**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D. C. 20549**

 

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##### ** **

**FORM 10****-****Q**

 

| **ý** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|------------|----------------------------------------------------------------------------------------------|

 

# **For the quarterly period ended September 30, 2002**

 

# **OR**

** **

| **o** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

** **

**For the transition periodfrom          to          **

 

# **Commission File Number: 0-30822**

 

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| **SYNAVANT Inc.**                                                           |
|----------------------------------------------------------------------------------|
| (Exact name of registrant as specified in its charter)                           |
|                                                                             |   |   |
| **Delaware**                                                                     |   | **22-2940965** |
| (State of Incorporation)                                                         |   | (I.R.S. Employer  Identification No.) |
|                                                                             |   |   |
| **3445 Peachtree Road NE, Suite 1400  Atlanta, GA**                              |   | **30326** |
| (Address of  principal executive offices)                                        |   | (Zip Code) |
|                                                                             |   |   |
| Registrant’s  telephone number, including area code **(404) 841-4000** |

 

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Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Sections 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past90 days.  Yes ý No o

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date:

 

| **Title of  Class**                   |   | **Shares  Outstanding  at October 31, 2002** |
|---------------------------------------|--------|----------------------------------------------|
| Common Stock,par value $.01 per share |   | 15,179,331  Shares                           |

 

 

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**SYNAVANT Inc.**

# **FORM 10-Q**

# **FOR THE QUARTER ENDED SEPTEMBER 30, 2002**

 

# **INDEX**

 
| **PART I.**  | **FINANCIAL INFORMATION**                                                                               |
|--------------|---------------------------------------------------------------------------------------------------------|
|         |                                                                                                    |
| ITEM 1.      | FINANCIAL STATEMENTS                                                                                    |
|         |                                                                                                    |
|         | Condensed  Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001                   |
|         |                                                                                                    |
|         | Consolidated  Statements of Operations for the Three and Nine Months Ended September 30,  2002 and 2001 |
|         |                                                                                                    |
|         | Consolidated  Statements of Cash Flows for the Nine Months Ended September 30, 2002 and  2001           |
|         |                                                                                                    |
|         | Notes to  Consolidated Financial Statements                                                             |
|         |                                                                                                    |
| ITEM  2.     | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS             |
|         |                                                                                                    |
| ITEM  3.     | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                             |
|         |                                                                                                    |
| **PART II.** | **OTHER INFORMATION**                                                                                   |
|         |                                                                                                    |
| ITEM  1.     | LEGAL  PROCEEDINGS                                                                                      |
|         |                                                                                                    |
| ITEM 2.      | CHANGES IN SECURITIES AND  USE OF PROCEEDS                                                              |
|         |                                                                                                    |
| ITEM 3.      | DEFAULTS UPON  SENIOR SECURITIES                                                                        |
|         |                                                                                                    |
| ITEM  4.     | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                    |
|         |                                                                                                    |
| ITEM  5.     | OTHER  INFORMATION                                                                                      |
|         |                                                                                                    |
| ITEM 6.      | EXHIBITS  AND REPORTS ON FORM 8-K                                                                       |
|         |                                                                                                    |
| SIGNATURES   |

 

2

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**PART I. FINANCIAL INFORMATION**

 

### **ITEM I. FINANCIAL STATEMENTS**

 

**SYNAVANT Inc.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

***(Dollar amounts in thousands, except per share data)***

 

 
|                                                                                                                                                                  |   | **September 30,****2002** |    | **December 31,****2001** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|---------|--------------------------|--------|
|                                                                                                                                                                  |   | **(Unaudited)**           |    | **(Audited)**            |   |
| **ASSETS:**                                                                                                                                                           |   |                      |    |                     |   |
| CURRENT  ASSETS:                                                                                                                                                      |   |                      |    |                     |   |
| Cash  and cash equivalents                                                                                                                                            |   | $                         | 11,446  |                     | $      | 9,578 |   |
| Accounts  receivable-net                                                                                                                                              |   | 35,011                    |    | 39,574                   |   |
| Other  receivables                                                                                                                                                    |   | 350                       |    | 209                      |   |
| Other  current assets                                                                                                                                                 |   | 6,126                     |    | 6,113                    |   |
| TOTAL CURRENT ASSETS                                                                                                                                                  |   | 52,933                    |    | 55,474                   |   |
|                                                                                                                                                                  |   |                      |    |                     |   |
| Property,  plant and equipment-net                                                                                                                                    |   | 12,429                    |    | 11,210                   |   |
| Computer  software-net                                                                                                                                                |   | 3,777                     |    | 7,410                    |   |
| Goodwill-net                                                                                                                                                          |   | 41,156                    |    | 41,156                   |   |
| Long  term notes receivable                                                                                                                                           |   | —                    |    | 1,000                    |   |
| Other  assets                                                                                                                                                         |   | 2,213                     |    | 2,008                    |   |
| TOTAL  LONG TERM ASSETS                                                                                                                                               |   | 59,575                    |    | 62,784                   |   |
| TOTAL ASSETS                                                                                                                                                          |   | $                         | 112,508 |                     | $      | 118,258 |   |
|                                                                                                                                                                  |   |                      |    |                     |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY:**                                                                                                                       |   |                      |    |                     |   |
| CURRENT  LIABILITIES:                                                                                                                                                 |   |                      |    |                     |   |
| Accounts  payable                                                                                                                                                     |   | $                         | 6,941   |                     | $      | 9,516 |   |
| Accrued restructuring                                                                                                                                                 |   | 3,058                     |    | 4,816                    |   |
| Accrued  and other current liabilities                                                                                                                                |   | 17,111                    |    | 13,289                   |   |
| Accrued  income taxes                                                                                                                                                 |   | 2,656                     |    | 1,885                    |   |
| Deferred  revenues                                                                                                                                                    |   | 7,805                     |    | 8,388                    |   |
| TOTAL CURRENT LIABILITIES                                                                                                                                             |   | 37,571                    |    | 37,894                   |   |
|                                                                                                                                                                  |   |                      |    |                     |   |
| Deferred  taxes                                                                                                                                                       |   | 437                       |    | 421                      |   |
| Accrued  liability due to former parent                                                                                                                               |   | 9,000                     |    | 9,000                    |   |
| Other  liabilities                                                                                                                                                    |   | 1,388                     |    | 793                      |   |
| TOTAL  LIABILITIES                                                                                                                                                    |   | $                         | 48,396  |                     | $      | 48,108 |   |
|                                                                                                                                                                  |   |                      |    |                     |   |
| Commitments  and contingencies (see note 2)                                                                                                                           |   |                      |    |                     |   |
|                                                                                                                                                                  |   |                      |    |                     |   |
| STOCKHOLDERS’  EQUITY:                                                                                                                                           |   |                      |    |                     |   |
| Common  stock, par value $.01, authorized 41,000,000 shares; 15,177,101 and  15,059,684 shares outstanding at September 30, 2002 and December 31, 2001,  respectively |   | 152                       |    | 150                      |   |
| Other  stockholders’ equity                                                                                                                                      |   | 63,960                    |    | 70,000                   |   |
| TOTAL  STOCKHOLDERS’ EQUITY                                                                                                                                      |   | 64,112                    |    | 70,150                   |   |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                      |   | $                         | 112,508 |                     | $      | 118,258 |   |

 

See accompanyingNotes to the Consolidated Financial Statements (unaudited).

 

3

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**SYNAVANT Inc.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

***(Dollar amounts in thousands, except per share data)***

 
|                                                         |   | **Three Months Ended**September 30, |       | **Nine Months Ended**September 30, |       |
|--------------------------------------------------------------|--------|-------------------------------------|------------|------------------------------------|------------|
|                                                         |   | **2002**                            |       | **2001**                           |       | **2002** |   | **2001** |   |
| REVENUES:                                                    |   |                                |       |                               |       |   |   |   |   |
| Software fees                                                |   | **$**                               | **1,678**  | ** **                         | **$**      | **1,594** | ** ** | **$** | **4,204** | ** ** | **$** | **8,765** | ** ** |
| Software services                                            |   | **20,059**                          | ** ** | **21,123**                         | ** ** | **63,015** | ** ** | **64,873** | ** ** |
| Interactive marketing                                        |   | **17,213**                          | ** ** | **18,029**                         | ** ** | **60,280** | ** ** | **57,859** | ** ** |
| TOTAL REVENUES                                               |   | **38,950**                          | ** ** | **40,746**                         | ** ** | **127,499** | ** ** | **131,497** | ** ** |
|                                                         |   |                                | ** ** |                               | ** ** |   | ** ** |   | ** ** |
| OPERATING COSTS:                                             |   |                                | ** ** |                               | ** ** |   | ** ** |   | ** ** |
| Software fees                                                |   | **619**                             | ** ** | **1,041**                          | ** ** | **2,153** | ** ** | **4,504** | ** ** |
| Software services                                            |   | **13,835**                          | ** ** | **15,039**                         | ** ** | **44,264** | ** ** | **49,924** | ** ** |
| Interactive marketing                                        |   | **14,960**                          | ** ** | **15,101**                         | ** ** | **51,083** | ** ** | **47,930** | ** ** |
| TOTAL OPERATING COSTS                                        |   | **29,414**                          | ** ** | **31,181**                         | ** ** | **97,500** | ** ** | **102,358** | ** ** |
|                                                         |   |                                | ** ** |                               | ** ** |   | ** ** |   | ** ** |
| Research & development                                   |   | **1,692**                           | ** ** | **2,250**                          | ** ** | **5,224** | ** ** | **6,704** | ** ** |
| Selling and administrative expenses                          |   | **8,248**                           | ** ** | **8,228**                          | ** ** | **24,159** | ** ** | **26,220** | ** ** |
| Restructuring expense                                        |   | **752**                             | ** ** | **4,620**                          | ** ** | **752** | ** ** | **4,620** | ** ** |
| Depreciation and amortization                                |   | **1,870**                           | ** ** | **5,267**                          | ** ** | **5,575** | ** ** | **15,966** | ** ** |
| Spin related costs                                           |   | **—**                          | ** ** | **729**                            | ** ** | **—** | ** ** | **1,289** | ** ** |
| OPERATING LOSS                                               |   | **(3,026**                          | **)**      | **(11,529**                        | **)**      | **(5,711** | **)** | **(25,660** | **)** |
| Other income-net                                             |   | **(331**                            | **)**      | **(1,520**                         | **)**      | **(296** | **)** | **(1,299** | **)** |
| LOSS BEFORE PROVISION (BENEFIT) FOR INCOME TAXES             |   | **(3,357**                          | **)**      | **(13,049**                        | **)**      | **(6,007** | **)** | **(26,959** | **)** |
| Income tax (Provision) Benefit                               |   | **511**                             | ** ** | **604**                            | ** ** | **(511** | **)** | **(1,348** | **)** |
| NET LOSS                                                     |   | **$**                               | **(2,846** | **)**                              | **$**      | **(12,445** | **)** | **$** | **(6,518** | **)** | **$** | **(28,307** | **)** |
|                                                         |   |                                | ** ** |                               | ** ** |   | ** ** |   | ** ** |
| Net loss per share of common stock:  basic and diluted  |   | **$**                               | **(0.19**  | **)**                              | **$**      | **(0.83** | **)** | **$** | **(0.43** | **)** | **$** | **(1.90** | **)** |
| Weighted average shares outstanding:  basic and diluted |   | **15,159**                          | ** ** | **14,945**                         | ** ** | **15,110** | ** ** | **14,909** | ** ** |

 

See accompanyingNotes to the Consolidated Financial Statements (unaudited).

 

4

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**SYNAVANT Inc.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

***(Dollar amounts in thousands)***

*** ***
|                                                                                    |   | **Nine  Months Ended  September 30,** |   |
|-----------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                    |   | **2002**                              |   | **2001** |   |
|                                                                                    |   |                                  |   |   |   |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                                  |   |                                  |   |   |   |
| Net  loss                                                                               |   | $                                     | (6,518 | ) | $ | (28,307 | ) |
| Adjustments  to reconcile net loss to net cash provided (used) by operating activities: |   |                                  |   |   |   |
| Depreciation  and amortization                                                          |   | 5,576                                 |   | 15,966 |   |
| Amortization  of capitalized computer software                                          |   | 1,785                                 |   | 1,551 |   |
| Loss  on sale of marketable equity securities                                           |   | —                                |   | 913 |   |
| Restructuring  charge                                                                   |   | 752                                   |   | 4,620 |   |
| Restructuring  payments                                                                 |   | (2,510                                | )      | — |   |
| Deferred  income taxes                                                                  |   | —                                |   | (24 | ) |
| Changes  in operating assets and liabilities:                                           |   |                                  |   |   |   |
| Accounts  and other receivable                                                          |   | 5,916                                 |   | 2,395 |   |
| Accounts  payable                                                                       |   | (2,888                                | )      | 553 |   |
| Accrued  liabilities and other current liabilities                                      |   | 3,181                                 |   | 287 |   |
| Accrued  income taxes                                                                   |   | 640                                   |   | (884 | ) |
| Deferred  revenues                                                                      |   | (887                                  | )      | (4,189 | ) |
| Other                                                                                   |   | 539                                   |   | (2,557 | ) |
| NET  CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                       |   | 5,586                                 |   | (9,676 | ) |
|                                                                                    |   |                                  |   |   |   |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                                  |   |                                  |   |   |   |
| Capital  expenditures                                                                   |   | (4,385                                | )      | (2,226 | ) |
| Additions  to computer software                                                         |   | (495                                  | )      | (19 | ) |
| Sale  of marketable equity securities                                                   |   | —                                |   | 3,084 |   |
| Other                                                                                   |   | —                                |   | (309 | ) |
| NET  CASH PROVIDED (USED) IN INVESTING ACTIVITIES                                       |   | (4,880                                | )      | 530 |   |
|                                                                                    |   |                                  |   |   |   |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                                  |   |                                  |   |   |   |
| Payments  for capital leases                                                            |   | (301                                  | )      | — |   |
| Cash  received from settlement of note receivable                                       |   | 950                                   |   | — |   |
| Payments  for deferred loan fees                                                        |   | —                                |   | (195 | ) |
| NET  CASH PROVIDED (USED) IN FINANCING ACTIVITIES                                       |   | 649                                   |   | (195 | ) |
|                                                                                    |   |                                  |   |   |   |
| Effect  of exchange rate changes on cash and cash equivalents                           |   | 513                                   |   | 239 |   |
| Increase  (decrease) in cash and cash equivalents                                       |   | 1,868                                 |   | (9,102 | ) |
| Cash  and cash equivalents, beginning of period                                         |   | 9,578                                 |   | 19,768 |   |
| Cash  and cash equivalents, end of period                                               |   | $                                     | 11,446 |   | $ | 10,666 |   |

 

Supplemental Disclosureof Cash Flow Information:

Cash payments forforeign, state and local income taxes were $399 and $2,516 for the nine monthsended September 30, 2002 and 2001, respectively.

 

See accompanyingNotes to the Consolidated Financial Statements (unaudited).

 

5

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**SYNAVANT Inc.**

### **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

**NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES**

 

*Basis of Presentation.*  The accompanying unaudited consolidatedfinancial statements have been prepared in accordance with U.S. generallyaccepted accounting principles (“US GAAP”) for interim financial informationand with the rules and regulations of the Securities and Exchange Commission(the “SEC”).  The consolidated financialstatements and related notes should be read in conjunction with theconsolidated financial statements and related notes of SYNAVANT Inc. (the“Company” or “SYNAVANT”) on Form 10-K. These consolidated financial statements include estimates andassumptions that affect the reported amounts of assets and liabilities,disclosure of contingent assets, and amounts of revenues and expenses.  Actual results may differ from thoseestimated.  In the opinion of management,all adjustments of a normal recurring nature considered necessary for a fairpresentation of financial position, results of operations and cash flows forthe periods presented have been included. Certain information and footnote disclosures have been condensed oromitted pursuant to SEC rules and regulations. However, management believes that the disclosures made are adequate fora fair presentation of the results for all interim periods reported herein.

 

*Organization.*  SYNAVANT serves the biopharmaceutical andhealthcare industries through implementing and supporting pharmaceutical-specificcustomer relationship management (“CRM”) solutions and developing interactivemarketing programs and medical professional databases.  SYNAVANT is composed of the automated salesand marketing support businesses which were formerly part of IMS HEALTHINCORPORATED (“IMS HEALTH”) which operated under the name IMS HEALTH StrategicTechnologies, Inc. (“ST”); certain other former foreign subsidiaries of IMSHEALTH; substantially all of IMS HEALTH’s former interactive and directmarketing businesses, including the business of Clark-O’Neill, Inc. (“ClarkO’Neill”), formerly a wholly owned subsidiary of IMS HEALTH; and a 51% interestin Permail Pty., Ltd. (“Permail”).  OnAugust 31, 2000, shares of SYNAVANT were distributed to shareholders of IMSHEALTH following the conveyance of assets and stock of entities comprising theSYNAVANT business into SYNAVANT Inc., a Delaware corporation.

 

*Reclassifications.*  Certain prior period amounts have been reclassified to conform with currentperiod presentation.

 

*Earnings Per Share.*  Basic and diluted earnings per share (“EPS”)are calculated in accordance with Statement of Financial StandardsNo. 128. For the Company’s calculation,the numerator is the same for the calculation of both basic and diluted EPS.The denominator for basic and diluted EPS is the same for the three and ninemonth periods ended September 30, 2002 and 2001 as the loss fromoperations would otherwise cause the inclusion of common stock options to beanti-dilutive.  Options to purchase7,474,662 shares of common stock at a weighted average price of $9.19 wereoutstanding but not included in the computation of diluted EPS for the three ornine months ended September 30, 2002.

 

*Recently Issued AccountingStandards.*  InJuly 2001, the FASB issued SFAS No. 141, “Business Combinations” andSFAS No. 142 “Goodwill and other Intangibles”. Under these new standards the FASB eliminated accounting forcertain mergers and acquisitions as poolings of interests, eliminatedamortization of goodwill and indefinite life intangible assets, and establishednew impairment measurement procedures for goodwill. For the Company, thestandards become effective for all acquisitions completed on or afterJune 30, 2001. Changes in financial statement treatment for goodwill andintangible assets arising from mergers and acquisitions completed prior toJune 30, 2001 became effective January 1, 2002, and has been adoptedby the Company as of the effective date.

 

6

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In October of 2001, theFASB issued SFAS No. 144, “Accounting for the Impairment or Disposal ofLong-Lived Assets”, which is effective for fiscal years beginning after December 15, 2001. Thisstatement supercedes FASB Statement No. 121, “Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.”However, it retains the fundamental provisions of SFAS No. 121 for therecognition and measurement of the impairment of long-lived assets to be heldand used and the measurement of long-lived assets to be disposed of by sale.Impairment on Goodwill is not included in the scope of SFAS No. 144 andwill be treated in accordance with the accounting standards established in SFASNo. 142, “Goodwill and Other Intangible Assets.” According to SFASNo. 144, long-lived assets are measured at the lower of carrying amount orfair value less cost to sell, whether reported in continuing or discontinuedoperations. The statement applies to all long-lived assets, includingdiscontinued operations, and replaces the provisions of APB OpinionNo. 30, “Reporting the Results of Unusual and Infrequently OccurringEvents and Transactions”, for the disposal of segments of a business. TheCompany has adopted this statement effective January 1, 2002.

 

There has been no materialimpact related to the implementation of these recently issued statements on itsresults of operations, financial position and cash flows.

 

In June of 2002, the FASBissued SFAS No. 146, Accounting for Costs Associated with Exit or DisposalActivities.  FAS 146 requires that aliability for a cost that is associated with an exit or disposal activity berecognized when the liability is incurred. It nullifies the guidance of the Emerging Issues Task Force (EITF) in EITF Issue No. 94-3,Liability Recognition for Certain Employee Termination Benefits and Other Coststo Exit an Activity (including Certain Costs Incurred in a Restructuring).Under EITF Issue No. 94-3, an entity recognized a liability for an exit cost onthe date that the entity committed itself to an exit plan.  In FAS 146, the Board acknowledges that anentity’s commitment to a plan does not, by itself, create a present obligationto other parties that meets the definition of a liability.  FAS 146 also establishes that fair value isthe objective for the initial measurement of the liability.  FAS 146 will be effective for exit ordisposal activities that are initiated after December 31, 2002.  The Company is currently assessing theimpact of implementing these guidelines on its results of operations, financialposition and cash flows.

 

**NOTE 2. CONTINGENCIES**

 

SYNAVANT has from time totime been involved in legal proceedings and litigation arising in the ordinarycourse of business. In the opinion of management, the outcome of all current proceedings, claims andlitigation will not materially affect SYNAVANT’s consolidated financialposition. In addition to these immaterial items, the Company is subject tocertain other contingencies discussed below.

 

In connection with theDistribution, SYNAVANT is jointly and severally liable to other parties inconnection with prior IMS HEALTH Distribution Agreements for the liabilitiesrelating to certain tax matters as well as a legal matter (“DistributionLiabilities”). Under the Distribution Agreement, IMS HEALTH and SYNAVANT agreedthat SYNAVANT would have a maximum liability of $9.0 million for theDistribution Liabilities. Management believes it is probable that at least oneof these matters will have an unfavorable outcome and as a result the Companyrecorded a $9.0 million liability associated with these matters as part ofthe Distribution in 2000. The Distribution Agreement required that if anunfavorable outcome occurred, the amount due up to $9.0 million is due andpayable in January 2003.  As of September30, 2002, the Company has determined that approximately $2.0 million of the$9.0 million described above is now certain. The $2.0 million relates solely to the legal fees associated with thesematters, as all matters are still unresolved as of September 30, 2002.  In concurrence with the Foothill Facilityobtained by the Company (See *“Management’s Discussion and Analysis—Liquidity andCapital Resources”*), IMS HEALTH agreed to defer any paymentsassociated with the Distribution Liabilities until January 2005. Under theDistribution Agreement, SYNAVANT would be liable for amounts in excess of$9.0 million, related to the Distribution Liabilities, only to the extentthat all of the parties involved do not have sufficient combined assets tosettle such contingencies.

 

7

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**NOTE 3. RESTRUCTURING CHARGE**

 

On August 16, 2001, theCompany announced that, in an attempt to optimize customer responsiveness andorganizational effectiveness, it would simplify its senior leadership structureas well as eliminate certain other positions in its international and domesticoperations. The Company completed the first two steps in the restructuringprocess during 2001, resulting in the elimination of approximately 100 positionsreflected in the charge totaling $7.5 million recorded in 2001.  These reductions included six seniormanagement positions with the remainder being operating, technical andadministrative staff.  The Companycontinued the restructuring actions in the third quarter of 2002 with theelimination of 23 additional operating, technical and administrative staff, aswell as two positions in senior management. During the quarter, the Company also recorded a charge of $0.3 millionrelated to the exit of certain real estate leases.  The remaining restructuring charge is composed entirely ofemployee severance and separation related costs, such as extended benefits andoutplacement fees.  Of the $8.2 millioncharge in 2001 and 2002, $5.1 million has been paid to date, with the remainderexpected to be paid within the next twelve months.  The Company has also announced its intentions to furtherrestructure its cost base in order to offset the impact expected from certaincustomer transitions.  These additionalcharges are expected to be up to $8.0 million through the end of 2003, whichwould result in $10 million to $15 million of annual cost savings.

 

**NOTE 4. INCOME TAX**

 

The Company’sconsolidated tax provision was a benefit of $0.5 million for the threemonths ended September 30, 2002 compared to a benefit of $0.6 million for thesame period in the prioryear.  The benefit in both periods isdue to changes in estimate during the third quarter of the respective yearsregarding full year taxes in various geographical regions.  For the nine months ended September 30,2002, the Company had a tax provision of $0.5 million compared to $1.3 millionin the same period in the prior year. The improvement in the tax provision isdue to worldwide tax planning by the Company. The Company’s effective tax rateis different from the U.S. federal statutory tax rate due to taxable income incertain foreign jurisdictions and certain losses for which a full valuation hasbeen provided.

 

**NOTE 5. OPERATIONS BY SEGMENT**

 

The Company delivers pharmaceuticalcustomer relationship management solutions globally in approximately 30countries. The Company’s chief operating decision–makers evaluate thebusiness on a global basis with consideration of resource allocation on ageographic basis. The Americas Segment principally consists of operations for the United States, the Company’scountry of domicile. The Europe Segment includes, but is not limited to, theoperations of the United Kingdom, which is the largest region in this segment.The Asia Pacific Segment consists principally of the operations of Australia.For further information on material individual countries see the additionaldisclosure in the second table of this note.

 
|                                         |   | **Americas**                       |   | **Europe** |   | **Asia  Pacific** |   | **Total** |   |
|----------------------------------------------|--------|------------------------------------|--------|------------|--------|-------------------|--------|-----------|--------|
|                                         |   | **(Dollar  amounts in thousands)** |   |
| **Nine  Months Ended September 30, 2002**    |   |                               |   |       |   |              |   |      |   |
| Operating  revenues                          |   | 77,227                             |   | 39,614     |   | 10,658            |   | 127,499   |   |
| Segment  operating income (loss)             |   | (5,937                             | )      | 752        |   | (526              | )      | (5,711    | )      |
| Non-operating  income (loss)                 |   | (1,207                             | )      | 845        |   | 66                |   | (296      | )      |
| Income  / (loss) before income taxes         |   | (7,144                             | )      | 1,597      |   | (460              | )      | (6,007    | )      |
| Provision  for income taxes                  |   |                               |   |       |   |              |   | (511      | )      |
| Net  loss                                    |   |                               |   |       |   |              |   | (6,518    | )      |
| Segment  total depreciation and amortization |   | 5,971                              |   | 1,050      |   | 340               |   | 7,361     |   |
| Segment  capital expenditures                |   | 4,146                              |   | 744        |   | 182               |   | 5,072     |   |
| Identifiable  assets at September 30, 2002   |   | 80,091                             |   | 27,225     |   | 5,190             |   | 112,506   |   |

 

8

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|                                         |   | **Americas** |   | **Europe** |   | **Asia  Pacific** |   | **Total** |   |
|----------------------------------------------|--------|--------------|--------|------------|--------|-------------------|--------|-----------|--------|
| **Nine  Months Ended September 30, 2001**    |   |         |   |       |   |              |   |      |   |
| Operating  revenues                          |   | $            | 79,359 |       | $      | 41,033            |   | $         | 11,105 |   | $ | 131,497 |   |
| Segment  operating income (loss)             |   | (25,966      | )      | 933        |   | (627              | )      | (25,660   | )      |
| Non-operating  income (loss)                 |   | 208          |   | (1,465     | )      | (42               | )      | (1,299    | )      |
| Income  / (loss) before income taxes         |   | (25,758      | )      | (532       | )      | (669              | )      | (26,959   | )      |
| Provision  for income taxes                  |   |         |   |       |   |              |   | (1,348    | )      |
| Net  loss                                    |   |         |   |       |   |              |   | (28,307   | )      |
| Segment  total depreciation and amortization |   | 15,571       |   | 1,503      |   | 443               |   | 17,517    |   |
| Segment  capital expenditures                |   | 826          |   | 1,083      |   | 317               |   | 2,226     |   |
| Identifiable  assets at September 30, 2001   |   | 89,933       |   | 29,731     |   | 6,076             |   | 125,740   |   |
|                                              |        |              |        |            |        |                   |        |           |        |  |  |  |  |

 

Information about theCompany’s operations and long-lived assets by geography is as follows:

 
|                                      |   | **US** |   | **UK** |   | **Australia** |   | **Rest of********World(2)** |   | **Total** |   |
|-------------------------------------------|--------|--------|--------|--------|--------|---------------|--------|-----------------------------|--------|-----------|--------|
|                                      |   |   |   |   |   |          |   |                        |   |      |   |
| **Nine  Months Ended September 30, 2002** |   |   |   |   |   |          |   |                        |   |      |   |
| Operating  revenues                       |   | $      | 72,822 |   | $      | 13,488        |   | $                           | 9,896  |      | $      | 31,293 |   | $ | 127,499 |   |
| Long-lived  assets(1)                     |   | 51,027 |   | 3,319  |   | 604           |   | 2,411                       |   | 57,361    |   |
| **Nine  Months Ended September 30, 2001** |   |   |   |   |   |          |   |                        |   |      |   |
| Operating  revenues                       |   | $      | 74,984 |   | $      | 15,917        |   | $                           | 10,237 |      | $      | 30,359 |   | $ | 131,497 |   |
| Long-lived  assets(1)                     |   | 57,892 |   | 3,250  |   | 686           |   | 2,470                       |   | 64,298    |   |

 

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(1)                                  Long-livedassets in the U.S. and the U.K. are comprised predominantly of goodwillassociated with the acquisition of Walsh International Inc. inJune 1998.

 

(2)                                  Restof World is primarily comprised of operations in Europe.

 

**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

The following“Management’s Discussion and Analysis of Financial Condition and Results ofOperations” includes forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact made inthis Quarterly Report on Form 10-Q are forward-looking, which can be identifiedby the use of forward-looking terminology such as “may,” “will,” “expect,”“anticipate,” “estimate,” “believe,” “continue” or other similar words. Suchforward looking statements are based on management’s current plans andexpectations and are subject to risks and uncertainties that could cause actualresults to differ materially fromthose described in the forward-looking statements.  Factors that could cause or contribute to such differencesinclude, but are not limited to: risks associated with competition from otherproviders of customer relationship management solutions; customer decisionsfavoring competitor products, solutions and/or services; the ability to obtainadditional financing on satisfactory terms to meet future capital requirements;loss of key personnel; failure to introduce new or enhanced products in atimely manner; defects in our products and delays related to market adoption ofour software; consolidation of the pharmaceutical industry; fluctuations inquarterly and/or annual operating results that may adversely affect the marketprice of our common stock; operating on a global basis; the ability to protectour intellectual property; product infringement claims; the ability toidentify, consummate and integrate acquisitions, alliances and ventures onsatisfactory terms; the ability to develop new or advanced technologies,systems or products; the ability to successfully maintain historic effectivetax rates; and regulatory, legislative and enforcement initiatives. These risksand uncertainties are not intended to be exhaustive and should be read inconjunction with other cautionary statements made herein including, but notlimited to, the material set forth

 

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herein under the heading“Factors That May Affect Future Performance.” The Company assumes no obligationto update any such forward-looking statements.

 

This discussion andanalysis should be read in conjunction with the consolidated financialstatements and related notes contained in Item I of this report and with theCompany’s Annual Report on Form 10-K for the year ended December 31,2001.

 

**OVERVIEW**

 

On August 31, 2000, SYNAVANT was spun off from IMSHEALTH, a provider of information solutions to the biopharmaceutical andhealthcare industries.  Pursuant to thespin-off, shares of SYNAVANT common stock were distributed to the shareholdersof IMS HEALTH. This transaction was structured as a tax-free dividend to thestockholders of IMS HEALTH, who received one share of SYNAVANT common stock(together with the associated preferred share purchase right) for every 20shares of IMS HEALTH common stock held as of the record date for theDistribution.

 

This discussion and analysis should be read inconjunction with the accompanying consolidated financial statements and relatednotes.

 

**SIEBEL ALLIANCE**

 

On July 14, 2000, SYNAVANT entered into a strategicalliance (the “Alliance”) with Siebel Systems Inc. (“Siebel”), a leadingprovider of eBusiness application software. Through the Alliance, the companiesintended to jointly develop, market and sell pharmaceutical and healthcarerelated versions of Siebel’s eBusiness software applications as part of a jointoffering.

 

As part of the Alliance, SYNAVANT and Siebel enteredinto:  (1) a Value Added IndustryRemarketer Agreement (the “Reseller Agreement”), (2) a Siebel Alliance ProgramMaster Agreement (the “Alliance Agreement”), and (3) a license of certainSiebel software for SYNAVANT’s internal use. Pursuant to the Reseller Agreement, Siebel appointed SYNAVANT as anon-exclusive distributor of certain Siebel licensed software.  The Alliance Agreement has been supercededby a new Siebel Alliance Program Master Agreement (“the Revised AllianceAgreement”) entered into by SYNAVANT and Siebel on December 31, 2001 (“RevisedAlliance”).

 

Under the Revised Alliance, SYNAVANT and Siebel haveagreed to terminate the Reseller Agreement and to continue the license ofcertain Siebel software for SYNAVANT’s internal use.  In addition, the Revised Alliance also results in the following:

 

•                  SYNAVANT isdesignated as a “Strategic Consulting Partner”;

 

•                  Siebel no longershares in revenue associated with the sale of SYNAVANT software licenses;

 

•                  SYNAVANT nolonger has restrictions on its product development, including Cornerstone andPremiere;

 

•                  SYNAVANT is nolonger required to exclusively support Siebel software; and

 

•                  SYNAVANT is ableto support a broader product set including Siebel eMedical, eClinical as wellas Employee Relationship Management (“ERM”).

 

A chief difference between this new partner status andthe previous one is that SYNAVANT is no longer a Siebel Value Added Reseller(“VAR”) and therefore no longer sells Siebel licenses.  This eliminates

 

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channel conflict for license sales, allowing SYNAVANT to focus ondelivering its core competencies of consulting, implementation and supportservices for Siebel technology in a manner that achieves high value.  Another important benefit of this new partnerstatus is that SYNAVANT has rights to implement and support Siebel’s *e*Medical,*e*Clinicaland ERM applications, providing a broader revenue potential opportunity withinthe life sciences area.

 

###### **CRITICALACCOUNTING POLICIES**

 

“Management’s Discussion and Analysis of FinancialCondition and Results of Operations” are based upon the Company’s consolidatedfinancial statements and the notes thereto, which have been prepared inaccordance with generally accepted accounting principles in the United States(“US GAAP”).  The preparation of thesefinancial statements requires management to make estimates and judgments thataffect the reported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reported periods.  On an on-going basis, management evaluatesits estimates and judgments, including those related to revenue recognition,allowance for uncollectible accounts, goodwill and other intangible assets,income taxes, restructuring costs, and litigation.

 

Management bases its estimates and judgments onhistorical experience and on various other factors that are believed to bereasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. There can be no assurance that actual results will not differ from thoseestimates.

 

The Company has identified the significant estimatesand judgments below as critical to our business operations and theunderstanding of our results of operations. For a detailed discussion on the application of these significantestimates and judgments and our accounting policies, also see Note 1 of theConsolidated Financial Statements.

 

*Revenuerecognition*.* *The Company recognizes revenueswhen persuasive evidence of an arrangement exists, services have been rendered,the price to the buyer is fixed or determinable, and collectibility isreasonably assured.  Revenues consist ofsoftware license fees, related maintenance and software service fees, databaseand information services, and interactive marketing programs.  Deferred revenue consists of maintenancebillings due in advance of service periods, and other software and projectbillings for which services have not yet been completed.  The Company’s revenue recognition policiesare consistent with the guidance in Staff Accounting Bulletin (“SAB”) No. 101,“Revenue Recognition in Financial Statements”, as amended by SAB No. 101A and101B, and AICPA Statement of Position (“SOP”) No. 97-2 “Software RevenueRecognition”, as amended by SOP Nos. 98-4 and 98-9.

 

In cases where services to be provided are not essential to thefunctionality of the software, the Company has sufficient vendor specificobjective evidence (“VSOE”) of fair value of the elements to recognize therevenue separately.  The Company hasdetermined the VSOE of its software license fee based on the consistent peruser license fee charged to its customers. The VSOE of the software serviceelement is based on the price of the software services when sold separately.The Company accounts for the maintenance and support element separately usingVSOE, which is determined based on the customer renewal fees for such services.

 

The Company’s software services derives a portion ofits revenue from contracts recorded using the percentage of completion methodof accounting based on labor input measures, which require the accurateestimation of the cost, scope and duration of each engagement.  If the Company does not accurately estimatethe resources required or the scope of work to be performed, or does not manageits projects properly within the planned periods of time or satisfy its obligationsunder the contracts, then future software service margins may be significantlyand negatively affected or losses on existing contracts may need to berecognized.  Any such resultingreductions in margins or contract losses could be material to the Company’sresults of operations.

 

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Should changes in conditions cause management to determine thesecriteria are not met for certain future transactions, revenue recognized forany reporting period could be adversely affected.

 

*Allowancefor uncollectible accounts.* Prior to the recognition of revenue, the Company makes a decision thatcollectibility is reasonably assured. Over time, management analyzes accounts receivable balances, historicalbad debts, customer concentrations, customer credit-worthiness, currenteconomic trends, and changes in our customer payment terms and trends whenevaluating the adequacy of the allowance for uncollectible accountsreceivable.  Significant managementjudgment and estimates must be made and used in connection with establishingthe allowance for uncollectible accounts receivable in any accountingperiod.  The Company provides specificamounts for known individual accounts that have deteriorated and generalamounts for changes that are indicators of future deterioration.  If the financial condition of the Company’scustomers were to deteriorate, resulting in an impairment of their ability tomake payments, additional allowances may be required.

 

*Goodwilland other intangible assets. *Purchaseaccounting requires extensive use of accounting estimates and judgments toallocate the purchase price to the fair market value of the assets andliabilities purchased.  The Companyevaluates acquired businesses for potential impairment indicators wheneverevents or changes in circumstances indicate that the carrying value may not berecoverable. Factors that management consider important, which could trigger animpairment review include, but are not limited to, the following:

 

•                  Significantdecrease in the market value of an asset;

 

•                  Significantchanges in our use of the acquired assets or the strategy for our overallbusiness;

 

•                  Significantadverse change in legal factors or negative industry or economic trends;

 

•                  Significantunderperformance relative to current period and/or projected future operatingprofits or cash flows associated with an asset;

 

•                  Significantdecline in the Company’s stock price for a sustained period; and

 

•                  Our marketcapitalization relative to net book value.

 

When the Companydetermines that the carrying value of long-lived assets, intangibles andrelated goodwill may not be recoverable based upon the existence of one or moreof the indicators of impairment, the Company recognizes an impairment loss whenthe sum of undiscounted expected future cash flow is less than the carryingamount of such assets.  The impairmentloss, if applicable, is then calculated based on the fair value or the sum ofthe discounted cash flows compared to the carrying value.  The discounted cash flow method would use adiscount rate determined by management to be commensurate with the riskinherent in the current business model.

 

Statement of FinancialAccounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”became effective January 1, 2002, and as a result, the Company ceasedamortization of the remaining $41.2 million of goodwill.  Goodwill amortization of approximately $11.7million was recorded during 2001.  Inlieu of amortization, the Company is required to perform a periodic impairmentreview of the goodwill.  The Companyperforms this review on a quarterly basis and no impairment has currently beenidentified.  However, future eventscould cause management to conclude that impairment indicators exist and thatgoodwill associated with the acquired businesses is impaired.  Any resulting impairment loss could have amaterial adverse impact on the balance sheet and results of operations.  Other intangible assets with finite livesthat do not meet the criteria of SFAS No. 142 will continue to be amortized inaccordance with the adoption of SFAS No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets”.  Thisamortization is based on the

 

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estimated useful lives ofthe underlying acquired business or underlying assets. * *Thesepronouncements have not had a material impact on the Company’s results ofoperations, financial position and cash flows.

 

The impact of SFAS No. 142 on previously reportedresults follows.

 
|                                     |   | **Three  months ended**  |   | **Nine  months ended**   |   |
|------------------------------------------|--------|--------------------------|--------|--------------------------|--------|
|                                     |   | **Sept 30,********2002** |   | **Sept 30,********2001** |   | **Sept 30,********2002** |   | **Sept 30,********2001** |   |
|                                     |   |                     |   |                     |   |   |   |   |   |
| Reported net  loss                       |   | $                        | (2,846 | )                        | $      | (12,445 | ) | $ | (6,518 | ) | $ | (28,307 | ) |
| Add back:  Goodwill amortization    |   | —                   |   | 2,933                    |   | — |   | 8,800 |   |
| Adjusted net  loss                       |   | (2,846                   | )      | (9,512                   | )      | (6,518 | ) | (19,507 | ) |
|                                     |   |                     |   |                     |   |   |   |   |   |
| Loss per share –  basic and diluted |   |                     |   |                     |   |   |   |   |   |
| Reported net  loss                       |   | $                        | (0.19  | )                        | $      | (0.83 | ) | $ | (0.43 | ) | $ | (1.90 | ) |
| Goodwill  amortization                   |   | —                   |   | 0.19                     |   | — |   | 0.59 |   |
| Adjusted net  loss                       |   | $                        | (0.19  | )                        | $      | (0.64 | ) | $ | (0.43 | ) | $ | (1.31 | ) |

 

*Incometaxes. *As part of theprocess of preparing the consolidated financial statements, it is required toestimate taxes in each of the jurisdictions in which the Company operates.  This process involves management estimatingthe actual current tax exposure together with assessing temporary differencesresulting from differing treatment of items for tax and US GAAP purposes.  These differences result in deferred taxassets and liabilities, which are included within the condensed consolidatedbalance sheet.  The Company must thenassess the likelihood that deferred tax assets will be recovered from futuretaxable income and to the extent management believes that recovery is notlikely, a valuation allowance must be established.  To the extent the Company establishes a valuation allowance orincreases this allowance in a period, an expense is recorded within the taxprovision in the consolidated statement of operations.

 

Significant management judgment is required indetermining our provision for income taxes, our deferred tax assets andliabilities and any valuation allowance recorded against our net deferred taxassets.  The Company has recorded avaluation allowance due to uncertainties related to our ability to utilize someof our deferred tax assets, primarily consisting of certain net operatinglosses carried forward and foreign tax credits, before they expire.  The valuation allowance is based on ourestimates of taxable income by jurisdiction in which the Company operates andthe period over which our deferred tax assets could be recoverable.  In the event that actual results differ fromthese estimates or the Company adjusts these estimates in future periods,management may need to establish an additional valuation allowance which couldmaterially impact our financial condition and results of operations.

 

The Company also records a reserve for certaininternational, federal and state tax contingencies based on the likelihood ofobligation, when needed.  In the normalcourse of business, the Company is subject to challenges from U.S. and non-U.S.tax authorities regarding the amount of taxes due. These challenges may resultin adjustments of the timing or amount of taxable income or deductions or theallocation of income among tax jurisdictions. Management believes SYNAVANT has appropriately accrued for taxexposures.  If the Company prevails in amatter for which an accrual has been established or is required to pay anamount exceeding its reserves, the financial impact will be reflected in theperiod in which the matter is resolved. In the event that actual results differ from these estimates or theCompany adjusts these estimates in future periods, management may need toestablish an additional valuation allowance which could materially impact thefinancial condition and results of operations.

 

*Restructuringcosts. *Therestructuring accruals are based on certain estimates and judgments related tocontractual obligations and related costs. Potential restructuring accruals related to contractual office lease obligationscould be materially affected by factors such as the ability to securesubleases, the credit-worthiness of sub-lessees and success in negotiatingearly termination agreements with lessors. In the event that actual

 

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results differ from these estimates or the Company adjusts theseestimates in future periods management may need to establish an additionalrestructuring accrual or reverse accrual amounts accordingly.

 

*Legalcontingencies. *TheCompany is currently involved in certain legal proceedings as disclosed in Note2.  The Company has accrued an estimateof the probable costs for the resolution of these claims.  This estimate has been developed inconsultation with outside counsel handling our defense in these matters and isbased upon an analysis of potential results, assuming a combination oflitigation and settlement strategies. The Company does not believe these proceedings will materially affectSYNAVANT’s financial position, although no assurance can be given as to theultimate outcome of any such proceedings.

 

*Fair Value of Stock Options. *SFAS No. 123, “Accounting for Stock–BasedCompensation”, requires that companies with stock-based compensation planseither recognize compensation expense based on the fair value of optionsgranted or continue to apply the existing accounting rules and disclosepro forma net income and earnings per share assuming the fair value method hadbeen applied. The Company has chosen to continue applying Accounting PrinciplesBoard Opinion No. 25 (“APB No. 25”) and related interpretations in accountingfor its stock incentive plans.  Accordingly, no compensation expense relatedto the issuance of stock options has been recognized for the three and ninemonths ended September 30, 2002 and 2001. The compensation cost for the SYNAVANT stock incentive plansbased on the fair value at the grant dates for awards under those plans,consistent with the method of SFAS No. 123, are disclosed on an annual basis inthe Company’s Annual Report on Form 10-K.

 

However, the Companyrecognizes that as a result of recent events in the business and financialcommunity, the accounting profession has been reevaluating practices concerningemployee compensation and the related accounting.  Therefore the Company will be evaluating the appropriateness ofthe practice of recording compensation expense as a result of the issuance ofstock options, as it relates to the Company’s particular situation and guidancefrom the accounting profession on appropriate valuation methods.

 

The above listing is not intended to be acomprehensive list of all the Company’s estimates and judgments or accountingpolicies.  In many cases, the accountingtreatment of a particular transaction is specifically dictated by US GAAP, withno need for management’s judgment in their application.  There are also areas in which management’sjudgment in selecting any available alternative would not produce a materiallydifferent result.  See the auditedconsolidated financial statements and notes thereto which contain accountingpolicies and other disclosures required by US GAAP.

 

**RESULTS OF OPERATIONS**

 

**THREE MONTHS ENDED SEPTEMBER 30,2002 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2001.**

 

**REVENUE**

 

Total revenues for the threemonths ended September 30, 2002 decreased by $1.8 million and 4% to $38.9million from $40.7 million for the three months ended September 30, 2001.The overall revenue decrease was primarily driven by a decrease in softwareservices and interactive marketing, partially offset by the impact of a weakerU.S. Dollar.  Excluding the impact of aweaker U.S. Dollar, revenues decreased by 8%.

 

*SOFTWARE FEES.*  Software fees increased to $1.7 millionfor the three months ended September 30, 2002 from $1.6 million forthe three months ended September 30, 2001, an increase of$0.1 million and 6%.  The increasein software fees is primarily due to license fees of $0.8 million from Siebelsoftware sold to a major U.S. customer, partially offset by a significant declinein customer sales representative expansions in the U.S. compared to the prioryear.  Although the Company is no longera Siebel software VAR, entitlement to the fees on the Siebel software sale werenegotiated as part of the Company’s VAR termination agreement with Siebel inDecember 2001.

 

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In recent periods,software fees have declined, and are expected to continue to decline in futureperiods, as the Company is no longer a Siebel VAR (See Siebel Alliance) and dueto the discontinuance of ongoing development of certain of the Company’s legacysoftware products.  Excluding the impactof a weaker U.S. Dollar, software fees revenue was essentially unchanged.

 

*SOFTWARE SERVICES.*  Software services revenue decreased to$20.1 million for the three months ended September 30, 2002 from$21.1 million for the three months ended September 30, 2001, adecrease of $1.0 million or 5%. The decrease in revenue from software services is principally due to adecrease of certain roll-out related revenues, such as hardware rebills,associated with customer salesrepresentative expansions in the U.S., partially offset by higher recurringrevenue.  In addition, the softwareservices revenue was negatively affected by the initial impact of a customertransition in the U.S.  Excluding theimpact of a weaker U.S. dollar, Software services revenue decreased by 8%.

 

*INTERACTIVE MARKETING.*  Interactive marketing revenue decreased to$17.2 million for the three months ended September 30, 2002 from$18.0 million for the three months ended September 30, 2001, a decrease of $0.8million or 4%.  The decrease isprimarily due to weak promotional activity in the pharmaceutical sector ingeneral and delays in FDA approvals for certain drugs.  Excludingthe impact of a weaker U.S. Dollar, Interactive marketing revenuedecreased by 8%.

 

**OPERATING COSTS**

* *

*COST OF SOFTWARE FEES.*  Cost of software fees decreased to$0.6 million for the three months ended September 30, 2002, from$1.0 million for the three months ended September 30, 2001, adecrease of $0.4 million and 40%. The decrease relates to the decline in proprietary software fee revenue,partially offset by an increase in amortization of capitalized softwarecosts.  The Siebel license fee revenueof $0.8 million had no associated costs.

 

*COST OF SOFTWARE SERVICES.*  Cost of software services decreased to$13.8 million for the three months ended September 30, 2002, from$15.0 million for the three months ended September 30, 2001, a decrease of$1.2 million and 8%. The decrease in cost of software services is primarily dueto a change in product mix, driven by lower levels of customer salesrepresentative expansions and other cost containment actions.

 

*COST OF INTERACTIVE MARKETING.*  Cost of interactive marketing revenueremained essentially unchanged at $15.0 million for the three months endedSeptember 30, 2002 from $15.1 million for the same period in the prior year.These costs remained relatively consistent despite the decrease in revenues dueto changes in the product mix, as a considerable portion of interactivemarketing operating costs on certain products are fixed.  Significant fluctuations in revenue, as aresult, can have a material impact on profitability.

 

### **GROSS MARGIN**

 

The Company calculatesgross margin as revenue less operating costs as categorized in the Company’sconsolidated financial statements.  Thefollowing table summarizes the Company’s gross margin information in dollarsand as a percentage of the associated revenues for the three months endedSeptember 30, 2002 and the comparable period for the prior year.

 
|                  |   | **9/30/02********Gross Margin** |   | **9/30/01********Gross Margin** |   |
|-----------------------|--------|---------------------------------|--------|---------------------------------|--------|
|                  |   | **(in thousands)**              |   |
| Software fees         |   | $                               | 1,059  |                            | 63.1   | % | $ | 553 |   | 34.7 | % |
| Software services     |   | 6,224                           |   | 31.0                            | %      | 6,084 |   | 28.8 | % |
| Interactive marketing |   | 2,253                           |   | 13.1                            | %      | 2,928 |   | 16.2 | % |
|                  |   |                            |   |                            |   |   |   |   |   |
| Total                 |   | $                               | 9,536  |                            | 24.5   | % | $ | 9,565 |   | 23.5 | % |

 

15

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Total gross margin forthe three months ended September 30, 2002 remained unchanged at$9.5 million and improved as a percentage of revenue by 1% to 25%.  The Company experienced improved softwareservices margins due to changes in product mix, reflecting a higher level ofrecurring service revenue and a lower level of one-time project related revenuesand cost containment actions taken in the second half of 2001.  These improved software services marginswere partially offset by a decline in interactive marketing margins caused byproduct mix and lower revenue.  Softwarefee margins were improved due to the one-time Siebel license fees associated with a customer in theU.S.  However, due to the ongoingtransition to a software services model from a proprietary software business,the Company expects software fees to decline as the Company is no longer aSiebel VAR and due to the discontinuance of ongoing development of certain ofthe Company’s legacy software products.

 

**OPERATING EXPENSES**

 

*RESEARCH AND DEVELOPMENT.*  Research and development expenses declinedby 0.6 million or 26% to $1.7 million for the three *months* ended September 30,2002 from $2.3 million for the three months ended September 30, 2001.  The decline in research and developmentcosts is principally attributable to a de-emphasis on proprietary software development.

 

*SELLING AND ADMINISTRATIVE.*  Selling and administrative expenses remainedunchanged at $8.2 million for the three *months* ended September 30, 2002 ascompared to the same period in the prior year. The Company has invested in new sales resources in 2002, which has beenoffset by the impact of administrative cost containment actions.

 

*DEPRECIATION AND AMORTIZATION.*  Depreciation and amortization for the threemonths ended September 30, 2002 declined to $1.9 million from$5.3 million for the same period in the prior year.  The decline is due to the absence ofGoodwill amortization during 2002 in accordance with new accounting standardsthat eliminated the amortization of goodwill (See Note 1 Recently IssuedAccounting Standards).

 

**OPERATING LOSS**

 

Operating loss decreasedto $3.0 million for the three months ended September 30, 2002 comparedwith an operating loss of $11.5 millionfor the three months ended September 30, 2001.  The loss narrowed by $8.5 million primarily due to theabsence of goodwill amortization, cost containment actions taken during thesecond half of 2001 and a reduction in the amount of restructuring chargesrecorded in 2002.

 

**RESTRUCTURING**

 

On August 16, 2001, theCompany announced that, in an attempt to optimize customer responsiveness andorganizational effectiveness, it would simplify its senior leadership structureas well as eliminate certain other positions in its international and domesticoperations. The Company completed the first two steps in the restructuringprocess during 2001, resulting in the elimination of approximately 100positions reflected in the charge totaling $7.5 million recorded in 2001.  These reductions included six seniormanagement positions with the remainder being operating, technical and administrativestaff.  The Company continued therestructuring actions in the third quarter of 2002 with the elimination of 23additional operating, technical and administrative staff, as well as twopositions in senior management.  Duringthe quarter, the Company also recorded a charge of $0.3 million related to theexit of certain real estate leases.  Theremaining $0.5 million restructuring charge taken in the third quarter iscomposed entirely of employee severance and separation related costs, such asextended benefits and outplacement fees. Of the $8.2 million cumulative charge recorded in 2001 and 2002, $5.1million has been paid to date, with the remainder expected to be paid withinthe next twelve months.  The Company hasalso announced its intentions to further restructure its cost base in order tooffset the impact expected from certain customer transactions.  These additional charges are expected to beup to $8.0 million through the end of 2003, which would result in $10 millionto $15 million of annual cost savings.

#### ** **

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#### **TAXES**

 

The Company had aconsolidated tax benefit of $0.5 million for the three months endedSeptember 30, 2002, compared with a tax benefit of $0.6 million for thethree months ended September 30, 2001. The benefit in both periods is due to changes in estimate during thethird quarter of the respective years regarding full year taxes in variousgeographical regions.  The Company’seffective tax rate is different from the U.S. federal statutory tax rate due totaxable income in certain foreign jurisdictions and losses for which a full valuation has been provided.

** **

**NINE MONTHS ENDED SEPTEMBER 30,2002 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2001.**

 

**REVENUE**

 

Total revenues for thenine months ended September 30, 2002 decreased by $4.0 million and 3% to$127.5 million from $131.5 millionfor the nine months ended September 30, 2001.  The overall revenue decrease was a result of a decrease inlicense fees and software services, partially offset by increased interactivemarketing services and the impact of a weaker U.S. Dollar.  Excluding the impact of a weaker U.S.Dollar, revenues decreased by 4%.

 

*SOFTWARE FEES.*  Software fees decreased to $4.2 millionfor the nine months ended September 30, 2002 from $8.8 million forthe nine months ended September 30, 2001, a decrease of $4.6 millionor 52%.  The decrease in Software feesis primarily due to a significant decline in customer sales representativeexpansions in the U.S. compared to the prior year.  Software fees have declined, and are expected to continue todecline in future periods, as the Company is no longer a Siebel VAR (See SiebelAlliance) and due to the discontinuance of ongoing development of certain ofthe Company’s legacy software products.

 

*SOFTWARE SERVICES.*  Software services revenue decreased to$63.0 million for the nine months ended September 30, 2002 from$64.9 million for the nine months ended September 30, 2001, a decrease of$1.9 million or 3%.  The decreasein revenue from software services is principally due to a decrease of certainhardware rebills associated with customer sales representative expansions inthe U.S., partially offset by increased recurring service revenue.  In addition, the software services revenuewas negatively affected by the initial impact of a customer transition in theU.S.

 

*INTERACTIVE MARKETING.*  Interactive marketing revenue increased to$60.3 million for the nine months ended September 30, 2002 from$57.9 million for the nine months ended September 30, 2001, an increase of$2.4 million or 4%. The increase in revenue from interactive marketing isprimarily due to a large product communications program implemented for acustomer in the U.S., partially offset by slower promotional spendingexperienced during 2002.

 

**OPERATING COSTS**

 

*COST OF SOFTWARE FEES.*  Cost of software fees decreased to$2.2 million for the nine months ended September 30, 2002, from $4.*5* millionfor the nine months ended September 30, 2001, a decrease of$2.3 million or 51%.  The decreaserelates to lower software fees revenue, partially offset by an increase inamortization of capitalized software costs.

 

*COST OF SOFTWARE SERVICES.*  Cost of software services decreased to$44.3 million for the nine months ended September 30, 2002, from$49.9 million for the nine months ended September 30, 2001, a decrease of$5.6 million or 11%.  The decrease incost of software services is primarily due to lower software services revenues,the product mix of services and cost containment actions.

 

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*COST OF INTERACTIVE MARKETING.*  Cost of interactive marketing revenueincreased to $51.1 million for the nine months ended September 30, 2002,from $47.9 million for the nine months ended September 30, 2001, anincrease of $3.2 million or 7%.  Theincrease in the cost of interactive marketing is primarily driven by therevenue increase and product mix.  Alarge product communications programimplemented for a customer in the U.S., included significant postage relatedfees, which are pass-through costs to the customer.  The cost of this program, including postage, was the primarydriver of the increase in costs.

 

### **GROSS MARGIN**

 

The Company calculatesgross margin as revenue less operating costs as categorized in the Company’sconsolidated financial statements.  Thefollowing table summarizes the Company’s gross margin information in dollarsand as a percentage of the associated revenues for the nine months endedSeptember 30, 2002 and the comparable period for the prior year.

 
|                  |   | **9/30/02********Gross Margin** |   | **9/30/01********Gross Margin** |   |
|-----------------------|--------|---------------------------------|--------|---------------------------------|--------|
|                  |   |                            |   |                            |   |   |   |   |   |
| Software fees         |   | $                               | 2,051  |                            | 48.8   | % | $ | 4,261 |   | 48.6 | % |
| Software services     |   | 18,751                          |   | 29.8                            | %      | 14,949 |   | 23.0 | % |
| Interactive marketing |   | 9,197                           |   | 15.3                            | %      | 9,929 |   | 17.2 | % |
|                  |   |                            |   |                            |   |   |   |   |   |
| Total                 |   | $                               | 29,999 |                            | 23.5   | % | $ | 29,139 |   | 22.2 | % |

 

Total gross margin forthe nine months ended September 30, 2002 increased by $0.9 millionand increased by 1.3% as a percentage of revenue to 23.5%.  The Company experienced improved softwareservices margins as a percentage of revenue due to changes in product mix,reflecting a higher level of recurring service revenue and a lower level ofone-time related revenues and cost containment actions taken in the second halfof 2001.  Based on the transition to asoftware services model from a proprietary software business, the Companyexpects software fee gross margin to decline in future periods compared toprior years.  The increase in softwareservices gross margins were also partially offset by lower interactive marketingmargins as a percentage of revenue due to postage costs associated with thelarge product communications program discussed above.

 

**OPERATING EXPENSES**

 

*RESEARCH AND DEVELOPMENT.*  Research and development expenses declinedby 22% to $5.2 million for the nine months ended September 30, 2002 from $6.7 million for the nine monthsended September 30, 2001.  The declinein research and development costs is principally attributable to a de-emphasison proprietary software development.

 

*SELLING AND ADMINISTRATIVE.*  Selling and administrative expensesdecreased to $24.2 million for the nine months ended *September* 30, 2002 from$26.2 million for the nine months ended September 30, 2001, a decrease of$2.0 million or 8%.  The decrease inselling and administrative expenses is principally due to cost containmentactions taken during the second half of 2001, partially offset by investmentsin sales resources and other revenue-generating initiatives.

 

*DEPRECIATION AND AMORTIZATION.*  Depreciation and amortization for the ninemonths ended September 30, 2002 declined to $5.6 million from$16.0 million for the same period in the prior year.  The decline is due to the absence ofgoodwill amortization during 2002 in accordance with new accounting standardsthat eliminated the amortization of goodwill (See Note 1. Recently IssuedAccounting Standards).

 

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**OPERATING LOSS**

 

Operating loss improvedto $5.7 million for the nine months ended September 30, 2002 compared withan operating loss of $25.7 million for the nine months ended September 30,2001.  The loss narrowed by$20 million primarily due to the absence of goodwill amortization and costcontainment actions taken during the second half of 2001.

 

**RESTRUCTURING**

 

On August 16, 2001, theCompany announced that, in an attempt to optimize customer responsiveness andorganizational effectiveness, it would simplify its senior leadership structureas well as eliminate certain other positions in its international and domesticoperations. The Company completed the first two steps in the restructuringprocess during 2001, resulting in the elimination of approximately 100positions reflected in the charge totaling $7.5 million recorded in 2001.  These reductions included six senior managementpositions with the remainder being operating, technical and administrativestaff.  The Company continued therestructuring actions in the third quarter of 2002 with the elimination of 23additional operating, technical and administrative staff, as well as twopositions in senior management.  Duringthe quarter, the Company also recorded a charge of $0.3 million related to theexit of certain real estate leases.  Theremaining $0.5 million restructuring charge taken in the third quarter iscomposed entirely of employee severanceand separation related costs, such as extended benefits and outplacementfees.  Of the $8.2 million charge in2001 and 2002, $5.1 million has been paid to date, with the remainder expectedto be paid within the next twelve months. The Company has also announced its intentions to further restructure itscost base in order to offset the impact expected from certain customertransactions.  These additional chargesare expected to be up to $8.0 million through the end of 2003, which wouldresult in $10 million to $15 million of annual cost savings.

#### ** **

#### **TAXES**

 

The Company had aconsolidated tax provision of $0.5 million for the nine months endedSeptember 30, 2002, compared with a provision of $1.3 million for the ninemonths ended September 30, 2001.  Thechange reflects the impact of global tax planning initiatives. The Company’seffective tax rate is different from the U.S. federal statutory tax rate due totaxable income in certain foreign jurisdictions and losses for which a fullvaluation has been provided.

 

**RESULTS BY SEGMENT**

 

*THE AMERICAS.*  Revenue for the nine months endedSeptember 30, 2002 was $77.2 million compared with $79.4 million forthe same period in the prioryear.  The decline is due to lowersoftware fees and services resulting from a decline in customer sales repexpansions in the U.S., partially offset by increased recurring servicesrevenue and interactive marketing revenue in the U.S.  The operating loss for the nine months ended September 30, 2002was $5.9 million compared to a loss of $26.0 million for the ninemonths ended September 30, 2001 primarily due to the absence of goodwillamortization, lower restructuring charges in 2002, and cost containment actionstaken during the second half of 2001.

 

*EUROPE.*  Revenue for the nine months ended September 30,2002 was $39.6 million compared with $41.0 million for the ninemonths ended September 30, 2001.  Lowersoftware fees and interactive marketing volumes were the primary factors forrevenue decreasing by $1.4 million. Operating income for the nine months ended September 30, 2002 remainedessentially unchanged at $0.8 million from $0.9 million in the ninemonths ended September 30, 2001 despite lower revenues, due to cost containmentactions in the second half of2001.

 

*ASIA PACIFIC.*  Revenue for the nine months ended September30, 2002, decreased to $10.7 million compared to $11.1 million forthe nine months ended September 30, 2001. The decrease in revenue was primarily

 

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the result of lowerinteractive marketing revenues in Australia in the first quarter of 2002. Theoperating loss for the nine months ended September 30, 2002 was$0.5 million compared withan operating loss of $0.6 million for the nine months ended September 30,2001.

 

**NON-U.S. OPERATING AND MONETARY ASSETS**

 

SYNAVANT operatesglobally, deriving 42.9% of its revenues in the first nine months of 2002 fromnon-U.S. operations.  As a result,fluctuations in the value of foreign currencies relative to the U.S. Dollar mayincrease the volatility of reported U.S. Dollar operating results.

 

Non-U.S. monetary assetsare maintained in currencies other than the U.S. Dollar, principally those ofthe Euro, the Pound Sterling and the Australian Dollar.  Changes in the value of these currenciesrelative to the U.S. Dollar are charged or credited to stockholders’equity.  The effect of exchange ratechanges during the nine months ended September 30, 2002 increased the U.S.Dollar amount of cash and cash equivalents by $0.5 million.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

On April 27, 2001,SYNAVANT Inc. entered into a revolving credit facility with FoothillCapital Corporation (the “Foothill Facility”), a wholly-owned subsidiary ofWells Fargo & Company.  The FoothillFacility has a term of five years with a maximum credit line of$20 million. The available line is determined based on a percentage of theeligible accounts receivable in the U.S. Any borrowing against the line will beat a rate of Prime plus 100 basis points. The average availability under the FoothillFacility for the third quarter of 2002 was $4.1 million.  The availability amount fluctuates based onthe eligible receivables of the Company. The Company is required to maintaincertain financial covenants relating to earnings, net worth and capitalexpenditures.  The Company has met thesecovenants through the first nine months of 2002.  As of September 30, 2002, the Company had no outstandingbalance in relation to the Foothill Facility. Concurrent with theFoothill Facility, IMS HEALTH agreed to defer any payments associated with theDistribution Liabilities (See Note 2) until January 1, 2005.  The Company filed an 8-K on May 8, 2001related to the closing of the Foothill Facility.

 

The Company currentlyestimates that cash and working capital needs for the next twelve months can bemet by cash on hand, amounts available under the credit facility, and cash flowfrom operations.  However, certain U.S.based customers have notified the Company that they have selected alternativesuppliers for their software services and, as a result, the financial impact ofthese transitions will varythroughout the remainder of 2002 and 2003. The Company estimates that in the U.S. approximately $25 million to $30million of 2002 software services revenue associated with these customers willnot recur in 2003.  Based on theserevenue reductions, further cost containment actions are expected.  Accordingly, the Company may potentiallyrequire additional financing by the end of 2003 to adequately fund its workingcapital requirements.  If the Companyincurs the Distribution liability of $9.0 million, pursuant to the agreementwith IMS Health, our cash flows may need to be over and above our projectedincome in order to meet our financial obligations.  If management’s expectations are not met, or change due to marketconditions, strategic opportunities or otherwise, capital requirements may varymaterially from those currently anticipated.

 

**CASH FLOWS**

 

Net cash provided byoperating activities totaled $5.6 million for the nine months endedSeptember 30, 2002 compared with net cash used in operating activities of$9.7 million for the nine months ended September 30, 2001. The increase of$15.3 million primarily reflects a smaller net loss and timing in workingcapital, partially offset by restructuring payments of $2.5 million (See Note3).

 

Net cash used ininvesting activities totaled $4.9 million for the nine months endedSeptember 30, 2002 compared with cash provided by investing activities of$0.5 million for the nine months ended September 30, 2001. The increase inthe cash outflow of $5.4 million was primarily due to the absence in 2002of the $3.1 million

 

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proceeds from the sale ofmarketable equity securities and higher capital expenditures associated with facilities moves in the U.S.interactive marketing business and our operations in the UK.

 

Net cash provided byfinancing activities totaled $0.6 million for the nine months endedSeptember 30, 2002 from cash used in financingactivities of $0.2 million in the same period in the prior year. Thecash inflow in 2002 was attributable to $1.0 million in proceeds from theliquidation of a note receivable, partially offset by payments on capitalleases.  The payment of deferred loanfees associated with the Foothill Facility was the primary outflow for thefirst nine months of 2001.

 

**CHANGES IN FINANCIAL POSITION ATSEPTEMBER 30, 2002 COMPARED WITH DECEMBER 31, 2001**

 

Cash and cash equivalentswere $11.4 million as of September 30, 2002 compared with$9.6 million as of December 31, 2001. The increase in cash and cashequivalents of $1.8 million was primarily due to a lower net loss for theperiod, the timing in working capital requirementsand the liquidation of a note receivable in 2002, partially offset byrestructuring payments and capital expenditures.

 

*Accounts and Other Receivables—Net.*  Decreased to $35.4 million at September30, 2002 from $39.8 million at December 31, 2001.  Thedecrease is due to improved collections and lower revenues.

 

*Other Current Assets.*  Remained unchanged at $6.1 million atSeptember 30, 2002 from December 31, 2001.

 

*Property,Plant and Equipment – Net*. Increased to $12.4 million at September 30, 2002 from $11.2 million atDecember 31, 2001.  The increase is due to capitalpurchases during the period partially offset by straight-line depreciation ofthe assets over their estimated useful lives.

 

*Computer Software.*  Decreased $3.6 million to$3.8 million due to amortization of the remaining book value based on thegreater of straight line orrevenue based amortization.

 

*Goodwill—Net.*  Remained unchanged as this balance is nolonger amortized in accordance with new accounting guidelines (See Note 1.Recently Issued Accounting Standards).

 

*AccountsPayable*.  Decreased by$2.6 million due to the timing of certain year-end related payments.

 

*Accrued Restructuring. *Decreased by $1.8 milliondue to severance payments made during the year, partially offset by a $0.8million charge accrued in the third quarter of 2002.

 

*Accrued and Other CurrentLiabilities.* Increased to $17.1 million at September 30, 2002 from$13.3 million at December 31, 2001. The increase reflected theaccrual of certain professional fees, employee bonuses and the current portionof capital lease commitments.

 

*AccruedIncome Taxes*. Increased to $2.7 million at September 30, 2002 from $1.9 million atDecember 31, 2001.  The increase isrelated to the quarterly accrual of income taxes, partially offset by cashpayments for taxes related to prior periods.

 

*Deferred Revenue.*  Decreased to $7.8 million at September30, 2002 from $8.4 million at December 31, 2001. The decrease relatesto the termination of certain software maintenance contracts related to theCompany’s legacy Cornerstone product during 2002.

 

*Total Equity.*  Decreased to $64.1 million at September30, 2002 from $70.2 million at December 31, 2001. The reduction wasprimarily due to the net loss during the period, partially offset by the impactof foreign currency fluctuations.

 

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**FACTORS THAT MAY AFFECT FUTURE PERFORMANCE**

 

*Inaddition to other information in this quarterly report on Form 10-Q, thefollowing risk factors should be carefully considered in evaluating our Companyand our business because such factors currently may have a significant impacton our business, operating results and financial condition. As a result of therisk factors set forth below, actual results could differ materially from thoseprojected in any forward-looking statements.*

 

**COMPETITIONFROM OTHER PROVIDERS OF CUSTOMER RELATIONSHIP MANAGEMENT SOLUTIONS MAY REDUCEDEMAND FOR OUR PRODUCTS AND SERVICES OR CAUSE US TO REDUCE THE PRICE OF OURPRODUCTS AND SERVICES.**

 

We compete with other companies that sell sales forcesoftware products and services and interactive marketing services thatspecifically target the pharmaceutical industry. We also face competition frommany vendors that market and sell CRM solutions across multiple industries. Inaddition, we compete with various companies that provide support services andinteractive marketing services similar to our services.

 

We may not compete effectively in our markets.Competitive pressure may result in our reducing the price of our products andservices, which would negatively affect our revenues and operating margins. Ifwe are unable to compete effectively in our markets, our business, results ofoperations and financial condition would be materially and adversely affected.

 

Increased competition isanticipated based on the growing strategic focus on Customer RelationshipManagement (“CRM”) and the success of Siebel’s e-Business solutions.  Large established companies, such as Oracle,SAP and Microsoft, that are well established providers of ERM software solutionsare expected to offer new CRM solutions that may compete with SYNAVANTsolutions based on Siebel technology.

 

The Company has typically contracted with customersfor a three year license and support agreement for software products.  At the end of the contract the customerwould typically renew their agreement, normally for a one to two yearperiod.  Past experience has indicatedthat the Company’s customers typically reassess these contracts every three to fiveyears.  As customers reassess their requirements,the Company may not be able to renew the agreements, and may not be selected toprovide implementation and/or support services even if a Siebel solution isselected by the customer.  Certain U.S.based customers have notified the Company that they have selected alternativesuppliers for their software services and, as a result, do not intend to renewexisting contracts.  The timing of thesetransitions is, in some cases, not certain. As a result, the financial impact of these transitions will varythroughout the remainder of 2002 and 2003. The Company estimates that in the U.S. approximately $25 million to $30million of 2002 software services revenue associated with these customers willnot recur in 2003.

 

Some of our competitors and potential competitors arepart of large corporate groups and have longer operating histories andsignificantly greater financial, sales and marketing, technology and otherresources than we have.  In the eventthat we are unable to compete successfully with these companies, it could havea material adverse effect on our business, operating results or financialcondition.

 

**OURREVISED ALLIANCE WITH SIEBEL IS CRITICAL TO OUR SUCCESS IN GENERATING CRMSERVICES REVENUE.**

 

You should note the following risk factors relating toour alliance with Siebel:

 

•                  Customers maychoose to purchase software services directly from Siebel or another providerand not as part of an integrated solutions offering from SYNAVANT;

 

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•                  We may not beable to implement successfully the changes to our business model necessitatedby the Siebel alliance;

 

•                  We may notsuccessfully develop and differentiate our value added services and productstogether with Siebel software products; and

 

•                  Other Siebelpartners and/or providers of CRM services may effectively compete to sellportions of a total solution offering such as implementation services, helpdesk support or data services to potential customers of SYNAVANT.

 

**WE MAYNEED ADDITIONAL FINANCING TO MEET OUR FUTURE CAPITAL REQUIREMENTS.**

 

We invest in research and development as well as incapital projects to enhance existing products and services and develop newproducts and services in response to technological and marketplacechanges.  As of September 30, 2002, theCompany had cash and cash equivalents of $11.4 million and availability underthe revolving credit facility with Foothill Capital Corporation (See Liquidityand Capital Resources).  To the extentthat we need additional funding in the future to finance our operations andcapital expenditures, we may not be able to access the capital markets orotherwise obtain necessary financing, or to obtain such financing in a timelymanner or on commercially favorable terms. In the event that we satisfy our financing needs through the issuance ofadditional equity securities, such issuance would be dilutive to existingstockholders.

 

The Company currentlyestimates that cash and working capital needs for the next twelve months can bemet by cash on hand, amounts available under the credit facility, and cash flowfrom operations.  However, certain U.S.based customers have notified the Company that they have selected alternativesuppliers for their software services and, as a result, the financial impact ofthese transitions will vary throughout the remainder of 2002 and 2003.  The Company estimates that in the U.S.approximately $25 million to $30 million of 2002 software services revenueassociated with these customers will not recur in 2003.  Based on these revenue reductions, furthercost containment actions are expected. Accordingly, the Company may potentially require additional financing bythe end of 2003 to adequately fund its working capital requirements.  If the Company incurs the Distributionliability of $9.0 million, pursuant to the agreement with IMS Health, our cashflows may need to be over and above our projected income in order to meet ourfinancial obligations.  If management’sexpectations are not met, or change due to market conditions, strategicopportunities or otherwise, capital requirements may vary materially from thosecurrently anticipated.

 

**WE HAVE EXPERIENCED LOSSES, AND WEEXPECT TO INCUR LOSSES IN THE NEAR TERM.**

 

We experienced a net loss of approximately $31.2million, or 17% of our total revenue, in the year ended December 31, 2001, anda net loss of approximately $138.6 million, or 76% of our total revenue, in theyear ended December 31, 2000, of which $129.0 million of the loss was prior tothe Spin from IMS Health.  At December31, 2001, we had an accumulated deficit of $40.3 million.  We anticipate that our restructuring andplanned expenditures on sales, marketing, and product development will resultin additional losses in the near term. Future expenditures on sales, marketing, and product development will bedriven primarily by our ability to achieve our targeted revenue goals.

 

We are not certain when we will gain profitability, ifat all. Even if we do gain profitability, we may not sustain or increaseprofitability on a quarterly or annual basis.

 

**THE LOW PRICE OF OUR COMMON STOCKCOULD RESULT IN THE DELISTING OF OUR COMMON STOCK FROM THE NASDAQ NATIONALMARKET.**

 

Our common stock iscurrently quoted on the Nasdaq National Market. We must satisfy Nasdaq’s

 

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minimum listingmaintenance requirements to maintain our listing on the Nasdaq National Market.Nasdaq listing maintenance requirements include a series of financial testsrelating to net tangible assets, public float, number of market makers andshareholders, market capitalization, and maintaining a minimum bid price of$1.00 for shares of our common stock. The minimum bid price of our common stockhas dropped to under $1.00 per share. Because the bid price of our common stock has remained below $1.00 for30 consecutive trading days, our common stock could be delisted from the NasdaqNational Market.  The Company has untilFebruary 3, 2003 to maintain a closing bid price of $1.00 or more for a minimumof 10 consecutive trading days to regain compliance.  If compliance is not demonstrated by February 3, 2003, theCompany’s securities may be delisted. The Company may then appeal thedetermination to the Nasdaq Listings Qualifications Panel. If our common stock is delisted from theNasdaq National Market, the common stock would trade on either the NasdaqSmallCap Market or on the Over-the-Counter Bulletin Board, both of which areviewed by most investors as less desirable and less liquid marketplaces.  Thus, delisting from the Nasdaq NationalMarket could make trading our shares more difficult for investors, leading tofurther declines in share price. It would also make it more difficult for us toraise additional capital. In addition, we would incur additional costs understate blue sky laws to sell equity if our common stock is delisted from theNasdaq National Market.

 

**THE LOSSOF OUR KEY PERSONNEL COULD NEGATIVELY IMPACT OUR BUSINESS AND RESULTS OFOPERATIONS.**

 

Our success depends on our continuing ability to attract,hire, train and retain a substantial number of highly skilled managerial,technical, sales, marketing and customer support personnel.  In particular, our Chairman and ChiefExecutive Officer, Wayne P. Yetter, is integral to our future success and is notcurrently bound by an employment agreement. Competition for qualified personnelis intense, and we may fail to retain our key employees or to attract or retainother highly qualified personnel.  Evenif we are able to attract qualified personnel, new hires frequently requireextensive training before they achieve desired levels of productivity.  If we are unable to hire or fail to retaincompetent personnel, our business, results of operations and financial conditioncould be materially and adversely affected. None of our key employees is bound by an employment agreement.

 

**OURFAILURE TO INTRODUCE NEW OR ENHANCED PRODUCTS AND SERVICES IN A TIMELY MANNERCOULD RENDER OUR PRODUCTS OBSOLETE AND UNMARKETABLE.**

 

We compete in businesses that provide and marketsophisticated information systems, software and other technology. We expectthat these systems, software and other technology will be subject torefinements as such systems and underlying technologies are upgraded andadvanced. As various systems and technologies become outdated, we may not beable to enhance or replace them, to enhance or replace them as quickly as ourcompetition, or to introduce and market new or enhanced products and servicesin the future on schedule and on a cost-effective basis.  Our failure to provide and market new orenhanced products and services that compete with other available products couldmaterially and adversely affect our business, results of operations andfinancial condition.

 

Our success will depend, in part, upon our ability to:

 

•                  continue toprovide best-in-class enterprise solutions;

 

•                  continue todevelop best-in-class CRM solutions;

 

•                  continue todevelop best-in-class interactive marketing solutions;

 

•                  enter newmarkets; and

 

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•                  develop and/orprovide new solutions that satisfy increasingly sophisticated customerrequirements, that keep pace with technological developments (including, inparticular, developments related to the Internet) and that are accepted in themarket.

 

**DEFECTSIN OUR PRODUCTS COULD DELAY MARKET ADOPTION OF OUR SOFTWARE OR CAUSE US TOCOMMIT SIGNIFICANT RESOURCES TO REMEDIAL EFFORTS.**

 

Software products frequently contain errors orfailures, especially when first introduced or when new versions or enhancementsare released. We could be forced to delay the commercial release of productsuntil software problems have been corrected. We could lose revenues as a resultof software errors or defects. Our products are intended for use in sales and marketingapplications that may be critical to a customer’s business. As a result, weexpect that customers and potential customers will have a greater sensitivityto product defects than the market for software products generally. Testingerrors may also be found in new products, enhancements or releases aftercommencement of commercial shipments, resulting in loss of revenue or delay inmarket acceptance, damage to our reputation, or increased service and warrantycosts, any of which could have a material adverse effect on our business,operating results or financial condition. The foregoing would also be applicable to Siebel products or otherpartner software around which future services would be based.  With respect to such products, we would alsodepend on Siebel or other responsible partners for the correction of errors andthe delivery of any required modifications relating to such products.

 

**OURSUCCESS DEPENDS ON THE STRENGTH OF THE PHARMACEUTICAL INDUSTRY.**

 

Our products and services are primarily used inconnection with the marketing and sale of prescription-only drugs. The marketfor prescription-only drugs is undergoing a number of significant changes,including:

 

•                  consolidationsand mergers, which may reduce the number of existing customers and the size oftheir combined sales forces, and could also alter implementation and purchasecycles;

 

•                  reclassificationof formerly prescription-only drugs to permit over-the-counter sales;

 

•                  competitivepressures on our pharmaceutical customers resulting from the continuing shiftto delivery of healthcare through managed care organizations; and

 

•                  changes in law,such as government-mandated price reductions for prescription-only drugs, thataffect the healthcare systems in the countries where our customers andpotential customers are located.

 

Our failure to respond effectively to any or all ofthese and other changes in the marketplace for prescription-only drugs couldhave a material and adverse effect on our business, operating results andfinancial condition.

 

**SIGNIFICANTFLUCTUATIONS IN OUR QUARTERLY AND ANNUAL OPERATING RESULTS MAY ADVERSELY AFFECTTHE MARKET PRICE OF OUR COMMON STOCK.**

 

We believe that our quarterly and annual operatingresults could fluctuate significantly in the future, and our results ofoperations could fall below the expectations of securities analysts andinvestors.  If this occurs or if marketanalysts perceive that it will occur, our market value could fluctuatesubstantially.  The selection of a CRMsoftware product and service partners often entails an extended decision-makingprocess because of the strategic implications and substantial costs associatedwith a customer’s license of the software and project implementation.  As a result, the decision-making processtypically takes nine to eighteen months, although in some cases it may takeeven longer.  Accordingly, we cannotcontrol or predict the timing of our execution of contracts with customers. Inaddition, an implementation process of three to nine months is

 

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customary before the software is rolled out to a customer’s salesforce. Other factors may cause significant fluctuations in our quarterly andannual operating results, including:

 

•                  changes in thedemand for our products and services;

 

•                  the timing,composition and size of orders from our customers;

 

•                  customerspending patterns and budgetary resources;

 

•                  lowercontribution margin associated with an expected decline in license fee revenue;

 

•                  our success inobtaining new customers;

 

•                  the timing ofintroductions of or enhancements to our products and services;

 

•                  changes in ourpricing policies or those of our competitors;

 

•                  our ability toanticipate and adapt effectively to developing markets and rapidly changingtechnologies;

 

•                  our ability toattract, retain and motivate qualified personnel, particularly within our salesand marketing and research and development organizations;

 

•                  the publicationof opinions or reports about us, our products, our services and those of ourcompetitors;

 

•                  changes ingeneral economic conditions;

 

•                  actions taken byour competitors, including new product introductions and enhancements; and

 

•                  our ability tocontrol costs.

 

We establish expenditure levels for productdevelopment, sales and marketing and other operating expenses based in largepart on expected future revenues and anticipated competitive conditions.  In particular, we frequently add staff inadvance of new business to permit adequate time for training.  If the new business is delayed or cancelled,we will incur expenses without the associated revenues.  In addition, we may increase sales andmarketing expenses if competitive pressures become greater than we currentlyanticipate.  Because only a smallportion of expenses varies directly with actual revenues in the near term,operating results and profitability are likely to be adversely anddisproportionately affected if revenues fall below expectations.

 

**AS WEEXPAND OUR INTERNATIONAL SALES AND MARKETING ACTIVITIES, OUR BUSINESS WILL BEMORE SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.**

 

Fluctuations in the value of foreign currenciesrelative to the U.S. dollar may increase the volatility of our operatingresults.  We expect to commit resourcesto expand our international sales and marketing activities. If successful, wewill be subject to a number of risks associated with international businessactivities. These risks generally include:

 

•                  currencyexchange rate fluctuations;

 

•                  seasonalfluctuations in purchasing patterns;

 

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•                  unexpectedchanges in regulatory requirements;

 

•                  tariffs, exportcontrols and other trade barriers;

 

•                  longer accountsreceivable payment cycles and difficulties in collecting accounts receivable;

 

•                  difficulties inmanaging and staffing international operations;

 

•                  potentiallyadverse tax consequences, including restrictions on the repatriation ofearnings;

 

•                  the burdens ofcomplying with a wide variety of foreign laws, including data privacy laws; and

 

•                  politicalinstability.

 

**EXPOSURETO CERTAIN DISTRIBUTION LIABILITIES MAY MATERIALLY AND ADVERSELY AFFECT THECOMPANY.**

 

We are subject to certain material liabilitiesassociated with certain matters relating to activities prior to theDistribution.  As a condition of ourspin-off from IMS HEALTH, we are required to undertake to be jointly andseverally liable to certain corporate predecessors of IMS HEALTH for IMSHEALTH’s obligations under certain agreements with such entities, includingpotential liability relating to a complaint filed against such entitiesalleging violations of federal antitrust laws and seeking $350 million indamages.  Pursuant to our agreement withIMS HEALTH, IMS HEALTH will indemnify the Company for any liability we incur inconnection with such Distribution liabilities in excess of $9.0 million, whichhas been recorded in the consolidated financial statements.  Any failure of IMS HEALTH to fulfill itsindemnification obligations that resulted in our obligation to fund asubstantial portion of such excess liabilities could have a material adverseeffect on our business, operating results and financial condition.

 

**WE MAY BE UNABLE TO GENERATESUFFICIENT CASH FLOWS TO ADEQUATELY FUND CERTAIN DISTRIBUTION LIABILITIES.**

 

If we incur theDistribution Liability of $9.0 million (See Note 2), pursuant to our agreementwith IMS HEALTH, in connection with the alleged violations of federal antitrustlaws by our corporate predecessors, our cash flows may need to be over andabove our projected income in order to meet our financial obligations.  There is no assurance that we will have asufficient amount of pre-tax income to meet our financial obligations inrespect to such Distribution liabilities, which could have a material andadverse effect on our business, operating results and financial condition.  Payments associated with the DistributionLiabilities have been deferred by IMS Health until January 2005.

 

**WE MAY BE SUBJECT TO TAXATION IF THESPIN-OFF DOES NOT QUALIFY AS A TAX FREE TRANSACTION.**

 

If the distribution ofSYNAVANT shares of common stock to IMS HEALTH shareholders, pursuant to thespin-off, were not to qualify underSection 355 of the Internal Revenue Code, the aggregate corporate tax liabilitycould be approximately $100 million and SYNAVANT could be severally liable forsuch tax.  In the event that SYNAVANTwere obligated to fund a substantial portion of such liability, it would have amaterial adverse effect on SYNAVANT’S financial condition.  Moreover, each IMS HEALTH stockholder thatreceived shares of SYNAVANT common stock in the spin-off would be treated as ifsuch stockholder had received a taxable distribution in an amount equal to thefair market value of the SYNAVANT common stock received.

 

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**GOVERNMENTALREGULATION MAY MATERIALLY AND ADVERSELY AFFECT OUR ABILITY TO DISTRIBUTECONTROLLED SUBSTANCES THROUGH THE MAIL.**

 

We currently distribute controlled substances todoctors’ offices through the mail as part of certain interactive marketingprograms we provide on behalf of pharmaceutical manufacturers. It is importantto our business that this practice of distributing prescription-only drugscontinues. Future legislation may restrict our ability to provide these typesof services. If any such legislation is enacted, it could have a material andadverse effect on our business, operating results and financial condition.

 

**WE RELYON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY.**

 

We rely on a combinationof trade secret, copyright and trademark laws, non-disclosure and othercontractual agreements, and technical measures to protect our proprietarytechnology. The steps we have taken or will take in the future may not preventmisappropriation of our technology. Further, protective actions we have takenor will take in the future may not prevent competitors from developing productswith features similar to our products. In addition, effective copyright andtrade secret protection may be unavailable or limited in certain foreigncountries. Despite our efforts to protect our products’ proprietary rights,unauthorized parties may attemptto copy aspects of our products or services or to obtain and use informationthat we regard as proprietary. Litigation may be necessary to enforce our intellectual property rights,to protect our trade secrets, to determine the validity and scope of theproprietary rights of others or to defend against claims of infringement orinvalidity. Such litigation could result in substantial costs and diversion ofresources and could harm our business, operating results and financialcondition.

 

**CLAIMSAGAINST US REGARDING OUR PROPRIETARY TECHNOLOGY COULD REQUIRE US TO PAYLICENSING OR ROYALTY FEES OR TO MODIFY OR DISCONTINUE OUR PRODUCTS.**

 

Any claim that ourproducts infringe on intellectual property rights could materially andadversely affect our business, results of operations and financial condition.Because knowledge of a third party’s patent rights is not required for adetermination of patent infringement and because the United States Patent andTrademark Office is issuing new patents on an ongoing basis, infringementclaims against us are a continuing risk.

 

Infringement claims could cause product releasedelays, require the redesign of our products or require us to enter intoroyalty or license agreements. These agreements may be unavailable onacceptable terms. Litigation, regardless of the outcome, could result insubstantial cost, divert management attention and delay or reduce customerpurchases. Claims of infringement are becoming increasingly common as thesoftware industry matures and as courts apply expanded legal protections tosoftware products. Third parties may assert infringement claims against usregarding our proprietary technology and intellectual property licensed fromothers. Generally, third-party software licensors indemnify us from claims ofinfringement. However, licensors may be unable to indemnify us fully for suchclaims, if at all.

 

If a court determines that one of our productsviolates a third party’s patent or other intellectual property rights, there isa material risk that the revenue from the sale of the infringing product willbe significantly reduced or eliminated, as we may have to:

 

•                  pay licensingfees or royalties to continue selling the product;

 

•                  incursubstantial expense to modify the product so that the third party’s patent orother intellectual property rights no longer apply to the product; or

 

•                  stop selling theproduct.

 

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In addition, if a court finds that one of our productsinfringes a third party’s patent or other intellectual property rights, then wemay be liable to that third party for actual damages and attorneys’ fees. If acourt finds that we willfully infringed on a third party’s patent, the thirdparty may be able to recover treble damages, plus attorneys’ fees and costs.

 

**OURCERTIFICATE OF INCORPORATION, OUR BYLAWS AND OUR AGREEMENT WITH IMS HEALTHCONTAIN PROVISIONS THAT MAY DISCOURAGE A TAKEOVER.**

 

Our Amended and Restated Certificate of Incorporationand Amended and Restated By-Laws contain provisions that may have the effect ofdiscouraging an acquisition of control of the Company not approved by our Boardof Directors.  Such provisions may alsohave the effect of discouraging third parties from making proposals involvingan acquisition or change of control of the Company, although such proposals,might be considered desirable by a majority of our stockholders.  Such provisions could further have theeffect of making it more difficult for third parties to cause the replacementof our Board of Directors. These provisions include:

 

**•**                  theavailability of capital stock for issuance from time to time at the discretionof our Board of Directors;

 

•                  prohibitionsagainst stockholders calling a special meeting of stockholders or acting bywritten consent in lieu of a meeting;

 

•                  requirements foradvance notice for raising business or making nominations at stockholders’meetings;

 

•                  the ability ofour Board of Directors to increase the board and appoint directors to newlycreated directorships;

 

•                  a classifiedBoard of Directors; and

 

•                  higher thanmajority requirements to make certain amendments to our By-Laws and Certificateof Incorporation.

 

These provisions have been designed to enable us todevelop our businesses and foster our long-term growth without disruptionscaused by the threat of a takeover not deemed by our Board of Directors to bein the best interests of the Company and our stockholders.  Such provisions may have the effect ofdiscouraging third parties from making proposals involving an acquisition orchange of control of the Company.

 

We have a stockholder rights plan that is designed toprotect our stockholders in the event of an unsolicited offer and othertakeover tactics that, in the opinion of our Board of Directors, could impairthe Board’s ability to represent stockholder interests. The provisions of ourstockholder rights plan may render an unsolicited takeover of the Company moredifficult or less likely to occur or might prevent such a takeover.

 

Pursuant to the Distribution Agreement with IMSHEALTH, we are each subject to certain non-competition arrangements thatrestrict our respective business activities for a specified period after thedistribution. Pursuant to the terms of the Distribution Agreement, therestrictions would generally be binding on an entity that acquires us or is thesurvivor in a business combination with the Company.  Such restrictions may have the effect of discouraging thirdparties from making proposals involving an acquisition or change in control ofthe Company.  We are also subject to theprovisions of Delaware corporate law, which may restrict certain businesscombination transactions.

 

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### **ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Information in responseto this Item is set forth in “Non-U.S. Operating and Monetary Assets” underManagement’s Discussion and Analysis of Financial Condition and Results ofOperations.

 

**ITEM 4.CONTROLS AND PROCEDURES**

 

Based on the evaluationof the Company’s disclosure controls and procedures as of a date within 90 daysof the filing date of this quarterly report, each of Wayne P. Yetter, the ChiefExecutive Officer of the Company and Clifford A. Farren, Jr., the ChiefFinancial Officer of theCompany, have concluded that the Company’s disclosure controls and proceduresare effective in ensuring that information required to be disclosed by theCompany in the reports that it files or submits under the Securities ExchangeAct of 1934, as amended, is recorded, processed, summarized and reported,within the time period specified by the Securities and Exchange Commission’srules and forms.

 

There were no significantchanges in the Company’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date of their evaluation,including any corrective actions with regard to significant deficiencies and material weaknesses.

 

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**PARTII. OTHER INFORMATION**

 

**Item 1.****   LegalProceedings**

 

Information in responseto this Item is also set forth in “Note 2 Contingencies” of the Notes toConsolidated Financial Statements.

 

**Item 2.   Changes In Securities**

 

None.

 

**Item 3.****   Default Upon Senior Securities**

 

None.

 

**Item 4.****   Submission of Matters to a Vote of Security Holders**

 

None.

 

**Item 5.****   OtherInformation**

 

None.

 

**Item 6.****   Exhibits and Reports on Form 8-K**

 

(a) Exhibits

 
| ExhibitNumber |   | Exhibit                                                                                                                  |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                     |
| 99.1          |   | Certification pursuant to 18  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 |
|          |   |                                                                                                                     |
| 99.2          |   | Certification pursuant to 18  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 |

 

(b) Reports on Form 8-K

 

On September 3, 2002, the Company filed Form 8-K underItem 5 announcing additional restructuring of certain senior leadershippersonnel (File 0-30822).

 

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# **SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

# **SYNAVANT Inc.**

 
| **Signature** |                        | **Title**                                          |               | **Date** |
|---------------|-----------------------------|----------------------------------------------------|--------------------|----------|
|          |                        |                                               |               |
|          |                        |                                               |               |
|          |                        |                                               |               |
| By:           | /s/ WAYNE P.  YETTER        | Chairman and  Chief Executive Officer              | November 14,  2002 |
|          | Wayne P. Yetter             | (Principal  Executive Officer)                     |               |
|          |                        |                                               |               |
|          |                        |                                               |               |
|          |                        |                                               |               |
| By:           | /s/ CLIFFORD A. FARREN, JR. | Senior Vice  President and Chief Financial Officer | November 14,  2002 |
|          | Clifford A.  Farren, Jr.    | (Principal  Financial and Accounting Officer)      |               |
|               |                             |                                                    |                    |          |  |

 

**SYNAVANT INC.**

 

**CERTIFICATION**

 

I, Wayne P. Yetter, President and Chief ExecutiveOfficer of SYNAVANT Inc. certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q of SYNAVANT Inc.

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                      presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and

 

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procedures based on our evaluation as of theEvaluation date;

 

 

5.                                       Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalent function):

 

a)                                      allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6)                                      Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date:   November 14, 2002 | By:    |                                  | /s/ Wayne P. Yetter |   |
|--------------------------------|--------|---------------------------------------|---------------------|--------|
|                           |   | Wayne P. Yetter                       |
|                           |   | President and Chief Executive Officer |
|                                |        |                                       |                     |        |  |

 

I, Clifford A. Farren, Jr., Chief Financial Officer ofSYNAVANT Inc. certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q of SYNAVANT Inc.

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                      presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the Evaluationdate;

 

5.                                       Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to

 

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the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)                                      allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6)                                      Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date:   November 14, 2002 | By:    |                    | /s/ Clifford A. Farren, Jr. |   |
|--------------------------------|--------|-------------------------|-----------------------------|--------|
|                           |   | Clifford A. Farren, Jr. |
|                           |   | Chief Financial Officer |

 

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