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Table of Contents

As filed with the Securities and Exchange Commission on January 4, 2016.

Registration No. 333-                     


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Tabula Rasa HealthCare, Inc.
(Exact name of registrant as specified in its charter)



Delaware
(State or other jurisdiction of
incorporation or organization)
  8099
(Primary Standard Industrial
Classification Code Number)
  46-5726437
(I.R.S. Employer
Identification Number)

110 Marter Avenue, Suite 309
Moorestown, NJ 08057
(866) 648 - 2767

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Dr. Calvin H. Knowlton, Ph.D.
Chief Executive Officer
Tabula Rasa HealthCare, Inc.
110 Marter Avenue, Suite 309
Moorestown, NJ 08057
(866) 648 - 2767

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

James W. McKenzie, Jr.
Jeffrey P. Bodle
Kevin S. Shmelzer
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
(215) 963 - 5000

 

Brian W. Adams
Chief Financial Officer
Tabula Rasa HealthCare, Inc.
110 Marter Avenue, Suite 309
Moorestown, NJ 08057
(866) 648 - 2767

 

Charles S. Kim
Brent B. Siler
Divakar Gupta
Cooley LLP
1114 Avenue of the Americas
New York, NY 10036
(212) 479 - 6000



Approximate date of commencement of proposed sale to public:
As soon as practicable after this registration statement is declared effective.

             If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

             If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

             If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

             If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

             Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

       
 
Title of Each Class of Securities
To Be Registered

  Proposed Maximum
Aggregate Offering
Price(1)

  Amount of
Registration Fee(2)

 

Common stock, $0.0001 par value per share

  $115,000,000   $11,580.50

 

(1)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended, and includes shares of common stock that the underwriters have an option to purchase to cover over allotments, if any.

(2)
Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.



             The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JANUARY 4, 2016

PRELIMINARY PROSPECTUS

                   Shares

LOGO

Common Stock
$              per share


This is the initial public offering of our common stock. We are offering                      shares of common stock. Prior to this offering, there has been no public market for our common stock. We intend to list our common stock on the NASDAQ Global Market under the symbol "TRHC." We currently estimate that the initial public offering price will be between $             and $             per share of common stock.


We are an "emerging growth company" under applicable Securities and Exchange Commission rules and will be eligible for reduced public company disclosure requirements.

 
  Per Share   Total  

Initial public offering price

  $     $    

Underwriting discounts and commissions(1)

  $     $    

Proceeds, before expenses, to Tabula Rasa

  $     $    

(1)
See "Underwriting" for a description of the compensation payable to the underwriters.



We have granted the underwriters an option for a period of 30 days to purchase up to an additional                      shares of common stock from us.

Investing in our common stock involves risks. See "Risk Factors" beginning on page 14.



Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about                      , 2016.



Wells Fargo Securities

 

 

 

UBS Investment Bank


 

 

Piper Jaffray

 

 



Baird       Stifel

Prospectus dated                                  , 2016.



TABLE OF CONTENTS

Summary

  1

The Offering

  9

Summary Consolidated Financial Data

  11

Risk Factors

  14

Special Note Regarding Forward-Looking Statements

  42

Market and Industry Data

  44

Use of Proceeds

  45

Dividend Policy

  47

Capitalization

  48

Dilution

  51

Selected Consolidated Financial Data

  54

Management's Discussion and Analysis of Financial Condition and Results of Operations

  59

Business

  84

Management

  109

Executive Compensation

  117

Transactions with Related Persons

  139

Principal Stockholders

  146

Description of Capital Stock

  150

Shares Eligible for Future Sale

  157

Material U.S. Tax Considerations for Non-U.S. Holders of Common Stock

  160

Underwriting

  164

Legal Matters

  170

Experts

  170

Where You Can Find More Information

  170

Index to Financial Statements

  F-1

          We are responsible for the information contained in this prospectus. Neither we nor any of the underwriters have authorized anyone to provide you with information different from that contained in this prospectus, and we take no responsibility for any other information others may give you. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

          Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required other than in the United States. Persons who come into possession of this prospectus and any applicable free writing prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any such free writing prospectus applicable to that jurisdiction.

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SUMMARY

          This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information that may be important to you. You should read and carefully consider the entire prospectus, including our consolidated financial statements and the notes thereto appearing elsewhere in this prospectus and the matters discussed in the sections "Risk Factors," "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," before deciding to invest in our common stock.

          Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to "Tabula Rasa," "the company," "we," "us" and "our" refer, prior to the Reorganization Transaction discussed below, to CareKinesis, Inc., or CareKinesis, and, after the Reorganization Transaction, to Tabula Rasa HealthCare, Inc., in each case together with its consolidated subsidiaries.


Overview

          We are a leader in providing patient-specific, data-driven technology and solutions that enable healthcare organizations to optimize medication regimens to improve patient outcomes, reduce hospitalizations, lower healthcare costs and manage risk. We deliver our solutions through a comprehensive suite of technology-enabled products and services for medication risk management, which includes bundled prescription fulfillment and adherence packaging services for client populations with complex prescription needs. We also provide risk adjustment services, which help our clients to properly characterize a patient's acuity, or severity of health condition, and optimize the associated payments for care. With 4.3 billion prescriptions filled in the United States in 2014, medication treatment is the most common medical intervention, and its imprecise use represents the fourth leading cause of death and contributes to an estimated 45 to 50 million adverse drug events, or ADEs, annually with 2.5 to 4.0 million of those ADEs considered serious, disabling or fatal. ADEs result in more than 100,000 deaths annually in the United States and approximately 125,000 hospitalizations, one million emergency room visits, two million affected hospital stays and 3.5 million physician office visits every year. The incidence of ADEs is highly correlated to the number of medications an individual is taking and non-adherence to prescribed regimens, and thus is particularly relevant to populations with complex healthcare needs. Our technology-driven approach to medication risk management represents an evolution from prevailing non-personalized approaches that primarily rely on single drug-to-drug interaction analysis. We currently serve approximately 100 healthcare organizations that focus on populations with complex healthcare needs and extensive medication requirements.

          Our suite of cloud-based software solutions provides prescribers, pharmacists and healthcare organizations with sophisticated and innovative tools to better manage the medication-related needs of patients. We believe we offer the first prospective clinical approach to medication risk management, which is designed to increase patient safety and promote adherence to a patient's personalized medication regimen. Furthermore, our medication risk management technology helps healthcare organizations lower costs by reducing ADEs, enhancing quality of care and avoiding preventable hospital admissions. Our products and services are built around our novel and proprietary Medication Risk Mitigation Matrix, or MRM Matrix, which enables optimization of a patient's medication regimen, involving personalizing medication selection, dosage levels, time-of-day administration and reducing the total medication burden by eliminating unnecessary prescriptions. The MRM Matrix analyzes a combination of clinical and pharmacology data, population-based algorithms and extensive patient-specific data, including medical history, lab results, medication lists and individual medication-related genomic information, to deliver "precision medicine." We provide software-enabled solutions that can be bundled with prescription fulfillment and adherence packaging services, which are informed by a patient's personalized MRM Matrix to increase adherence to a patient's optimized regimen, through our three prescription fulfillment pharmacies serving clients across the United States. Our team of clinical pharmacists is available to support prescribers at the point of care through our proprietary technology platform, including real-time secure messaging, with more than 100,000 messages exchanged per month.

 

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Recently, we began offering software solutions on a standalone software-as-a-service basis, although to date, all of our medication risk management clients have contracted for a bundled offering of our software-enabled solutions, prescription fulfillment and adherence packaging services. While prescription medication revenue has comprised substantially all of our revenue to date, we do not offer prescription fulfillment and adherence packaging services on a standalone basis.

          As the U.S. healthcare market continues to evolve from fee-for-service to value-based models of care, healthcare organizations require new and emerging technologies to optimize treatment and manage risk on a patient-specific, customized basis. Our solutions are targeted currently to "at-risk" healthcare organizations that are clinically and financially responsible for the populations they serve, receiving a fixed payment for the care provided to each patient for an entire episode of care or enrollment period. According to the Congressional Budget Office, or CBO, there were approximately 121 million people in the United States covered under government-sponsored programs in 2014, and this number is expected to reach 160 million by 2020. Government-sponsored programs are leading the shift to value-based care. Our solutions support our clients in achieving the Institute for Healthcare Improvement, or IHI, "Triple Aim" of improving a patient's experience, while managing the health of a client's population and controlling costs.

          We are led by highly experienced and entrepreneurial executive officers with more than 70 years of cumulative experience in the healthcare industry. Our co-founder, Dr. Calvin H. Knowlton, founded excelleRx, Inc. and, along with Dr. Orsula Knowlton and other members of our management team, built it into the largest national hospice medication management pharmacy in the United States, servicing approximately 400 hospice agencies with approximately 48,000 patients in 46 states, at the time it was sold to Omnicare, Inc. in 2005.

          Since our first year of active operations in 2011, our revenue has grown to $48.4 million for the year ended December 31, 2014, and $50.3 million for the nine months ended September 30, 2015 with net losses of $1.1 million and $3.9 million, respectively, and adjusted EBITDA of $3.0 million and $6.2 million, respectively for those periods. See "Selected Consolidated Financial Data — Adjusted EBITDA" for our definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net losses. We had an annual revenue retention rate of 95% and client retention rate of 97% in 2014. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Business Metrics" for our definitions of revenue retention rate and client retention rate.


Market Opportunity

          We believe the following market trends drive a growing need for our medication risk management and risk adjustment products and services.

Pervasive Use of Medication is Driving Increased Complexity in Healthcare

          Medication treatment is the most common medical intervention. In any given month, 48% of Americans take a prescription drug and 11% take five or more prescription drugs. The number of prescription drugs individuals are using in the United States is increasing as the number of medication therapies rises, the population ages and chronic diseases become more prevalent. We believe the pervasive and rising use of prescription and non-prescription drugs is increasing the complexity of medication management for healthcare organizations and making adherence to medication regimens more difficult for patients.

Imprecise Use of Medication Harms Patients and Increases Healthcare Costs

          Given the extensive and increasing use of medication in the United States, the potential for harm from ADEs and patient medication non-adherence constitutes a critical patient safety and public health challenge. According to the Alliance for Human Research Protection, 2.5 to 4 million serious, disabling or fatal ADEs occur on an annual basis in the United States. In 2012, the IMS Institute of Healthcare

 

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Informatics estimated that medication non-adherence and unnecessary use of medicines are responsible for more than $200 billion in otherwise avoidable medical spending annually in the United States alone, and ADEs contribute $3.5 billion to U.S. healthcare costs on a yearly basis, according to the Institute of Medicine.

Healthcare Organizations Have a Significant Unmet Need for Comprehensive, Personalized Medication Risk Management

          The current tools for medication safety produce inconsistent results and are widely viewed as ineffective. Personalized and precision-based methods are typically absent in prevailing trial-and-error approaches to medication selection, rendering providers ineffective and ultimately limited in their ability to deliver optimal patient care due to insufficient data at the point of prescribing. Research suggests that a majority of ADEs are preventable. According to the American Academy of Pediatrics, ADEs account for up to 25% of all hospital admissions and 12% of emergency room visits in adults, of which up to 70% are preventable.

Industry Dynamics Favor a Personalized Approach to Medication Safety

          The shift to value-based healthcare has increasingly placed healthcare organizations at financial risk related to imprecise medication usage, providing new incentives to reduce costs and improve quality. Rising healthcare costs and strained government budgets have driven both federal and state government agencies to expand the role of value-based, capitated payment models, which shift the incentives of healthcare organizations away from volume and toward quality and value. In these at-risk models, the provider is incentivized to deliver efficient care, increasing pressure on providers to simultaneously lower costs and improve care quality, safety and the patient experience. As a result of this transition, data on patient-specific disease states and co-morbidities, clinical and quality outcomes, resource utilization and individualized patient information have become increasingly relevant to healthcare delivery.

Accurate Coding is Critical for Optimizing Reimbursement

          Accurate coding of medical procedures and diagnoses is increasingly complex and is required throughout the healthcare landscape for proper reimbursement and regulatory compliance. Coding is particularly important in at-risk, value-based care models as healthcare organizations bear financial risk for their patients' medical expenses. Risk scoring based on accurate coding is a significant factor in determining premium reimbursement rates and payments in many government-sponsored healthcare programs. In addition, government agencies, including the Centers for Medicare & Medicaid Services, or CMS, regularly perform audits of healthcare organizations to validate coding practices.


Our Solutions

          Medication risk management is our leading offering, and our cloud-based software applications, including EireneRx and MedWise Advisor, together with our bundled prescription fulfillment and adherence packaging services, provide solutions for a range of payors, providers and other healthcare organizations. Our products and services are built around our proprietary MRM Matrix, which combines clinical and pharmacology data, population-based algorithms and extensive patient-specific data, including medical history, lab results, medication lists and personal genomic information, to deliver what the U.S. Food and Drug Administration, or FDA, refers to as "precision medicine." Our suite of technology products is built on a powerful rules engine that houses comprehensive pharmacotherapy profiles, provides risk alerts and includes a combination of proprietary decision-support tools, real-time secure messaging, e-prescribing and advanced precision-dosing functionality, among other functions. Our software applications help reduce ADEs, enhance medication adherence and quality of care, improve medication safety at the individual patient level and reduce the total medication burden by eliminating unnecessary prescriptions. We also provide risk adjustment services and pharmacy cost management

 

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services to help our clients achieve correct reimbursement, maintain regulatory compliance and optimize pharmacy spend.

Precision-Based Approach to Deliver Patient-Specific Solutions

          We believe we are at the forefront of precision medicine with solutions that help our clients tailor medical treatment to the individual characteristics of each patient. Our cloud-based software solutions are designed to identify high-risk individuals, detect susceptibility to ADEs and embed proper dosing guidelines. Our optional medication-adherence technology promotes adherence to a patient's personalized regimen and dosing schedule. By providing patient-specific, data-driven analytical insights and medication safety solutions, we help clients reduce trial-and-error-based medication selection, unintentional medication overdoses and other causes of ADEs.

Demonstrated Ability to Produce Higher Quality Outcomes, Reduce the Cost of Care and Improve the Patient Experience

          By offering solutions that improve outcomes in a cost-effective manner, we are aligned with healthcare organizations that are transitioning to value-based healthcare. Our clients have reported that our medication risk management services have resulted in significant reductions in hospital admissions, length of hospital stays and emergency room visits for their patients, thereby reducing their medical expenditures. Our pharmacy cost management services saved our clients more than $44 million in recovered or prevented overpayments in 2014, and our risk adjustment clients realized revenue increases of approximately $350 per patient per month on average in 2014.


Our Strengths

Innovative Technology Solutions for Medication Risk Management Aligned with Transformative Shifts in Healthcare

          We believe our innovative technology platform is uniquely equipped to provide comprehensive medication risk management solutions to a variety of healthcare organizations. The shift from a fee-for-service to a value-based model of care, which focuses on outcomes and quality, is driving the rapid adoption of risk-based arrangements across many healthcare organizations.

First-Mover Advantage with Track Record of Improved Outcomes

          We believe the six years we have devoted to developing and optimizing our solutions, and our intellectual property portfolio, provide a significant competitive advantage over potential competitors. Leveraging our industry experience, we believe we offer the first prospective clinical approach to medication risk management, utilizing advanced patient safety tools and medication-adherence technology that enable depth and breadth of data-driven analytical insights and actionable interventions. In addition, we integrate directly with many industry-leading electronic health record systems, or EHRs, that are used by many of our clients.

Expertise in Serving At-Risk Healthcare Organizations with Complex Patient Populations

          Since our founding, we have leveraged our knowledge of medication risk management and risk adjustment to develop expertise in serving the growing at-risk segment of the healthcare system. Our focus on medication risk management is highly relevant to populations with complex care requirements, and we have developed solutions to address the needs of these patients and their providers and payors.

Highly Scalable Platform

          We believe the scalability of our technology platform allows us to rapidly and cost-effectively pursue new opportunities and meet rising market demand. Our clients access our products and services

 

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through an efficient and scalable cloud-based technology platform that allows for on-demand capacity expansion, rapid deployment capabilities and accelerated speed of execution.

Recurring Revenue Model with Significant Operating Leverage

          We believe we have an attractive business model due to the recurring and predictable nature of our revenue, embedded growth opportunities within our existing client base and significant operating leverage. Our client contracts are typically exclusive and multi-year and, while they do not include minimum member or prescription volume or mix requirements, based on our experience, patient populations at our clients do not generally decline over time, the number of medications per patient have been consistent following an initial onboarding period and the overall mix of medications dispensed is generally predictable. As such, our contracts provide significant visibility into our future cash flows. The revenue models under these contracts typically include charges and dispensing fees for medication fulfillment for our clients' patients, which are often high-acuity patients with long-term prescription needs, payments on a per-member per-month basis and payments on a subscription basis. Our annual revenue retention rate was 100% and 95% for 2013 and 2014, respectively, and our client retention rate was 100% and 97%, respectively. As we grow our revenue base, we expect our operating expenses to decrease as a percentage of revenue, providing for substantial operating leverage.

Experienced Management Team

          We are led by highly experienced and entrepreneurial executive officers with more than 70 years of cumulative experience in the healthcare industry. Prior to our founding in April of 2009, our co-founder, Dr. Calvin H. Knowlton, founded excelleRx, Inc., which became the largest national hospice medication management pharmacy in the United States. excelleRx was sold to Omnicare, Inc. in 2005. We believe that our experienced management team and a strong commitment to our culture are key drivers of our success and position us well for long-term growth.


Our Strategy

Further Penetrate and Grow with the Expansion of Our Current At-Risk Markets

          By leveraging our industry expertise and thought leadership and expanding our sales and marketing efforts, we believe that we can increasingly penetrate the market for existing and new at-risk clients. We are the market leader in providing medication risk management to Program of All-Inclusive Care for the Elderly, or PACE, a CMS sponsored program through which participating healthcare organizations provide fully integrated healthcare delivery on an at-risk basis for elderly adults, most of whom are dually eligible for Medicare and Medicaid, where we believe we have a significant opportunity to continue to grow. The number of participants enrolled in PACE organizations, who have a typical length of stay exceeding four years, has doubled over the last five years, yet, according to a study we commissioned from AEC Consulting, LLC, an independent healthcare consulting firm, represents only 4% of the total eligible individuals within current PACE service areas. We expect our clients to continue to grow to cover more eligible lives. We are also the market leader in risk adjustment and front-end coding for PACE organizations and we plan to continue to expand these services to other Medicare Advantage programs.

Continue Expansion into Emerging At-Risk Provider and Payor Markets

          We intend to leverage our expertise and experience from our existing clients to expand to other at-risk providers and payors through increased investment in our sales force and marketing efforts. We believe that the growth in government healthcare programs and the shift to value-based care models are creating opportunities for many organizations to capture growing portions of the expanding healthcare market. Accordingly, we are actively targeting at-risk, value-based markets, including managed care organizations, physician provider groups and Accountable Care Organizations, or ACOs, which are

 

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healthcare organizations characterized by a payment and care delivery model that ties provider reimbursement to quality metrics and the total cost of care for an assigned population. We also target post-acute healthcare organizations, which provide a range of medical services to support an individual's recovery or manage chronic illness after a period of in-patient care. As the market leader in pharmacy cost management solutions in the post-acute market, we believe we are also well positioned to further serve these organizations with medication risk management solutions as they migrate to an at-risk reimbursement structure.

Expand Offerings to a Large and Growing Behavioral Health Market

          We believe our solutions have the potential to offer substantial value to the behavioral health market. Behavioral health medications are powerful, are subject to trial-and-error prescribing methods and are prone to side effects and ADEs. The behavioral health market is growing, in part as a result of the Patient Protection and Affordable Care Act, or ACA, which significantly expanded coverage for mental health and substance use disorder services. Accordingly, we are currently pursuing intervention studies or pilot programs to evaluate the benefits of our medication risk management solutions in the behavioral health population.

Continue to Innovate and Expand Platform Offerings to Meet Evolving Market Needs

          We believe our investments in human capital, technology and services capabilities position us to continue to pursue rapid innovation and expand our medication risk management solutions and other platform offerings to the broader healthcare marketplace. We are developing or piloting new technologies and offerings to capitalize on these opportunities.

Selectively Pursue Strategic Acquisitions, Joint Ventures and Partnerships

          Since our founding in 2009, we have completed and integrated four acquisitions. We plan to continue to acquire assets and businesses and may enter into joint ventures and partnerships that strengthen or expand our service offerings, capabilities and geographic reach and facilitate our entry into new markets.

Develop International Market Opportunities

          We believe we are well positioned to provide our products and services to international healthcare organizations that face challenges similar to those that our clients face domestically. Our solutions are readily scalable and can be utilized by healthcare organizations abroad seeking to achieve the IHI Triple Aim.


Risks Associated with Our Business

          Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the section titled "Risk Factors." If any of these risks actually occurs, our business, results of operations, financial condition or prospects could be materially and adversely affected. Below is a summary of some of the principal risks we face:

    the market for technology-enabled healthcare products and services is in its early stages, which makes it difficult to forecast demand for our technology-enabled products and services;

    consolidation in the healthcare industry could lead to the elimination of some of our clients and make others larger, which could decrease demand for our solutions or create pricing pressure;

    if we are unable to offer new and innovative products and services or our products and services fail to keep pace with our clients' needs, our clients may terminate or fail to renew their relationships with us;

 

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    we have incurred significant net losses since inception and we may not be able to generate net income in the future;

    we may not grow at the rates we historically have achieved or at all, even if our key metrics may indicate growth;

    we derive a significant portion of our revenue from PACE organizations, and any changes in laws or regulations or any other factors that cause a decline in the use of PACE organizations to provide healthcare, could hurt our ability to generate revenue and grow our business;

    a few clients account for a significant portion of our revenue and the loss of one or more of these clients could cause us to lose significant revenue;

    our sales and implementation cycle can be long and unpredictable and can require considerable time and expense, which may cause our operating results to fluctuate;

    we may face competition and aggressive business tactics in our markets by potential competitors and may lack sufficient financial or other resources to compete successfully;

    data loss or corruption due to failures or errors in our systems may expose us to liability, hurt our reputation and relationships with existing clients and force us to incur significant costs;

    upon the completion of this offering, our executive officers, directors and principal stockholders will, in the aggregate, beneficially own shares representing approximately         % of our capital stock and, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs;

    complying with, and changes to, significant state and federal regulations could restrict our ability to conduct our business or cause us to incur significant costs; and

    we may require additional capital to support business growth, and this capital might not be available to us on acceptable terms or at all.


Our Corporate Information

          We were incorporated under the laws of the state of Delaware on May 21, 2014 under the name Tabula Rasa HealthCare, Inc. Our principal executive offices are located at 110 Marter Avenue, Suite 309, Moorestown, NJ 08057 and our telephone number is (866) 648-2767. Our website address is www.tabularasahealthcare.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.


Reorganization Transaction

          Effective June 30, 2014, in order to facilitate the administration, management and development of our business and the proposed initial public offering, we implemented a holding company reorganization pursuant to which we became the new parent company and CareKinesis became our direct, wholly owned subsidiary. To implement the reorganization, we formed CK Merger Sub, Inc. The holding company structure was implemented by the merger of CK Merger Sub, Inc. with and into CareKinesis, with CareKinesis surviving the merger as our direct, wholly owned subsidiary. As a result of the reorganization, each share of CareKinesis issued and outstanding immediately prior to the merger automatically converted into the same share, with the same rights and preferences, in our company. The business conducted by CareKinesis immediately prior to the corporate reorganization continues to be conducted by CareKinesis following the reorganization. In addition, in connection with the reorganization, CareKinesis distributed all of the equity interests in two of its wholly owned subsidiaries, Capstone Performance Systems, LLC, or Capstone, and CareVentions, Inc., to us.

 

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Implications of Being an Emerging Growth Company

          As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

    being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;

    not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

    not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

    reduced disclosure obligations regarding executive compensation; and

    exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

          We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenue, have more than $700 million in market value of our capital stock held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of some reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

          In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

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THE OFFERING

Common stock offered

                   shares

Common stock to be outstanding immediately after this offering

 

                 shares

Option to purchase additional shares

 

We have granted the underwriters a 30-day option to purchase a maximum of       additional shares of our common stock.

Use of proceeds

 

We estimate that the net proceeds from the sale of shares of our common stock in this offering will be approximately $         million (or approximately $         million if the underwriters exercise their option to purchase additional shares in full), based upon an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

We currently expect that we will use the net proceeds from this offering to repay approximately $             of our outstanding indebtedness, to continue to develop new product offerings, to enter into new market segments with our existing solutions, to expand our sales and marketing infrastructure, to fund acquisitions of businesses and technologies and for working capital and general corporate purposes. See "Use of Proceeds" for a more complete description of the expected use of proceeds from this offering.

Risk factors

 

See "Risk Factors" for a discussion of factors to consider carefully before deciding to invest in our common stock.

Proposed NASDAQ Global Market symbol

 

"TRHC"

          The number of shares of our common stock to be outstanding after this offering is based on                 shares of our common stock outstanding as of September 30, 2015, which includes:

    9,873,511 shares of common stock issuable upon the automatic conversion of all outstanding shares of preferred stock into 9,873,511 shares of our common stock immediately prior to the completion of this offering;

                     shares of our common stock issuable upon the net exercise of outstanding warrants that would otherwise expire upon the completion of this offering, assuming an initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and

                     shares of restricted common stock issuable under our 2014 Equity Compensation Plan to certain members of management immediately prior to the effective date of the registration statement of which this prospectus forms a part.

          The number of shares of common stock to be outstanding after this offering excludes:

    312,500 shares of our common stock issuable upon the exercise of outstanding warrants as of September 30, 2015, at a weighted-average exercise price of $0.80 per share, which warrants are exercisable to purchase shares of our Series A-1 preferred stock prior to the completion of this offering;

 

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    586,868 shares of our common stock issuable upon the exercise of outstanding warrants as of September 30, 2015, at a weighted-average exercise price of $2.96 per share, which warrants are exercisable to purchase shares of our Series B preferred stock prior to the completion of this offering;

    5,412,858 shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2015, under our 2014 Equity Compensation Plan, as amended, or the 2014 Equity Compensation Plan, at a weighted-average exercise price of $1.67 per share;

    an additional                 shares of our common stock reserved for future issuance under our 2016 Equity Compensation Plan, or the 2016 Equity Compensation Plan, upon the completion of this offering;

                               shares of our common stock that may be issuable at the completion of this offering, at the election of the holder, upon the conversion of all principal outstanding under subordinated convertible promissory notes that we issued in December 2014, or the Medliance Notes, in connection with the acquisition of Medliance LLC, or Medliance, assuming an initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and

    21,000 shares of our common stock that will be issuable in the future as consideration in connection with our acquisition of St. Mary Prescription Pharmacy, or SMPP.

          Unless otherwise indicated, all information in this prospectus assumes or gives effect to:

    the redesignation of all of our Class A Non-Voting common stock and Class B Voting common stock into shares of our common stock;

    no exercise of the other outstanding warrants or options described above;

    no exercise by the underwriters of their option to purchase up to                 shares of our common stock;

    no election by the holders of the Medliance Notes to convert such notes into shares of our common stock;

    no issuance of any shares of our common stock issuable in the future as consideration in connection with our acquisition of SMPP;

    a                 -for-                 reverse stock split of our common stock effected on                          , 2015; and

    the amendment and restatement of our certificate of incorporation and bylaws immediately prior to the completion of this offering.

 

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Summary Consolidated Financial Data

          The following tables summarize our consolidated financial data and other data for the periods and at the dates indicated. We have derived the consolidated statements of operations data for the years ended December 31, 2013 and 2014 from our audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated statements of operations data for the nine months ended September 30, 2014 and September 30, 2015 and the consolidated balance sheet data as of September 30, 2015 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Our unaudited consolidated financial statements were prepared on the same basis as our audited consolidated financial statements and include, in our opinion, all normal recurring adjustments necessary for the fair presentation of the financial information set forth in those statements.

          Our historical results for any prior period are not necessarily indicative of the results that should be expected in any future period, and our interim results are not necessarily indicative of the results to be expected for a full year. The following summary of consolidated financial data should be read in conjunction with the sections entitled "Capitalization", "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

          See notes 3 and 14 to our audited consolidated financial statements and note 11 to our unaudited consolidated financial statements appearing elsewhere in this prospectus for information regarding computation of basic and diluted net loss per share attributable to common stockholders, unaudited pro forma basic and diluted net loss per share attributable to common stockholders, and the unaudited pro forma weighted average basic and diluted common shares outstanding used in computing the pro forma basic and diluted net loss per share attributable to common stockholders.

 

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  Year Ended
December 31,
  Nine Months Ended September 30,  
 
  2013   2014   2014   2015  
 
  (In thousands, except share and
per share amounts)

 

Consolidated Statement of Operations Data:

                         

Revenue:

                         

Product revenue

  $ 25,143   $ 46,878   $ 33,710   $ 42,684  

Service revenue

        1,550     965     7,594  

Total revenue

    25,143     48,428     34,675     50,278  

Cost of revenue, exclusive of depreciation and amortization shown below:

                         

Product cost

    20,921     37,073     26,940     32,811  

Service cost

        739     464     2,398  

Total cost of revenue

    20,921     37,812     27,404     35,209  

Gross profit

    4,222     10,616     7,271     15,069  

Operating (income) expenses:

                         

Research and development

    1,338     1,660     1,148     1,879  

Sales and marketing

    1,775     2,272     1,573     2,071  

General and administrative

    2,482     3,970     2,672     5,374  

Change in fair value of acquisition-related contingent consideration (income) expense

        790     284     (1,348 )

Depreciation and amortization

    1,118     1,817     1,309     2,935  

Total operating (income) expenses

    6,713     10,509     6,986     10,911  

(Loss) income from operations

    (2,491 )   107     285     4,158  

Other (income) expense:

                         

Change in fair value of warrant liability

    547     269     (18 )   3,477  

Interest expense

    833     1,354     988     4,418  

Total other (income) expense

    1,380     1,623     970     7,895  

Loss before income taxes

    (3,871 )   (1,516 )   (685 )   (3,737 )

Income tax (benefit) expense

        (409 )   (426 )   212  

Net loss

    (3,871 )   (1,107 )   (259 )   (3,949 )

Accretion of redeemable convertible preferred stock

    (5,346 )   (3,884 )   (531 )   (12,058 )

Net loss attributable to common stockholders

  $ (9,217 ) $ (4,991 ) $ (790 ) $ (16,007 )

Net loss per share attributable to common stockholders, basic and diluted

  $ (1.22 ) $ (0.63 ) $ (0.10 ) $ (1.95 )

Weighted average common shares outstanding, basic and diluted

    7,525,931     7,862,025     7,824,537     8,210,760  

Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(1)

        $                   $            

Pro forma weighted average common shares outstanding, basic and diluted (unaudited)(1)

                                                       

Other Financial Data:

                         

Adjusted EBITDA(2)

  $ (1,284 ) $ 2,968   $ 2,068   $ 6,216  

(1)
We intend to use a portion of the proceeds from this offering to repay outstanding debt. The pro forma net loss per share information is calculated based upon an assumed initial public offering price of $      per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and gives effect to the automatic conversion of all outstanding shares of preferred stock into 9,873,511 shares of our common stock immediately prior to the completion of this offering, the add back of accretion of redeemable convertible preferred stock, the sale of             shares of our common stock, which is the number of shares whose proceeds would be necessary to repay $      of outstanding debt, and the repayment of such debt, all as of the beginning of the reporting period, before deducting estimated underwriting discounts and expenses payable by us. The net loss attributable to common stockholders has been adjusted to exclude interest expense associated with the interest expense incurred on the portion of the debt expected to be repaid with net proceeds from this offering. See "Selected Consolidated Financial Statements" for more information regarding the calculation of pro forma net loss per share.

 

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(2)
Adjusted EBITDA is a non-GAAP financial measure. See "Selected Consolidated Financial Data—Adjusted EBITDA" for our definition of Adjusted EBITDA, why we present Adjusted EBITDA, limitations on the usefulness of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss, the most nearly comparable GAAP measurement.

          The following sets forth our summary balance sheet data as of September 30, 2015 on:

    an actual basis;

    a pro forma basis to give effect to (1) the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 9,873,511 shares of our common stock immediately prior to the completion of this offering and the reclassification to additional paid-in capital of the warrant liability related to warrants to purchase preferred stock, (2) the issuance of             shares of our common stock upon the net exercise of outstanding warrants that would otherwise expire upon the completion of this offering, assuming an initial public offering price of $       per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and (3) the issuance of             shares of restricted common stock under our 2014 Equity Compensation Plan to members of management immediately prior to the effective date of the registration statement of which this prospectus forms a part; and

    a pro forma as adjusted basis to give further effect to (1) our issuance and sale of                 shares of our common stock in this offering at an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, (2) our receipt of the net proceeds of this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and (3) our application of a portion of such net proceeds to repay indebtedness as set forth under "Use of Proceeds."

 
  As of September 30, 2015  
 
  Actual   Pro Forma   Pro Forma
as Adjusted
 
 
  (In thousands)
 

Consolidated Balance Sheet Data:

                   

Cash

  $ 2,558   $ 2,558        

Working capital

    (30,675 )   (30,675 )      

Total assets

    58,341     58,341        

Line of credit

    10,000     10,000        

Long-term debt, including current portion

    14,341     14,341        

Notes payable to related parties

    660     660        

Notes payable related to acquisition

    15,256     15,256        

Warrant liability

    6,260            

Total liabilities

    62,187     55,927        

Total redeemable convertible preferred stock

    31,065            

Total stockholders' equity (deficit)

    (34,911 )   2,414        

          Each $1.00 increase or decrease in the assumed initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted working capital, total assets and total stockholders' equity by $              million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares offered by us would increase or decrease the pro forma as adjusted working capital, total assets and total stockholders' equity by $              million, assuming no change in the assumed initial public offering price per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. This pro forma as adjusted information is illustrative only and will depend on the actual initial public offering price and other terms of this offering determined at pricing.

 

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RISK FACTORS

          Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock. The risks below are not the only ones we face. Additional risks and uncertainties that we are unaware of may also become important factors that adversely affect our business. If any of the following risks actually occur, our business, prospects, operating results and financial condition could be harmed. In such event, the trading price of our common stock could decline and you might lose all or part of your investment.


Risks Relating to Our Business and Industry

The healthcare industry in the United States is undergoing significant structural change and is rapidly evolving, and the market for technology-enabled healthcare products and services is in its early stages, which makes it difficult to forecast demand for our technology-enabled products and services. If we are not successful in promoting the benefits of our products and services, our growth may be limited.

          The healthcare industry in the United States is undergoing significant structural change and is rapidly evolving. We believe demand for our products and services has been driven in large part by price pressure in traditional fee-for-service healthcare, a regulatory environment that is incentivizing value-based care models, the movement toward patient-centricity and personalized healthcare and advances in technology. Widespread acceptance of the value-based care model is critical to our future growth and success. A reduction in the growth of value-based care or patient-centric models could reduce the demand for our products and services and result in a lower revenue growth rate or decreased revenue.

          The market for technology-enabled healthcare products and services is in the early stages and it is uncertain whether it will achieve and sustain high levels of demand and market adoption. Our future financial performance will depend in part on growth in this market and on our ability to adapt to emerging demands of our clients. It is difficult to predict the future growth rate and size of our target market.

          Our success will depend to a substantial extent on the willingness of healthcare organizations to increase their use of our technology and our ability to demonstrate the value of our technology to our existing clients and potential clients. If healthcare organizations do not recognize or acknowledge the benefits of our products and services or if we are unable to reduce healthcare costs or drive positive health outcomes, then the market for our products and services might not develop at all, or it might develop more slowly than we expect.

If we are unable to offer innovative products and services or our products and services fail to keep pace with our clients' needs, our clients may terminate or fail to renew their agreements with us and our revenue and results of operations may suffer.

          Our success depends on providing innovative, high-quality products and services that healthcare providers and payors use to improve clinical, financial and operational performance. If we cannot adapt to rapidly evolving industry standards, technology and increasingly sophisticated and varied client needs, our existing technology could become undesirable, obsolete or harm our reputation. In order to remain competitive, we must continue to invest significant resources in our personnel and technology in a timely and cost-effective manner in order to enhance our existing products and services and introduce new high-quality products and services that existing clients and potential new clients will want. We are continually involved in a number of projects to develop new products and services, including the further refinement of our proprietary MRM Matrix. If our innovations are not responsive to the needs of our existing clients or potential new clients, are not appropriately timed with market opportunity, are not

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effectively brought to market or significantly increase our operating costs, we may lose existing clients or be unable to obtain new clients and our results of operations may suffer.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

          We commenced active operations in 2011 and our operations to date have included organizing and staffing our company, business planning, raising capital and developing and marketing our product and services. As an early stage business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.

We have incurred significant net losses since inception and we may not be able to generate net income in the future.

          We have incurred significant losses in each period since our inception. For the years ended December 31, 2013 and 2014 and for the nine months ended September 30, 2015, we reported a net loss of $3.9 million, $1.1 million and $3.9 million, respectively. As of September 30, 2015, we had an accumulated deficit of $34.9 million. Substantially all of our operating losses resulted from costs incurred in connection with our research and development program, acquisitions and from general and administrative costs associated with our operations. Our ability to generate net income is dependent upon, among other things, the acceptance of our products and services by, and the strength of, our existing and potential clients.

Our recurring operating losses have raised substantial doubt regarding our ability to continue as a going concern.

          We have incurred net losses since inception and do not currently have the wherewithal to repay a note payable related to an acquisition that is due on June 30, 2016, which raises substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2014 with respect to this uncertainty. We have limited sources of liquidity to sustain our present activities and satisfy our outstanding indebtedness. Accordingly, our ability to continue as a going concern will require us to obtain additional financing to fund our operations and indebtedness. The perception of our ability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations and could result in the loss of confidence by investors, suppliers and employees.

If we fail to effectively manage our growth, our business and results of operations could be harmed.

          We have expanded our operations significantly since our inception. For example, we grew from 29 employees on January 1, 2011, the beginning of our first year of active operations, to 182 employees as of November 30, 2015, and our revenue increased from $34.7 million for the nine months ended September 30, 2014 to $50.3 million for the nine months ended September 30, 2015, and from $25.1 million for the year ended December 31, 2013 to $48.4 million for the year ended December 31, 2014. If we do not effectively manage our growth as we continue to expand, the quality of our products and services could suffer and our revenue could decline. Our growth to date has increased the significant demands on our management, our operational and financial systems, IT infrastructure, security mechanisms and other resources. In order to successfully expand our business, we must effectively recruit, integrate and motivate new employees, while maintaining the beneficial aspects of our corporate culture. We may not be able to hire new employees, including software engineers, quickly enough to meet our needs. If we fail to effectively manage our hiring needs and successfully integrate our new hires, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, and our business and results of operations could be harmed. We must also

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continue to improve our existing systems for operational and financial management, including our reporting systems, procedures and controls. These improvements could require significant capital expenditures and place increasing demands on our management. We may not be successful in managing or expanding our operations or in maintaining adequate financial and operating systems and controls. If we do not successfully manage these processes, our business and results of operations could be harmed.

We may not grow at the rates we historically have achieved or at all, even if our key metrics may indicate growth, which could cause the market price of our common stock to decline.

          We have experienced significant growth since 2011, our first year of active operations, with total revenue growing from $5.8 million for the year ended December 31, 2011, to $48.4 million for the year ended December 31, 2014, and from $34.7 million for the nine months ended September 30, 2014, to $50.3 million for the nine months ended September 30, 2015. Future revenue may not grow at these same rates or may decline. Our future growth will depend, in part, on our ability to grow our revenue from existing clients, to complete sales to new clients and to expand our client base in the healthcare industry and with provider and payor organizations. We may not be successful in executing on our growth strategies and may not continue to grow our revenue at similar rates as we have in the past. Our ability to execute on our existing sales pipeline, create additional sales pipelines and expand our client base depends on, among other things, the attractiveness of our products and services relative to those offered by our competitors, our ability to demonstrate the value of our existing and future products and services and our ability to attract and retain a sufficient number of qualified sales and marketing personnel. In addition, clients in some market segments in which we have a more limited presence may be slower to adopt our products and services than we currently anticipate.

To date, we have derived substantially all of our product revenue from sales of prescription medications, and revenue from sales of prescription medications is dependent upon factors outside of our control.

          To date, substantially all of our product revenue has been derived from sales of prescription medications, and we expect to continue to derive the substantial majority of our product revenue from sales of prescription medications for the foreseeable future. Revenue from prescription medication fulfillment is dependent upon a number of factors, many of which are outside of our control, such as growth or contraction in patient populations at our clients and the number and mix of medications each patient is prescribed. Any change in these factors could harm our financial results.

We derive a significant portion of our revenue from PACE organizations, and any changes in laws or regulations, or any other factors that cause a decline in the use of PACE organizations to provide healthcare could hurt our ability to generate revenue and grow our business.

          We derive a significant portion of our revenue from PACE organizations, which are our largest clients, accounting for 94.0% and 86.9% of our revenue for the year ended December 31, 2014 and the nine months ended September 30, 2015, respectively. PACE organizations reflect a relatively new, value-based model for providing healthcare to the elderly and are funded by both Medicare and Medicaid. If the laws and regulations that currently promote PACE organizations were to change in a way that makes operating a PACE organization less attractive, if other Medicare or Medicaid reimbursement models are developed that are more attractive to the healthcare providers that operate PACE organizations or if the prevalence of PACE organizations were to decline for any other reason, our ability to generate revenue and grow our business may be compromised.

Consolidation in the healthcare industry could lead to the elimination of some of our clients and make others larger, which could decrease demand for our solutions or create pricing pressure.

          Many healthcare industry participants are consolidating to create larger and more integrated healthcare delivery systems. If regulatory and economic conditions continue to facilitate additional

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consolidation in the healthcare industry, some of our current clients, and possibly our future clients, may be eliminated. Such market fluctuations may result in decreased need for some or all of our products and services as some of our clients disappear, and others acquire larger market power, which may be used to develop various solutions in-house, rather than purchasing them from us, or negotiate fee reductions for our products and services.

Failure by PACE organization clients to meet applicable penetration benchmarks could result in loss of their service area, which could lead to our loss of that business and a corresponding decline in our revenue.

          PACE organizations in many states are subject to penetration benchmarks regarding the number of eligible lives in their service areas that have been captured by the program. If the number of members covered by any of our PACE organization clients were to be reduced by a material amount, such decrease may lead to a loss of their service area, which could result in our loss of the client and a corresponding decline in our revenue.

The growth of our business relies, in part, on the growth of our clients, which is difficult to predict and is affected by factors outside of our control.

          We enter into agreements with our clients under which a portion of our fees are dependent upon the number of members that are covered by our clients' programs each month. The number of members covered by a client's program is often affected by factors outside of our control, such as the client's pricing, overall quality of service and member retention initiatives. If the number of members covered by one or more of our client's programs were to be reduced, such decrease would lead to a decrease in our revenue. In addition, the growth forecasts of our clients are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. Even if the markets in which our clients compete meet the size estimates and growth forecasted, their program membership could fail to grow at similar rates, if at all.

A few clients account for a significant portion of our revenue and, as a result, the loss of one or more of these clients could hurt our revenue.

          Our largest ten clients accounted for 62% and 54% of our revenue for the year ended December 31, 2014 and the nine months ended September 30, 2015, respectively. No single client accounted for more than 10% of our revenue during the nine months ended September 30, 2015. For the year ended December 31, 2014, our two largest clients, Viecare Beaver and Viecare Butler, together under common control, and On Lok Senior Health Services, accounted for 11% and 10% of our revenue, respectively, and 21% of our revenue in the aggregate. For the year ended December 31, 2013, our largest client, Viecare Beaver and Viecare Butler, together under common control, accounted for 16% of our revenue. Our engagement with these clients is generally covered through contracts that are multi-year in their duration. One or more of these clients may decline to renew their existing contracts with us upon expiration and any such failure to renew could have a negative impact on our revenue and compromise our growth strategy. Further, if one or more of these clients significantly decreases its use of our solutions, we would lose revenue and our growth would be compromised.

Because we generally bill our clients and recognize revenue over the term of the contract, near-term declines in new or renewed agreements may not be reflected immediately in our operating results.

          Most of our revenue in each quarter is derived from agreements entered into with our clients during previous quarters. Consequently, a decline in new or renewed agreements in any one quarter may not be fully reflected in our revenue for that quarter because, although we enter into multi-year arrangements with our clients and recognize revenue over the term of the contract, such revenue is not recognized ratably. Such declines, however, would negatively affect our revenue in future periods. The effect of any significant downturns in sales of, and market demand for, our products and services, as

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well as any potential changes in our rate of renewals or renewal terms, may not be fully reflected in our results of operations until future periods. In addition, we may be unable to adjust our cost structure rapidly or at all, to take account of reduced revenue.

If we do not continue to attract new clients, we may not be able to grow our business.

          In order to grow our business, we must continually attract new clients. Our ability to do so depends in large part on the success of our sales and marketing efforts. Potential clients may seek out other options. Therefore, we must demonstrate that our products and services provide a viable solution for potential clients. If we fail to provide high-quality solutions and convince individual clients of our value proposition, we may not be able to attract new clients. If the market for our products and services declines or grows more slowly than we expect, or if the number of individual clients that use our solutions declines or fails to increase as we expect, our financial results could be harmed.

If we are not able to maintain and enhance our reputation and brand recognition, our business will be harmed.

          Maintaining and enhancing our reputation and brand recognition is critical to our relationships with existing clients and to our ability to attract new clients. The promotion of our brand may require us to make substantial investments and we anticipate that, as our market becomes increasingly competitive, these marketing initiatives may become more difficult and expensive. Our marketing activities may not be successful or yield increased revenue, and to the extent that these activities yield increased revenue, the increased revenue may not offset the expenses we incur. In addition, any factor that diminishes our reputation or that of our management, including failing to meet the expectations of our clients, could make it substantially more difficult for us to attract new clients. If we do not successfully maintain and enhance our reputation and brand recognition, our business may not grow and we could lose our relationships with clients.

Initial positive outcomes and cost reductions for our clients have not been statistically analyzed, are not necessarily attributable to our services, and are not necessarily predictive of future outcomes or costs.

          Although several of our clients have reported improved outcomes for their patients and cost reductions on a per member per month basis, these initial outcomes have not been statistically analyzed and are not necessarily predictive of future outcomes. Other factors, including changes in healthcare regulations or other business practices or our clients' implementation of other cost saving measures may have contributed to positive outcomes or reduced costs. Moreover, outcome and cost reduction data are often susceptible to varying interpretations and analyses, and many companies that believed their technologies and services were effective initially were unable to maintain positive results over time. If we fail to produce positive outcomes and reduce costs for our clients, they may not continue to use our services and we may be unable to attract new clients, each of which could harm our business.

Our marketing efforts depend significantly on our ability to receive positive references from our existing clients.

          Our marketing efforts depend significantly on our ability to call on our current clients to provide positive references to new, potential clients. Given our limited number of long-term clients, the loss or dissatisfaction of any client could substantially harm our brand and reputation, inhibit the market adoption of our products and services, impair our ability to attract new clients and maintain existing clients and, ultimately, harm our financial results.

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Our sales and implementation cycle can be long and unpredictable and can require considerable time and expense, which may cause our operating results to fluctuate.

          The sales cycle for our products and services from initial sales activity with a potential client to contract execution and implementation can be long and varies widely by client, typically ranging from three to 12 months. Some of our clients undertake pilot programs for our products and services which range from six to 18 months in length. These pilot programs may result in extended sales cycles and upfront sales costs as the potential client evaluates our products and services. Our sales efforts involve educating our clients about the use, technical capabilities and benefits of our products and services. It is possible that in the future we may experience even longer sales cycles, more complex client requirements, higher upfront sales costs and less predictability in completing some of our sales as we continue to expand into new territories and add additional products and services. If our sales cycle lengthens or our substantial upfront sales and implementation investments do not result in sufficient sales to justify our investments, our operating results may be harmed.

Any failure to offer high-quality client support services may adversely affect our relationships with our clients and harm our financial results.

          Our clients depend on our technical support to resolve any issues relating to our offering and technology solutions and to provide initial and ongoing training and education, when necessary. In addition, our sales process is highly dependent on the quality of our offering, our business reputation and on strong recommendations from our existing clients. Any failure to maintain high-quality and highly-responsive technical support, or a market perception that we do not maintain high-quality and highly-responsive support, could harm our reputation and compromise our ability to sell our solutions to existing and prospective clients.

          We offer client support services with our offering and may be unable to respond quickly enough to accommodate short-term increases in client demand for support services, particularly as we increase the size of our client base. We also may be unable to modify the format of our support services to compete with changes in support services provided by competitors. It is difficult to predict client demand for our support services and if client demand increases significantly, we may be unable to provide satisfactory support services to our clients. Additionally, increased client demand for these services, without corresponding revenue, could increase costs and hurt our ability to achieve profitability.

Our proprietary products and services may not operate properly, which could damage our reputation, give rise to a variety of claims against us or divert our resources from other purposes, any of which could harm our business and operating results.

          Technology-enabled product and service development is time-consuming, expensive and complex and may involve unforeseen difficulties. We may encounter technical obstacles, and we may discover additional problems that prevent our proprietary products and services from operating properly. If our products and services do not function reliably or fail to achieve client expectations in terms of performance, clients could assert liability claims against us and attempt to cancel their contracts with us. Moreover, material performance problems, defects or errors in our existing or new products and services may arise in the future and may result from, among other things, the lack of interoperability of our software with systems and data that we did not develop and the function of which are outside of our control or undetected in our testing. Defects or errors in our products or services might discourage existing or potential clients from purchasing services from us. Correction of defects or errors could prove to be time consuming, costly, impossible or impracticable. The existence of errors or defects in our products and services and the correction of such errors could divert our resources from other matters relating to our business, damage our reputation and increase our costs.

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Adverse drug events resulting from optimizing a patient's medication regimen through recommendations made by our technology or our pharmacists could give rise to claims against us and could damage our reputation.

          We provide medication risk management services which includes answering prescriber questions and making recommendations to prescribers at the point-of-prescribing, during pharmacist consultation and at periodic patient review. In the event that optimizing a patient's medication regimen through recommendations made by our technology or our pharmacists contribute to an ADE, clients and patients could assert liability claims against us, which may not be subject to a contractually agreed upon liability cap, and clients could attempt to cancel their contracts with us. Such instances may also generate significant negative publicity that could harm our reputation, increase our costs and materially affect our results of operations.

Future sales to clients outside the United States or clients with international operations might expose us to risks inherent in international markets, which could hurt our business.

          An element of our growth strategy is to expand internationally. Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks that are different from those in the United States. We currently do not have any international operations. Because of our lack of experience with international operations, any international expansion efforts might not be successful in creating demand for our products and services outside of the United States or in effectively selling our products and services in the international markets we enter. In addition, we will face risks in doing business internationally that could hurt our business, including:

    the need to localize and adapt our products and services for specific countries, including translation into foreign languages and associated expenses;

    difficulties in staffing and managing foreign operations;

    different pricing environments, longer sales cycles and longer accounts receivable payment cycles and collections issues;

    new and different sources of competition;

    weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States;

    laws and business practices favoring local competitors;

    compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, anti-bribery, foreign investment, tax, privacy and data protection laws and regulations;

    increased financial accounting and reporting burdens and complexities;

    adverse tax consequences; and

    if we denominate our international contracts in local currencies, fluctuations in the value of the U.S. dollar and foreign currencies might negatively affect our operating results when translated into U.S. dollars.

We purchase a significant portion of our pharmaceutical products through a buying group which receives discounts from our primary supplier.

          We purchase a substantial amount of our pharmaceutical products through a group purchasing organization, pursuant to a membership agreement. The group purchasing organization receives discounts on pharmaceutical product purchases from AmerisourceBergen Drug Corporation, our primary supplier. If we are no longer able to purchase our pharmaceutical products through the group

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purchasing organization, there can be no assurance that our operations would not be disrupted or that we could obtain the necessary pharmaceutical products at similar cost or at all. In this event, failure to satisfy our clients' requirements would result in defaults under client contracts subjecting us to damages and the potential termination of those contracts.

Any restrictions on our ability to license or share data and integrate third-party technologies could harm our business.

          We depend upon licenses from third parties for some of the technology and data used in our products and services, and for some of the technology platforms upon which these products and services are built and operate. Most of our third-party licenses are non-exclusive and our competitors may obtain the right to use any of the technology covered by these licenses to compete directly with us. We also license some of our technology and share data we collect with our clients, including under agreements with health systems and providers of electronic health records. We expect that we will need to obtain additional licenses from third parties in the future in connection with the development of our products and services. In addition, we obtain a portion of the data that we use from public records and from our clients for specific client engagements. Our licenses for information may not be sufficient to allow us to use the data that is incorporated into our products and services for all potential or contemplated applications and products.

          In the future, data providers could withdraw their data from us or restrict our usage for any reason, including if there is a competitive reason to do so, if legislation is passed restricting the use of the data or if judicial interpretations are issued restricting use of the data that we currently use in our products and services. In addition, data providers could fail to adhere to our quality control standards in the future, causing us to incur additional expense to appropriately utilize the data. If a substantial number of data providers were to withdraw or restrict their data, or if they fail to adhere to our quality control standards, and if we are unable to identify and contract with suitable alternative data suppliers and integrate these data sources into our service offerings, our ability to provide products and services to our clients would be compromised and our future growth and success could be delayed or limited.

          We also integrate into our proprietary applications and use third-party software to maintain and enhance, among other things, content generation and delivery, and to support our technology infrastructure. Some of this software is proprietary and some is open source software. Our use of third-party technologies exposes us to increased risks, including, but not limited to, risks associated with the integration of new technology into our solutions, the diversion of our resources from development of our own proprietary technology and our inability to generate revenue from licensed technology sufficient to offset associated acquisition and maintenance costs. These technologies may not be available to us in the future on commercially reasonable terms or at all and could be difficult to replace once integrated into our own proprietary applications. Most of these licenses can be renewed only by mutual consent and may be terminated if we breach the terms of the license and fail to cure the breach within a specified period of time. Our inability to obtain, maintain or comply with any of these licenses could delay development until equivalent technology can be identified, licensed and integrated, which could delay or limit our future growth.

Data loss or corruption due to failures or errors in our systems may expose us to liability, hurt our reputation and relationships with existing clients and force us to incur significant costs.

          Hardware failures or errors in our systems could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our clients regard as significant. Complex software such as ours may contain errors or failures that are not detected until after the software is introduced or updates and new versions are released. We continually introduce new software and updates and enhancements to our existing software. Despite testing by us, we may discover defects or errors in our software. Any defects or errors could expose us to risk of liability to clients and the government, and could cause delays in the introduction of new products and services, result in

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increased costs and diversion of development resources, require design modifications, decrease market acceptance or client satisfaction with our products and services or cause harm to our reputation. Data losses related to personal health records could result in additional risks, see "— We are subject to data privacy and security laws and regulations and contractual obligations governing the transmission, security and privacy of health and other sensitive or proprietary information, which may impose restrictions on the manner in which we access, store, transmit, use and disclose such information and subject us to penalties if we are unable to fully comply with such laws or contractual provisions."

          Furthermore, our clients might use our software together with products from other companies. As a result, when problems occur, it might be difficult to identify the source of the problem. Even when our software does not cause these problems, the existence of these errors might cause us to incur significant costs, divert the attention of our technical personnel from our product development efforts, hurt our reputation and lead to significant client relations problems.

Our business is subject to online security risks, and if we are unable to safeguard the security and privacy of confidential data, our reputation and business will be harmed.

          Our products and services involve the collection, storage and analysis of confidential or proprietary information. If a cyber incident, such as a phishing attack, virus, malware installation, server malfunction, software or hardware failure, impairment of data integrity, loss of data or other computer assets, adware or other similar issue, impairs or shuts down one or more of our computing systems or our IT network, we may be subject to negative treatment and lawsuits by our clients. In addition, attention to remediating cyber incidents may distract our technical or management personnel from their normal responsibilities. Public announcements of such cyber incidents could occur and negative perception of such cyber incidents could adversely affect the price of our common stock, and we could lose sales and clients.

          In certain cases, confidential or proprietary information is provided to third parties, such as the service providers that host our technology platform, and we may be unable to control the use of our information or the security protections used by third parties. Cyber incidents and malicious internet-based activity continue to increase generally, and providers of hosting and cloud-based services are often targeted. If the third parties with whom we work violate applicable laws, contracts or our security policies, these violations could also put our confidential or proprietary information at risk and otherwise hurt our business. In addition, if the security measures of our clients are compromised, even without any actual compromise of our own systems, we may face negative publicity or reputational harm if our clients or anyone else incorrectly attributes the blame for such security breaches to us or our systems.

          We may be required to expend significant capital and other resources to protect against security incidents caused by known cyber vulnerabilities or to alleviate problems caused by security breaches. Despite our implementation of security measures, techniques used to obtain unauthorized access to information or to sabotage information technology systems change frequently and unknown cyber vulnerabilities caused by third-party software or services may exist within our system. As a result, we may be unable to anticipate such techniques or vulnerabilities or to implement adequate preventative measures. Any compromise or perceived compromise of our security could damage our reputation and our relationship with our clients, could reduce demand for our products and services and could subject us to significant liability or regulatory actions. In addition, in the event that new privacy or data security laws are implemented, we may not be able to timely comply with such requirements, or such requirements may not be compatible with our current processes. Changing our processes could be time consuming and expensive, and failure to timely implement required changes could subject us to liability for non-compliance.

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We rely on internet infrastructure, bandwidth providers, other third parties and our own systems to provide services to our clients, and any failure or interruption in the services provided by these third parties or our own systems could expose us to litigation and hurt our reputation and relationships with clients.

          Our ability to deliver our products and services, particularly our cloud-based solutions, is dependent on the development and maintenance of the infrastructure of the internet and other telecommunications services by third parties. This includes maintenance of a reliable network connection with the necessary speed, data capacity and security for providing reliable internet access and services and reliable telephone and facsimile services. Our services are designed to operate without perceptible interruption in accordance with our service level commitments.

          We have, however, experienced limited interruptions in these systems in the past, including server failures that temporarily slow down the performance of our services, and we may experience similar or more significant interruptions in the future. We rely on internal systems as well as third-party suppliers, including bandwidth and telecommunications equipment providers, to provide our services. We do not currently maintain redundant systems or facilities for some of these services. Interruptions in these systems or services, whether due to system failures, cyber incidents, physical or electronic break-ins or other events, could affect the security or availability of our services and prevent or inhibit the ability of our clients and their patients to access our services. In the event of a catastrophic event with respect to one or more of these systems or facilities, we may experience an extended period of system unavailability, which could result in substantial costs to remedy those problems or harm our relationship with our clients and our business.

          Additionally, any disruption in the network access, telecommunications or co-location services provided by third-party providers or any failure of or by third-party providers' systems or our own systems to handle current or higher volume of use could significantly harm our business. We exercise limited control over our third-party suppliers, which increases our vulnerability to problems with services they provide. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies and information services or our own systems could hurt our relationships with clients and expose us to third-party liabilities. Although we maintain insurance for our business, the coverage under our policies may not be adequate to compensate us for all losses that may occur. In addition, we might not continue to be able to obtain adequate insurance coverage at an acceptable cost.

          The reliability and performance of our internet connection may be harmed by increased usage or by denial-of-service attacks or related cyber incidents. The services of other companies delivered through the internet have experienced a variety of outages and other delays as a result of damages to portions of the internet's infrastructure, and such outages and delays could affect our systems and services in the future. These outages and delays could reduce the level of internet usage as well as the availability of the internet to us for delivery of our internet-based services.

We rely on third-party vendors to host and maintain our technology platform.

          We rely on third-party vendors to host and maintain our technology platform, including our EireneRx and MedWise Advisor software. Our ability to offer our products and services and operate our business is dependent on maintaining our relationships with third-party vendors, particularly Amazon Web Services, and entering into new relationships to meet the changing needs of our business. Any deterioration in our relationships with such vendors or our failure to enter into agreements with vendors in the future could harm our business and our ability to pursue our growth strategy. Because of the large amount of data that we collect and manage, it is possible that, despite precautions taken at our vendors' facilities, the occurrence of a natural disaster, cyber incident, decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions in our service. These service interruptions could cause our platform to be unavailable to our clients and impair our ability to deliver products and services and to manage our relationships with new and existing clients.

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          If our vendors are unable or unwilling to provide the services necessary to support our business, or if our agreements with such vendors are terminated, our operations could be significantly disrupted. Some of our vendor agreements may be unilaterally terminated by the licensor for convenience, and if such agreements are terminated, we may not be able to enter into similar relationships in the future on reasonable terms or at all. We may also incur substantial costs, delays and disruptions to our business in transitioning such services to ourselves or other third-party vendors. In addition, third-party vendors may not be able to provide the services required in order to meet the changing needs of our business.

We depend on our senior management team, and the loss of one or more of our executive officers or key employees or an inability to attract and retain highly skilled employees could compromise our ability to pursue our growth strategy and grow our business.

          Our success depends largely upon the continued services of our executive officers and other key employees. We do not maintain "key person" insurance for our executive officers, other than for our Chief Executive Officer, Dr. Calvin H. Knowlton, or any of our other key employees. From time to time, there may be changes in our senior management team resulting from the hiring or departure of executives, which could disrupt our business. The replacement of one or more of our executive officers or other key employees would likely involve significant time and costs and may significantly delay or prevent the achievement of our business objectives.

          In addition, competition for qualified management in our industry is intense. Many of the companies with which we compete for management personnel have greater financial and other resources than we do. As a result, we may experience difficulty hiring and retaining qualified personnel. The departure of key personnel could also hurt our business. In such event, we would be required to hire other personnel to manage and operate our business, and we might not be able to employ a suitable replacement for the departing individual, or a replacement might not be willing to work for us on terms that are favorable to us.

          In addition, in making employment decisions, particularly in the technology industry, job candidates often consider the value of the stock options or other equity instruments they are to receive in connection with their employment. Volatility in the price of our common stock might, therefore, compromise our ability to attract or retain highly skilled personnel. Furthermore, the requirement to expense stock options and other equity instruments might discourage us from granting the size or type of stock option or equity awards that job candidates require to join our company. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be severely harmed.

We may make future acquisitions and investments that may be difficult to integrate, divert management resources, result in unanticipated costs or dilute our stockholders.

          Part of our business strategy is to acquire or invest in companies, products or technologies that complement our current products and services, enhance our market coverage or technical capabilities or offer growth opportunities. Future acquisitions and investments could pose numerous risks to our operations, including:

    difficulty integrating the purchased operations, products or technologies;

    substantial unanticipated integration costs;

    assimilation of the acquired businesses, which may divert significant management attention and financial resources from our other operations and could disrupt our ongoing business;

    the loss of key employees, particularly those of the acquired businesses;

    difficulty retaining or developing the acquired business' clients;

    adverse effects on our existing business relationships;

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    failure to realize the potential cost savings or other financial or strategic benefits of the acquisitions, including failure to consummate any proposed or contemplated transaction; and

    liabilities from the acquired businesses for infringement of intellectual property rights, loss of intellectual property or goodwill through inadequate data security measures, unknown cyber vulnerabilities or network intrusions, or other claims and failure to obtain indemnification for such liabilities or claims.

          In connection with these acquisitions or investments, we could incur debt, amortization expenses related to intangible assets or large and immediate write-offs, assume liabilities or issue stock that would dilute our current stockholders' ownership. We may be unable to complete acquisitions or integrate the operations, products or personnel gained through any such acquisition successfully or without adversely affecting our business, financial condition and results of operations.

Substantially all of our assets are pledged as collateral under our existing line of credit.

          As of September 30, 2015, our total indebtedness, net of debt discounts of $2.4 million, was $40.3 million, and after giving effect to this offering and the application of a portion of the net proceeds to repay indebtedness, our total indebtedness as of September 30, 2015 would have been $0 on a pro forma as adjusted basis. Although we expect to repay all outstanding amounts due under our April 29, 2015 revolving line of credit, or the 2015 Line of Credit, with Bridge Bank, National Association with the proceeds received from this offering, the 2015 Line of Credit will remain in place following the completion of this offering even though there will be no borrowings outstanding. The 2015 Line of Credit provides for borrowings, on a revolving basis, in an aggregate amount up to $15.0 million to be used for general corporate purposes. The 2015 Line of Credit is secured by all of our personal property, whether presently existing or created or acquired in the future, as well as our intellectual property. If we are unable to repay any secured borrowings that remain outstanding or that we make following this offering when due, whether at maturity or if declared due and payable following a default, the lenders would have the right to proceed against the collateral pledged to the indebtedness and may sell the assets pledged as collateral in order to repay those borrowings.

We may require additional capital to support business growth, and this capital might not be available to us on acceptable terms or at all.

          Our operations have required a significant investment of cash since inception and we intend to continue to make significant investments to support our business growth, respond to business challenges or opportunities, develop new applications and services, enhance our existing platform and services, hire additional sales and marketing personnel, enhance our operating infrastructure and potentially acquire complementary businesses and technologies. As of September 30, 2015, we had $2.6 million of cash, which was held for working capital purposes.

          Our future capital requirements may be significantly different from our current estimates and will depend on many factors, including our growth rate, renewal activity, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and services and the continuing market acceptance of our products and services. Accordingly, we might need to engage in equity or debt financings or collaborative arrangements to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We might have to obtain funds through arrangements with collaborators or others that may require us to relinquish rights to our technologies or offering that we otherwise would not

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consider. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be limited.

Our pro forma financial information may not be representative of our future performance.

          In preparing the unaudited pro forma consolidated financial information included in this prospectus, we have made adjustments to our historical financial information based upon currently available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of acquisitions and as further adjusted for this offering and the contemplated use of the estimated net proceeds from this offering. The unaudited pro forma consolidated financial information also reflects the application of purchase accounting. The estimates and assumptions used in the calculation of the unaudited pro forma consolidated financial information in this prospectus may be materially different from our actual experience. Accordingly, the unaudited pro forma consolidated financial information included in this prospectus does not purport to indicate the results that would have actually been achieved had the acquisitions been completed on the assumed date or for the periods presented, or which may be realized in the future, nor does it give effect to any events other than those described in our unaudited pro forma consolidated financial statements and notes thereto.

We may become subject to litigation, which could be costly and result in significant liability.

          We may become subject to litigation in the future. Any future claims may result in significant defense costs and potentially significant judgments against us, some of which we are not insured against. We generally intend to defend ourselves vigorously; however, we cannot be certain of the ultimate outcomes of any claims that may arise in the future. Resolution of these types of matters against us may result in our having to pay significant fines, judgments or settlements, which, if uninsured, or if the fines, judgments and settlements exceed insured levels, could diminish our financial resources. Litigation or the resolution of litigation may also affect the availability or cost of some of our insurance coverage, which could increase our costs, expose us to increased risks that would be uninsured and compromise our ability to attract directors and officers.


Risks Related to Our Intellectual Property

If we are unable to obtain, maintain and enforce intellectual property protection for our technology and products or if the scope of our intellectual property protection is not sufficiently broad, others may be able to develop and commercialize technology and products substantially similar to ours, and our ability to successfully commercialize our technology and products may be compromised.

          Our business depends on proprietary technology and content, including software, databases, confidential information and know-how, the protection of which is crucial to the success of our business. We rely on a combination of patent, trademark, trade-secret and copyright laws, confidentiality procedures, cyber security practices and contractual provisions to protect the intellectual property rights of our proprietary technology and content. We are pursuing the registration of additional trademarks and service marks in the United States, as well as patent protection related to certain business methods employed by us. We may, over time, increase our investment in protecting our intellectual property through additional trademark, patent and other intellectual property filings, which could be expensive and time-consuming. We may not be able to obtain protection for our technology and even if we are successful in attaining effective patent, trademark, trade-secret and copyright protection, it is expensive to maintain these rights and the costs of defending our rights could be substantial. Furthermore, recent changes to U.S. intellectual property laws may jeopardize the enforceability and validity of our intellectual property portfolio and harm our ability to obtain patent protection of some of our unique business methods.

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          In addition, these measures may not be sufficient to offer us meaningful protection or provide us with any competitive advantages. If we are unable to adequately protect our intellectual property and other proprietary rights, our competitive position and our business could be harmed, as third parties may be able to commercialize and use technologies and software products that are substantially the same as ours without incurring the development and licensing costs that we have incurred. Any of our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed or misappropriated, our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties, or our intellectual property rights may not be sufficient to permit us to take advantage of current market trends or to otherwise to provide us with competitive advantages, which could result in costly redesign efforts, discontinuance of some of our offerings or other competitive harm.

          Monitoring unauthorized use of our intellectual property is difficult and costly. From time to time, we seek to analyze our competitors' products and services, and may in the future seek to enforce our rights against potential infringement. However, the steps we have taken to protect our proprietary rights may not be adequate to enforce our rights as against infringement or misappropriation of our intellectual property. We may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Any inability to meaningfully protect our intellectual property rights could harm our ability to compete and reduce demand for our products and services. Moreover, our failure to develop and properly manage new intellectual property could hurt our market position and business opportunities. Also, some of our products and services rely on technologies, data and software developed by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all. Any loss of the right to use any third-party technologies, data or software could result in delays in implementing or provisioning our products and services until equivalent technology is either developed by us or, if available, is identified, obtained and integrated, which could harm our business.

          We may also be required to protect our proprietary technology and content in an increasing number of jurisdictions, a process that is expensive and may not be successful, or which we may not pursue in every location. In addition, effective intellectual property protection may not be available to us in every country, and the laws of some foreign countries may not be as protective of intellectual property rights as those in the United States. Additional uncertainty may result from changes to intellectual property legislation enacted in the United States and elsewhere, and from interpretations of intellectual property laws by applicable courts and agencies. Accordingly, we may be unable to obtain, maintain and enforce the intellectual property rights necessary to provide us with a competitive advantage. Our failure to obtain, maintain and enforce our intellectual property rights could therefore adversely affect our business, financial condition and results of operations.

If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our competitive position may be harmed.

          The registered or unregistered trademarks or trade names that we own may be challenged, infringed, circumvented, declared generic, lapsed or determined to be infringing on or dilutive of other marks. We may not be able to protect our rights in these trademarks and trade names, which we need in order to build name recognition with potential clients. In addition, third parties may in the future file for registration of trademarks similar or identical to our trademarks. If they succeed in registering or developing common law rights in such trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to develop brand recognition of our technologies, products or services. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively.

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If we cannot protect our domain names, our ability to successfully promote our brand will be impaired.

          We currently own the web domain names www.tabularasahealthcare.com, www.carekinesis.com, www.careventions.com, www.medliance.com, www.capstoneperformancesystems.com, www.eirenerx.com, www.medwiseadvisor.com and www.niarx.com, which are critical to the operation of our business. The acquisition and maintenance of domain names is generally regulated by governmental agencies and their designees. The regulation of domain names in the United States and in foreign countries is subject to change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names in all countries in which we conduct business. Furthermore, it is unclear whether laws protecting trademarks and similar proprietary rights will be extended to protect domain names. Therefore, we may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights. We may not be able to successfully implement our business strategy of establishing a strong brand if we cannot prevent others from using similar domain names or trademarks. This failure could impair our ability to increase our market share and revenue.

We could incur substantial costs as a result of any claim of infringement of another party's intellectual property rights.

          Our commercial success depends in part on our ability to develop and commercialize our products and services without infringing or being claimed to have infringed the intellectual property or proprietary rights of third parties. Intellectual property disputes can be costly to defend and may cause our business, operating results and financial condition to suffer. As the market for technology-enabled healthcare solutions in the United States expands and intellectual property protections asserted by others increase, the risk increases that there may be intellectual property asserted by others and patents issued to third parties that relate to our products and technology of which we are not aware or that we must challenge to continue our operations as currently contemplated. Whether merited or not, we may face allegations that we, our clients, our licensees or parties indemnified by us have infringed or otherwise violated the patents, trademarks, copyrights or other intellectual property rights of third parties. In addition, we have received letters from third parties in the past claiming that our software, technologies and methodologies are covered by their patents, and future claims may require us to expend time and money to address and resolve these claims. Such claims may be made by competitors seeking to obtain a competitive advantage or by other parties. Additionally, in recent years, individuals and groups have begun purchasing intellectual property assets for the purpose of making claims of infringement and attempting to extract settlements from other technology-reliant companies. We may also face allegations that our employees or consultants have misappropriated the intellectual property or proprietary rights of their former employers or other third parties, as the case may be. It may be necessary for us to initiate litigation to defend ourselves in order to determine the scope, enforceability and validity of third-party intellectual property or proprietary rights, or to establish our respective rights. Regardless of whether claims that we are infringing patents or other intellectual property rights have merit, such claims can be time-consuming, divert management's attention and financial resources and can be costly to evaluate and defend. Results of any such litigation are difficult to predict and may require us to stop commercializing or using our products or technology, obtain licenses, modify our products and technology while we develop non-infringing substitutes, incur substantial damages or settlement costs, or face a temporary or permanent injunction prohibiting us from marketing or providing the affected products and services. If we require a third-party license, it may not be available on reasonable terms or at all, and we may have to pay substantial royalties, upfront fees or grant cross-licenses to intellectual property rights for our products and services. We may also have to redesign our products or services so they do not infringe third-party intellectual property rights, which may not be possible or may require substantial monetary expenditures and time, during which our technology and products may not be available for commercialization or use. Even if we have an agreement to indemnify

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us against such costs, the indemnifying party may be unable to uphold its contractual obligations. If we cannot or do not obtain a third-party license to the infringed technology at all, license the technology on reasonable terms or obtain similar technology from another source, our ability to operate our business could be compromised.

Our use of open source software could compromise our ability to offer our services and subject us to possible litigation.

          We use open source software in connection with our products and services. Companies that incorporate open source software into their products have, from time to time, faced claims challenging the use of open source software and compliance with open source license terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute software containing open source software to publicly disclose all or part of the source code to the licensee's software that incorporates, links or uses such open source software, and make available to third parties for no cost, any derivative works of the open source code created by the licensee, which could include the licensee's own valuable proprietary code. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous. Any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help our competitors develop products and services that are similar to or better than ours.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

          Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to monitor for such infringement and file infringement claims, both of which can be expensive and time consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, or may construe the patent's claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in a proceeding could put one or more of our patents at risk of being invalidated.

We may be subject to claims by third parties asserting that our employees, our consultants or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

          Many of our employees were previously employed at universities or other technology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and our consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that our employees, our consultants, or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee's former employer. Costly litigation may be necessary to defend against these claims.

          In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend

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claims they may bring against us, to determine the ownership of what we regard as our intellectual property.

          If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

          Even if resolved in our favor, litigation or other legal proceedings against us relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.

If we are unable to protect the confidentiality of our trade secrets, know-how and other proprietary information, the value of our technology, products and services could be hurt.

          We may not be able to protect our trade secrets, know-how and other proprietary information adequately. Although we use reasonable efforts to protect this proprietary information and technology, our employees, consultants and other parties may unintentionally or willfully disclose our information or technology to competitors. In addition, our trade secrets, know-how and other proprietary information may be accessed or disclosed during a cyber incident, which could have a significant negative impact on us. Further, such cyber incidents, if disclosed publicly, could adversely affect the price of our common stock.

          Enforcing a claim that a third party illegally obtained and is using any of our proprietary information or technology is expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets, know-how and other proprietary information. We rely, in part, on non-disclosure, confidentiality and invention assignment agreements with our employees, consultants and other parties to protect our trade secrets, know-how and other intellectual property and proprietary information. These agreements may not be self-executing, or they may be breached and we may not have adequate remedies for such breach. Moreover, third parties may independently develop similar or equivalent proprietary information or otherwise gain access to our trade secrets, know-how and other proprietary information.


Risks Related to Industry Regulation and Other Legal Compliance Matters

The healthcare regulatory and political framework is uncertain and evolving.

          Healthcare laws and regulations are rapidly evolving and may change significantly in the future. For example, in March 2010, the ACA was adopted, which is a healthcare reform measure that seeks to contain healthcare costs while improving quality and access to coverage. The ACA includes a variety of healthcare reform provisions and requirements that have already become effective or will become effective at varying times through 2018 and substantially changes the way healthcare is financed by both governmental and private insurers, which may significantly affect our industry and our business. Many

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of the provisions of the ACA will phase in over the course of the next several years, and we may be unable to predict accurately what effect the ACA or other healthcare reform measures that may be adopted in the future, including amendments to the ACA, will have on our business. In addition, provisions of the ACA may be challenged in the courts. For example, in 2015 the U.S. Supreme Court determined that the IRS can extend tax credits to individuals enrolled in a plan offered by the federal health insurance exchanges established by the U.S. Department of Health & Human Services, or HHS, despite language in the ACA that was alleged to authorize tax credits only for individuals enrolled in a plan offered by exchanges established by states.

          In addition, we are subject to various other healthcare laws and regulations, including, among others, the Stark Law relating to self-referrals, anti-kickback laws, including the federal Anti-Kickback Statute, antitrust laws and the data privacy and security laws and regulations described below. See "Business — Healthcare Regulatory Environment". If we were to become subject to litigation or liabilities or found to be out of compliance with these or other laws, our business could be hurt. See "— We may become subject to litigation, which could be costly and result in significant liability."

We are subject to data privacy and security laws, regulations and contractual obligations governing the transmission, security and privacy of health and other sensitive or proprietary information, which may impose restrictions on the manner in which we access, store, transmit, use and disclose such information and subject us to penalties if we are unable to fully comply with such laws or contractual provisions.

          As described below, we are required to comply with numerous federal and state laws and regulations governing the collection, use, disclosure, storage and transmission of individually identifiable health information that we may obtain or have access to in connection with the provision of our services. These laws and regulations, including their interpretation by governmental agencies, are subject to frequent change. These laws and regulations include the following.

    The Health Insurance Portability and Accountability Act, or HIPAA, and its implementing regulations, required expanded protection of the privacy and security of protected health information, the execution of certain contracts to safeguard protected health information and the adoption of standards for the exchange of electronic health information, for health plans, healthcare clearinghouses and certain healthcare providers, which we refer to as Covered Entities, and their business associates. Among the standards that HHS has adopted pursuant to HIPAA are standards for electronic transactions and code sets, unique identifiers for providers, employers, health plans and individuals, security, electronic signatures, privacy and enforcement. Actual failure to comply with HIPAA could result in fines and civil and criminal penalties, as well as contractual damages, which could harm our business, finances and reputation.

    The Health Information Technology for Economic and Clinical Health Act, or the HITECH Act, enacted as part of the American Recovery and Reinvestment Act of 2009, also known as the "Stimulus Bill", effective February 22, 2010, modified HIPAA by setting forth health information security breach notification requirements and increasing penalties for violations of HIPAA, among other things. The HITECH Act requires individual notification for all breaches as defined by HIPAA, media notification of breaches affecting over 500 individuals located in the same region and either prompt or annual reporting of breaches to HHS, depending on the number of affected individuals. The HITECH Act also replaced the prior monetary penalty system of $100 per violation and an annual maximum of $25,000 per violation with a four-tier system of sanctions for breaches. Penalties now range from a minimum of $100 per violation and an annual maximum of $25,000 per violation for the first tier to a minimum of $50,000 per violation and an annual maximum of $1.5 million per violation for the fourth tier. Failure to comply with HIPAA as modified by the HITECH Act could result in fines and penalties, criminal sanctions and reputational damage that could harm our business.

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    Numerous other federal and state laws may apply that restrict the use and disclosure and mandate the protection of the privacy and security of individually identifiable information, as well as employee personal information, and that require notifications and mitigation in the event of a breach. These include state medical information privacy laws, state social security number protection laws and federal and state consumer protection laws, among others. These various laws in many cases are not preempted by HIPAA and may be subject to varying interpretations by the courts and government agencies, creating complex compliance issues for us and our clients and potentially exposing us to additional expense, adverse publicity and liability.

    Federal and state consumer protection laws are increasingly being applied by the United States Federal Trade Commission, or FTC, and states' attorneys general to regulate the collection, use, storage and disclosure of personal or individually identifiable information, through websites or otherwise, and to regulate the presentation of website content.

          There is ongoing concern from privacy advocates, regulators and others regarding data protection and privacy issues, and the number of jurisdictions with data protection and privacy laws has been increasing. In addition, the scope of protection afforded to data subjects by many of these data protection and privacy laws has been increasing. Also, there are ongoing public policy discussions regarding whether the standards for deidentified, anonymous or pseudonomized health information are sufficient, and the risk of re-identification sufficiently small, to adequately protect patient privacy. These discussions may lead to further restrictions on the use of such information. These initiatives or future initiatives could compromise our ability to access and use data or to develop or market current or future services.

          The security measures that we and our third-party vendors and subcontractors have in place to ensure compliance with privacy and data protection laws and contractual commitments may not protect our facilities and systems from security breaches, acts of vandalism or theft, cyber incidents, misplaced or lost data, programming and human errors or other similar events. The occurrence of a cyber incident that affects either individually identifiable health information or other confidential or proprietary information with which we have been entrusted may result in liability and hurt our reputation.

          Additionally, as a business associate under HIPAA, we may also be liable for privacy and security breaches of protected health information and certain similar failures of our subcontractors. Even though we contractually require our subcontractors to safeguard protected health information as required by law, we still have limited control over their actions and practices. An actual or perceived breach of privacy or security of individually identifiable health information held by us or by our subcontractor may result in an enforcement action, including criminal and civil liability, against us, as well as negative publicity, reputational harm and contractual ramifications with our clients.

          We are not able to predict the full extent of the impact such incidents may have on our business. Our failure to comply with HIPAA may result in criminal or civil liability, and due to the heightened enforcement climate and recent changes to the law, the potential for enforcement action against business associates under HIPAA is now greater than in prior years. Enforcement actions against us could be costly and could interrupt regular operations, which may harm our business. While we have not received any notices of violation of the applicable privacy and data protection laws and believe we adequately protect our information, including in compliance with such laws, there can be no assurance that we will not receive such notices in the future. Further, costly breaches can occur regardless of our compliance infrastructure.

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We operate in a highly regulated industry and must comply with a significant number of complex and evolving requirements. Achieving and sustaining compliance with state and federal statutes and regulation related to the healthcare industry may prove costly. Changes in these laws could restrict our ability to conduct our business. Further, if we fail to comply with these requirements, we could incur significant penalties and our reputation could suffer.

          In addition to HIPAA, additional federal and state statutes, regulations, guidance and contractual provisions regarding healthcare that may apply to our business activities, including:

    The federal Anti-Kickback Statute, or AKS, prohibits individuals and entities from knowingly and willfully paying, offering, receiving or soliciting anything of value in order to induce the referral of patients or in return for purchasing, leasing, ordering, arranging for, or recommending services or goods covered in whole or in part by Medicare, Medicaid, or other government healthcare programs. The AKS is an intent-based statute and the failure of an arrangement to satisfy all elements of a safe harbor will not necessarily make it illegal, but it may subject that arrangement to scrutiny by enforcement authorities. Any violation of the AKS can lead to significant penalties, including criminal penalties, civil fines and exclusion from participation in a federal healthcare program, among other penalties.

    Various state anti-kickback laws that sometimes track federal AKS prohibitions, although some apply to all-payors as opposed to only government healthcare programs.

    The federal physician self-referral law, often referred to as the Stark Law, prohibits, with limited exceptions, physicians from referring Medicare or Medicaid patients to an entity for the provision of specified Designated Health Services, or DHS, among them outpatient prescription drugs, if the physician or a member of such physician's immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with the entity. The Stark Law also prohibits the entity from billing Medicare or Medicaid programs for such DHS. A referral that may implicate the Stark Law does not fall within a statutory exception is strictly prohibited by the Stark Law. A violation of the Stark Law is punishable by civil sanctions, including significant fines and exclusion from participation in Medicare and Medicaid programs.

    State data privacy and security laws that track federal requirements or impose more stringent or different requirements than HIPAA regarding storage, transmission, use and disclosure of protected health information, general individually identifiable information or other sensitive information.

    Consumer protection laws require us to publish statements to users of our services that describe how we handle personal information. If such information that we publish is considered untrue, we may be subject to claims of deceptive practices, which could lead to significant liabilities and consequences, including, costs of defending against litigation, settling claims and loss of willingness of current and potential future clients to work with us.

    Federal and state false claims laws, including the civil False Claims Act, impose civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment to the government or knowingly make, or cause to be made, a false statement in order to have a false claim paid. The civil False Claims Act provides for treble damages and mandatory minimum penalties per false claim or statement. In this context, it is particularly notable that a significant portion of our revenue is derived from services provided to PACE organizations. PACE organizations are funded by both Medicare and Medicaid, and the Medicare risk-adjustment methodology applies to the Medicare component of PACE organization reimbursement. PACE submissions may also be comparable to state Medicaid risk-adjustment submissions, and vary by state. Because risk adjustment submissions to Medicare and state Medicaid programs have a direct impact on the amounts that Medicare and Medicaid Programs

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      pay to PACE organizations, these activities may be the subject of scrutiny and litigation under the federal civil False Claims Act.

    HHS Office of Inspector General, or OIG, and many state Medicaid agencies maintain lists of individuals and organizations that have been excluded from participation in a federal healthcare program. A significant part of our revenue is derived from our services as federal healthcare program providers, specialty pharmacies, or contractors to federal healthcare program providers or plans and as such, we need to comply with restrictions on employing or contracting with personnel and vendors who have been excluded from participation in federal healthcare programs. Adhering to the best practice of conducting monthly screenings against the federal and state exclusion lists for employees and contractors may be costly and resource-consuming, but failure to do so may give rise to significant administrative liability and sanctions.

    As contractors to PACE organizations and Medicare Advantage organizations, or MAOs, we are subject to contractual provisions, which impose on us various obligations related to healthcare compliance and healthcare fraud, waste and abuse reduction and elimination efforts. These obligations stem from the provisions contained in prime contracts between PACE organizations and MAOs, and the federal government. Examples of such flow down provisions include subcontractor's compliance with all applicable state and federal laws, subcontractor's obligation to screen state and federal exclusion lists and its obligation to conduct periodic audits, among many others. Breaches of these requirements would not necessarily be a regulatory risk per se, but they could create contract compliance issues, which may yield contractual damages, be costly to resolve and may hurt our reputation and restrict our ability to service such organizations in the future.

    Various state licensure, registration and certification laws are applicable to pharmacies, pharmacists, pharmacy technicians and other pharmacy personnel. If we are unable to maintain our licenses or if states place burdensome restrictions or limitations on non-resident pharmacies, this could limit or affect our ability to operate in some states. Additionally, if we or any of our personnel violate conditions of their pharmacy or pharmacist licensure, we could face penalties and lose valuable personnel.

    A number of federal and state laws and registration requirements are applicable to dispensing controlled substances. If we are unable to maintain our registrations this could limit or affect our ability to dispense controlled substances.

    Federal and state laws and policies require pharmacies to maintain, enroll and participate in federal healthcare programs or to report specified changes in their operations to the agencies that administer these programs. If we do not comply with these laws, we may not be able to participate in some federal healthcare programs, which could compromise our ability to sell our solutions.

    A number of FDA regulations are applicable to our business. Some technologies and software applications used in healthcare analytics, genomic testing and analysis are considered medical devices and are subject to regulation by the FDA. If any of our current or future services or applications become regulated by the FDA as medical devices, we would be subject to various laws, regulations and policies enforced by the FDA or other governmental authorities, such as the U.S. Federal Trade Commission, including both premarket and post-market requirements. FDA and state regulators, such as state boards of pharmacy, also regulate drug packaging and repackaging. Our drug packaging activities must comply with the relevant FDA and state statutes, regulations and policies. Noncompliance with applicable FDA requirements, including those related to pharmaceutical and medical device promotional practices and the pre-market and post-market approval requirements for medical devices can result in an enforcement action that could substantially harm our business. Changes in existing regulatory requirements, our failure to comply with current or future requirements or adoption of new requirements could negatively affect our business.

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Further modifications to the Medicare Part D program and changes in pricing benchmarks may reduce revenue and impose additional costs to the industry.

          The Medicare Prescription Drug Improvement and Modernization Act of 2003 included a major expansion of the Medicare program with the addition of a prescription drug benefit under the new Medicare Part D program. The continued impact of these regulations depends upon a variety of factors, including our ongoing relationships with the Part D Plans and the patient mix of our clients. Future modifications to the Medicare Part D program may reduce revenue and impose additional costs to the industry. In addition, contracts and fee schedules in the prescription drug industry, including our contracts with certain of our clients use certain published benchmarks, including average wholesale price, or AWP, to establish pricing for prescription drugs. Most of our contracts utilize the AWP standard. However, there can be no assurance that our clients will continue to utilize AWP, as previously calculated, or that other pricing benchmarks will not be adopted to establish prices for prescription drugs within the industry.


Risks Related to Our Common Stock and This Offering

After this offering, our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to control all matters submitted to stockholders for approval.

          Upon the completion of this offering, our executive officers and directors, combined with our stockholders who own more than five percent of our outstanding capital stock before this offering will, in the aggregate, beneficially own shares representing approximately         % of our capital stock. As a result, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership control may:

    delay, defer or prevent a change in control;

    entrench our management and the board of directors; or

    impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.

As a result, these executive officers, directors and current five percent or greater stockholders could pursue transactions that may not be in our best interests and which could harm our business.

Some provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws may deter third parties from acquiring us.

          We expect that our amended and restated certificate of incorporation and amended and restated bylaws will, among other things:

    divide our board of directors into three staggered classes of directors that are each elected to three-year terms;

    provide that the authorized number of directors may be changed only by resolution of our board of directors;

    provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

    prohibit stockholder action by written consent;

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    authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to increase the number of outstanding shares of capital stock, making a takeover more difficult and expensive;

    prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;

    provide that special meetings of the stockholders may be called only by or at the direction of the board of directors, the chairman of our board or the chief executive officer; and

    require advance notice to be given by stockholders for any stockholder proposals or director nominees.

          In addition, Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, may affect the ability of an "interested stockholder" to engage in specified business combinations, for a period of three years following the time that the stockholder becomes an "interested stockholder". We intend to elect in our amended and restated certificate of incorporation not to be subject to Section 203 of the DGCL. Nevertheless, our amended and restated certificate of incorporation will contain provisions that have the same effect as Section 203 of the DGCL.

          These and other provisions could have the effect of discouraging, delaying or preventing a transaction involving a change in control of our company or could make it more difficult for you and other stockholders to elect directors of your choosing or to cause us to take other corporate actions that you desire. See "Description of Capital Stock".

Our amended and restated certificate of incorporation will designate courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

          Our amended and restated certificate of incorporation will provide that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (c) any action asserting a claim against us arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws, (d) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or amended and restated bylaws or (e) any other action asserting a claim against us that is governed by the internal affairs doctrine. We refer to each of these proceedings as a covered proceeding. In addition, our amended and restated certificate of incorporation will provide that if any action the subject matter of which is a covered proceeding is filed in a court other than the specified Delaware courts without the approval of our board of directors, which we refer to as a foreign action, the claiming party will be deemed to have consented to (1) the personal jurisdiction of the specified Delaware courts in connection with any action brought in any such courts to enforce the exclusive forum provision described above and (2) having service of process made upon such claiming party in any such enforcement action by service upon such claiming party's counsel in the foreign action as agent for such claiming party. Our amended and restated certificate of incorporation will also provide that, except to the extent prohibited by the DGCL, in the event that a claiming party initiates, asserts, joins, offers substantial assistance to or has a direct financial interest in any foreign action without the prior approval of our board of directors, each such claiming party will be obligated jointly and severally to reimburse us and any officer, director or other employee made a party to such proceeding for all fees, costs and expenses of every kind and description (including, but not limited to, all attorneys' fees and other litigation expenses) that the parties may incur in connection with such foreign action. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to these provisions. These provisions may limit a stockholder's ability

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to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions.

Our amended and restated bylaws will provide that if a claiming party brings certain actions against us and is not successful on the merits then it will be obligated to pay our litigation costs, which could have the effect of discouraging litigation, including claims brought by our stockholders.

          Our amended and restated bylaws will provide that, except to the extent prohibited by the DGCL, and unless our board of directors otherwise approves, in the event that any claiming party (a) initiates, asserts, joins, offers substantial assistance to or has a direct financial interest in a covered proceeding and (b) such claiming party does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought by such claiming party, then each such claiming party will be obligated to reimburse us and any applicable director, officer or other employee for all fees, costs and expenses of every kind and description (including, but not limited to, all attorneys' fees and other litigation expenses) that we or any such director, officer or other employee actually incurs in connection with the covered proceeding. While application of this standard will necessarily need to take into account the particular facts, circumstances and equities of any particular claim, we would expect a claiming party to be required to prevail on the merits on substantially all of the claims asserted in the complaint and, as a result, receive substantially the full remedy that it was seeking (including, if applicable, any equitable remedy) in order to avoid responsibility for reimbursing such fees, costs and expenses. Any person or entity purchasing or otherwise acquiring any interest in the shares of our capital stock will be deemed to have notice of and consented to this provision. This provision could have the effect of discouraging litigation against us, including claims brought by our stockholders and including claims that are partially (but not wholly) successful on the merits. However, it is currently unclear whether the Delaware legislature will take action to eliminate or limit the ability of stock corporations to implement provisions such as this, or whether Delaware courts will enforce in full a provision such as this for a Delaware stock corporation. If the Delaware legislature takes action to limit or eliminate our ability to include this provision in our amended and restated bylaws or a court were to find this provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions.

If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.

          The initial public offering price of our common stock will be substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of capital stock. To the extent shares subsequently are issued pursuant to the exercise of options to purchase common stock under our equity incentive plans, you will incur further dilution. For a further description of the dilution that you will experience immediately after this offering, see the section of this prospectus titled "Dilution".

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An active trading market for our common stock may not develop.

          Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. Although we have applied to have our common stock approved for listing on the NASDAQ Global Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares or at all. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to acquire other companies, products or technologies by using our common stock as consideration.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

          The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our common stock could be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price will likely decline. If one or more of these analysts fails to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

          Our stock price is likely to be volatile. The stock market in general and the market for smaller healthcare technology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

    the success of competitive products, services or technologies;

    regulatory or legal developments in the United States and other countries;

    developments or disputes concerning patent applications, issued patents or other proprietary rights;

    the recruitment or departure of key personnel;

    the level of expenses related to developing any of our products or services;

    the results of our efforts to discover, develop, acquire or in-license additional products;

    actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

    variations in our financial results or those of companies that are perceived to be similar to us;

    changes in the structure of healthcare payment systems;

    market conditions in the healthcare technology sector;

    global and general economic, industry and market conditions; and

    the other factors described in this "Risk Factors" section.

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We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

          Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could harm our business, cause the price of our common stock to decline and delay further development of our products. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

          Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have outstanding             shares of common stock based on the number of shares outstanding as of             . This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates or existing stockholders. Of the remaining shares,             shares are currently restricted as a result of securities laws or lock-up agreements but will become eligible to be sold at various times after the offering. Moreover, after this offering, holders of an aggregate of             shares of our common stock will have rights, subject to specified conditions, to require us to file registration statements covering their shares or, along with holders of additional shares of our common stock, to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the "Underwriting" section of this prospectus.

We are an "emerging growth company," and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

          We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from some disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

    being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;

    not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

    not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

    reduced disclosure obligations regarding executive compensation; and

    exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

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          We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

          As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual report for the year ending December 31, 2016, provide a management report on the internal control over financial reporting. Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an "emerging growth company," as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.

          If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. In connection with the audit for the year ended December 31, 2013, we identified certain deficiencies in our internal controls over financial reporting, including a material weakness in our internal control over financial reporting during 2013 related to the accretion of the redemption value of our Series B redeemable convertible preferred stock as a result of not having a process in place to obtain and review valuations on a timely basis as a privately held company. We have remediated the material weakness and have remediated or are addressing the other internal control deficiencies identified. If we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected and we could become subject to investigations by the NASDAQ Global Market, on which our securities will be listed, the SEC or other regulatory authorities, which could require us to obtain additional financial and management resources.

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an "emerging growth company".

          Following the completion of this offering, we will be required to comply with various regulatory and reporting requirements, including those required by the SEC and the NASDAQ Stock Market. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us. As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, and the Sarbanes-Oxley Act. These

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requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we may need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth as a public company will also require us to commit additional management, operational and financial resources to identify new professionals to join our company and to maintain appropriate operational and financial systems to adequately support expansion. These activities may also divert management's attention from other business concerns.

          As an "emerging growth company" as defined in the JOBS Act, we may take advantage of temporary exemptions from various reporting requirements, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

          When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

Our business and stock price may suffer as a result of our lack of public company operating experience.

          We have been a privately held company since we began operations in 2009. Our lack of public company operating experience may make it difficult to forecast and evaluate our future prospects. If we are unable to execute our business strategy, either as a result of our inability to effectively manage our business in a public company environment or for any other reason, our stock price may be harmed.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

          We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

          Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change," generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation's ability to use its pre-change federal net operating loss carryforwards, or NOLs, and other pre-change federal tax attributes (such as research tax credits) to offset its post-change income may be limited. We have experienced ownership changes in the past, but have not determined if such changes could limit the use of our NOLs. In addition, we may experience ownership changes in the future as a result of the completion of this offering and subsequent shifts in our stock ownership. State NOL carryforwards may be similarly or more stringently limited. As a result, if we earn net taxable income, our ability to use our pre-change NOLs to offset United States federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

          This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

          The forward-looking statements in this prospectus include, among other things, statements about:

    our expectations regarding industry and market trends, including the expected growth and continued structural change and consolidation in the market for healthcare in the United States;

    our expectations about the growth of PACE organizations;

    our expectations about private payors establishing their own at-risk programs;

    the advantages of our solutions as compared to those of competitors;

    our estimates about our financial performance, including our expectation that some of our expenses will decline as a percentage of total revenue;

    the visibility into future cash flows from our business model;

    our growth strategy, including our ability to grow our client base;

    our plans to further penetrate existing markets and enter new markets;

    our plans to pursue strategic acquisitions and partnerships and international expansion;

    our plans to expand and enhance our solutions; and

    our estimates regarding capital requirements and needs for additional financing.

          We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. We operate in a very competitive and rapidly changing environment. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make, and accordingly you should not place undue reliance on our forward-looking statements. We have included important factors in the cautionary statements included in this prospectus, particularly in the "Risk Factors" section that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

          You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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TRADEMARKS AND TRADE NAMES

          Our material trademarks, service marks and other marks include EireneRx®, Medication Risk Mitigation by CareKinesis®, MedWise Advisor®, NiaRx®, Capstone Performance Systems™, CareVentions™, Medication Risk Mitigation™, Medication Risk Mitigation Matrix™, Medliance™ and Tabula Rasa HealthCare™. We also have trademark applications pending to register marks in the United States. We have proprietary and licensed rights to trademarks used in this prospectus which are important to our business, many of which are registered under applicable intellectual property laws. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the "®" or "™" symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Each trademark, trade name or service mark of any other company appearing in this prospectus is the property of its respective holder.

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MARKET AND INDUSTRY DATA

          This prospectus contains estimates and other statistical data, including those relating to our industry and the market in which we operate, that we have obtained or derived from industry publications and reports, including reports from the Centers for Medicare & Medicaid Services, the Centers for Disease Control and Prevention, the Alliance for Human Research Protection and the Kaiser Family Foundation. These industry publications and reports generally indicate that they have obtained their information from sources believed to be reliable, but do not guarantee the accuracy and completeness of their information. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. Based on our industry experience, we believe that the publications and reports are reliable and that the conclusions contained in the publications and reports are reasonable. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled "Risk Factors." These and other factors could cause our actual results to differ materially from those expressed in the industry publications and reports.

          Information referenced in this prospectus regarding the total eligible individuals within current PACE service areas is based upon estimates of the eligible individuals as of July 2015, prepared by AEC Consulting, LLC, an Altitude Edge company, an independent healthcare consulting firm. We have included these estimates in reliance on the authority of such firm as an expert in such matters.

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USE OF PROCEEDS

          We estimate that the net proceeds from our issuance and sale of             shares of our common stock in this offering will be approximately $              million, assuming an initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares in full, we estimate that the net proceeds from this offering will be approximately $              million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

          A $1.00 increase or decrease in the assumed initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds from this offering by approximately $              million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares of common stock offered by us would increase or decrease the net proceeds from this offering by approximately $              million, assuming the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

          We currently estimate that we will use the net proceeds from this offering as follows:

    to repay our outstanding indebtedness, including approximately:

    $             to Eastward Fund Management, LLC, or Eastward, under our December 2014 $12.0 million loan, or the December 2014 Eastward Loan;

    $             to Eastward under our April 2014 $3.0 million loan or the April 2014 Eastward Loan;

    $250,000 to Dr. John Durham and Mrs. Joanne Durham under our $250,000 demand promissory note bearing interest at 6% per annum;

    $             to the holders of the Medliance Notes, bearing interest at 8% per annum and maturing in June 2016, assuming the holders of such notes do not elect to convert the notes into shares of our common stock upon the completion of this offering; and

    $             for all remaining amounts due under all equipment financing arrangements outstanding as of the completion of the offering;

    to fully repay Bridge Bank, National Association for borrowings under the 2015 Line of Credit to the extent of any borrowings outstanding as of the completion of this offering;

    to continue to develop new product offerings;

    to enter into new market segments with our existing solutions;

    to expand our sales and marketing infrastructure;

    to fund acquisitions of businesses and technologies; and

    the remainder for working capital and general corporate purposes.

          In April 2015, we entered into the 2015 Line of Credit with Bridge Bank, National Association, or Bridge Bank, pursuant to which we can request up to an aggregate amount of $15.0 million in revolving advances. The proceeds of the 2015 Line of Credit were used to repay all outstanding amounts owed under the December 2013 Revolving Credit Facility with Silicon Valley Bank and to fund our general business requirements. Amounts outstanding under the 2015 Line of Credit bear interest at 1% above the greater of 3.25% per year or the variable rate of interest, per annum, most recently announced by Bridge

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Bank, as its "prime rate," with interest payable monthly. Upon completion of this offering, such rate shall be equal to 0.5% above the greater of 3.25% per year or Bridge Bank's prime rate. The 2015 Line of Credit has a maturity date of April 2017, and is secured by all of our personal property, whether presently existing or created or acquired in the future, as well as our intellectual property.

          The first payment of interest under the December 2014 Eastward Loan was due January 1, 2015 in an amount of $120,000. The payments due are $120,000 per month for the first 12 months, which payments then increase to $460,374 per month for the following 30 months. The term of the December 2014 Eastward Loan ends on June 30, 2018.

          The first payment of interest under the April 2014 Eastward Loan was due May 1, 2014 in an amount of $28,750. The payments due are $28,750 per month for the first 12 months, which payments then increase to $114,441 per month for the following 30 months. The term of the April 2014 Eastward Loan ends on October 31, 2017.

          The expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors including the factors described in the section titled "Risk Factors." As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. In addition, our anticipated use of proceeds does not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make. We have no current understandings, agreements or commitments for any material acquisitions or licenses of any products, businesses or technologies. Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

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DIVIDEND POLICY

          We have never declared or paid cash dividends on our capital stock. We intend to retain all of our future earnings, if any, to finance the growth and development of our business. We do not intend to pay cash dividends to our stockholders in the foreseeable future. In addition, under the terms of our loan and security agreement with Bridge Bank, we may not declare or pay any cash dividends or distributions without the consent of Bridge Bank.

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CAPITALIZATION

          The following table sets forth our cash and capitalization as of September 30, 2015 on:

    an actual basis;

    a pro forma basis to give effect to (1) the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 9,873,511 shares of our common stock immediately prior to the completion of this offering and the reclassification to additional paid-in capital of the warrant liability related to warrants to purchase preferred stock, (2) the issuance of             shares of our common stock upon the net exercise of outstanding warrants that would otherwise expire upon the completion of this offering, assuming an initial public offering price of $       per share, which is the midpoint of the price range set forth on the cover page of this prospectus, (3) the issuance of             shares of restricted common stock under our 2014 Equity Compensation Plan to members of management immediately prior to the effective date of the registration statement of which this prospectus forms a part and (4) the amendment and restatement of our certificate of incorporation immediately prior to the completion of this offering; and

    a pro forma as adjusted basis to give further effect to (1) our issuance and sale of                 shares of our common stock in this offering at an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, (2) our receipt of the net proceeds of this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and (3) our application of a portion of such net proceeds to repay indebtedness, as set forth under "Use of Proceeds."

          The information in this table is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with the information contained in the sections titled "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," along with our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

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  September 30, 2015  
 
  Actual   Pro
Forma
  Pro Forma As
Adjusted
 
 
  (In thousands)
 

Cash

  $ 2,558   $             $            

Line of credit

  $ 10,000   $     $    

Notes payable to related parties

    660              

Notes payable related to acquisition

    15,256              

Long-term debt, including current portion

    14,341              

Warrant liability

    6,260              

Redeemable convertible preferred stock:

                   

Series A and A-1 preferred stock, $0.0001 par value per share; 7,224,266 shares authorized, 6,911,766 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted

    6,453              

Series B preferred stock, $0.0001 par value per share; 3,548,614 shares authorized, 2,961,745 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted

    24,612              

Total redeemable convertible preferred stock

    31,065              

Stockholders' equity (deficit):

                   

Preferred stock, $0.0001 par value per share; no shares authorized, issued or outstanding, actual;             shares authorized, no shares issued or outstanding, pro forma and pro forma as adjusted

                 

Common stock, $0.0001 par value per share; 27,836,869 shares authorized, 8,871,248 shares issued and outstanding, actual;             shares authorized,             shares issued and outstanding, pro forma;             shares authorized,             shares issued and outstanding, pro forma as adjusted

    1              

Additional paid-in capital

                 

Accumulated deficit

    (34,912 )            

Total stockholders' equity (deficit)

    (34,911 )            

Total capitalization

  $ 42,671   $             $            

          A $1.00 increase or decrease in the assumed initial public offering price of $              per share would increase or decrease each of the pro forma as adjusted cash, additional paid-in capital, total stockholders' equity (deficit) and total capitalization by $              million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase or decrease of 1.0 million shares offered by us would increase or decrease each of pro forma as adjusted cash, additional paid-in capital, total stockholders' equity (deficit) and total capitalization by $              million, assuming that the assumed initial public offering price, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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          The table above does not include:

    312,500 shares of our common stock issuable upon the exercise of outstanding warrants as of September 30, 2015 at a weighted-average exercise price of $0.80 per share, which warrants are exercisable to purchase shares of our Series A-1 preferred stock prior to the completion of this offering;

    586,868 shares of our common stock issuable upon the exercise of outstanding warrants as of September 30, 2015 at a weighted-average exercise price of $2.96 per share, which warrants are exercisable to purchase shares of our Series B preferred stock prior to the completion of this offering;

    5,412,858 shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2015 under our 2014 Equity Compensation Plan at a weighted-average exercise price of $1.67 per share;

    an additional                 shares of our common stock reserved for future issuance under our 2016 Equity Compensation Plan, upon the completion of this offering;

                     shares of our common stock that may be issuable at the completion of this offering, at the election of the holder, upon the conversion of all principal outstanding under the Medliance Notes, assuming an initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and

    21,000 shares of our common stock that will be issuable in the future as consideration in connection with our acquisition of SMPP.

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DILUTION

          If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible book value per share of our common stock is determined at any date by subtracting our total liabilities and redeemable convertible preferred stock from the amount of our total tangible assets and dividing the difference by the number of shares of our common stock deemed outstanding at that date.

          The historical net tangible book value of our common stock as of September 30, 2015 was a deficit of $(74.8) million, or $(8.43) per share, based on 8,871,248 shares of our common stock outstanding as of September 30, 2015.

          The pro forma net tangible book value of our common stock as of September 30, 2015 was a deficit of $          million, or $          per share, after giving effect to (1) the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 9,873,511 shares of our common stock immediately prior to the completion of this offering and the reclassification to additional paid-in capital of the warrant liability related to warrants to purchase preferred stock, (2) the issuance of               shares of our common stock upon the net exercise of outstanding warrants that would otherwise expire upon the completion of this offering, assuming an initial public offering price of $        per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and (3) the issuance of              shares of restricted common stock under our 2014 Equity Compensation Plan to members of management immediately prior to the effective date of the registration statement of which this prospectus forms a part.

          After giving further effect to (1) our issuance and sale of                 shares of our common stock in this offering at an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, (2) our receipt of the net proceeds of this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and (3) our application of a portion of such net proceeds to repay indebtedness, as set forth under "Use of Proceeds," our pro forma as adjusted net tangible book value as of September 30, 2015 would have been $              million, or $             per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $             per share to existing stockholders, and an immediate dilution of $             per share to investors purchasing common stock in this offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share

        $    

Historical net tangible book value (deficit) per share as of September 30, 2015

  $ (8.43 )      

Pro forma increase in net tangible book value per share attributable to the pro forma effects described above

                     

Pro forma net tangible book value (deficit) per share as of September 30, 2015

                     

Pro forma increase in net tangible book value per share attributable to new investors

             

Pro forma as adjusted net tangible book value per share after this offering

             

Dilution per share to new investors purchasing common stock in this offering

        $            

          A $1.00 increase or decrease in the assumed initial public offering price of $             per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted net tangible book value by $              million, or $             per share, and the dilution to new investors in this offering by $             per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We

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may also increase or decrease the number of shares we are offering. An increase or decrease of 1.0 million shares offered by us would increase or decrease our pro forma as adjusted net tangible book value, by $              million, or $             per share, and the dilution per share to new investors purchasing common stock in this offering by $             , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

          If the underwriters partially or fully exercise their option to purchase additional shares from us, the pro forma as adjusted net tangible book value per share after giving effect to this offering would be $             per share, which amount represents an immediate increase in pro forma net tangible book value of $             per share of our common stock to existing stockholders and an immediate dilution in net tangible book value of $             per share of our common stock to new investors purchasing shares of common stock in this offering.

          The following table summarizes, as of September 30, 2015, on the pro forma basis described above, the differences between the number of shares purchased from us, the total consideration paid to us, and the average price per share paid to us by existing stockholders and by new investors purchasing common stock in this offering at an assumed initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
  Shares Purchased   Total Consideration    
 
 
  Average
Price
Per Share
 
 
  Number   Percentage   Amount   Percentage  
 
  (Dollars in thousands)
   
 

Existing stockholders

            % $                 % $            

New investors

                               

Total

            % $                 %      

          The number of shares of our common stock to be outstanding after this offering is based on                 shares of our common stock outstanding as of September 30, 2015, which includes:

    9,873,511 shares of common stock issuable upon the automatic conversion of all outstanding shares of preferred stock into 9,873,511 shares of our common stock immediately prior to the completion of this offering;

                     shares of our common stock issuable upon the net exercise of outstanding warrants that would otherwise expire upon the completion of this offering, assuming an initial public offering price of $              per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and

                     shares of restricted common stock issuable under our 2014 Equity Compensation Plan to certain members of management immediately prior to the effective date of the registration statement of which this prospectus forms a part.

          The number of shares of common stock to be outstanding after this offering excludes:

    312,500 shares of our common stock issuable upon the exercise of outstanding warrants as of September 30, 2015 at a weighted-average exercise price of $0.80 per share, which warrants are exercisable to purchase shares of our Series A-1 preferred stock prior to the completion of this offering;

    586,868 shares of our common stock issuable upon the exercise of outstanding warrants as of September 30, 2015 at a weighted-average exercise price of $2.96 per share, which warrants are exercisable to purchase shares of our Series B preferred stock prior to the completion of this offering;

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    5,412,858 shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2015 under the 2014 Equity Compensation Plan at a weighted-average exercise price of $1.67 per share;

                 shares of our common stock that may be issuable upon the completion of this offering, at the election of the holder, upon the conversion of all principal outstanding under the Medliance Notes, assuming an initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and

    21,000 shares of our common stock that will be issuable in the future as consideration in connection with our acquisition of SMPP.

          To the extent that outstanding stock options or warrants are subsequently exercised, there will be further dilution to new investors.

          Effective upon the completion of this offering, an aggregate of                 shares of our common stock will be reserved for future issuance under our 2016 Equity Compensation Plan, and the number of reserved shares will also be subject to automatic annual increases in accordance with the terms of such plan. New options that we may grant under our 2016 Equity Compensation Plan will further dilute investors purchasing common stock in this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA

          The following tables set forth selected consolidated financial data and other data for the periods and at the dates indicated. We have derived the consolidated statements of operations data for the years ended December 31, 2013 and 2014 and the consolidated balance sheet data as of December 31, 2013 and 2014 from our audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated statements of operations data for the nine months ended September 30, 2014 and September 30, 2015 and the consolidated balance sheet data as of September 30, 2015 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Our unaudited consolidated financial statements were prepared on the same basis as our audited consolidated financial statements and include, in our opinion, all normal recurring adjustments necessary for the fair presentation of the financial information set forth in those statements.

          Our historical results for any prior period are not necessarily indicative of the results that should be expected in any future period, and our interim results are not necessarily indicative of the results to be expected for a full year. The following selected consolidated financial data should be read in conjunction with the sections entitled "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

          See notes 3 and 14 to our audited consolidated financial statements and note 11 to our unaudited consolidated financial statements appearing elsewhere in this prospectus for information regarding computation of basic and diluted net loss per share attributable to common stockholders, unaudited pro forma basic and diluted net loss per share attributable to common stockholders, and the unaudited pro forma weighted average basic and diluted common shares outstanding used in computing the pro forma basic and diluted net loss per share attributable to common stockholders.

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  Year Ended December 31,   Nine Months Ended September 30,  
 
  2013   2014   2014   2015  
 
  (In thousands, except share and
per share amounts)

 

Consolidated Statement of Operations Data:

                         

Revenue:

                         

Product revenue

  $ 25,143   $ 46,878   $ 33,710   $ 42,684  

Service revenue

        1,550     965     7,594  

Total revenue

    25,143     48,428     34,675     50,278  

Cost of revenue, exclusive of depreciation and amortization shown below:

                         

Product cost

    20,921     37,073     26,940     32,811  

Service cost

        739     464     2,398  

Total cost of revenue

    20,921     37,812     27,404     35,209  

Gross profit

    4,222     10,616     7,271     15,069  

Operating (income) expenses:

                         

Research and development

    1,338     1,660     1,148     1,879  

Sales and marketing

    1,775     2,272     1,573     2,071  

General and administrative

    2,482     3,970     2,672     5,374  

Change in fair value of acquisition-related contingent consideration (income) expense

        790     284     (1,348 )

Depreciation and amortization

    1,118     1,817     1,309     2,935  

Total operating (income) expenses           

    6,713     10,509     6,986     10,911  

(Loss) income from operations

    (2,491 )   107     285     4,158  

Other (income) expense:

                         

Change in fair value of warrant liability

    547     269     (18 )   3,477  

Interest expense

    833     1,354     988     4,418  

Total other (income) expense

    1,380     1,623     970     7,895  

Loss before income taxes

    (3,871 )   (1,516 )   (685 )   (3,737 )

Income tax (benefit) expense

        (409 )   (426 )   212  

Net loss

    (3,871 )   (1,107 )   (259 )   (3,949 )

Accretion of redeemable convertible preferred stock

    (5,346 )   (3,884 )   (531 )   (12,058 )

Net loss attributable to common stockholders

  $ (9,217 ) $ (4,991 ) $ (790 ) $ (16,007 )

Net loss per share attributable to common stockholders, basic and diluted

  $ (1.22 ) $ (0.63 ) $ (0.10 ) $ (1.95 )

Weighted average common shares outstanding, basic and diluted

    7,525,931     7,862,025     7,824,537     8,210,760  

Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(1)

        $                   $    

Pro forma weighted average common shares outstanding, basic and diluted (unaudited)(1)

                                         

Other Financial Data:

                         

Adjusted EBITDA(2)

  $ (1,284 ) $ 2,968   $ 2,068   $ 6,216  

(1)
We intend to use a portion of the proceeds from this offering to repay outstanding debt. The pro forma net loss per share information is calculated based upon an assumed initial public offering price of $      per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and gives effect to

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    the automatic conversion of all outstanding shares of preferred stock into 9,873,511 shares of our common stock immediately prior to the completion of this offering, the add back of accretion of redeemable convertible preferred stock, the sale of             shares, which is the number of shares whose proceeds would be necessary to repay $      of outstanding debt, and the repayment of such debt, all as of the beginning of the reporting period, before deducting estimated underwriting discounts and expenses payable by us. The net loss attributable to common stockholders has been adjusted to exclude interest expense associated with the interest expense incurred on the portion of the debt expected to be repaid with net proceeds from this offering.

    The table below provides a summary of net loss attributable to common stockholders used in the calculation of pro forma net loss per share:

 
  Year Ended
December 31, 2014
  Nine Months Ended
September 30, 2015
 

Net loss attributable to common stockholders

  $ (4,991 ) $ (16,007 )

Accretion of redeemable convertible preferred stock

    3,884     12,058  

Reduction of interest expense

             

Pro forma net loss attributable to common stockholders

  $     $    

    The table below provides a summary of the pro forma weighted average common shares outstanding, basic and diluted:

 
  Year Ended
December 31, 2014
  Nine Months Ended
September 30, 2015
 

Weighted average common shares outstanding, basic and diluted

    7,862,025     8,210,760  

Conversion of redeemable convertible preferred stock

    9,873,511     9,873,511  

Common shares sold in offering related to repayment of debt

             

             
(2)
Adjusted EBITDA is a non-GAAP financial measure. See "Adjusted EBITDA" below for our definition of Adjusted EBITDA, why we present Adjusted EBITDA, limitations on the usefulness of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss, the most nearly comparable GAAP measurement.

 
  December 31,   September 30,  
 
  2013   2014   2015  
 
  (In thousands)
 

Consolidated Balance Sheet Data:

                   

Cash

  $ 6,027   $ 4,122   $ 2,558  

Working capital

    3,119     (9,822 )   (30,675 )

Total assets

    14,533     58,823     58,341  

Line of credit

    6,860     6,860     10,000  

Long-term debt, including current portion

    3,235     15,110     14,341  

Notes payable to related parties

    1,089     1,014     660  

Notes payable related to acquisition

        14,350     15,256  

Warrant liability

    679     2,783     6,260  

Total liabilities

    15,430     59,818     62,187  

Total redeemable convertible preferred stock

    15,123     19,007     31,065  

Total stockholders' deficit

    (16,020 )   (20,002 )   (34,911 )

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Adjusted EBITDA

          The following is a reconciliation of Adjusted EBITDA to our net loss for the years ended December 31, 2013 and 2014 and the nine months ended September 30, 2014 and 2015:

 
  Year Ended December 31,   Nine Months Ended September 30,  
 
  2013   2014   2014   2015  
 
  (In thousands)
 

Reconciliation of Adjusted EBITDA to net loss:

                         

Net loss

  $ (3,871 ) $ (1,107 ) $ (259 ) $ (3,949 )

Add:

                         

Change in fair value of warrant liability

    547     269     (18 )   3,477  

Interest expense

    833     1,354     988     4,418  

Income tax (benefit) expense           

        (409 )   (426 )   212  

Depreciation and amortization

    1,118     1,817     1,309     2,935  

Change in fair value of acquisition-related contingent consideration expense (income)

        790     284     (1,348 )

Stock-based compensation expense

    89     254     190     471  

Adjusted EBITDA

  $ (1,284 ) $ 2,968   $ 2,068   $ 6,216  

          To provide investors with additional information about our financial results, we disclose within this prospectus Adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA consists of net loss plus total other expenses, which includes change in fair value of warrant liability and interest expense; provision (benefit) for income tax, depreciation and amortization, change in fair value of acquisition-related contingent consideration (income) expense and stock-based compensation expense. We present Adjusted EBITDA because it is one of the measures used by our management and board of directors to understand and evaluate our core operating performance, and we consider it an important supplemental measure of performance. We believe this metric is commonly used by the financial community, and we present it to enhance investors' understanding of our operating performance and cash flows. We believe Adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations.

          Our management uses Adjusted EBITDA:

    as a measure of operating performance to assist in comparing performance from period to period on a consistent basis;

    to prepare and approve our annual budget; and

    to develop short- and long-term operational plans

          Adjusted EBITDA is not in accordance with, or an alternative to, measures prepared in accordance with GAAP. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. As a non-GAAP measure, Adjusted EBITDA has limitations in that it does not reflect

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all of the amounts associated with our results of operations as determined in accordance with GAAP. In particular:

    although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

    Adjusted EBITDA does not reflect cash interest income or expense;

    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

    Adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation;

    Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and

    other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

          Because of these and other limitations, you should consider Adjusted EBITDA alongside other GAAP-based financial performance measures, including various cash flow metrics, net income and our other GAAP financial results and not in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. You should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in the presentation, and we do not intend to imply that our future results will be unaffected by unusual or non-recurring items.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this prospectus, our actual results could differ materially from the results we describe or imply in the forward-looking statements contained in the following discussion and analysis.


Overview

          We are a leader in providing patient-specific, data-driven technology and solutions that enable healthcare organizations to optimize medication regimens to improve patient outcomes, reduce hospitalizations, lower healthcare costs and manage risk. We deliver our solutions through a comprehensive suite of technology-enabled products and services for medication risk management, which includes bundled prescription fulfillment and adherence packaging services for client populations with complex prescription needs. We also provide risk adjustment services, which help our clients to properly characterize a patient's acuity, or severity of health condition, and optimize the associated payments for care.

          Our suite of cloud-based software solutions provides prescribers, pharmacists and healthcare organizations with sophisticated and innovative tools to better manage the medication-related needs of their patients. We believe we offer the first prospective clinical approach to medication risk management, which is designed to increase patient safety and promote adherence to a patient's personalized medication regimen. Furthermore, our medication risk management technology helps healthcare organizations lower costs by reducing ADEs, enhancing quality of care and avoiding preventable hospital admissions. Our products and services are built around our novel and proprietary MRM Matrix, which enables optimization of a patient's medication regimen, involving personalizing medication selection, dosage levels, time-of-day administration and reducing the total medication burden by eliminating unnecessary prescriptions. The MRM Matrix analyzes a combination of clinical and pharmacology data, population-based algorithms and extensive patient-specific data, including medical history, lab results, medication lists and individual genomic data, to deliver "precision medicine." We provide software-enabled solutions that can be bundled with prescription fulfillment and adherence packaging services, which are informed by a patient's personalized MRM Matrix to increase adherence to a patient's optimized regimen, through our three prescription fulfillment pharmacies. Our prescription fulfillment pharmacies are strategically located to efficiently distribute medications nationwide for our clients and medications are packaged to promote adherence to their patients' personalized regimens and dosing schedules. Our team of clinical pharmacists is available to support prescribers at the point of care through our proprietary technology platform, including real-time secure messaging, with more than 100,000 messages exchanged per month. Recently, we began offering software solutions on a standalone software-as-a-service basis, although to date, all of our medication risk management clients have contracted for a bundled offering of our software-enabled solutions, prescription fulfillment and adherence packaging services. While prescription medication revenue has comprised substantially all of our revenue to date, we do not offer prescription fulfillment and adherence packaging services on a standalone basis.

          Our technology-driven approach to medication risk management represents an evolution from prevailing non-personalized approaches that primarily rely on single drug-to-drug interaction analysis. At the end of 2011, 2012, 2013 and 2014, we were serving 8, 13, 20 and 51 healthcare organizations, respectively, and as of September 30, 2015, this number had grown to 101 healthcare organizations that focus on populations with complex healthcare needs and extensive medication requirements.

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          Our total revenue and Adjusted EBITDA for the nine months ended September 30, 2015 were $50.3 million and $6.2 million, respectively, compared to $34.7 million and $2.1 million, respectively, for the nine months ended September 30, 2014. Our total revenue and Adjusted EBITDA for the year ended December 31, 2014 were $48.4 million and $3.0 million, respectively, compared to $25.1 million and $(1.3) million, respectively, for the year ended December 31, 2013. We incurred net losses of $259 thousand and $3.9 million for the nine months ended September 30, 2014 and 2015, respectively, and $3.9 million and $1.1 million for the years ended December 31, 2013 and 2014, respectively. See "Selected Consolidated Financial Data — Adjusted EBITDA" for our definition of Adjusted EBITDA, why we present Adjusted EBITDA and a reconciliation of net losses to Adjusted EBITDA.

          We face a variety of challenges and risks, which we will need to address and manage as we pursue our growth strategy. In particular, we will need to continue to innovate in the face of a rapidly changing healthcare landscape if we are to remain competitive. We will also need to effectively manage our growth, especially related to our expansion beyond the PACE and post-acute markets to other at-risk providers and payors. Our senior management continuously focuses on these and other challenges, and we believe that our culture of innovation and our history of growth and expansion will contribute to the success of our business. We are engaged in a number of pilot programs of our technology and services and we intend to use these pilot programs to evaluate the viability and impact of our offerings in certain markets. We cannot, however, assure you that we will be successful in addressing and managing the many challenges and risks that we face.

          We manage our operations and allocate resources as a single reportable segment. All of our revenue is recognized in the United States and all of our assets are located in the United States.


Key Business Metrics

          We regularly review a number of metrics, including the following key metrics, to evaluate and manage our business and that are useful in evaluating our operating performance compared to that of other companies in our industry.

 
  Nine Months Ended
September 30,
  Change  
 
  2014   2015   $   %  
 
  (Dollars in thousands)
 

Total revenue

  $ 34,675   $ 50,278   $ 15,603     45 %

Net loss

    (259 )   (3,949 )   (3,690 )   (1,425 )

Adjusted EBITDA

    2,068     6,216     4,148     201  

 

 
  Year Ended
December 31,
  Change  
 
  2013   2014   $   %  
 
  (Dollars in thousands)
 

Total revenue

  $ 25,143   $ 48,428   $ 23,285     93 %

Net loss

    (3,871 )   (1,107 )   2,764     71  

Adjusted EBITDA

    (1,284 )   2,968     4,252     331  

          We monitor the key metrics set forth in the preceding table to help us evaluate trends, establish budgets, measure the effectiveness and efficiency of our operations and gauge our cash generation. We discuss Adjusted EBITDA in "Selected Consolidated Financial Data — Adjusted EBITDA."

          We also monitor revenue retention rate and client retention rate. Our revenue retention rate and client retention rate were 95% and 97%, respectively for 2014 and 100% and 100%, respectively, for 2013.

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Revenue retention rate

          We believe that our ability to retain revenue associated with new or existing client relationships is an indicator of the stability of our revenue base and the long-term value we provide to our clients. We assess our performance in this area using a metric we refer to as our revenue retention rate. We calculate our revenue retention rate at the end of each calendar year by dividing total revenue in the year from client contracts that have not renewed or have been terminated during the year by our total revenue for that year, and subtracting this quotient from 100%.

Client retention rate

          We monitor our client retention rate as a measure for our overall business performance. We believe that our ability to retain clients is an indicator of the stability of our revenue base and the long-term value of our client relationships. We assess our performance in this area using a metric we refer to as our client retention rate. We calculate this rate by dividing the number of client terminations and client non-renewals during a calendar year by the total number of clients serviced during that year, and subtracting this quotient from 100%.


Factors Affecting our Future Performance

          We believe that our future success will be dependent on many factors, including our ability to maintain and grow our relationships with existing clients, expand our client base, continue to enter new markets and expand our offerings to meet evolving market needs. While these areas present significant opportunity, they also present risks that we must manage to ensure successful results. See the section entitled "Risk Factors" for a discussion of certain risks and uncertainties that may impact our future success.


Recent Developments

Reorganization

          Effective June 30, 2014, in order to facilitate the administration, management and development of our business and the proposed initial public offering, we implemented a holding company reorganization pursuant to which we became the new parent company and CareKinesis became our direct, wholly owned subsidiary. To implement the reorganization, we formed CK Merger Sub, Inc. The holding company structure was implemented by the merger of CK Merger Sub, Inc. with and into CareKinesis, with CareKinesis surviving the merger as our direct, wholly owned subsidiary. As a result of the reorganization, each share of CareKinesis issued and outstanding immediately prior to the merger automatically converted into the same share, with the same rights and preferences, of stock in our company. The business conducted by CareKinesis immediately prior to the corporate reorganization continues to be conducted by CareKinesis following the reorganization. In addition, in connection with the reorganization, CareKinesis distributed all of the equity interests in two of its wholly owned subsidiaries, Capstone Performance Systems, LLC, or Capstone, and CareVentions, Inc., to us.

Acquisitions

          In January 2014, we acquired all of the authorized, issued and outstanding shares of capital stock of J. A. Robertson, Inc., doing business as St. Mary Prescription Pharmacy, or SMPP, a pharmacy based in San Francisco, California that has been servicing the needs of PACE participants for over 30 years. The acquisition consideration consisted of cash consideration of up to $2.0 million, consisting of $1.0 million payable upon closing, up to $500 thousand payable following the six-month anniversary of the closing date, up to $300 thousand payable following the 12-month anniversary of the closing date and a fixed amount of $200 thousand payable following the 24-month anniversary of the closing date. The first two cash payments made subsequent to the closing date were contingent upon the achievement of specified revenue targets, as set forth in the underlying purchase agreement. As of September 30, 2015, each of the first two contingent cash payments have been made in full. The final

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payment on the 24-month anniversary of the closing date will be paid if we have not made any claims for indemnification pursuant to the purchase agreement. In addition to the cash consideration, the purchase price included up to 210,000 shares of our common stock, consisting of 105,000 shares due upon the closing of the acquisition, up to 52,500 shares due following the six-month anniversary of the closing date, up to 31,500 shares due following the 12-month anniversary of the closing date and a fixed amount of 21,000 shares due following the 24-month anniversary of the closing date. The first two issuances made subsequent to the closing date were contingent upon the achievement of specified revenue targets. As of September 30, 2015, the first two contingent stock payments have been made in full. The final issuance following the 24-month anniversary of the closing date will be issued if we have not made any claims for indemnification pursuant to the purchase agreement. No claims for indemnification have been made as of September 30, 2015.

          In April 2014, we acquired substantially all of the assets, and assumed certain liabilities, of Capstone, a consulting business providing expert Medicare risk adjustment services for at-risk healthcare organizations. The acquisition consideration consisted of cash consideration consisting of $3.0 million payable upon closing, $500 thousand payable following the six-month anniversary of the closing date, and the greater of (i) $2.0 million or (ii) an amount equal to a multiple of EBITDA, as defined in the purchase agreement, payable following the 12-month anniversary of the closing date. As of September 30, 2015, all contingent cash payments had been made, totaling $577 thousand, and no additional contingent cash consideration is payable. In addition to the cash consideration, the purchase price included up to 677,862 shares of our common stock, which was issuable following the 12-month anniversary of the closing date if specified net income targets, as defined in the purchase agreement, were achieved. As of September 30, 2015, 239,088 shares of our common stock have been issued and no additional stock consideration is payable.

          In December 2014, we acquired all of the authorized, issued and outstanding equity interests of Medliance LLC, or Medliance, which provides pharmacy cost management services through data analytics. The acquisition consideration consisted of $16.4 million in the form of promissory notes with an aggregate fair value of $14.3 million as of the acquisition date, or the Medliance Notes, and cash consideration consisting of $12.0 million payable upon closing and contingent purchase price consideration with an estimated acquisition date fair value of $7.3 million due upon achieving specified revenue targets as of the 12-, 24- and 36-month anniversaries of the acquisition. The Medliance Notes accrue interest at 8% per annum, compounding annually and are due on June 30, 2016 unless an initial public offering occurs prior to the maturity date, at which time all principal and interest shall become due and payable or, at the option of the holder, the holder may receive a number of shares of our common stock equal to the quotient obtained by dividing (i) the outstanding principal amount under such Medliance Note by (ii) 92% of the public offering price per share of our common stock in the initial public offering.

          We account for acquisitions using the purchase method of accounting. In each case, we allocated the purchase price to the assets acquired, including intangible assets and liabilities assumed, based on estimated fair values at the date of the acquisition. The results of operations from each acquisition are included in our consolidated financial statements from the acquisition date.

Financing

          On April 29, 2015 we entered into a revolving line of credit, or the 2015 Line of Credit, with a lender pursuant to the terms of a loan and security agreement, which provides for borrowings in an aggregate amount up to $15.0 million to be used for general corporate purposes, including repayment of a prior line of credit. We borrowed $10.0 million under the 2015 Line of Credit at that time. See "—Liquidity and Capital Resources—Revolving Credit Facility" for additional information with respect to the 2015 Line of Credit.

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Components of Our Results of Operations

Revenue

          Our revenue is derived from our product sales and service activities. For the nine months ended September 30, 2014 and 2015, product sales represented 97% and 85%, respectively, of our total revenue, and service revenue represented 3% and 15%, respectively, of our total revenue.

          For the years ended December 31, 2013 and 2014, product sales represented 100% and 97%, respectively, of our total revenue and service revenue represented 0% and 3%, respectively, of our total revenue. We did not generate service revenue until our acquisition of Capstone in April 2014.

Product Revenue

          Our product revenue is primarily generated through our medication risk management contracts with healthcare organizations. Our MRM Matrix technology enables our pharmacists to prospectively optimize personalized medication regimens for each patient. Recently, we began offering software solutions on a standalone software-as-a-service basis, although to date, all of our medication risk management clients have contracted for a bundled offering of our software-enabled solutions, prescription fulfillment and adherence packaging services. We do not offer, and have not generated any revenue from, standalone prescription fulfillment and adherence packaging services.

          Under our medication risk management contracts, revenue is generated through the following components:

          Prescription medication revenue.    We sell prescription medications directly to healthcare organizations through our prescription fulfillment pharmacies. Prescription medication fees are based upon the prices stated in client contracts for the prescription and include a dispensing fee. For the periods presented, substantially all of our product revenue has consisted of prescription medication revenue.

          Per member per month, or PMPM, fees.    We also receive a fixed monthly administrative fee for each member in the program contracted for medication risk management services.

          Our revenue from prescription medication sales varies based on the number and mix of medications dispensed; however, based on our historical experience, patient populations at our clients do not generally decline over time, the number of medications per patient have been consistent following an initial onboarding period and the overall mix of medications dispensed is generally predictable. In addition, our dispensing fees vary directly with the volume of prescription medication sales each period. Our PMPM fees vary directly with the number of members serviced by our clients each month. Although revenue is generated from various sources, pricing and other key contractual terms are negotiated on a bundled basis.

Service Revenue

          Our service revenue is generated by the risk adjustment and pharmacy cost management services that we provide to healthcare organizations. Our client contracts for these services include a PMPM fee for selected services, monthly subscription fees, initial set up fees and hourly consulting charges. PMPM fees vary directly with the number of members serviced by our clients each month under our risk adjustment contracts. Additionally, service revenue includes data and statistics fees we receive from medication manufacturers for the sale of medication utilization data we collect through our pharmacy cost management engagements, which is recognized when we receive such amounts due to the unpredictable nature of the payments.

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Cost of Revenue

Product Cost

          Cost of product revenue includes all costs directly related to the medication risk management offering, including costs relating to our pharmacists' collaboration on a patient's medication management, medication risk analysis and offering guidance to the prescriber based upon the assessment of the MRM Matrix and the individual patient's medical history, as well as the fulfillment and distribution of prescription medications. Costs consist primarily of the purchase price of the prescription medications we dispense. For the nine months ended September 30, 2014 and 2015, prescription medication costs represented 75% and 76%, respectively, of our total product costs. For the years ended December 31, 2013 and 2014, prescription medication costs represented 71% and 75%, respectively, of our total product costs. In addition to costs incurred for the prescription medications we dispense, other costs include expenses to package, dispense and distribute prescription medications, expenses associated with our clinical pharmacist support centers and prescription fulfillment centers, including employment costs and stock-based compensation, and expenses related to the hosting of our technology platform. Such costs also include direct overhead expenses, as well as allocated miscellaneous overhead costs. We allocate miscellaneous overhead costs among functions based on employee headcount.

Service Cost

          Cost of service revenue includes all labor costs, including stock-based compensation expense, directly related to the risk adjustment and pharmacy cost management services and expenses for claims processing, technology services and overhead costs.

Research and Development Expenses

          Our research and development expenses consist primarily of salaries and related costs, including stock-based compensation expense, for personnel in our research and development functions, costs for design and development of new software and technology and enhancement of existing software and technology, including fees paid to third-party consultants, costs related to quality assurance and testing, and depreciation and other allocated facility-related overhead and expenses.

          We continue to focus our research and development efforts on adding new features and applications, increasing the functionality and enhancing the ease of use of our existing suite of software solutions.

          We capitalize certain costs incurred in connection with obtaining or developing internal-use software, including external direct costs of material and services and payroll costs for employees directly involved with the software development. Capitalized software costs are amortized beginning when the software project is substantially complete and the asset is ready for its intended use. Costs incurred during the preliminary project stage and post-implementation stage, as well as maintenance and training costs, are expensed as incurred as part of research and development expense.

          We expect our research and development expenses will increase in absolute dollars as we increase our research and development headcount to further strengthen and enhance our software solutions, but will decrease as a percentage of revenue in the long term as we expect our revenue to increase at a greater rate than such expenses.

Sales and Marketing Expenses

          Sales and marketing expenses consist principally of salaries, commissions, bonuses, stock-based compensation and employee benefits for sales and marketing personnel, as well as travel costs related to sales, marketing and client service activities. Marketing costs also include costs of communication and branding materials, trade shows and public relations, as well as allocated overhead.

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          We expect our sales and marketing expenses to increase in absolute dollars as we strategically invest to grow our marketing operations and expand into new products and markets, but decrease as a percentage of revenue in the long term. We expect to hire additional sales personnel and related account management and sales support personnel as we continue to grow.

General and Administrative Expenses

          General and administrative expenses consist principally of salaries and related costs for executives, administrative personnel and consultants, including stock-based compensation and travel expenses. Other general and administrative expenses include professional fees for legal, consulting and accounting services. General and administrative expenses are expensed when incurred.

          We expect that our general and administrative expenses will increase as we expand our infrastructure and transition to a public company. These increases will likely include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel and increased fees for directors, outside consultants, lawyers and accountants. We also expect to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to public companies.

Remeasurement of Acquisition-related Contingent Consideration

          We classify our acquisition-related contingent consideration as a liability. Acquisition-related contingent consideration is subject to remeasurement at each balance sheet date. Any change in the fair value of such acquisition-related contingent consideration is reflected in our consolidated statements of operations as a change in fair value of the liability. We will continue to adjust the carrying value of the acquisition-related contingent consideration until the contingency is finally determined.

Depreciation and Amortization Expenses

          Depreciation and amortization expenses are primarily attributable to our capital investment in equipment and our capitalized software and acquisition-related intangibles.

Change in Fair Value of Warrant Liability

          Warrants to purchase shares of our preferred stock are classified as warrant liabilities and recorded at fair value. This warrant liability is subject to remeasurement at each balance sheet date and we recognize any change in fair value in our consolidated statements of operations as a change in fair value of the warrant liability. Upon the completion of this offering, these warrants will automatically convert into warrants to purchase shares of our common stock. At that time, the liabilities will be reclassified to additional paid-in capital, a component of stockholders' equity (deficit).

Interest Expense

          Interest expense is primarily attributable to interest expense associated with our revolving credit facility, term loans, related party notes, capital lease obligations and acquisition-related notes. It also includes the amortization of discounts on debt and amortization of deferred financing costs related to these various debt arrangements.

Accretion of Redeemable Convertible Preferred Stock

          The carrying values of Series A and Series A-1 redeemable convertible preferred stock are being accreted to their respective redemption values at each reporting period, from the date of issuance to the earliest date the holders can demand redemption. The carrying value of Series B redeemable convertible preferred stock is being accreted to redemption value at each reporting period at the greater of (i) the original issuance price plus unpaid accrued dividends or (ii) the fair value of the redeemable convertible preferred stock. Upon the completion of this offering, our preferred stock will automatically convert into shares of our common stock. At that time, we will discontinue accreting our preferred stock to its redemption value.

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Results of Operations

          The following table summarizes our results of operations for the years ended December 31, 2013 and 2014 and for the nine months ended September 30, 2014 and 2015:

 
  Year Ended
December 31,
  Change   Nine Months Ended
September 30,
  Change  
 
  2013   2014   $   %   2014   2015   $   %  
 
  (Dollars in thousands)
 

Revenue:

                                                 

Product revenue

  $ 25,143   $ 46,878   $ 21,735     86 % $ 33,710   $ 42,684   $ 8,974     27 %

Service revenue

        1,550     1,550     nm     965     7,594     6,629     687  

Total revenue

    25,143     48,428     23,285     93     34,675     50,278     15,603     45  

Cost of revenue, exclusive of depreciation and amortization shown below:

                                                 

Product cost

    20,921     37,073     16,152     77     26,940     32,811     5,871     22  

Service cost

        739     739     nm     464     2,398     1,934     417  

Total cost of revenue

    20,921     37,812     16,891     81     27,404     35,209     7,805     28  

Gross profit

    4,222     10,616     6,394     151     7,271     15,069     7,798     107  

Operating (income) expenses:

                                                 

Research and development

    1,338     1,660     322     24     1,148     1,879     731     64  

Sales and marketing

    1,775     2,272     497     28     1,573     2,071     498     32  

General and administrative

    2,482     3,970     1,488     60     2,672     5,374     2,702     101  

Change in fair value of acquisition-related contingent consideration (income) expense

        790     790     nm     284     (1,348 )   (1,632 )   nm  

Depreciation and amortization

    1,118     1,817     699     63     1,309     2,935     1,626     124  

Total operating (income) expenses

    6,713     10,509     3,796     57     6,986     10,911     3,925     56  

(Loss) income from operations

    (2,491 )   107     2,598     nm     285     4,158     3,873     nm  

Other (income) expense:

                                                 

Change in fair value of warrant liability

    547     269     (278 )   (51 )   (18 )   3,477     3,495     nm  

Interest expense

    833     1,354     521     63     988     4,418     3,430     347  

Total other (income) expense

    1,380     1,623     243     18     970     7,895     6,925     714  

Loss before income taxes

    (3,871 )   (1,516 )   2,355     61     (685 )   (3,737 )   (3,052 )   (446 )

Income tax (benefit) expense

        (409 )   (409 )   nm     (426 )   212     638     nm  

Net loss

    (3,871 )   (1,107 )   2,764     71     (259 )   (3,949 )   (3,690 )   (1,425 )

Accretion of redeemable convertible preferred stock

    (5,346 )   (3,884 )   1,462     27     (531 )   (12,058 )   (11,527 )   2,171  

Net loss attributable to common stockholders

  $ (9,217 ) $ (4,991 ) $ 4,226     46 % $ (790 ) $ (16,007 ) $ (15,217 )   1,926 %

nm = not meaningful

Comparison of the Nine Months Ended September 30, 2014 and 2015

Product Revenue

          Product revenue increased $9.0 million, or 27%, from $33.7 million for the nine months ended September 30, 2014 to $42.7 million for the comparable period in 2015. The increase was primarily driven

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by organic growth in our core business, medication risk management, which represented approximately $5.6 million of the increase. Of that $5.6 million increase, $2.1 million was attributable to new customers acquired period over period, while the remaining $3.5 million was attributable to increased prescription fulfillment volume from existing customers. Manufacturer price increases, medication mix we fulfilled for our clients' patients and payor mix contributed to an additional $3.4 million of the overall increase in product revenue.

Service Revenue

          Service revenue increased $6.6 million from $1.0 million for the nine months ended September 30, 2014 to $7.6 million for the nine months ended September 30, 2015, which was primarily the result of a $5.5 million increase related to our pharmacy cost management services related to Medliance, which we acquired in December 2014, and an additional $1.1 million increase related to nine months of revenue from risk adjustment services related to Capstone for the period ended September 30, 2015 as compared to only five months for the period ended September 30, 2014.

          For the nine months ended September 30, 2014, revenue generated from our PMPM fees and subscription revenue was $858 thousand while the remainder of the service revenue primarily related to hourly consulting charges and setup fees. For the nine months ended September 30, 2015, $3.1 million related to PMPM fees and subscription revenue and $4.5 million represented hourly consulting charges and data and statistics revenue.

Cost of Product Revenue

          Cost of product revenue increased $5.9 million, or 22%, from $26.9 million for the nine months ended September 30, 2014 to $32.8 million for the comparable period in 2015. This increase was largely driven by increased volume of revenue which contributed approximately $3.6 million to the period over period change, while manufacturer price increases and medication mix we fulfilled for our clients' patients contributed $2.1 million to the overall increase in the cost of product revenue. In addition, labor costs increased $527 thousand, which was primarily due to added pharmacy headcount, including additional pharmacists, technicians and support staff, to support our growth, as well as a $313 thousand increase in distribution charges related to increased shipping volume for the medications we fulfilled for our clients' patients. These increases were offset by more favorable rebates on wholesale product purchases of prescription medications. Specifically, we joined a purchasing group in the first quarter of 2014 and, as a result, were able to gain access to more favorable pricing, which decreased the cost of the prescription medications we purchased by $727 thousand.

Cost of Service Revenue

          Cost of service revenue increased $1.9 million from $464 thousand for the nine months ended September 30, 2014 to $2.4 million for the nine months ended September 30, 2015. Of the $1.9 million increase, $1.3 million was attributable to pharmacy cost management services related to Medliance, which we acquired in December 2014, and $533 thousand was the result of risk adjustment services related to Capstone for the period ended September 30, 2015 as compared to five months for the period ended September 30, 2014.

Research and Development Expenses

          Research and development expenses increased $731 thousand, or 64%, from $1.1 million for the nine months ended September 30, 2014 to $1.9 million for the comparable period in 2015. The overall increase was primarily attributable to a $476 thousand increase in payroll and payroll-related costs. Additionally, $236 thousand of the increase was from expenses related to new Medliance product offerings.

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Sales and Marketing Expenses

          Sales and marketing expenses increased $498 thousand, or 32%, from $1.6 million for the nine months ended September 30, 2014 to $2.1 million for the comparable period in 2015. The increase was primarily attributable to a $202 thousand increase in personnel costs, including salaries and benefits, related to market adjustments as well as performance-based increases. The remaining portion of the increase was principally related to increased marketing efforts, in particular marketing events and conferences, which contributed approximately $134 thousand to the overall increase in such expenses. The increase in the period also included $162 thousand in sales and marketing expenses related to the ongoing operations of Capstone and Medliance.

General and Administrative Expenses

          General and administrative expenses increased $2.7 million, or 101%, from $2.7 million for the nine months ended September 30, 2014 to $5.4 million for the nine months ended September 30, 2015. The increase was primarily attributable to a $894 thousand increase in personnel costs, including salaries and benefits, related to an increase in headcount to support the overall growth of our operations. Finance and accounting fees increased by $805 thousand as a result of higher costs related to preparation for this offering that did not qualify for deferral. Additionally, the increase in the period included $555 thousand of general and administrative expenses related to the ongoing operations of Medliance and $232 thousand for nine months of operations of Capstone for the period ended September 30, 2015 as compared to $90 thousand for the five months for the period ended September 30, 2014.

Acquisition-related Contingent Consideration Expense

          During the nine months ended September 30, 2014, we recognized a $284 thousand remeasurement charge, as compared to a $1.3 million remeasurement gain during the nine months ended September 30, 2015, related to the contingent consideration associated with our acquisitions of SMPP, Capstone and Medliance. The remeasurement gain recorded during the nine months ended September 30, 2015 was due to a decrease in expected revenue for Medliance due to a lost customer in 2015, which reduced the amount of contingent consideration we expect to pay.

Depreciation and Amortization Expenses

          Depreciation and amortization expenses increased $1.6 million, or 124%, from $1.3 million for the nine months ended September 30, 2014 to $2.9 million for the comparable period in 2015. This increase was due to an increase in depreciation expense of $112 thousand related to the continued capital investment in pharmacy and other equipment to support our medication adherence and fulfillment technology, an increase in amortization expense of $102 thousand due to capitalized internal-use software and an increase of $1.4 million due to acquisition-related intangibles.

Change in Fair Value of Warrant Liability

          During the nine months ended September 30, 2014, we recognized $18 thousand of income for the change in fair value of warrant liability as compared to expense of $3.5 million during the nine months ended September 30, 2015. The change in fair value of warrant liability for the nine months ended September 30, 2015 was due to the increase in the fair value of our Series A-1 and Series B redeemable convertible preferred stock.

Interest Expense

          Interest expense increased $3.4 million from $1.0 million for the nine months ended September 30, 2014 to $4.4 million for the nine months ended September 30, 2015. The increase was primarily attributable to interest payable and the amortization of debt discounts recorded in connection with

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various acquisition debt financing, including the Medliance Notes, in an aggregate amount of $3.4 million.

Income Taxes

          During the nine months ended September 30, 2015, we recognized expense of $212 thousand related to state income taxes and deferred income tax expense related to goodwill that is attributable to the nine months ended September 30, 2015. For the nine months ended September 30, 2014, we recognized a $426 thousand income tax benefit. The income tax benefit was primarily the result of deferred tax liabilities that were recorded in connection with the acquisition of SMPP, which created a source of recoverability of a portion of previously reserved deferred tax assets.

Comparison of the Years Ended December 31, 2013 and 2014

Product Revenue

          Product revenue increased $21.8 million, or 86%, from $25.1 million for the year ended December 31, 2013 to $46.9 million for the year ended December 31, 2014. The increase was primarily driven by organic growth in our core business, medication risk management, which represented $11.8 million of the increase. Of that $11.8 million increase, $1.8 million was attributable to new customers acquired period over period, while the remaining $10.0 million was attributable to increased prescription fulfillment volume from existing customers. Medication manufacturer price increases, medication mix we fulfilled for our clients' patients and payor mix contributed to an additional $3.7 million of the overall increase in product revenue. An additional $6.2 million of the increase was attributable to the acquisition of SMPP, which resulted in higher medication fulfillment revenue.

Service Revenue

          Service revenue was $1.6 million for the year ended December 31, 2014, which was attributable to revenue derived from risk adjustment services related to Capstone, which we acquired in April 2014. Nearly all of this service revenue related to PMPM fees.

Cost of Product Revenue

          Cost of product revenue increased $16.2 million, or 77%, from $20.9 million for the year ended December 31, 2013 to $37.1 million for the year ended December 31, 2014. This increase was largely driven by increased volume of revenue, which contributed $7.2 million to the year over year change, while medication manufacturer price increases and medication mix we fulfilled for our clients' patients contributed $3.6 million to the overall increase in the cost of product revenue. In addition, labor costs increased $939 thousand, primarily due to added pharmacy headcount, including additional pharmacists, technicians and support staff, to support our sales growth. We also experienced a $450 thousand increase in distribution charges related to increased shipping volume for the medications we fulfilled for our clients' patients. These increases were offset in part by more favorable rebates on wholesale product purchases of prescription medications. Specifically, we joined a purchasing group in the first quarter of 2014 and, as a result, were able to gain access to more favorable pricing which decreased the cost of the prescription medications we purchased by $1.7 million. The increase in the period also included $5.2 million for cost of product revenue related to the ongoing operations of SMPP, which we acquired in January 2014.

Cost of Service Revenue

          Cost of service revenue was $739 thousand for the year ended December 31, 2014. The cost of service revenue in the period primarily related to risk adjustment services related to Capstone, which we acquired in April 2014.

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Research and Development Expenses

          Research and development expenses increased $322 thousand, or 24%, from $1.3 million for the year ended December 31, 2013 to $1.7 million for the year ended December 31, 2014. The overall increase was primarily attributable to a $183 thousand increase in personnel costs due to an increase in headcount, an increase in professional fees of $42 thousand and an increase in technology cost of $63 thousand attributable to the continued development of our software applications.

Sales and Marketing Expenses

          Sales and marketing expenses increased $497 thousand, or 28%, from $1.8 million for the year ended December 31, 2013 to $2.3 million for the year ended December 31, 2014. The increase was primarily attributable to a $211 thousand increase in personnel costs, including salaries and benefits, related to market adjustments as well as performance based increases. The increase in the period also included $105 thousand sales and marketing expenses related to the ongoing operations of SMPP and Capstone. The remaining portion of the increase was principally related to increased marketing efforts, in particular marketing events and conferences.

General and Administrative Expenses

          General and administrative expenses increased $1.5 million, or 60%, from $2.5 million for the year ended December 31, 2013 to $4.0 million for the year ended December 31, 2014. The increase was primarily attributable to a $796 thousand increase in personnel costs, including salaries and benefits, related to an increase in headcount to support the overall growth of our operations. Additionally, professional fees increased $218 thousand primarily due to the three acquisitions we completed in 2014 as well as the corporate reorganization that we completed during 2014. The increase also included an increase of $198 thousand in general and administrative expenses related to the ongoing operations of SMPP and Capstone.

Acquisition-related Contingent Consideration Expense

          During the year ended December 31, 2014, we recognized a $790 thousand remeasurement charge related to the contingent consideration associated with our acquisitions of SMPP and Capstone, each of which were acquired in 2014. The change was primarily due to Capstone's actual results exceeding the amounts estimated as of the acquisition date, which we determined made the related contingent consideration we expect to pay higher.

Depreciation and Amortization Expenses

          Depreciation and amortization expenses increased $699 thousand, or 63%, from $1.1 million for the year ended December 31, 2013 to $1.8 million for the year ended December 31, 2014. This increase was primarily due to an increase in depreciation expense of $99 thousand related to the continued capital investment in pharmacy and other equipment to support our medication adherence and fulfillment technology, an increase in amortization expense of $138 thousand due to capitalized internal-use software and $463 thousand due to acquisition-related intangibles.

Change in Fair Value of Warrant Liability

          We recorded expense related to the change in fair value of our warrant liability of $547 thousand and $269 thousand for the years ended December 31, 2013 and 2014, respectively. The change in the fair value of the warrant liability in 2013 and 2014 was due to the increase in the fair value of our preferred stock.

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Interest Expense

          Interest expense increased $521 thousand, or 63%, from $833 thousand for the year ended December 31, 2013 to $1.4 million for the year ended December 31, 2014. Of the increase, $428 thousand was due to borrowings under a revolving line of credit we entered into in December 2013 to fund working capital needs to support our growth. In addition, $314 thousand of the increase was attributable to borrowings under a debt facility we entered into to finance the acquisition of Capstone. These increases were offset by $63 thousand related to the write-off of the debt discount associated with the NJEDA Loan. The remaining offset was attributable to higher principal payments due on outstanding debt compared with the year ended December 31, 2013.

Income Taxes

          During the year ended December 31, 2014, we recognized a $409 thousand income tax benefit. We recorded a valuation allowance against deferred income tax assets as a result of our history of losses. The income tax benefit recorded in 2014 was primarily the result of deferred tax liabilities that were recorded in connection with the acquisition of SMPP, which created a source of recoverability of a portion of previously reserved deferred tax assets. We do not expect to record an income tax benefit until such time that it generates income before income taxes on a recurring basis or unless there are other sources of recoverability, such as future acquisitions that create taxable temporary differences.


Liquidity and Capital Resources

          Since inception, we have incurred net losses from our operations. We incurred net losses of $3.9 million and $1.1 million for the years ended December 31, 2013 and 2014, respectively, and $259 thousand and $3.9 million for the nine months ended September 30, 2014 and 2015, respectively. Our primary liquidity and capital requirements are for research and development, sales and marketing, general and administrative expenses, debt service obligations and strategic business acquisitions. We have funded our operations, working capital needs and investments with cash generated through operations, issuance of preferred stock and borrowings under our credit facilities. At September 30, 2015, we had cash of $2.6 million. Through September 30, 2015, we have received net proceeds of $13.3 million from the issuance of our preferred and common stock, including pursuant to the exercise of stock options.

Summary of Cash Flows

          The following table shows a summary of our cash flows for the years ended December 31, 2013 and 2014 and the nine months ended September 30, 2014 and 2015.

 
  Year Ended
December 31,
  Nine Months
Ended
September 30,
 
 
  2013   2014   2014   2015  
 
  (In thousands)
 

Net cash (used in) provided by operating activities

  $ (2,155 ) $ 870   $ 310   $ 2,783  

Net cash used in investing activities

    (845 )   (14,916 )   (5,326 )   (2,907 )

Net cash provided by (used in) financing activities

    8,868     12,141     1,209     (1,440 )

Net increase (decrease) in cash and cash equivalents

  $ 5,868   $ (1,905 ) $ (3,807 ) $ (1,564 )

Operating Activities

          Net cash provided by operating activities was $310 thousand for the nine months ended September 30, 2014 and consisted primarily of our net loss of $259 thousand and changes in our operating assets and liabilities totaling $1.0 million, offset by noncash items of $1.4 million. The

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significant factors that contributed to the change in operating assets and liabilities included an increase in accounts receivable of $869 thousand, an increase in inventories of $677 thousand and an increase in rebates receivable of $375 thousand, each of which were directly related to the increase in product sales, partially offset by increases in accounts payable of $375 thousand and accrued expenses and other liabilities of $777 thousand, each of which was primarily due to the timing of our vendor payments and the purchase of prescription medications to build inventory to support our increase in sales. The noncash increases were primarily attributable to depreciation and amortization expenses related to leasehold improvements, capital equipment and capitalized internal-use software development costs of $1.3 million, amortization of deferred financing fees of $177 thousand, stock-based compensation expenses of $190 thousand and an expense of $284 thousand for the revaluation of acquisition contingent consideration partially offset by deferred income tax benefit of $426 thousand. The income tax benefit was primarily the result of deferred tax liabilities that were recorded in connection with the acquisition of SMPP, which created a source of recoverability of a portion of previously reserved deferred tax assets.

          Net cash provided by operating activities was $2.8 million for the nine months ended September 30, 2015 and consisted primarily of our net loss of $3.9 million and decreases in cash from changes in our operating assets and liabilities totaling $488 thousand, which were more than offset by non-cash charges of $7.2 million, which were primarily attributable to depreciation and amortization expenses related to leasehold improvements, capital equipment and capitalized internal-use software development costs of $2.9 million, amortization of deferred financing fees and debt discount of $1.6 million, stock-based compensation expense of $471 thousand, the non-cash expense related to the revaluation of the warrant liability of $3.5 million partially offset by a gain of $1.3 million for the revaluation of acquisition-related contingent consideration. The significant factors that contributed to the decrease in cash from changes in operating assets and liabilities included an increase in accounts receivable of $951 thousand, an increase in inventories of $353 thousand, and an increase of $191 thousand in prepaid expenses and other assets. The increase in accounts receivable is directly related to the increase in product sales. The increase in prepaid expenses and other assets was primarily due to a prepayment of rent for a new office space and prepayment in connection with a conference we attended in October 2015. These operating asset increases were partially offset by a decrease of $308 thousand in rebates receivable, primarily related to timing of payments, and increases in accounts payable of $322 thousand and accrued expenses and other liabilities of $912 thousand primarily due to the timing of our vendor payments and the purchase of prescription medications to build inventory that supports our increase in sales, offset by a $610 thousand decrease primarily attributable to contingent considerations payments made to the previous owners of Capstone.

          Net cash used in operating activities was $2.2 million for the year ended December 31, 2013 and consisted primarily of our net loss of $3.9 million, partially offset by noncash charges of $1.9 million and a $219 thousand decrease in cash related to changes in operating assets and liabilities. The non-cash charges were primarily attributable to depreciation and amortization expense related to leasehold improvements, capital equipment and capitalized internal-use software development costs of $1.1 million, amortization of deferred financing fees and debt discount of $166 thousand, stock-based compensation expense of $89 thousand and the non-cash expense related to the revaluation of the warrant liability of $547 thousand. The significant factors that contributed to the decrease in cash from changes in operating assets and liabilities included an increase in accounts receivables of $884 thousand and increase in inventories of $337 thousand, each of which were directly related to the increase in product sales, partially offset by increases in accounts payable of $801 thousand and accrued expenses and other liabilities of $403 thousand primarily due to the timing of our vendor payments and the purchase of prescription medications to build inventory to support our increase in sales.

          Net cash provided by operating activities was $870 thousand for the year ended December 31, 2014 and consisted primarily of our net loss of $1.1 million and decreases in cash from changes in our operating assets and liabilities totaling $1.0 million, which were more than offset by non-cash charges of

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$3.0 million, which were primarily attributable to depreciation and amortization expenses related to leasehold improvements, capital equipment and capitalized internal-use software development costs of $1.8 million, amortization of deferred financing fees and debt discount of $259 thousand, stock-based compensation expense $254 thousand, non-cash expense related to the revaluation of the warrant liability of $269 thousand and a charge of $730 thousand for the revaluation of acquisition-related contingent consideration, offset by $422 thousand of deferred tax benefit. The significant factors that contributed to the decrease in cash from changes in operating assets and liabilities included an increase in accounts receivable of $1.4 million, an increase in inventories of $792 thousand and an increase in rebates receivable of $715 thousand directly related to the increase in product sales and more favorable rebates due to joining a buying group in the first quarter of 2014, partially offset by increases in accounts payable of $1.4 million and accrued expenses and other liabilities of $604 thousand primarily due to the timing of our vendor payments and the purchase of prescription medications to build inventory that supports our increase in sales.

Investing Activities

          Net cash used in investing activities was $5.3 million for the nine months ended September 30, 2014 and $2.9 million for the nine months ended September 30, 2015. Investing activities for the nine months ended September 30, 2014 reflects $4.0 million paid in connection with the acquisitions of SMPP and Capstone, net of cash acquired, along with $300 thousand in purchases of property and equipment, a $500 thousand increase in restricted cash due to funds placed in escrow for the SMPP acquisition and $535 thousand in software development costs. Investing activities for the nine months ended September 30, 2015 reflects $2.4 million paid in connection with the acquisition of Medliance, along with $135 thousand in purchases of property and equipment and $669 thousand in software development costs, offset by a decrease of $300 thousand in restricted cash from the release of funds related to a contingent purchase price payment for the SMPP acquisition that was paid.

          Net cash used in investing activities was $845 thousand for the year ended December 31, 2013 and $14.9 million for the year ended December 31, 2014. Investing activities for the 2013 fiscal year reflect purchases of property and equipment of $366 thousand and software development costs of $479 thousand. Investing activities for the 2014 fiscal year reflects $13.4 million paid in connection with the acquisitions of SMPP, Capstone and Medliance, net of cash acquired, $230 thousand in purchases of property and equipment, a $500 thousand increase in restricted cash due to funds placed in escrow for the SMPP acquisition and $738 thousand in software development costs.

Financing Activities

          Net cash provided by financing activities was $1.2 million for the nine months ended September 30, 2014 as compared to net cash used in financing activities of $1.4 million for the nine months ended September 30, 2015. Financing activities for the nine months ended September 30, 2014 primarily reflect net borrowings under our various financing arrangements of $1.7 million offset by $62 thousand in deferred financing costs relating to our acquisitions and $440 thousand in payments of contingent purchase price consideration related to our SMPP acquisition. Financing activities for the nine months ended September 30, 2015 are primarily attributable to net borrowings of $1.2 million under our various financing arrangements offset by $69 thousand in deferred financing costs, $2.2 million in payments of deferred and contingent purchase price consideration related to our SMPP and Capstone acquisitions, and $390 thousand in payments of deferred costs associated with this offering.

          Net cash provided by financing activities was $8.9 million and $12.1 million for the years ended December 31, 2013 and 2014, respectively. Financing activities in 2013 primarily reflected net borrowings under our various financing arrangements of $5.3 million, including $1.4 million from related parties, and $3.8 million in net proceeds from the sale of our preferred stock, partially offset by $300 thousand for the cancellation of warrants. Financing activities in 2014 primarily related to net borrowings under our various financing arrangements of $13.2 million offset in part by $212 thousand in financing costs and a $1.0 million payment of deferred and contingent purchase price consideration relating to our SMPP and Capstone acquisitions.

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Funding Requirements

          We have not achieved profitability and have incurred net losses since our inception, and we expect to continue to incur net losses for the foreseeable future. We had an accumulated deficit of $20.0 million as of December 31, 2014. Following this offering, we will be a publicly traded company and will incur significant legal, accounting and other expenses that we were not required to incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules adopted by the SEC and NASDAQ Stock Market, require public companies to implement specified corporate governance practices that are currently inapplicable to us as a private company. We expect these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We estimate that we will incur approximately $1.0 million to $2.0 million in incremental costs per year as a result of being a publicly traded company, although it is possible that our actual incremental costs will be higher than we currently estimate. Additionally, as disclosed in note 7 to our unaudited consolidated financial statements, we are required to pay $16.4 million on June 30, 2016 or upon the completion of this offering related to the Medliance Notes. We plan to repay the Medliance Notes with the proceeds from this offering if the holders of the notes do not elect to convert such notes into shares of our common stock.

          We believe that the net proceeds of this offering, together with our cash of $2.6 million as of September 30, 2015, borrowing capacity under our 2015 Line of Credit and cash flows from continuing operations, will be sufficient to fund our planned operations through at least January 31, 2017. Our ability to maintain successful operations will depend on, among other things, new business, the retention of clients and the effectiveness of sales and marketing initiatives.

          We may seek additional funding through public or private debt or equity financings. We may not be able to obtain financing on acceptable terms, or at all. The terms of any financing may adversely affect our stockholders. If we are unable to obtain funding, we could be forced to delay, reduce or eliminate our research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect our business prospects. There is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.

Contractual Obligations and Commitments

          The following summarizes our significant contractual obligations as of December 31, 2014:

 
  Payments due by period  
 
  Total   Less than
1 year
  1-3 years   3-5 years   More than
5 years
 
 
  (In thousands)
 

Revolver(1)

  $ 6,860   $ 6,860   $   $   $  

Long-term debt(2)

    19,686     3,303     16,383          

Related party notes(3)

    1,014     1,014              

Contingent consideration payments(4)

    8,379     1,079     7,300          

Non-contingent consideration payments(5)

    20,979     4,594     16,385          

Capital leases(6)

    1,237     733     504          

Operating leases(7)

    1,186     630     494     62      

Total

  $ 59,341   $ 18,213   $ 41,066   $ 62   $  

(1)
Revolver represents the principal balance outstanding as of December 31, 2014 under the 2013 Credit Facility. In April 2015, we satisfied all amounts due under the 2013 Credit Facility and replaced such facility with the 2015 Line of Credit with Bridge Bank. The principal amount

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    outstanding under the 2015 Line of Credit as of September 30, 2015 was $10.0 million, which is not included in the table above.

(2)
Long-term debt represents obligations outstanding as of December 31, 2014 under our senior secured term loans, including both principal and interest.

(3)
Related party notes represents the principal balances outstanding as of December 31, 2014 on outstanding indebtedness due to related parties. On December 8, 2015, we repaid $408,407 under two demand promissory notes with the satisfaction of the loan we made to certain executive officers on August 14, 2015.

(4)
Contingent consideration represents the fair value of future cash payments and stock consideration as of December 31, 2014 related to acquisitions completed in 2014.

(5)
Non-contingent consideration includes outstanding obligations associated with acquisition-related notes and deferred payments, including accrued interest.

(6)
Capital lease obligations represent future lease payments for equipment including interest.

(7)
The operating lease obligations represent future lease payments for office space. On August 21, 2015, we entered into three operating lease agreements to occupy office space in Moorestown, New Jersey. The leases commence upon the substantial completion of tenant improvement work completed by the landlord, estimated to be February 2016, and will continue for 11 years and eight months from the commencement date. We have an option to extend the leases for one additional period of ten years. The aggregate base rental payments over the term of the leases, excluding any extension period, are $17.6 million. In addition to the base rent payments, we will be obligated to pay a pro rata share of operating expenses and taxes.

          Except as discussed in (1), (3) and (7) above, our contractual obligations as of December 8, 2015 have not materially changed from December 31, 2014.

Revolving Credit Facility

          In December 2013, we entered into a Revolving Credit Facility, or the 2013 Credit Facility, with Silicon Valley Bank pursuant to which we had the ability to request up to $7.0 million in revolving advances. The proceeds of the 2013 Facility were used to repay existing indebtedness, fund a portion of the acquisition of SMPP and fund our general business requirements. As of April 2015, we had $6.9 million of debt outstanding under the 2013 Facility.

          In April 2015, we entered into the 2015 Line of Credit with Bridge Bank pursuant to which we can request up to $15.0 million in revolving advances and we borrowed $10.0 million at that time. We used $6.9 million of the proceeds from borrowings under the 2015 Line of Credit to repay all outstanding amounts owed under the 2013 Credit Facility. Amounts outstanding under the 2015 Line of Credit bear interest at 1% above the greater of 3.25% per year or the variable rate of interest, per annum, most recently announced by Bridge Bank, as its "prime rate," with interest payable monthly. Following the completion of this offering, such rate will be equal to 0.5% above the greater of 3.25% per year or Bridge Bank's prime rate. The 2015 Line of Credit has a maturity date of April 2017, and is secured by all of our personal property, whether presently existing or created or acquired in the future, as well as our intellectual property.

          The 2015 Line of Credit contains financial covenants, including covenants requiring us to maintain a minimum unrestricted cash balance, a minimum monthly recurring revenue retention rate, measured monthly, and a minimum EBITDA, measured each quarter. The 2015 Line of Credit also contains operating covenants, including covenants restricting our ability to effect a sale of any part of our business, merge with or acquire another company, incur additional indebtedness, encumber or assign any right to or interest in our property, pay dividends or other distributions, make certain investments, transact with affiliates outside of the ordinary course of business and incur annual capital expenditures in excess of $1.0 million. The 2015 Line of Credit contains customary events of default, including upon

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the occurrence of a payment default, a covenant default, a material adverse change, our insolvency and judgments against us in excess of $250 thousand that remain unsatisfied for 30 days or longer. The 2015 Line of Credit provides for a ten day cure period for a covenant breach, which may be extended to up to 30 days in certain circumstances. As of September 30, 2015, we were in compliance with all of the financial covenants related to the 2015 Line of Credit.

Cumulative Preferred Stock Dividends

          As of December 31, 2014, accrued dividends in the amount of $813 thousand, $403 thousand and $417 thousand were payable on our Series A preferred stock, Series A-1 preferred stock and Series B preferred stock, respectively, if declared by our board of directors or upon the occurrence of certain other events, including a liquidation event, as set forth in our certificate of incorporation. All accumulated dividends are forfeited upon conversion of our preferred stock into shares of our common stock, which will occur immediately prior to the consummation of this offering.


Off-Balance Sheet Arrangements

          During the periods presented, we did not have any off-balance sheet arrangements, as defined by applicable SEC rules and regulations.

Critical Accounting Policies and Significant Judgments and Estimates

          We base this management's discussion and analysis of our financial condition and results of operations on our financial statements, which we have prepared in accordance with generally accepted accounting practices in the United States, or GAAP. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our financial statements. We evaluate our estimates and judgments, including those related to: (i) the fair value of assets acquired and liabilities assumed for business combinations, (ii) the valuation of our common stock and preferred stock, (iii) the recognition and disclosure of contingent liabilities, (iv) the useful lives of long-lived assets (including definite-lived intangible assets), (v) the evaluation of revenue recognition criteria, (vi) assumptions used in the Black-Scholes option-pricing model to determine the fair value of equity and liability classified warrants and stock-based compensation instruments and (vii) the realizability of long-lived assets including goodwill and intangible assets. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. You should consider your evaluation of our financial condition and results of operations with these policies, judgments and estimates in mind.

          While we describe our significant accounting policies in the notes to our financial statements appearing elsewhere in this prospectus, we believe the following accounting policies are the most critical to the judgments and estimates we use in the preparation of our financial statements.

Revenue Recognition

          We recognize revenue from product sales or services rendered when (i) persuasive evidence of an arrangement exists, (ii) services have been rendered, (iii) the price to our client is fixed or determinable and (iv) collectability is reasonably assured.

          When we enter into arrangements with multiple deliverables, we apply the accounting guidance for revenue arrangements with multiple deliverables and evaluate each deliverable to determine whether it represents a separate unit of accounting based on the following criteria: (i) whether the delivered item has value to the client on a standalone basis, and (ii) if the contract includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in our control. Revenue is allocated to each element in an arrangement based on a

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selling price hierarchy. The selling price for a deliverable is based on estimated selling prices, or ESP, as vendor specific objective evidence or third party evidence is not available. We establish ESP for the elements of our arrangements based upon our pricing practices and class of client. The stated prices for the various deliverables of our contracts are consistent across classes of clients.

Product Revenue

          We enter into multiple-element arrangements with healthcare organizations to provide software-enabled medication risk management solutions. Under these contracts, revenue is generated through the following components:

    Prescription drug revenue

    We sell prescription medications directly to healthcare organizations through our prescription fulfillment pharmacies. Prescription medication fees are based upon the prices stated in client contracts for the prescription and include a dispensing fee. Prescription medications are considered a separate unit of accounting. Prescription medication revenue, including dispensing fees, is recognized when the product is shipped to the client. For the periods presented, substantially all of our product revenue has been in the form of prescription medication revenue.

    Per member per month fees—medication risk management services

    We receive a fixed monthly administrative fee for each member in the program contracted for medication risk management services. This fee, which is included in product revenue in our income statement, is recognized on a monthly basis as medication risk management services are provided. The services associated with the per member per month fees are considered a separate unit of accounting.

Service Revenue

          We enter into contracts with healthcare organizations to provide (i) risk adjustment services and (ii) pharmacy cost management services, which include training client staff and providers about documentation and diagnosis coding, analyzing clients' data collection and submission processes and delivering meaningful analytics for understanding reimbursement complexities.

          Under the risk adjustment contracts, there are three revenue generating components:

    Set up fees:

    Our contracts with our risk adjustment service clients often require clients to pay non-refundable set up fees, which are deferred and recognized over the estimated term of the contract. These fees are charged at the beginning of the client relationship as compensation for our efforts to prepare the client and configure its system for the data collection process. The set up activities do not represent a separate unit of accounting as they do not have value apart from the broader risk adjustment service contracts.

    Per member per month fees—risk adjustment services

    We receive a fixed monthly fee for each member in the program contracted for risk adjustment services. These services represent a separate unit of accounting and are offered independently from any other services. Revenue for these services is recognized each month as the related risk adjustment services are performed.

    Hourly consulting fees

    We contract with clients to perform various risk adjustment services. Such services are billed on a time and materials basis, at agreed hourly rates. Consulting services represent a separate unit of

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    accounting and are offered independently from any other services. Revenue for these services is recognized as time is incurred on the project.

          Our pharmacy cost management services include subscription revenue from clients and revenues from drug manufacturers for data and statistics we collect from our pharmacy cost management engagements. Subscription revenue is recognized monthly as either a flat fee or as a percentage of monthly transactions incurred. Data and statistics revenue from drug manufacturers is recognized when received due to the unpredictable nature of the payments and because fees are not fixed and determinable until received.

Business Combinations and Contingent Consideration

          Acquired businesses are accounted for using the purchase method of accounting, which requires that the purchase price be allocated to the net assets acquired at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Amounts allocated to contingent consideration are recorded to the balance sheet at the date of acquisition based on their relative fair values. The purchase price allocation requires us to make significant estimates and assumptions, especially at the acquisition date, with respect to intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

          We account for contingent consideration in accordance with applicable guidance provided within the business combination accounting rules. As part of our consideration for the SMPP, Capstone and Medliance acquisitions, we are contractually obligated to pay certain consideration resulting from the outcome of future events. Therefore, we are required to update our underlying assumptions each reporting period, based on new developments, and record such contingent consideration liabilities at fair value until the contingency is resolved. Changes in the fair value of the contingent consideration liabilities are recognized each reporting period and included in our consolidated statements of operations.

          Examples of critical estimates used in valuing certain of the intangible assets and contingent consideration include:

    future expected cash flows from sales, and acquired developed technologies;

    the acquired company's trade name and customer relationships as well as assumptions about the period of time the acquired trade name and customer relationships will continue to be used in the combined company's portfolio;

    the probability of meeting the future events; and

    discount rates used to determine the present value of estimated future cash flows.

          These estimates are inherently uncertain and unpredictable, and if different estimates were used the purchase price for the acquisition could be allocated to the acquired assets and liabilities differently from the allocation that we have made. In addition, unanticipated events and circumstances may occur, which may affect the accuracy or validity of such estimates, and if such events occur we may be required to record a charge against the value ascribed to an acquired asset or an increase in the amounts recorded for assumed liabilities.

Warrant Liability

          We classified our warrants to purchase shares of our preferred stock as a warrant liability, which we record at fair value. We estimate the warrant fair values using the option pricing method as discussed in the American Institute of Certified Public Accountants, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation, or the AICPA Practice Guide. The option pricing method treats securities as options based on the enterprise's value,

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with exercise prices based on the liquidation preferences set forth in the terms of the underlying stock, option or warrant agreements. Preferred stock, common stock, options and warrants are treated as call options that give the holder the right to buy the underlying net assets at a predetermined or "strike" price at a liquidity event. The option pricing method considers the various terms of the stockholder agreements and implicitly considers the effect of the liquidation preference as of the appropriate date in the future and uses the Black-Scholes model to price the call option.

          The significant inputs, which we estimate as part of this method, include the expected term of the warrants, expected volatility and the estimated fair value of the underlying share of preferred stock. Because we do not have sufficient history to estimate the expected volatility of our stock price, expected volatility is based on the average volatility of peer public entities that are similar in size and industry. We estimate the expected term of the warrants based on the timing of anticipated future liquidity events. The risk-free rate is based on the U.S. Treasury yield curve equal to the expected term of the warrant as of the measurement date. These warrant liabilities are subject to remeasurement at each balance sheet date, and we recognize any change in fair value in our statements of operations as a change in fair value of the derivative liability.

Goodwill

          Goodwill consists of the excess purchase price over fair value of net tangible and intangible assets acquired. Goodwill is not amortized, but tested for impairment annually. GAAP provides an entity an option to perform a qualitative assessment to determine whether it is more-likely than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more-likely than-not that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required. If the two -step goodwill impairment test is required, first, the fair value of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting units' goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill.

          Factors we generally consider important in our qualitative assessment that could trigger a step-two impairment test include significant underperformance relative to expected operating trends, significant changes in the way assets are used, underutilization of our tangible assets, discontinuance of certain products by us or by our clients, changes in the competitive environment and significant negative industry or economic trends.

Impairment of Long-Lived Assets Including Other Intangible Assets

          Long-lived assets consist of property and equipment, software development costs and definite-lived intangible assets. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that we consider in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for recoverability, we compare forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows.

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          Although we believe the carrying values of our long-lived assets are currently realizable, future events could cause us to conclude otherwise.

Stock-Based Compensation

          We recognize compensation expense related to the fair value of stock-based awards in our consolidated statements of operations. For stock options we issued to employees and members of our board of directors for their services on our board of directors, we estimate the grant-date fair value of options using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and the value of the common stock. For awards subject to time-based vesting, we recognize stock-based compensation expense, net of estimated forfeitures, on a straight-line basis over the requisite service period, which is generally the vesting term of the award. We record stock-based awards issued to non-employees and non-directors at their fair values, and periodically revalue them as the equity instruments vest and are recognized as expense over the related service period of the award.

          We will continue to use judgment in evaluating the expected volatility, expected terms and forfeiture rates utilized for our stock-based compensation calculations on a prospective basis. As we continue to accumulate additional data related to our common stock, we may have refinements to the estimates of our expected volatility, expected terms and forfeiture rates, which could materially impact our future stock-based compensation expense.

Fair Value of Common and Preferred Stock

          We are required to estimate the fair value of the common stock underlying our stock-based awards when performing fair value calculations. We are also required to estimate the fair value of our preferred stock as it relates to determining the fair value of our Series B redeemable convertible preferred stock and our warrant liability. We engaged an independent third-party valuation firm to assist our board of directors in estimating the fair value of the common and preferred stock on a retrospective basis. We have granted all options to purchase shares of our common stock with an exercise price per share no less than the fair value per share of our common stock underlying those options on the date of grant, based on the information we knew on the date of grant.

          In the absence of a public trading market for our common stock, on each grant date, we develop an estimate of the fair value of our common stock in order to determine an exercise price for the option grants based in part on input from the independent third-party valuation firm. We determined the fair value of our common and preferred stock using methodologies, approaches and assumptions consistent with the AICPA Practice Guide. In addition, our board of directors considered various objective and subjective factors, along with input from management and the independent third-party valuation firm, to estimate the fair value of our common stock, including external market conditions affecting the healthcare market, trends within the healthcare market, the prices at which we sold shares of our different series of preferred stock, the superior rights and preferences of each series of preferred stock relative to our common stock at the time of each grant, our results of operations and financial position, our business strategy, the lack of an active public market for our common and our preferred stock and the likelihood of achieving a liquidity event such as an initial public offering or sale in light of prevailing market conditions.

          The per share estimated fair value of common stock in the table below represents the determination by our board of directors of the fair value of our common stock as of the date of grant, taking into consideration the various objective and subjective factors described above, including the conclusions, if applicable, of contemporaneous valuations of our common stock as discussed below. The following table presents the grant dates and related exercise prices of stock options granted to employees and non-employees from January 1, 2014 through the date of this prospectus:

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Month of Issuance
  Number of
Shares
Underlying
Option Grants
  Exercise
Price Per
Option
  Per Share
Estimated
Fair Value of
Common
Stock
   
 

January 2014

    257,938   $ 3.00   $ 1.85        

January 2014

    161,082     3.30     1.85        

February 2014

    4,000     3.00     1.85        

March 2014

    8,500     3.00     1.85        

April 2014

    26,900     3.00     1.84        

May 2014

    750     3.00     1.84        

June 2014

    5,500     3.00     1.84        

July 2014

    17,977     3.00     1.84        

August 2014

    4,500     3.00     1.84        

September 2014

    4,750     3.00     1.84        

October 2014

    5,500     3.00     1.84        

November 2014

    6,000     3.00     1.84        

January 2015

    372,900     3.00     3.00        

January 2015

    140,000     3.30     3.00        

February 2015

    65,432     3.00     3.00        

February 2015

    6,835     3.30     3.00        

March 2015

    6,500     3.00     3.00        

April 2015

    13,250     3.00     3.00        

June 2015

    61,650     3.00     3.27        

July 2015

    2,000     IPO price     7.36        

August 2015

    9,500     IPO price     7.36        

September 2015

    14,000     IPO price     7.36        

          In determining the fair value of our common stock for purposes of granting stock options and in determining the fair value of our preferred stock for purposes of valuing our Series B redeemable convertible preferred stock and warrant liability, our board of directors considered the most recent valuations of our common and preferred stock, which an independent third party prepared as of June 28, 2013, January 7, 2014, June 30, 2014, January 1, 2015 and September 30, 2015. The board of directors based its determination in part on the analyses summarized below in determining the exercise price of options to be issued after those dates.

          In valuing our common and preferred stock, the board of directors determined the equity value of our business by taking a combination of the income and market approaches.

          The income approach estimates the fair value of a company based on the present value of the company's future estimated cash flows and the residual value of the company beyond the forecast period. These future values are discounted to their present values using a discount rate which is derived from an analysis of the cost of capital of comparable publicly-traded companies in the same industry or similar lines of business as of each valuation date and is adjusted to reflect the risks inherent in the company achieving these estimated cash flows.

          For the market approach, we utilized the guideline company method by analyzing a population of comparable companies and selected those technology companies that we considered to be the most comparable to us in terms of product offerings, revenue, margins and growth. Under the market approach, we then used these guideline companies to develop relevant market multiples and ratios, which are then applied to our corresponding financial metrics to estimate our equity value.

          Prior to 2015, the enterprise values determined by the income and market approaches were then allocated to the common stock using the Option Pricing Method, or OPM.

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          The OPM treats common stock and preferred stock as call options on a company's enterprise value, with exercise prices based on the liquidation preferences of the preferred stock. Therefore, the common stock has value only if the funds available for distribution to the stockholders exceed the value of the liquidation preference at the time of an assumed liquidity event such as a merger, sale or IPO. The common stock is modeled as a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred stock is liquidated. The OPM uses the Black-Scholes option-pricing model to determine the price of the call option. The OPM is appropriate to use when the range of possible future outcomes is so difficult to predict that forecasts would be highly speculative.

          Beginning in 2015, we used the probability-weighted expected return method to determine the value of our common stock. Under the probability-weighted expected return method, the value of an enterprise's common stock is estimated based upon an analysis of future values assuming various possible future liquidity events, such as an initial public offering, a strategic sale or merger and remaining a private enterprise without a liquidity event. The fair market value of the stock is based upon the probability-weighted present value of expected future net cash flows as a result of distributions to stockholders considering each of the possible future events, as well as the rights and preferences of each class of stock.

          Once our common stock commences publicly trading following the completion of this offering it will not be necessary to use estimates to determine the fair value of new stock-based awards. Additionally, we will no longer need to estimate the fair value of our preferred stock as it converts to common stock.

          The aggregate intrinsic value of vested and unvested stock options as of September 30, 2015, based on an assumed public offering price per share of $             , the midpoint of the price range set forth on the front cover of this prospectus, was $             and $             , respectively.


Quantitative and Qualitative Disclosure about Market Risk

          We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risks are principally limited to interest rate fluctuations.

          We had cash of $4.1 million and $2.6 million as of December 31, 2014 and September 30, 2015, respectively. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate one percentage point increase in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect a sudden change in market interest rates to affect materially our operating results or cash flows.

          We have $10.0 million outstanding under our 2015 Line of Credit, which we entered into to fund working capital needs to support our growth. Interest on the loan is based on the lender's prime rate plus 1.0%, with the lender's prime rate having a floor of 3.25%, which exposes us to market risk due to changes in interest rates. This means that a change in the prevailing interest rates may cause our periodic interest payment obligations to fluctuate. We believe that a one percentage point increase in interest rates would result in an approximate $100 thousand increase to our interest expense for the nine months ended September 30, 2015.


Recent Accounting Pronouncements

          In May 2014, the Financial Accounting Standards Board, or FASB. issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers, or ASU 2014-09. ASU 2014-09 represents a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the company expects to be entitled to receive in exchange for those goods or

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services. ASU 2014-09 sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed. For public companies, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017 and interim reporting periods within that reporting period. Early adoption is not permitted. Accordingly, we will adopt ASU 2014-09 on January 1, 2018. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. We are currently evaluating the impact of ASU 2014-09 on our consolidated financial statements and have not yet selected a transition method.

          In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, or ASU 2014-15. ASU 2014-15 will explicitly require management to assess a company's ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The new standard will be effective in the first annual period ending after December 15, 2016. Early application is permitted. We are currently evaluating the impact of the adoption of ASU 2014-15 on our consolidated financial statements.

          In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, or ASU 2015-03. ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. For public companies, ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial stateme