<PAGE>
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
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(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)
<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
CHI-COR INFORMATION MANAGEMENT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
------------------------- SEPTEMBER 30,
1999 2000 2000
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
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
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<PAGE>
CHI-COR INFORMATION MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------- ---------------------
1999 2000 1999 2000
----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
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
=========== =========== ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<PAGE>
CHI-COR INFORMATION MANAGEMENT, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
SUBSCRIPTION
COMMON STOCK DEFERRED RECEIVABLE TOTAL
--------------------- STOCK-BASED FROM ACCUMULATED STOCKHOLDERS'
SHARES VALUE COMPENSATION SHAREHOLDER DEFICIT DEFICIT
-------- ---------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
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)
======= ========== ========= ========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<PAGE>
CHI-COR INFORMATION MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------- ---------------------
1999 2000 1999 2000
----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
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
=========== =========== ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<PAGE>
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
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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:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
DESCRIPTION LIVES
------------------------------------------------------------ ----------------
<S> <C>
Computer equipment.......................................... 5 years
Office furniture and equipment.............................. 5-7 years
Equipment under capital leases.............................. 3-4 years
</TABLE>
(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.
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<PAGE>
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:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30, SEPTEMBER 30,
------------------- -------------------
1999 2000 1999 2000
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Customer A.................................................. * 15% * *
Customer B.................................................. * 29% * *
Customer C.................................................. 31% * * *
Customer D.................................................. 13% * * *
</TABLE>
------------------------
* Was less than 10% of the Company's total net accounts receivable balance.
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<PAGE>
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:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30, SEPTEMBER 30,
------------------- -------------------
1999 2000 1999 2000
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Customer E.................................................. * 10% 90% *
Customer F.................................................. * * 26% *
</TABLE>
------------------------
* 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.
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<PAGE>
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-
<PAGE>
CHI-COR INFORMATION MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) DETAIL OF FINANCIAL STATEMENT COMPONENTS
<TABLE>
<CAPTION>
JUNE 30,
------------------- SEPTEMBER 30,
1999 2000 2000
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
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
======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
------------------- SEPTEMBER 30,
1999 2000 2000
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
(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:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- --------
<S> <C>
Current assets.............................................. $107,668
Fixed assets................................................ 25,379
Line of credit.............................................. (82,386)
Goodwill.................................................... 942,939
--------
$993,600
========
</TABLE>
-14-
<PAGE>
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:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF SHARES EXERCISE PRICE EXERCISE PRICE
---------------- ------------------ --------------
<S> <C> <C> <C>
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)......... -- $ -- $ --
====== ================== =====
</TABLE>
-15-
<PAGE>
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:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING
NUMBER OF OPTIONS NUMBER OF OPTIONS EXERCISE CONTRACTUAL LIFE
OUTSTANDING EXERCISABLE PRICES (YEARS)
----------------- ----------------- -------- ----------------
<S> <C> <C> <C>
75,968 -- $0.31 3.8
14,000 -- 0.55 3.8
----------------- -------- ---
89,968 -- 3.8
================= ======== ===
</TABLE>
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.
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
2000
-----------
<S> <C>
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)
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
2000
----------
<S> <C>
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
</TABLE>
-16-
<PAGE>
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-
<PAGE>
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:
<TABLE>
<CAPTION>
OPERATING LEASES CAPITAL LEASES
---------------- --------------
<S> <C> <C>
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
=======
</TABLE>
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-
<PAGE>
I-MANY, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -------------------------------
COMBINED
I-MANY CHI-COR ADJUSTMENTS COMPANY
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
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
============ =========== ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL
STATEMENTS.
-19-
<PAGE>
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:
<TABLE>
Consideration
-------------
<S> <C>
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
============
</TABLE>
(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-
<PAGE>
I-MANY, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- -----------------------------
COMBINED
I-MANY CHI-COR ADJUSTMENTS COMPANY
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
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
=========== =========== =========== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL
STATEMENTS.
-21-
<PAGE>
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-
<PAGE>
I-MANY, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -----------------------------
COMBINED
I-MANY CHI-COR ADJUSTMENTS COMPANY
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
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
============ =========== =========== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL
STATEMENTS.
-23-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-