,879  

Restricted cash

      681       377  

Other assets

      281       330  

Acquired intangible assets, net

      2,853       2,822  

Goodwill

      8,667       8,531  
    
 

Total assets

    $ 44,517     $ 49,569  
    
 

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

                 

Current liabilities:

                 

Accounts payable

    $ 2,048     $ 1,483  

Accrued expenses

      4,851       5,989  

Current portion of deferred revenue

      7,948       7,180  

Current portion of capital lease obligations

      476       709  
    
 

Total current liabilities

      15,323       15,361  

Deferred revenue, net of current portion

      292       3,816  

Capital lease obligations, net of current portion

      41       128  

Other long-term liabilities

      1,387       1,109  
    
 

Total liabilities

      17,043       20,414  
    
 

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 – 41,369,942 and 40,550,590 shares
    at June 30, 2004 and December 31, 2003, respectively

      4       4  

Additional paid-in capital

      150,528       150,613  

Deferred stock-based compensation

      (877 )     (3,680 )

Accumulated other comprehensive income

      51       43  

Accumulated deficit

      (122,232 )     (117,825 )
    
 

Total stockholders’ equity

      27,474       29,155  
    
 

Total liabilities and stockholders’ equity

    $ 44,517     $ 49,569  
    
 

 

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 June 30,

    

Six months

ended June 30,

  
     2004
     2003
     2004
     2003
  

Net revenues:

                                 

Product

    $ 1,040     $ 3,898     $ 5,948     $ 8,769  

Services

      7,115       6,340       13,637       12,568  
    
 
 
 

Total net revenues

      8,155       10,238       19,585       21,337  

Cost of revenues

      4,067       3,941       7,969       7,646  
    
 
 
 

Gross profit

      4,088       6,297       11,616       13,691  
    
 
 
 

Operating expenses:

                                 

Sales and marketing

      2,140       4,265       4,371       9,402  

Research and development

      2,610       4,335       6,120       8,671  

General and administrative

      1,188       1,583       2,853       3,242  

Depreciation

      220       481       431       970  

Amortization of other acquired intangible assets

      378       663       709       1,325  

In-process research and development

      290       —         290       —    

Impairment of acquired intangible assets

      —         2,019       —         2,019  

Impairment of goodwill

      —         14,767       —         14,767  

Restructuring and other charges

      162       368       1,309       1,829  
    
 
 
 

Total operating expenses

      6,988       28,481       16,083       42,225  
    
 
 
 

Loss from operations

      (2,900 )     (22,184 )     (4,467 )     (28,534 )

Other income, net

      29       93       60       125  
    
 
 
 

Net loss

    $ (2,871 )   $ (22,091 )   $ (4,407 )   $ (28,409 )
    
 
 
 

Basic and diluted net loss per common share

    $ (0.07 )   $ (0.55 )   $ (0.11 )   $ (0.70 )
    
 
 
 

Weighted average shares outstanding

      41,000       40,483       40,827       40,411  
    
 
 
 

 

See notes to condensed consolidated financial statements

 

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I-MANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     Six Months Ended
June 30,
  
     2004
     2003
  

Cash Flows from Operating Activities:

                 

Net loss

    $ (4,407 )   $ (28,409 )

Adjustments to reconcile net loss to net cash used in operating activities:

                 

Depreciation and amortization

      1,140       2,295  

In-process research and development

      290       —    

Restructuring and other charges

      1,309       1,829  

Impairment of goodwill and acquired intangible assets

      —         16,786  

Amortization of deferred stock-based compensation

      2,442       23  

Provision for doubtful accounts

      120       75  

Noncash marketing expense related to issuance of warrant

      —         795  

Noncash cost of revenue related to issuance of stock

      —         75  

Changes in operating assets and liabilities, net of acquisitions:

                 

Accounts receivable

      944       1,365  

Prepaid expense and other current assets

      (160 )     24  

Accounts payable

      316       436  

Accrued expenses and other liabilities

      (2,440 )     (3,428 )

Deferred revenue

      (2,757 )     (892 )

Deferred rent

      8       (4 )
    
 

Net cash used in operating activities

      (3,195 )     (9,030 )
    
 

Cash Flows from Investing Activities:

                 

Purchases of property and equipment

      (236 )     (44 )

Proceeds from disposition of property and equipment

      27       —    

Cash paid to acquire Pricing Analytics, Inc.

      (385 )     —    

Purchases of short-term investments

      (4,021 )     —    

Redemptions of short-term investments

      1,000       —    

Decrease in other assets

      49       19  
    
 

Net cash used in investing activities

      (3,566 )     (25 )
    
 

Cash Flows from Financing Activities:

                 

Payments on capital lease obligations

      (319 )     (276 )

(Increase) decrease in restricted cash

      83       (79 )