**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 thequarterly period ended March 31, 2002**

 

**OR**

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

 

**For the transition period from               to            **

 

**CommissionFile Number: 0-30822**

** **

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**SYNAVANT Inc.**

(Exact name ofregistrant 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 ýNo o

 

Indicate the number of shares outstanding of each ofthe issuer’s classes of common stock, as of the latest practicable date:

 

| **Title of Class**                     |   | **Shares  Outstanding  at April 30, 2002** |   |
|----------------------------------------|--------|--------------------------------------------|--------|
| Common Stock, par value $.01 per share |   | 15,103,147  Shares                         |   |

 

 

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**SYNAVANT Inc.**

**FORM10-Q**

**FOR THEQUARTER ENDED MARCH 31, 2002**

 

**INDEX**

 
| **PART I.**  | **FINANCIAL INFORMATION**                                                                   |
|--------------|---------------------------------------------------------------------------------------------|
|         |                                                                                        |
| ITEM 1.      | FINANCIAL STATEMENTS  (UNAUDITED)                                                           |
|         |                                                                                        |
|         | Condensed  Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001           |
|         |                                                                                        |
|         | Consolidated  Statements of Operations for the Three Months Ended March 31, 2002 and 2001   |
|         |                                                                                        |
|         | Consolidated  Statements of Cash Flows for the Three Months Ended March 31, 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)***

 
|                                                                                                          |   | **March 31,  2002** |    | **December  31,  2001** |   |
|---------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|-------------------------|--------|
|                                                                                                          |   | **(Unaudited)**     |    | **(Audited)**           |   |
| **ASSETS:**                                                                                                   |   |                |    |                    |   |
| CURRENT  ASSETS:                                                                                              |   |                |    |                    |   |
| Cash  and cash equivalents                                                                                    |   | $                   | 11,379  |                    | $      | 9,578 |   |
| Accounts  receivable—net                                                                                 |   | 39,608              |    | 39,574                  |   |
| Other  receivables                                                                                            |   | 309                 |    | 209                     |   |
| Other  current assets                                                                                         |   | 6,589               |    | 6,113                   |   |
| TOTAL CURRENT ASSETS                                                                                          |   | 57,885              |    | 55,474                  |   |
|                                                                                                          |   |                |    |                    |   |
| Property,  plant and equipment—net                                                                       |   | 10,638              |    | 11,210                  |   |
| Computer  software—net                                                                                   |   | 6,162               |    | 7,410                   |   |
| Goodwill—net                                                                                             |   | 41,156              |    | 41,156                  |   |
| Long  term notes receivable                                                                                   |   | 1,000               |    | 1,000                   |   |
| Other  assets                                                                                                 |   | 2,244               |    | 2,008                   |   |
| TOTAL  LONG TERM ASSETS                                                                                       |   | 61,200              |    | 62,784                  |   |
|                                                                                                          |   |                |    |                    |   |
| TOTAL ASSETS                                                                                                  |   | $                   | 119,085 |                    | $      | 118,258 |   |
|                                                                                                          |   |                |    |                    |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY:**                                                               |   |                |    |                    |   |
| CURRENT  LIABILITIES:                                                                                         |   |                |    |                    |   |
| Accounts  payable                                                                                             |   | $                   | 7,940   |                    | $      | 9,516 |   |
| Accrued  restructuring                                                                                        |   | 4,128               |    | 4,816                   |   |
| Accrued  and other current liabilities                                                                        |   | 13,578              |    | 13,289                  |   |
| Accrued  income taxes                                                                                         |   | 2,510               |    | 1,885                   |   |
| Deferred  revenues                                                                                            |   | 12,240              |    | 8,388                   |   |
| TOTAL CURRENT LIABILITIES                                                                                     |   | 40,396              |    | 37,894                  |   |
|                                                                                                          |   |                |    |                    |   |
| Deferred  taxes                                                                                               |   | 420                 |    | 421                     |   |
| Accrued  liability due to former parent                                                                       |   | 9,000               |    | 9,000                   |   |
| Other  liabilities                                                                                            |   | 890                 |    | 793                     |   |
| TOTAL  LIABILITIES                                                                                            |   | $                   | 50,706  |                    | $      | 48,108 |   |
|                                                                                                          |   |                |    |                    |   |
| Commitments  and contingencies (see note 2)                                                                   |   |                |    |                    |   |
|                                                                                                          |   |                |    |                    |   |
| STOCKHOLDERS’  EQUITY:                                                                                   |   |                |    |                    |   |
| Common  stock, par value $.01, authorized 41,000,000 shares; 15,103,147 shares  outstanding at March 31, 2002 |   | 151                 |    | 150                     |   |
| Other  stockholders’ equity                                                                              |   | 68,228              |    | 70,000                  |   |
| TOTAL STOCKHOLDERS’ EQUITY                                                                               |   | 68,379              |    | 70,150                  |   |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY                                                              |   | $                   | 119,085 |                    | $      | 118,258 |   |

 

See accompanyingNotes to the Consolidated Financial Statements (unaudited).

 

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**SYNAVANT Inc.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

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

 
|                                                            |   | **Three  Months Ended  March 31,** |   |
|-----------------------------------------------------------------|--------|------------------------------------|--------|
|                                                            |   | **2002**                           |   | **2001** |   |
|                                                            |   |                               |   |   |   |
| REVENUES:                                                       |   |                               |   |   |   |
| Software  fees                                                  |   | $                                  | 1,440  |   | $ | 3,153 |   |
| Software  services                                              |   | 20,848                             |   | 21,454 |   |
| Interactive  marketing                                          |   | 22,672                             |   | 19,471 |   |
| TOTAL  REVENUES                                                 |   | 44,960                             |   | 44,078 |   |
|                                                            |   |                               |   |   |   |
| OPERATING  COSTS:                                               |   |                               |   |   |   |
| Software  fees                                                  |   | 726                                |   | 1,697 |   |
| Software  services                                              |   | 15,106                             |   | 16,657 |   |
| Interactive  marketing                                          |   | 19,259                             |   | 15,931 |   |
| TOTAL  OPERATING COSTS                                          |   | 35,091                             |   | 34,285 |   |
|                                                            |   |                               |   |   |   |
| Research  & development                                     |   | 1,939                              |   | 2,365 |   |
| Selling  and administrative expenses                            |   | 7,596                              |   | 9,261 |   |
| Depreciation  and amortization                                  |   | 1,838                              |   | 5,361 |   |
| Spin  related costs                                             |   | —                             |   | 210 |   |
| OPERATING  LOSS                                                 |   | (1,504                             | )      | (7,404 | ) |
| Other  expense—net                                         |   | (100                               | )      | (78 | ) |
| LOSS  BEFORE PROVISION FOR INCOME TAXES                         |   | (1,604                             | )      | (7,482 | ) |
| Income  tax provision                                           |   | (341                               | )      | (2,165 | ) |
| NET  LOSS                                                       |   | $                                  | (1,945 | ) | $ | (9,647 | ) |
| Goodwill  Amortization                                          |   | —                             |   | 2,934 |   |
| ADJUSTED  NET LOSS                                              |   | $                                  | (1,945 | ) | $ | (6,713 | ) |
|                                                            |   |                               |   |   |   |
| Net  loss per share of common stock: basic and diluted          |   | $                                  | (0.13  | ) | $ | (0.65 | ) |
| Adjusted  net loss per share of common stock: basic and diluted |   | $                                  | (0.13  | ) | $ | (0.45 | ) |
| Weighted  average shares outstanding: basic and diluted         |   | 15,067                             |   | 14,872 |   |

 

See accompanyingNotes to the Consolidated Financial Statements (unaudited).

 

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**SYNAVANT Inc.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

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

 
|                                                                                    |   | **Three  Months Ended  March 31,** |   |
|-----------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                    |   | **2002**                           |   | **2001** |   |
|                                                                                    |   |                               |   |   |   |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                                  |   |                               |   |   |   |
| Net  loss                                                                               |   | $                                  | (1,945 | ) | $ | (9,647 | ) |
| Adjustments  to reconcile net loss to net cash provided (used) by operating activities: |   |                               |   |   |   |
| Depreciation  and amortization                                                          |   | 1,838                              |   | 5,361 |   |
| Amortization  of capitalized computer software                                          |   | 595                                |   | 517 |   |
| Restructuring  payments                                                                 |   | (688                               | )      | — |   |
| Deferred  income taxes                                                                  |   | —                             |   | 12 |   |
| Changes  in operating assets and liabilities:                                           |   |                               |   |   |   |
| Accounts  and other receivable                                                          |   | (227                               | )      | (1,073 | ) |
| Accounts  payable                                                                       |   | (1,557                             | )      | (271 | ) |
| Accrued  liabilities and other current liabilities                                      |   | 347                                |   | (1,645 | ) |
| Accrued  income taxes                                                                   |   | 632                                |   | 2,034 |   |
| Deferred  revenues                                                                      |   | 3,886                              |   | 3,805 |   |
| Other                                                                                   |   | (573                               | )      | (3,933 | ) |
| NET  CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                       |   | 2,308                              |   | (4,840 | ) |
|                                                                                    |   |                               |   |   |   |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                                  |   |                               |   |   |   |
| Capital  expenditures                                                                   |   | (456                               | )      | (703 | ) |
| Additions  to computer software                                                         |   | —                             |   | (19 | ) |
| Other                                                                                   |   | —                             |   | (189 | ) |
| NET  CASH PROVIDED (USED) IN INVESTING ACTIVITIES                                       |   | (456                               | )      | (911 | ) |
|                                                                                    |   |                               |   |   |   |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                                  |   |                               |   |   |   |
| Payments  for capital leases                                                            |   | (65                                | )      | — |   |
| Payments  for deferred loan fees                                                        |   | —                             |   | (195 | ) |
| NET  CASH PROVIDED (USED) IN FINANCING ACTIVITIES                                       |   | (65                                | )      | (195 | ) |
|                                                                                    |   |                               |   |   |   |
| Effect  of exchange rate changes on cash and cash equivalents                           |   | 14                                 |   | 69 |   |
| Increase  (decrease) in cash and cash equivalents                                       |   | 1,801                              |   | (5,877 | ) |
| Cash  and cash equivalents, beginning of period                                         |   | 9,578                              |   | 19,768 |   |
| Cash  and cash equivalents, end of period                                               |   | $                                  | 11,379 |   | $ | 13,891 |   |

 

Supplemental Disclosure of Cash Flow Information:

Cash payments forforeign, state and local income taxes were $31 and $261 for the three monthsended March 31, 2002 and 2001, respectively.

 

See accompanyingNotes to the Consolidated Financial Statements (unaudited).

 

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**SYNAVANT Inc.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

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

 

*Basisof Presentation.*  Theaccompanying unaudited consolidated financial statements have been prepared inaccordance with U.S. generally accepted accounting principles for interimfinancial information and with the rules and regulations of the Securities andExchange Commission (the “SEC”).  Theconsolidated financial statements and related notes should be read inconjunction with the consolidated 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 ofmanagement, all adjustments of a normal recurring nature considered necessaryfor a fair presentation of financial position, results of operations and cashflows for the periods presented have been included.  Certain information and footnote disclosures have been condensedor omitted pursuant to SEC rules and regulations.  However, management believes that the disclosures made areadequate for a fair presentation of the results of all interim periods reportedherein.

 

*Organization.*  SYNAVANT serves the biopharmaceutical andhealthcare industries through its three core business categories:  implementing and supportingpharmaceutical-specific customer relationship management (“CRM”) solutions,developing interactive marketing programs and medical professional databases,and offering strategic consulting services that support clinical research,sales and marketing decision-making and program implementation.  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 beenreclassified to conform with current period presentation.

 

*EarningsPer Share.*  Basic anddiluted earnings per share (“EPS”) are calculated in accordance with Statementof Financial Standards No. 128. For the Company’s calculation, the numeratoris the same for the calculation of both basic and diluted EPS. The denominatorfor basic and diluted EPS is the same for the three month periods endedMarch 31, 2002 and 2001 as the loss from operations would otherwise causethe inclusion of common stock options to be anti-dilutive. Options to purchase7,102,362 shares of common stock at a weighted average price of $9.20 wereoutstanding but not included in the computation of diluted EPS for the threemonths ended March 31, 2002.

 

*RecentlyIssued Accounting Standards.* In July 2001, the FASB issued SFAS No. 141, “BusinessCombinations” and SFAS No. 142 “Goodwill and other Intangibles”. Underthese new standards the FASB eliminated accounting for certain mergers andacquisitions as poolings of interests, eliminated amortization of goodwill andindefinite life intangible assets, and established new impairment measurementprocedures for goodwill. For the Company, the standards become effective forall acquisitions completed on or after June 30, 2001. Changes in financialstatement treatment for goodwill and intangible assets arising from mergers andacquisitions completed prior to June 30, 2001 became effectiveJanuary 1, 2002, and has been adopted by the Company as of the effectivedate.

 

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In June of 2001, the FASB issued SFAS No. 143,“Accounting for Asset Retirement Obligations.” The statement providesaccounting and reporting standards for recognizing obligations related to assetretirement costs associated with the retirement of tangible long-lived assets.Under this statement, legal obligations associated with the retirement oflong-lived assets are to be recognized at their fair value in the period inwhich they are incurred if a reasonable estimate of fair value can be made. Thefair value of the asset retirement costs is capitalized as part of the carryingamount of the long-lived asset and subsequently allocated to expense using asystematic and rational method over the assets’ useful life. Any subsequentchanges to the fair value of the liability due to the passage of time orchanges in the amount or timing of estimated cash flows is recognized as anaccretion expense. The Company will be required to adopt this statement nolater then January 1, 2003.

 

In October of 2001, the FASB issued SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets”, which iseffective 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.

 

The Company does not expect a material impact relatingto the implementation of these recently issued statements on its results ofoperations, financial position and cash flows.

 

**NOTE 2. CONTINGENCIES**

 

SYNAVANT has from time to time been involved in legal proceedingsand litigation arising in the ordinary course of business. In the opinion ofmanagement, the outcome of all current proceedings, claims and litigation willnot materially affect SYNAVANT’s consolidated financial position. In additionto these immaterial items, the Company is subject to certain othercontingencies discussed below.

 

In connection with the Distribution, SYNAVANT isjointly and severally liable to other parties in connection with prior IMSHEALTH Distribution Agreements for the liabilities relating to certain taxmatters as well as a legal matter (“Distribution Liabilities”). Under theDistribution Agreement, IMS HEALTH and SYNAVANT agreed that SYNAVANT would havea maximum liability of $9.0 million for the Distribution Liabilities. Managementbelieves it is probable that at least one of these matters will have anunfavorable outcome and as a result the Company has recorded a$9.0 million liability associated with these matters as part of theDistribution. The Distribution Agreement required that if an unfavorableoutcome occurred, the amount due up to $9.0 million is due and payable in2003. In concurrence with the Foothill Facility obtained by the Company (See *“Management’sDiscussion and Analysis—Liquidity and Capital Resources”*), IMSHEALTH has agreed to defer any payments associated with the DistributionLiabilities until 2005. Under the Distribution Agreement, SYNAVANT would beliable for amounts in excess of $9.0 million, related to the DistributionLiabilities, only to the extent that all of the parties involved do not havesufficient combined assets to settle such contingencies.

 

**NOTE 3. RESTRUCTURING CHARGE**

 

On August 16, 2001, the Company announced that, in anattempt to optimize customer responsiveness and organizational effectiveness,it would simplify its senior leadership structure as well as eliminate certainother positions in its international and domestic operations.  This action resulted in a reduction inpersonnel by

 

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approximately 6% to 8% worldwide. The Company completed the first two steps in the restructuring processduring 2001, resulting in the elimination of approximately 100 positionsreflected in the charge of $7.5 million for 2001.  These reductions included six senior management positions withthe remainder being operating, technical and administrative staff.  The restructuring charge is composedentirely of employee severance and separation related costs, such as extendedbenefits and outplacement fees.  Therehas been no additional restructuring charge taken in 2002.  Of the $7.5 million charge, $2.6 million waspaid during 2001, $0.7 million in the three months ended March 31, 2002 and theremainder expected to be paid within the next twelve to twenty-four months.

 

**NOTE 4. INCOME TAX**

 

The Company’s consolidated tax provision was$0.3 million for the three months ended March 31, 2002 compared witha provision of $2.2 million for the same period in the prior year.  The Company’s effective tax rate is differentthan the U.S. federal statutory tax rate due to taxable income in certainforeign jurisdictions and losses for which a full valuation has been provided.

 

**NOTE 5. OPERATIONS BY SEGMENT**

 

The Company delivers pharmaceutical relationshipmanagement solutions globally in approximately 30 countries. The Company’schief operating decision–makers evaluate the business on a global basiswith consideration of resource allocation on a geographic basis. The AmericasSegment 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)** |    |
| **Three  Months Ended March 31, 2002**       |   |                               |    |       |   |              |   |      |   |
| Operating  revenues                          |   | $                                  | 29,786  |       | $      | 12,254            |   | $         | 2,920  |   | $ | 44,960 |   |
| Segment  operating income (loss)             |   | (843                               | )       | (355       | )      | (306              | )      | (1,504    | )      |
| Non-operating  income (loss)                 |   | 218                                |    | (342       | )      | 24                |   | (100      | )      |
| Loss  before income taxes                    |   | (625                               | )       | (697       | )      | (282              | )      | (1,604    | )      |
| Provision  for income taxes                  |   |                               |    |       |   |              |   | (341      | )      |
| Net  loss                                    |   |                               |    |       |   |              |   | (1,945    | )      |
| Segment  total depreciation and amortization |   | (1,986                             | )       | (333       | )      | (114              | )      | (2,433    | )      |
| Segment  capital expenditures                |   | 293                                |    | 141        |   | 22                |   | 456       |   |
| Identifiable  assets at March 31, 2002       |   | $                                  | 85,356  |       | $      | 28,230            |   | $         | 5,499  |   | $ | 119,085 |   |
|                                         |   |                               |    |       |   |              |   |      |   |
|                                         |   | **Americas**                       |    | **Europe** |   | **Asia  Pacific** |   | **Total** |   |
| **Three  Months Ended March 31, 2001**       |   |                               |    |       |   |              |   |      |   |
| Operating  revenues                          |   | $                                  | 25,543  |       | $      | 14,977            |   | $         | 3,558  |   | $ | 44,078 |   |
| Segment  operating income (loss)             |   | (7,953                             | )       | 1,104      |   | (555              | )      | (7,404    | )      |
| Non-operating  income (loss)                 |   | (390                               | )       | 386        |   | (74               | )      | (78       | )      |
| Loss  before income taxes                    |   | (8,343                             | )       | 1,490      |   | (629              | )      | (7,482    | )      |
| Provision  for income taxes                  |   |                               |    |       |   |              |   | (2,165    | )      |
| Net  loss                                    |   |                               |    |       |   |              |   | (9,647    | )      |
| Segment  total depreciation and amortization |   | (5,499                             | )       | (218       | )      | (161              | )      | (5,878    | )      |
| Segment  capital expenditures                |   | 182                                |    | 310        |   | 211               |   | 703       |   |
| Identifiable  assets at March 31, 2001       |   | $                                  | 101,070 |       | $      | 42,179            |   | $         | 6,595  |   | $ | 149,844 |   |

 

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

 
|                                   |   | **US** |   | **UK** |   | **Australia** |   | **Rest of  World (2)** |   | **Total** |   |
|----------------------------------------|--------|--------|--------|--------|--------|---------------|--------|------------------------|--------|-----------|--------|
|                                   |   |   |   |   |   |          |   |                   |   |      |   |
| **Three  Months Ended March 31, 2002** |   |   |   |   |   |          |   |                   |   |      |   |
| Operating  revenues                    |   | $      | 28,126 |   | $      | 4,848         |   | $                      | 2,679  |      | $      | 9,307 |   | $ | 44,960 |   |
| Long-lived  assets(1)                  |   | 52,741 |   | 3,138  |   | 669           |   | 2,407                  |   | 58,955    |   |
| **Three  Months Ended March 31, 2001** |   |   |   |   |   |          |   |                   |   |      |   |
| Operating  revenues                    |   | $      | 23,942 |   | $      | 5,757         |   | $                      | 3,296  |      | $      | 11,083 |   | $ | 44,078 |   |
| Long-lived  assets(1)                  |   | 69,132 |   | 3,914  |   | 851           |   | 3,031                  |   | 76,928    |   |

 

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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 ofFinancial Condition and Results of Operations” includes forward-lookingstatements within the meaning of the Private Securities Litigation Reform Actof 1995.  All statements other thanstatements of historical fact made in this Quarterly Report on Form 10-Q areforward-looking, which can be identified by the use of forward-lookingterminology such as “may,” “will,” “expect,” “anticipate,” “estimate,”“believe,” “continue” or other similar words. Such forward-looking statementsare based on management’s current plans and expectations and are subject torisks and uncertainties that could cause actual results to differ materiallyfrom those described in the forward-looking statements.  Factors that could cause or contribute tosuch differences include, but are not limited to: risks associated withcompetition from other providers of customer relationship management solutions;customer decisions favoring competitor products, solutions and/or services; theability to obtain additional financing on satisfactory terms to meet futurecapital requirements; loss of key personnel; failure to introduce new orenhanced products in a timely manner; defects in our products and delays relatedto market adoption of our software; consolidation of the pharmaceuticalindustry; fluctuations in quarterly and/or annual operating results that mayadversely affect the market price of our common stock; operating on a globalbasis; the ability to protect our intellectual property; product infringementclaims; the ability to identify, consummate and integrate acquisitions,alliances and ventures on satisfactory terms; the ability to develop new oradvanced technologies, systems or products; the ability to successfullymaintain historic effective tax rates; and regulatory, legislative andenforcement initiatives. These risks and uncertainties are not intended to beexhaustive and should be read in conjunction with other cautionary statementsmade herein including, but not limited to, the material set forth herein underthe heading “Factors That May Affect Future Performance.” The Company assumesno obligation to update any such forward-looking statements.

 

This discussion and analysis should be read in conjunctionwith the consolidated financial statements and related notes contained in ItemI of this report and with the Company’s Annual Report on Form 10-K for theyear 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

 

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SYNAVANT common stock were distributed to the shareholders of IMSHEALTH. 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. Under theAgreement, SYNAVANT had the right to distribute Siebel software products tocompanies in the life sciences industry (e.g., pharmaceutical, biotechnologyand healthcare companies) worldwide in conjunction with SYNAVANT’s ownproprietary software and services.  Aspart of the arrangement, Siebel and SYNAVANT shared in the fees generated fromthe licensing of the Siebel software when contracted by SYNAVANT as part of ajoint offering.  The Alliance Agreementhas been superceded by a new Siebel Alliance Program Master Agreement (“theRevised Alliance Agreement”) entered into by SYNAVANT and Siebel on December31, 2001 (“Revised Alliance”).

 

Under the Revised Alliance, SYNAVANT and Siebel haveagreed to terminate the Reseller Agreement, revise the Alliance Agreement andto continue the license of certain Siebel software for SYNAVANT’s internaluse.  In addition to terminating theReseller Agreement, 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 any channel conflict forlicense sales, allowing SYNAVANT to concentrate on delivering its corecompetencies of consulting, implementation and support services for Siebeltechnology in a manner that achieves high value.  Another important benefit of this new partner status is thatSYNAVANT has additional rights to implement and support Siebel’s *e*Medical,*e*Clinicaland ERM applications, providing a broader revenue opportunity from the lifesciences area.

 

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**CRITICAL ACCOUNTING 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 itsobligations under the contracts, then future software service margins may besignificantly and negatively affected or losses on existing contracts may needto be recognized.  Any such resultingreductions in margins or contract losses could be material to the Company’sresults of operations.   Should changesin conditions cause management to determine these criteria are not met forcertain future transactions, revenue recognized for any reporting period couldbe 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

 

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balances, historical bad debts, customer concentrations, customercredit-worthiness, current economic trends, and changes in our customer paymentterms and trends when evaluating the adequacy of the allowance foruncollectible accounts receivable. Significant management judgment and estimates must be made and used inconnection with establishing the allowance for uncollectible accountsreceivable in any accounting period. The Company provides specific amounts for known individual accountswhich have deterioriated and general amounts for changes that are indicators offuture deterioration.  If the financialcondition of the Company’s customers were to deteriorate, resulting in animpairment of their ability to make payments, additional allowances may berequired.

 

*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 managementconsider important, which could trigger an impairment review include, but arenot 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 Company determines that the carrying value oflong-lived assets, intangibles and related goodwill may not be recoverablebased upon the existence of one or more of the indicators of impairment, theCompany recognizes an impairment loss when the sum of undiscounted expectedfuture cash flow is less than the carrying amount of such assets.  The impairment loss, if applicable, is thencalculated based on the fair value or the sum of the discounted cash flowscompared to the carrying value.  Thediscounted cash flow method using a discount rate determined by management tobe commensurate with the risk inherent in our current business model.

 

Statement of Financial Accounting Standards (“SFAS”)No. 142, “Goodwill and Other Intangible Assets” became effective January 1,2002, and as a result, we ceased amortization of the remaining $41.2 million ofgoodwill.  The Company recordedapproximately $11.7 million of goodwill amortization during 2001.  In lieu of amortization, we are required toperform a periodic impairment review of the goodwill.  Future events could cause us to conclude that impairmentindicators exist and that goodwill associated with our acquired businesses isimpaired.  Any resulting impairment losscould have a material adverse impact on our financial condition and results ofoperations.  Other intangible assetswith finite lives that do not meet the criteria of SFAS No. 142 will continueto be amortized in accordance with the adoption of SFAS No. 144, “Accountingfor the Impairment or Disposal of Long-Lived Assets”.  This amortization is based on the estimated useful lives of theunderlying acquired business or underlying assets. * *The Company iscurrently assessing the impact of these pronouncements and does not expect themto have a material impact on its results of operations and financial condition.

 

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

 
|                                        |   | **March 31,  2002** |   | **March 31,  2001** |   |
|---------------------------------------------|--------|---------------------|--------|---------------------|--------|
|                                        |   |                |   |                |   |
| Reported net  loss                          |   | $                   | (1,945 | )                   | $      | (9,647 | ) |
| Add back:  Goodwill amortization       |   | —              |   | 2,934               |   |
| Adjusted net  loss                          |   | $                   | (1,945 | )                   | $      | (6,713 | ) |
|                                        |   |                |   |                |   |
| Earning per  share – basic and diluted |   |                |   |                |   |
| Reported net  loss                          |   | (0.13               | )      | (0.65               | )      |
| Goodwill  amortization                      |   | —              |   | 0.20                |   |
| Adjusted net  loss                          |   | (0.13               | )      | (0.45               | )      |

 

*Incometaxes. *As part of theprocess of preparing our consolidated financial statements we are required toestimate our taxes in each of the jurisdictions in which we operate.  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 our condensed consolidatedbalance sheet.  The Company must then assessthe likelihood that deferred tax assets will be recovered from future taxableincome and to the extent we believe that recovery is not likely, we mustestablish a valuation allowance.  To theextent the Company establishes a valuation allowance or increases thisallowance in a period, an expense is recorded within the tax provision in theconsolidated 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 will be recoverable.  In the event that actual results differ fromthese estimates or the Company adjusts these estimates in future periods we mayneed to establish an additional valuation allowance which could materiallyimpact 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 we may need to establish anadditional valuation allowance which could materially impact our financialcondition 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 lease contractualobligations could be materially affected by factors such as our ability tosecure subleases, the credit-worthiness of sub-lessees and our success atnegotiating early termination agreements with lessors.  In the event that actual results differ fromthese estimates or the Company adjusts these estimates in future periods we mayneed to establish an additional restructuring accrual or reverse accrualamounts accordingly.

 

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*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.

 

The above listing is not intended to be acomprehensive list of all of our estimates and judgments or accountingpolicies.  In many cases, the accountingtreatment of a particular transaction is specifically dictated by generallyaccepted accounting principles, with no need for management’s judgment in theirapplication.  There are also areas inwhich management’s judgment in selecting any available alternative would notproduce a materially different result. See our audited consolidated financial statements and notes theretowhich contain accounting policies and other disclosures required by generallyaccepted accounting principles.

 

**RESULTS OF OPERATIONS**

 

**THREE MONTHS ENDED MARCH 31, 2002COMPARED WITH THREE MONTHS ENDED MARCH 31, 2001.**

 

**REVENUE**

 

Total revenues for the three months endedMarch 31, 2002 increased by $0.9 million and 2.0% to$45.0 million from $44.1 million for the three months endedMarch 31, 2001. The overall revenue increase was driven by an increase ininteractive marketing, partially offset by decreases in software fees and softwareservice fees, along with a stronger U.S. Dollar.  Excluding the impact of a stronger U.S. Dollar, revenuesincreased by 3.5%.

 

*SOFTWAREFEES.*  Software feesdecreased to $1.4 million for the three months ended March 31, 2002from $3.1 million for the three months ended March 31, 2001, adecrease of $1.7 million and 54.8%. The decrease in Software fees isprimarily due to significant customer sales representative expansions in theU.S. during the prior year.  Softwarefees have declined, and are expected to continue to decline in future periods,as the Company is no longer a Siebel VAR (See Siebel Alliance) and due to thediscontinuance of ongoing development of certain of the Company’s legacyproducts.  Excluding the impact of astronger U.S. Dollar, Software fees revenue decreased 53.3%.

 

*SOFTWARESERVICES.*  Softwareservices revenue decreased to $20.8 million for the three months endedMarch 31, 2002 from $21.4 million for the three months endedMarch 31, 2001, a decrease of $0.6 million and 2.8%. The decrease inrevenue from Software services is principally due to fluctuations in foreigncurrency exchange rates and the absence of certain hardware rebills associatedwith a customer sales representative expansion in the U.S. during 2001.  Excluding the impact of a stronger U.S.dollar, Software services revenue was essentially flat, a decrease of 1.3%.

 

*INTERACTIVEMARKETING.* Interactive marketing revenue increased to $22.7 million for thethree months ended March 31, 2002 from $19.5 million for the threemonths ended March 31, 2001, an increase of $3.2 million and 16.4%.The increase in revenue from Interactive marketing is primarily due to a largeproduct communications program implemented for a customer in the U.S.,partially offset by a stronger U.S. dollar. Excluding the impact of a stronger U.S. Dollar, Interactive marketingrevenue increased by 18.1%.

 

**OPERATING COSTS**

 

*COSTOF SOFTWARE FEES.* Cost of Software fees decreased to $0.7 million for the threemonths ended March 31, 2002, from $1.7 million for the three monthsended March 31, 2001, a decrease of $1.0 million and

 

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58.8%.  The decrease relates tothe decrease in Software fees revenue, partially offset by an increase inamortization of capitalized software costs.

 

*COSTOF SOFTWARE SERVICES.* Cost of Software services decreased to $15.1 million for the threemonths ended March 31, 2002, from $16.7 million for the three monthsended March 31, 2001, a decrease of $1.6 million and 9.6%. The decrease inCost of Software services is primarily due to lower Software services revenues,the product mix of services, cost containment actions and the impact of astronger U.S. Dollar.

 

*COSTOF INTERACTIVE MARKETING.* Cost of Interactive marketing revenue increased to $19.3 millionfor the three months ended March 31, 2002, from $15.9 million for thethree months ended March 31, 2001, an increase of $3.4 million or21.4%.  The increase in the Cost ofInteractive marketing is primarily driven by the revenue increase.  A large 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 calculates gross margin as revenue lessoperating costs as categorized in the Company’s consolidated financialstatements.  The following tablesummarizes the Company’s gross margin information in dollars and as apercentage of the associated revenues for the three months ended March 31, 2002and the comparable period for the prior year.

 
|                   |   | **3/31/01  Gross Margin** |   | **3/31/01  Gross Margin** |   |
|------------------------|--------|---------------------------|--------|---------------------------|--------|
| Software fees          |   | $                         | 714    |                      | 49.6   | % | $ | 1,456 |   | 46.2 | % |
| Software  services     |   | 5,742                     |   | 27.5                      |   | 4,797 |   | 22.4 |   |
| Interactive  marketing |   | 3,413                     |   | 15.1                      |   | 3,540 |   | 18.2 |   |
|                   |   |                      |   |                      |   |   |   |   |   |
| Total                  |   | $                         | 9,869  |                      | 22.0   | % | $ | 9,793 |   | 22.2 | % |

 

Total gross margin for the three months endedMarch 31, 2002 increased by $0.1 million and remained essentiallyunchanged as a percentage of revenue at 22.0%. The Company experienced improved software services margins, partiallyoffset by a decline in software fee margins, due to an ongoing transition to asoftware services model from a proprietary software business.  Based on this transition, the Companyexpects software fee gross margin to continue to decline compared to prioryears.  The increase in softwareservices gross margins were also partially offset by lower interactivemarketing margins as a percentage of revenue due to postage costs associatedwith the large product communications program discussed above.

 

**OPERATING EXPENSES**

 

*RESEARCHAND DEVELOPMENT.* Research and development expenses declined by 20.8% to $1.9 millionfor the three months ended March 31, 2002 from $2.4 million for the threemonths ended March 31, 2001.  Thedecline in research and development costs is principally attributable to ade-emphasis on proprietary software development.

 

*SELLINGAND ADMINISTRATIVE.* Selling and administrative expenses decreased to $7.6 million forthe three months ended March 31, 2002 from $9.3 million for the threemonths ended March 31, 2001, a decrease of $1.7 million or 18.3%.  The decrease in Selling and administrativeexpenses is principally due to cost containment actions taken during the secondhalf of 2001.

 

*DEPRECIATIONAND AMORTIZATION.* Depreciation and amortization for the three months ended

 

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March 31, 2002 declined to $1.8 million from $5.4 million forthe same period in the prior year.  Thedecline is due to the absence of Goodwill amortization during 2002 inaccordance with new accounting standards that eliminated the amortization ofgoodwill (See Note 1. Recently Issued Accounting Standards).

 

**OPERATING LOSS**

 

Operating loss decreased to $1.5 million for thethree months ended March 31, 2002 compared with an operating loss of$7.4 million for the three months ended March 31, 2001.  The $5.9 million decrease in operatingloss is primarily due to the absence of goodwill amortization and costcontainment actions taken during the second half of 2001.

 

**RESTRUCTURING**

 

On August 16, 2001, the Company announced that, in anattempt to optimize customer responsiveness and organizational effectiveness,it would simplify its senior leadership structure as well as eliminate certainother positions in its international and domestic operations.  This action resulted in a reduction inpersonnel by approximately 6% to 8% worldwide. The Company completed the first two steps in the restructuring processduring 2001, resulting in the elimination of approximately 100 positionsreflected in the charge of $7.5 million for 2001.  These reductions included six senior management positions withthe remainder being operating, technical and administrative staff.  The restructuring charge is composedentirely of employee severance and separation related costs, such as extendedbenefits and outplacement fees.  Therehas been no additional restructuring charge taken in 2002.  Of the $7.5 million charge, $2.6 million waspaid during 2001, $0.7 million in the three months ended March 31, 2002 and theremainder expected to be paid within the next twelve to twenty-four months.

 

**TAXES**

 

The Company had a consolidated tax provision of$0.3 million for the three months ended March 31, 2002, compared witha provision of $2.2 million for the three months ended March 31,2001.  The change reflects the impact ofglobal tax planning initiatives. The Company’s effective tax rate is differentthan the U.S. federal statutory tax rate due to taxable income in certainforeign jurisdictions and losses for which a full valuation has been provided.

 

**RESULTS BY SEGMENT**

 

*THEAMERICAS.*  Revenue forthe three months ended March 31, 2002 was $29.8 million compared with$25.5 million for the three months ended March 31, 2001. The increase wasdue to improved interactive marketing revenue driven by a large productcommunications program implemented for a customer in the U.S.  The operating loss for the three monthsended March 31, 2002 was $0.8 million compared to a loss of$8.0 million for the three months ended March 31, 2001 primarily dueto improved revenues, the absence of goodwill amortization and cost containmentactions taken during the second half of 2001.

 

*EUROPE.*  Revenue for the three months endedMarch 31, 2002 was $12.3 million compared with $15.0 million forthe three months ended March 31, 2001. Lower Interactive marketing volumesand the negative impact of foreign currency fluctuations were the primaryfactors for revenue decreasing by $2.7 million.  Operating income for the three months ended March 31, 2002decreased to a loss of $0.4 million from income of $1.1 million inthe three months ended March 31, 2001 due to lower revenues.

 

*ASIAPACIFIC.*  Revenue forthe three months ended March 31, 2002, decreased to $2.9 millioncompared to $3.6 million for the three months ended March 31, 2001.The decrease in revenue was primarily the result of lower interactive marketingrevenues in Australia and the negative impact of foreign currency fluctuations.The improved operating loss for the three months ended March 31, 2002 was$0.3 million compared to an operating loss of $0.6 million for thethree months ended March 31, 2001. The operating loss improvement, despite the

 

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decrease in revenue, is due to cost containment actions taken in thesecond half of 2001.

 

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

 

SYNAVANT operates globally, deriving 37.4% of itsrevenues in the first three months of 2002 from non-U.S. operations.  As a result, fluctuations in the value offoreign currencies relative to the U.S. Dollar may increase the volatility ofreported U.S. Dollar operating results.

 

Non-U.S. monetary assets are maintained in currenciesother than the U.S. Dollar, principally those of the Euro, the Pound Sterlingand the Australian Dollar.  Changes inthe value of these currencies relative to the U.S. Dollar are charged orcredited to stockholders’ equity.  Theeffect of exchange rate changes during the three months ended March 31,2002 had minimal impact on the U.S. Dollar amount of cash and cash equivalents.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

On April 27, 2001, SYNAVANT Inc. enteredinto a revolving credit facility with Foothill Capital Corporation (the“Foothill Facility”), a wholly-owned subsidiary of Wells Fargo &Company.  The Foothill Facility has aterm of five years with a maximum credit line of $20 million. Theavailable line is determined based on a percentage of the eligible accountsreceivable in the U.S. Any borrowing against the line will be at a rate ofPrime plus 100 basis points. The Company is required to maintain certainfinancial covenants relating to earnings, net worth and capitalexpenditures.  The Company has met thesecovenants for the first quarter of 2002. As of March 31, 2002, the Company has not required the use of theFoothill Facility.  Concurrent with theFoothill Facility, IMS HEALTH has agreed to defer any payments associated withthe Distribution 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.

 

We currently estimate that our cash and workingcapital needs for the next twelve months can be met by cash on hand, amountsavailable under our credit facility, and cash flow from operations. If ourexpectations change due to market conditions, strategic opportunities orotherwise, then our capital requirements may vary materially from thosecurrently anticipated.

 

**CASH FLOWS**

 

Net cash provided by operating activities totaled$2.3 million for the three months ended March 31, 2002 compared withnet cash used in operating activities of $4.8 million for the three monthsended March 31, 2001. The increase of $7.1 million primarily reflectsa smaller Net Loss and timing in working capital, partially offset by paymentsrelated to restructuring (See Note 3).

 

Net cash used in investing activities totaled$0.5 million for the three months ended March 31, 2002 compared withcash used in investing activities of $0.9 million for the three monthsended March 31, 2001. The improvement in the cash outflow of$0.4 million was primarily due to lower capital expenditures.

 

Net cash used in financing activities totaled$0.1 million for the three months ended March 31, 2002 compared withnet cash used in financing activities of $0.2 million for the three monthsended March 31, 2001. The improvement in cash flows was due to the paymentof deferred loan fees associated with the Foothill Facility in 2001, partiallyoffset by payments in 2002 related to certain capital equipment leases.

 

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

 

Cash and cash equivalents were $11.4 million asof March 31, 2002 compared with $9.6 million as of December 31,2001. The increase in cash and cash equivalents of $1.8 million wasprimarily due to an improved net loss for the period as well as the timing inworking capital requirements.

 

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*Accountsand Other Receivables—Net.* Increased to $39.9 million at March 31, 2002 from$39.8 million at December 31, 2001 due to increased deferred revenuesoffset by improved collections.

 

*OtherCurrent Assets.* Increased $0.5 million to $6.6 million primarily due to an increasein prepaid expenses associated with advances on certain subcontracted projectsin our U.S. interactive marketing business.

 

*ComputerSoftware.*  Decreased$1.2 million to $6.2 million due to amortization of the remainingbook value based on the greater of straight line or revenue 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).

 

*AccruedRestructuring.*  Decreased by $0.7 million due to severance payments made during 2002.

 

*AccountsPayable*.  Decreased by$1.6 million due to the timing of certain year-end related payments.

 

*Accruedand Other Current Liabilities.*  Increased to $16.1 million at March 31, 2002 from $15.2 millionat December 31, 2001. The increase reflected the accrual of quarterlyestimated income taxes, employee bonuses and professional fees, partiallyoffset by certain payments related to 2001 liabilities.

 

*DeferredRevenue.*  Increased to$12.2 million at March 31, 2002 from $8.4 million atDecember 31, 2001. The increase related to the billing of annual softwaremaintenance contracts.

 

*TotalEquity.*  Decreased to$68.4 million at March 31, 2002 from $70.2 million atDecember 31, 2001. The reduction was primarily due to the Net Loss duringthe period.

 

**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 in the consumer packaged goodsindustry. In addition, we compete with various companies that provide supportservices and interactive 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 is anticipated based on thegrowing strategic focus on Customer Relationship Management (“CRM”) and thesuccess of Siebel’s E-Business solutions. Large established companies, such as Oracle, SAP and Microsoft, that arewell established providers of ERP software solutions are expected to offer newCRM solutions that may compete with SYNAVANT solutions based on Siebeltechnology.

 

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The Company typically contracts with customers for athree year license and support agreement for software products.  At the end of the contract the customer mayrenew their agreement, normally for a one to two year period.  Past experience has indicated that theCompany’s customers typically reassess these contracts every three to fiveyears.  As customers reassess theirrequirements, the Company may not be able to renew the agreements, and may notbe selected to provide implementation and/or support services even if a Siebelsolution is selected by the customer. The Company estimates that during 2002, between 15% to 20% of itsworldwide revenue base will be evaluating and concluding on which softwareproducts will be utilized by its sales force in future years.

 

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 have amaterial adverse effect on our business, operating results or financialcondition.

 

**IF OURREVISED ALLIANCE WITH SIEBEL IS UNSUCCESSFUL, OUR BUSINESS MAY SUFFERMATERIALLY.**

 

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;

 

•                  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 sell portionsof a total solution offering such as integration services, help desk support ordata 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 March 31, 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 ourfinancing needs through the issuance of additional equity securities, suchissuance would be dilutive to existing stockholders.

 

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

 

Our success depends on our continuing ability toattract, hire, train and retain a substantial number of highly skilledmanagerial, technical, sales, marketing and customer support personnel.  In particular, our Chairman and ChiefExecutive Officer, Wayne P. Yetter, is integral to our future success and isnot currently bound by an employment agreement. Competition for qualifiedpersonnel is intense, and we may fail to retain our key employees or to attractor retain other highly qualified personnel. Even if we are able to attract

 

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qualified personnel, new hires frequently require extensive trainingbefore they achieve desired levels of productivity.  If we are unable to hire or fail to retain competent personnel,our business, results of operations and financial condition could be materiallyand adversely affected.  None of our keyemployees is bound by an employment agreement.

 

**OURFAILURE TO INTRODUCE NEW OR ENHANCED PRODUCTS IN A TIMELY MANNER COULD RENDEROUR 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 that compete with other available products could materiallyand adversely affect our business, results of operations and financialcondition.

 

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

 

•                  continue toprovide best-in-class enterprise solutions;

 

•                  continue todevelop best-in-class CRM solutions;

 

•                  enter newmarkets; and

 

•                  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 andmarketing applications that may be critical to a customer’s business. As aresult, we expect that customers and potential customers will have a greatersensitivity to product defects than the market for software products generally.Testing errors may also be found in new products, enhancements or releasesafter commencement of commercial shipments, resulting in loss of revenue ordelay in market acceptance, damage to our reputation, or increased service andwarranty costs, any of which could have a material adverse effect on ourbusiness, operating results or financial condition.  The foregoing would also be applicable to Siebel products aroundwhich future services would be based. With respect to such products, we would also depend on Siebel for thecorrection of errors and the delivery of any required modifications relating tosuch 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;

 

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•                  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 decreasesubstantially.  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 customary beforethe software is rolled out to a customer’s sales force. Other factors may causesignificant fluctuations in our quarterly and annual operating results,including:

 

•                  changes in thedemand for our products;

 

•                  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;

 

•                  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 competitors or theirproducts;

 

•                  changes ingeneral economic conditions;

 

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

 

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•                  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 currently anticipate.  Because only a small portion of expensesvaries directly with actual revenues in the near term, operating results andprofitability are likely to be adversely and disproportionately affected ifrevenues 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;

 

•                  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 to 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.

 

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**WE MAY BE UNABLE TO GENERATE SUFFICIENTCASH FLOWS TO ADEQUATELY FUND CERTAIN DISTRIBUTION LIABILITIES.**

 

If we incur the Distribution liability of up to $9.0million, pursuant to our agreement with IMS HEALTH, in connection with thealleged violations of federal antitrust laws by our corporate predecessors, ourcash flows may need to be over and above our projected income in order to meetour financial obligations.  There is noassurance that we will have a sufficient amount of pre-tax income to meet ourfinancial obligations in respect to such Distribution liabilities, which couldhave a material and adverse effect on our business, operating results andfinancial condition.

 

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

 

If the distribution of SYNAVANT shares of common stockto IMS HEALTH shareholders, pursuant to the spin-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.

 

**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 combination of trade secret, copyrightand trademark laws, non-disclosure and other contractual agreements, andtechnical measures to protect our proprietary technology. The steps we havetaken or will take in the future may not prevent misappropriation of ourtechnology. Further, protective actions we have taken or will take in thefuture may not prevent competitors from developing products with featuressimilar to our products. In addition, effective copyright and trade secretprotection may be unavailable or limited in certain foreign countries. Despiteour efforts to protect our products’ proprietary rights, unauthorized partiesmay attempt to copy aspects of our products 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 our products infringe on theintellectual property rights of others could materially and adversely affectour business, results of operations and financial condition. Because knowledgeof a third party’s patent rights is not required for a determination of patentinfringement and because the United States Patent and Trademark Office isissuing new patents on an ongoing basis, infringement claims against us are a

 

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continuing risk.

 

Infringement claims could cause product releasedelays, require the redesign our products or require us to enter into royalty orlicense agreements. These agreements may be unavailable on acceptable terms.Litigation, regardless of the outcome, could result in substantial cost, divertmanagement attention and delay or reduce customer purchases. Claims ofinfringement are becoming increasingly common as the software industry maturesand as courts apply expanded legal protections to software products. Thirdparties may assert infringement claims against us regarding our proprietarytechnology and intellectual property licensed from others. Generally,third-party software licensors indemnify us from claims of infringement.However, licensors may be unable to indemnify us fully for such claims, if atall.

 

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.

 

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:

 

•                  the availabilityof capital stock for issuance from time to time at the discretion of our Boardof Directors;

 

•                  prohibitionsagainst stockholders calling a special meeting of stockholders or acting by writtenconsent 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 

 

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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.  In addition, under the Distribution Agreementwe entered into with IMS HEALTH, we agree that until August 31, 2002 we willnot, among other things, merge or consolidate with another corporation, sell ortransfer all or substantially all of our assets, or take any other action whichwould result in one or more persons acquiring a 50 percent or greater interestin us, unless, before taking such action, we obtain a written opinion of a lawfirm or a ruling from the Internal Revenue Service that such action will notaffect the tax-free treatment of the distribution.  Such provisions may have the effect of discouraging third partiesfrom making proposals involving an acquisition or change of control of theCompany.

 

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.

 

**ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Information in response to this Item is set forth in“Non-U.S. Operating and Monetary Assets” under Management’s Discussion andAnalysis of Financial Condition and Results of Operations.

 

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**PARTII. OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

Information in response to this Item is also set forthin “Note 2 Contingencies” of the Notes to Consolidated FinancialStatements.

 

**Item 2. Changes In Securities**

 

None.

 

**Item 3. Default Upon SeniorSecurities**

 

None.

 

**Item 4. Submission of Matters to aVote of Security Holders**

 

None.

 

**Item 5. Other Information**

 

None.

 

**Item 6. Exhibits and Reports onForm 8-K**

 

(a) Exhibits

 

None.

 

(b) Reports on Form 8-K

 

On January 7, 2002, theCompany filed Form 8-K under Item 5 announcing that it had entered into a newworldwide strategic consulting partner alliance with Siebel Systems, Inc.

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 

SYNAVANT INC.

 
| **Signature** |                         | **Title** |   | **Date**                                                                                                  |
|---------------|------------------------------|-----------|--------|-----------------------------------------------------------------------------------------------------------|
|          |                         |      |   |                                                                                                      |   |
| By:           | /s/ WAYNE P.  YETTER         |      |   | Chairman and  Chief Executive Officer   (Principal Executive Officer)                                     |   | May 15, 2002 |
|          | Wayne P. Yetter              |      |   |                                                                                                      |   |
|          |                         |      |   |                                                                                                      |   |
| By:           | /s/ CLIFFORD A.  FARREN, JR. |      |   | Vice President,  Finance and Acting Chief Financial  Officer (Principal Financial and Accounting Officer) |   | May 15,  2002 |
|          | Clifford A.  Farren, Jr.     |      |   |                                                                                                      |   |

 

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