4. Acquisitions

St. Mary Prescription Pharmacy

On January 7, 2014, the Company acquired all of the authorized, issued and outstanding shares of capital stock of J.A. Robertson, Inc., doing business as St. Mary Prescription Pharmacy (“SMPP”). SMPP is a pharmacy based in San Francisco, California that has been servicing the needs of Program of All-inclusive Care for the Elderly participants for over 30 years. The acquisition consideration was comprised of cash consideration of up to $2,000 and stock consideration of up to 108,247 shares of Class A Non-Voting common stock. The Company paid $1,000 cash and issued 54,124 shares of common stock upon closing of the acquisition, with the remaining cash and stock consideration payments to be made on the six-month, 12-month, and 24-month anniversary date of the closing date. The first two cash payments made subsequent to the closing date were contingent upon the achievement of specified revenue targets. The final payment on the 24-month anniversary of the closing date would be paid if the Company did not make any claims for indemnification pursuant to the purchase agreement.

The Company paid $500 in cash and issued 27,062 shares of the Company's common stock, with a fair value of $96, in the third quarter of 2014, and $300 in cash and 16,237 shares of the Company's common stock, with a fair value of $94, in the first quarter of 2015 in satisfaction of the SMPP acquisition-related contingent consideration.

During the first quarter of 2016, the Company made a final cash payment of $185, which included a $15 reduction for an indemnification claim made by the Company pursuant to the purchase agreement, and issued 10,824 shares of common stock, with a fair value of $35, in satisfaction of the remaining obligations under the purchase agreement.

Capstone

On April 22, 2014, the Company used the funds provided by the April 2014 Eastward Loan (see Note 10) to acquire substantially all of the assets, and assumed certain liabilities, of Capstone Performance Systems, LLC (“Capstone”), a consulting business providing expert Medicare risk adjustment services for healthcare organizations. The acquisition consideration was comprised of cash consideration consisting of $3,000 paid upon closing, $500 paid during the fourth quarter of 2014, and $2,000 paid during the second quarter of 2015. The acquisition-related cash consideration of $500 paid during the fourth quarter of 2014 was recorded at its acquisition date fair value of $487 and a $13 discount was amortized to interest expense using the effective interest method through its payment date in the fourth quarter of 2014. The acquisition-related consideration of $2,000 paid during the second quarter of 2015 was recorded at its acquisition date fair value of $1,895 and a $105 discount was amortized to interest expense using the effective interest method through its consideration payment date. The Company amortized $33 and $72 of the discount to interest expense for the years ended December 31, 2015 and 2014, respectively. The Company also paid $577 in cash and issued 18,418 shares of the Company's common stock, with a fair value of $107, in the second quarter of 2015 in full satisfaction of the acquisition-related contingent consideration.

Medliance LLC

On December 31, 2014, the Company acquired all of the authorized, issued and outstanding equity interests of Medliance LLC ("Medliance"), which provides pharmacy cost management services through data analytics. The acquisition consideration was comprised of $16,385 in non-cash consideration in the form of promissory notes to the sellers with a fair value of $14,347 (Note 9) and cash consideration consisting of $12,000 payable upon closing and contingent purchase price consideration with an estimated fair value of $7,300 ("Medliance Earnout") due upon achieving specified revenue targets as of the 12, 24 and 36 month anniversaries of the acquisition. The Company paid $9,597 in cash upon closing in the fourth quarter of 2014, with the remaining $2,403 paid in the first quarter of 2015.

The aggregate Medliance acquisition-related contingent consideration is equal to the difference of (i) the product of yearly revenue for the 2015 calendar year multiplied by 4.5 minus (ii) $26,000 (the "Aggregate Earn-Out Amount"). The Aggregate Earn-Out Amount is payable in cash, subject to achieving specified revenue targets, at three intervals: one-third following the 12-month anniversary of the closing date (the "Twelve Month Contingent Payment Date"), one-third following the 24-month anniversary of the closing date (the "Twenty-four Month Contingent Payment Date") and the Aggregate Earn-Out Amount less any portion actually paid at the Twelve Month Contingent Payment Date and Twenty-four Month Contingent Payment Date, following the 36-month anniversary of the closing date.

The Aggregate Earn-Out Amount is payable based on the yearly revenue of the acquired business during the twelve month period preceding each Contingent Payment Date ("Measurement Period"). If the yearly revenue is equal to or exceeds the 2015 Medliance calendar year revenue target ("Yearly Revenue Target") during a Measurement Period, the portion of the Aggregate Earn-Out Amount due, as defined above, is payable in full. If the yearly revenue is less than the Yearly Revenue Target for a Measurement Period, then an amount shall be payable equal to the portion of the Aggregate Earn-Out Amount due multiplied by a fraction, the numerator of which is the yearly revenue for the Measurement Period and the denominator of which is the Yearly Revenue Target.

The Company, with the assistance of a third-party appraiser, utilized a Monte Carlo simulation to estimate the acquisition-date fair value of the acquisition-related contingent consideration. The fair value measurement was based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy (see Note 15).

9179-1916 Quebec Inc.

On September 15, 2016, the Company acquired certain assets, consisting primarily of intellectual property and software assets of 9176-1916 Quebec Inc. (an entity indirectly controlled by the Company’s Chief Scientific Officer, Jacques Turgeon). The intellectual property and software assets were previously licensed by the Company and are integrated into the Company’s Medication Risk Mitigation Matrix. The purchase price consisted of cash consideration of up to $6,000, consisting of $1,000 which was paid upon closing, $2,200 paid on November 2, 2016, $2,200 paid on December 9, 2016, and $600 following the 12-month anniversary of the closing date of the acquisition, which is contingent upon no claims for indemnification being made pursuant to the purchase agreement. In addition to the cash consideration, the purchase price included $5,000 worth of common stock, consisting of $2,500, or 201,353 shares, of common stock issued on November 15, 2016 and $2,500, or 194,054 shares, of common stock issued on December 29, 2016. The stock consideration issued on November 15, 2016 and on December 29, 2016 was calculated based on the arithmetic average of the daily volume-weighted average price of the Company’s common stock for the 30 business days ending on, and including, the 30th and 60th business day, respectively, following the completion of the IPO.

The deferred acquisition cash consideration of $5,000 was recorded at its acquisition-date fair value of $4,955, using an assumed cost of debt of 7.8%. The $45 discount is being amortized to interest expense using the effective interest method through the consideration payment date. The Company amortized $13 of the discount to interest expense for the year ended December 31, 2016. Additionally, the deferred stock consideration of $5,000 was recorded at its acquisition-date fair value of $4,445 and was accreted up to its payment-date fair value of $4,500. The stock consideration paid in connection with the acquisition is subject to a lock-up agreement and, as a result, a discount for lack of marketability of 10% was applied to determine the fair value of the stock consideration as of the acquisition date. These amounts are included in acquisition-related consideration payable in the consolidated balance sheets. As of December 31, 2016, the acquisition-related consideration balance was $568.

The assets acquired, and revenue generated from the acquired assets, are included in the Company’s consolidated financial statements from the date of acquisition.

The following table summarizes the final allocation of the purchase price based on the estimated fair values of the assets acquired at the date of acquisition:


Developed technology	$	10,100
Trade name		220
Goodwill		80
Total assets acquired	$	10,400

The purchase price was allocated to identifiable intangible assets acquired based on their acquisition-date estimated fair values. The identifiable intangible assets principally included developed technology valued at $10,100 and trade name valued at $220, each of which are subject to amortization on a straight-line basis over 7 and 5 years, respectively. The weighted average amortization period for acquired intangible assets as of the date of acquisition is 6.96 years.

The Company, with the assistance of a third-party appraiser, assessed the fair value of the assets. The fair value of the developed technology was estimated using a discounted present value income approach. To calculate fair value, the Company used cash flows discounted at a rate considered appropriate given the inherent risks associated with the intangible asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. The fair value of the trade name was estimated using the relief from royalty method. The Company derived the hypothetical royalty income from the incremental projected revenues related to utilizing the acquired technology.

The amortization of intangible assets is deductible for income tax purposes.

The unaudited pro forma results presented below include the results of the SMPP, Capstone, Medliance, and 9176-1916 Quebec Inc. acquisitions as if they had been consummated as of January 1, 2014. The unaudited pro forma results include the amortization associated with acquired intangible assets and interest expense on debt to fund these acquisitions. Material nonrecurring charges directly attributable to the transactions are excluded. In addition, the unaudited pro forma results do not include any expected benefits of the acquisitions. Accordingly, the unaudited pro forma results are not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated as of January 1, 2014.


	Year Ended
	December 31,
	2016		2015		2014
Revenue	$	94,101	$	70,076	$	55,429
Net loss		(7,305)		(4,335)		(4,535)
Net loss per share attributable to common stockholders, basic		(0.54)		(2.39)		(1.47)
Net loss per share attributable to common stockholders, diluted		(0.60)		(2.39)		(1.47)