-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TyZLJrxlh7skJGEg1DMskLeCN1Cz+jqfYgCUxUoflp8fs+WP940I13TNuBy4/k19 g7ALDZEaaeYAMN2MDHYJjg== /in/edgar/work/0000912057-00-051599/0000912057-00-051599.txt : 20001130 0000912057-00-051599.hdr.sgml : 20001130 ACCESSION NUMBER: 0000912057-00-051599 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001114 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: I MANY INC CENTRAL INDEX KEY: 0001104017 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] IRS NUMBER: 010524931 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-30883 FILM NUMBER: 780079 BUSINESS ADDRESS: STREET 1: 537 CONGRESS STREET STREET 2: 5TH FLOOR CITY: PORTLAND STATE: ME ZIP: 04101 BUSINESS PHONE: 2077743244 MAIL ADDRESS: STREET 1: 537 CONGRESS STREET CITY: PORTLAND STATE: ME ZIP: 04101 8-K 1 a2031974z8-k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): November 14, 2000 I-many, Inc. ------------------------------------------------------ (Exact Name of Registrant as Specified in Charter) Delaware ------------------------------------------------------ (State or Other Jurisdiction of Incorporation) 000-30883 01-0524931 - --------------------------------- ---------------------------------- (Commission File Number) (I.R.S. Employer Identification No.) 537 Congress Street 5th Floor Portland, Maine 04101-3353 - ---------------------------------------- ----------------------------------- (Address of Principal Executive Offices) (Zip Code) (207) 774-3244 -------------------------------- (Registrant's Telephone Number, Including Area Code) --------------- Not Applicable ------------------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report) CAUTIONARY NOTE REGARDING CERTAIN STATEMENTS AND REFERENCES This Form 8-K contains forward-looking statements that involve risks and uncertainties. Discussions containing forward-looking statements may be found in Item 2--Acquisition or Disposition of Assets. as well as in the Form 8-K 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 used these words to describe its present belief about future events relating to, among other things, the integration of the acquired assets into the Company's business. Our forward-looking statements apply only as of the date of this Form 8-K 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 the Form 8-K. 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 8-K to conform these statements to actual results or to changes in our expectations, other than as required by law. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On November 14, 2000, the Registrant completed its acquisition of Chi-Cor Information Management, Inc., an Illinois corporation ("Chi-Cor"), pursuant to an Agreement and Plan of Merger and Reorganization dated as of November 3, 2000 (the "Merger Agreement") among the Registrant, Chi-Cor, Cimian Corporation ("Merger Sub"), certain stockholders of Chi-Cor and Karl F. Effgen, as agent for the stockholders. At the effective time of the merger contemplated by the Merger Agreement (the "Effective Time"), Chi-Cor was merged with and into Merger Sub which is continuing in existence as the surviving corporation. The purchase price of the transaction consisted of $4.9 million of cash and 251,600 shares of Company common stock valued at approximately $5 million and the assumption of approximately $4.2 million of liabilities. In addition to the fixed consideration, the agreement contains a performance based earn-out of a maximum of $4.6 million to be paid, subject to the satisfaction of certain performance criteria during 2001, half in cash and half in stock. In connection with the acquisition, the Company expects to incur transaction costs of approximately $450,000. The Merger is intended to qualify as a tax-free reorganization within the meaning of Sections 361 and 368 of the Internal Revenue Code of 1986, as amended. The Company expects to treat the Merger as a purchase for accounting purposes. The Registrant used authorized but previously unissued shares of its Common Stock and cash from its available cash balances as consideration in the Merger. The terms of the Merger Agreement and the Merger were determined on the basis of "arm's-length" negotiations among the parties. The board of directors of the Registrant and the board of directors and the stockholders of Chi-Cor approved the Merger Agreement and the Merger. Prior to the execution of the Merger Agreement, none of the Registrant, its affiliates, officers or directors or any associate of any such officer or director, had any material relationship with Chi-Cor or any of Chi-Cor's other stockholders. Chi-Cor, which is based in Chicago, provides customer financial management software and Internet services to major consumer goods manufacturers, distributors and retailers. The Registrant currently intends to continue to use the tangible assets of Chi-Cor and its intellectual property substantially in the same manner in which they were used by Chi-Cor immediately prior to the Merger. -2- The foregoing discussion of the Merger Agreement does not purport to be complete and is qualified by reference to the full text of the Merger Agreement, which was filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. The Company's press release dated November 6, 2000, which was filed as Exhibit 99.1 to the Registrant's Current Report on Form 8-K, filed on November 8, 2000, is also incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED The following financial statements of Chi-Cor and the notes related thereto are filed herewith: (i) audited balance sheets as of June 30, 1999 and 2000 and unaudited September 30, 2000; (ii) audited statements of operations for the years ended June 30, 1999 and 2000 and unaudited for the three months ended September 30, 1999 and 2000; (iii) audited statements of stockholders' deficit for the years ended June 30, 1999 and 2000 and unaudited for the three months ended September 30, 2000; and (iv) audited statements of cash flows for the years ended June 30, 1999 and 2000 and unaudited for the three months ended September 30, 1999 and 2000 (b) PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma combined condensed financial statements of the Registrant and Chi-Cor and the notes related thereto were previously reported in the Registration Statement: (i) balance sheet as of September 30, 2000; and (ii) statements of operations for the nine months ended September 30, 2000 and for the year ended December 31, 1999. (c) EXHIBITS The Exhibits filed as part of this Current Report on Form 8-K are listed on the Exhibit Index immediately preceding such Exhibits, which Exhibit Index is incorporated herein by reference. Documents identified by footnotes are not being filed herewith and, pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), reference is made to such documents as previously filed as exhibits filed with the Securities and Exchange Commission. The Registrant's file number under the Exchange Act is 000-30883. -3- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Chi-Cor Information Management, Inc.: We have audited the accompanying balance sheets of Chi-Cor Information Management, Inc. (an Illinois corporation) as of June 30, 1999 and 2000, and the related statements of operations, stockholders' deficit and cash flows for the years then ended. These financial statements are the responsibility of Chi-Cor Information Management, Inc.'s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Chi-Cor Information Management, Inc. as of June 30, 1999 and 2000 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. Boston, Massachusetts November 10, 2000 -4- CHI-COR INFORMATION MANAGEMENT, INC. BALANCE SHEETS
JUNE 30, ------------------------- SEPTEMBER 30, 1999 2000 2000 ----------- ----------- ------------- (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents............................ $ 29,261 $ 9,147 $ 6,545 Accounts receivable, net of allowance for doubtful accounts of $81,000, $78,000 and $83,000, respectively....................................... 617,529 609,161 637,496 Prepaid expenses and other current assets............ -- 22,200 45,023 ----------- ----------- ----------- Total current assets........................... 646,790 640,508 689,064 Property and Equipment, net (Note 2)................... 72,857 105,964 151,332 Intangible and Other Assets (Note 3)................... 777,035 585,478 542,048 ----------- ----------- ----------- Total assets................................... $ 1,496,682 $ 1,331,950 $ 1,382,444 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Line of credit....................................... $ 243,666 $ 376,000 $ 599,893 Accounts payable..................................... 226,225 266,614 358,919 Accrued expenses..................................... 283,438 335,766 262,171 Deferred revenue..................................... 2,667,553 3,162,125 3,680,523 Current portion of capital lease obligations......... 8,477 23,998 38,090 ----------- ----------- ----------- Total current liabilities...................... 3,429,359 4,164,503 4,939,596 Capital Lease Obligations, net of current portion...... 15,426 42,789 74,856 Deferred Rent.......................................... -- 35,652 43,554 Stockholders' Deficit: Common stock, no par value Authorized--1,000,000 shares Issued and outstanding--621,000, 632,290 and 632,290 shares at June 30, 1999 and 2000 and September 30, 2000, respectively................. 1,371,091 2,307,306 2,307,306 Deferred stock-based compensation.................... -- (636,597) (569,412) Subscription receivable from stockholder............. (4,528) (4,528) (4,528) Accumulated deficit.................................. (3,314,666) (4,577,175) (5,408,928) ----------- ----------- ----------- Total stockholders' deficit.................... (1,948,103) (2,910,994) (3,675,562) ----------- ----------- ----------- Total liabilities and stockholders' deficit.... $1,496,682 $ 1,331,950 $ 1,382,444 =========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. -5- CHI-COR INFORMATION MANAGEMENT, INC. STATEMENTS OF OPERATIONS
THREE MONTHS ENDED YEARS ENDED JUNE 30, SEPTEMBER 30, ------------------------- --------------------- 1999 2000 1999 2000 ----------- ----------- --------- --------- (UNAUDITED) Net Revenues: Product..................................... $ 70,875 $ 2,174,709 $ 493,090 $ 46,821 Service..................................... 865,215 1,237,727 245,345 354,681 ----------- ----------- --------- --------- Total net revenues........................ 936,090 3,412,436 738,435 401,502 Cost of Revenues.............................. 896,624 944,831 248,102 247,693 ----------- ----------- --------- --------- Gross profit.............................. 39,466 2,467,605 490,333 153,809 ----------- ----------- --------- --------- Operating Expenses: Research and development.................... 717,241 1,374,115 311,140 358,431 Sales and marketing......................... 1,240,722 1,491,759 470,207 342,960 General and administrative.................. 589,253 577,202 85,807 210,105 Depreciation and amortization............... 194,956 238,772 49,760 61,033 ----------- ----------- --------- --------- Total operating expenses.................. 2,742,172 3,681,848 916,914 972,529 Loss from operations...................... (2,702,706) (1,214,243) (426,581) (818,720) ----------- ----------- --------- --------- Other Income (Expense): Interest expense, net....................... (18,857) (48,321) (9,958) (10,902) Other income (expense), net................. (2,052) 55 1,733 (2,131) ----------- ----------- --------- --------- Total other expense....................... (20,909) (48,266) (8,225) (13,033) ----------- ----------- --------- --------- Net loss.................................. $(2,723,615) $(1,262,509) $(434,806) $(831,753) =========== =========== ========= ========= Net Loss per Share: Basic and diluted........................... $ (4.57) $ (2.01) $ (0.70) $ (1.32) =========== =========== ========= ========= Weighted Average Shares Outstanding: Basic and diluted........................... 595,751 626,989 621,000 632,290 =========== =========== ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. -6- CHI-COR INFORMATION MANAGEMENT, INC. STATEMENTS OF STOCKHOLDERS' DEFICIT
SUBSCRIPTION COMMON STOCK DEFERRED RECEIVABLE TOTAL --------------------- STOCK-BASED FROM ACCUMULATED STOCKHOLDERS' SHARES VALUE COMPENSATION SHAREHOLDER DEFICIT DEFICIT -------- ---------- ------------- ------------ ------------ ------------- Balance, June 30, 1998 (unaudited).......... 372,600 $ 377,491 $ -- $ (4,528) $ (591,051) $ (218,088) Issuance of common stock for purchase of TPG (Note 3)............................ 248,400 993,600 -- -- -- 993,600 Net loss.................................. -- -- -- -- (2,723,615) (2,723,615) ------- ---------- --------- ---------- ----------- ----------- Balance, June 30, 1999...................... 621,000 1,371,091 -- (4,528) (3,314,666) (1,948,103) Issuance of common stock.................. 11,290 130,000 -- -- -- 130,000 Deferred stock-based compensation on stock options................................. -- 806,215 (806,215) -- -- -- Amortization of deferred stock-based compensation............................ -- -- 169,618 -- -- 169,618 Net loss.................................. -- -- -- -- (1,262,509) (1,262,509) ------- ---------- --------- ---------- ----------- ----------- Balance, June 30, 2000...................... 632,290 2,307,306 (636,597) (4,528) (4,577,175) (2,910,994) Amortization of deferred stock-based compensation (unaudited)................ -- -- 67,185 -- -- 67,185 Net loss (unaudited)...................... -- -- -- -- (831,753) (831,753) ------- ---------- --------- ---------- ----------- ----------- Balance, September 30, 2000 (unaudited)..... 632,290 $2,307,306 $(569,412) $ (4,528) $(5,408,928) $(3,675,562) ======= ========== ========= ========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. -7- CHI-COR INFORMATION MANAGEMENT, INC. STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED YEARS ENDED JUNE 30, SEPTEMBER 30, ------------------------- --------------------- 1999 2000 1999 2000 ----------- ----------- --------- --------- (UNAUDITED) Cash Flows from Operating Activities: Net loss.................................... $(2,723,615) $(1,262,509) $(434,806) $(831,753) Adjustments to reconcile net loss to net cash provided by (used in) operating activities- Depreciation and amortization............. 194,956 238,772 49,760 61,033 Amortization of deferred stock-based compensation............................ -- 169,618 12,124 67,185 Deferred rent............................. -- 35,652 7,902 Changes in assets and liabilities- Accounts receivable, net................ (292,088) 8,368 (159,782) (28,335) Prepaid expenses and other current assets................................ -- (22,200) -- (22,823) Accounts payable........................ 153,883 40,389 236,189 92,305 Accrued expenses........................ 283,438 52,328 5,988 (73,595) Deferred revenue........................ 2,311,047 494,572 130,742 518,398 ----------- ----------- --------- --------- Net cash used in operating activities.......................... (72,379) (245,010) (159,785) (209,683) ----------- ----------- --------- --------- Cash Flows from Investing Activities: Net cash acquired from TPG acquisition...... 16,372 -- -- -- Purchases of property and equipment......... (40,340) (26,779) (7,981) (6,814) Decrease (increase) in other assets......... (6,968) 2,969 -- (3,718) ----------- ----------- --------- --------- Net cash used in investing activities.......................... (30,936) (23,810) (7,981) (10,532) ----------- ----------- --------- --------- Cash Flows from Financing Activities: Proceeds from sale of common stock.......... -- 130,000 -- -- Net proceeds from borrowing on line of credit.................................... 61,280 132,334 165,000 223,893 Payments on capital lease obligations....... (4,143) (13,628) (2,201) (6,280) ----------- ----------- --------- --------- Net cash provided by financing activities.......................... 57,137 248,706 162,799 217,613 ----------- ----------- --------- --------- Net Decrease in Cash and Cash Equivalents..... (46,178) (20,114) (4,967) (2,602) Cash and Cash Equivalents, beginning of period...................................... 75,439 29,261 29,261 9,147 ----------- ----------- --------- --------- Cash and Cash Equivalents, end of period...... $ 29,261 $ 9,147 $ 24,924 $ 6,545 =========== =========== ========= ========= Supplemental Disclosure of Cash Flow Information: Cash paid during the year for interest...... $ 18,857 $ 48,863 $ 9,985 $ 10,092 =========== =========== ========= ========= Supplemental Disclosure of Noncash Investing and Financing Activities: Deferred stock-based compensation associated with the issuance of stock options........ $ -- $ 806,215 $ 581,915 $ -- =========== =========== ========= ========= Property and equipment acquired under capital lease obligations................. $ 28,046 $ 56,512 $ 9,876 $ 52,439 =========== =========== ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. -8- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Chi-Cor Information Management, Inc. (the Company) is engaged in the design, license and maintenance of software solutions that allow clients to manage and analyze the collection of customer payments. The Company's clients are located principally in the United States. The Company was incorporated in Illinois in June 1979. On November 3, 2000, the Company agreed to be acquired by I-many, Inc. for approximately $9.9 million in initial consideration including cash of $4.9 million and 251,600 shares of I-many common stock plus a performance-based earn-out of a maximum of $4.6 million payable in cash and I-many common stock. In addition, I-Many will assume net liabilities of approximately $4.2 million. The acquisition is anticipated to close on or about November 14, 2000. The Company's financial statements reflect the application of certain accounting policies, as described below and elsewhere in these notes to financial statements. (a) INTERIM FINANCIAL STATEMENTS The accompanying balance sheet as of September 30, 2000 and the statements of operations, cash flows and stockholders' deficit for the three months ended September 30, 1999 and 2000 are unaudited, but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of results for these interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted, although the Company believes that the disclosures included are adequate to make the information presented not misleading. The results of operations for the three months ended September 30, 2000 are not necessarily indicative of the results to be expected for the entire fiscal year or any other interim period. (b) REVENUE RECOGNITION The Company recognizes revenue in accordance with American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2, SOFTWARE REVENUE RECOGNITION, as amended. The Company generates revenues from licensing its software and providing professional services, training, maintenance and customer support services. The Company executes separate contracts that govern the terms and conditions of each software license and maintenance arrangement and each professional services arrangement. These separate contracts are generally elements in a multiple element arrangement. The Company uses the residual method to allocate the total fee to the individual elements of a multiple element arrangement. The Company first allocates a portion of the total fee to maintenance and customer support based on its fair value, which is consistent with the fee paid to renew maintenance and support in subsequent years. The Company then allocates the residual amount to the software license fee and the related professional services, which is recognized upon completion, delivery and acceptance of the software and professional services, provided the fee is fixed and determinable and there is no uncertainty regarding collectibility. Service revenues include professional services, training, maintenance and customer support fees. Maintenance and customer support fees include the right to unspecified upgrades on a -9- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) when-and-if-available basis and ongoing technical support. Maintenance and customer support fees are recognized ratably over the term of the maintenance contract on a straight-line basis. Due to the Company's method of revenue recognition, a significant portion of the deferred revenue balance consists of unearned product revenues, for which the payments have been received from the customers in advance of revenue recognition. Payments received from customers at the inception of a maintenance period are treated as deferred revenue. Substantially all of the amounts included in cost of revenues represent direct costs related to the delivery of professional services, training, maintenance and customer support. To date, cost of product revenues have not been material. (c) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (d) CASH AND CASH EQUIVALENTS The Company considers all highly liquid securities purchased with remaining maturities of 90 days or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value, and primarily consist of cash and money market funds. (e) DEPRECIATION AND AMORTIZATION The Company provides for depreciation and amortization using the straight-line method over the following estimated useful lives:
ESTIMATED USEFUL DESCRIPTION LIVES - ------------------------------------------------------------ ---------------- Computer equipment.......................................... 5 years Office furniture and equipment.............................. 5-7 years Equipment under capital leases.............................. 3-4 years
(f) LONG-LIVED ASSETS The Company assesses 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. The Company reviews its long-lived assets for impairment as events and circumstances indicate the carrying amount of an asset may not be recoverable. The Company evaluates the realizability of its long-lived assets based on profitability and cash flow expectations for the related asset. As a result of its review, the Company does not believe that any impairment currently exists related to its long-lived assets. -10- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) RESEARCH AND DEVELOPMENT COSTS 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 the Company's 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, for the years ended June 30, 1999 and 2000 and for the three months ended September 30, 2000, all research and development costs, which include software development costs, have been expensed as incurred. (h) CONCENTRATIONS OF CREDIT RISK 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. The Company does 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 the Company places its investments in highly rated institutions. Concentration of credit risk with respect to accounts receivable is limited to certain customers to whom the Company makes substantial sales. To reduce risk, the Company routinely assesses the financial strength of its customers and, as a consequence, believes that its accounts receivable credit risk exposure is limited. The Company maintains an allowance for potential credit losses which management believes is adequate to cover any potential losses. The Company had certain customers whose accounts receivable balances individually represented a significant percentage of total accounts receivable at period-end, as follows:
THREE MONTHS ENDED JUNE 30, SEPTEMBER 30, ------------------- ------------------- 1999 2000 1999 2000 -------- -------- -------- -------- (UNAUDITED) Customer A.................................................. * 15% * * Customer B.................................................. * 29% * * Customer C.................................................. 31% * * * Customer D.................................................. 13% * * *
- ------------------------ * Was less than 10% of the Company's total net accounts receivable balance. -11- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Company had certain customers whose revenues individually represented a significant percentage of total net revenues, as follows:
THREE MONTHS ENDED JUNE 30, SEPTEMBER 30, ------------------- ------------------- 1999 2000 1999 2000 -------- -------- -------- -------- (UNAUDITED) Customer E.................................................. * 10% 90% * Customer F.................................................. * * 26% *
- ------------------------ * Was less than 10% of the Company's total net revenues. (i) FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable and line of credit approximate fair value due to the short-term nature of these instruments. (j) NET LOSS PER SHARE In accordance with SFAS No. 128, EARNINGS PER SHARE, basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average basic and diluted number of shares of common stock outstanding during the period. 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 is composed of incremental shares of common stock issuable upon the exercise of outstanding stock options. The calculation of diluted net loss per share excludes 0, 89,968, and 89,968 shares of common stock issuable upon the exercise of outstanding stock options at June 30, 1999, June 30, 2000 and September 30, 2000, respectively. (k) COMPREHENSIVE INCOME SFAS No. 130, REPORTING COMPREHENSIVE INCOME, requires disclosure of all components of comprehensive income on an annual and interim basis. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. For the years ended June 30, 1999 and 2000, and the three months ended September 30, 1999 and 2000, the Company had no items of other comprehensive income; therefore, comprehensive income (loss) for all periods presented is the same as reported net loss. (l) STOCK SPLIT The Company effected a 100-for-1 stock split in October 1998. All share and per share amounts in the accompanying financial statements have been retroactively adjusted to reflect this stock split. -12- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m) RECENT ACCOUNTING PRONOUNCEMENTS In March 1998, the American Institute of Certified public Accountants (AICPA) issued Statement of Position (SOP) 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1 is effective for financial statements for the years beginning after December 15, 1998. SOP 98-1 provides guidance regarding accounting for computer software developed or obtained for internal use, including the requirement to capitalize specified costs and amortization of such costs. The Company adopted SOP 98-1 beginning January 1, 1999. The adoption of this statement did not affect prior years financials. In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts and for hedging activities. SFAS no. 133, as amended by SFAS No. 137, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is not expected to have a material impact on the Company's financial statements. In March 2000, the FASB issued Interpretation No. 44. ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION--AN INTERPRETATION OF APB OPINION NO. 25. The interpretation clarifies the application of APB Opinion No. 25 in certain situations, as defined. The interpretation is effective July 1, 2000, but covers certain events occurring during the period after December 15, 1998 but before the effective date. To the extent that events covered by this interpretation occur during the period after December 31, 1998 but before the effective date, the effects of applying this interpretation would be recognized on a prospective basis from the effective date. Accordingly, upon initial application of the final interpretation, no adjustments would be made to the financial statements before the effective date and no expense would be recognized for any additional compensation cost measured that is attributable to periods before the effective date. The adoption of this interpretation did not have any effect on the Company's financial statements. -13- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (2) DETAIL OF FINANCIAL STATEMENT COMPONENTS
JUNE 30, ------------------- SEPTEMBER 30, 1999 2000 2000 -------- -------- ------------- (UNAUDITED) Property and Equipment: Computer equipment........................................ $59,012 $ 59,012 $ 63,095 Office furniture and other equipment...................... 105,228 117,721 168,317 Equipment under capital leases............................ 28,046 84,558 136,998 ------- -------- -------- 192,286 261,291 368,410 Less--Accumulated depreciation and amortization............. 119,429 155,327 217,078 ------- -------- -------- $72,857 $105,964 $151,332 ======= ======== ========
JUNE 30, ------------------- SEPTEMBER 30, 1999 2000 2000 -------- -------- ------------- (UNAUDITED) Accrued Expenses: Accrued legal settlement.................................. $ 80,000 $ 80,000 $ 55,000 Accrued payroll and benefits.............................. 64,453 76,782 72,936 Accrued commissions....................................... 62,467 95,870 73,732 Accrued other............................................. 76,518 83,114 60,503 -------- -------- -------- $283,438 $335,766 $262,171 ======== ======== ========
(3) TPG ACQUISITION In August 1998, the Company acquired all of the capital stock of TPG Software, Inc. (TPG). In connection with the acquisition the Company issued 248,400 shares of common stock, the fair value of which was determined by the Company's Board of Directors to be $993,600 or $4.00 per share. The Company has allocated the total consideration to the fair value of the assets acquired and liabilities assumed and the residual amount was allocated to goodwill. The Company is amortizing goodwill over its estimated useful life of five years. The Company has treated the acquisition as a purchase for accounting purposes; accordingly, the Company has recorded the results of operations of TPG since the acquisition date. The Company has allocated the purchase price based upon the deemed fair value of the assets acquired and liabilities assumed as follows:
DESCRIPTION AMOUNT - ----------- -------- Current assets.............................................. $107,668 Fixed assets................................................ 25,379 Line of credit.............................................. (82,386) Goodwill.................................................... 942,939 -------- $993,600 ========
-14- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (4) LINE OF CREDIT On July 11, 2000, the Company entered into a credit facility with a bank. The facility consists of a revolving line of credit of $750,000. Interest is payable monthly and accrues at the daily prime rate (9.5% at September 30, 2000) plus 0.5%. The facility is secured by all of the Company's assets and is personally guaranteed by Company directors and officers. The Company had outstanding borrowings on its line of credit of $243,666, $376,000 and $599,893 as of June 30, 1999 and 2000 and September 30, 2000, respectively. At September 30, 2000, the Company had approximately $150,000 available to borrow on the line of credit. (5) STOCKHOLDERS' DEFICIT (a) COMMON STOCK The authorized common stock of the Company consists of 1,000,000 shares of common stock at no par value per share, of which 632,290 shares are issued and outstanding and 150,000 have been reserved for issuance pursuant to option grants under the 1999 Stock Option Plan. (b) STOCK OPTION PLAN In October 1998, the Company established the 1999 Stock Option Plan (the Plan), for which 150,000 shares of common stock have been reserved. Under the terms of the Plan, the Company may grant incentive or non-qualified stock options to directors, officers or employees of the Company. The exercise price for incentive stock option grants shall be determined by the Board of Directors and shall be equal to or greater than the fair market value of the common stock subject to the option at the date of the grant or not less than 110% of the fair market value if options are granted to a shareholder with more than 10% of the total combined voting power. All options expire on July 31, 2004. Options generally vest over a period of 3 years and vesting is subject to 100% acceleration upon a change in control of the Company, as defined. The following table summarizes stock option activity under the Company's stock option plan:
WEIGHTED AVERAGE NUMBER OF SHARES EXERCISE PRICE EXERCISE PRICE ---------------- ------------------ -------------- Balance, June 30, 1999.............................. -- $ -- $ -- Granted........................................... 89,968 0.31--0.55 0.35 Exercised......................................... -- -- -- Canceled.......................................... -- -- -- ------ ------------------ ----- Balance, June 30, 2000.............................. 89,968 0.31--0.55 0.35 Granted........................................... -- -- -- Exercised......................................... -- -- -- Canceled.......................................... -- -- -- ------ ------------------ ----- Balance, September 30, 2000 (unaudited)............. 89,968 $ 0.31--0.55 $0.35 ====== ================== ===== Exercisable, June 30, 2000 ......................... -- $ -- $ -- ====== ================== ===== Exercisable, September 30, 2000 (unaudited)......... -- $ -- $ -- ====== ================== =====
-15- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (5) STOCKHOLDERS' DEFICIT (CONTINUED) Additional information regarding options outstanding and exercisable as of September 30, 2000 is as follows:
WEIGHTED AVERAGE REMAINING NUMBER OF OPTIONS NUMBER OF OPTIONS EXERCISE CONTRACTUAL LIFE OUTSTANDING EXERCISABLE PRICES (YEARS) - ----------------- ----------------- -------- ---------------- 75,968 -- $0.31 3.8 14,000 -- 0.55 3.8 - ----------------- -------- --- 89,968 -- 3.8 ================= ======== ===
The Company applies Accounting Principles Board Opinion (APB) No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, in accounting for its stock compensation plans. In cases where options are granted or stock is issued at a price below fair market value, the Company calculates compensation as the difference between the fair market value, as determined by the Board of Directors, and the exercise or issuance price. The Company recognizes compensation expense over the vesting term of the related option. Had compensation expense for stock options been determined based on the fair values at the grant dates for awards under the plans consistent with the method of accounting prescribed by SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company's net loss would have been increased to the pro forma amounts indicated below.
YEAR ENDED JUNE 30, 2000 ----------- Net loss-- As reported............................................... $(1,262,509) Pro forma................................................. (1,266,098) Basic and diluted net loss per share- As reported............................................... $ (2.01) Pro forma................................................. (2.02)
The Company's calculations for the grants under its stock option plans were made using the Black-Scholes option-pricing model with the following assumptions:
YEAR ENDED JUNE 30, 2000 ---------- Risk-free interest rate..................................... 6% Dividend yield.............................................. -- Volatility.................................................. 75% Expected term............................................... 4 years Weighted average fair value of options granted during the year...................................................... $ 0.21
-16- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (5) STOCKHOLDERS' DEFICIT (CONTINUED) (c) DEFERRED COMPENSATION In connection with all 89,968 stock option grants in fiscal 2000, the Company recorded deferred compensation of $806,215. The deferred compensation represents the aggregate difference between the option exercise price and the deemed fair value of the common stock at the date of grant and is being charged to operations over the related vesting period of three years. (d) SUBSCRIPTION RECEIVABLE FROM STOCKHOLDER At June 30, 1999 and 2000 and September 30, 2000, the Company had a note receivable of $4,528 due from a stockholder related to the purchase of common stock. This amount is classified as a subscription receivable from stockholder in the accompanying balance sheets. (6) INCOME TAXES The Company accounts for income taxes in accordance with the provisions of SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under SFAS No. 109, a deferred tax asset or liability is recorded for all temporary differences between book and tax reporting of assets and liabilities. A deferred tax valuation allowance is required if it is more likely than not that all or a portion of any deferred tax asset will not be realized. At June 30, 2000, the Company had a net deferred tax asset of approximately $750,000, substantially all of which represented tax credit and net operating loss carryforwards that would be available to offset future income taxes, if any. Due to the uncertainty surrounding the Company's ability to realize this NOL and therefore the Company's deferred tax asset, a full valuation allowance has been placed against the otherwise recognizable net deferred tax asset. -17- CHI-COR INFORMATION MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) (7) COMMITMENTS AND CONTINGENCIES (a) LEASES The Company leases its facilities under operating lease agreements and certain of its equipment under noncancelable capital and operating lease agreements through 2009. Future minimum lease commitments under all noncancelable leases at June 30, 2000 are approximately as follows:
OPERATING LEASES CAPITAL LEASES ---------------- -------------- Year ending June 30, 2001...................................................... $ 151,000 $32,070 2002...................................................... 142,000 27,774 2003...................................................... 147,000 14,212 2004...................................................... 152,000 1,773 2005...................................................... 156,000 -- Thereafter................................................ 673,000 -- ---------- ------- Total minimum lease payments............................ $1,421,000 75,829 ========== ======= Less--Amount representing interest.......................... 9,042 ------- Present value of minimum lease payments................. 66,787 Less--Current portion of capital lease obligations.......... 23,998 ------- Capital lease obligations, net of current portion....... $42,789 =======
Total rent expense was approximately $104,000, $139,000 and $34,000, for the years ended June 30, 1999 and 2000 and the three months ended September 30, 2000, respectively. (b) CONTINGENCIES From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues for contingent liabilities when it is probable or likely that future expenditures will be made and such expenditures can be reasonably estimated. In the opinion of management, there are no pending claims of which the outcome is expected to result in a material adverse effect to the financial position or results of operations of the Company. (8) EMPLOYEE PROFIT SHARING AND 401(K) SAVINGS PLAN The Company participates in a profit sharing and 401(k) plan. Eligible employees, as defined, may participate in these plans. Company contributions are determined by the Board of Directors. No contributions were made during the two fiscal years ended June 30, 1999 or 2000 or during the three months ended September 30, 2000. -18- I-MANY, INC. PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 2000 (UNAUDITED)
HISTORICAL PRO FORMA -------------------------- ------------------------------- COMBINED I-MANY CHI-COR ADJUSTMENTS COMPANY ------------ ----------- ------------ ------------ ASSETS Current Assets: Cash and cash equivalents............. $ 61,537,247 $ 6,545 $ (4,944,000)(1) $ 56,599,792 Accounts receivable, net.............. 6,293,477 637,496 -- 6,930,973 Unbilled receivables.................. 3,641,278 -- -- 3,641,278 Prepaid expenses and other current assets.............................. 422,114 45,023 -- 467,137 Prepaid and refundable income taxes... 224,349 -- -- 224,349 Deferred tax asset.................... -- -- -- -- ------------ ----------- ------------ ------------ Total current assets................ 72,118,465 689,064 (4,944,000) 67,863,529 Property and Equipment, net............. 8,986,513 151,332 -- 9,137,845 Deferred Tax Asset...................... -- -- -- -- Intangible and Other Assets............. 1,024,183 542,048 9,754,442(3) 11,320,673 ------------ ----------- ------------ ------------ Total assets........................ $ 82,129,161 $ 1,382,444 $ 4,810,442 $ 88,322,047 ============ =========== ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable...................... $ 2,247,924 $ 358,919 -- $ 2,606,843 Accrued expenses...................... 5,450,620 262,171 450,000(2) 6,162,791 Bank overdraft........................ -- -- -- -- Line of credit........................ -- 599,893 -- 599,893 Deferred revenue...................... 6,020,080 3,680,523 (1,859,120)(5) 7,841,483 Current portion of capital lease obligations......................... 58,657 38,090 -- 96,747 ------------ ----------- ------------ ------------ Total current liabilities........... 13,777,281 4,939,596 (1,409,120) 17,307,757 Capital Lease Obligations, net of current portion....................... 125,763 74,856 -- 200,619 Deferred Rent........................... -- 43,554 -- 43,554 Stockholders' Equity (Deficit): Common stock.......................... 3,200 2,307,306 (2,307,281)(1)(4) 3,225 Additional paid-in capital............ 93,641,616 -- 4,943,975 (1) 98,585,591 Deferred stock-based compensation..... (157,549) (569,412) 569,412 (4) (157,549) Subscription receivable from shareholder......................... -- (4,528) 4,528 (4) -- Accumulated deficit................... (25,261,150) (5,408,928) 3,008,928 (3)(4) (27,661,150) ------------ ----------- ------------ ------------ Total stockholders' equity (deficit)......................... 68,226,117 (3,675,562) 6,219,562 70,770,117 ------------ ----------- ------------ ------------ Total liabilities and stockholders' equity (deficit).................. $ 82,129,161 $ 1,382,444 $ 4,810,442 $ 88,322,047 ============ =========== ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL STATEMENTS. -19- I-MANY, INC. NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 2000 (UNAUDITED) The accompanying unaudited pro forma combined condensed balance sheet has been prepared by combining the historical results of the Company and Chi-Cor as of September 30, 2000 and reflects the following pro forma adjustments: (1) Represents the issuance of an estimated 251,600 shares of Company common stock at $19.65 per share and the payment of $4,944,000 in cash to acquire Chi-Cor. (2) Represents the accrual of estimated direct acquisition costs. (3) Represents the estimated allocation of the purchase price to in-process research and development and other intangible assets and the related charge to operations for the estimated value assigned to in-process research and development. The Company is in the process of obtaining an independent appraisal. The preliminary allocation of the purchase price is as follows: Consideration ------------- Cash $ 4,944,000 Stock 4,944,000 Transaction costs 450,000 ------------ Total 10,338,000 Net Liabilities of Chi-Cor (4,217,610) ------------ Purchase price $ 14,555,610 ============ Preliminary Allocation ---------------------- In-process R&D $ 2,400,000 Deferred revenue 1,859,000 Developed technology 3,200,000 Assembled workforce 300,000 Goodwill 6,796,610 ------------ $ 14,555,610 ============
(4) Represents the elimination of the Chi-Cor equity accounts. (5) Represents the elimination of the portion of deferred revenue recorded by Chi-Cor that will not be earned by I-Many. -20- I-MANY, INC. PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED)
HISTORICAL PRO FORMA ------------------------- ----------------------------- COMBINED I-MANY CHI-COR ADJUSTMENTS COMPANY ----------- ----------- ----------- ------------ Net Revenues: Product............................... $ 9,227,860 $ 716,080 -- $ 9,943,940 Service............................... 10,183,552 959,370 -- 11,142,922 ----------- ----------- ----------- ------------ Total net revenues.................. 19,411,412 1,675,450 -- 21,086,862 Cost of Revenues........................ 5,354,333 986,869 -- 6,341,202 ----------- ----------- ----------- ------------ Gross profit........................ 14,057,079 688,581 -- 14,745,660 ----------- ----------- ----------- ------------ Operating Expenses: Sales and marketing................... 6,613,343 1,574,932 -- 8,188,275 Research and development.............. 8,222,307 1,042,558 -- 9,264,865 General and administrative............ 3,555,734 610,603 -- 4,166,337 In-process research and development... -- -- --(2) -- Depreciation and amortization......... 751,152 236,477 2,619,123(1) 3,606,752 ----------- ----------- ----------- ------------ Total operating expenses............ 19,142,536 3,464,570 2,619,123 25,226,229 ----------- ----------- ----------- ------------ Loss from operations................ (5,085,457) (2,775,989) (2,619,123) (10,480,569) Other income (Expense): Interest income....................... 184,729 542 -- 185,271 Interest expense...................... (10,604) (33,531) -- (44,135) Other income (expense), net........... (27,537) 109 -- (27,428) ----------- ----------- ----------- ------------ Total other income (expense)........ 146,588 (32,880) -- 113,708 ----------- ----------- ----------- ------------ Loss before income taxes.............. (4,938,869) (2,808,869) (2,619,123) (10,366,861) Provision for (benefit from) income taxes................................. 281,075 -- -- 281,075 ----------- ----------- ----------- ------------ Net loss............................ $(5,219,944) $(2,808,869) $(2,619,123) $(10,647,936) =========== =========== =========== ============ Accretion of dividends on redeemable convertible preferred stock......... 2,746 -- -- 2,746 ----------- ----------- ----------- ------------ Net loss applicable to common stockholders...................... $(5,222,690) $(2,808,869) $(2,619,123) $(10,650,682) =========== =========== =========== ============ Net Loss per Share: Basic and diluted..................... $ (0.46) $ (4.51) $ (0.91) =========== =========== ============ Weighted Average Shares Outstanding: Basic and diluted..................... 11,432,945 623,154 (371,554)(3) 11,684,545 =========== =========== =========== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL STATEMENTS. -21- I-MANY, INC. NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) The accompanying unaudited pro forma combined condensed statement of operations has been prepared by combining the historical results of the Company and Chi-Cor for the year ended December 31, 1999 and reflects the following pro forma adjustments: (1) Reflects amortization expense on acquired intangible assets based on their estimated useful life of 4 years. (2) Represents charge to operations of approximately $2,400,000 for the estimated fair values of certain in process research and development projects, and subsequent reversal of this nonrecurring charge, in accordance with Securities and Exchange Commission regulations. (3) Represents an adjustment to the number of Chi-Cor shares to reflect the equivalent number of Company shares, based on the terms of the Agreement and Plan of Merger and Reorganization. -22- I-MANY, INC. PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
HISTORICAL PRO FORMA -------------------------- ----------------------------- COMBINED I-MANY CHI-COR ADJUSTMENTS COMPANY ------------ ----------- ----------- ------------ Net Revenues: Product.............................. $ 9,163,823 $ 1,416,020 $ -- $ 10,579,843 Service.............................. 14,892,465 916,808 -- 15,809,273 ------------ ----------- ----------- ------------ Total net revenues................. 24,056,288 2,332,828 -- 26,389,116 Cost of Revenues....................... 11,786,131 744,620 -- 12,530,751 ------------ ----------- ----------- ------------ Gross profit....................... 12,270,157 1,588,208 -- 13,858,365 ------------ ----------- ----------- ------------ Operating Expenses: Sales and marketing.................. 16,546,550 1,035,790 -- 17,582,340 Research and development............. 9,977,127 1,132,834 -- 11,109,961 General and administrative........... 3,330,476 537,036 -- 3,867,512 In-process research and development........................ -- -- --(2) -- Depreciation and amortization........ 2,846,431 176,099 1,964,342(1) 4,986,872 ------------ ----------- ----------- ------------ Total operating expenses........... 32,700,584 2,881,759 1,964,342 37,546,685 ------------ ----------- ----------- ------------ Loss from operations............... (20,430,427) (1,293,551) (1,964,342) (23,688,320) Other income (Expense): Interest income...................... 949,925 -- -- 949,925 Interest expense..................... (92,977) (39,450) -- (132,427) Other expense, net................... (28,136) (3,020) -- (31,156) ------------ ----------- ----------- ------------ Total other income (expense)....... 828,812 (42,470) -- 786,342 ------------ ----------- ----------- ------------ Loss before income taxes............. (19,601,615) (1,336,021) (1,964,342) (22,901,978) Provision for (benefit from) income taxes................................ -- -- -- -- ------------ ----------- ----------- ------------ Net loss........................... $(19,601,615) $(1,336,021) $(1,964,342) $(22,901,978) ============ =========== =========== ============ Accretion of dividends on redeemable convertible preferred stock........ 544,236 -- -- 544,236 ------------ ----------- ----------- ------------ Net loss applicable to common stockholders..................... $(20,145,851) $(1,336,021) $(1,964,342) $(23,446,214) ============ =========== =========== ============ Net Loss per Share: Basic and diluted.................... $ (1.09) $ (2.12) $ (1.25) ============ =========== ============ Weighted Average Shares Outstanding: Basic and diluted.................... 18,538,657 631,134 (379,534)(3) 18,790,257 ============ =========== =========== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL STATEMENTS. -23- I-MANY, INC. NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) The accompanying unaudited pro forma combined condensed statement of operations has been prepared by combining the historical results of the Company and Chi-Cor for the nine months ended September 30, 2000 and reflects the following pro forma adjustments: (1) Reflects amortization expense on acquired intangible assets based on their estimated useful life of 4 years. (2) Represents charge to operations of approximately $2,400,000 for the estimated fair values of certain in process research and development projects and subsequent reversal of this nonrecurring charge, in accordance with Securities and Exchange Commission regulations. (3) Represents an adjustment to the number of Chi-Cor shares to reflect the equivalent number of Company shares, based on the terms of the Agreement and Plan of Merger and Reorganization. -24- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. I-MANY, INC. Date: November 28, 2000 By: /s/ PHILIP M. ST. GERMAIN --------------------------------------- Philip M. St. Germain CHIEF FINANCIAL OFFICER -25- EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 4.1 (1) Specimen stock certificate for shares of common stock 10.28 (2) Agreement and Plan of Merger and Reorganization dated as of November 3, 2000 among the Registrant, Cimian Corporation, Chi-Cor Information Management, Inc., certain stockholders of Chi-Cor and Karl F. Effgen, as agent for the Stockholders 23.1 Consent of Independent Public Accountants 99.1 (3) Press Release dated November 2000. - ------------------------ (1) Incorporated herein by reference to the Registrant's Registration Statement on Form S-1 (Commission File No. 333-32346), as amended. (2) Incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (3) Incorporated herein by reference to the Registrant's Current Report on Form 8-K dated November 8, 2000. -26-
EX-23.1 2 a2031974zex-23_1.txt EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included (or incorporated by reference) in this Form 8-K, into the Company's previously filed Registration Statement File No. 333-41362. Arthur Andersen LLP Boston, Massachusetts November 28, 2000
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