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.