I-many Announces Third-Quarter 2005 Financial Results

Net revenues for the third quarter totaled $7.1 million, adecrease of 16% versus $8.3 million reported in the second quarter of2005 and a decrease of 24% versus $9.3 million reported in the thirdquarter of 2004. License revenue of $567,000 decreased 62% from $1.5million in the second quarter of 2005 and decreased 76% from $2.4million in the third quarter of 2004. Service revenue of $6.5 milliondecreased 6% versus $6.9 million reported in both the second quarterof 2005 and in the third quarter of 2004. Loss for the third quarterof 2005 was $(0.07) per share, versus a loss of $(0.02) per share inthe third quarter of 2004.

Quarter-end cash, restricted cash and short-term investmentsdecreased to $18.2 million as of September 30, 2005 versus $19.1million as of June 30, 2005.

I-many Acting CEO Yorgen Edholm commented, "I have been on the jobfor almost three months now and continue to be excited about I-many'sopportunity. Management's mandate from the company's board is clear -to build shareholder value by leveraging I-many's dominant position inthe Life Sciences market and its leadership role as the onlypublicly-traded, independent company devoted to Enterprise ContractManagement. We are committed to delivering the industry's leadingtechnology, serving as a trusted partner to a satisfied and loyalclient base in Life Sciences and other selected vertical markets, andachieving significant growth and profitability." Mr. Edholm added,"The company expects to be measured by how well it:

-- Continues to lead the Enterprise Contract Management market

-- Builds on its successes in the Life Sciences market by creating new products and creating additional value for existing customers

-- Expands into new vertical markets

-- Decreases the volatility of its revenues and earnings by gradually increasing its use of long-term subscription licenses, and

-- Leverages its existing sales and professional services organizations with partnerships and alliances."

I-many CFO Kevin Harris commented, "This has been an importanttransition quarter for I-many as we integrate new managementleadership and re-design the business." Towards this end we achievedsignificant milestones during the third quarter, including:

-- Signing 9 license transactions, 4 with new customers, with an aggregate value over the term of the 9 contracts of $2.6 million, further expanding the company's industry-leading customer base.

-- Signing 6 new subscription transactions during the quarter, bringing the unamortized value of subscriptions to be recognized over the next 5 years to $7.9 million, and adding to I-many's base of recurring revenue. Deferred revenue plus the value of unamortized subscriptions now totals $17.5 million. Our recurring revenue from maintenance and support, hosting and subscription revenue is anticipated to be approximately $3.9 million in the fourth quarter of 2005.

-- Further demonstrating the strength of our position in the Life Sciences market while diversifying with new sales in other industries.

Transactions in the quarter included license sales to ZLB Behring,Sykes Enterprises, Eisai Inc. and Elan Pharmaceuticals, Allergan andMGI Pharma.

Fourth Quarter 2005 and 2006 Guidance:

Management anticipates a better fourth quarter, in terms of bothrecognized revenue and total recognized and deferred revenue from newcontracts, compared with the third quarter. While it is difficult topredict the mix of recognizable and deferred transactions the companywill sign in a quarter, management expects the gross value of newlicense transactions in the fourth quarter of 2005 to be in excess of$3 million. Total recognized revenues are expected to be the in therange of $8.5 to $10 million. Management expects expenses to rangefrom $11.2 to $11.5 million and cash at year end to be between $17 and$18 million.

I-many anticipates growth in both recognized revenue and aggregatenew license values (recognized or deferred) in 2006 and plans to giveannual guidance at its fourth quarter 2005 conference call.

Management is including additional financial information in thispress release and in its third quarter report on Form 10-Q that itbelieves will give shareholders additional insight into quarterlyresults. Following the balance sheet and income statement, managementhas included a table that shows the trends over the last five quartersfor new license transactions including subscription contracts, therecognition into reportable revenue of subscriptions and otherdeferred transactions, and the reconciliation of those numbers tototal product revenue according to generally accepted accountingprinciples ("GAAP"). Also, this quarter the company has discontinuedthe use of the non-GAAP "pro forma" income statement measures, asmanagement no longer believes that they enhance the overallunderstanding of the company's financial statements.

I-many will hold a conference call tomorrow, Wednesday, July 26th,2005, at 10:00 a.m. Eastern Time. The call-in number is (866) 202-3048or (617) 213-8843, passcode 96029238. The call is also being webcastand can be accessed at I-many's web site at www.imany.com.

Use of Non-GAAP Financial Information

The company supplements its GAAP financial statements with anon-GAAP quarterly reconciliation of the gross value of licensetransactions to its reported GAAP product revenues. This non-GAAPfinancial information is provided as additional information forinvestors and is not in accordance with or an alternative to GAAP.Management believes its inclusion can enhance an overall understandingof the company's past operational performance and also its prospectsfor the future. This reconciliation of product revenues is made withthe intent of providing both management and investors a more completeunderstanding of the revenue performance of the company, as opposed toGAAP revenue results, which do not include the impact ofnewly-executed subscription agreements and other deferred revenuearrangements that are material to the ongoing performance of thecompany's business. This information quantifies the various componentscomprising current revenue, which in each quarter consists of revenuesfrom licenses sold in current periods plus revenues deferred fromprior periods, less revenue deferred from licenses sold in currentperiods. Management uses this information as a basis for planning andforecasting core business activity in future periods and believes itis useful in understanding our results of operations. The presentationof this additional revenue information is not meant to be consideredin isolation or as a substitute for revenues reported in accordancewith generally accepted accounting principles in the United States.

About I-many

I-many (NASDAQ:IMNY - News) delivers advanced Enterprise ContractManagement solutions for managing corporate commitments. Designed toextend beyond the traditional contract management capabilities, I-manyContractSphere(R) offers an end-to-end solution, from pre-contractprocesses and contract management to transaction compliance.Ultimately, this provides companies with the visibility and controlneeded to manage any type of commitment - from contracts andobligations to payments and collections. The result is increasedrevenue, minimized risk and dramatically reduced operating costs,which deliver improved profitability with hard return on investment.More than 280 customers across 21 industries worldwide haveimplemented and realized the value of I-many business solutions. Formore information, please visit www.imany.com.

This news release contains forward-looking statements, and actualresults may vary from those expressed or implied herein. Factors thatcould affect these results include: the risk of unforeseen technicalor practical impediments to planned software development, which couldaffect the company's product release timetable; the inherent risks oflarge software implementation projects, which can cause customerdisagreements that could affect I-many's ability to collect bothservices and license revenue, whether recognized or deferred; thepossibility that customers could cancel maintenance and supportservices at the time of annual renewal, which could decrease I-many'sbase of recurring revenue; the possibility that current economicconditions will not improve as anticipated or will deteriorate; thepossibility that extraordinary events outside the company's controlcould extend the length of the sales cycle for the company's productsor make the market for the company's products more unpredictable; therisk that the company's historical dependence on the healthcare marketwill continue; the risk that the company will not be successful inopening new markets for its products; and other risk factors set forthfrom time to time in the company's filings with the Securities andExchange Commission.
I-MANY, INC.
Condensed Consolidated Balance Sheets
(in thousands)



September 30, December 31,
2005 2004
------------- ------------
(Unaudited)

Assets
Current Assets:
Cash and cash equivalents $17,501 $6,098
Restricted cash 21 161
Short-term investments and securities
held for sale 0 14,610
Accounts receivable 7,564 9,964
Other current assets 1,174 518
------------- ------------
Total current assets 26,260 31,351

Property and equipment, net 1,339 1,300
Restricted cash 641 663
Other assets 121 120
Acquired intangible assets, net 1,056 2,097
Goodwill 8,667 8,667
------------- ------------
Total assets $38,084 $44,198
============= ============


Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $5,200 $6,571
Current portion of deferred revenue 11,338 9,975
Capital lease obligations 21 160
------------- ------------
Total current liabilities 16,559 16,706

Deferred revenue, net of current portion 187 275
Other long-term liabilities 1,105 1,347

Stockholders' equity 20,233 25,870
------------- ------------

Total liabilities and stockholders'
equity $38,084 $44,198
============= ============
I-MANY, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)

Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
---------- ------- -------- --------

Net Revenues:
Product $567 $2,393 $4,124 $8,341
Services 6,483 6,914 20,226 20,551
---------- ------- -------- --------
Total net revenues 7,050 9,307 24,350 28,892

Cost of revenues 3,888 3,788 11,659 11,757
---------- ------- -------- --------

Gross profit 3,162 5,519 12,691 17,135
---------- ------- -------- --------

Operating expenses:
Sales and marketing 1,961 1,964 6,177 6,335
Research and development 2,795 2,759 8,727 8,879
General and administrative 1,320 1,068 3,613 3,921
Depreciation 204 233 591 664
Amortization of acquired
intangible assets 343 378 1,041 1,087
In-process research and
development 0 0 0 290
Restructuring and other charges
(credits) 8 62 (25) 1,371
---------- ------- -------- --------
Total operating expenses 6,631 6,464 20,124 22,547
---------- ------- -------- --------

Loss from operations (3,469) (945) (7,433) (5,412)

Other income, net 110 107 182 167
---------- ------- -------- --------

Loss before income taxes (3,359) (838) (7,251) (5,245)

Benefit from income taxes 0 (82) 0 (82)
---------- ------- -------- --------

Net loss ($3,359) ($756) ($7,251) ($5,163)
========== ======= ======== ========

Basic and diluted net loss per
common share ($0.07) ($0.02) ($0.16) ($0.13)
========== ======= ======== ========

Weighted average shares
outstanding 45,348 41,575 43,951 41,076
========== ======= ======== ========
Reconciliation of Value of License Transactions to
Reportable Product Revenue



QUARTER ENDED
---------------
9/30 12/31 3/31 6/30 9/30
2004 2004 2005 2005 2005
------- ------- ------- ------- -------
(AMOUNTS IN THOUSANDS)
Gross value of license
contracts sold:
Health and Life Sciences $2,004 $3,886 $1,474 $4,536 $1,209
Industry Solutions 224 1,617 421 500 1,405
------- ------- ------- ------- -------
2,228 5,503 1,895 5,036 2,614
Add product revenue recorded
in current quarter from
contracts sold in prior
periods:
Health and Life Sciences
- subscriptions 34 69 138 223 239
Health and Life Sciences
- other deferrals 0 289 1,476 0 0
Industry Solutions -
other deferrals 550 0 0 0 0
------- ------- ------- ------- -------
584 358 1,614 223 239
Less value of license
contracts sold in current
quarter and deferred to
future periods:
Health and Life Sciences 419 2,802 1,249 3,779 904
Industry Solutions 0 125 183 0 1,382
------- ------- ------- ------- -------
419 2,927 1,432 3,779 2,286
------- ------- ------- ------- -------
Product revenue recorded:
Health and Life Sciences 1,619 1,442 1,839 980 544
Industry Solutions 774 1,492 238 500 23
------- ------- ------- ------- -------
$2,393 $2,935 $2,077 $1,480 $567
======= ======= ======= ======= =======