Pro Forma Financial Information

EX-99.3 4 dex993.htm PRO FORMA FINANCIAL INFORMATION Pro Forma Financial Information

Exhibit 99.3

ITEM 9.01(b) PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma combined condensed financial statements of I-many and its subsidiaries present the combined financial position and results of operations of I-many and Edge as if the acquisition described in Item 9.01(a) occurred as of March 31, 2008 for purposes of the unaudited pro forma combined condensed balance sheet as of March 31, 2008, and as of January 1, 2007 for purposes of the unaudited pro forma combined condensed statements of operations for the year ended December 31, 2007 and for the quarter ended March 31, 2008.

The unaudited pro forma combined condensed financial statements have been derived from and should be read in conjunction with (i) the historical consolidated financial statements and notes and other financial information pertaining to I-many included in its annual reports on Form 10-K and quarterly reports on Form 10-Q and (ii) the audited financial statements and notes and other information pertaining to Edge included in Item 9.01(a) in this filing.

The acquisition will be accounted for using the purchase method of accounting. Under this method, the purchase price and related transaction costs will be allocated to the assets acquired and liabilities assumed based on their fair values as of the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired (including identifiable intangible assets) will be allocated to goodwill. The allocation of the purchase price to the identified tangible and intangible assets acquired and liabilities assumed based on their respective fair values requires extensive use of accounting estimates and judgments. For the preliminary purchase price allocation, I-many estimated the fair values of assets and liabilities based upon assumptions the Company believes are reasonable. The Company’s process for estimating the fair values of identifiable intangible assets, certain tangible assets, in-process research and development and deferred revenue requires significant estimates and assumptions including, but not limited to, determining the timing and estimated costs to complete the in-process projects, estimating future cash flows and discount rates. The purchase price allocation is subject to finalization of the Company’s analysis of the fair value of the assets acquired and liabilities assumed, and therefore is preliminary and may be adjusted upon completion of the final valuation. Such adjustments could be significant. The final allocation is expected to be completed as soon as practicable, but no later than 12 months from the acquisition date.

The pro forma combined condensed financial statements do not reflect any cost savings or other synergies that might result from the transaction. They are provided for informational purposes only and are not necessarily indicative of the combined financial position or results of operation for future periods or the financial position or results that actually would have been realized had the acquisition occurred during the specified period.

I-MANY, INC. AND SUBSIDIARIES

PRO FORMA COMBINED CONDENSED BALANCE SHEET

AS OF MARCH 31, 2008

(IN THOUSANDS)

(UNAUDITED)


	HISTORICAL						PRO FORMA
	I-many			Edge			Adjustments				Combined Company
ASSETS
Current assets:
Cash and cash equivalents	$	20,263		$	1,204		$	(2,828	)	(1)(3)	$	18,639
Accounts receivable, net of allowance		4,794			303							5,097
Prepaid expenses and other current assets		987			588							1,575

Total current assets		26,044			2,095			(2,828	)			25,311
Property and Equipment, net		1,852			348							2,200
Restricted cash		351			—							351
Deferred charges and other Assets		1,326			52							1,378
Acquired intangible assets, net		291			—			2,300		(3)		2,591
Goodwill		9,255			—			347		(1)(2)(3)		9,602

Total assets	$	39,119		$	2,495		$	(181	)		$	41,433

LIABILITIES, MANDATORILY CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,878		$	273						$	2,151
Accrued expenses		4,121			477			1,583		(2)(3)		6,181
Current portion of deferred revenue		13,426			1,791			(1,015	)	(3)		14,202
Current portion of capital lease obligations		408			—							408
Current portion of equipment and term loans		—			839			(839	)	(1)		—

Total current liabilities		19,833			3,380			(271	)			22,942
Convertible notes payable		17,000			—							17,000
Equipment and term loans, net of current portion		—			985			(985	)	(1)		—
Deferred revenue, net of current portion		1,471			222			(222	)	(3)		1,471
Capital Lease Obligations, net of current portion		383			—							383
Other long-term liabilities		661			5							666

Total liabilities		39,348			4,592			(1,478	)			42,462

Mandatorily redeemable convertible preferred stock		—			26,127			(26,127	)	(4)		—

Stockholders’ deficit:
Common stock		5			10			(10	)	(4)		5
Additional paid-in capital		165,278			473			(473	)	(4)		165,278
Accumulated other comprehensive loss		(27	)		—							(27	)
Accumulated deficit		(165,485	)		(28,707	)		27,907		(3)(4)		(166,285	)

Total stockholders’ equity		(229	)		(28,224	)		27,424				(1,029	)

Total liabilities, mandatorily redeemable convertible preferred stock and stockholders’ deficit	$	39,119		$	2,495		$	(181	)		$	41,433

The accompanying notes are an integral part of these pro forma financial statements.

I-MANY, INC. AND SUBSIDIARIES

NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET

AS OF MARCH 31, 2008

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)

The accompanying unaudited pro forma combined condensed balance sheet has been prepared by combining the historical results of I-many and Edge as of March 31, 2008 and reflects the following pro forma adjustments:

(1)

To record merger consideration, consisting of payments of $500 to the preferred shareholders of Edge and $1,729 to the holder of Edge’s equipment and term loans. Also includes principal amounts paid by Edge to the holder of Edge’s equipment and term loans between April 1, 2008 and May 5, 2008.

(2)

To record the accrual of estimated direct acquisition costs.

(3)

To record the estimated allocation of the purchase price to in-process research and development, acquired intangible assets, and goodwill and the related charge to operations for the estimated value assigned to in-process research and development. Includes adjustments of (i) Edge deferred revenue to an amount equivalent to the estimated cost plus an appropriate profit margin to perform the services related to Edge’s support, hosting and services contracts, and (ii) Edge accrued expenses for its acquisition-related costs incurred subsequent to March 31, 2008. The preliminary allocation of the purchase price is as follows:


Consideration:
Cash including loan payoffs	$	2,229
Assumed liabilities		2,860
Transaction costs		345

Total	$	5,434

Preliminary Allocation:
Net Tangible assets of Edge	$	1,987
In-process research & development		800
Acquired developed technology		1,500
Customer relationships		800
Goodwill		347

	$	5,434

(4)

To eliminate Edge stockholders’ equity account balances.

I-MANY, INC. AND SUBSIDIARIES

PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2007

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)


	HISTORICAL						PRO FORMA
	I-many			Edge			Adjustments			Combined Company
Net Revenues:
Recurring	$	19,720		$	1,880		$	—		$	21,600
Services		13,491			3,550			—			17,041
License		7,341			1,933			—			9,274

Total net revenues		40,552			7,363						47,915
Operating expenses:
Cost of recurring revenue		6,351			830			—			7,181
Cost of services		11,034			3,627			—			14,661
Cost of third-party technology		300			49			—			349
Amortization of acquired intangible assets		185			—			575	(1)		760
Sales and marketing		10,079			3,278			—			13,357
Research and development		15,629			2,979			—			18,608
General and administrative		6,241			1,141			—			7,382
Depreciation and amortization		891			322			—			1,213
Restructuring and other charges		93			—			—			93

Total operating expenses		50,803			12,226			575			63,604

Loss from operations		(10,251	)		(4,863	)		(575	)		(15,689	)
Interest expense		(123	)		(283	)		283	(2)		(123	)
Other income, net		566			1,499			—			2,065

Net loss	$	(9,808	)	$	(3,647	)	$	(292	)	$	(13,747	)

Basic and diluted net loss per common share	$	(0.19	)							$	(0.27	)

Weighted average common shares outstanding		51,753									51,753

The accompanying notes are an integral part of these pro forma financial statements.

I-MANY, INC. AND SUBSIDIARIES

PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2008

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)


	HISTORICAL						PRO FORMA
	I-many			Edge			Adjustments			Combined Company
Net Revenues:
Recurring	$	4,916		$	527		$	—		$	5,443
Services		2,242			675			—			2,917
License		205			209			—			414

Total net revenues		7,363			1,411						8,774
Operating expenses:
Cost of recurring revenue		1,566			217			—			1,783
Cost of services		2,381			693			—			3,074
Cost of third-party technology		9			19			—			28
Amortization of acquired intangible assets		56			—			144	(1)		200
Sales and marketing		2,398			624			—			3,022
Research and development		3,656			441			—			4,097
General and administrative		1,532			309			—			1,841
Depreciation and amortization		229			72			—			301
In-process research and development		760			—			—			760
Restructuring and other charges		13			—			—			13

Total operating expenses		12,600			2,375			144			15,119

Loss from operations		(5,237	)		(964	)		(144	)		(6,345	)
Interest expense		(394	)		(51	)		51	(2)		(394	)
Other income, net		189			39			—			228

Net loss	$	(5,442	)	$	(976	)	$	(93	)	$	(6,511	)

Basic and diluted net loss per common share	$	(0.10	)							$	(0.12	)

Weighted average common shares outstanding		52,327									52,327

The accompanying notes are an integral part of these pro forma financial statements.

I-MANY, INC. AND SUBSIDIARIES

NOTES TO PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2007 AND THREE MONTHS ENDED MARCH 31, 2008

(AMOUNTS IN THOUSANDS)

(UNAUDITED)

The accompanying unaudited pro forma combined condensed statements of operations for the year ended December 31, 2007 and for the three months ended March 31, 2008 have been prepared by combining the historical results of the I-many and Edge and reflect the following pro forma adjustments:

(1)

To record amortization expense on acquired intangible assets, based on their estimated useful life of four (4) years, using the straight-line method.

(2)

To eliminate interest amounts incurred by Edge in connection with bank debt that was paid off as part of the acquisition.

Note: the charge for in-process research and development has not been included in the unaudited proforma combined condensed statements of operations since such adjustment is non-recurring in nature.