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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 September 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 October 31, 2004, 41,949,358 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

    

Item 1.

   Condensed Consolidated Financial Statements     
     Condensed Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003    4
     Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2004 and 2003    5
     Condensed Consolidated Statements of Cash Flows for the nine months ended September 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    15

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk    28

Item 4.

   Controls and Procedures    29

PART II.

   OTHER INFORMATION     

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds    29

Item 6.

   Exhibits    30
     Signatures    30
     Index to Exhibits    31

 

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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)

 

    

September 30,

2004


   

December 31,

2003


 

ASSETS

                

Current assets:

                

Cash and cash equivalents

   $ 15,534     $ 21,864  

Restricted cash

     327       871  

Short-term investments

     4,528       2,019  

Accounts receivable, net of allowance

     9,050       10,057  

Prepaid expenses and other current assets

     1,030       819  
    


 


Total current assets

     30,469       35,630  

Property and equipment, net

     1,320       1,879  

Restricted cash

     659       377  

Other assets

     122       330  

Acquired intangible assets, net

     2,475       2,822  

Goodwill

     8,667       8,531  
    


 


Total assets

   $ 43,712     $ 49,569  
    


 


LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

                

Current liabilities:

                

Accounts payable

   $ 1,898     $ 1,483  

Accrued expenses

     4,758       5,989  

Current portion of deferred revenue

     7,935       7,180  

Current portion of capital lease obligations

     327       709  
    


 


Total current liabilities

     14,918       15,361  

Deferred revenue, net of current portion

     271       3,816  

Capital lease obligations, net of current portion

     14       128  

Other long-term liabilities

     1,325       1,109  
    


 


Total liabilities

     16,528       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 – 41,846,124 and 40,550,590 shares at September 30, 2004 and December 31, 2003, respectively

     4       4  

Additional paid-in capital

     150,589       150,613  

Deferred stock-based compensation

     (470 )     (3,680 )

Accumulated other comprehensive income

     49       43  

Accumulated deficit

     (122,988 )     (117,825 )
    


 


Total stockholders’ equity

     27,184       29,155  
    


 


Total liabilities and stockholders’ equity

   $ 43,712     $ 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
September 30,


    Nine months ended
September 30,


 
     2004

    2003

    2004

    2003

 

Net revenues:

                                

Product

   $ 2,393     $ 1,227     $ 8,341     $ 9,996  

Services

     6,914       6,056       20,551       18,624  
    


 


 


 


Total net revenues

     9,307       7,283       28,892       28,620  

Cost of revenues

     3,788       4,111       11,757       11,757  
    


 


 


 


Gross profit

     5,519       3,172       17,135       16,863  
    


 


 


 


Operating expenses:

                                

Sales and marketing

     1,964       3,287       6,335       12,689  

Research and development

     2,759       4,169       8,879       12,840  

General and administrative

     1,068       1,291       3,921       4,533  

Depreciation

     233       438       664       1,408  

Amortization of other acquired intangible assets

     378       331       1,087       1,656  

In-process research and development

     —         —         290       —    

Impairment of acquired intangible assets

     —         —         —         2,019  

Impairment of goodwill

     —         —         —         14,767  

Restructuring and other charges

     62       359       1,371       2,188  
    


 


 


 


Total operating expenses

     6,464       9,875       22,547       52,100  
    


 


 


 


Loss from operations

     (945 )     (6,703 )     (5,412 )     (35,237 )

Other income, net

     107       77       167       202  
    


 


 


 


Loss before income taxes

     (838 )     (6,626 )     (5,245 )     (35,035 )

Benefit from income taxes

     (82 )     —         (82 )     —    
    


 


 


 


Net loss

   $ (756 )   $ (6,626 )   $ (5,163 )   $ (35,035 )
    


 


 


 


Basic and diluted net loss per common share

   $ (0.02 )   $ (0.16 )   $ (0.13 )   $ (0.87 )
    


 


 


 


Weighted average shares outstanding

     41,575       40,451       41,076       40,424  
    


 


 


 


 

See notes to condensed consolidated financial statements

 

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I-MANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

    

Nine Months Ended

September 30,


 
     2004

    2003

 

Cash Flows from Operating Activities:

                

Net loss

   $ (5,163 )   $ (35,035 )

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

                

Depreciation and amortization

     1,751       3,064  

In-process research and development

     290       —    

Restructuring and other charges

     1,371       2,188  

Impairment of goodwill and acquired intangible assets

     —         16,786  

Amortization of deferred stock-based compensation

     2,791       489  

Provision for doubtful accounts

     170       169  

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

     858       4,099  

Prepaid expense and other current assets

     (211 )     21  

Accounts payable

     414       (114 )

Accrued expenses and other liabilities

     (2,578 )     (2,796 )

Deferred revenue

     (2,790 )     2,851  

Deferred rent

     3       (6 )
    


 


Net cash used in operating activities

     (3,094 )     (7,414 )
    


 


Cash Flows from Investing Activities:

                

Purchases of property and equipment

     (451 )     (52 )

Proceeds from disposition of property and equipment

     35       —    

Cash paid to acquire Pricing Analytics, Inc.

     (633 ) <