424B3 1 d216513d424b3.htm FORM 424(B)(3) Form 424(b)(3)
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-259333

 

PROSPECTUS

 

LOGO

SHARECARE, INC.

Primary Offering of

1,186,667 Shares of Common Stock Issuable Upon Exercise of Warrants

Secondary Offering of

68,013,223 Shares of Common Stock and

5,933,334 Warrants to Purchase Common Stock

This prospectus relates to the issuance by us of up to an aggregate of 1,186,667 shares of our common stock, par value $0.0001 per share (“common stock”), that are issuable upon the exercise of certain private placement warrants (the “private placement warrants”) originally issued in a private placement in connection with the initial public offering (the ‘‘IPO”) of Falcon Capital Acquisition Corp., a Delaware corporation (“FCAC”), at an exercise price of $11.50 per share of common stock. This prospectus also related to the offer and sale, from time to time, by the selling holders identified in this prospectus (the “Selling Securityholders”), or their permitted transferees, of (i) up to 68,013,223 shares of common stock (including (i) 5,933,334 shares of common stock that may be issued upon exercise of the private placement warrants, (ii) 5,000,000 shares of common stock that may be issued upon conversion of the Series A Preferred Stock (as defined herein) and (iii) 1,905,236 Earnout Shares (as defined herein)) and (ii) up to 5,933,334 private placement warrants.

This prospectus provides you with a general description of such securities and the general manner in which we and the Selling Securityholders may offer or sell the securities. More specific terms of any securities that we and the Selling Securityholders may offer or sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering. The prospectus supplement may also add, update or change information contained in this prospectus.

We will not receive any proceeds from the sale of shares of common stock or private placement warrants by the Selling Securityholders pursuant to this prospectus or of the shares of common stock by us pursuant to this prospectus, except with respect to amounts received by us upon exercise of the private placement warrants to the extent such private placement warrants are exercised for cash. However, we will pay the expenses, other than underwriting discounts and commissions, associated with the sale of securities pursuant to this prospectus.

Our registration of the securities covered by this prospectus does not mean that either we or the Selling Securityholders will issue, offer or sell, as applicable, any of the securities. The Selling Securityholders may offer and sell the securities covered by this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell the shares in the section entitled “Plan of Distribution.”

You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our securities.

Our common stock and public warrants (as defined herein) are listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “SHCR” and “SHCRW,” respectively. On September 2, 2021, the closing price of our common stock was $8.59 per share and the closing price of our warrants was $1.70.

We are an “emerging growth company” and a “smaller reporting company” as such terms are defined under the federal securities laws and, as such, are subject to certain reduced public company reporting requirements.

Investing in our securities involves risks that are described in the “Risk Factors” section beginning on page 7 of this prospectus.

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

The date of this prospectus is September 14, 2021.


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TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS

     ii  

TRADEMARKS

     iii  

MARKET AND INDUSTRY DATA

     iii  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     iv  

SUMMARY OF THE PROSPECTUS

     1  

THE OFFERING

     4  

MARKET PRICE, TICKER SYMBOL AND DIVIDEND INFORMATION

     6  

RISK FACTORS

     7  

USE OF PROCEEDS

     41  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     42  

NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

     49  

BUSINESS

     58  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS OF SHARECARE

     83  

MANAGEMENT

     103  

EXECUTIVE COMPENSATION

     113  

DESCRIPTION OF SECURITIES

     127  

RESTRICTIONS ON RESALE OF OUR COMMON STOCK

     139  

BENEFICIAL OWNERSHIP OF SECURITIES

     141  

SELLING SECURITYHOLDERS

     143  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     146  

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     149  

PLAN OF DISTRIBUTION

     155  

LEGAL MATTERS

     160  

EXPERTS

     160  

WHERE YOU CAN FIND MORE INFORMATION

     162  

INDEX TO FINANCIAL INFORMATION

     F-1  

 

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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under this shelf registration process, we and the Selling Securityholders may, from time to time, issue, offer and sell, as applicable, any combination of the securities described in this prospectus in one or more offerings. We may use the shelf registration statement to issue up to an aggregate of 1,186,667 shares of common stock upon exercise of certain private placement warrants. The Selling Securityholders may use the shelf registration statement to sell up to an aggregate of 68,013,223 shares of common stock and up to 5,933,334 private placement warrants from time to time through any means described in the section entitled “Plan of Distribution.” More specific terms of any securities that the Selling Securityholders offer and sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the common stock and/or private placement warrants being offered and the terms of the offering.

A prospectus supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. See “Where You Can Find More Information.

Neither we nor the Selling Securityholders have authorized anyone to provide any information or to make any representations other than those contained in this prospectus, any accompanying prospectus supplement or any free writing prospectus we have prepared. We and the Selling Securityholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate only as of the date on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

On July 1, 2021 (the “Closing Date”), FCAC, our predecessor company, consummated its previously announced business combination (the “Business Combination”) pursuant to terms of the agreement and plan of merger, dated February 12, 2021, by and among FCAC, FCAC Merger Sub Inc., a wholly-owned subsidiary of FCAC (“Merger Sub”), Sharecare, Inc., a Delaware corporation (“Legacy Sharecare”), and Colin Daniel, solely in his capacity as representative of the Legacy Sharecare stockholders (the “Stockholder Representative”) (as may be amended and/or restated from time to time, the “Merger Agreement”). Immediately upon the completion of the Business Combination (such completion, the “Closing”), Legacy Sharecare became a direct wholly-owned subsidiary of FCAC. In connection with the Business Combination, FCAC changed its name to “Sharecare, Inc.”

Unless the context indicates otherwise, references to “the Company,” “Sharecare,” “we,” “us” and “our” refer to Sharecare, Inc., a Delaware corporation, and its consolidated subsidiaries following the Business Combination. References to “FCAC” refer to Falcon Capital Acquisition Corp. prior to the Business Combination. References to “Legacy Sharecare” refer to Sharecare, Inc. and its consolidated subsidiaries prior to the Business Combination.

 

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TRADEMARKS

This document contains references to trademarks and service marks belonging to other entities. 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 the applicable licensor will not assert, to the fullest extent under applicable law, its rights 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.

MARKET AND INDUSTRY DATA

We are responsible for the disclosure contained in this prospectus. However, this prospectus contains information concerning the market and industry in which Sharecare conducts its business that Sharecare has obtained from industry publications and from surveys or studies conducted by third parties that Sharecare believes to be reliable. Sharecare cannot assure you of the accuracy and completeness of such information, and it has not independently verified the market and industry data contained in this prospectus or the underlying assumptions relied on therein. As a result, you should be aware that any such market, industry and other similar data may not be reliable. While Sharecare is not aware of any misstatements regarding any industry data presented in this prospectus, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the section entitled “Risk Factors.”

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial, of Sharecare (both before and after the Business Combination and including Legacy Sharecare). These statements are based on the beliefs and assumptions of our management (both before and after the Business Combination and including Legacy Sharecare). Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, neither Legacy Sharecare nor Sharecare can assure you that it will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” “possible,” “continue,” “might,” “potential” or “intends” or similar expressions. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

 

   

our ability to realize the benefits expected from the Business Combination;

 

   

our ability to maintain the listing of our shares of common stock and public warrants on Nasdaq;

 

   

our success in retaining or recruiting, or changes required in, its officers, key employees or directors;

 

   

our business, operations and financial performance (both before and after the Business Combination and including Legacy Sharecare), including:

 

   

expectations with respect to our financial and business performance, including financial projections and business metrics and any underlying assumptions thereunder;

 

   

future business plans and growth opportunities, including revenue opportunity available from new or existing clients and expectations regarding the enhancement of platform capabilities and addition of new solution offerings;

 

   

developments and projections relating to our competitors and the digital healthcare industry;

 

   

the impact of the COVID-19 pandemic on our business and the actions we may take in response thereto;

 

   

expectations regarding future acquisitions, partnerships or other relationships with third parties;

 

   

our future capital requirements and sources and uses of cash, including our ability to obtain additional capital in the future; and

 

   

other factors detailed under the section entitled “Risk Factors.”

These forward-looking statements are based on information available as of the date of this prospectus, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Important factors could cause actual results to differ materially from those indicated or implied by forward-looking statements such as those contained in documents we have filed with the SEC. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. For a discussion of the risks involved in our business and investing in our common stock and warrants, see the section entitled “Risk Factors.”

Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may vary in material respects from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

 

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SUMMARY OF THE PROSPECTUS

This summary highlights selected information from this prospectus and does not contain all of the information that is important to you in making an investment decision. This summary is qualified in its entirety by the more detailed information included in this prospectus. Before making your investment decision with respect to our securities, you should carefully read this entire prospectus, including the information under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Sharecare,” “Unaudited Pro Forma Condensed Combined Financial Statements” and the financial statements included elsewhere in this prospectus.

The Company

We are a leading digital healthcare platform company that helps members consolidate and manage various components of their health in one place, regardless of where they are on their health journey. Our comprehensive platform is a health and well-being digital hub that unifies elements of individual and community health into one experience in order to enable members to live better, longer lives. We are driven by our philosophy that we are “All Together Better” as well as our goal to turn individual progress into community transformation.

At Sharecare, we believe everyone’s health and well-being is inherently interconnected. Just as a person’s physical health is inextricably linked to their mental and emotional health, an individual’s health is also connected to a greater collective that includes their employer, providers, insurers, colleagues, family, friends, and local communities. However, these groups have historically remained very disconnected with various stakeholders providing hundreds of fragmented point solutions, each addressing only one or two specific health-related objectives. By integrating fragmented point solutions and bringing together disparate stakeholders across the entire healthcare ecosystem into one connected, interoperable virtual care platform, we believe that we can fulfill the role of a unifier and leverage smartphone technology to foster a frictionless user-friendly experience that engages people across the dynamic continuum of their healthcare needs.

Legacy Sharecare was created in 2010 by digital health pioneer Jeff Arnold, with its platform launching in 2012. Given a unique blend of expertise across technology, media, and healthcare, we have, through a number of strategic acquisitions and integration of key technologies and capabilities over the last ten years, built our platform into what we believe is the most comprehensive and seamless experience currently available in the digital healthcare space.

Background

We were originally formed as a Delaware corporation on June 5, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization, recapitalization or other similar business combination with one or more businesses. On February 12, 2021, we entered into the Merger Agreement pursuant to which, among other things, Merger Sub merged with and into Legacy Sharecare, after which, the separate corporate existence of Merger Sub ceased and Legacy Sharecare survived the merger as a wholly-owned subsidiary of FCAC. On July 1, 2021, we consummated the Business Combination.

In connection with the Closing, we changed our name from “Falcon Capital Acquisition Corp.” to “Sharecare, Inc.” and continued the listing of our common stock and public warrants on Nasdaq under the symbols “SHCR” and “SHCRW,” respectively. Prior to the consummation of the Business Combination, our common stock, public warrants and units were listed on Nasdaq under the symbols “FCACU,” “FCAC” and “FCACW,” respectively.

The rights of holders of our common stock, preferred stock and warrants are governed by our fourth amended and restated certificate of incorporation (including the Certificate of Designations for our Series A


 

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Convertible Preferred Stock) (collectively, our “Charter”), our amended and restated bylaws (the “bylaws”) and the Delaware General Corporation Law (the “DGCL”), and in the case of the our private placement warrants and our warrants issued in connection with the IPO, at an exercise price of $11.50 per share of common stock (the “public warrants” and, together with the private placement warrants, the “warrants”), the Warrant Agreement, dated September 21, 2020, between FCAC and Continental Stock Transfer & Trust Company. See the sections entitled “Description of Securities” and “Selling Securityholders.

Emerging Growth Company

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of Sharecare’s financial statements with those of another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of FCAC’s IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700.0 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors,” that represent challenges that we face in connection with the successful implementation of our strategy and growth of our business. The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on our business, cash flows, financial condition and results of operations.

These risk factors include, but are not limited to, the following:

 

   

our ability to adapt in a rapidly evolving industry and to promote and improve the benefits of our platform;


 

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our ability to compete against current and future competitors;

 

   

our ability to maintain and expand our relationship with our clients and partners;

 

   

the impact of the COVID-19 pandemic and other catastrophic events;

 

   

the failure of our platform and solutions to achieve market acceptance and our ability to develop, or incorporate through acquisition or partnership, new solutions, or enhancements, new features and modifications to existing solutions;

 

   

security breaches, loss of data and other disruptions;

 

   

our ability to comply with evolving regulations, including healthcare and privacy and security regulations;

 

   

our ability to protect or enforce our intellectual property rights;

 

   

our ability to obtain additional capital in the future;

 

   

our ability to successfully identify, consummate and successfully integrate acquisitions and investments;

 

   

our ability to maintain our historic growth rates and effectively manage our growth in the future; and

 

   

our ability to operate as a public company, including with respect to increased costs and demands on management as a result of complying with additional laws and regulations.

Corporate Information

Our principal executive offices are located at 255 East Paces Ferry Road NE, Suite 700, Atlanta, Georgia 30305, and our website address is www.sharecare.com. Information contained on our website or connected thereto is provided for textual reference only and does not constitute part of, and is not incorporated by reference into, this prospectus or the registration statement of which it forms a part.


 

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THE OFFERING

We are registering the issuance by us of up to 1,186,667 shares of our common stock that may be issued upon exercise of certain private placement warrants to purchase common stock. We are also registering the resale by the Selling Securityholders or their permitted transferees of (i) up to 68,013,223 shares of common stock and (ii) up to 5,933,334 private placement warrants. Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” on page 7 of this prospectus.

Issuance of Common Stock

The following information is as of September 1, 2021 and does not give effect to issuances of our common stock or warrants after such date, or the exercise of warrants after such date.

 

Shares of our common stock to be issued upon exercise of certain private placement warrants   

1,186,667

Shares of our common stock outstanding    335,137,704(1)
Use of proceeds    We will receive up to an aggregate of $13,646,670.50 from the exercise of the private placement warrants assuming the exercise in full of all such warrants for cash. Unless we inform you otherwise in a prospectus supplement or free writing prospectus, we intend to use the net proceeds from the exercise of such warrants for general corporate purposes which may include acquisitions or other strategic investments.
Resale of Common Stock and Warrants   
Shares of common stock offered by the Selling Securityholders (including (i) 5,933,334 shares of common stock that may be issued upon exercise of the private placement warrants, (ii) 5,000,000 shares of common stock that may be issued upon conversion of the Series A Preferred Stock and (iii) 1,905,236 Earnout Shares)   

68,013,223

Warrants offered by the Selling Securityholders (representing private placement warrants)   

5,933,334

Redemption    The warrants are redeemable in certain circumstances. See “Description of Securities — Warrants and Earned Obligations” for further discussion.
Use of proceeds    We will not receive any proceeds from the sale of the common stock and warrants to be offered by the Selling Securityholders. With respect to shares of common stock underlying the warrants, we will not receive any proceeds from such shares except with respect to amounts received by us upon exercise of such warrants to the extent such warrants are exercised for cash.

 

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Lock-up agreements    Certain of our stockholders are subject to restrictions on the transfer of the securities held by them until the termination of applicable lock-up periods. See “Restrictions on Resale of our Common Stock —Lock-up Agreements” for further discussion.
Ticker symbols    Our common stock and public warrants are listed on Nasdaq under the symbols “SHCR” and “SHCRW,” respectively.

(1) The number of shares of common stock outstanding is based on 335,137,704 shares of common stock outstanding as of September 1, 2021 and does not include:

 

   

161,317,138 shares of common stock reserved for issuance under the Sharecare, Inc. 2021 Omnibus Incentive Plan (the “Incentive Plan”), including 130,151,939 shares of common stock issuable upon the exercise of outstanding options to purchase shares of our common stock;

 

   

11,500,000 shares of common stock underlying public warrants and 5,933,334 shares of common stock underlying our private placement warrants;

 

   

890,314 shares of common stock underlying warrants issued at the Closing in exchange for certain existing warrants of Legacy Sharecare (the “Legacy Sharecare warrants”);

 

   

5,000,000 shares of common stock issuable upon conversion of the Series A Preferred Stock; and

 

   

3,213,000 Earnout Shares held in escrow, which may be released to the Sponsor and Legacy Sharecare stockholders, subject to the achievement of certain stock price targets (including 448,355 Earnout Shares underlying contingent options (as defined herein)).


 

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MARKET PRICE, TICKER SYMBOL AND DIVIDEND INFORMATION

Market Price and Ticker Symbol

Sharecare’s common stock and public warrants are currently listed on Nasdaq under the symbols “SHCR” and “SHCRW,” respectively.

The closing price of Sharecare’s common stock and public warrants on September 2, 2021 was $8.59 and $1.70, respectively.

Holders

As of September 2, 2021, there were approximately 450 holders of record of our common stock, one holder of record of our Series A Preferred Stock and approximately 25 holders of record of our warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose common stock and warrants are held of record by banks, brokers and other financial institutions. There is no public market for our Series A Preferred Stock.

Dividend Policy

We have not paid any cash dividends on our common stock to date. The payment of cash dividends is dependent upon Sharecare’s revenue and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends is within the discretion of the Board of Directors of Sharecare (the “Sharecare Board”).


 

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RISK FACTORS

We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, results of operations or reputation. The risks described below are not the only risks we face. Additional risks not presently known to us or that we currently believe are not material may also significantly affect our business, financial condition, results of operations or reputation. Our business could be harmed by any of these risks. In assessing these risks, you should also refer to the other information contained in this prospectus, including the financial statements and related notes included elsewhere in this prospectus. In this section, “we,” “us,” “our” and “Sharecare” generally refer to Sharecare in the present tense or Legacy Sharecare prior to the consummation of the Business Combination, unless the context otherwise requires.

Risk Factors Relating to Our Securities

We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.

We will have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of our common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending on the third business day prior to the date we give notice of redemption. If and when the warrants become redeemable by us, we may exercise the redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force holders to (i) exercise the warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) sell the warrants at the then-current market price when the holder might otherwise wish to hold on to such warrants or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of the warrants. None of the private placement warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.

In addition, we may redeem your warrants after they become exercisable for a number of shares of our common stock determined based on the redemption date and the fair market value of our common stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of our common stock had your warrants remained outstanding.

There can be no assurance that the warrants will be in the money at the time they become exercisable, and they may expire worthless.

The exercise price for the outstanding warrants is $11.50 per share of common stock. There can be no assurance that the warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the warrants may expire worthless.

Any future series of Sharecare preferred stock may have rights and preferences that are senior, or in addition, to the rights and preferences of the Sharecare common stock.

The Charter authorizes the issuance by us of up to 15,000,000 shares of Sharecare preferred stock (including 5,000,000 shares of Series A convertible preferred stock, par value $0.0001 per share (the “Series A Preferred Stock”)). In connection with the consummation of the Business Combination, 5,000,000 shares of Series A Preferred Stock were issued upon conversion of Legacy Sharecare’s Series D redeemable convertible preferred stock (the “Legacy Sharecare Series D Preferred Stock”) pursuant to terms of the Merger Agreement. The Series A Preferred Stock has, and any future series of Sharecare preferred stock may have, rights, preferences and privileges that are senior, or in addition, to the rights, preferences and privileges of our common stock. For example, the Series A Preferred Stock has a right to receive, upon a liquidation of Sharecare, a preference amount out of the assets available for distribution to stockholders before any distribution can be made to holders

 

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of our common stock. If we were to file for bankruptcy, holders of Sharecare preferred stock that remain outstanding would have a claim in bankruptcy that is senior to any claim holders of our common stock would have. The Series A Preferred Stock is also subject to mandatory redemption by us on the fifth anniversary of its issue date. Future series of Sharecare preferred stock may also have rights to dividends in priority to dividends on our common stock. These rights, preferences and privileges of holders of our preferred stock could negatively affect the investment of holders of Sharecare common stock. Holders of common stock could potentially not receive dividends that they might otherwise have received and could receive less proceeds in connection with any future sale of Sharecare, in liquidation or on any other basis.

We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.

We may be forced to write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject. Accordingly, a stockholder could suffer a reduction in the value of their shares.

The trading price of our common stock and warrants may be volatile.

The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

Factors affecting the trading price of our securities may include:

 

   

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

 

   

changes in the market’s expectations about our operating results;

 

   

success of competitors;

 

   

operating results failing to meet the expectations of securities analysts or investors in a particular period;

 

   

changes in financial estimates and recommendations by securities analysts concerning Sharecare or the industry in which we operate in general;

 

   

operating and stock price performance of other companies that investors deem comparable to Sharecare;

 

   

ability to market new and enhanced products and services on a timely basis;

 

   

changes in laws and regulations affecting our business;

 

   

commencement of, or involvement in, litigation involving Sharecare;

 

   

changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of shares of Sharecare common stock available for public sale;

 

   

any major change in the Sharecare Board;

 

   

sales of substantial amounts of Sharecare common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and

 

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general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and Nasdaq specifically, 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 securities at or above the price at which it was acquired. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to Sharecare could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

Anti-takeover provisions contained in our Charter as well as provisions of Delaware law, could impair a takeover attempt.

Our Charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. Sharecare is also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions will include:

 

   

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

   

a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Sharecare Board;

 

   

the right of the Sharecare Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on the Sharecare Board;

 

   

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; and

 

   

the requirement that a meeting of stockholders may only be called by Chairman of the Sharecare Board, the Chief Executive Officer, or the Sharecare Board pursuant to a resolution adopted by a majority of the Sharecare Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors.

These provisions, alone or together, could delay hostile takeovers and changes in control of Sharecare or changes in the Sharecare Board and our management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the DGCL, which prevents some stockholders holding more than 15% of outstanding Sharecare common stock from engaging in certain business combinations without approval of the holders of substantially all of Sharecare common stock. Any provision of the Charter or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of common stock and could also affect the price that some investors are willing to pay for common stock. See “Description of Securities.

Our Charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings and the federal district courts as the sole and exclusive forum for other types of actions and proceedings, in each case, that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with us or our directors, officers or other employees.

The Charter provides that, unless Sharecare consents in writing to the selection of an alternative forum, any (i) derivative action or proceeding brought on behalf of Sharecare, (ii) action asserting a claim of breach of a

 

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fiduciary duty owed by any director, officer or other employee of Sharecare to Sharecare or Sharecare’s stockholders, (iii) action asserting a claim against Sharecare or any director or officer arising pursuant to any provision of the DGCL or the Charter or bylaws or (iv) action asserting a claim against Sharecare or any director or officer of Sharecare governed by the internal affairs doctrine, shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit shall be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which the Court of Chancery of the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery of the State of Delaware within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware, (C) for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction, or (D) any action arising under the Securities Act, as to which the Court of Chancery of the State of Delaware and the federal district court for the District of Delaware shall have concurrent jurisdiction. Subject to the foregoing, the federal district courts of the United States are the exclusive forum for the resolution of any action, suit or proceeding asserting a cause of action under the Securities Act. The exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Exchange Act. Any person or entity purchasing or otherwise acquiring an interest in any shares of Sharecare’s capital stock shall be deemed to have notice of and to have consented to the forum provisions in the Charter. These choice-of-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that he, she or it believes to be favorable for disputes with Sharecare or Sharecare’s directors, officers or other employees, which may discourage such lawsuits. We note that there is uncertainty as to whether a court would enforce these provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

Alternatively, if a court were to find these provisions of the Charter or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.

Risks Related to our Business and Industry

Our industry is rapidly evolving and undergoing significant technological change. If we are not successful in adapting to this evolving environment and promoting and improving the benefits of our platform, our growth may be limited, and our business may be adversely affected.

The digital healthcare industry is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing customer needs, and intense competition. In addition, there may be a limited-time opportunity to achieve and maintain a significant share of this market due in part to our rapidly evolving industry and the substantial resources available to our existing and potential competitors. It is uncertain whether our market will achieve and sustain high levels of demand and market adoption. In order to remain competitive, we are constantly evaluating the marketplace for ways to broaden and improve our client and member experience through product innovation, partnerships, and acquisitions.

Our success depends to a substantial extent on the willingness of individuals to increase their use of digital health platforms to manage their healthcare journey, our ability to demonstrate the value of our solutions to our current and future clients, and our ability to drive engagement and activation within the populations of current and future clients. If our existing or future clients do not recognize the benefits of our platform or we do not achieve sufficient engagement and activation of our clients’ populations, then the market for our solutions might develop more slowly than we expect, which could adversely affect our operating results.

 

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We may be unable to compete effectively against our current and future competitors, which could have a material adverse effect on our results of operations, financial condition, business, and prospects.

The market for our solutions is highly competitive, rapidly evolving, and fragmented. We compete with other digital health technology companies that serve the needs of members across a broad set of health-related needs, typically through platforms focused on wellness/well-being, benefits navigation, and/or health navigation. We also face competition from many other vendors in the digital healthcare industry offering point solutions addressing only one specific aspect of a person’s health.

If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could materially adversely affect our ability to compete effectively. Our competitors may also establish or strengthen cooperative relationships with our current or future sponsors or partners, thereby limiting our ability to grow our strategic relationship with such parties. Our existing point solution partners may also develop new capabilities over time that address similar needs to, and compete with, other portions of our platform. If we are unable to compete effectively with these or other competitors, our business, financial condition, and results of operations could be materially adversely affected.

Many of our competitors may also have longer operating histories and significantly greater financial, technical, marketing, and other resources than we have. As a result, some of these competitors may be in a position to devote greater resources to the development, promotion, sale, and support of their products and services and have offered, or may in the future offer, a wider range of products and services that are increasingly desirable to potential clients, and they may also use advertising and marketing strategies that (including loss-leaders) achieve broader brand recognition or acceptance.

We derive a material portion of our revenue from our largest clients. The loss, termination, or renegotiation of any contract with such clients could negatively impact our results.

Historically, we have relied on a limited number of our largest clients for a material portion of our total revenue and accounts receivable. One client accounted for 16%, 17%, 16% and 13% of our revenue for the years ended December 31, 2018, 2019 and 2020, and the six months ended June 30, 2021, respectively. For the years ended December 31, 2018, 2019 and 2020, and the six months ended June 30, 2021, our top 10 clients accounted for 49%, 44%, 44% and 44% of our revenue, respectively. The sudden loss of any of our largest clients or the renegotiation of any of our largest client contracts could adversely affect our results of operations. In the ordinary course of business, we engage in active discussions and renegotiations with our clients regarding the solutions we provide and the terms of our client agreements, including our fees. As our clients’ businesses respond to market dynamics and financial pressures, and as our clients make strategic business decisions with respect to the lines of business they pursue and programs in which they participate, we expect that certain of our clients will, from time to time, seek to restructure their agreements with us. In the ordinary course of our business, we renegotiate the terms of our agreements with our clients in connection with renewals or extensions of these agreements. These discussions and future discussions could result in reductions to the fees and changes to the scope of services contemplated by our original client contracts and consequently could negatively impact our revenue, business, and prospects.

Because we rely on a limited number of our largest clients for a material portion of our revenue, we depend on the creditworthiness of these clients. If the financial condition of our clients declines, our credit risk could increase. Should one or more of our significant clients declare bankruptcy, be declared insolvent, or otherwise be restricted by state or federal laws or regulation from continuing in some or all of their operations, this could adversely affect our ongoing revenue, the collectability of our accounts receivable, affect our bad debt reserves and negatively impact our net income.

 

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Our sales cycles can be long and complicated and requires considerable time and expense. As a result, our sales and revenue are difficult to predict and may vary substantially from period to period, which may cause our results of operations to fluctuate significantly.

The timing of our sales and related revenue recognition is difficult to predict because of the length of our sales cycle, particularly with respect to our enterprise clients which include a range of clients from large employers and health systems to government agencies and health plans. The sales cycle for our solutions from initial contact with a potential client to enrollment launch varies widely, ranging from less than six months to well over a year. Some of our enterprise clients undertake a significant and lengthy evaluation process, including to determine whether our platform meets their unique healthcare needs, which frequently involves evaluation of not only our platform but also an evaluation of other available services and solutions, which has in the past resulted in extended sales cycles. Our sales efforts involve educating our clients about the ease of use, technical capabilities, and potential benefits of our platform. Once an enterprise client enters into an agreement with us, we then explain the benefits of our solutions again to eligible employees to encourage them to sign up as members. During the sales cycle, we expend significant time and money on sales and marketing activities, which lowers our operating margins, particularly if no sale occurs. There are many other factors specific to clients that contribute to the timing of their purchases and the variability of our revenue recognition, including budgetary constraints, funding authorization, and changes in their personnel. In addition, the significance and timing of our product enhancements, and the introduction of new products by our competitors, may also affect our clients’ purchases. For all of these reasons, it is difficult to predict whether a sale will be completed, the particular period in which a sale will be completed or the period in which revenue from a sale will be recognized. It is possible that in the future we may experience even longer sales cycles, more complex client needs, higher upfront sales costs, and less predictability in completing some of our sales as we continue to expand our direct sales force, expand into new territories, and market additional solutions. Our sales process is also subject to being lengthened as a result of ongoing travel restrictions and business interruptions caused by the COVID-19 pandemic. Moreover, we may in the future enter into agreements under which we will not receive any payments or recognize any revenue until we complete a lengthy implementation cycle. If our sales cycle lengthens or our substantial upfront sales and implementation investments do not result in sufficient sales to justify our investments, our revenue could be lower than expected and it could have a material adverse effect on our business, financial condition, or results of operations.

We have also historically experienced some unpredictability and cyclicality in the timing for recognizing revenue, with higher revenue in some quarters compared with others. For example, with respect to our enterprise clients, and in particular our clients with contract years commencing at the beginning of a calendar year, we record a disproportionate amount of revenue from such clients during the fourth quarter of our fiscal year relative to the first three quarters of our fiscal year. In addition, we have also historically recorded disproportionately higher revenue from our consumer solutions in the fourth quarter of our fiscal year as a result of our sponsors committing incremental marketing dollars available for the fiscal year. If these cyclical fluctuations in our business become more pronounced in the future, our business, financial condition and results of operations may be exposed to further risks.

If our existing clients do not continue or renew their contracts with us, renew at lower fee levels or decline to purchase additional solutions from us, it could have a material adverse effect on our business, financial condition, and results of operations.

We expect to derive a significant portion of our revenue from renewal of existing client contracts and sales of additional solutions to existing clients. As part of our growth strategy, for instance, we are focused on offering additional solutions to our existing clients in order to enhance member experience, improve clinical results, and increase our revenue per year. We also believe there is significant opportunity to cross-sell our provider solutions to existing accounts. As a result, expanding the solutions that we provide to our existing client base is critical to our future business, revenue growth, and results of operations.

 

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Factors that may affect our ability to sell additional solutions include, but are not limited to: the price, performance, and functionality of our solutions; the availability, price, performance, and functionality of competing solutions; our ability to develop and sell complementary applications and services; the stability, performance, and security of our hosting infrastructure and hosting services; changes in healthcare, data privacy and other laws, regulations, or trends; and the business environment and development of our clients.

With respect to our enterprise clients, contracts with health plans and integrated healthcare systems generally range from three to five years, with several comprehensive strategic agreements extending up to ten years in length, while contracts with large employers generally have two- to four-year terms. Provider revenue is based on the volume of health document requests fulfilled and also from subscription fees for various technology related services that assist providers with efficiency, productivity, quality, performance and risk-adjustment tools, billing contract compliance and enhanced patient care. Subscription fees are recognized ratably over a one- to three-year contractual period. Our provider channel’s revenue is based on the volume of health document requests fulfilled and subscription fees for various technology-related services that assist providers with performance and risk-adjustment tools, billing contract compliance and enhanced patient care. Subscription fees are recognized ratably over a one- to three-year contractual period. Our clients generally have no obligation to renew their contracts for our solutions after the initial terms expire. In addition, our clients may negotiate terms less advantageous to us upon renewal, which may reduce our revenue from these clients. Our future results of operations also depend, in part, on our ability to expand into new clinical specialties and across care settings and use cases. If our clients fail to renew their contracts, renew their contracts upon less favorable terms or at lower fee levels or fail to purchase new solutions from us, our revenue may decline, or our future revenue growth may be constrained.

In addition, after the initial contract term, a significant number of our client contracts allow clients to terminate such agreements for convenience at certain times, typically with an advance notice. If a client terminates its contract early and revenue and cash flows expected from a client are not realized in the time period expected or not realized at all, our business, financial condition, and results of operations could be adversely affected.

Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity, and teamwork fostered by our culture and our business may be harmed.

We believe that our culture has been and will continue to be a critical contributor to our success. We expect to continue to hire aggressively as we expand, and we believe our corporate culture has been crucial in our success and our ability to attract highly skilled personnel. If we do not continue to develop our corporate culture or maintain and preserve our core values as we grow and evolve both in the United States and internationally, we may be unable to foster the innovation, curiosity, creativity, focus on execution, teamwork, and the facilitation of critical knowledge transfer and knowledge sharing we believe we need to support our growth. Moreover, our anticipated headcount growth and our status as a public company may result in a change to our corporate culture, which could harm our business.

Economic uncertainty or downturns, particularly as it impacts particular industries, could adversely affect our business and operating results.

In recent years, global markets have experienced cyclical downturns and worldwide economic conditions remain uncertain. This uncertainty has been exacerbated in particular by the ongoing COVID-19 pandemic and the associated quarantines, interruptions in travel and business disruptions. Economic uncertainty and associated macroeconomic conditions make it extremely difficult for our clients and us to accurately forecast and plan future business activities and could cause our clients to slow spending on our platform, which could delay and lengthen sales cycles. Furthermore, during uncertain economic times our clients may face issues gaining timely access to sufficient credit, which could result in an impairment of their ability to make timely payments to us. Our clients’ ability to make timely payments to us may also be impacted by their own customers’ financial

 

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condition or ability to gain timely access to credit causing payments to our clients to be delayed. If our clients are not able to make timely payments to us, we may be required to increase our allowance for doubtful accounts and our business, financial condition, and results of operations could be materially negatively impacted.

Furthermore, we have enterprise clients in a variety of different industries. A significant downturn in the economic activity attributable to any particular industry may cause organizations to react by reducing their capital and operating expenditures in general or by specifically reducing their spending on healthcare matters. In addition, our enterprise clients may delay or cancel healthcare projects or seek to lower their costs by renegotiating vendor contracts. Such delays or reductions in general healthcare spending may disproportionately affect our revenue. Also, competitors may respond to challenging market conditions by lowering prices and attempting to lure away our clients.

We cannot predict the timing, strength, or duration of any economic slowdown or any subsequent recovery generally, of any industry in particular. If the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, and results of operations could be materially adversely affected.

The growth of our business relies, in part, on the growth and success of our enterprise clients and the number of members with access to our offerings, which are difficult to predict and are affected by factors outside of our control. If the number of members of the populations of our enterprise clients decreases or the number of those members that utilize our solutions decreases, our revenue will likely decrease.

Under most of our enterprise client contracts, we base our fees on the number of individuals enrolled in the solutions subscribed to by our enterprise clients. In addition, some fees are subject to credits if certain performance criteria are not met, which in some cases depend on the behavior and health of our members, such as their continued engagement with our solutions, and other factors outside of our control. Many factors may lead to a decrease in the number of individuals covered by our enterprise clients and the number of solutions subscribed to by our clients, including, but not limited to: natural attrition of members of our enterprise clients’ populations; decline in prevalence of employer-sponsored healthcare or private health insurance coverage; continued acceptance of our solutions by members and prospective members; the timing of development and release of new solutions; introduction and development of features and functionality that are lower cost alternatives by our competitors; technological changes and developments that we cannot respond to within the markets we serve; and changes in the healthcare industry. The growth forecasts of our enterprise clients are also subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate and their member enrollment in our solutions could fail to grow at anticipated rates, if at all. If the number of individuals covered by our enterprise clients decreases, or the number of solutions to which they subscribe decreases, for any reason, our enrollment rate may decline and our revenue will likely decrease which would harm our business, financial condition, and results of operations.

Our sales and the success of our marketing efforts depend in part on our ability to call upon our current clients to provide positive references to new, potential clients. Failure to obtain such references may adversely affect our ability to grow our client base and have a negative and adverse effect on our business, financial condition, and results of operations.

Our sales and the success of our marketing efforts depend in part on our ability to call upon our current clients to provide positive references to new, potential clients. The loss or dissatisfaction of our clients, particularly our large, long-term enterprise clients, including as a result of our platform providing a poor member experience, could adversely affect our brand and reputation and our ability to rely on our clients for positive references. If that were to occur, it could substantially harm our ability to maintain existing clients, attract new clients, and sell and achieve widespread adoption of our solutions, and, in turn, our business, financial condition, and results of operations.

 

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We face risks, such as unforeseen costs and potential liability in connection with content we produce, license, and distribute through our platform.

As a producer and distributor of content, we face potential liability for negligence, copyright, and trademark infringement, or other claims based on the nature and content of materials that we produce and distribute. We also may face potential liability for content used in promoting our service, including marketing materials. We may decide to remove content from our platform, not to place certain content on our platform, or to discontinue or alter our production of certain types of content if we believe such content might not be well received by our clients or members or could be damaging to our brand and business.

To the extent we do not accurately anticipate costs or mitigate risks, including for content that we obtain but ultimately does not appear on or is removed from our platform, or if we incur unforeseen liabilities with respect to the content we produce or distribute, our business may suffer. Litigation to defend related claims could be costly and the expenses and damages arising from any liability could harm our results of operations. We may not be indemnified against claims or costs of these types and we may not have insurance coverage for these types of claims.

The growth of our business and future success relies, in part, on our partnerships and other relationships with third parties and our business could be harmed if we fail to maintain or expand these relationships.

In the ordinary course of our business, we may enter into partnerships and other collaborations, in-licensing arrangements, joint ventures, and strategic alliances with third parties to develop proposed solutions, or integrate existing solutions into our platform. Proposing, negotiating, and implementing partnerships, collaborations, in-licensing arrangements, joint ventures, or strategic alliances may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms, or at all. In particular, these collaborations may not result in the development or integration of solutions that achieve commercial success or result in significant revenues and could be terminated prior to developing or integrating any solutions. In addition, the financial condition and viability of our collaborators is beyond our control. Failure to retain and expand any of our partnerships or other third-party relationships, or the failure of our collaborators to remain a viable business, could harm our relationships with our clients and our reputation and brand.

Additionally, we may not be in a position to exercise sole decision making authority regarding certain transactions or arrangements, which could create the potential risk of creating impasses on decisions, and our collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise with our current or future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. In addition, we have limited control over the amount and timing of resources that our current collaborators or any future collaborators devote to their own or our future solutions. Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements are contractual in nature and may be terminated or dissolved under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

 

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We could face reputational damage or loss of trust from our clients and members as a result of transferring inaccurate or incomplete information, as well as potential regulatory risk or other liability for errors in processing information, all of which could harm out business, financial condition and results of operations.

We provide healthcare-related information for use by our partners, clients and members. However, data in the healthcare industry is generally fragmented in origin, inconsistent in format, and often incomplete. To the extent the information from third-parties that we transfer is incorrect or incomplete, we may suffer reputational risks and loss of trust from our partners, clients and members. We may also face potential regulatory risk or other liability to our partners, clients and members to the extent that we transfer inaccurate or incomplete data as a result of our own processing errors rather than simply passing on third-party information. For example, if, as a result of such a processing error, we provided sensitive information to the wrong party or such error results in incorrect delivery of services, we could be exposed to risk of regulatory non-compliance under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) or personal liability to our partners, clients and members under state law causes of action such as negligence. We could also be subject to liability for wrongful delivery or handling of healthcare services or erroneous health information. While we maintain insurance coverage for such claims, this coverage may prove to be inadequate or could cease to be available to us on acceptable terms, if at all. Even unsuccessful claims could result in substantial costs and diversion of management resources. A claim brought against us that is uninsured or under-insured could harm our business, financial condition, and results of operations.

Our business, financial condition, and results of operations may be adversely affected by the COVID-19 pandemic or other similar epidemics or adverse public health developments.

The outbreak of COVID-19 caused many governments to implement quarantines and significant restrictions on travel, or to advise that people remain at home where possible and avoid crowds. Healthcare providers around the world, including certain of our partners and clients, have faced and will continue to face, substantial challenges in treating patients with COVID-19, such as the diversion of hospital staff and resources from ordinary functions to the treatment of COVID-19, supply, resource and capital shortages, and overburdening of staff and resource capacity. In the United States, governmental authorities have also recommended, and in certain cases required, that elective, specialty, and other procedures and appointments, including certain primary care services, be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and personnel capacity toward the treatment of COVID-19.

The current resurgence of COVID-19 and related current and future measures to contain the spread of COVID-19, could cause disruptions and severely impact our business, including, but not limited to: increasing the likelihood of clients not renewing their contracts with us or being unable to pay us in accordance with the terms of their agreements; reducing the demand of the solutions offered on our platform due to restrictions on elective procedures and access to hospitals and other healthcare facilities; causing one or more of our clients or partners to file for bankruptcy protection or shut down; negatively impacting our ability to provide our solutions to clients and members; and harming our business, financial condition, and results of operations.

Furthermore, we cannot predict with any certainty whether and to what degree the disruption caused by the COVID-19 pandemic and reactions thereto will continue, and in turn, we also expect to face difficulty accurately predicting our internal financial forecasts.

Our business could be disrupted by catastrophic events and man-made problems, such as power disruptions, data security breaches, terrorism, and health epidemics.

Our systems are vulnerable to damage or interruption from the occurrence of any catastrophic event, including earthquake, fire, flood, tsunami, or other weather event, power loss, telecommunications failure, software or hardware malfunction, cyber-attack, war, health epidemic (including the recent outbreak of

 

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COVID-19), terrorist attack, or incident of mass violence, which could result in lengthy interruptions in access to our platform. In addition, acts of terrorism, including malicious internet-based activity, could cause disruptions to the internet or the economy as a whole. Even with our disaster recovery arrangements, access to our platform could be interrupted. If our systems were to fail, or be negatively impacted as a result of a natural disaster or other event, our ability to deliver our platform and solutions to our clients and members would be impaired or we could lose critical data. If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster, and successfully execute on those plans in the event of a disaster or emergency, our business, financial condition, and results of operations would be harmed.

We have implemented a disaster recovery program that allows us to move platform traffic to a backup data center in the event of a catastrophe. However, to the extent our disaster recovery program does not effectively support the movement of traffic in a timely or complete manner in the event of a catastrophe, our business, financial condition, and results of operations may be harmed.

We depend on our talent to grow and operate our business, and if we are unable to hire, integrate, develop, motivate and retain our personnel, including our senior management, we may not be able to grow effectively.

Our success depends in large part on our ability to attract and retain high-quality employees in sales, services, engineering, marketing, operations, finance, and support functions. Competition for qualified employees is intense in our industry, and the loss of even a few qualified employees, or an inability to attract, retain, and motivate additional highly skilled employees required for the planned expansion of our business could harm our operating results and impair our ability to grow. To attract and retain key personnel, we use various measures, including an equity incentive program for key employees. These measures may not be enough to attract and retain the personnel we require to operate our business effectively.

As we continue to grow, we may be unable to continue to attract or retain the personnel we need to maintain our competitive position. In addition to hiring new employees, we must continue to focus on retaining our best talent. Competition for these resources is intense. If we are not able to effectively increase and retain our talent, our ability to achieve our strategic objectives will be adversely impacted, and our business will be harmed. Employees may be more likely to leave us if the shares of our capital stock they own or the shares of our capital stock underlying their equity incentive awards have significantly reduced in value or the vested shares of our capital stock they own or vested shares of our capital stock underlying their equity incentive awards have significantly appreciated. Many of our employees may receive significant proceeds from sales of our equity in the public markets, which may reduce their motivation to continue to work for us.

In addition, our future also depends on the continued contributions of our senior management team, each of whom would be difficult to replace. We rely on our leadership team in the areas of operations, technology, marketing, sales, and general and administrative functions. From time to time, there may be changes in our senior management team that may be disruptive to our business, particularly if we have failed to have in place and execute an effective succession plan. If our senior management team, including any new hires that we may make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business, financial condition, and results of operations could be harmed.

If we are not able to maintain and enhance our reputation and brand recognition, our business, financial condition, and results of operations could be adversely affected.

We believe that maintaining and enhancing our reputation and brand recognition is critical to our relationships with existing clients, partners, and sponsors, and to our ability to attract new clients, partners, and sponsors. 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 increasingly difficult and expensive. Brand promotion and 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

 

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and our business, financial condition, and results of operations could be harmed. In addition, any factor that diminishes our reputation or that of our management, including failing to meet the expectations of our clients, partners, or sponsors could harm our reputation and brand and make it substantially more difficult for us to attract new client, partners, and sponsors. If we do not successfully maintain and enhance our reputation and brand recognition, our business may not grow or our current revenue may decline and we could lose our relationships with our existing clients, partners, and sponsors, including, in particular, our enterprise clients, which would harm our business, financial condition, and results of operations.

Risks Related to Technology and Data Privacy

The failure of our platform to achieve and maintain market acceptance could result in us achieving sales below our expectations, which would cause our business, financial condition, and results of operation to be materially and adversely affected.

Our current business strategy is highly dependent on our platform achieving and maintaining market acceptance. Market acceptance and adoption of our platform depends on educating our clients and members as to the distinct features, ease-of-use, positive lifestyle impact, cost savings, and other perceived benefits of the solutions offered on our platform as compared to competitive solutions. If we are not successful in demonstrating to existing and potential clients and members the benefits of our solutions, our sales may decline or we may fail to increase our sales in line with our forecasts.

Achieving and maintaining market acceptance of our solutions could be negatively impacted by many factors, including the perceived risks and rate of acceptance associated with the use of digital healthcare technologies generally as compared to traditional healthcare solutions. In addition, our platform may be perceived by our partners, clients, and members to be more complicated or less effective than traditional approaches, and people may be unwilling to adopt our platform solutions.

If we are not able to develop new solutions, or successful enhancements, new features and modifications to our existing solutions, or otherwise incorporate such new solutions or enhancements, new features or modifications to existing solutions through acquisition or partnership, our business, financial condition, and results of operations could be adversely affected.

The markets in which we operate are characterized by rapid technological change, frequent new product and service introductions and enhancements, changing customer demands, and evolving industry standards. The introduction of products and services embodying new technologies can quickly make existing products and services obsolete and unmarketable. Additionally, changes in laws and regulations could impact the usefulness of our solutions and could necessitate changes or modifications to our solutions to accommodate such changes. We invest substantial resources in researching and developing, or otherwise incorporating into our platform through acquisition or partnership, new solutions or enhancements to our existing solutions by incorporating additional features, improving functionality, and adding other improvements to meet our clients’ and members’ evolving needs. The success of any enhancements or improvements to our solutions or any new solutions depends on several factors, including timely completion, competitive pricing, adequate quality testing, integration with new and existing technologies on our platform and third-party partners’ technologies, and overall market acceptance. We may not succeed in developing or incorporating, marketing, and delivering on a timely and cost-effective basis enhancements or improvements to our solutions or any new solutions that respond to continued changes in market demands or new client requirements, and any enhancements or improvements to our solutions or any new solutions may not achieve market acceptance. Since developing, or incorporating through acquisition or partnership, our solutions is complex, the timetable for the release of new solutions and enhancements to existing solutions is difficult to predict, and we may not offer new solutions and updates as rapidly as our clients require or expect. Any new solutions that we develop or incorporate into our platform, or through acquisition or partnership, may not be introduced in a timely or cost-effective manner, may contain errors or defects, or may not achieve the broad market acceptance necessary to generate sufficient revenue. Moreover, even if we

 

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introduce new solutions, we may experience a decline in revenue of our existing solutions that is not offset by revenue from the new solutions. For example, clients may delay adoption of new solutions to permit them to make a more thorough evaluation of these solutions or until industry and marketplace reviews become widely available. Some clients may hesitate to migrate to a new solution due to concerns regarding the performance of the new solution. In addition, we may lose existing clients who choose a competitor’s products and services. This could result in a temporary or permanent revenue shortfall and adversely affect our business, financial condition, and results of operations.

We may experience difficulties with software development, industry standards, design, or marketing that could delay or prevent our development or incorporation in our platform, introduction or implementation of new solutions, enhancements, additional features, or capabilities. If clients do not widely purchase and adopt our solutions, we may not be able to realize a return on our investment. If we do not accurately anticipate customer demand or we are unable to develop, license, or acquire new features and capabilities on a timely and cost-effective basis, or if such enhancements do not achieve market acceptance, it could result in adverse publicity, loss of revenue or market acceptance or claims by clients or members brought against us, each of which could have a material and adverse effect on our reputation, business, financial condition, and results of operations.

We rely on internet infrastructure, bandwidth providers, third-party computer hardware and software, and other third parties for providing services to our clients and members, and any failure or interruption in the services provided by these third parties or the inability to access our platform on third-party operating systems could negatively impact our relationships with clients and members, adversely affecting our business, financial condition, and results of operations.

Our ability to deliver our internet-based services depends on the development and maintenance of the infrastructure of the internet by third parties. This includes maintenance of a reliable network backbone with the necessary speed, data capacity, bandwidth capacity, and security. Our services are designed to operate without interruption. However, we may experience future interruptions and delays in services and availability from time to time. In the event of a catastrophic event with respect to one or more of our systems, we may experience an extended period of system unavailability, which could negatively impact our relationship with clients and members.

Our platform relies, in part, on broad interoperability with a range of operating systems and third-party applications. We are dependent on the accessibility of our platform across these third-party operating systems and applications that we do not control. Third-party services and products are constantly evolving, and we may not be able to modify our platform to assure its compatibility with that of other third parties following development changes. Should the interoperability of our platform across devices, operating systems and third-party applications decrease, or if members are unable to easily and seamlessly access our application or information stored in our platform, our business, financial condition, and results of operations could be harmed.

We also rely on software licensed from third parties in order to offer our services. These licenses are generally commercially available on varying terms. However, it is possible that this software may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use any of this software could result in delays in the provisioning of our services until equivalent technology is either developed by us, or, if available, is identified, obtained, and integrated. Furthermore, our use of additional or alternative third-party software would require us to enter into license agreements with third parties, and integration of our software with new third-party software may require significant work and require substantial investment of our time and resources. Also, any undetected errors or defects in third-party software could prevent the deployment or impair the functionality of our software, delay new updates or enhancements to our solutions, result in a failure of our solutions, and injure our reputation.

 

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Our solutions may not operate properly, which could damage our reputation, give rise to claims against us or our partners, or divert application of our resources from other purposes, any of which could harm our business, financial condition, and results of operations.

Software development is time-consuming, expensive, and complex, and may involve unforeseen difficulties. We may encounter technical obstacles, and it is possible that we discover problems or design defects that prevent our solutions and platform, including third-party solutions integrated into our platform, from operating properly. Moreover, we may encounter incompatibilities or other technical issues resulting from the interaction of proprietary and/or third-party solutions included in our platform. If our proprietary or third-party solutions do not function reliably, malfunction, or fail to achieve client expectations in terms of performance, clients could assert liability claims against us or our partners or attempt to cancel their contracts with us. This could damage our reputation, or the reputation of our partners, and impair our ability to attract or maintain clients.

The software underlying our platform is highly complex and may contain undetected errors or vulnerabilities, some of which may only be discovered after the code has been used by our clients and members. Any real or perceived errors, failures, bugs, or other vulnerabilities discovered in our code could result in negative publicity and damage to our reputation, or the reputation of our partners, loss of clients, loss of members, loss of or delay in market acceptance of our platform, loss of competitive position, loss of revenue, or liability for damages, overpayments and/or underpayments, any of which could harm our enrollment rates. In such an event, we may be required or may choose to expend additional resources in order to help correct the problem. Such efforts could be costly, or ultimately unsuccessful. Even if we are successful at remediating issues, we may experience damage to our reputation and brand. There can be no assurance that provisions typically included in our agreements with partners that attempt to limit our exposure to claims would be enforceable or adequate or would otherwise protect us from liabilities or damages with respect to any particular claim. Even if unsuccessful, a claim brought against us by any client or partners would likely be time-consuming and costly to defend and could seriously damage our reputation and brand.

If our enterprise resource planning system or other licensed software systems prove ineffective, we may be unable to timely or accurately prepare financial reports, make payments to our suppliers and employees, or invoice and collect from our members and clients.

Data integrity problems in our enterprise resource planning system or other licensed software systems or other issues may be discovered which, if not corrected, could impact our business, financial condition, and results of operations. In addition, we may experience periodic or prolonged disruption of our financial functions arising out of our use of such system, migrations, or improvements to our systems, integration of newly acquired businesses into our system, other periodic upgrades or updates, or other external factors that are outside of our control. From time to time we implement additional software systems, and we may also transition to new systems, which may be disruptive to our business if they do not work as planned or if we experience issues relating to their implementation. Such disruptions could impact our ability to timely or accurately make payments to our suppliers and employees, and could also inhibit our ability to invoice and collect from our users. If we encounter unforeseen problems with our enterprise resource planning system or other related systems and infrastructure, our business, financial condition, and results of operations could be adversely affected.

Security breaches, loss of data, and other disruptions could compromise sensitive information related to our business, partners, clients, or members, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we collect, store, use, and disclose sensitive data, including protected health information (“PHI”) and other types of personal data or personally identifiable information (“PII”). We also process and store, and use additional third parties to process and store, sensitive information including intellectual property and other proprietary business information, including that of our partners, clients, and members. Our member information is encrypted but not always de-identified. We manage and maintain our

 

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platform and data utilizing a combination of on-site systems, managed data center systems, and cloud-based computing center systems.

We are highly dependent on information technology networks and systems, including the internet, to securely process, transmit, and store this critical information. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, and employee or contractor error, negligence, or malfeasance, have created, and can in the future create system disruptions, shutdowns, or unauthorized disclosure or modifications of confidential information, causing member health information to be accessed or acquired without authorization or to become publicly available. We utilize third-party service providers for important aspects of the collection, storage, and transmission of client, user, and patient information, and other confidential and sensitive information, and therefore rely on third parties to manage functions that have material cybersecurity risks. Because of the sensitivity of the PHI, other PII, and other confidential information, we and our service providers collect, store, transmit, and otherwise process, the security of our technology platform and other aspects of our services, including those provided or facilitated by our third-party service providers, are important to our operations and business strategy. We take certain administrative, physical, and technological safeguards to address these risks, such as by requiring outsourcing subcontractors who handle client, and member information for us to enter into agreements that contractually obligate those subcontractors to use reasonable efforts to safeguard PHI, other PII, and other sensitive information. Measures taken to protect our systems, those of our subcontractors, or the PHI, other PII, or other sensitive data we or our subcontractors process or maintain, may not adequately protect us from the risks associated with the collection, storage, and transmission of such information. Although we take steps to help protect confidential and other sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses, failures, or breaches due to third-party action, employee negligence or error, malfeasance, or other disruptions.

A security breach or privacy violation that leads to disclosure or unauthorized use or modification of, or that prevents access to or otherwise impacts the confidentiality, security, or integrity of, member information, including PHI or other PII, or other sensitive information we or our subcontractors maintain or otherwise process, could harm our reputation, compel us to comply with breach notification laws, cause us to incur significant costs for remediation, fines, penalties, notification to individuals and for measures intended to repair or replace systems or technology and to prevent future occurrences, potential increases in insurance premiums, and require us to verify the accuracy of database contents, resulting in increased costs or loss of revenue. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, or if it is perceived that we have been unable to do so, our operations could be disrupted, we may be unable to provide access to our platform, and could suffer a loss of clients or members or a decrease in the use of our platform, and we may suffer loss of reputation, adverse impacts on client, member, and investor confidence, financial loss, governmental investigations or other actions, regulatory or contractual penalties, and other claims and liability. In addition, security breaches and other inappropriate access to, or acquisition or processing of, information can be difficult to detect, and any delay in identifying such incidents or in providing any notification of such incidents may lead to increased harm.

Any such breach or interruption of our systems or any of our third-party information technology partners has, and in the future could, compromise our networks or data security processes and sensitive information could be inaccessible or could be accessed by unauthorized parties, publicly disclosed, lost, or stolen. Any such interruption in access, improper access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws and regulations that protect the privacy of member information or other personal information, and regulatory penalties. Unauthorized access, loss, or dissemination could also disrupt our operations, including our ability to perform our services, provide member assistance services, conduct development activities, collect, process, and prepare company financial information, provide information about our current and future solutions, and engage in other education and outreach efforts. Any such breach could also result in the compromise of our trade secrets and other proprietary information, which could adversely affect our business and competitive position. While we maintain insurance covering certain security and privacy damages

 

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and claim expenses, we may not carry insurance or maintain coverage sufficient to compensate for all liability and in any event, insurance coverage would not address the reputational damage that could result from a security incident.

Risks Related to Legal and Regulatory Matters

We may be subject to legal proceedings, litigation, regulatory and other disputes, and governmental inquiries which are costly to defend and could adversely affect our business, financial condition, and results of operations.

We may be party to lawsuits, legal proceedings and other disputes in the normal course of business. These matters are often expensive and disruptive to normal business operations. We have faced, and may in the future face allegations, lawsuits, and regulatory inquiries, audits and investigations regarding data privacy, medical liability, security, labor and employment, consumer protection and intellectual property infringement, misappropriation, or other violation, including claims related to privacy, patents, publicity, trademarks, copyrights, contractual obligations and other rights. A portion of the technologies we use incorporates open source software, and we may face claims claiming ownership of open source software or patents related to that software, rights to our intellectual property or breach of open source license terms, including a demand to release material portions of our source code, or otherwise seeking to enforce the terms of the applicable open source license. We may also face allegations or litigation related to our acquisitions, securities issuances, business practices or other contractual obligations, including public disclosures about our business. For example, we are party to a sponsorship agreement pursuant to which we may be required to make a payment up to $15 million (which may be in the form of equity securities) to the counterparty upon certain qualifying liquidity events, such as a change of control transaction. While we do not believe the Business Combination constitutes a qualifying liquidity event under the agreement, there can be no assurance that the counterparty will not dispute our position. Litigation and regulatory proceedings, and particularly the patent infringement and class action matters we could face, may be protracted and expensive, and the results are difficult to predict. Certain of these matters may include speculative claims for substantial or indeterminate amounts of damages and include claims for injunctive relief. Additionally, our litigation costs could be significant and not covered by applicable indemnification arrangements or otherwise exceed the limits of our insurance. Adverse outcomes with respect to litigation or any of these legal proceedings or other disputes may result in significant settlement costs or judgments, penalties and fines, or require us to modify our solutions or require us to stop offering certain features, all of which could negatively impact our enrollment rate and revenue growth. We may also become subject to periodic audits, which would likely increase our regulatory compliance costs and may require us to change our business practices, which could negatively impact our revenue growth. Managing legal proceedings, litigation and audits, even if we achieve favorable outcomes, is time-consuming and diverts management’s attention from our business.

Evolving government regulations may require increased costs or adversely affect our business, financial condition, and results of operations.

In a regulatory climate that is uncertain, our operations may be subject to direct and indirect adoption, expansion, or reinterpretation of various laws and regulations. Compliance with these future laws and regulations may require us to change our practices at an undeterminable and possibly significant initial monetary and annual expense. These additional monetary expenditures may increase future overhead, which could have a material adverse effect on our business, financial condition, and results of operations.

There is also uncertainty regarding whether, when, and what other health or data privacy reform initiatives will be adopted and the impact of such efforts on our business, as well as on the businesses of our partners and clients. The implications of such proposals may be unexpected, and such measures, if implemented, could alter the landscape of our industry in ways that adversely affect our business.

There could be laws and regulations applicable to our business that we have not identified or that, if changed, may be costly to us, and we cannot predict all the ways in which implementation of such laws and regulations may affect us.

 

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In the states in which we operate, we believe we are in compliance with all applicable material regulations, but, due to the uncertain regulatory environment, certain states may determine that we are in violation of their laws and regulations. Similarly, we believe we are in compliance with all applicable material regulations in each international jurisdiction that we operate. In the event that we must remedy such violations, we may be required to modify our solutions in such states or other jurisdictions in a manner that undermines our solution’s attractiveness to partners, clients, or members, we may become subject to fines or other penalties or, if we determine that the requirements to operate in compliance in such states or other jurisdictions are overly burdensome, we may elect to terminate our operations in such states or other jurisdictions. In each case, our revenue may decline and our business, financial condition, and results of operations could be adversely affected.

Additionally, the introduction of new solutions may require us to comply with additional, yet undetermined, laws and regulations. Compliance may require obtaining appropriate state or jurisdictional medical board licenses or certificates, increasing our security measures, and expending additional resources to monitor developments in applicable rules and ensure compliance. The failure to adequately comply with these future laws and regulations may delay or possibly prevent our solutions from being offered to clients and members, which could have a material adverse effect on our business, financial condition, and results of operations.

If we fail to comply with healthcare and other governmental regulations, we could face substantial penalties, liabilities, or reputational harm and our business, financial condition, and results of operations could be adversely affected.

Our solutions, as well as our business activities, are or may in the future be subject to a complex set of regulations and rigorous enforcement, including by the U.S. Food and Drug Administration (the “FDA”), Federal Trade Commission (the “FTC”), U.S. Department of Justice, U.S. Department of Health and Human Services (“HHS”), Office of the Inspector General and Office for Civil Rights, and numerous other federal and state governmental authorities.

Our employees, consultants, and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements. Federal, state and foreign healthcare laws and regulations that may affect our ability to conduct business include, without limitation:

 

   

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, which impose certain requirements relating to the privacy, security, and transmission of PHI on certain healthcare providers, health plans, and healthcare clearinghouses, and their business associates that access or otherwise process individually identifiable health information on their behalf; HIPAA also created criminal liability for knowingly and willfully falsifying or concealing a material fact or making a materially false statement in connection with the delivery of or payment for healthcare benefits, items, or services;

 

   

state laws governing the privacy and security of personal information beyond health information, including state breach notification requirements, which differ from each other in significant ways with respect to scope, application, and requirements and which often exceed the standards under HIPAA, thus complicating compliance efforts;

 

   

foreign laws governing the privacy and security of personal information, such as the General Data Protection Regulation (EU) 2016/679 (the “GDPR”);

 

   

laws that regulate how businesses operate online, including measures relating to privacy and data security and how such information is communicated to customers (i) under the FTC’s unfair and deceptive trade practice authority from the FTC Act and (ii) from state attorneys general under state consumer protection laws and data privacy laws;

 

   

state laws governing the corporate practice of medicine and other healthcare professions and related fee-splitting laws;

 

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potential regulation of certain of our solutions and research by the FDA;

 

   

the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the Centers for Medicare & Medicaid Services programs;

 

   

the federal civil false claims and civil monetary penalties laws, including, without limitation, the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government;

 

   

federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; and

 

   

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “Affordable Care Act”) among other things, amends the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act.

Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, it is possible that some of our activities could be subject to challenge under one or more of such laws. Any action brought against us for violations of these laws or regulations, even if successfully defended, could cause us to incur significant legal expenses and divert management’s attention from the operation of our business. We may be subject to private “qui tam” actions brought by individual whistleblowers on behalf of the federal or state governments, with potential liability under the federal False Claims Act including mandatory treble damages and significant per-claim penalties.

Although we have adopted policies and procedures designed to comply with these laws and regulations and conduct internal reviews of our compliance with these laws, our compliance is also subject to governmental review. The growth of our business and sales organization and any future expansion outside of the United States may increase the potential of violating these laws or our internal policies and procedures. The risk of our being found in violation of these or other laws and regulations is further increased by the fact that many have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action brought against us for violation of these or other laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert management’s attention from the operation of our business. If our operations are found to be in violation of any of the federal, state, and foreign laws described above or any other current or future fraud and abuse or other healthcare laws and regulations that apply to us, we may be subject to penalties, including significant criminal, civil, and administrative penalties, damages and fines, disgorgement, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, imprisonment for individuals and exclusion from participation in government programs, such as Medicare and Medicaid, as well as contractual damages and reputational harm. Any of the foregoing consequences could seriously harm our business, financial condition, and results of operations.

 

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Individuals may claim our outbound engagement techniques, including digital outreach, are not compliant with HIPAA or federal marketing laws.

Several federal laws are designed to protect consumers from various types and modes of marketing. HIPAA prohibits certain types of marketing to individuals using PHI, except for certain treatment and healthcare operations, including communications made to describe a health-related product or service (or payment for such product or service) that is provided by, or included in, a plan of benefits. Our solutions may be subject to regulatory review and deemed in violation of HIPAA, which could subject us to fines or other penalties. In addition, the Telephone Consumer Protection Act (the “TCPA”) is a federal statute that protects consumers from unwanted telephone calls and faxes. Since its inception, the TCPA’s purview has extended to text messages sent to consumers. We may communicate with and perform outreach to members through multiple modes of communication, including email and secure messaging. We must ensure that our solutions that leverage secure messaging comply with TCPA regulations and agency guidance. While we strive to adhere to strict policies and procedures, the Federal Communications Commission, as the agency that implements and enforces the TCPA, may disagree with our interpretation of the TCPA and subject us to penalties and other consequences for noncompliance. Determination by a court or regulatory agency that our solutions violate the TCPA could subject us to civil penalties, could invalidate all or portions of some of our client contracts, could require us to change or terminate some portions of our offerings, could require us to refund portions of our fees, and could have an adverse effect on our business. Even an unsuccessful challenge by consumers or regulatory authorities of our activities could result in adverse publicity and could require a costly response from us. Other laws focus on unsolicited email, such as the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”) which establishes requirements for the transmission of commercial email messages and specifies penalties for unsolicited commercial email messages that follow a recipient’s opt-out request or deceive the receiving consumer.

In addition, some of our marketing activities require that we obtain permissions consistent with HIPAA and applicable state health information privacy laws. If we are unable to secure such permissions, or if there is a future change in law, we may face limitations on the use of such information, which may harm our business.

If our arrangements with our clients are found to violate state laws prohibiting the corporate practice of medicine or fee splitting, our business, financial condition, results of operations, and our ability to operate in those states could be adversely affected.

The laws of most states, including states in which our clients are located, prohibit us from practicing medicine, providing any treatment or diagnosis, or otherwise exercising any control over the medical judgments or decisions of licensed physicians and from engaging in certain financial arrangements, such as splitting professional fees with physicians. These laws and their interpretations vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. We enter into contracts with our clients to deliver certain solutions in exchange for fees. Although we comply, to the extent applicable, with state prohibitions on the corporate practice of medicine and fee splitting, state officials who administer these laws or other third parties may successfully challenge our existing organization and contractual arrangements. If such a claim were successful, we could be subject to civil and criminal penalties and could be required to restructure or terminate the applicable contractual arrangements. A determination that these arrangements violate state statutes, or our inability to successfully restructure our relationships with our clients to comply with these statutes, could eliminate clients or members located in certain states from the market for our solutions, which would have a material adverse effect on our business, financial condition, and results of operations.

Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.

We are subject to the U.S. Foreign Corrupt Practices (the “FCPA”) and other anti-corruption, anti-bribery, and anti-money laundering laws in the jurisdictions in which we do business, both domestic and abroad. These

 

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laws generally prohibit us and our employees from improperly influencing government officials or commercial parties in order to obtain or retain business, direct business to any person, or gain any improper advantage. The FCPA and similar applicable anti-bribery and anti-corruption laws also prohibit our third-party business partners, representatives, and agents from engaging in corruption and bribery. We and our third-party business partners, representatives, and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. While we have policies and procedures to address compliance with such laws, we cannot assure you that our employees and agents will not take actions in violation of our policies or applicable law, for which we may be ultimately held responsible. Our exposure for violating these laws may increase as we expand internationally and as we commence sales and operations in additional foreign jurisdictions. Any violation of the FCPA or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, severe criminal or civil sanctions or suspension or debarment from U.S. government contracts, substantial diversion of management’s attention, a drop in stock price or overall adverse consequences to our business, all of which may have an adverse effect on our reputation, business, financial condition, and results of operations.

Our use, disclosure, and other processing of PII and PHI is subject to HIPAA and other federal, state, and foreign privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm and, in turn, have a material adverse effect on our client base, member base and revenue.

Numerous state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability, integrity, and other processing of PHI and PII. These laws and regulations include HIPAA, which establishes a set of national privacy and security standards for the protection of PHI by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services. We are generally considered a business associate under HIPAA but in limited circumstances will also act as a covered entity. HIPAA requires covered entities and business associates, such as us, to develop and maintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical, and technical safeguards to protect such information.

Some of our business activities require that we or our partners obtain permissions consistent with HIPAA to provide certain marketing and data aggregation services as well as those activities that require the creation and use of de-identified information. If we or our partners are unable to secure these rights, or if there is a future change in law, we may face limitations on the use of PHI and our ability to provide marketing services and use de-identified information, which could harm our business or subject us to potential government actions or penalties. Also, there are ongoing public policy discussions regarding whether the standards for de-identified, anonymous or pseudonymized 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 or create additional regulatory burdens. There can be no assurance that these initiatives or future initiatives will not adversely affect our ability to access and use data or to develop or market current or future services.

In addition, we could be subject to periodic audits for compliance with the HIPAA Privacy and Security Standards by HHS and our clients. Penalties for violations of HIPAA and its implementing regulations start at $119 per violation and are not to exceed $59,522 per violation, subject to a cap of $1.78 million for violations of the same standard in a single calendar year. However, a single breach incident can result in violations of multiple standards. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not

 

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create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

In addition to HIPAA, numerous other federal, state, and foreign laws and regulations protect the confidentiality, privacy, availability, integrity, and security of PHI and other types of PII. For example, to the extent we expand internationally into Europe, we may have obligations under GDPR and related European Union (the “EU”) privacy laws and regulations related to the use, transfer, and protection of employee-related data. These laws and regulations in many cases may be more restrictive than, and may not be preempted by, HIPAA and its implementing rules. These laws and regulations may also require additional compliance obligations relating to the transfer of data between Sharecare and its subsidiaries. There is a risk that regulatory authorities may determine that we have not implemented our compliance obligations in a timely or appropriate manner. Penalties for noncompliance under GDPR and related EU privacy laws may include significant monetary fines, up to a maximum of €20 million, or four percent of worldwide turnover. These laws and regulations are often uncertain, unclear, and subject to changed or differing interpretations, and we expect new laws, rules and regulations regarding privacy, data protection, and information security to be proposed and enacted in the future.

Such new regulations and legislative actions (or changes in interpretation of existing laws or regulations regarding data privacy and security together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new laws, regulations, and industry standards relating to privacy and data protection in the United States, the EU and other jurisdictions, such as the California Consumer Privacy Act of 2018 (the “CCPA”) which has been characterized as the first “GDPR-like” privacy statute to be enacted in the United States, and we cannot determine how broadly or narrowly regulators will interpret and enforce such new laws, regulations, and standards and the corresponding impact it may have on our business. Although we are modifying our data collection, use and processing practices and policies in an effort to comply with the law, there is a risk that the California Attorney General does not find our practices or policies to be compliant with the CCPA, which would potentially subject us to civil penalties or an inability to use information collected from California consumers. In addition, such laws and regulations could restrict our ability to store and process personal data (in particular, our ability to use certain data for purposes such as risk or fraud avoidance, marketing, or advertising due to the expansive definition of personal information under CCPA), our ability to control our costs by using certain vendors or service providers, or impact our ability to offer certain services in certain jurisdictions. Further, the CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information (which may not fall under the CCPA HIPAA exemption), and allow for a new cause of action for data breaches. Additionally, such laws and regulations are often inconsistent and may be subject to amendment or re-interpretation, which may cause us to incur significant costs and expend significant effort to ensure compliance. For example, the CCPA has already been substantially amended by the California Privacy Rights Act of 2020, which will come into effect in January 1, 2023. Given that requirements may be inconsistent and evolving, our response to these requirements may not meet the expectations of our clients or their employees, which could thereby reduce the demand for our services. Finally, some clients may respond to these evolving laws and regulations by asking us to make certain privacy or data-related contractual commitments that we are unable or unwilling to make. This could lead to the loss of current or prospective clients or other business relationships.

This complex, dynamic legal landscape regarding privacy, data protection, and information security creates significant compliance issues for us and our clients and potentially exposes us to additional expense, adverse publicity and liability. Although we take steps to help protect confidential and other sensitive information from unauthorized access or disclosure, our information technology and infrastructure has been subject to, and may be vulnerable in the future to, attacks by hackers or viruses, failures, or breaches due to third-party action, employee negligence or error, malfeasance, or other incidents or disruptions. Furthermore, while we have implemented data privacy and security measures in an effort to comply with applicable laws and regulations relating to privacy and data protection, some PHI and other PII or confidential information is transmitted to us by third parties, who may

 

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not implement adequate security and privacy measures, and it is possible that laws, rules and regulations relating to privacy, data protection, or information security may be interpreted and applied in a manner that is inconsistent with our practices or those of third parties who transmit PHI and other PII or confidential information to us. If we or these third parties are found to have violated such laws, rules or regulations, it could result in government-imposed fines, orders requiring that we or these third parties change our or their practices, or criminal charges, which could adversely affect our business.

We outsource important aspects of the storage and transmission of customer and member information, and thus, rely on third parties to manage functions that have material cyber-security risks. A breach of privacy or security of such information by a subcontractor may result in an enforcement action against us. We attempt to address these risks by requiring outsourcing subcontractors who handle such information to sign business associate agreements contractually requiring those subcontractors to adequately safeguard such information. However, we cannot be assured that these contractual measures and other safeguards will adequately protect us from the risks associated with the storage and transmission of such information on our behalf by our subcontractors.

Complying with these various laws and regulations could cause us to incur substantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to our business. We also publish statements to our clients and members that describe how we handle and protect PHI (for example, through our privacy policies connected with our website, mobile applications and other digital tools). If federal or state regulatory authorities, such as the FTC or state attorneys general, or private litigants consider any portion of these statements to be untrue, we may be subject to claims of deceptive practices, which could lead to significant liabilities and consequences, including costs of responding to investigations, defending against litigation, settling claims, and complying with regulatory or court orders. Any of the foregoing consequences could seriously harm our business and our financial results. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to the businesses of our clients may limit the use and adoption of, and reduce the overall demand for, our existing and future solutions. Any of the foregoing consequences could harm our business, financial condition, and results of operations.

Any restrictions on our ability to obtain or use data could harm our business.

Our business depends, in part, on data provided to us by, among other sources, health plans, benefits administrators, data warehouses, electronic data interchange transaction data providers, and our trusted suppliers. Any errors or defects in any third-party data or other technology could result in errors in our existing and future solutions that could harm our business and damage our reputation and cause losses in revenue, and we could be required to spend significant amounts of additional resources to fix any problems. In addition, certain of our solutions depend on maintaining our data and analytics technology platform, which is populated with data provided by third parties. While our existing agreements with these data providers have multiple-year terms, these providers could become our competitors in the future. Any loss of the right to use of data provided by any health plan providers, benefits administrators, or other entities that provide us data, could result in delays in producing or delivering our solutions until equivalent data, other technology, or intellectual property is identified and integrated, which delays could harm our business. In this situation we would be required to either redesign our solutions to function with technology, data, or intellectual property available from other parties or to develop these components ourselves, which would result in increased costs. Furthermore, we might be forced to limit the features available in our existing or future solutions. If we fail to maintain or renegotiate any of these technology or intellectual property licenses, we could face significant delays and diversion of resources in attempting to develop similar or replacement solutions or to license and integrate a functional equivalent of the technology or intellectual property. The occurrence of any of these events may harm our business.

 

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Failure to protect or enforce our intellectual property rights could harm our business, financial condition, and results of operations.

Our success depends in part on our ability to obtain, maintain, protect, and enforce our intellectual property and other proprietary rights (including intellectual property and other proprietary rights acquired through acquisitions). We rely upon a combination of trademark, patents, copyrights, and trade secret laws, as well as license agreements, intellectual property assignment agreements, confidentiality agreements and other similar agreements, to protect our intellectual property and other proprietary rights. These laws, procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed, misappropriated or otherwise violated. There can also be no assurances that third parties will not also independently develop or offer products, services and/or technology that is similar to, or competitive with, our technology, products and services. Despite our efforts to protect our intellectual property, unauthorized parties may also attempt to disclose, copy, use, duplicate or obtain and use our technology including to develop applications with the same functionality as our solutions, and policing unauthorized use of our technology and intellectual property rights is difficult, costly and may not be effective. In order to adequately protect our intellectual property and other proprietary rights, we may be required to devote significant time and resources to defending against claims or protecting and enforcing our own rights. Furthermore, attempts to enforce our intellectual property rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against us, or result in a holding that invalidates or narrows the scope of our rights, in whole or in part. These actions as well as any failure to protect our intellectual property and other proprietary rights could have a material adverse effect on our business, financial condition, and results of operations.

Risks Related to Financing and Tax

We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve or maintain profitability.

We have incurred net losses on an annual basis since our inception. We incurred net losses attributable to Sharecare of $55.9 million, $40.0 million and $60.0 million, for the years ended December 31, 2018, 2019 and 2020, respectively. We expect our costs will increase substantially in the foreseeable future and our losses will continue as we expect to invest significant additional funds towards growing our business and operating as a public company and as we continue to invest in increasing our client base, expanding our marketing channels and operations, hiring additional employees, developing new solutions, and otherwise incorporating new solutions into our platform through acquisition or partnership. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. To date, we have financed our operations principally from the sale of our equity, revenue from sales of our solutions, and the incurrence of indebtedness. Despite having achieved EBITDA profitability in 2017, we may be unable to achieve positive cash flow from operations or profitability in any given period. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.

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

As of December 31, 2020, we had net operating loss (“NOL”) carryforwards for federal and state income tax purposes of approximately $224.0 million and $163.0 million, respectively, which may be available to offset future taxable income, and which expire in various years beginning in 2023 for federal purposes if not utilized. The state NOLs will expire depending upon the various rules in the states in which we operate. A lack of future taxable income would adversely affect our ability to utilize these NOLs before they expire. In addition, under Section 382 of the Internal Revenue Code of 1986, as amendment (the “Code”), a corporation that undergoes an “ownership change” (as defined under Section 382 of the Code and applicable Treasury Regulations) may be subject to limitations on its ability to utilize its pre-change NOLs to offset its future taxable income. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. A corporation that experiences

 

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an ownership change generally will be subject to an annual limitation on its utilization of pre-ownership change NOLs equal to the equity value of the corporation immediately before the ownership change, multiplied by the long-term, tax-exempt rate posted monthly by the IRS (“AFR”) (subject to certain adjustments). The limitation on the use of such NOLs would be dependent on the value of the corporation’s equity and the AFR at the time of any ownership change, and the annual limitation would be increased each year to the extent that there is an unused limitation in a prior year. Similar rules may apply under state tax laws.

We have not previously completed a study to assess whether an ownership change for purposes of Section 382 has occurred, or whether there have been multiple ownership changes since our inception due to the significant costs and complexities associated with such study. However, we are currently in the process of completing a Section 382 study, to determine whether we have had any prior ownership changes and whether the Business Combination constituted an ownership change. To the extent we have experienced a prior ownership change, or we experience an ownership change in the future (including as a result of the Business Combination) our ability to utilize NOLs to offset our income could be adversely affected.

Furthermore, our ability to utilize NOLs of companies that we have acquired or may acquire in the future may be subject to limitations. There is also a risk that due to changes in law, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities, including for state income tax purposes. For these reasons, we may not be able to utilize a material portion of our NOLs, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our business, financial condition, and results of operations.

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

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new solutions, or enhance our existing solutions, enhance our operating infrastructure, and acquire complementary businesses and technologies. In order to achieve these objectives, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer 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. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. 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 significantly limited.

Our debt agreements contain certain restrictions that may limit our ability to operate our business.

The terms of our existing debt agreements and related collateral documents contain, and any future indebtedness would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability, and the ability of our subsidiaries, to take actions that may be in our best interests, including, among others, disposing of assets, entering into change of control transactions, mergers or acquisitions, incurring additional indebtedness, granting liens on our assets, declaring and paying dividends, and agreeing to do any of the foregoing. Our ability to meet financial covenants can be affected by events beyond our control, and we may not be able to continue to meet this covenant. A breach of any of these covenants or the occurrence of other events (including a material adverse effect or the inability to generate cash to service our obligations under our debt agreements) specified in the debt agreements and/or the related collateral documents could result in an event of default under the same. Upon the occurrence of an event of default, our lenders could elect to declare all amounts outstanding, if any, to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, lenders could proceed against the collateral, if any, granted to them to secure such indebtedness. We have pledged substantially

 

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all of our respective assets (other than intellectual property) as collateral under the loan documents. If lenders accelerate the repayment of borrowings, if any, we may not have sufficient funds to repay our existing debt.

The applicability of sales, use, and other tax laws or regulations on our business is uncertain. Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our clients or members, which could subject us to additional tax liability and related interest and penalties, increase the costs of our solutions, and adversely affect our business, financial condition, and results of operations.

The application of federal, state, local, and international tax laws to services provided electronically is evolving. New income, sales, use, value-added or other tax laws, statutes, rules, regulations, or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services provided over the internet or could otherwise materially affect our business, financial position, and results of operations.

In addition, state, local and foreign tax jurisdictions have differing rules and regulations governing sales, use, value-added and other taxes, and these rules and regulations can be complex and are subject to varying interpretations that may change over time. Existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us (possibly with retroactive effect). We have not collected sales taxes in all jurisdictions in which we have made sales to our clients, and we believe we may have exposure for potential sales tax liability, including interest and penalties, for which we have established a reserve in our financial statements, and any sales tax exposure may be material to our operating results. Although our contracts typically provide that our clients must pay all applicable sales and similar taxes, our clients may be reluctant to pay back taxes and associated interest or penalties, or we may determine that it would not be commercially feasible to seek reimbursement. In addition, we or our clients could be required to pay additional tax amounts on both future as well as prior sales, and possibly fines or penalties and interest for past due taxes. If we are required to collect and pay back taxes and associated interest and penalties, and if the amount we are required to collect and pay exceeds our estimates and reserves, or if we are unsuccessful in collecting such amounts from our clients, we could incur potentially substantial unplanned expenses, thereby adversely impacting our operating results and cash flows. Imposition of such taxes on our solutions going forward or collection of sales tax from our clients in respect of prior sales could also adversely affect our sales activity and have a negative impact on our operating results and cash flows.

One or more states may seek to impose incremental or new sales, use, value added or other tax collection obligations on us, including for past sales by us or our partners. A successful assertion by a state, country or other jurisdiction that we should have been or should be collecting additional sales, use, value added or other taxes on our solutions could, among other things, result in substantial tax liabilities for past sales, create significant administrative burdens for us, discourage users from utilizing our solutions or otherwise harm our business, financial condition, and results of operations.

Changes in legislation in U.S. and foreign taxation of international business activities or the adoption of other tax reform policies, as well as the application of such laws, could adversely impact our financial position and operating results.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) became law, and significantly reformed the Code. The Tax Act, among other things, includes changes to U.S. federal tax rates and the taxation of foreign earnings, imposes significant additional limitations on the deductibility of interest, and the use of net operating losses generated in tax years beginning after December 31, 2017, allows for the immediate expensing of certain capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. We continue to examine the impact the Tax Act may have on our business. Due to our plans to potentially expand into international markets, any changes in the U.S. or international taxation of such activities may increase our worldwide effective tax rate and harm our business, financial condition, and results of operations. The impact of the Tax Act and other changes to U.S. and non-U.S. tax laws, and regulations or

 

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interpretations thereof, on us or our business is uncertain and could be adverse. We urge prospective investors to consult with their legal and tax advisors with respect to the potential tax consequences of investing in or holding our common stock.

Certain U.S. state tax authorities may assert that we have a state nexus and seek to impose state and local income taxes which could harm our results of operations.

We are qualified to operate in, and file income tax returns in multiple states. There is a risk that certain state tax authorities where we do not currently file a state income tax return could assert that we are liable for state and local income taxes based upon income or gross receipts allocable to such states. States are becoming increasingly aggressive in asserting a nexus for state income tax purposes. We could be subject to state and local taxation, including penalties and interest attributable to prior periods, if a state tax authority successfully asserts that our activities give rise to a nexus. Such tax assessments, penalties and interest may adversely impact our results of operations.

Risks Related to Future Growth

Acquisitions and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely affect our business, financial condition, and results of operations. Additionally, if we are not able to identify and successfully acquire suitable businesses, our operating results and prospects could be harmed.

In the past, we have made a number of acquisitions, and we may in the future make acquisitions to add employees, complementary companies, solutions, technologies, or revenue. These transactions could be material to our business, financial condition, and results of operations. We also expect to continue to evaluate and enter into discussions regarding a number of potential partnerships and other transactions with third parties. The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to complete acquisitions on favorable terms, if at all. The process of integrating an acquired company, business or technology has created, and will continue to create unforeseen operating difficulties and expenditures. The areas where we face risks include:

 

   

diversion of management time and focus from operating our business to addressing acquisition integration challenges;

 

   

loss of key employees of the acquired company and other challenges associated with integrating new employees into our culture, as well as reputational harm if integration is not successful;

 

   

implementation or remediation of controls, procedures, and policies at the acquired company;

 

   

difficulties in integrating and managing the combined operations, technologies, technology platforms, and solutions of the acquired companies and realizing the anticipated economic, operational, and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical, or financial problems;

 

   

integration of the acquired company’s accounting, human resource, and other administrative systems, and coordination of product, engineering, and sales and marketing functions;

 

   

failure to successfully further develop the acquired technology or realize our intended business strategy;

 

   

our dependence on unfamiliar affiliates and partners of acquired businesses;

 

   

uncertainty of entry into markets in which we have limited or no prior experience or in which competitors have stronger market positions;

 

   

unanticipated costs associated with pursuing acquisitions;

 

   

failure to successfully onboard clients or maintain brand quality of acquired companies;

 

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responsibility for the liabilities of acquired businesses, including those that were not disclosed to us or exceed our estimates, as well as, without limitation, liabilities arising out of their failure to maintain effective data protection and privacy controls and comply with applicable regulations;

 

   

inability to maintain our internal standards, controls, procedures, and policies;

 

   

difficulties in complying with antitrust and other government regulations;

 

   

challenges in integrating and auditing the financial statements of acquired companies that have not historically prepared financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”);

 

   

potential accounting charges to the extent intangibles recorded in connection with an acquisition, such as goodwill, trademarks, client relationships, or intellectual property, are later determined to be impaired and written down in value; and

 

   

failure to accurately forecast the impact of an acquisition transaction.

Moreover, we rely heavily on the representations and warranties provided to us by the sellers of acquired companies, including as they relate to creation of, and ownership and rights in, intellectual property, existence of open source, and compliance with laws and contractual requirements. If any of these representations and warranties are inaccurate or breached, such inaccuracy or breach could result in costly litigation and assessment of liability for which there may not be adequate recourse against such sellers, in part due to contractual time limitations and limitations of liability.

Future acquisitions could also result in expenditures of significant cash, dilutive issuances of our equity securities, the incurrence of debt, restrictions on our business, contingent liabilities, amortization expenses or write-offs of goodwill, any of which could harm our financial condition. In addition, any acquisitions we announce could be viewed negatively by partners, clients, members, investors or our other stakeholders.

Additionally, competition within our industry for acquisitions of business, technologies, and assets is intense. Even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable terms or the target may be acquired by another company. We may enter into negotiations for acquisitions that are not ultimately consummated. Those negotiations could result in diversion of management time and significant out-of-pocket costs. If we fail to evaluate and execute acquisitions successfully, we may not be able to realize the benefits of these acquisitions, and our operating results could be harmed. If we are unable to successfully address any of these risks, our business, financial condition, 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.

We have experienced significant growth in the last 10 years. Future revenues may not grow at these same rates or may decline. Our future growth will depend, in part, on our ability to expand our footprint and establish new client relationships, expand our existing client relationships, including offering additional solutions to our existing clients, and grow and evolve our platform capabilities with the changing needs of our industry. We can provide no assurances that we will be successful in executing on these growth strategies or that, even if our key metrics would indicate future growth, we will continue to grow our revenue or to generate net income. 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 solutions relative to those offered by our competitors, our ability to demonstrate the value of our existing and future solutions, our ability to foster and develop our existing and new partner relationships, and our ability to attract and retain a sufficient number of qualified sales and marketing leadership and support personnel. In addition, our existing clients may be slower to adopt our solutions than we currently anticipate, which could adversely affect our results of operations and growth prospects.

 

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If we fail to effectively manage our growth, we may be unable to execute our business plan, adequately address competitive challenges or maintain our corporate culture, and our business, financial condition, and results of operations could be adversely affected.

Our historical rapid growth and expansion increases the complexity of our business and places significant strain on our management, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions. We may not be able to manage growth effectively, which could damage our reputation, limit our growth, and negatively affect our operating results. In the event of continued growth of our operations or in the number of our third-party relationships, our information technology systems and our internal controls and procedures may not be adequate to support our operations. To effectively manage our growth, we must continue to improve our operational, financial, and management processes and systems and to effectively expand, train, and manage our employee base. As our organization continues to grow and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative solutions or execute on our expansion strategy through acquisition or new partnership relationships. This could negatively affect our business performance.

The estimates of market opportunity and forecasts of market growth included herein may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, or at all.

Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates in this prospectus relating to the expected growth of the digital healthcare market may prove to be inaccurate. Even if the market in which we compete meets our size estimates and forecasted growth, our business could fail to grow at similar rates, if at all.

As we expand our international operations, we will increasingly face political, legal and compliance, operational, regulatory, economic and other risks that we do not face or are more significant than in our domestic operations. Our exposure to these risks is expected to increase.

As we expand our international operations, we will increasingly face political, legal and compliance, operational, regulatory, economic, and other risks that we do not face or that are more significant than in our domestic operations. These risks vary widely by country and include varying regional and geopolitical business conditions and demands, government intervention and censorship, discriminatory regulation, nationalization or expropriation of assets and pricing constraints. Our international solutions need to meet country-specific client and member preferences as well as country-specific legal requirements, including those related to licensing, digital healthcare, privacy, data storage, location, protection and security. Our ability to provide solutions internationally is subject to the applicable laws governing remote healthcare and the practice of medicine in such location, and the interpretation of these laws is evolving and vary significantly from country to county and are enforced by governmental, judicial and regulatory authorities with broad discretion. We cannot, however, be certain that our interpretation of such laws and regulations is correct in how we structure our operations, our arrangements with physicians, services agreements and customer arrangements.

Our international operations increase our exposure to, and require us to devote management resources to implement controls and systems to comply with, the privacy and data protection laws of non-U.S. jurisdictions and the anti-bribery, anti-corruption and anti-money laundering laws of the United States (including the FCPA) and similar laws in other jurisdictions. Implementing our compliance policies, internal controls, and other systems upon our expansion into new countries and geographies may require the investment of considerable management time and financial and other resources over a number of years before any significant revenues or profits are generated. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or employees, restrictions or outright prohibitions on the conduct of our business, and significant brand and reputational harm. We must regularly reassess the size, capability, and location of our global

 

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infrastructure and make appropriate changes, and must have effective change management processes and internal controls in place to address changes in our business and operations. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties, and the failure to do so could have a material adverse effect on our business, operating results, financial position, brand, reputation and/or long-term growth.

Our international operations require us to overcome logistical and other challenges based on differing languages, cultures, legal and regulatory schemes, and time zones. Our international operations encounter labor laws, customs, and employee relationships that can be difficult, less flexible than in our domestic operations and expensive to modify or terminate. In some countries we are required to, or choose to, operate with local business partners, which requires us to manage our partner relationships and may reduce our operational flexibility and ability to quickly respond to business challenges. Our international operations may also expose us to foreign currency exchange risks.

Risks Related to Being a Public Company

We face high costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business, financial condition, and results of operations.

As a public company, we are subject to the reporting requirements of the Exchange Act, the listing standards of Nasdaq and other applicable securities rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems, and resources. For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, financial condition, and results of operations, although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

We also expect that these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation and human capital committee, and qualified executive officers.

As a result of disclosure of information in filings required of a public company, our business and financial condition is more visible than that of a private company, which may result in an increased risk of threatened or

 

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actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, and results of operations could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, financial condition, and results of operations.

We are an “emerging growth company,” and our election to comply with the reduced disclosure requirements as a public company may make our common stock less attractive to investors.

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies,” including not being required to comply with the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, being required to provide fewer years of audited financial statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We may lose our emerging growth company status and become subject to the SEC’s internal control over financial reporting management and auditor attestation requirements. If we are unable to certify the effectiveness of our internal controls, or if our internal controls have a material weakness, we could be subject to regulatory scrutiny and a loss of confidence by stockholders, which could harm our business and adversely affect the market price of our common stock. We will cease to be an “emerging growth company” upon the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a large accelerated filer, with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have, in any three-year period, issued more than $1.0 billion in non-convertible debt securities; and (iv) December 31, 2026 (the last day of the fiscal year following the fifth anniversary of becoming a public company).

As an emerging growth company, we may choose to take advantage of some but not all of these reduced reporting burdens. Accordingly, the information we provide to our stockholders may be different than the information you receive from other public companies in which you hold stock. In addition, the JOBS Act also provides that an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to take advantage of this extended transition period under the JOBS Act. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards. It is possible that some investors will find our common stock less attractive as a result, which may result in a less active trading market for our common stock and higher volatility in our stock price.

Investors may find our common stock less attractive because we may 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 and may decline.

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, the price of our common stock may be adversely affected, and our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of Nasdaq. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources.

 

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As a result of the restatement described in “Note 2 — Restatement” of the notes to the financial statements of FCAC included herein, FCAC identified a material weakness in FCAC’s internal control over financial reporting (please refer to Part II, Item 9A of FCAC’s Annual Report on Form 10-K/A, dated May 11, 2021, for further discussion). We are required to establish and maintain appropriate internal control over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, financial condition or results of operations. In addition, management’s assessment of internal control over financial reporting may identify weaknesses and conditions that need to be addressed in our internal control over financial reporting, or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, or disclosure of management’s assessment of our internal control over financial reporting, may have an adverse impact on the price of our common stock.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting, which includes hiring additional accounting and financial personnel to implement such processes and controls. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses in our controls.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act require an annual assessment of internal control over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm. The standards that must be met for management to assess the internal control over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards. We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In addition, although attestation requirements by our independent registered public accounting firm are not presently applicable to us we could become subject to these requirements in the future and we may encounter problems or delays in completing the implementation of any resulting changes to internal control over financial reporting. In the event that our Chief Executive Officer or Chief Financial Officer determine that our internal

 

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control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our shares will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.

Our independent registered public accounting firm is not required to formally attest to 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. Any failure to maintain effective disclosure controls and internal control over financial reporting could have an adverse effect on our business and results of operations and could cause a decline in the price of our common stock.

We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.

On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). Following the issuance of the SEC Staff Statement, after consultation with FCAC’s independent registered public accounting firm, FCAC’s management and audit committee concluded that it was appropriate to restate its previously issued audited financial statements as of December 31, 2020. As discussed elsewhere in this prospectus, FCAC identified a material weakness in its internal controls over financial reporting related to the accounting for a significant and unusual transaction related to the warrants it issued in connection with its initial public offering in September 2020.

As a result of such material weakness, the restatement of FCAC’s financial statements for the affected period, the change in accounting for the warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weaknesses in FCAC’s internal control over financial reporting and the preparation of its financial statements. As of the date of this prospectus, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on the business of the combined company and its results of operations and financial condition.

FCAC has previously identified a material weakness in FCAC’s internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

FCAC’s management identified a material weakness in FCAC’s internal control over financial reporting related to the accounting for a significant and unusual transaction related to the warrants FCAC issued in connection with its initial public offering in September 2020. As a result of this material weakness, FCAC’s management concluded that its internal control over financial reporting was not effective as of December 31,

 

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2020. This material weakness resulted in a material misstatement of its warrant liabilities, change in fair value of warrant liabilities, common stock subject to possible redemption, additional paid-in capital, accumulated deficit and related financial disclosures for the fiscal year ended December 31, 2020 and for the quarterly period ended September 30, 2020.

To respond to this material weakness, we and FCAC have (both before and following consummation of the Business Combination) devoted significant effort and resources to the remediation and improvement of our internal control over financial reporting. For a discussion of FCAC’s management’s consideration of the material weakness identified related to its accounting for a significant and unusual transaction related to the warrants FCAC issued in connection with FCAC’s initial public offering in September 2020, see “Note 2 — Restatement” to FCAC’s accompanying consolidated financial statements.

We can give no assurance that the measures we have taken will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.

Our business, financial condition, and results of operations may fluctuate on a quarterly and annual basis, which may result in a decline in our stock price if such fluctuations result in a failure to meet the expectations of securities analysts or investors.

Our operating results have in the past and could in the future vary significantly from quarter-to-quarter and year-to-year and may fail to match our past performance, our projections or the expectations of securities analysts because of a variety of factors, many of which are outside of our control and, as a result, should not be relied upon as an indicator of future performance. As a result, we may not be able to accurately forecast our operating results and growth rate. Any of these events could cause the market price of our common stock to fluctuate. Factors that may contribute to the variability of our operating results include, but are not limited to: our ability to attract new clients and partners, retain existing clients and partners and maximize engagement and enrollment with existing and future clients; changes in our sales and implementation cycles, especially in the case of our large clients; new solution introductions and expansions, or challenges with such introductions; changes in our pricing or fee policies or those of our competitors; the timing and success of new solution introductions by us or our competitors or announcements by competitors or other third parties of significant new products or acquisitions or entrance into certain markets; any other change in the competitive landscape of our industry, including consolidation among our competitors; increases in operating expenses that we may incur to grow and expand our operations and to remain competitive; our ability to successfully expand our business, whether domestically or internationally; breaches of security or privacy; changes in stock-based compensation expenses; the amount and timing of operating costs and capital expenditures related to the expansion of our business; adverse litigation judgments, settlements, or other litigation-related costs; changes in the legislative or regulatory environment, including with respect to privacy or data protection, or enforcement by government regulators, including fines, orders, or consent decrees; the cost and potential outcomes of ongoing or future regulatory investigations or examinations, or of future litigation; changes in our effective tax rate; our ability to make accurate accounting estimates and appropriately recognize revenue for our solutions for which there are no relevant comparable products; changes in accounting standards, policies, guidance, interpretations, or principles; instability in the financial markets; general economic conditions, both domestic and international; volatility in the global financial markets; political, economic, and social instability, including terrorist activities and health epidemics (including the COVID-19 pandemic), and any disruption these events may cause to the global economy; and changes in business or macroeconomic conditions. The impact of one or more of the foregoing or other factors may cause our operating results to vary significantly.

 

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Changes in accounting principles may cause previously unanticipated fluctuations in our financial results, and the implementation of such changes may impact our ability to meet our financial reporting obligations.

We prepare our financial statements in accordance with GAAP, which are subject to interpretation or changes by the Financial Accounting Standards Board (“FASB”), the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future which may have a significant effect on our financial results. Furthermore, any difficulties in implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our business, financial condition, and results of operations could be adversely affected.

The preparation of financial statements in conformity with GAAP and our key metrics require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes and amounts reported in our key metrics. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Sharecare.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to allowance for doubtful accounts, assessment of the useful life and recoverability of long-lived assets, fair value of guarantees included in revenue arrangements and fair values of stock-based awards, warrants, contingent consideration, and income taxes. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.

 

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USE OF PROCEEDS

All of the securities offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from these sales. We will receive up to an aggregate of $13,646,670.50 from the exercise of the private placement warrants assuming the exercise in full of all such warrants for cash. Unless we inform you otherwise in a prospectus supplement or free writing prospectus, we intend to use the net proceeds from the exercise of such warrants for general corporate purposes which may include acquisitions or other strategic investments.

The Selling Securityholders will pay any underwriting discounts and commissions and expenses incurred by the Selling Securityholders for brokerage, accounting, tax or legal services or any other expenses incurred by the Selling Securityholders in disposing of the securities. We will bear the costs, fees and expenses incurred in effecting the registration of the securities covered by this prospectus, including all registration and filing fees, Nasdaq listing fees and fees and expenses of our counsel and our independent registered public accounting firm.

There is no assurance that the holders of the private placement warrants will elect to exercise any or all of the private placement warrants. To the extent that the private placement warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the private placement warrants will decrease.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Defined terms included below have the same meaning as terms defined elsewhere in this prospectus. Unless the context otherwise requires, the “Company” refers to Sharecare, Inc. and its subsidiaries after the Closing, and FCAC prior to the Closing.

The following unaudited pro forma condensed combined financial information present the combination of the financial information of FCAC and Legacy Sharecare adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

FCAC was incorporated as a Delaware corporation on June 5, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more operating businesses.

Legacy Sharecare was founded in 2009 to develop an interactive health and wellness platform.

On July 1, 2021, FCAC consummated the Business Combination pursuant to the terms of the Merger Agreement. The merger was approved by FCAC’s stockholders on June 29, 2021. In connection with the Merger Agreement, Merger Sub merged with and into Legacy Sharecare with Legacy Sharecare surviving the merger as a wholly owned subsidiary of the Company. In addition, in connection with the consummation of the Business Combination, the Company changed its name to “Sharecare, Inc.”

In connection with the closing of the Business Combination, (i) the issued and outstanding shares of FCAC’s Class B common stock were automatically converted, on a one-for-one basis, into shares of common stock and (ii) the issued and outstanding shares of FCAC’s Class A common stock were automatically converted, on a one-for-one basis, into shares of common stock. All of FCAC’s outstanding warrants became warrants to acquire shares of common stock on the same terms as FCAC’s warrants.

In connection with consummation of the Business Combination, Falcon Equity Investors LLC (the “Sponsor”) delivered 1,713,000 shares of common stock (formerly FCAC Class B common stock held by the Sponsor) into escrow (the “Sponsor Earnout Shares”) and the Company delivered 1,500,000 newly issued shares of Common Stock (the “Company Earnout Shares” and, together with Sponsor Earnout Shares, the “Earnout Shares”), in each case, that are subject to forfeiture if certain earn-out conditions described more fully in the earnout escrow agreement, dated July 1, 2021 (the “Earnout Escrow Agreement”), by and among the Company, the Stockholder Representative, the Sponsor and Continental Stock Transfer & Trust Company are not satisfied.

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 combines the historical balance sheet of FCAC and Legacy Sharecare on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on June 30, 2021. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2021 and year ended December 31, 2020 combines the historical statements of operations of FCAC and Legacy Sharecare for such periods on a pro forma basis as if the Business Combination and related transactions had been consummated on January 1, 2020, the beginning of the earliest period presented. The unaudited pro forma condensed combined financial statements do not necessarily reflect what the post-combination company’s financial condition or results of operations would have been had the Business Combination and related transactions occurred on the dates indicated. The pro forma combined financial information also may not be useful in predicting the future financial condition and results of operations of the post-combination company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

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The combined financial information presents the pro forma effects of the following transactions:

 

   

the merger of Legacy Sharecare with and into Merger Sub, a wholly owned subsidiary of FCAC, with Legacy Sharecare surviving the merger as a wholly-owned subsidiary of FCAC;

 

   

Legacy Sharecare’s acquisition of doc.ai discussed in Note 3; and

 

   

the issuance and sale of 42,560,000 shares of FCAC Class A common stock for a purchase price of $10.00 per share and an aggregate purchase price of $425.6 million in a private placement immediately prior to the consummation of the Business Combination pursuant to those certain subscription agreements, each dated February 12, 2021 (the “Subscription Agreements”), between FCAC and the investors named therein (the “Private Placement”).

This information should be read together with FCAC’s and Legacy Sharecare’s audited financial statements and related notes, the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Sharecare” and other financial information included elsewhere in this prospectus.

The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Legacy Sharecare has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

   

Legacy Sharecare’s existing stockholders have the largest voting interest in the combined company;

 

   

Legacy Sharecare appointed a majority of the board of directors of the combined company;

 

   

Legacy Sharecare’s senior management will be the senior management of the combined company; and

 

   

Legacy Sharecare is the larger entity based on historical revenues and business operations.

Under this method of accounting, FCAC was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Sharecare issuing stock for the net assets of FCAC, accompanied by a recapitalization. The net assets of FCAC will be stated at historical cost, with no goodwill or other intangible assets recorded.

Description of the Business Combination

The following represents the aggregate merger consideration:

 

(in thousands)

   Purchase price      Shares Issued  

Stock Consideration1

   $ 3,935,347        390,827  

Cash Consideration2

     91,779     

Debt Paydown3

     14,539     
  

 

 

    

 

 

 

Total consideration

   $ 4,041,665        390,827  
  

 

 

    

 

 

 

 

(1)

Stock consideration is calculated as the $3.8 billion equity value (consisting of $3.6 billion equity value plus $50.0 million strategic investment plus $192.5 million doc.ai equity value less $25.0 million as defined in the Merger Agreement) plus $209.6 million incremental value assuming cash exercise of options and warrants less cash consideration. Stock consideration is inclusive of Legacy Sharecare common stock, redeemable convertible preferred stock, warrants, options, and doc.ai acquisition.

(2)

Calculated as the sum of the cash held in the trust account plus the Private Placement and closing cash of Legacy Sharecare less FCAC redemptions, Legacy Sharecare debt pay down and transaction expenses for FCAC and Legacy Sharecare.

(3)

The total debt to be paid down reflected in the unaudited pro forma balance sheet is $56.5 million which includes $42.5 million of debt and accrued interest outstanding at June 30, 2021 plus the doc.ai note payable

 

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  of $14.0 million. At the closing of the Business Combination, FCAC paid down $14.5 million of Legacy Sharecare’s debt and remaining debt was repaid by Legacy Sharecare separately in July 2021 and at the closing of the Business Combination.

The following summarizes the unaudited pro forma common stock shares outstanding at Closing:

Ownership

 

actuals

   Shares      %  

FCAC public stockholders

     14,635,970        4.4

FCAC initial stockholders1

     4,643,103        1.4

FCAC other stockholders2

     984,147        0.3
  

 

 

    

 

 

 

Total FCAC

     20,263,220        6.1

Legacy Sharecare stockholders3

     271,051,959        81.2

Private Placement investors

     42,560,000        12.7
  

 

 

    

 

 

 

Total Shares at Closing (excluding shares below)

     333,875,179        100

Shares underlying Legacy Sharecare warrants and options3

     114,775,275     

Legacy Sharecare strategic investors Series A preferred shares3

     5,000,000     
  

 

 

    

Total Shares at Closing (including shares above)

     453,650,454     

 

(1)

Represents the 8.6 million shares outstanding at June 30, 2021 less 1.7 million shares placed into escrow subject to earn-out provisions, 1.7 million shares forfeited (of which 1.3 million shares is forfeited and cancelled to provide for the Sharecare earn-out described below and 0.4 million shares transferred from the Sponsor to Legacy Sharecare’s charity) and 0.5 million shares transferred pursuant to certain transactions that were entered into in connection with the Business Combination. Pursuant to the Merger Agreement, half of the Sponsor Earnout Shares shall vest if on or prior to the fifth anniversary of the Closing Date: (x) the VWAP of shares of common stock equals or exceeds $12.50 per share for 20 of any 30 consecutive trading days commencing after the Closing, or (y) if the Company consummates a transaction which results in the stockholders of the Company having the right to exchange their shares for cash, securities or other properties having a value equaling or exceeding $12.50 per share. The other half of the Sponsor Earnout Shares shall vest if on or prior to the fifth anniversary of the Closing Date: (x) the VWAP of shares of common stock equals or exceeds $15.00 per share for 20 of any 30 consecutive trading days commencing after the Closing, or (y) if the Company consummates a transaction which results in the stockholders of the Company having the right to exchange their shares for cash, securities or other properties having a value equaling or exceeding $15.00 per share.

(2)

Represents the 0.4 million shares transferred from the Sponsor to Legacy Sharecare’s charity and 0.5 million shares transferred pursuant to certain transactions that were entered into in connection with the Business Combination, plus 60 thousand shares for FCAC’s independent directors that converted from FCAC Class B common stock to FCAC Class A common stock at the Closing.

(3)

The total shares to be issued includes Legacy Sharecare and doc.ai common and preferred stock, convertible notes, and shares underlying options and warrants. Accordingly, the shares outstanding at the closing of the Business Combination has been adjusted to exclude the Series A Preferred Stock and the portion of consideration shares for options and warrants that will be unvested, unissued, and/or unexercised at the closing of the Business Combination. Additionally, excludes 1.5 million shares subject to an earn-out to be issued to Legacy Sharecare stockholders on a pro rata basis if the VWAP of the shares meet the thresholds noted in (1) above within the fifth anniversary of the closing.

Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited

 

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pro forma condensed combined financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Business Combination and related transactions occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of the Company following the completion of the Business Combination and related transactions. The unaudited pro forma adjustments represent the Company’s management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2021

(in thousands)

 

     As of June 30, 2021                  As of
June 30, 2021
 
     FCAC
(Historical)
     Legacy
Sharecare
(Historical)
     Transaction
Accounting
Adjustments
          Pro Forma
Combined
 

ASSETS

            

Cash and cash equivalents

   $ 14      $ 42,842      $ 344,974       (a   $ 416,267  
           425,600       (b  
           (49,487     (c  
           (680     (c  
           (56,572     (d  
           (91,779     (e  
           (198,645     (i  

Accounts receivable, net

     —          80,875            80,875  

Other receivables

     —          2,527            2,527  

Prepaid expenses and other current assets

     205        11,393        (12     (k     11,586  
  

 

 

    

 

 

    

 

 

     

 

 

 

Total current assets

     219        137,637        373,399         511,255  
  

 

 

    

 

 

    

 

 

     

 

 

 

Cash and investments held in Trust Account

     345,008        —          (34     (a     —    
           (344,974     (a  

Property and equipment, net

     —          4,056            4,056  

Intangible assets, net

     —          120,433            120,433  

Goodwill

     —          155,050            155,050  

Other long-term assets

     —          19,982        (456     (d     7,538  
           (11,988     (c  
  

 

 

    

 

 

    

 

 

     

 

 

 

Total assets

     345,227        437,158        15,947         798,332  
  

 

 

    

 

 

    

 

 

     

 

 

 

LIABILITIES, REDEEMABLE STOCK, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY (DEFICIT)

            

Accounts payable and accrued expenses

     680        —          (680     (c     —    

Accounts payable

     —          30,483        (1,600     (c     25,119  
           (3,337     (g  
           (427     (d  

Accrued expenses and other current liabilities

     —          54,999        (3,674     (c     47,132  
           (193     (d  
           (14,000     (d  
           10,000       (c  

Deferred revenue

     —          30,409            30,409  

Contract liabilities, current

     —          4,300            4,300  

Debt, current

     —          1,157        (400     (d     757  
  

 

 

    

 

 

    

 

 

     

 

 

 

Total current liabilities

     680        121,348        (14,311       107,717  
  

 

 

    

 

 

    

 

 

     

 

 

 

Deferred underwriting compensation

     12,075        —          (12,075     (c     —    

Contract liabilities, noncurrent

     —          3,983            3,983  

Warrant liabilities

     31,740        11,120            42,860  

Long-term debt

     —          166,834        (41,396     (d     2,241  
           1,148       (d  
           (124,345     (g  

Other long-term liabilities

     —          47,042            47,042  
  

 

 

    

 

 

    

 

 

     

 

 

 

Total liabilities

     44,495        350,327        (190,979       203,843  
  

 

 

    

 

 

    

 

 

     

 

 

 

 

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Table of Contents
     As of June 30, 2021                 As of
June 30, 2021
 
     FCAC
(Historical)
    Legacy
Sharecare
(Historical)
    Transaction
Accounting
Adjustments
          Pro Forma
Combined
 

Commitment and contingencies

          

Class A common stock subject to possible redemption

     295,732       —         (295,732     (f     —    

Redeemable non-controlling interest

     —         —         —           —    

Redeemable convertible preferred stock

     —         242,629       (190,875     (g     —    
         (51,754     (j  
Series A convertible redeemable preferred shares          51,754       (j     51,754  

Stockholders’ equity (deficit)

          

Common stock

     1       2       4       (b     33  
         3       (f  
         25       (g  
         (2     (i  

Additional paid-in capital

     15,159       287,495       425,596       (b     1,004,472  
         (49,359     (c  
         (91,779     (e  
         295,729       (f  
         190,875       (g  
         140,048       (g  
         (464     (g  
         (25     (g  
         (10,160     (h  
         (198,643     (i  
         —        

Accumulated other comprehensive loss

     —         (1,158         (1,158

Accumulated deficit

     (10,160     (444,207     (34     (a     (462,682
         (4,767     (c  
         (1,760     (d  
         (11,902     (g  
         10,160       (h  
         (12     (k  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total equity (deficit) attributable to stockholders

     5,000       (157,868     693,533         540,665  
  

 

 

   

 

 

   

 

 

     

 

 

 

Non-controlling interest in subsidiaries

     —         2,070       —           2,070  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total stockholders’ equity (deficit)

     5,000       (155,798     693,533         542,735  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities, redeemable and stockholders’ equity (deficit)

   $ 345,227     $ 437,158     $ 15,947       $ 798,332  
  

 

 

   

 

 

   

 

 

     

 

 

 

 

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Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2021

(in thousands, except share and per share data)

 

     For the six
months ended
June 30, 2021
    For the six
months ended
June 30, 2021
                For the six
months ended
June 30, 2021
 
     FCAC
(Historical)
    Legacy
Sharecare
(Historical)
    Transaction
Accounting
Adjustments
          Pro Forma
Combined
 

Revenue

   $ —       $ 188,068         $ 188,068  

Costs and Operating expenses:

             —    

Costs of revenue (exclusive of depreciation and amortization below)

     —         93,028           93,028  

Sales and marketing

     —         23,556           23,556  

Product and technology

     —         36,266           36,266  

General and administrative

     1,741       38,752       (90     (aa     40,403  

Franchise tax expenses

     64       —             64  

Depreciation and amortization

     —         13,850       360       (ff     14,210  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total costs and operating expenses

     1,805       205,452       270         207,527  
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss from operations

     (1,805     (17,384     (270       (19,459
  

 

 

   

 

 

   

 

 

     

 

 

 

Other income (expense):

          

Change in fair market value of derivative warrant liabilities

     8,946       —             8,946  

Interest income

     74       29       (74     (bb     29  

Interest expense

     —         (14,105     13,264       (cc     (841

Other income (expense)

     —         (20,730         (20,730
  

 

 

   

 

 

   

 

 

     

 

 

 

Total other income (expense)

     9,020       (34,806     13,190         (12,596
  

 

 

   

 

 

   

 

 

     

 

 

 

Income (Loss) before income tax expense

     7,215       (52,190     12,920         (32,055
  

 

 

   

 

 

   

 

 

     

 

 

 

Income tax benefit (expense)

     —         14       (21     (dd     (7
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss)

     7,215       (52,176     12,899         (32,062
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) attributable to non-controlling interest in subsidiaries

     —         (82     —           (82
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) attributable to stockholders

   $ 7,215     $ (52,094   $ 12,899       $ (31,980
  

 

 

   

 

 

   

 

 

     

 

 

 

Weighted average Class A common stock outstanding

     34,500,000             333,875,179  

Net income (loss) per common stock, Class A—basic and diluted

   $ —             $ (0.10

Weighted average Class B common stock outstanding

     8,625,000             —    

Net income (loss) per common stock, Class B—basic and diluted

   $ 0.84             —    

 

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Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2020

(in thousands, except share and per share data)

 

     For the period
from June 5
(inception)
through
December 31,
2020
    For the year
ended
December 31,
2020
                For the year
ended
December 31,
2020
 
     FCAC
(Historical)
    Legacy
Sharecare As
Adjusted
(Note 3)
    Transaction
Accounting
Adjustments
          Pro Forma
Combined
 

Revenue

   $ —       $ 343,615         $ 343,615  

Costs and Operating expenses:

          

Costs of revenue (exclusive of depreciation and amortization below)

     —         160,911           160,911  

Sales and marketing

     —         34,372           34,372  

Product and technology

     —         44,078           44,078  

General and administrative

     307       86,445       (48     (aa     97,340  
         5,869       (ee  
         4,767       (gg  

Research and development

     —         16,477           16,477  

Depreciation and amortization

     —         26,848           26,848  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total costs and operating expenses:

     307       369,131       10,588         380,026  
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss from operations

     (307     (25,516     (10,588       (36,411
  

 

 

   

 

 

   

 

 

     

 

 

 

Other income (expense):

          

Warrant issuance transaction costs

     (890     —             (890

Change in fair market value of derivative warrant liabilities

     (16,261     —             (16,261

Change in fair value of SAFE

     —         (10,419         (10,419

Interest income

     82       101       (82     (bb     101  

Interest expense

     —         (31,043     28,536       (cc     (2,507

Other income (expense)

     —         (9,924         (9,924
  

 

 

   

 

 

   

 

 

     

 

 

 

Total other expense

     (17,069     (51,285     28,454         (39,900
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss before income tax expense and loss from equity method investment

     (17,376     (76,801     17,866         (76,311
  

 

 

   

 

 

   

 

 

     

 

 

 

Income tax benefit (expense)

     —         1,557       511       (dd     2,068  

Loss from equity method investment

     —         (3,902         (3,902
  

 

 

   

 

 

   

 

 

     

 

 

 

Net loss

     (17,376     (79,146     18,377         (78,145
  

 

 

   

 

 

   

 

 

     

 

 

 

Net loss attributable to non-controlling interest in subsidiaries

     —         (443     —           (443
  

 

 

   

 

 

   

 

 

     

 

 

 

Net loss attributable to stockholders

   $ (17,376   $ (78,703   $ 18,377       $ (77,702
  

 

 

   

 

 

   

 

 

     

 

 

 

Weighted average Class A common stock outstanding

     34,500,000             333,875,179  

Net income (loss) per common stock, Class A - basic and diluted

   $ —             $ (0.23

Weighted average Class B common stock outstanding

     8,030,048             —    

Net loss per common stock, Class A - basic and diluted

   $ (2.16           —    

 

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Table of Contents

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. Basis of Presentation

The Business Combination was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, FCAC was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Sharecare issuing stock for the net assets of FCAC, accompanied by a recapitalization. The net assets of FCAC will be stated at historical cost, with no goodwill or other intangible assets recorded.

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 assumes that the Business Combination and related transactions occurred on June 30, 2021. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and year ended December 31, 2020 presents pro forma effect to the Business Combination and related transactions as if they have been completed on January 1, 2020.

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 has been prepared using, and should be read in conjunction with, the following:

 

   

FCAC’s unaudited consolidated balance sheet as of June 30, 2021 and the related notes included elsewhere in this prospectus; and

 

   

Legacy Sharecare’s unaudited consolidated balance sheet as of June 30, 2021 and the related notes included elsewhere in this prospectus.

The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 has been prepared using, and should be read in conjunction with, the following:

 

   

FCAC’s unaudited consolidated statement of operations for the six months ended June 30, 2021 and the related notes included elsewhere in this prospectus; and

 

   

Legacy Sharecare’s unaudited consolidated statement of operations for the six months ended June 30, 2021 and the related notes included elsewhere in this prospectus.

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 has been prepared using, and should be read in conjunction with, the following:

 

   

FCAC’s audited statement of operations for the period from June 5, 2020 (date of inception) through December 31, 2020 and the related notes included elsewhere in this prospectus; and

 

   

Legacy Sharecare’s audited consolidated statement of operations for the year ended December 31, 2020 and the related notes included elsewhere in this prospectus.

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Business Combination and related transactions. The pro forma adjustments reflecting the consummation of the Business Combination and related transactions are based on certain currently available information and certain assumptions and methodologies that the Company believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as

 

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additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. The Company believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and related transactions based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

2. Accounting Policies

After the consummation of the Business Combination and related transactions, management will perform a comprehensive review of the entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the combined company. Based on its initial analysis, the Company has identified the presentation differences that would have an impact on the unaudited pro forma condensed combined financial information and recorded the necessary adjustments.

3. Sharecare’s doc.ai Acquisition

On January 26, 2021, Legacy Sharecare entered into an Agreement and Plan of Merger to acquire 100% of the outstanding equity interest of doc.ai. Incorporated on August 4, 2016 and headquartered in Palo Alto, California, doc.ai is an enterprise AI platform accelerating digital transformation in healthcare. The acquisition of doc.ai closed on February 22, 2021. Legacy Sharecare acquired doc.ai for its developed technology and customer relationships. Total preliminary purchase consideration is approximately $120.6 million. As Legacy Sharecare is determined to be the accounting acquirer in the doc.ai acquisition, the doc.ai acquisition will be considered a business combination under ASC 805, and will be accounted for using the acquisition method of accounting. Legacy Sharecare will record the fair value of assets acquired and liabilities assumed from doc.ai.

The estimated consideration paid by Legacy Sharecare for the doc.ai acquisition is as follows:

 

     (in thousands)  

Estimated Consideration

  

Equity Consideration(1)

   $ 81,292  

Cash Consideration

     15,000  

Note Payable(2)

     14,000  

Deferred Equity/Contingent Consideration(1)

     10,304  
  

 

 

 

Total estimated purchase consideration

   $ 120,596  
  

 

 

 

 

(1)

Represents value of Legacy Sharecare common stock and rollover options to be issued to doc.ai. These amounts are based on the preliminary ASC 805 valuation, which are subject to change.

(2)

Represents the $14.0 million, 1% interest bearing note due upon the earlier of December 31, 2021 or the closing of the Business Combination that was issued by Legacy Sharecare as part of the consideration. The note was settled at the closing of the Business Combination.

For all assets acquired and liabilities assumed other than identified intangible assets below and goodwill, the carrying value was assumed to equal fair value. The final determination of the fair value of certain assets and liabilities will be completed within the one-year measurement period as required by ASC 805. Accordingly, the purchase price allocation is subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed. There can be no assurances that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.

 

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Table of Contents

The table below indicates the preliminary estimated fair value of each of the identifiable intangible assets. These have been prepared based on preliminary estimates so the actual amounts recorded for the acquisition may differ significantly from the information presented.

 

(in thousands, except for useful lives)

   Preliminary
Fair Value
     Estimated
Weighted
Average
Useful Life
(Years)
     Estimated
Annual
Amortization
     Estimated
Quarterly
Amortization
 

Acquired technology

   $ 15,668        15        1,045        261  

Customer relationships

     21,122        19        1,112        278  
  

 

 

       

 

 

    

 

 

 

Total Preliminary Fair Value

     36,790           2,157        539  

Historical Expense

           490        359  
        

 

 

    

 

 

 

Statement of Operations Adjustment

         $ 1,667      $ 180  

The preliminary fair values of the acquired technology intangible assets were determined by using an “income approach,” specifically the relief-from-royalty approach, which is a commonly accepted valuation approach. This approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset. The fair values of the customer relationship intangible assets were determined by using an “income approach,” specifically a multi-period excess earnings approach, which is a commonly accepted valuation approach. Under this approach, the net earnings attributable to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. The preliminary estimates of remaining average useful lives for the intangible assets were determined by assessing the period of economic benefit of the asset. These preliminary estimates of fair value and estimated useful lives may differ from final amounts the Company will calculate after completing a detailed valuation analysis, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial information, including increases or decreases to the expected amortization expense.

The following table sets forth a preliminary allocation of the estimated consideration for the doc.ai acquisition to the identifiable tangible and intangible assets acquired and liabilities assumed, with the excess recorded as goodwill:

 

Estimated Goodwill(1)

  

Total current assets

   $ 12,861  

Intangible assets, net

     36,790  
  

 

 

 

Total assets acquired (a)

     49,651  
  

 

 

 

Total liabilities assumed (b)

     8,641  
  

 

 

 

Net assets acquired (a) – (b) = (c)

     41,010  
  

 

 

 

Estimated purchase consideration (d)

     120,596  
  

 

 

 

Estimated goodwill (d) – (c)

   $ 79,586  
  

 

 

 

 

(1)

Individual assets and liabilities acquired except for the assets for which preliminary fair value has been determined are condensed.

In accordance with ASC Topic 350, Goodwill and Other Intangible Assets, goodwill will not be amortized, but instead will be tested for impairment at least annually or more frequently if certain indicators are present. In the event management determines that the value of goodwill has become impaired, an accounting charge for the amount of impairment during the quarter in which the determination is made may be recognized. Goodwill recognized is not expected to be deductible for tax purposes.

 

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Table of Contents

For the purposes of the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020, the Legacy Sharecare historical audited consolidated statement of operations for the year ended December 31, 2020 were combined with doc.ai’s audited statement of operations for the year ended December 31, 2020 and adjusted for the preliminary purpose price allocation shown above as well as for reclassifications to align the financial statement captions for presentation purposes. As the acquisition closed as of and for the six months ended June 30, 2021, no such adjustments were performed for the purposes of the unaudited pro forma condensed combined balance sheet as of June 30, 2021 and statements of operations for the six months ended June 30, 2021. The ending amounts from this exercise are included in the “Legacy Sharecare As Adjusted” columns in the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020.

“Legacy Sharecare As Adjusted” for the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 was determined as follows:

 

     Year Ended
December 31, 2020
                   

(in 000’s)

   Legacy
Sharecare
(Historical)
    Doc.ai
(Historical)
    Reclassifications
and other
adjustments
    Doc.ai
pro forma
fair value
adjustments
    Legacy
Sharecare
(As
Adjusted)
 

Revenue

   $ 328,805     $ 14,810         $ 343,615  

Costs and Operating expenses:

          

Costs of revenue (exclusive of depreciation and amortization
below)

     160,911       —             160,911  

Sales and marketing

     33,335       1,037           34,372  

Product and technology

     44,078       —             44,078  

General and administrative

     83,238       3,207           86,445  

Research and development

     —         16,974       (497       16,477  

Depreciation and amortization

     24,684       —         497       1,667       26,848  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and operating expenses:

     346,246       21,218       —         1,667       369,131  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (17,441     (6,408     —         (1,667     (25,516
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

          

Change in fair value of SAFE

     —         (10,419         (10,419

Interest income

     71       30           101  

Interest expense

     (31,037     (6         (31,043

Other miscellaneous income
(expense)

     —         (215     215         —    

Other income (expense)

     (9,709     —         (215       (9,924
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (40,675     (10,610     —         —         (51,285
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax expense and loss from equity method investment

     (58,116     (17,018     —         (1,667     (76,801
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     1,557       —             1,557  

Loss from equity method
investment

     (3,902     —             (3,902
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (60,461     (17,018     —         (1,667     (79,146
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to non-controlling interest

     (443           (443
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to
stockholders

   $ (60,018   $ (17,018   $ —       $ (1,667   $ (78,703
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Fair value adjustments reflect the incremental amortization expense associated with the fair value step up of intangible assets, net.

4. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and related transactions and has been prepared for informational purposes only.

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). The Company has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the following unaudited pro forma condensed combined financial information.

The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated income tax returns during the periods presented.

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of post-combination company’s common stock outstanding, assuming the Business Combination and related transactions occurred on January 1, 2020.

Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The Transaction Accounting Adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2021 are as follows:

 

  a.

Reflects the reduction of cash and investments held in the Trust Account since June 30, 2021 and reclassification of such amount that becomes available at the closing of the Business Combination.

 

  b.

Reflects the gross proceeds of $425.6 million from the issuance and sale of 42,560,000 shares of FCAC Class A common stock at $10.00 per share in the Private Placement pursuant to the Subscription Agreements. Fees associated with the Private Placement are included in total transaction costs below.

 

  c.

Reflects $64.0 million of estimated transaction costs incurred in connection with the Business Combination, of which $4.4 million was already paid as of June 30, 2021, $10.0 million accrued as a liability to be paid for transaction bonuses after the closing and $49.5 million paid in cash. Total transaction costs are allocated between accumulated deficit and additional paid in capital. Further, the cash settlement of $49.5 million includes approximately $12.1 million of deferred underwriting costs related to the FCAC IPO payable at closing, $14.1 million for the Private Placement above which is offset against additional paid in capital, $2.5 million included in Sharecare accounts payable and accrued expenses, and $20.8 million related to legal, financial advisory and other professional fees. Additionally, represents $6.1 million capitalized as a deferred asset that will be reclassed to additional paid in capital at close. $0.2 million of FCAC accounts payable and accrued expenses was separately settled out of the FCAC cash balance at close.

 

  d.

Reflects the repayment of Legacy Sharecare’s outstanding debt. Of the amount, approximately $41.4 million was repaid at the close of the Business Combination for its Senior Secured Credit Agreement and Second Lien Credit Agreement (each as defined herein). The remaining $14.5 million was repaid by FCAC for the principal and interests on Legacy Sharecare’s $14.0 million, 1% interest bearing doc.ai note payable and $0.4 million Note payable.

 

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  e.

Reflects the payment of $91.7 million of cash consideration to certain Legacy Sharecare shareholders.

 

  f.

Reflects the reclassification of common stock subject to possible redemption to permanent equity at $0.0001 par value.

 

  g.

Reflects the recapitalization of Legacy Sharecare’s equity and issuance of 271.1 million shares of common stock for the reverse recapitalization. Shares outstanding prior to the closing of the Business Combination includes shares for Legacy Sharecare’s outstanding common stock, redeemable convertible preferred stock, Series B-3 Convertible Notes, Series B-4 Convertible Notes, Series B Convertible promissory note, warrants, and options as well as options for doc.ai acquisition by Legacy Sharecare. Shares subject to further vesting and exercise terms are excluded as shown in the capitalization table herein. Also reflects the allocation of the debt issuance costs associated between APIC and accumulated deficit. The ending par value for the combined company also includes the par value of the FCAC Class B common stock held by the Sponsor and FCAC’s executive officers and independent director nominees and other investors that converted from Class B common stock to Class A common stock at the Closing.

 

  h.

Reflects the reclassification of the historical accumulated deficit of FCAC to additional paid in capital as part of the reverse recapitalization.

 

  i.

Reflects the redemption of approximately 19.9 million FCAC public shares outstanding at a redemption price of $10.00 per share for $198.6 million held in trust, which is allocated to Class A common stock and additional paid-in capital using $0.0001 par value per share.

 

  j.

Reflects the investment from Anthem, Inc. or one of its affiliates, (the “Strategic Investor”) of $50.0 million in exchange for approximately 0.06 million Legacy Sharecare Series D Preferred Stock which converted to 5.0 million shares of Series A Preferred Stock upon transaction close. The Series A Preferred Stock has a Liquidation Preference equal to the outstanding principal amount plus any accrued and unpaid dividends. They will share in any dividends paid on the Company’s common stock on an as converted basis but will not accrue separate dividends. The Series A Preferred Stock is convertible at any time, at the holder’s option, into common stock at a conversion price equal to the issue price (as converted in connection with the Business Combination). Following the Business Combination, the Company has the right to require the conversion of the outstanding Series A Preferred Stock beginning three years after the issue date at the applicable conversion price if the closing price of the Company’s common stock exceeds 130% of the issue price for at least 20 trading days during a period of 30 consecutive trading days. If not previously converted to common stock, on the fifth anniversary of the issue date, the Company will be obligated to redeem the Series A Preferred Stock at the Liquidation Preference value.

 

  k.

Reflects the settlement of the amounts prepaid to an affiliate of the Sponsor under FCAC’s administrative support agreement which will cease upon the close of the Business Combination.

Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The accounting adjustments listed below include transaction accounting adjustments related to the Business Combination as well as the doc.ai preliminary purchase accounting adjustments. A description of the amounts included in the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and year ended December 31, 2020 are as follows:

 

  aa.

Reflects the elimination of the FCAC administrative service fee paid to the Sponsor that will cease upon the close of the Business Combination.

 

  bb.

Reflects the elimination of interest income earned on the FCAC Trust Account.

 

  cc.

Reflects the elimination of the interest expense associated with the Second Lien Credit Agreement, Note Payable, Series B-3 Convertible Notes, Series B-4 Convertible Notes, and Series B Convertible

 

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  promissory note that were repaid in cash at or prior to closing or were settled as part of consideration at the closing of the Business Combination.

 

  dd.

Reflects income tax effect of pro forma adjustments using the estimated effective tax rate of 0.16% and 2.86% for the six months ended June 30, 2021 and year ended December 31, 2020, respectively. In its historical periods, Legacy Sharecare concluded that it is more likely than not that it will not recognize the full benefits of federal and state net deferred tax assets and as a result established a valuation allowance. For pro forma purposes, it is assumed that this conclusion will continue at the close date of the Business Combination and as such, the effective tax rate for each period is reflected.

 

  ee.

Represents the recognition of stock compensation expense for certain stock options held by Legacy Sharecare stockholders that are expected to vest upon consummation of a liquidity event which includes this Business Combination based on the terms and conditions in the respective stock option agreements. Due to these stock options only vesting upon a liquidity event, no stock compensation expense was recognized by Legacy Sharecare in the historical financial statements. This is a non-recurring item.

 

  ff.

Represents the incremental amortization expense for the six months ended June 30, 2021 associated with the fair value of intangible assets recognized upon Legacy Sharecare’s acquisition of doc.ai described in Note 3 above. The incremental amortization expense for the year ended December 31, 2020 is captured in Note 3 above.

 

  gg.

Represents the portion of transaction costs for the Business Combination not eligible for capitalization. Transaction costs are reflected as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statement of operations. This is a non-recurring item.

5. Loss per Share

Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination and related transactions, assuming the shares were outstanding since January 1, 2020. As the Business Combination and related transactions are being reflected as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination and related transactions have been outstanding for the entire periods presented. When assuming maximum redemption, this calculation is adjusted to eliminate such shares for the entire period.

 

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The unaudited pro forma condensed combined financial information has been prepared for the six months ended June 30, 2021 and year ended December 31, 2020:

 

(in thousands, except share and per share data)

   Six Months
Ended

June 30, 2021
     Year Ended
December 31,
2020
 

Pro forma weighted average common stock outstanding - basic and diluted

     333,875,179        333,875,179  

Net income (loss) per common stock - basic and diluted

   $ (0.10    $ (0.23

Numerator:

     

Pro forma net loss

   $ (31,980    $ (77,702

Denominator:

     

Pro forma weighted average shares outstanding - basic and diluted

     

FCAC public stockholders

     14,635,970        14,635,970  

FCAC initial stockholders

     4,643,103        4,643,103  

FCAC other stockholders

     984,147        984,147  
  

 

 

    

 

 

 

Total Falcon

     20,263,220        20,263,220  

Legacy Sharecare stockholders

     271,051,959        271,051,959  

Private Placement investors

     42,560,000        42,560,000  
  

 

 

    

 

 

 

Pro forma weighted average shares outstanding - basic and diluted(1)(2)(3)

     333,875,179        333,875,179  
  

 

 

    

 

 

 

 

(1)

For the purposes of applying the if converted method for calculating diluted earnings per share, it was assumed that all outstanding warrants sold in the FCAC IPO and warrants sold in the private placement net of forfeitures are exchanged for 17.4 million shares of common stock. However, since this results in anti-dilution, the effect of such exchange was not included in calculation of diluted loss per share.

(2)

For the purposes of applying the if converted method for calculating diluted earnings per share, it was assumed that all outstanding Legacy Sharecare, including doc.ai, options and warrants included in consideration and that roll over as part of the Business Combination are exchanged for 114.8 million shares of common stock. However, since this results in anti-dilution and the shares are issuable upon the occurrence of future events (i.e. exercise of stock options and warrants), the effect of such exchange was not included in calculation of diluted loss per share. Excludes any shares for the earnouts associated with the WhiteHat.AI and Visualize Health Sharecare acquisitions in 2020 as the earn-outs have not met their revenue and cash flow targets. Excludes shares of Series A Preferred Stock convertible into 5.0 million shares of common stock.

(3)

Excludes 1.7 million Earnout Shares for the FCAC initial stockholders and 1.5 million Earnout Shares for the Legacy Sharecare stockholders placed into escrow at close as these are not participating securities and results in anti-dilution.

 

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BUSINESS

The following discussion reflects the business of Sharecare both prior to and after giving effect to the Business Combination, as the context indicates. In this section, “we,” “us,” “our” generally refer to Sharecare in the present tense or Legacy Sharecare prior to the consummation of the Business Combination.

Overview

We are a leading digital healthcare platform company that helps members consolidate and manage various components of their health in one place, regardless of where they are on their health journey. Our comprehensive platform is a health and well-being digital hub that unifies elements of individual and community health into one experience in order to enable members to live better, longer lives. We are driven by our philosophy that we are “All Together Better” as well as our goal to turn individual progress into community transformation.

We believe everyone’s health and well-being is inherently interconnected. Just as a person’s physical health is inextricably linked to their mental and emotional health, an individual’s health is also connected to a greater collective that includes their employer, providers, insurers, colleagues, family, friends, and local communities. However, these groups have historically remained very disconnected with various stakeholders providing hundreds of fragmented point solutions, each addressing only one or two specific health-related objectives. By integrating fragmented point solutions and bringing together disparate stakeholders across the entire healthcare ecosystem into one connected, interoperable virtual care platform, we believe that we can fulfill the role of a unifier and leverage smartphone technology to foster a frictionless user-friendly experience that engages people across the dynamic continuum of their healthcare needs.

We were founded in 2010 by digital health pioneer Jeff Arnold, with our platform launching in 2012. Given a unique blend of expertise across technology, media, and healthcare, we have, through a number of strategic acquisitions and integration of key technologies and capabilities over the last ten years, built our platform into what we believe is the most comprehensive and seamless experience currently available in the digital healthcare space.

We believe the breadth of our platform and diversity of our solution channels uniquely positions us to reach a wide and increasing array of members at all different stages of their healthcare journey. Further, by focusing on the individual, we have created a solution that we believe is significantly more comprehensive than any other digital healthcare platform as a result of our scientifically validated clinical programs and engaging content to deliver a highly personalized and empowering experience for our members, whether they connect to our platform through their workplace (enterprise), exam room (provider), or the living room (consumer):

 

   

Enterprise: Our enterprise channel includes a range of clients, from large employers and healthcare systems to government agencies and health plans, that use our platform to engage with their population, dynamically measure the impact of that engagement and efficiently deliver health and wellness services.

 

   

Provider: Our suite of data- and information-driven solutions for healthcare providers are tailored to improve productivity and efficiency and enhance patient care and management while upholding the latest compliance, security and privacy standards.

 

   

Consumer Solutions: Our robust platform and suite of digital products and medical expert knowledge provides members with personalized information, programs, and resources to improve their health and well-being, and affords sponsors the opportunity to integrate their brands into our consumer experience in a highly contextual, relevant and targeted environment.

Our platform offers an accessible, interactive, personalized and rewarding environment that aims to transform user engagement with healthcare from episodic to everyday. The platform provides a single destination for people, patients and caregivers to access quality and clinically reviewed content; digitally connect with other patients, community members and healthcare professionals; and adopt action plans provided by healthcare

 

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professionals from top institutions. Centralized within its dynamic digital platform, we provide health assessment and wellness tools and population health services to create personalized action plans, improve productivity and reduce health-related costs. We also provide physicians and physician practices with value-based care arrangements through the use of various tools geared towards identifying care gaps, patient engagement and billing efficiencies. Additionally, we provide secure, automated release of information, electronic medical record archiving and business consulting services to streamline the medical records process for both patients and medical facilities. Finally, Sharecare yields strong return on investment performance on behalf of its life sciences and pharmaceutical partners through consumer acquisition campaigns that utilize data-driven and contextual lead generation, sponsorships, audience targeting and condition-specific marketing.

Whether a member’s path to Sharecare originates as an employee, health plan member, patient, community member, or self-motivated individual, we believe it provides the messaging, motivation, management, and measurement tools to drive behavior change and make access to better living more affordable.

 

LOGO

Since the Sharecare platform was launched in 2012, it has grown to approximately 64,000 employer clients, 9 million eligible lives, and 6,000 hospitals and physician practices. Additionally, we have raised over $1 billion from our roster of investors, whose reach extends from the living room to doctors’ exam rooms and into the workplace. Several of our investors are also customers and are fully aligned with our mission. They realize how we are helping them achieve better outcomes for their populations. Select strategic investors include hospitals, healthcare investment firms, and health plans, in particular, HCA, Trinity Health, the Heritage Healthcare Innovation Fund, Wellstar, and CareFirst; media companies such as Discovery Communications, Harpo Productions, and Sony Pictures Television; high-growth technology investment firms such as Claritas Capital; noted institutional investment funds such as Wellington Management; and other major reputable corporations, such as Aflac Corporate Ventures, Quest Diagnostics, Wells Fargo and Swiss Re.

On January 26, 2021, we entered into an Agreement and Plan of Merger to acquire 100% of the outstanding equity interests of doc.ai, an enterprise AI platform company, for total consideration of $175.0 million. The acquisition was consummated on February 22, 2021. Following the acquisition of doc.ai, its AI platform is being integrated into, and has enhanced the capabilities of, our platform and expanded our product offerings with solutions such as Serenity and Passport (as discussed below). In addition, we believe we are uniquely positioned to benefit from the combination of our constantly expanding dataset coupled with the doc.ai platform, which we believe will provide us with additional member insights and solution capabilities well into the future.

 

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Furthermore, in connection with the acquisition, we added a team of more than 70 engineers who have developed technology and product offerings that enable clients to launch products faster and at lower costs.

On August 11, 2021, we consummated the acquisition of CareLinx Inc. (“CareLinx”), a nationwide home care platform able to deliver intermittent, on-demand personal care services, in a transaction valued at approximately $65.0 million. Through its network of over 450,000 caregivers, CareLinx provides services across the continuum of care, including non-medical, companionship and housework, and personal and clinical care. We believe the acquisition will enable Sharecare to penetrate the home healthcare market and strengthens our digital platform by helping customers manage the “last mile” of care: the home. CareLinx’s services can be sold into our Enterprise, Provider and Consumer Solutions channels, and we have existing customers actively looking for this type of solution. Following the acquisition of CareLinx, we plan to leverage its platform and mobile technology to facilitate rich data capture in the post-acute care environment, generate population health analytics, and enable real-time care coordination with remote clinical teams.

Industry Challenges and Our Opportunity

All healthcare stakeholders, including individuals, providers, employers, health plans, government organizations, and communities, face a myriad of challenges given the increasing complexity, misaligned incentives, and rising costs of healthcare. The consumer’s healthcare journey often starts with confusion and frustration during health plan enrollment, which then extends into provider selection, post-care follow-up, and ongoing care management. Consumers are further impacted by a lack of coordinated services, which makes it difficult to address an individual’s holistic care and well-being needs. Additionally, despite the increasing prevalence of value-based care models, there is a growing realization of the need for, and lack of, consistent patient engagement and care coordination solutions to drive improved outcomes.

Once individuals engage with the healthcare system, they face a new set of challenges in navigating the highly fragmented provider and site of care network. Selecting a primary care provider or specialist can be a daunting task for many who lack access to easy-to-navigate provider directories and reliable provider cost and quality data, despite their desire to leverage such information. Further, after the occurrence of a healthcare event, a number of issues can prevent effective care coordination: lack of technology interoperability between different providers; lack of systems to monitor patients across the care continuum; lack of follow through with care plans or prescription adherence; and a lack of incentives for any one provider to ensure the consumer does not get lost in the system.

As costs continue to rise, health plans and employers are increasingly focused on managing their healthcare expense, in many cases, shifting more of the cost burden to members and employees in the form of increased premiums, deductibles and coinsurance. This often yields suboptimal healthcare experiences for patients, further complicated by misaligned incentives across the care continuum:

 

   

Health plans: As large health plans’ core competencies are underwriting risk, managing claims, administering benefits, and developing provider networks on behalf of their insured populations, they have historically underinvested in member engagement services and do not leverage integrated data, technology, or consumer-facing tools.

 

   

Providers: Providers have traditionally been compensated on a fee-for-service model, which incentivizes episodic care across a large number of patients rather than comprehensive, integrated care. This can result in more narrowly focused and often insufficient patient interactions in which the provider treats the symptom rather than the individual’s full care needs. These kinds of suboptimal patient interactions are associated with a higher likelihood of non-urgent use of emergency departments and contribute to inefficient and more expensive care delivery.

 

   

Employers: Employers strive to build comprehensive, attractive benefits packages in order to recruit and retain a satisfied workforce, as well as to ensure that their employees’ overall well-being is

 

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maintained so they remain engaged and productive. However, employers are generally not equipped to provide comprehensive advice to help their employees navigate the healthcare system, nor do they employ the resources to provide personalized clinical guidance to help their employees understand treatment and care options.

We have a diverse product portfolio that is marketed to a variety of end users within the enterprise, provider and consumer solutions channels. We believe this diversity in products and clients results in a significant competitive advantage as our total addressable market size is an estimated $240 billion. Our market reach includes proprietary digital therapeutics as well as preferred partner programs that address a broad spectrum of solutions for high-cost conditions.

Our Innovative Platform Removes Hurdles to Better Health While Benefiting All Participants. We believe the confluence of consumer empowerment, emergence of broad technology solutions and focus on providing accessible, high-quality, cost-effective healthcare creates a unique opportunity for a disruptive platform that transforms the way people access, providers deliver and employers and health plans administer, healthcare. While the narrow focus of many digital healthcare platforms and fragmented solutions available in the marketplace today have largely failed to sufficiently meet healthcare consumers’ needs, we believe we have a significant opportunity to solve access, cost and quality of care challenges while simultaneously offering health plans and employers an attractive, cost-effective alternative for their populations through our comprehensive platform. Further, we believe our ability to bundle a diverse set of digital therapeutics — addressing high-cost conditions such as diabetes prevention and management, stress, financial health, maternal health, tobacco cessation, muscle/joint health and weight loss — into an integrated platform allows us to drive deeper and more meaningful engagement with our members and provide an attractive alternative to a marketplace that we believe is fatigued by managing multiple and disparate healthcare vendors that have limited engagement with end users.

Competitive Strengths

We believe the following are our key competitive strengths.

Comprehensive Platform. Designed to help individuals, workforces and communities optimize their holistic well-being, our interoperable platform is based on human centered design principles and integrates fragmented point solutions and disparate stakeholders that provide a single place for members to interact with all features and services offered by us and our partners to foster a frictionless user-friendly experience. Moreover, our platform has both a flexible infrastructure and is scalable and configurable, which allows us to meet the different and evolving needs of our clients and also create opportunistic businesses like our facility and employee readiness and digital vaccine assistant tools created in response to the COVID-19 pandemic. The flexibility and adaptability of our platform infrastructure also allows us to partner with, and seamlessly integrate, third-party solutions into our ecosystem to promote a high degree of awareness, engagement, and outcomes through an integrated flow of data. We believe that our integration of third-party solutions, including features such as single sign-on, provides us with a competitive advantage over other digital health platforms that simply redirect users to a third-party solution, which results in a fragmented user experience.

Large, Well Established Clients. We have a large, diverse and well-established client base — including seven Blue Cross Blue Shield health plans, Fortune 100 companies such as Walmart and Delta Air Lines, and large public sector clients such as the State Health Benefit Plan of Georgia — which we believe provides us with significant existing revenue opportunity from signed contracts. Our large base of existing clients also provides us with a captive market to increase penetration of our products and services and optimize member engagement and enrollment.

Diverse Product Portfolio. We have a diverse portfolio of products and solutions that are marketed to a variety of users within our enterprise, provider and consumer solutions channels. We believe that the diversity of these offerings, together with our ability to bundle them into a comprehensive and integrated platform, provides

 

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us with a competitive advantage over other digital health platforms or point solutions that are focused more narrowly on one or two specific health-related needs. Our portfolio of products also offers members clinical connectivity through various incorporated touch points to healthcare systems and/or to providers, which we believe is another key differentiator to a number of our competitors that do not contemplate access to care or a provider component in their solutions. Moreover, our diverse portfolio of products enables us to offer tailored and personalized tools, including the ability to interact directly with lifestyle management and disease management coaches on our platform, representing an ideal intersection of high tech and high touch.

Value of Technology, Innovation and Data. We derive significant value from its proprietary technology platform that leverages an innovative architecture and data aggregation capabilities to give members a hyper-personalized experience. Through our platform we offer a portfolio of privacy-first technologies and AI software services to drive personalization of our digital assets and create improved value for members. Our single robust platform, designed to service all our stakeholders, including consumers, health plan members, employees, provider groups, health systems, and Blue Zones Project sites/communities, is built on a highly secure, multi-tenant enabled technology stack that uses the latest design patterns for scale and flexibility.

Our data architecture enables us to ingest substantial amounts of multivariate data sets, such as eligibility, claims, biometrics, and social determinants of health data, from multiple sources in near real-time. The value we derive from the quality and quantity of our data (more than 1.8 petabytes) uniquely positions us to scale, commercialize, contextually intervene, and materially engage members. These data sets along with the RealAge test and our AI infused models and trackers are aggregated and presented in user-facing applications and reports.

Our technology innovation includes a sophisticated informatics platform to create an up-to-date profile of each member using data across past claims, RealAge results, predictive AI technology and devices for the purpose of creating derived attributes such as disease states, disease severities and risk levels. This construct allows for the generation of intelligent personal insights and social comparisons with communities, and performs aggregate and individual analyses to demonstrate population and individual outcomes. Other key innovations include a no-code platform that allows for the creation of hyper-personalized member journeys, the incorporation of gaming techniques to better engage and motivate members to adopt change, an administrative command center to provision services and manage individual members and natural language-oriented conversational chatbots to help members navigate the Sharecare platform.

As an established, trusted source for health information that has spent nearly a decade building the infrastructure, resources and partnerships to support massive shifts in population health and community well-being, we believe we also have a unique vantage point for innovating new product offerings, especially in response to market dynamics that both directly and indirectly accelerate our ability to bring our vision to life on behalf of our clients and members. As an example, in rapid response to the COVID-19 pandemic, we launched a suite of distinct but complementary digital tools and programs that empower organizations to address the evolving emotional, educational, clinical and operational challenges introduced by the pandemic. See “Growth Strategies.”

Comprehensive Content Library. We have a comprehensive library of content that is subject to a rigorous medical review and fact-checking process before publication. The library consists of more than 200,000 expert-driven Q&As, articles and slideshows, and over 40,000 videos. We have built relationships with over 180 organizations (including the National Institutes of Health, Centers for Disease Control, or the CDC, and the American Diabetes Association) to develop, approve and improve content for our platform. Our team of health and medical subject-matter experts, physicians, and scientists regularly create, review and update content. The size and quality of our content library allows us to deliver highly personalized content to our members, which drives engagement and builds trust.

Experienced Management Team. We believe the successful trajectory of our platform to date is due in large part to our senior leadership team, who has decades of experience scaling and leading operations and innovation at world-class organizations across healthcare, technology, media, and business verticals. We believe

 

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this starts with the successful execution of the vision of our founder, Jeff Arnold. Mr. Arnold and the founding team purpose-built Sharecare to address the limited solutions driving consumer engagement in healthcare and the problems that arise as a result, with Mr. Arnold drawing from a host of prior experiences, including his founding of WebMD. In addition, our senior management team has a long track record of working together, both at Sharecare and at previous companies, with some members having worked together for over 20 years. We share our mission with the dedicated and passionate people that we employ, and our culture is a driving factor in our ability to attract and retain top talent. We foster a culture of transparency and alignment whereby we update our employees on how their contributions each day drive us toward the achievement of our mission.

Acquisition Expertise. To date, we have successfully completed multiple strategic acquisitions that have extended and expanded our platform, leveraged our core competencies and capabilities across business lines, met evolving consumer trends such as ultra-personalization, mobile adoption, AI integration and changing communication needs, and delivered outcomes at scale. We intend to continue to capitalize on our acquisition expertise to add additional technology capabilities, product lines and revenue streams.

Growth Strategies

The following are our key growth strategies.

Expand our Footprint. We believe that our current client base represents a small fraction of potential clients that could benefit from our highly differentiated solutions. We will continue to invest in our sales and marketing efforts and leverage our partner relationships to continue to acquire new clients, including individuals, providers, employers, health plans, government organizations and communities.

Expansion of Existing Client Relationships (Land and Expand). We also believe that there is significant opportunity to generate growth by maintaining and expanding our relationships with existing clients, including:

 

   

increasing engagement and enrollment of eligible members at our existing enterprise clients through continued sales and marketing efforts, including targeted next-generation digital modeling and marketing, and capitalizing on insights from claims ingestion (the process by which we receive and process information from our clients), population risk stratification and incentives management;

 

   

promoting our marketplace of existing targeted digital therapeutics to close gaps in care in high-cost areas (with incremental fee per enrollee), which we believe represents a $1 billion revenue opportunity within our currently contracted clients; and

 

   

expanding our relationships with our top 25 provider clients with an opportunity to extend our provider products and services to more than 4,000 additional healthcare sites.

We also believe there is significant opportunity to cross-sell our provider solutions to existing accounts, including deploying our value-based care and payment integrity solutions to approximately 6,000 hospitals and physician practices.

Continue to Grow the Capabilities of our Platform. We are constantly evaluating the marketplace for ways to broaden and enhance our client and member experience, improve clinical results and increase revenue through product innovation, partnerships and acquisitions. We intend to continue to leverage our expertise through adding digital therapeutics partnerships as well as the acquisition of products and services that are directly relevant to our existing clients. Additionally, we believe our strong and embedded client relationships provide us with unique perspectives into their evolving needs and the needs of their populations.

Evolving Products to Cater to an Evolving Industry. As the digital healthcare industry grows, we closely monitor evolving consumer trends and organizations’ needs so that we may adapt our platform to better suit our clients’ demands. Since March 2020, the COVID-19 pandemic greatly accelerated the demand for virtual care solutions and resulted in rapid growth and increased adoption of digital health technologies, which Sharecare was in a unique position to undertake. By building on our deep expertise in handling and managing mass health data,

 

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we launched a suite of distinct but complementary digital tools and programs to address the evolving emotional, educational, clinical and operational challenges introduced by the pandemic. These include:

 

   

COVID-19 Hub. A centralized destination for the general public to easily access the latest developments, medically verified guidance, tools and programs to keep them informed and safe against COVID-19. Spanning a breadth of topics, which includes stress and financial management, public health and safety best practices, we earned 14 Digital Health Awards in 2020 and 2021 for our news articles, videos, and interactive tools related to COVID-19.

 

   

Well-Being@Work. As a complement to our flagship platform, this comprehensive readiness solution covers three distinct areas of focus — assessment and triage, testing and tracking, and building and maximizing resilience — to support the health and well-being of our enterprise client partners and their employees in the face of the pandemic while enabling them to return to work safely when the time is right.

 

   

Facility and Employee Readiness. Designed to help organizations comply with the proactive and reactive activities required to minimize the risk and impact of acute public health events, this AI-driven chatbot verification platform ensures that physical facilities comply with the appropriate safety protocols while employees, members and guests within those spaces have the tools and resources to stay safe and build resilience. Current and prospective partners in this area include Forbes Travel Guide, CAA ICON, and Oak View Group. See “Health Security.”

 

   

Vaccine Assistant. In a matter of weeks, we developed a turnkey solution to help manage large-scale vaccination administration for entities, including the state of Florida. Our comprehensive package to support vaccine adherence on behalf of state and local governments includes engaging, relevant content about the vaccine, health security verification for testing sites, a digital vaccine assistant and robust analytics/reporting built to scale. See “Health Security.”

Acquisitions. We believe that our proven track record of successful acquisitions coupled with the flexibility and capabilities of our platform uniquely positions us to continue opportunistically pursuing attractive M&A opportunities. We believe this potential is further accentuated by our multiple client channels and constantly expanding member base. Future acquisitions could drive value and growth in a host of ways including access to new customers and potential cross-sell opportunities, unlocking new customer channels or geographies, adding new solutions to serve our existing client base, and adding new capabilities to enhance our existing solution offering or the efficiency of our platform. In addition, we believe our acquisition track record demonstrates our ability to realize synergies and optimize performance of potential M&A partners.

We intend to continue to look for opportunities to leverage our platform and expertise to provide first-mover solutions to evolving and future demands in the digital healthcare industry.

Our Channels

Sharecare combines business-to-business and direct-to-consumer sales models and functions on a more distinctive business-to-business-to-person model. Focusing on the individual, we aim to provide a solution that we believe is more comprehensive than other digital platforms by bringing together scientifically validated clinical programs and engaging content to deliver a personalized experience for our members, whether they come to us by way of the workplace, the exam room, or the living room.

Strategically and intentionally building on this concept, our business is structured across three primary channels: enterprise, provider, and consumer solutions, which affords us diversity in clients, markets, and a significant total addressable market. While we are focused on the individual’s unique experience, our platform is purpose-built to seamlessly connect stakeholders to the health management tools they need to drive engagement, establish sustained participation, increase satisfaction, reduce costs, and improve outcomes, regardless of entry point. As we expand our offerings and look to further develop our technologies, we continue to consider the distinct needs of each channel as well as opportunities to better connect and cross-sell while we grow and integrate our solutions into one seamless platform.

 

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Enterprise Solutions

Our enterprise solutions are based on a software-as-a-service, (“SaaS”) model that allows enterprise clients to message, motivate and manage their populations, and measure their populations’ progress, through one platform. Our enterprise clients can leverage our scientifically validated clinical protocols and personalized approaches, which drive high-impact engagement to achieve measurable outcomes and close gaps in care for their populations.

Our enterprise clients include a range of stakeholders, from large employers and health systems to government agencies and health plans, that use our digital platform to engage with their populations, dynamically measure the impact of that engagement, and efficiently deliver health and wellness services. We believe these outcomes create tangible value for our enterprise clients and their eligible populations. As of June 30, 2021, we had approximately 150 enterprise clients, including 11 Fortune 500 companies, and our services reached over 9 million members. We generate revenue from our enterprise clients by providing access to our core digital platform on a per member, per month basis with incremental fees charged per enrollee for access to our marketplace of digital therapeutics.

Provider Solutions

We offer providers a suite of data and information-driven solutions that are tailored to improve productivity and efficiency and enhance patient care and management while upholding the latest compliance, security and privacy standards. We have integrated a range of capabilities and introduced new services to support providers in a number of ways, including medical record management; quality, performance and risk-adjustment tools, and billing contract compliance.

We are rapidly offering new and innovative products to our provider solutions clients, and growing our provider solutions client base and revenue streams organically. Our current offerings include:

 

   

Health Information Management: Automates health record requests, using a simple and efficient consent-based record access management solution to reduce administrative burdens for record delivery; uses actionable analytics and AI to consolidate, audit and manage data for record management and revenue analysis; and provides rapid and reliable responses to record requests that result in improved patient satisfaction.

 

   

Value-Based Care: Enables providers and health systems to participate in value-based care arrangements by providing capabilities to identify care gaps, accurately document diagnoses, engage patients between visits and improve billing documentation; provides quality reporting solutions that help providers, practices, and systems measure their practices’ performance and success with value-based programs including the Merit-based Incentive Payment System and Medicare’s Quality Payment Program; and helps our clients navigate complex requirements, improve quality scores and measure performance which in turn, increases their reimbursement and quality earnings.

 

   

Payment Integrity: Employs advanced analytics, AI, and process automation to support improvements in payment integrity for providers, payors and patients; works with payors to defend against fraud, waste and abuse while helping providers with denial prevention issues, which, in turn, may greatly improve revenue cycle management; and creates a more accurate payment support system by reducing costs, increasing patient satisfaction, and lowering payor/provider abrasion.

 

   

Chronic Condition Intervention: Helps providers identify eligible patients for diabetes and obesity management solutions and other chronic care conditions; and gives providers confidence that these services are covered and billable, as well as the convenience of digital prescriptions integrated into the provider workflow.

 

   

Digital Patient Platform: Consolidates patients’ healthcare data into one place; provides the connectivity to generate care gap reminders that are seamlessly integrated into the patient’s digital healthcare journey.

 

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We generate revenue from our provider clients based on the volume of health document requests and through subscription fees for various technology related services. Subscription fees are recognized ratably over a one- to three-year contractual period with the opportunity to sell additional solutions at any time. As of June 30, 2021, our provider solutions clients consisted of approximately 6,000 hospitals and physician practices and more than 90 health plan and audit clients.

Consumer Solutions

Our consumer solutions offering is a robust platform and suite of digital products and medical expert knowledge that provides members with personalized information, programs, and resources to improve their health and well-being. We believe we have differentiated our products from the competition by not only developing original content which we leverage across the entire business, but also by creating strategic partnerships to broaden distribution and develop additional unique, high quality content and member touch points, thereby furthering our standing as a leading innovator in the health and well-being space. By contributing to the vast amount of content and targeted programs available on our platform, sponsors and partners have the rare opportunity to integrate their brands into our member experience and market themselves in a highly relevant and engaging environment. Our approach yields deep, targeted insights into patient adoption, engagement and behavior change.

In support of pharma and other consumer brands, including Eli Lilly, AbbVie, and Novartis, Sharecare drives significant patient engagement across our consumer audiences using a unique library of content, including:

 

   

more than 200,000 expert-driven Q&As, articles and slideshows;

 

   

more than 40,000 original videos;

 

   

more than 2.5 million social media followers;

 

   

more than 140 in-depth conditions and topics;

 

   

hundreds of hours of relaxation/ambient content; and

 

   

comprehensive virtual reality capabilities.

To drive awareness, adoption and engagement on behalf of our partners, we have created a comprehensive strategy to reach the member through a unique mix of member outreach, including social media, search engine optimization and marketing and precision audience targeting. As of June 30, 2021, we had a database of over 100 million first-party members, and we have historically generated an average of approximately 400,000 new users per month through our client acquisition engine. We generate revenue from our consumer solutions clients through products such as lead generation, sponsorships, audience targeting and condition-specific content.

Our Platform

We believe our solution is more comprehensive than any other digital platform, bridging clinical programs and content, with a personalized experience offering well-being and healthcare support. Our platform begins with RealAge, which is a NCQA-certified health assessment that uses scientifically-based methods to assess a variety of behaviors and existing conditions of our members and provide them with an easily understandable metric for their physical health. With approximately 45 million individuals completing the assessment since its inception in 1998, RealAge delivers immediate results and recommendations about how to improve a member’s health, and also identifies behaviors, both positive and negative, that may be impacting it. Using RealAge as a person’s baseline, our algorithms power a data-driven dialogue with the member, creating a content-rich, personalized experience that presents them with relevant benefits programs, resources and providers for those needing healthcare and well-being support. As members change their behavior, the platform refines its predictive analytics to provide increasingly compelling recommendations.

Through our digital platform we are able to gain key insights into each member’s health gleaned from self-reported data, in addition to data from the smartphone, eligibility and claims, social determinants of health, and,

 

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in some cases, medical records. This data is then analyzed, with each member’s permission, to recommend personalized resources, tools, information and programs that meet each person where they are in their healthcare journey. Through our platform, members can store and access all their health data in one place. We then provide the resources members need to manage their health through lifestyle or disease management and coaching programs, such as diabetes management and smoking cessation; well-being solutions, such as financial health and anxiety management; and care navigation tools, such as find-a-doctor, prescription savings, clinical decision support and medical records. Our product design philosophy uniquely positions us to drive meaningful engagement while also aggregating a critical mass of behavioral data, to which we apply AI to more accurately personalize recommendations to predict and influence positive outcomes for each individual.

Beyond our offerings that focus on individual health and well-being, our platform also provides customized and innovative health data services to provider organizations around the country, helping them become more profitable, productive and secure. See above for a description of the services we offer through our provider solutions under the caption “Our Channels — Provider Solutions.”

Finally, we believe that the flexibility of our platform infrastructure allows us to react quickly to rapidly changing public health needs and demands and create new but complementary businesses, such as our facility and employee readiness and digital vaccine assistant tools, as well as doc.ai’s return-to-work product offering, Passport. See above for a description of the solutions we created in response to the COVID-19 pandemic under the caption “Evolving Products to Cater to an Evolving Industry.”

Our key product offerings are summarized below, many of which are owned by Sharecare. However, we have adopted an approach of partnering with best-in-class solutions and integrating them into our platform as an additional benefit to our enterprise clients. As a result, some of the digital therapeutics and other tools we offer are subject to agreements and arrangements that we have in place with third-party marketplace solution providers. We are constantly evaluating the suite of solutions we provide to our clients and whether there are new capabilities either Sharecare or other third-party vendors can deliver to maximize the health objectives of their populations. For additional information, see the section titled “Risk Factors Risks Related to our Business and Industry The growth of our business and future success relies, in part, on our partnerships and other relationships with third parties and our business could be harmed if we fail to maintain or expand these relationships.”

Key Capabilities of Our Flagship Platform

Benefits Hub. Within the Sharecare platform, the Benefits Hub provides a centralized opportunity to educate employees on and direct them to the benefits available to them through Sharecare, as well as those client programs or resources offered outside of our platform, such as: medical, dental, and vision insurance; 401K; legal benefits; telehealth services; and employer-specific programs. By reducing the need to search through documents and websites, or to create or find additional login information, members are able to manage the resources they need. This removes barriers of access to information, helps employees extract the most value from their benefits and leads to stress reduction, higher employee satisfaction, and increased benefits usage, which helps keep employees healthier, and ultimately increases productivity and lowers health costs.

Daily Health Tracking. With RealAge as our baseline, we motivate members to engage in their health by tracking their “green days,” the proprietary health currency we use to measure their daily progress towards the 13 critical health factors that impact one’s RealAge the most: weight, stress, smoke, sleep, relationships, medications, fitness, diet, cholesterol, blood pressure, steps, glucose and alcohol. While members can manually update their green day trackers, we also use the latest smartphone technology to gather health data and analyze members’ activities, patterns and behaviors throughout the day in order to provide personalized and real-time feedback to further their progress. Over time, members are prompted to recalculate their RealAge to see how much they have improved their health.

Engaging Challenges. Designed to impact the core health factors that influence the health and RealAge of our members, our challenges are time-based programs focused on driving engagement throughout the platform.

 

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Leveraging our green day trackers described above, challenges make it fun and easy for groups to participate, stay on track to improve their health and lower their RealAge. Enterprise clients can create customized challenges specifically targeted for their populations and members can track their progress against others in the community via a leaderboard. Sample challenge types can include diet and nutrition, relationships, sleep, steps and stress. Upon successful completion of a challenge, members may be eligible for rewards, further incentivizing engagement.

Health Profile. When it comes to healthcare needs, many people make poor health choices because they are not sure where to go or what to do. We believe that we have made that easier through our health profile, a personal health record, serving as a living, breathing, evolving story of a member’s health. Controlled by the member, the health profile is one place for individuals to store and access their biometrics and health data at any time. As a core feature of our platform, the personalized health profile allows members to easily connect to the information, evidence-based programs and health professionals they need to live their healthiest, happiest and most productive lives. Key insights into member health gleaned through self-reported data, such as the RealAge test and AskMD consultations, in addition to smartphone-driven data, eligibility and claims data, and more is analyzed with member permission to recommend personalized resources, tools, information, and programs that meet members where they are on their health journey. Members’ personalized health profiles empower them to store and access their health data in one place. From the health profile, they can also view their personalized RealAge tips, insurance information, and more.

Lifestyle Risk Program. Upon completion of the RealAge test, members can begin participating in the RealAge program, our comprehensive healthy behavior program that targets four main categories of lifestyle risks: stress; sleep; nutrition; and activity. Personalized to the individual based on risk level for each lifestyle category gleaned through RealAge test responses and stated interests, we believe the RealAge program presents achievable goals and encourages members to prioritize small adjustments to their lifestyle, giving them the tools and support to make lasting change.

Rewards and Incentives. Designed to motivate engagement and drive behavior change that leads to improved health outcomes, we designed our rewards approach based on proven behavioral science principles that drive member engagement. Focusing on strategic activities and rewards that are tailored to the individual and easy to understand, we use personalized content and communications to educate and engage members to sustain participation over time. Reward activities are configurable by population to support key objectives like increased engagement or cost savings. Initial and sustained engagement focused activities are available, as well as those that meet participatory or outcomes-based requirements. Sharecare becomes a strategic partner to help members construct the right program from a vast array of activities that help reduce health risks, including: the RealAge test, biometric screenings, challenges, program enrollment, program engagement, procedures, immunizations, videos and more.

Symptom checker. Ranked in the top five symptom checkers by a Harvard Medical School research study for clinical accuracy of symptom checkers, AskMD is a personalized health consultation and comprehensive symptom checker that matches member answers against the latest clinical research to help members take ownership of their health and be better informed before visiting the doctor. AskMD guides members through a personalized pre-encounter questionnaire that delivers decision support, considering all their symptoms and other factors, such as medications and known conditions.

Digital Therapeutics Marketplace

An array of value-added proprietary and partner-powered solutions that integrate directly into our flagship platform are available for enterprise and provider clients to purchase for their populations.

Behavioral Health. The COVID-19 pandemic has had a major impact on our lives. Many people are facing mental health challenges from feelings of loneliness and isolation to increased stress and anxiety and our members and clients are focused on finding solutions that address these concerns. Beyond the free content and

 

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resources available through the Sharecare platform to help people address a range of behavioral health challenges, including guided meditation and relaxation exercises powered by its award-winning nature and ambient video content, we offer several digital therapeutics to aid in anxiety and stress management, tobacco and vaping cessation and overeating that consumers may purchase directly or enterprise clients can “unlock” and sponsor for those in their own populations.

 

   

Anxiety and Stress Management

 

   

Unwinding Anxiety is an award-winning, evidence-based digital therapeutic that combines neuroscience, mindfulness and proprietary tools to help members identify their triggers, ride out stressful episodes and completely change their relationship with stress.

 

   

Serenity is a mental health chatbot developed by doc.ai, that provides members with expert, confidential, and judgment-free mental health support, anytime, anywhere. Serenity can provide the correct resources for a wide range of issues including anxiety, depression, low esteem, sleep problems, and relationship conflict, drawing from the latest research in the fields of cognitive-behavioral therapy, mindfulness, and positive psychology.

 

   

Scheduled to launch in 2021, Unwinding from Sharecare is an accessible, engaging, and evidence-based mental wellness app that builds resilience, decreases stress, and helps members engage with life with more joy and productivity. Using the latest neuroscience and research on how the brain deals with challenges to provide an antidote, the robust program includes short video courses to address specific pain points (e.g., sleep, stress, overeating, anger, relationships, and finances), in-the-moment tools to help overcome issues as they happen, powerful mindfulness exercises designed to build resilience and increase happiness, and a unique habit-change framework to decrease bad habits and to build new, durable, healthy ones. Unlike other programs offered by other digital healthcare providers that we believe provide only temporary distractions and generic approaches, this app is expected to meet members wherever they are on their mental wellness journey, guide them along a path specific to their unique situation and ensure lasting, positive benefits. Enterprise client partners will be able to bundle other behavioral health digital therapeutics from our platform into this offering for their populations.

 

   

Tobacco/Vaping Cessation. Craving to Quit is a dynamic, evidence-based, multimodal program that    we believe can dramatically improve a participant’s chances of quit success. Funded in part by the National Institutes of Health, Craving to Quit was developed based on the study of the underlying neural mechanisms of cravings. The award-winning 21-day program teaches awareness of cravings and habits to help participants quit smoking or vaping.

 

   

Overeating. Eat Right Now is an award-winning, evidence-based program that incorporates the latest research in cognitive neuroscience, habit change, and mindfulness into a step-by-step program that is aimed to help members to quit dieting for good. Over the course of 28 days, members rewire their brains to change habits, gain personal insights and master mindfulness tools that can lead to lasting changes for sustained weight loss.

Diabetes. As the first and only end-to-end turnkey diabetes care and glycemic management program for health systems and physician groups, we integrate personalized high-touch interventions with high-tech products to improve the management of people living with diabetes across the care continuum. Our proprietary content, developed by clinical and operations specialists, is designed to ensure patient and professional education adhere to the latest standards of care and evidenced-based best practices. Coupled with FDA-cleared digital therapeutics for diabetes medication optimization, Sharecare Diabetes Solution focuses on scaling people, processes, and technology for optimal results. We believe that our solution set enables healthcare organizations to deliver financial cost savings and exceed clinical and quality measures as well as yield positive outcomes for people living with diabetes. Our diabetes solutions include:

 

   

Diabetes Prevention Program. An interactive, telehealth-based weight loss program that can be accessed by our members through our partnership with Fruit Street Health. The 12-month program

 

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helps participants lose 5-7% of their body weight with the goal of significantly reducing the risk of developing Type 2 diabetes and associated chronic diseases. This innovative program uses the same diabetes prevention curriculum developed by the CDC.

 

   

Diabetes Education. A self-paced digital learning curriculum that teaches people living with diabetes how to effectively take control of and manage their condition. The program leverages national standard curriculum to educate people with diabetes on key concepts and lifestyle best practices to manage their condition.

 

   

Virtual Diabetes Care. We offer access to Onduo through our partnership with Onduo LLC, an innovative virtual care program dedicated to bringing people everywhere who are living with Type 2 diabetes the most up-to-date care through features including live video conferencing with endocrinologists, personalized lifestyle coaching and best-in-class devices such as connected blood glucose meters. With one single sign-on between Sharecare and Onduo, patients can experience a fully comprehensive and consolidated healthcare experience.

Disease Management. Using a combination of advanced disease algorithms and proprietary predictive risk models, we analyze medical and pharmacy claims, procedure and eligibility data to appropriately identify individuals with primary chronic conditions, such as diabetes, coronary artery disease, heart failure, chronic obstructive pulmonary disease and asthma. Individuals who are currently, or at near-term risk of, high healthcare utilization are then targeted for proactive outreach and intervention through the Sharecare platform.

Fertility, Pregnancy, and Parenting. We currently partner with Ovia Health Inc., to bring a suite of applications that support women and their partners throughout the parenthood journey including fertility, pregnancy and parenting.

Financial Health. While our platform already includes assessments, educational content, and tools to help members take action to mitigate financial stress and step into financial wellness, we also offer members access to SmartDollar, a leading online financial wellness solution that has helped millions of people get on a budget, save for emergencies, pay off debt, and save for retirement. Our partnership with SmartDollar delivers a seamless member experience, including single sign-on for members and fully integrated and consolidated reporting for our enterprise clients.

Heart Disease. The first and only program scientifically proven to reverse the progression of heart disease, Ornish Lifestyle Medicine focuses on four key areas: eating; stress; love and support; and activity. We provide a multi-platform approach to train and certify health systems in effectively providing the Ornish Lifestyle Medicine program to their patients. Currently, the program is reimbursed by Medicare and many other commercial payors, offered in more than 18 states, and delivered with a turnkey process that is optimized by years of operating knowledge.

Lifestyle Coaching. We actively target and engage individuals who are at risk for developing a condition and, through the support of a personal coach, teach them how to take healthy steps to change behavior. Personalized to the participant, the program is designed to address areas that contribute to overall physical health and well-being, such as exercise, healthy eating, stress management, tobacco cessation, and weight management.

Musculoskeletal. Through our partnership with Fusionetics, we can help enterprise clients deliver their populations an evidence-based solution for preventing and improving musculoskeletal issues. The patented technology is designed to assess human movement and identify compensations that are decreasing the body’s performance and increasing the risk of injury. The system then generates an individualized plan of care to increase durability, performance, and mobility.

Community-Driven Care Solutions

At Sharecare, just as we are guided by our mission to help every person — no matter where they are in their health journey live longer, better, we also are fiercely committed to ensuring the healthy choice is the easy choice

 

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across the places where people work, live, play and stay. Our ability to drive this kind of demonstrable change extends beyond the digital realm and into the community through our Blue Zones Project and Community Well-Being Index (“CWBI”) initiatives. Recently, in light of the COVID-19 pandemic, we are finding that our community-driven care solutions are becoming increasingly popular as the pandemic has re-energized the need for strong, resilient, and healthier communities. Additionally, COVID has amplified digital healthcare engagement, which we believe could have sustained momentum for further utilization of our solutions.

Blue Zones Project. Our Blue Zones Project is a community well-being improvement initiative in partnership with Adventist Health designed to change the way people experience the world around them by encouraging and promoting better lifestyle choices, such as commuting, eating and social habits. Because healthier environments naturally nudge people toward healthier choices, Blue Zones Project focuses on influencing the Life Radius®, the area close to home in which people spend 90% of their lives. Blue Zones Project best practices use people, places and policy as levers to transform those surroundings. Our 61 communities across 12 states have populations with greater well-being, improved health outcomes, reduced costs, and increased civic pride, all of which support healthy economic development.

Community Well-Being Index. Based on over 3 million surveys and more than 600 elements of social determinants of health data, our CWBI serves as the definitive measure of community well-being across and within populations. A collaboration between Sharecare and the Boston University School of Public Health, CWBI combines individual risk derived from the Well-Being Index with community risk from the Social Determinants of Health Index to create a single composite measure that defines our collective health risk and opportunities. Merging decades of clinical research, health care leadership and behavioral economics expertise to track and understand the key factors that drive greater well-being for individuals and populations, CWBI provides an in-depth, nearly real-time view of U.S. residents’ well-being, providing unmatched insights into people at the community, state and national levels.

Our data and insights on well-being inform more effective strategies that encourage the sustained lifestyle changes necessary for people to thrive and perform to their highest potential. For employers, health plans, health systems and community leaders, this holistic view of health provides the framework for understanding the underlying root causes of poor health, enabling hyper-targeted interventions that make the healthy choice the easy choice.

We have been able to successfully leverage the data accumulated through the CWBI in a number of state transformation campaigns to measure the health of communities over the last 13 years and then fortify positive changes through our Blue Zone Project initiatives.

Digital Health Trials. With our acquisition of doc.ai, we expect that our platform will be able to offer individuals the opportunity to join a growing community of people who are advancing research in the healthcare field by participating in ongoing clinical trials. By doing so, we believe that we will be able to further connect the various individuals and stakeholders in the industry.

Health Security

As COVID-19 began to spread to the United States, we rapidly mobilized to help our client partners, and people in general, while maintaining an adaptability to handle the constantly evolving regulatory and clinical environment. As part of this initiative and building on our deep expertise in handling mass health data, we developed critical capabilities to help a host of organizations mitigate the operational and health safety challenges introduced by the pandemic, while restoring confidence among people that their surroundings are safe. Not unlike the hefty investments that IT departments make in cybersecurity to protect businesses from viruses ($150 billion in expected spend globally in 2021) our new normal requires that we also protect our infrastructures from viruses of the epidemiological variety.

Facility and Employee Readiness. Going far beyond basic facility standards and establishing a consistent global baseline for health security, our proprietary platform helps unify and verify the different health safety and

 

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security protocols to ensure a safe and secure location for employees, guests and customers. This confidence-restoring verification is signified by an easily identifiable “seal of approval,” the Sharecare Health Security VERIFIED badge, for venues to display on their official websites and on-property.

Initially launching in November 2020 for the hospitality industry in partnership with Forbes Travel Guide, more than 880 properties have been Sharecare VERIFIED by completing and maintaining verification on more than 360 global health security standards. Additionally, over 70 travel companies, destinations and destination specialists, corporate travel programs, and meeting and event planners have endorsed that health protocols at hotels will be Sharecare VERIFIED prior to booking.

Our health security verification has already expanded into new verticals beyond hospitality: live sports; and entertainment. Early collaborators in our health security efforts for sports and entertainment include prospective partners CAA ICON, the world’s leading owners’ representative and strategic management consulting firm for public and private sports and entertainment facility owners/operators, and Oak View Group, a global advisory, development and investment company for the sports and live entertainment industries.

Digital Vaccine Assistant. Building on our extensive experience in media, technology and healthcare, we have the unique ability to provide a turnkey solution to help manage large-scale vaccination administration for entities such as the state of Florida, which officially contracted with Sharecare for these services in February 2021.

On the backbone of our health security platform, we have built a comprehensive package to support vaccine adherence on behalf of state and local governments that includes engaging, relevant content about the vaccine, health security verification for testing sites, a digital vaccine assistant, and robust analytics/reporting built to scale. Through this offering, we believe we are uniquely and immediately positioned to provide people with easy access to vaccine information and registration through text message, a toll-free call center, a website, a downloadable web-app, and a QR code. Following vaccination, we provide individuals with access to a simple and secure digital vaccine record, reminders for their second dose, and ongoing, up-to-date vaccine information. We believe that this tech-enabled approach will increase awareness and demand for the vaccine, provide consumers with a digital vaccination record for easy reference and safe-keeping, and support states as they safely reopen communities.

 

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Passport. In connection with our acquisition of doc.ai, we added Passport to our health security platform. Passport is a SaaS-based, identity product, fully digitized for return-to-work and post-pandemic health security that serves as a private health signature. Passport helps users check for potential symptoms of infectious diseases and determines return-to-work eligibility based on specific guidelines (e.g., CDC, state, or employer-specific). Enterprise clients can customize the questions/criteria to tailor to their specific return-to-work eligibility guidelines by office or facility location, providing an easy and efficient way to accelerate a “return to normal” and increase safety in our communities and workplaces.

Sales and Marketing

We sell our solutions through our direct sales organization and through partner relationships. Our direct sales team is comprised of sales professionals organized into one of three channels: enterprise; provider; and consumer solutions. Within each of these categories, our direct sales team is organized principally by channel, geography, segments, and/or account size. Our enterprise and provider contracts range in length from one- to five-year terms with most renewing automatically, and typically subject to cancellation by either party upon 90 days’ notice prior to the renewal date. These agreements contain standard commercial terms and conditions, including payment terms, billing frequency, and indemnification. The sales cycle for our solutions from initial contact with a potential client to client launch is difficult to predict and varies widely by client and segment, ranging from less than six months to well over a year.

Enterprise Sales Team

Our enterprise sales team is organized by channel, segment, and markets. Our channels include health plans (commercial, managed care, and Medicare), employers (direct and through intermediaries like consultants), government (local, state, and federal), and health systems. Our team members are also assigned to segments for each channel to leverage their specialization and drive efficiency. Lastly, we have our teams focused by market or geographic locations for efficiency and scalability.

Provider Sales Team

Our provider sales team is organized into three groups, including East, West and Strategic accounts. We also have a team of specialists aligned with our payment integrity, clinical solutions and value-based care solutions. Our sales teams target hospitals and provider practices and sell our full portfolio of provider solutions.

Consumer Solutions Sales Team

Our consumer solutions sales team is responsible for identifying and securing new accounts across pharmaceutical and life sciences, over-the-counter, consumer packaged goods, and lifestyle/general interest advertisers, clinical trial recruitment, and visual health solutions.

Enrolling Members

Upon signing a contract with a client, we begin the marketing process to enroll members. We identify individuals within a given population that are eligible for our solution and work with the client on a communications strategy to enable member enrollment. Our marketing team has developed a sophisticated omnichannel marketing capability to reach eligible members with precision, predict response and maximize engagement with desired actions. The omnichannel communication will utilize efficient channel mix, including print, email, social, websites, TV, phone calls, and text messaging to reduce spend, boost conversion, and improve return on investment.

Our Brand

Our vision since inception has been “all your health in one place,” leveraging the power of the smartphone to enable people to track, manage and optimize their health as seamlessly as possible. We were among the first

 

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companies in the health tech space to offer a holistic platform as opposed to focusing on individual point solutions. Additionally, we differentiated ourselves early on by not white-labeling (removing our name and logo from our platform when it is rolled out to client populations) our solution given, at the time, people were more likely to trust us more than their health plan or employer. In terms of customer satisfaction, we enjoy a Net Promoter Score across our telephonic and digital products and services of 71%.

From a branding perspective, we believe is that our name (and logo) lend itself to the statement of “sharing care” which is the foundation of who we are and what our product does. Thus, our corporate marketing strategy is focused on efficiently building meaningful brand awareness to generate and activate consumers to care about their health while demonstrating a return on investment for our existing clients, members, and deployed technologies.

All Together Better. As we have outlined above, we unify the elements of an individual’s health with the greater collective, which includes employers, providers, insurers, colleagues, family, friends, and local communities, to create one health and well-being digital hub where every piece works together so everyone can live better, longer. Just as we have evolved how we execute on our initial vision, so has our brand mantra, stated simply as “All Together Better.” All the pieces of an individual’s health in one connected system that’s working together, for better, for all.

Whether executing bespoke social campaigns, contests and sweepstakes, or celebrity appearances and health festivals, that mantra is at the core of how we generate meaningful and relevant awareness for not only Sharecare but also our client partners in the populations and communities they serve. In addition to those proven engagement tactics, we work to drive new partnership and client opportunities by engaging in a wide range of traditional marketing activities, including publishing research findings in scientific journals, briefing industry media and analysts, participating in a number of healthcare industry events to communicate our thought leadership and member outcomes, and pursuing targeted marketing activities through both digital and non-digital channels. We also depend, in part, on our existing clients (particularly our enterprise clients) to provide positive references to new, potential clients as part of our larger marketing effort.

We believe that a major area of marketing differentiation versus our competitors is our ability to engage with people in highly relevant ways and introduce our brand through unique, and in many cases, exclusive, content deals. We not only have a vast library of award-winning original content, but also strategically leverage our extensive reach of more than 2.5 million followers on social media. To date, our comprehensive suite of content, social channels, and digital health tools – including our flagship virtual health platform – has been recognized with more than 100 Digital Health Awards. This includes 14 awards earned in 2020 and 2021 for our consumer resources developed in response to COVID-19.

We also engage in strategic partnerships that license our content to create brand awareness through licensing partnerships with the likes of Delta Air Lines (Sharecare Windows/in-flight entertainment), Amazon Prime (Sharecare Windows), Amazon Alexa (more than 80,000 Sharecare Q&As), and in hotels throughout the world (Sharecare Windows).

In the spirit of “All Together Better,” our clients, including many Fortune 500 companies, leverage our brand positioning as well as our marketing materials and omnichannel tactics to reach and activate their populations. While we have evolved our business-to-business marketing strategy to expand our pipeline in this new virtual world, in parallel, we believe we are well positioned to present our enterprise and provider clients with unique engagement tactics stemming from our consumer solutions channel.

Our Technology

Our “flagship” platform includes a single mobile application available on iOS, Android and the web as well as a suite of infrastructure and business services hosted in the Amazon Web Services, or AWS, cloud.

 

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Designed as a mobile-first, scalable, configurable and easy to operate platform, Sharecare is purpose-built with enterprise-grade framework, uptime guarantees, processes, and organizational structures; and optimized for developing new services and features, change management, incident management, management of services, members and clients, and new client implementations.

While Sharecare members are guided through a personalized journey that helps them navigate their health and well-being, two critical technology-driven capabilities of the platform include the enablement of timely interventions and the ability to combine high-touch coaching with high-tech, digital interventions. Other notable technology and infrastructure highlights include:

 

   

state of the art technology stack, deployed in the AWS cloud, that uses the latest design patterns such as micro services and separation of concerns;

 

   

a sophisticated data pipeline that can ingest several different categories of data (eligibility, claims, biometrics, labs, care plans, fitness and diagnostic data from devices), combine these data sets, and produce a single view of a user in our system;

 

   

an advanced identity management scheme that separates sensitive personal health information from personal identifying information in a manner that enables privacy;

 

   

complex data mining, AI and clinical informatics techniques that combine data from the RealAge test and all the ingested data to build wellness profiles of each member, including their health conditions and risks, and ultimately measure outcomes;

 

   

an intricate segmentation mechanism to offer the right set of services as applicable based on eligibility and client relationships to each member or a cohort of members;

 

   

a command center to manage population-level administrative capabilities, including messaging and reporting;

 

   

gaming techniques to engage members for the purpose of improving wellness via challenges and rewards;

 

   

flexibility to seamlessly integrate third-party services for members; and

 

   

proven ability to overlay and integrate new solutions and acquired platforms into existing technology stack.

We host our services at AWS across two geographically redundant data centers. To provide high levels of availability and enhance security, our system designs involve redundant subsystems and compartmentalized networks. To ensure compliance with privacy and security regulations as well as our obligations to our clients and members, we implement industry-standard processes and technical controls from software development to deployment and network administration, including regularly scheduled vulnerability scans and third-party penetration testing to reduce security risks in our system. On an annual basis, we also undergo independent, third-party ISO27001, HITRUST, HIPAA and SSAE 16 audits. Our systems are continuously monitored to ensure availability and we have institutionalized problem escalation and incidence management mechanisms; and we have achieved over 99.9% uptime over the last 12 months.

Further, we believe that the technology and platform capabilities that doc.ai has developed, when integrated with our platform, will assist in:

 

   

realizing a more unified AI data-driven platform;

 

   

more quickly scaling and automating across all products;

 

   

offering more personalized insights in real-time;

 

   

expanding our footprint to research in addition to care; and

 

   

improved technology development capabilities as a result of the more than 70 engineers we expect to add to the platform as a result of the acquisition of doc.ai.

 

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Following our acquisition of doc.ai, in addition to Serenity and Passport discussed above, our platform offerings have been expanded to include:

 

   

Genewall, a genetic insights tool delivered via a mobile private genome browser to learn about and compare genetic variants;

 

   

Omix Research that accelerates and simplifies the design, deployment and measurement of multi-omics clinical research;

 

   

Toniq Insights and Models, a self-serving machine learning environment to automate data fluency and deploy multiple models for continuous training; and

 

   

Amplified Infrastructure that manages workload identities and the exchange of learning from cloud-to-edge and from edge-to-cloud.

Competition

Our primary competitors in the digital healthcare industry are other health tech companies, some of which have had their scope limited after being acquired by large healthcare organizations, that serve the needs of members across a broad set of health-related needs and are not limited to a single demographic. These digital health companies generally fall into one or more of the following platform types:

 

   

Wellness/Well-being platforms that provide a range of solutions to support the wellness/well-being of their members, including health risk assessments, incentive administration, coaching and support programs for lifestyle and disease management, biometric screening, health and wellness challenges and activity tracking and other health-related content.

 

   

Benefits Navigation platforms that provide solutions to help members navigate their health benefits programs, including solutions that integrate third party benefits information, tools for managing health spending accounts and other digital wallet offerings, guided benefits enrollment and other communications tools to make navigation of benefits more accessible for members.

 

   

Health Navigation platforms that provide offerings to help members navigate their personal healthcare journey, including health concierge and advocacy services, coordination of care and decision support, and solutions to help members access care, ensure price transparency and provide claims-driven personalization.

We also face competition from many other vendors in the digital healthcare space offering point solutions addressing only one specific aspect of a person’s health. These point solutions may either be offered on a standalone basis or incorporated into larger digital healthcare platforms, like Sharecare, through partnership arrangements. We expect to face increasing competition, both from current competitors, who may be well established and enjoy greater resources or other strategic advantages, as well as new entrants into our market, some of which may become significant competitors in the future. With the introduction of new technologies and market entrants, we expect the competitive environment to be and remain intense. The competitive success of our solutions is contingent on our ability to provide superior solutions and a strong value proposition for all stakeholders in the member’s health journey.

Although certain of our competitors enjoy greater resources, recognition, larger existing client bases, or more mature intellectual property portfolios, we believe we compete favorably across these factors. We believe we create measurable, sustainable health improvements for members; our clients realize meaningful benefits and cost savings and that we enable healthcare providers to help improve the health of their patients even when they are outside the provider’s facility. As our market grows and rapidly changes, we expect it will continue to attract new companies, including smaller emerging companies, which could introduce new products and services, as well as players in the health system who may elect to develop their own offering and would have vast resources and relationships to leverage. In addition, we may expand into new markets, including international markets, and encounter additional competitors in such markets.

 

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Employees and Human Capital Management

As of June 30, 2021, we had 2,866 employees worldwide, including approximately 260 nurses, clinicians and health coaches, as well as contract and part-time employees who are working less than 40 hours a week. Of our total employees, 2,299 reside in the United States and 567 in other countries, such as Brazil, France, Germany and India. None of our employees are unionized or members of collective bargaining arrangements, other than our employees in Brazil that are members of a collective bargaining agreement as required under Brazilian law. Our strong employee base, along with their commitment to our culture and uncompromising values, provides the foundation of our company’s success.

The attraction, retention, and development of talented colleagues is critical to our success. We accomplish this, in part, by developing our team members through learning, development and performance management programs. These programs include consistent new hire onboarding, new manager training, structured goal setting and annual performance management review processes as well as other customized approaches to development at the team or individual levels.

Our employees are responsible for supporting our ultimate goal of connecting doctors, health plans, employers, useful tools, and quality information to deliver robust solutions in an easy-to-use platform. We recognize that every employee has the opportunity to make a difference, and we have developed skill and competencies expectations to support them in meeting their full potential. In addition to their individual performance goals, our team members are measured annually in areas of communication, change management, problem solving, decision making, and conflict resolution, as well as in their ability to drive results, coach others, build trust, and act as an effective team member.

To keep our leadership team informed of the needs of our human capital assets, we track and report internally on key metrics including headcounts by functional area, onboarding experiences, colleague engagement levels and exit data.

We continue to vet and hone our organizational structure as our business evolves and accordingly, we establish new roles as needed to reflect the talent and capabilities required by our business. We have recently added talent at both the Chief Operating Officer, Chief Information Security Officer, and Executive Vice President, Enterprise & Provider Solutions positions.

Our human capital practices are governed by various federal, state and local regulations. We monitor key employment activities, such as hiring, termination and pay practices to ensure compliance with established regulations across the world.

Diversity

Our diversity, equity, and inclusion objective is to be a company where each individual in our organization genuinely belongs, is respected and valued and can do their best work. We embrace diversity, equity, and inclusion. A truly innovative workforce needs to be diverse and leverage the skills and perspectives of a wealth of backgrounds and experiences. To attract a diverse workforce, we strive to embed a culture where employees can bring their whole selves to work.

In 2020, we accelerated our diversity, equity, and inclusion efforts by forming an internal Diversity Council, comprised of colleagues who are accountable for developing strategic policies and practices that enhance respect for cultural and other differences within our organization. In the third quarter of 2020, we partnered with Publicis Health Media to launch the unity project, a media campaign in which Sharecare colleagues pledged stories of their personal commitment to promote unity and affect change. Additionally, we signed the Parity Pledge at Parity.Org, furthering our commitment to diversity and equal opportunity in our recruitment and career progression practices. Late in 2020, we launched a companywide Diversity Survey to assist us with benchmarking, measuring, and planning our strategic diversity programs for 2021.

 

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As of June 30, 2021, our workforce was comprised of female — 70%, minority — 35%, disability — 3%, and veterans — 1%. Our Executive Team of 21 included eight females and three minorities as of June 30, 2021. Our Medical Advisory Board of 20 included eight females and two minorities as of June 30, 2021. With our diversity recruiting initiatives we expect that we will increase our workforce diversity, and advance inclusion and equity within all Sharecare divisions to create future opportunities for all colleagues.

In 2021, we will implement diversity, equity, and inclusion training by engaging an external diversity consultant to lead this effort. Additional plans include maximizing opportunities for mentoring relationships and strengthening our partnerships with community groups. We are also assembling a team of volunteers across the enterprise who will promote, support, and facilitate diversity initiatives; and empower colleagues to establish Employee Resource Groups to support one another in their personal and professional development at the company.

Safety

The safety and well-being of our employees is always our top priority and a primary focus of our leaders. All policies and procedures related to safety are reviewed and acknowledged by colleagues annually.

Throughout the COVID-19 crisis, we have remained focused on protecting the health and safety of our team members while meeting the needs of our clients. Within weeks of the start of COVID-19 pandemic, we moved approximately 90% of our office-based team members to a work-from-home model with minimal impact to productivity. We immediately created, and then continuously evaluated and amended, protocols and guidelines to ensure the health and safety of our employees. We monitor and track the impact of the pandemic on our teammates and within our business operations. As a part of our COVID-19-focused employee communications, we frequently remind our Sharecare colleagues of the helpful resources and tools available to them.

Benefits

Our compensation program is based on our philosophy that total compensation should support the company’s mission and values. We believe our compensation program is a management tool that when aligned with an effective communication plan, is designed to support, reinforce and align our values, business strategy, and operational and financial needs with a goal of growth and profitability. The program is designed to attract, motivate, and retain talented colleagues who are dedicated to the success of the organization.

In recognition of the need to employ top-tier talent, we strive to provide base salaries that meet or exceed the market for colleagues who are fully proficient and meeting expectations. The company utilizes incentive or variable pay as a way to meet the strategic goals of the company. Incentive pay is available to some colleagues with consideration of a number of factors and is based on individual goals that relate to company objectives as well as overall company performance. The compensation process is intended to be fair and simple so that all employees and managers understand the goals and the outcomes of the process. We are committed to administering the compensation program in a manner that is consistent and free of discrimination.

As a part of our total rewards offerings, we offer competitive benefits, evidenced-based programs and wellness tools to assist our employees in making the right choices every day, representing our commitment to employee health and wellness. We provide health, welfare and retirement benefits for our employees, including medical, HSA grants, dental, vision, life insurance, short- and long-term disability, paid time off, various voluntary insurance programs, tuition reimbursement, a robust EAP and a 401(k) retirement plan. Our offerings are designed to enhance employee productivity and loyalty by giving our team members the tools they need to live their healthiest, happiest, and most productive lives. As a leader in digital healthcare, we have also partnered with innovators to offer added tools that address specific aspects of personal and financial health.

Training

We continue to emphasize employee development and training. To empower employees to unleash their potential, we provide a range of development programs and opportunities, skills and resources. Our Learning

 

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Management System platform supplements our talent development strategies through an online portal that enables employees to access instructor-led classroom or virtual courses and self-directed web-based courses.

We have all-company competencies focused on individual contributors to front-line managers to senior managers. These competencies focus on how we coach others, drive results, problem solve and make decisions, resolve conflict, build trust, build effective teams, manage change and communicate. We believe these behavioral expectations are integrated into the way we assess and select talent, manage performance and develop our people.

We are committed to identifying and developing the talents of our next generation leaders. For colleagues who have been promoted or hired as a people manager, we conduct New Manager Essentials training within 30-60 days. This training focuses on human resource laws and regulations, wage and hour standards for hourly workers, approving timecards, basics of interviewing, such as what you can and cannot ask, performance management as a manager including managing the performance improvement plan process, and transitioning from a peer to a manager.

For our mid-level leaders, we conduct a multi-day program that continues to support our key competencies such as team building, coaching with emotional intelligence, leading through transition and change, communicating appropriately, and how to manage difficult situations. To supplement our leader development programs we provide a quarterly newsletter developed in-house that is focused on current topics pertinent to our business.

We partnered with LinkedIn Learning to allow colleagues to develop in their current role by expanding their knowledge in areas of interest. Additionally, we have internal training courses on topics such as: critical conversations; managing a remote workforce; how to give and receive feedback; conducting interviews; time management/ prioritization; setting performance management goals; and coaching to those goals. Utilizing the experience of our own colleagues, we also have a mentoring program in place for some of our operations.

Intellectual Property

Our intellectual property rights are important to our business. We rely on trademarks, patents, copyrights, trade secrets, license agreements, intellectual property assignment agreements, confidentiality agreements and other similar agreements to establish and protect our proprietary rights. Though we rely in part upon these legal and contractual protections, we believe that the overall significance to our business is minimal, and that factors such as the skills and ingenuity of our employees and the functionality and frequent enhancements to our solutions are larger contributors to our success.

As of June 30, 2021, we held 57 registered trademarks in the U.S. and also held 115 registered trademarks in foreign jurisdictions. In addition, as of June 30, 2021, we owned a number of copyrights and registered domain names for websites that we use in our business, such as www.sharecare.com.

As of June 30, 2021, we also owned a portfolio of (a) nine issued patents and (b) 23 pending patent applications in the U.S. In foreign jurisdictions, we had three patent applications and no issued patents as of June 30, 2021. As noted below, we believe that the impact of our patent portfolio is relatively minimal (with the exception of the newly acquired doc.ai patent applications discussed below), and that our current solutions and revenue are driven primarily by our brands (including our registered trademarks), along with our knowledge and trade secrets.

We have historically acquired a substantial portion of our intellectual property through acquisitions. Nearly all of our issued patents were acquired through our acquisition of the Population Health business of Healthways in 2016 and consist of patents for various automated medical diagnostic and treatment advice systems, disease management systems, panel diagnostic systems and an end-of-life predictive model. The patents acquired from Healthways expire between 2021 and 2030 and we do not believe any of them to be integral to the functionality of our existing solutions.

 

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One pending patent application was acquired through our acquisition of MindSciences and relates to behavior change user interface response. Similar to the Healthways patents discussed above, we do not believe this patent application to be integral to the functionality of any of our existing solutions.

In connection with our acquisition of doc.ai, we further enhanced our intellectual property portfolio with the acquisition of a portfolio comprising one issued patent, 25 current patent applications (including applications in the U.S., China, and Japan) and three trademark registrations/applications in the U.S. as of June 30, 2021. doc.ai’s patent applications consist of applications with respect to software and AI in the healthcare field and expire between April 2037 and October 2040.

More so than patents, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. However, trade secrets and know-how can be difficult to protect. We seek to protect our proprietary information by, in part, entering into confidentiality agreements and intellectual property assignment agreements with our employees and other partners. The confidentiality agreements we enter into are designed to protect our proprietary information and the agreements or clauses requiring assignment of inventions to us are designed to grant us ownership of technologies that are developed through our relationship with the respective counterparty. We cannot guarantee, however, that we have executed such agreements with all of employees and other partners, or that to the extent an agreement is in place, it will not be breached or will afford us adequate protection of our intellectual property and proprietary rights. For additional information, see the section titled “Risk Factors — Risks Related to Legal and Regulatory Matters — Failure to protect or enforce our intellectual property rights could harm our business, financial condition, and results of operations.”

Licensing and Collaboration Agreements

We have historically leveraged, and intend to continue to leverage, licensing and other third-party collaboration agreements in order to expand and enhance the suite of solutions we are able to offer to our clients and members.

For example, we have entered into a license and/or collaboration agreement with respect to each of the digital therapeutic solutions provided through our suite of marketplace solutions that are integrated into our platform as discussed under “Our Platform — Digital Therapeutics Marketplace.” Although each marketplace solution that is integrated into our platform provides an opportunity for our members to meet their healthcare needs for a particular set of health issues, these marketplace solutions together accounted for less than 5% of our total revenue for the year ended December 31, 2020 and the six months ended June 30, 2021, and we do not believe any single marketplace solutions is critical to our platform. Moreover, we intend that our suite of marketplace solutions will evolve over time as healthcare needs change. As a result, we expect to periodically pivot to additional or replacement marketplace solutions (or to develop our own solution alternatives) as existing marketplace solutions become obsolete or otherwise fail to meet the evolving needs of our members.

In addition to licensing and/or collaboration agreements with respect to our suite of marketplace solutions, certain of our other offerings are subject to licensing agreements, such as our Blue Zones Project initiative in partnership with Adventist Health. We also license various software and services from third-party providers in connection with the operation of our platform and business. See “Risk Factors — Risks Related to Technology and Data Privacy — We rely on internet infrastructure, bandwidth providers, third-party computer hardware and software, and other third parties for providing services to our clients and members, and any failure or interruption in the services provided by these third parties or the inability to access our platform on third-party operating systems could negatively impact our relationships with clients and members, adversely affecting our business, financial condition, and results of operations.”

Regulatory Matters

Our business is subject to extensive, complex, and rapidly changing federal, state, and foreign laws and regulations. Specifically, our solutions are subject to extensive regulation covering the privacy and security of

 

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personal health information. Because maintaining the safety of our platform and keeping personal information secure and confidential are our most important responsibilities as a healthcare company, we have structured our operations with a focus on compliance. We continue to monitor and respond to changes in the regulatory landscape, however, there can be no assurance that our operations will not be challenged or impacted by such changes.

HIPAA and Other Privacy and Security Requirements

There are numerous U.S. federal and state laws and regulations related to the privacy and security of personal information, particularly PHI. HIPAA establishes privacy and security standards that limit the use and disclosure of PHI and requires the implementation of administrative, physical, and technical safeguards to ensure the confidentiality, integrity and availability of PHI. We are regulated as both a business associate and covered entity under HIPAA. In addition to HIPAA, some states in which we operate have laws that protect the privacy and security of sensitive and personal information, including health information. Such state laws can be similar to or even more protective than HIPAA, in which case we must comply with the more stringent law. We also may become increasingly subject to foreign laws governing the privacy and security of personal information, such as the General Data Protection Regulation (the “GDPR”) as we continue to expand our business internationally. As a result, it may be necessary to modify our planned operations in order to ensure we are in compliance with the stricter state or foreign laws.

In order to comply with the requirements of HIPAA and other similar state laws, we have implemented safeguards to protect our members’ PHI, including storing and transmitting PHI securely in compliance with the HIPAA Security Rule, utilizing the minimum data necessary to provide any particular service, restricting the use and sharing of PHI, limiting access to PHI to authorized personnel, maintaining training programs on how to protect PHI and ensuring business associate agreements and data sharing agreements are in place with the appropriate parties.

Data Protection and Breaches

In recent years, there have been a number of well-publicized data breaches involving the improper disclosure of individuals’ PHI or other personal information. Certain states have reacted to these breaches by enacting laws and regulations requiring holders of such information to take additional steps, including responding to breaches in certain timeframes, to safeguard the information. While HIPAA requires us to report breaches of unsecured PHI to our clients no later than 60 days following discovery of the breach, our own compliance standards and the terms of our contractual agreements require earlier reporting of any such breach. We are also required to notify the U.S. Department of Health and Human Services and, in cases involving large breaches, the media.

In addition to the HIPAA compliance measures discussed above, we de-identify, encrypt and back up data, maintain company-wide security awareness training, enter into business associate agreements with our partners, as well as ensure our partners have implemented physical security and safeguards at the data centers where our data is stored and conduct regular internal and external security audits. See “Risk Factors Risks Related to Legal and Regulatory Matters Our use, disclosure, and other processing of PII and PHI is subject to HIPAA and other federal, state, and foreign privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm and, in turn, have a material adverse effect on our client base, member base, and revenue.

Other Healthcare Regulations

In addition to data privacy laws, our operations and arrangements with healthcare professionals, clients and third-party payors may subject us to various federal, state, and foreign healthcare laws and regulations, including without limitation, fraud and abuse laws, such as the federal Anti-Kickback Statute; civil and criminal false claims laws; physician transparency laws; and state laws regarding the corporate practice of medicine and

 

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fee-splitting prohibitions. These laws may impact, among other things, our sales and marketing operations, and our interactions with healthcare professionals. Although we have adopted policies and procedures designed to comply with these healthcare laws and regulations, failure to maintain compliance could result in significant penalties and require changes in our business operations.

Legal Proceedings

From time-to-time, we may be subject to various legal proceedings and claims that arise in the normal course of our business activities. Although the results of these legal proceedings, claims, and investigations cannot be predicted with certainty, we do not believe that the final outcome of any matters that we, or any of our subsidiaries, are currently involved in are reasonably likely to have a material adverse effect on our business, financial condition or results of operations. Regardless of final outcomes, however, any such proceedings, claims and investigations may nonetheless impose a significant burden on management and employees and be costly to defend, with unfavorable preliminary or interim rulings.

International Operations

We have international operations in Brazil and France that provide health and wellness services to corporate and health insurer clients. In Brazil, we have a 10-year joint venture agreement with SulAmerica (“SAS”), one of the largest insurance companies in the country, under which we provide services to SAS and other third-party clients. Services are delivered via our platform and local contact centers, including nursing and lifestyle management outreach for disease management, senior programs, coaching and inbound nurse triage call lines. In France, we provide a tobacco cessation offering to a health insurer population. We may, in the future, expand our international operations as opportunities become available.

Properties

We are party to an office lease agreement effective through 2022 for approximately 28,456 square feet of office space that houses our corporate headquarters in Atlanta, Georgia. We also lease additional office space around the world, including Tennessee, California, New York, Brazil, and Germany. We believe our facilities are sufficient for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS OF SHARECARE

As a result of the completion of the Business Combination, the financial statements of Legacy Sharecare are now the financial statements of Sharecare. Thus, the following discussion and analysis of the financial condition and results of operations of Legacy Sharecare prior to the Business Combination and Sharecare, Inc. following the completion of the Business Combination (for purposes of this section, “Sharecare,” “we,” “us” and “our”) should be read together with Sharecare’s audited financial statements as of and for the years ended December 31, 2020, 2019 and 2018, and Sharecare’s unaudited interim financial statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 in each case together with the related notes thereto, included elsewhere in this prospectus. The discussion and analysis should also be read together with the pro forma financial information as of June 30, 2021 and for the six months ended June 30, 2021 and the year ended December 31, 2020 included in this prospectus. See “Unaudited Pro Forma Condensed Financial Information.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the section entitled “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements.

Overview

We are a leading digital healthcare platform company that helps members consolidate and manage various components of their health in one place, regardless of where they are on their health journey. Our comprehensive platform is a health and well-being digital hub that unifies elements of individual and community health into one experience in order to enable members to live better, longer lives. We are driven by our philosophy that we are “All Together Better” as well as our goal to turn individual progress into community transformation. Given a unique blend of expertise across technology, media, and healthcare, we have, through a number of strategic acquisitions and integration of key technologies and capabilities over the last ten years, built our platform into what we believe is the most comprehensive and seamless experience currently available in the digital healthcare space.

Our business combines business-to-business and direct-to-consumer sales models and functions on a more distinctive business-to-business-to-person model. Focusing on the individual, we aim to provide a solution that we believe is more comprehensive than other digital platforms by bringing together scientifically validated clinical programs and engaging content to deliver a personalized experience for our members, whether they come to us by way of the workplace, the exam room, or the living room.

We derive net revenue from multiple stakeholders and while we are focused on the individual’s unique experience, our platform is purpose-built to seamlessly connect stakeholders to the health management tools they need to drive engagement, establish sustained participation, increase satisfaction, reduce costs, and improve outcomes. As we expand our offerings and look to further develop our technologies, we continue to consider the distinct needs of each division as well as opportunities to better connect and cross-sell while we grow and integrate our solutions into one seamless platform.

Our revenue is derived primarily from our domestic operations, with only a small portion from our international operations. For the six months ended June 30, 2021, 4.6% of our total revenue, or $8.6 million, was derived from our international operations, mostly from Brazil.

Our one platform can be disaggregated into three different client channels:

 

   

Enterprise: Our enterprise channel includes a range of clients — from large employers and healthcare systems to government agencies and health plans — that use our platform to engage with their population, dynamically measure the impact of that engagement, and efficiently deliver health and wellness services.

 

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Provider: Our suite of data and information-driven solutions for healthcare providers are tailored to improve productivity and efficiency and enhance patient care and management while upholding the latest compliance, security, and privacy standards.

 

   

Consumer Solutions: Our robust platform and suite of digital products and medical expert knowledge provides members with personalized information, programs, and resources to improve their health and well-being, and affords sponsors the opportunity to integrate their brands into Sharecare’s consumer experience in a highly contextual, relevant, and targeted environment.

Recent Developments Affecting Comparability

COVID-19 Impact

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the U.S. Many U.S. states declared a health emergency and issued orders to close all nonessential businesses until further notice. As an organization within the healthcare industry, we are deemed to be an essential business. Nonetheless, out of concern for employees’ safety and pursuant to the government orders, we requested many employees telecommute from their homes.

While we are an essential business for our customers, we do not expect a significant negative impact to our consolidated financial position, results of operations, and cash flows related to this matter. However, as a result of the broader economic impact and the prolonged disruption to the economy, our customers may be facing liquidity issues and may be slower to pay or altogether withdraw from their commitments and the ultimate financial impact related to the pandemic is still unknown.

Given the volatility of the circumstances surrounding the pandemic, we have evaluated potential risks to our business plan. The economic slowdown could delay our sales objectives for new business for our digital product. Any decline in non-urgent medical appointments could lessen the demand for our medical record transfers in the ROI business and Blue Zone communities may see a decrease in spending due to social distancing. In addition, we may be impacted by currency fluctuations, as the U.S. Dollar has gained strength during the pandemic, with the biggest impact to us thus far being to the Brazilian Real.

Key Factors and Trends Affecting our Operating Performance

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including our success with respect to the following:

 

   

Expanding our Footprint. We believe that our current client base represents a small fraction of potential clients that could benefit from our highly differentiated solutions. We will continue to invest in our sales and marketing efforts and leverage our partner relationships to continue to acquire new clients, including individuals, providers, employers, health plans, government organizations, and communities.

 

   

Expanding our Existing Client Relationships. We also believe that there is significant opportunity to generate growth by maintaining and expanding our relationships with existing clients, including:

 

   

increasing engagement and enrollment of eligible members at our existing enterprise clients through continued sales and marketing efforts, including targeted next-generation digital modeling and marketing, and capitalizing on insights from claims ingestion (the process by which we receive and process information from our clients), population risk stratification and incentives management;

 

   

promoting our marketplace of existing targeted digital therapeutics to close gaps in care in high-cost areas (with incremental fee per enrollee), which we believe represents a $1 billion revenue opportunity within our currently contracted clients; and

 

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expanding our relationships with our top 25 provider clients with an opportunity to extend our provider products and services to more than 4,000 additional healthcare sites.

 

   

Offering Additional Solutions. We also believe there is significant opportunity to cross-sell our provider solutions to existing accounts, including deploying our value-based care and payment integrity solutions to approximately 6,000 hospitals and physician practices.

 

   

Growing our Platform. We are constantly evaluating the marketplace for ways to broaden and enhance our client and member experience, improve clinical results, and increase revenue through product innovation, partnerships, and acquisitions. We intend to continue to leverage our expertise through adding digital therapeutics partnerships as well as the acquisition of products and services that are directly relevant to our existing clients. Additionally, we believe our strong and embedded client relationships provide us with unique perspectives into their evolving needs and the needs of their populations.

 

   

Evolving our Products to Cater to an Evolving Industry. As the digital healthcare industry grows, we closely monitor evolving consumer trends and organizations’ needs so that we may adapt our platform to better suit our clients’ demands. Since March 2020, the COVID-19 pandemic greatly accelerated the demand for virtual care solutions and resulted in rapid growth and increased adoption of digital health technologies, which Sharecare was in a unique position to undertake. By building on our deep expertise in handling and managing mass health data, we launched a suite of distinct but complementary digital tools and programs to address the evolving emotional, educational, clinical, and operational challenges introduced by the pandemic. We intend to continue to look for opportunities to leverage our platform and expertise to provide first-mover solutions to evolving and future demands in the digital healthcare industry.

 

   

Acquisitions. We believe that our proven track record of successful acquisitions coupled with the flexibility and capabilities of our platform uniquely positions us to continue opportunistically pursuing attractive M&A opportunities. We believe this potential is further accentuated by our multiple client channels and constantly expanding member base. Future acquisitions could drive value and growth in a host of ways including access to new customers and potential cross-sell opportunities; unlocking new customer channels or geographies; adding new solutions to serve our existing client base; and adding new capabilities to enhance our existing solution offering or the efficiency of our platform. In addition, we believe our acquisition track record demonstrates our ability to realize synergies and optimize performance of potential M&A partners.

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with GAAP, we believe adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance. We use adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measure, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. In particular, we believe that the use of adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. The reconciliations of adjusted EBITDA to net loss, the most directly comparable financial measures stated in accordance with GAAP, is provided below. Investors are encouraged to review the reconciliation and not to rely on any single financial measure to evaluate our business.

 

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Adjusted EBITDA

Adjusted EBITDA is a key performance measure that management uses to assess our operating performance. Because adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes.

We calculate adjusted EBITDA as net loss adjusted to exclude (i) depreciation and amortization, (ii) interest income, (iii) interest expense, (iv) other expense (non-operating), (v) gain/loss from equity method investment, (vi) income tax (benefit) expense, (vii) share-based compensation, (viii) severance, (ix) warrant value for revenue contracts (x) common stock issues for services and (xi) transaction and closing costs. We do not view the items excluded as representative of our ongoing operations.

The following table presents a reconciliation of adjusted EBITDA from the most comparable GAAP measure, net loss, for each of the years ended December 31, 2020, 2019 and 2018 as well as the six months ended June 30, 2021 and 2020, respectively:

 

     Six Months Ended
June 30,
    Year Ended December 31,  
(in thousands)    2021     2020     2020     2019     2018  

Net loss

   $ (52,176   $ (25,308   $ (60,461   $ (39,437   $ (54,994

Add:

          

Depreciation and amortization

     13,850     13,047     24,684       23,782       19,653  

Interest income

     (29     (53     (71     (149     (403

Interest expense

     14,105     15,423     31,037       28,685       25,655  

Other expense

     20,730     312     9,709       808       298  

Loss from equity method investments

     —         —         3,902       —         2,034  

Income tax (benefit) expense

     (14     (227     (1,557     213       94  

Share-based compensation

     14,386     5,813     19,160       3,532       6,885  

Severance

     265     1,797     2,553       4,378       3,931  

Warrants issued with revenue contracts(a)

     38     263     1,188       485       249  

Common stock issued for services

     —         —         —         —         807  

Transaction/closing costs

     2,022     188     2,187       2,675       3,382  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA(b)

   $ 13,177   $ 11,255   $ 32,331     $ 24,972     $ 7,591  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Represents the non-cash value of warrants issued to clients for meeting specific revenue thresholds.

(b)

Includes non-cash amortization associated with contract liabilities recorded in connection with acquired businesses.

Components of Our Results of Operations

Revenue

The enterprise channel provides employers and health plans with health management programs for large populations, including digital engagement, telephonic coaching, incentives, biometrics, and digital therapeutics offerings. Revenue is recognized on a per member per month (“PMPM”) basis or based on member participation as services are provided. These contracts often include a fee for the implementation of and the subsequent subscription of the Sharecare digital platform which may also be sold on a stand-alone basis. Provider revenue is primarily based on health document requests filled in the health data services business line, as well as subscription fees for various technology related services that assist providers with performance and maximizing reimbursement. Consumer solutions revenue is generated mostly through ad sponsorships to Sharecare’s extensive member database.

 

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Costs of Revenue

Costs of revenue primarily consists of costs incurred in connection with delivering our various revenue generating activities, including personnel related expenses. Costs are primarily driven by volumes related to requests, engagement, and incentive fulfillment. The major components that make up our cost of revenue are personnel costs to support program delivery as well as customer service along with share-based compensation, data management fees related to file processing, and variable fees to deliver specific services that may require third party vendors, direct marketing, fulfillment, transaction fees, or other costs that can be reduced to offset a decline in revenue. Because our growth strategy includes substantial opportunity to scale low-personnel cost products, we would anticipate future revenue to grow at a faster rate than cost of revenue as those low-personnel cost products mature. Costs of revenue do not include depreciation or amortization, which are accounted for separately.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of employee-related expenses, including salaries, benefits, commissions, employment taxes, travel, and share-based compensation costs for our employees engaged in sales, account management, marketing, public relations and related support. In addition, these expenses include marketing sponsorships and engagement marketing spend. These expenses exclude any allocation of occupancy expense and depreciation and amortization.

We expect our sales and marketing expenses to increase as we strategically invest to expand our business. We expect to hire additional sales personnel and related account management, marketing, public relations and related support personnel to capture an increasing amount of our market opportunity and upsell/cross-sell within our existing client base. As we scale our sales and marketing personnel in the short- to medium-term, we expect these expenses to increase in both absolute dollars and as a percentage of revenue.

Product and Technology Expenses

Product and technology expenses include personnel and related expenses for software engineering, information technology infrastructure, business intelligence, technical account management, project management, security, product development and share-based compensation. Product and technology expenses also include indirect hosting and related costs to support our technology, outsourced software, and engineering services. Our technology and development expenses exclude any allocation of occupancy expense and depreciation and amortization.

We expect our technology and development expenses to increase for the foreseeable future as we continue to invest in the development of our technology platform. Our technology and development expenses may fluctuate as a percentage of our total revenue from period to period partially due to the timing and extent of our technology and development expenses.

General and Administrative Expenses

General and administrative expenses include personnel and related expenses for our executive, finance, legal, and human resources departments plus all indirect staff in the divisions not attributable to Sales, Marketing or Product and Technology. They also include professional fees, share-based compensation, and all rent, utilities and maintenance related costs. Our general and administrative expenses exclude any allocation of depreciation and amortization.

We expect our general and administrative expenses to increase for the foreseeable future following the completion of the Business Combination due to the additional legal, accounting, insurance, investor relations, and other costs that we will incur as a public company, as well as other costs associated with continuing to grow

 

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our business. However, we expect our general and administrative expenses to remain steady as a percentage of our total revenue over the near-term. Our general and administrative expenses may fluctuate as a percentage of our total revenue from period to period partially due to the timing and extent of our general and administrative expenses.

Depreciation and Amortization

Depreciation and amortization consists primarily of depreciation of fixed assets, amortization of software, amortization of capitalized software development costs and amortization of acquisition-related intangible assets.

Interest Expense

Interest expense primarily relates to interest incurred on our long-term debt and the amortization of debt issuance costs.

Other Expense

Other expense primarily relates to changes in fair value of contingent consideration and warrant liabilities.

Results of Operations

Comparison of the Six Months Ended June 30, 2021 and 2020

The following table presents our unaudited consolidated statement of operations for the six months ended June 30, 2021 and 2020, and the percentage change between the two periods:

 

     Six Months Ended June 30,  
(in thousands)    2021     2020     $ Change     %
Change
 

Revenue

   $ 188,068   $ 160,156   $ 27,912     17

Costs and operating expenses:

        

Costs of revenue (exclusive of amortization and depreciation below)

     93,028     80,247     12,781     16

Sales and marketing

     23,556     17,889     5,667     32

Product and technology

     36,266     21,146     15,120     72

General and administrative

     38,752     37,680     1,072     3

Depreciation and amortization

     13,850     13,047     803     6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and operating expenses

     205,452     170,009     35,443     21
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (17,384     (9,853     (7,531     (76 )% 

Other income (expense)

        

Interest income

     29     53     (24     (45 )% 

Interest expense

     (14,105     (15,423     1,318     9

Other expense

     (20,730     (312     (20,418     (6544 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (34,806     (15,682     (19,124     (122 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax (expense) benefit

     (52,190     (25,535     (26,655     (104 )% 

Income tax (expense) benefit

     14     227     (213     94

Net loss

   $ (52,176   $ (25,308   $ (26,868     (106 )% 

Net (loss) income attributable to non-controlling interest in subsidiaries

     (82     (268     186     (69 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Sharecare, Inc.

   $ (52,094   $ (25,040   $ (27,054     (108 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

n.m. — Percentage change not meaningful

 

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Revenue

Revenue increased $27.9 million, or 17%, from $160.2 million for the six months ended June 30, 2020 to $188.1 million for the six months ended June 30, 2021. Overall, we saw net gains from new product lines (digital, digital therapeutics and health security programs) and growth in pharmaceutical ad spending for an increase of $37.2 million. In addition, growth from the acquisition of doc.ai was $6.6 million. We also had other growth of $3.4 million around other parts of the business, including population health, HDS audits and ROI business and international operations. Offsetting this growth was the negative impact of COVID-19 on multiple product line revenues in the amount of $13.9 million and the expected attrition of one contract related to a previous acquisition, accounting for a reduction of $5.2 million. The COVID-19 impact resulted from fewer doctor visits, reduction of community events and cancellations of heart health programs and overall concern about the economy that affected long-term contract decisions. Currency translation fluctuations, mostly from our Brazil operations, negatively impacted revenues by $0.5 million.

The channel revenue changed as follows: Enterprise channel increased by $17.1 million (from $96.4 million for 2020 to $113.6 million for 2021), the Provider channel increased by $1.8 million (from $40.3 million for 2020 to $42.2 million for 2021) and the Consumer channel increased by $9.0 million (from $23.4 million for 2020 to $32.4 million for 2021).

Increases in the Enterprise channel (18%) were attributable to a combination of new product and client gains in the digital, digital therapeutics and health security programs, offset by the impact of COVID-19, expected contract attrition from a previous acquisition and currency translation losses. The Provider channel increase (5%) was primarily attributable to the growth in release of information and audit services as volumes return closer to pre-COVID-19 levels. The Consumer channel increase (38%) was due to increased pharmaceutical advertising spend, including addition of new customers and brands.

Costs of Revenue

Costs of revenue increased $12.8 million, or 16%, from $80.2 million for the six months ended June 30, 2020 to $93.0 million for the six months ended June 30, 2021. The increase was due to the growth in sales across all channels and a return to full workforce in the release of information and population health business lines from the reduced staffing in the prior year due to COVID-19 limitations.

Sales and Marketing

Sales and marketing expense increased $5.7 million, or 32%, from $17.9 million for the six months ended June 30, 2020 to $23.6 million for the six months ended June 30, 2021. Sales consultant expenses of $3.0 million were incurred to advance engagement metrics across our client base. Additional sales, sales support and marketing headcount and commissions of $2.2 million is in line with revenue growth efforts. Non-cash stock compensation accounted for $0.4 million of the increase, in line with expense attribution on share-based compensation related to employee stock option issuances based on increases in the stock price.

Product and Technology

Product and technology expenses increased $15.1 million, or 72%, from $21.1 million for the six months ended June 30, 2020 to $36.3 million for the six months ended June 30, 2021. The increase is primarily due to $9.6 million of non-cash stock option expense and $2.3 million in personnel and other technology expense related to the doc.ai acquisition. $8.2 million of the stock option expense is related to replacement options issued in connection with the acquisition of doc.ai that were fully vested and will have no further expense attribution. The remainder of the change was due to platform and security expenses to support the additional staff and customers, mostly the new health security programs that started in 2021.

 

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General and Administrative

General and administrative expense increased $1.1 million, or 3%, from $37.7 million for the six months ended June 30, 2020 to $38.8 million for the six months ended June 30, 2021. Non-recurring legal fees tied to the acquisition of doc.ai of $0.7 million and non-operational consulting fees of $0.6 million related to public market readiness were incurred in the current period. The other increases are attributable to $1.8 million in additional staff tied to growth and recent acquisitions and $1.2 million in contract support for our health security programs. These increases were offset by $1.2 million lower legal fees and a decrease of $2.0 million in stock compensation in the current period.

Depreciation and Amortization

Depreciation and amortization increased $0.8 million, or 6%, from $13.0 million for the six months ended June 30, 2020 to $13.9 million for the six months ended June 30, 2021.

Interest Expense

Interest expense decreased $1.3 million, from $15.4 million for the six months ended June 30, 2020 to $14.1 million for the six months ended June 30, 2021. The decrease is related to a 2% average reduction in the interest rate, lower debt balance on our revolving line of credit as well as a decrease in the accretion of loan financing costs.

Other Expense

Other expense increased $20.4 million, from $312.0 thousand for the six months ended June 30, 2020 to $20.7 million for the six months ended June 30, 2021. The increase is primarily related to additional expense of $15.2 million of re-measurement of contingent consideration and $6.2 million of re-measurement of warrant liabilities. Other expenses are influenced by fluctuations in our stock price and may vary from period to period.

Comparison of the Years Ended December 31, 2020, 2019 and 2018

The following table presents our audited consolidated statement of operations for each of the years ended December 31, 2020, 2019 and 2018, and the dollar and percentage change between the three years:

 

     Year Ended December 31,     2019 to
2020
% Change
    2018 to
2019
% Change
 
(in thousands)    2020     2019     2018  

Revenue

   $ 328,805     $ 339,541     $ 341,866       (3 )%      (1 )% 

Costs and operating expenses:

          

Costs of revenue (exclusive of amortization and depreciation below)

     160,911       179,967       192,147       (11 )%      (6 )% 

Sales and marketing

     33,335       33,993       34,604       (2 )%      (2 )% 

Product and technology

     44,078       45,855       51,415       (4 )%      (11 )% 

General and administrative

     83,238       65,824       71,363       26     (8 )% 

Depreciation and amortization

     24,684       23,782       19,653       4     21
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and operating expenses

     346,246       349,421       369,182       (1 )%      (5 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (17,441     (9,880     (27,316     77     (64 )% 

Other income (expense)

          

Interest income

     71       149       403       (52 )%      (63 )% 

Interest expense

     (31,037     (28,685     (25,655     (8 )%      (12 )% 

Other expense

     (9,709     (808     (298     (1102 )%      (171 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (40,675     (29,344     (25,550     (39 )%      (15 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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     Year Ended December 31,     2019 to
2020
% Change
    2018 to
2019
% Change
 
(in thousands)    2020     2019     2018  

Net loss before taxes and loss from equity method investment

     (58,116     (39,224     (52,866     (48 )%      26

Income tax expense

     1,557       (213     (94     831     (127 )% 

Loss from equity method investment

     (3,902     —         (2,034     n.m.       n.m.  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (60,461   $ (39,437   $ (54,994     (53 )%      28

Net (loss) income attributable to non-controlling interest in subsidiaries

     (443     543       932       (182 )%      (42 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Sharecare, Inc.

     $(60,018)     $ (39,980   $ (55,926     (50 )%      29
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

n.m. — Percentage change not meaningful

Comparison of the Years Ended December 31, 2020 and 2019

Revenue

Revenue decreased $10.7 million, or 3%, from $339.5 million for the year ended December 31, 2019 to $328.8 million for the year ended December 31, 2020. Overall, COVID-19 substantially impacted multiple product lines with an impact on revenues of $26.5 million from delayed new revenue starts, cancellations and reduced services. More specifically, biometric screenings and gym memberships for our clients employees/members were cut back, release-of-information requests slowed down from less doctor visits overall and community events, diabetes and heart health programs were canceled or limited. We continued our shift away from clients with low margin products inherited from a previous acquisition, accounting for a decline of $9.7 million. Currency translation fluctuations, mostly from our Brazil operations, negatively impacted revenues by $4.4 million. In addition, non-cash warrant value for revenue contracts increased by $0.7 million, resulting in a corresponding decrease to revenue.

On the growth side, we saw gains in our new digital and digital therapeutics products of $12.2 million (+39%) and grew or added new customers across multiple product lines of $18.2 million. On the new digital therapeutics growth, we upsold 14 customers, several buying multiple products.

The channel revenue changed as follows: Enterprise channel decreased by $14.3 million (from $202.6 million for 2019 to $188.3 million for 2020), the Provider channel decreased by $1.4 million (from $80.7 million for 2019 to $79.3 million for 2020) and the Consumer channel increased by $5.0 million (from $56.2 million for 2019 to $61.1 million for 2020).

The Enterprise channel decline came from a combination of the impact of COVID-19, inherited client attrition and currency translation losses offset by new product and client gains. The Provider channel decline was a combination of COVID-19 impacts offset by new client gains, of which $1.2 million was from the acquisition of Visualize Health in 2020. The Consumer channel increase was due to a strong fourth quarter of 2020 which saw client spend on pharma advertising ramp up, offset by a COVID-19 impact on the non-pharma clients who reduced advertising spend in the second and third quarters of 2020.

Costs and Expenses

Costs of Revenue

Costs of revenue decreased $19.1 million, or 11%, from $180.0 million for the year ended December 31, 2019 to $160.9 million for the year ended December 31, 2020. The cost reductions resulted from several of the revenue shifts mentioned above, specifically, the termination of acquired Enterprise clients and the decline in several of the COVID-19 impacted products (release-of-information, diabetes and heart health management,

 

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biometric screenings and gym memberships). Additionally, we reduced direct staffing across multiple product lines in response to the COVID-19 slowdown and used these reductions to make efficiency improvements.

Sales and Marketing

Sales and marketing expense decreased $0.7 million, or 2%, from $34.0 million for the year ended December 31, 2019 to $33.3 million for the year ended December 31, 2020. The sales and marketing costs increased by $1.2 million for additional staff and related variable compensation tied to additional staff (+$1.2 million) and $1.2 million for outside sales consulting services in the fourth quarter of 2020. Several components of sales and marketing expenses decreased due to travel and trade show reductions caused by COVID-19 limitations on face-to-face interactions (-$1.7 million), reduced marketing sponsorships (-$0.7 million), lower stock compensation expense (-$0.4 million) and reduced severance (-$0.4 million).

Product and Technology

Product and technology expenses decreased $1.8 million, or 4%, from $45.9 million for the year ended December 31, 2019 to $44.1 million for the year ended December 31, 2020. Three main areas of the product and technology expense caused the decrease: reduced travel due to COVID-19 restrictions (-$0.5 million), lower employee cell phone and internet charges (-$0.5 million) and lower severance (-$0.8 million).

General and Administrative

General and administrative expense increased $17.4 million, or 26%, from $65.8 million for the year ended December 31, 2019 to $83.2 million for the year ended December 31, 2020. The biggest factor for the increase was the additional non-cash stock option expense tied to executive and senior management option issuances in 2020 (+$15.6 million). Excluding this non-cash impact, the general and administrative expense increased 3%. Professional fees tied to legal, audit and valuation service fees from several acquisitions and public company readiness activities caused an increase to professional fees (+$2.5 million). Additionally, bad debt expense increased $3.7 million tied to clients in the release-of-information and consumer service lines and correlated to tightened budgets from COVID-19 impacts.

Offsetting the increases mentioned above, salary reductions in response to the revenue impacts of COVID-19 (-$2.2 million) and reduced travel (-$1.5 million) in response to COVID-19 restrictions resulted in expense savings. In addition, work-from-home policies for most of the workforce beginning in late first quarter of 2020 in response to COVID-19 and the reduction in office space in several locations resulted in a decrease of $0.7 million.

Depreciation and Amortization

Depreciation and amortization increased $0.9 million, or 4%, from $23.8 million for the year ended December 31, 2019 to $24.7 million for the year ended December 31, 2020.

Interest Expense

Interest expense increased $2.4 million, or 8%, from $28.7 million for the year ended December 31, 2019 to $31.0 million for the year ended December 31, 2020. In the first quarter of 2020, we moved from a cash based interest arrangement with a majority of our convertible debt holders to a non-cash payment-in-kind arrangement at a higher interest rate, resulting in the higher expense.

Other Expense

Other expense increased $8.9 million, from $0.8 million for the year ended December 31, 2019 to $9.7 million for the year ended December 31, 2020. The increase is primarily related to increased expense of

 

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$6.2 million of re-measurement of contingent consideration and $3.4 million of re-measurement of warrant liabilities during the year ended December 31, 2020.

Comparison of the Years Ended December 31, 2019 and 2018

Revenue

Revenue decreased $2.3 million, or 1%, from $341.9 million for the year ended December 31, 2018 to $339.5 million for the year ended December 31, 2019. Overall, the declines resulted from the shift away from lower margin contracts inherited with a previous acquisition (-$20.6 million), the cessation of international operations (-$8.5 million) and currency translation losses in our international operations (-$1.8 million). The Digital product line increased $23.0 million (+302%) and customer growth across several business lines of $5.8m helped offset the above declines.

The channel revenue changed as follows: Enterprise channel decreased by $7.1 million (from $209.8 million for 2018 to $202.6 million for 2019), the Provider channel increased by $6.9 million (from $73.8 million for 2018 to $80.7 million for 2019) and the Consumer channel decreased by $2.1 million (from $58.3 million for 2018 to $56.2 million for 2019).

The Enterprise channel fluctuation was driven by the shift away from the previously acquired low-margin contracts, the international currency translation losses in Brazil and the cessation of operations in Australia, offset by gains in the digital product line. The Provider channel increased on new customer growth, mostly in the audit product line. The Consumer channel decreased, not as a result of lost customers but due to a stronger fourth quarter of 2018.

Costs and Expenses

Costs of Revenue

Costs of revenue decreased $12.2 million, or 6%, from $192.1 million for the year ended December 31, 2018 to $180.0 million for the year ended December 31, 2019. Product shifts from low margin to high margin products (from coaching and other labor-intensive products to digital products), along with efficiency improvements, removing direct labor and technology costs, led to the decrease in costs.

Sales and Marketing

Sales and marketing expense decreased $0.6 million, or 2%, from $34.6 million for the year ended December 31, 2018 to $34.0 million for the year ended December 31, 2019. The decrease resulted primarily from a decrease in personnel-related costs due to efficiencies in the account management team improving staff to customer ratios and was partially offset by an increase in travel and other sales related costs to support new client opportunities.

Product and Technology

Product and technology expenses decreased $5.6 million, or 11%, from $51.4 million for the year ended December 31, 2018 to $45.9 million for the year ended December 31, 2019. The savings was driven by software and platform cost decreases (-$6.4 million) linked to bringing several processes in-house or shifting to lower priced vendors. These savings were partially offset by a $1.3 million increase in personnel-related costs as we ramped staffing to quickly scale the development of our products.

General and Administrative

General and administrative expense decreased $5.5 million, or 8%, from $71.4 million for the year ended December 31, 2018 to $65.8 million for the year ended December 31, 2019. The combination of a $6.7 million

 

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decrease in personnel-related costs, including reduction of headcount and share-based compensation expense, a $3.7 million decrease in professional fees due to a reduction of share-based compensation for third parties, reduced accounting and legal fees and a decrease in our international operations tied to shifting strategies, a $1.9 million decrease in facility and related costs due to consolidation of office space and reduced office and telephony costs, a $1.5 million decrease in corporate sponsorships and other administrative costs, and a $1.5 million reduction in one-time fees tied to acquisition activity in 2018 drove the decrease. These impacts were offset by a $9.6 million one-time, non-cash increase in professional fees in 2018 tied to the cancellation and write-off of purchase price accounting contract liabilities.

Depreciation and Amortization

Depreciation and amortization increased $4.1 million, or 21%, from $19.7 million for the year ended December 31, 2018 to $23.8 million for the year ended December 31, 2019 primarily related to an increase in capitalized internal-use software costs.

Interest Expense

Interest expense increased $3.0 million, or 12%, from $25.7 million for the year ended December 31, 2018 to $28.7 million for the year ended December 31, 2019 driven by higher outstanding debt balances, including proceeds from the issuance of Series B-4 Convertible Notes.

Liquidity and Capital Resources

We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital and capital expenditure needs, contractual obligations and other commitments, with cash flows from operations and other sources of funding. Our ability to expand and grow our business will depend on many factors, including our working capital needs and the evolution of our operating cash flows.

We had $42.8 million in cash and cash equivalents as of June 30, 2021. Our principal commitments as of June 30, 2021, consist of our long-term debt, operating leases, and purchase commitments. See Note 6 and Note 11 to Sharecare’s consolidated financial statements included elsewhere in this prospectus. See also “Unaudited Pro Forma Condensed Financial Information.”

We believe our operating cash flows, together with our cash on hand and the cash we obtained as a result of the Business Combination, will be sufficient to meet our working capital and capital expenditure requirements in the short-term, i.e., beyond 12 months from the date of this prospectus. Our long-term liquidity needs include cash necessary to support our business growth. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs, however, we are continually reviewing our capital resources to determine whether we can meet our short- and long-term goals and we may require additional capital to do so. We may also need additional cash resources due to changed business conditions or other developments, including unanticipated regulatory developments, significant acquisitions, and competitive pressures. We expect our capital expenditures and working capital requirements to continue to increase in the immediate future as we seek to expand our solution offerings. To the extent that our current resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. If the needed financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in new product offerings and related marketing initiatives or to scale back our existing operations, which could have an adverse impact on our business and financial prospects. See Note 1 to Sharecare’s audited consolidated financial statements and the section titled “Risk Factors — Risks Related to Financing and Tax — We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all” included elsewhere in this prospectus.

 

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The following table summarizes our cash flow data for the periods presented:

 

     Six Months Ended
June 30,
    Year Ended
December 31,
 
(in thousands)    2021     2020     2020     2019     2018  

Net cash (used in)/provided by operating activities

   $ 80     $ 5,326     $ 14,761     $ 2,577     $ (34,355

Net cash used in investing activities

     (18,458     (11,464     (19,171     (16,644     (17,925

Net cash provided by financing activities

     38,641       7,369       3,770       20,797       27,711  

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2021 was $80 thousand, a decrease of $5.2 million from $5.3 million of cash provided by operating activities for the six months ended June 30, 2020.

Cash provided during this period included the $52.2 million net loss for the six months ended June 30, 2021 and $372 thousand cash used net of non-cash items. The cash used was offset by cash provided by changes in operating assets and liabilities of $452 thousand. Cash provided during the prior period included the $25.3 million net loss for the six months ended June 30, 2020 and $0.8 million cash used net of non-cash items. This result for the prior period was offset by cash provided by changes in operating assets and liabilities of $6.1 million.

The operating activity cash change over the prior period of $5.2 million, therefore, was a function of changes in operating assets and liabilities, specifically an increase in accounts receivables and prepaid expenses offset by an increase in deferred revenue. Accounts receivable increased due to new customers related to health security programs. Prepaid expenses increased due to payments related to insurance and software licensing. Deferred revenue increased related to new health security program and doc.ai related customers.

Net cash provided by operating activities for the year ended December 31, 2020 was $14.8 million, an increase of $12.2 million from $2.6 million of cash provided by operating activities for the year ended December 31, 2019. Cash provided during this period included the $60.5 million net loss for the year ended December 31, 2020, net of non-cash items (which increased $40.1 million between periods). This was partially offset by net cash used in changes in operating assets and liabilities of $6.9 million between periods, primarily attributable to deferred revenue, accounts receivable and other receivables, and accounts payable and accrued expenses.

Deferred revenue decreased due to the recognition of revenue that was deferred as of the beginning of the period related to a contract that was executed in the previous year where payment was received in advance of services being delivered. Accounts receivable decreased between periods due to a decrease is the enterprise channel revenue attributable to the impact of COVID-19 as discussed above. Accrued expenses increased as a result of increased PIK interest, accrued payroll taxes due to the passage of the CARES Act in 2020, and an increase of accrued bonuses and professional fees. These increases in accrued expenses were offset by the timing of payments of accounts payable as of December 31, 2020.

Net cash provided by operating activities for the year ended December 31, 2019 was $2.6 million, an increase of $36.9 million from $34.4 million of cash used in operating activities for the year ended December 31, 2018. Cash provided by this period included a lower net loss of $39.4 million (a decrease of $15.6 million between periods), as discussed above, and non-cash items that increased by $9.4 million between periods. Changes in our operating assets and liabilities provided an additional $11.9 million of cash between periods, primarily attributable to deferred revenue and accounts receivable.

 

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Cash provided by deferred revenue increased due to the execution of a new customer agreement in the enterprise channel and the advance payment for services to be delivered in the subsequent year. This increase was offset by the recognition of revenue for various individually immaterial customer balances that were deferred as of the beginning of 2019. Accounts receivable and other receivables decreased due to collection efforts and timing of customer payments as of December 31, 2019.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2021 was $18.5 million compared to $11.5 million of net cash used in investing activities for the six months ended June 30, 2020. The increase in cash outflows was primarily due to cash paid for internal-use software of $7.5 million in support of investments in new products and current product enhancements.

Net cash used in investing activities for the year ended December 31, 2020 was $19.2 million compared to $16.6 million of net cash used in investing activities for the year ended December 31, 2019. The increase in cash outflows was primarily due to cash paid for our acquisition of Visualize Health.

Net cash used in investing activities for the year ended December 31, 2019 was $16.6 million compared to $17.9 million of net cash used in investing activities in 2018. The decrease was primarily due to decreases in both cash paid for internal-use software and property and equipment.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2021 was $38.6 million, primarily due to cash received from the issuance of 62,500 shares of Legacy Sharecare Series D Preferred Stock in the amount of $50.0 million, proceeds from the exercise of common stock options and warrants of $2.3 million offset by the net repayment of our Senior Secured Credit Agreement of $13.3 million.

Net cash provided by financing activities for the six months ended June 30, 2020 was $7.4 million, which was primarily due to cash received from the draw down on our Senior Secured Credit Agreement, offset by the partial repayment of our outstanding indebtedness.

Net cash provided by financing activities for the year ended December 31, 2020 was $3.8 million, primarily due to cash received from the draw down on our Senior Secured Credit Agreement, offset by the partial repayment of our outstanding indebtedness.

Net cash provided by financing activities for the year ended December 31, 2019 was $20.8 million, which was primarily due to cash received from the issuance of Series C convertible preferred stock, partially offset from debt repayments during the period.

Net cash provided by financing activities for the year ended December 31, 2018 was $27.7 million, which was primarily due to cash received from the issuance of debt, offset by the partial repayment of outstanding indebtedness.

Contractual Obligations

The following is a summary of material contractual obligations and commitments as of December 31, 2020:

 

(in thousands)    Total      2021      2022 – 2023      2024 –2025      Thereafter  

Long-term debt

   $ 190,834      $ 400      $ 188,529      $ —      $ 1,905  

Operating Leases

     9,214        4,482        4,492        240        —    

Purchase Commitments

     44,622        12,885        17,516        6,221        8,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 244,670      $ 17,767      $ 210,537      $ 6,461      $ 9,905  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Financing Arrangements

Senior Secured Credit Agreement

In March 2017, we refinanced our existing debt through the execution of that certain Credit Agreement, dated as of March 9, 2017 (as amended, the “Senior Secured Credit Agreement”), among Legacy Sharecare, certain subsidiaries of Legacy Sharecare (together with Legacy Sharecare, the “Borrowers”), the lenders named therein (the “Lenders”) and Wells Fargo Bank, National Association, as administrative agent (the “Administrative Agent”).

The Senior Secured Credit Agreement provides for a senior secured revolving credit facility with total commitments of $60.0 million (the “Revolving Facility”). Availability under the Revolving Facility is generally subject to a borrowing base based on a percentage of applicable eligible receivables. Borrowings under the Revolving Facility generally bear interest at a rate equal to, at the applicable Borrower’s option, either (a) a base rate or (b) a rate based on LIBOR, in each case, plus an applicable margin. The applicable margin is based on a fixed charge coverage ratio and ranges from (i) 1.75% to 2.25% for U.S. base rate loans and (ii) 2.75% to 3.25% for LIBOR. The Senior Secured Credit Agreement matures on February 10, 2023.

In connection with the consummation of the Business Combination, Legacy Sharecare, the other Borrowers, the Lenders and the Administrative Agent, entered into an Amendment Number Six to the Senior Secured Credit Agreement (the “Sixth Amendment”). Pursuant to the Sixth Amendment, the Administrative Agent and Lenders provided certain consents with respect to the consummation of the Business Combination and related transactions (collectively, the “Transactions”) and certain amendments were made to the terms of the Senior Secured Credit Agreement to reflect the Transactions. Sharecare and certain other subsidiaries of Legacy Sharecare executed joinders to become a party to the Senior Secured Credit Agreement as required by the Sixth Amendment in July 2021.

The Senior Secured Credit Agreement contains a number of customary affirmative and negative covenants and we were in compliance with those covenants as of June 30, 2021. As of June 30, 2021, there were $22 thousand of borrowings outstanding under the Revolving Facility.

In connection with the Business Combination, we repaid all outstanding amounts under the Senior Secured Credit Agreement. In the future, we may incur additional borrowings under the Senior Secured Credit Agreement. See Note 6, Debt, to Sharecare’s consolidated financial statements and the section titled “Risk Factors — Risks Related to Financing and Tax — Our debt agreements contain certain restrictions that may limit our ability to operate our business” included elsewhere in this prospectus.

Second Lien Credit Agreement

In May 2017, we entered into a Second Lien Credit Agreement with a lender for loans up to $50.0 million the (“Second Lien Credit Agreement”). In connection with the execution of the Second Lien Credit Agreement, we borrowed $40.0 million.

During 2018, we executed an amendment to the Second Lien Credit Agreement. In conjunction with the amendment, we issued 5,000 warrants totaling $0.2 million and recorded as a discount to the debt, which is being amortized to interest expense.

The lender agreed to accept paid in-kind interest for a portion of the period aggregating $1.4 million as of June 30, 2021. As of June 30, 2021, principal amounts outstanding total $40.2 million.

The Second Lien Credit Agreement was repaid in full and terminated in connection with the consummation of the Business Combination.

 

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Series B-3 Convertible Notes

We issued $30.0 million of Series B-3 Convertible Notes during 2018. The Series B-3 Convertible Notes include interest at 10%, payable quarterly in arrears. The principal on the outstanding notes is convertible into Series B-3 redeemable convertible preferred stock, at a conversion price of $249.87 per share. The carrying value of the Series B-3 Convertible Notes is comprised of the principal outstanding less amounts recorded based on the fair value of warrants issued and the beneficial conversion feature net of accretion. As of June 30, 2021, $95.0 million of Series B-3 Convertible Notes had been issued.

During 2019 and 2018, the total reduction in the debt upon issuance for the warrants and beneficial conversion features in connection with this issuance totaled $2.1 million and $7.1 million, respectively. These amounts are accounted for as deferred financing fees, net of the debt and amortized over the life of the debt as interest expense.

In 2020, certain of the holders of our Series B-3 Convertible Notes agreed to accept paid in-kind interest for a portion of the period at a rate of 12% aggregating $9.2 million as of June 30, 2021. Principal amounts outstanding total $93.5 million as of June 30, 2021.

The Series B-3 Convertible Notes were converted into shares of Legacy Sharecare Series B-3 redeemable convertible preferred stock (and such preferred stock was subsequently converted into Legacy Sharecare common stock) immediately prior to the consummation of the Business Combination.

Series B-4 Convertible Notes

We issued $25.0 million of Series B-4 Convertible Notes during 2019. The Series B-4 Convertible Notes has interest at 10%, payable quarterly in arrears. In 2018 and prior to the issuance of the notes, we issued 21,350 warrants for a commitment of future funding. The warrants were liability classified as they contained a provision such that once issued they could be clawed back if the amount committed was not funded, representing a freestanding derivative. Upon the issuance of the debt, the fair value of the warrants of $2.6 million was remeasured, at which time the number of shares to be issued became fixed (no warrants could be cancelled) and the warrants were subsequently reclassified from a liability to an equity instrument.

In 2020, certain of the holders of our Series B-4 Convertible Notes agreed to accept paid in-kind interest for a portion of the period at a rate of 12% aggregating $2.0 million as of June 30, 2021. Principal amounts outstanding total $25.7 million as of June 30, 2021.

The Series B-4 Convertible Notes were converted into shares of Legacy Sharecare Series B-4 redeemable convertible preferred stock (and such preferred stock was subsequently converted into Legacy Sharecare common stock) immediately prior to the consummation of the Business Combination.

Series B Convertible Promissory Notes to Claritas Capital

In June 2013, we received proceeds of $5.0 million from the issuance of promissory notes to Claritas Capital, convertible into Series B redeemable convertible preferred stock, with interest paid quarterly at 10%, annualized.

In 2020, Claritas Capital agreed to accept paid in-kind interest for a portion of the period at a rate of 12% aggregating $0.5 million as of June 30, 2021. Principal amounts outstanding total $5.1 million as of June 30, 2021.

The Series B Convertible Promissory Notes were converted into shares of Legacy Sharecare Series B redeemable convertible preferred stock (and such preferred stock was subsequently converted into Legacy Sharecare common stock) immediately prior to the consummation of the Business Combination.

 

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity or cash flows.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including, but not limited to, revenue recognition, the valuation of assets and liabilities acquired, and the useful lives of intangible assets acquired in business combinations and the valuation of common stock. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

We believe that the accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. For further information, see Note 1, Nature of Business and Significant Accounting Policies, to Sharecare’s consolidated financial statements included elsewhere in this prospectus.

Revenue Recognition

Revenue is recognized when control of the promised good or service is transferred to the client, in an amount that reflects the consideration we expect to be entitled to in exchange for that good or service. Sales and usage-based taxes are excluded from revenue. We do not have any contracts that include significant financing fees. We are the principal in all outstanding revenue arrangements. We serve a diverse group of clients.

Enterprise Revenue

We provide employers, health plans, health systems and government organizations with health management programs for their employee base or covered population, including digital engagement, telephonic coaching, incentives, and biometrics. Revenue is recognized on a PMPM basis or based on member participation as services are provided. Member participation fees are generally determined by multiplying the contractually negotiated member rate by the number of members eligible for services during the month. Member participation rates are established during contract negotiations with clients, often based on a portion of the value the programs are expected to create. Contracts with health plans, health care systems and government organizations generally range from three to five years with several comprehensive strategic agreements extending up to ten years in length. Contracts with larger employer clients typically have two-to four-year terms.

Health management program contracts often include a fee for the subscription of the Sharecare digital platform, which may also be sold on a stand-alone basis. This service allows members to access Sharecare’s proprietary mobile application with a comprehensive suite of health and wellness management programs, content, and tools. Revenue is recognized on a per member or a fixed fee basis as the services are provided. These contracts may also include a performance obligation to implement the platform, which includes services such as marketing to the member population, configuration of the platform to be employer/provider specific and the set-up of challenges and incentives. These services are recognized over time as the services are performed. Any termination clauses may impact the contract duration.

 

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Sharecare’s Blue Zones Project is a community well-being improvement initiative designed to change the way people experience the world around them by encouraging and promoting better lifestyle choices, such as commuting, eating, and social habits. Because healthier environments naturally nudge people toward healthier choices, Blue Zones Project focuses on influencing the Life Radius®, the area close to home in which people spend 90% of their lives. Blue Zones Project best practices use people, places, and policy as levers to transform those surroundings. These contracts normally include two performance obligations, the discovery period and the subsequent content delivery for each year of engagement. The revenue is recognized based on the relative standalone selling price of the performance obligations evenly over time. These contracts do not include termination clauses and often have two- to four-year terms.

Certain contracts place a portion of fees at risk based on achieving certain performance metrics, such as cost savings, and/or clinical outcomes improvements (performance-based). We use the most likely amount method to estimate variable consideration for these performance guarantees. We include in the transaction price some or all of an amount of variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We utilize customer data in order to measure performance.

In the event performance levels are not met by the end of the measurement period, typically one year, some or all of the performance-based fees are required to be refunded. During the settlement process under a contract, which generally occurs six to eight months after the end of a contract year, performance-based fees are reconciled and settled.

Prior to January 1, 2019, performance-related adjustments (including any amounts recorded as revenue that were ultimately refunded), changes in estimates, or data reconciliation differences may have caused recognition or reversal of revenue in a current year that pertained to services provided during a prior year. Performance-related adjustments to revenue were not recognized (to the extent that performance-based services are provided, and the price is not fixed or determinable). Effective with the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), on January 1, 2019, performance-related revenue is recorded based on the most likely amount to be earned after applying the constraint that a significant reversal of revenue will not occur in future periods.

Clients are generally billed monthly for the entire amount of the fees contractually due for the prior month’s enrollment, which typically includes the amount, if any, that is performance-based and may be subject to refund should performance targets not be met. Fees for participation are typically billed in the month after the services are provided. Deferred revenues arise from contracts that permit upfront billing and collection of fees covering the entire contractual service period, generally 6-12 months. A limited number of contracts provide for certain performance-based fees that cannot be billed until after they are reconciled with the client.

Provider Revenue

Our provider channel revenue is primarily based on the volume of health document requests fulfilled and recognized upon satisfactory delivery to the client. In addition, provider revenue is derived from subscription fees for various technology-related services that assist providers with efficiency and productivity and enhanced patient care. Subscription fees are recognized ratably over the contractual period.

Consumer Solutions Revenue

Our consumer solutions channel generates revenue mostly through ad sponsorships and content delivery. Content delivery revenue is recognized when the content is delivered to the client and the transaction has met the other criteria listed above. Ad sponsorship revenue is recognized when the contractual page views or impressions are delivered to the client.

 

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Certain customer transactions may contain multiple performance obligations that may include delivery of content, page views, and ad sponsorship over time. To account for each of these elements separately, the delivered elements must be capable of being distinct and must be distinct in the context of the contract. Revenue is allocated based on the stand-alone or unbundled selling price for each performance obligation as the services are provided.

Business Combinations

We account for business acquisitions in accordance with ASC Topic 805, Business Combinations. We measure the cost of an acquisition as the aggregate of the acquisition date fair values of the assets transferred and liabilities assumed and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. We record goodwill for the excess of (i) the total costs of acquisition and fair value of any non-controlling interests over (ii) the fair value of the identifiable net assets of the acquired business.

The acquisition method of accounting requires us to exercise judgment and make estimates and assumptions based on available information regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of identifiable intangible assets, deferred tax asset valuation allowances, liabilities related to uncertain tax positions, and contingencies. We must also refine these estimates over a one-year measurement period, to reflect any new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Estimates and assumptions that we must make in estimating the fair value of future acquired technology, user lists, and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed, which could materially impact our results of operation.

New Accounting Pronouncements

See Note 1, Nature of Business and Significant Accounting Policies, to Sharecare’s consolidated financial statements included elsewhere in this prospectus.

Emerging Growth Company Accounting Election

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. Following the consummation of the Business Combination, we expect to remain an emerging growth company at least through the end of the 2022 fiscal year and expect to continue to take advantage of the benefits of the extended transition period. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions for emerging growth companies because of the potential differences in accounting standards used. For additional information, see the section titled “Risk Factors — Risks Related to Being a Public Company — We are an ‘emerging growth company,’ and our election to comply with the reduced disclosure requirements as a public company may make our common stock less attractive to investors” included elsewhere in this prospectus.

 

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Quantitative and Qualitative Disclosures about Market Risk

We have in the past and may in the future be exposed to certain market risks, including interest rate, foreign currency exchange, and financial instrument risks, in the ordinary course of our business. Currently, these risks are not material to our financial condition or results of operations, but they may be in the future.

 

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MANAGEMENT

The following is a list of Sharecare’s directors and executive officers and their ages and positions as of the closing of the Business Combination.

 

Name

   Age     

Position

Jeff Arnold

     51     

Founder, Chief Executive Officer, Chairman and Director

Justin Ferrero

     48     

President, Chief Financial Officer

Dawn Whaley

     52     

President, Chief Marketing Officer

Pam Shipley

     50     

Chief Operating Officer

Jeffrey A. Allred

     67     

Director

John Chadwick

     54     

Director

Dr. Sandro Galea

     50     

Director

Ken Goulet

     62     

Director

Dr. Veronica Mallett

     64     

Director

Alan G. Mnuchin

     61     

Director

Rajeev Ronanki

     50     

Director

Jeff Sagansky

     69     

Director

Jeff Arnold founded and has been the chairman and chief executive officer of Sharecare since Sharecare’s inception in 2012. Prior to founding Sharecare, Mr. Arnold was chairman and CEO of HowStuffWorks.com, until its sale to Discovery Communications in 2007, where he then served as chief digital strategy officer and chief architect of The Curiosity Project, until December 2011. Prior to that, in 1998, he founded and served as CEO of WebMD until 2000. Mr. Arnold has been widely recognized for his innovative contributions to media, healthcare, and technology throughout the years, including: EY naming him Entrepreneur Of The Year in the Southeast twice; being inducted into the American Academy of Achievement; being named a Global Leader of Tomorrow by the World Economic Forum; being presented with the Blumenthal Award by Johns Hopkins University; being inducted into the Honor Society of Nursing, Sigma Theta Tau International, as an honorary member; receiving the Phoenix Award by the State of Georgia; being inducted into the Technology Hall of Fame of Georgia; named a Health Care Hero by the Atlanta Business Chronicle; presented with a Groundbreaker Award by Atlanta Magazine; and honored by the Atlanta chapter of the IndUS Entrepreneurs with a Lifetime Achievement Award. Mr. Arnold is a graduate of the University of Georgia, where he majored in communications studies. He has been on numerous boards for public, private, and charitable organizations over the years and currently serves on the board of Five Star Travel, Inc., is acting chairman of Forbes Travel Guide and co-chairman of Endeavor Atlanta.

We believe Mr. Arnold is qualified to serve on the Sharecare Board due, among other things, to his role as founder of Sharecare and chief executive officer since its inception.

Justin Ferrero has served as president and chief financial officer of Sharecare since Sharecare’s inception in 2012. Responsible for technology, finance, corporate development, and strategic partnerships since Sharecare’s inception, Mr. Ferrero has played a key leadership role in helping to drive Sharecare’s long-term growth strategy. Before joining Sharecare, Mr. Ferrero was executive vice president and chief financial officer for HowStuffWorks until 2011. Before HowStuffWorks, Mr. Ferrero was a partner and founding member of The Convex Group, a media and technology holding company that owned HowStuffWorks until its sale to Discovery. Prior to The Convex Group, Mr. Ferrero was an associate with the Conseco Private Capital Group, where he gained extensive experience in corporate finance, mergers and acquisitions, and corporate organization and governance. Mr. Ferrero holds a bachelor’s degree in economics from the University of North Carolina at Chapel Hill. Mr. Ferrero currently serves on the board of directors for Forbes Travel Guide. He was named in 2020 and 2021 to Atlanta Magazine’s Atlanta 500, a list of the city’s most influential leaders.

Dawn Whaley has served as president and chief marketing officer of Sharecare since Sharecare’s inception in 2012. Ms. Whaley is involved in the development of overall corporate strategy and scaling operational

 

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execution, and is directly responsible for marketing, strategic partnerships, and business development. Previously, Ms. Whaley was the executive vice president of marketing and strategic relationships for HowStuffWorks, where she helped manage operations, marketing, and corporate development. Ms. Whaley was also a founding member of The Convex Group, the media and technology holding company that acquired HowStuffWorks in 2002, until its sale to Discovery. Prior to her role with The Convex Group, Ms. Whaley served as executive vice president for Alexander Ogilvy Public Relations, a leading, high-tech communications firm, and helped to orchestrate its acquisition by WPP in 1998.

Ms. Whaley currently holds a bachelor’s degree in telecommunications and business management from the University of Georgia. Ms. Whaley currently holds positions on the boards of directors for Forbes Travel Guide and the American Heart Association’s Metro Atlanta Division, for which she served on the executive committee of the 2016 Go Red for Women annual fundraiser. Additionally, she was recently named to the Atlanta 500, bestowed with Atlanta Magazine’s Groundbreaker Award and selected as a Diversity in Technology Game Changer by the Technology Association of Georgia.

Pam Shipley has served as executive vice president, chief operating officer, and chief client officer of Sharecare since September 2020. Bringing more than 30 years of experience in healthcare to her role, Ms. Shipley oversees Sharecare’s ongoing operational growth and end-to-end delivery of its comprehensive virtual health platform, services, and solutions. Ms. Shipley joined Sharecare from Centene Corporation, a Fortune 50 company and leading multi-national healthcare enterprise, where she served as Senior Vice President, Markets, with oversight and responsibility for multiple markets in the South, East, and Midwest regions. Spanning her 12 years with Centene, Ms. Shipley was responsible for strategy and business development for Envolve. She also led the Provider division, the Business Implementation Group and IT Configuration Unit, served as Plan President and was the company’s first Executive Sponsor for Digital Transformation. Prior to Centene, Ms. Shipley held a number of positions at other leading healthcare organizations, including UnitedHealthcare. In 2018, Ms. Shipley was chosen by the McKinsey Group to be included in their “Remarkable Women” program, for which a dozen women are selected each year across the world. She has also served as the executive sponsor for Centene’s women’s Employee Inclusion Group, I.N.S.P.I.R.E., is a member of Women Business Leaders, and sits on the Advisory Board of Nuvo Cares. Ms. Shipley attended Villanova University and received her B.S. from Chestnut Hill College in Philadelphia.

Jeffrey A. Allred is a partner at the law firm of Nelson Mullins Riley & Scarborough LLP (“Nelson Mullins”), where he serves as the firmwide Chair of the Corporate Practice Group. Prior to joining Nelson Mullins in April 2008, he was CEO of Griffeon Group LLC, a strategic advisory firm, from January 2007 to March 2008. Prior to that, Mr. Allred was at Premiere Global Services, Inc. (NYSE: PGI), a publicly traded global communications technology and services company, from July 1997 to December 2006. At Premiere, he served in various executive roles, including Executive Vice President—Strategic Development and Finance, Chief Investment Officer, and President and Chief Operating Officer, and as a member of the company’s Board of Directors. Mr. Allred serves as a director and member of the investment committee of the Kenan-Flagler Private Equity Funds. He has also served on the board of trustees, advisors and capital committees of numerous educational institutions and non-profit organizations, including as the Chairman of the Board of Visitors of the University of North Carolina at Chapel Hill and the Chairman of the Board of Advisors of the Kenan-Flagler Business School. Mr. Allred received his B.A. with Highest Honors in Political Science, his M.B.A. and his J.D. with Honors, from the University of North Carolina at Chapel Hill.

We believe Mr. Allred is qualified to serve on the Sharecare Board due, among other things, to his extensive experience leading both public and private companies in a variety of leadership roles.

John Chadwick founded and has been a partner of Claritas Capital since its inception in 2001. Mr. Chadwick has over thirty years of experience in financial services, with over twenty five years of experience in venture capital and private equity. Mr. Chadwick represents Claritas Capital on the boards of directors of numerous privately held companies, including FOH & BOH, Forbes Travel Guide, Genomind, MyWoundDoctor,

 

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Sharecare, StudioNow and TwelveStone Health Partners; and serves as an observer to the board of directors of Cogitativo. During his tenure as a partner of Claritas Capital, Mr. Chadwick has overseen numerous investments, including Continuum 700 (sold to T-Mobile), Entrada (sold to NextGen), Empyrean Benefit Solutions (sold to Securian Financial), HCA Healthcare (IPO) and StudioNow (sold to AOL). Prior to founding Claritas Capital, Mr. Chadwick was a partner at Richland Ventures and a Vice President of the Energy Group at Chemical Bank Mr. Chadwick also serves on the board of directors of W. S. Farish & Company, a private trust company. Mr. Chadwick earned an MBA from the Wharton School at the University of Pennsylvania and a B.A. from the University of Virginia.

We believe Mr. Chadwick is qualified to serve on the Sharecare Board due, among other things, to his extensive experience in healthcare, financings and capital structure and corporate governance.

Dr. Sandro Galea is a physician, epidemiologist and author and has served as the Robert A. Knox Professor, since January 2016, and Dean, since January 2015, at the Boston University School of Public Health. Dr. Galea previously held academic and leadership positions at Columbia University, the University of Michigan and the New York Academy of Medicine, including as the Gelman Professor and Chair of the Department of Epidemiology at the Columbia University Mailman School of Public Health. Dr. Galea has published over 900 scientific journal articles, 50 chapters and 18 books and his research has been cited over 70,000 times and featured extensively in current periodicals and newspapers. Dr. Galea has also published widely in the lay press, including in The Wall Street Journal, Harvard Business Review, The Boston Globe and The New York Times, and he is a regular contributor to Fortune. Dr. Galea is an elected member of the National Academy of Medicine and currently chairs the Rockefeller-Boston University Determinants, Data, Decision Making (3-D) global high- level commission. He has served as board Chair of the Association of Schools and Programs of Public Health, president of the Society for Epidemiologic Research and the Interdisciplinary Society for Population Health Science. Dr. Galea was named one of TIME magazine’s epidemiology innovators in 2006 and has been listed by Thomson Reuters/Clarivate as one of the “World’s Most Influential Scientific Minds” for the social sciences since 2015.

Dr. Galea has received several lifetime achievement awards for his research, including the Rema Lapouse Award from the American Public Health Association and the Robert S. Laufer Award from the International Society for Traumatic Stress. Dr. Galea serves frequently on advisory groups to national and global organizations. He formerly served as chair of the New York City Department of Health and Mental Hygiene’s Community Services Board and as a member of its Health Board. He served on the Advisory Council of the National Institute on Minority Health and Health Disparities, and on the Board of Scientific Counselors, Office of Public Health Preparedness and Response. More recently, he has served on several national and state COVID-19 committees, including co-chairing the Massachusetts Public Health Association Emergency Task Force on Coronavirus and Equity. Dr. Galea holds a medical degree from the University of Toronto, graduate degrees from Harvard University and Columbia University, and an honorary doctorate from the University of Glasgow

We believe Dr. Galea is qualified to serve on the board of directors of New Sharecare due, among other things, to his extensive expertise in the medical field and significant contributions to fields of medicine and social sciences.

Ken Goulet previously served as Executive Vice President, President Commercial & Specialty Businesses at Anthem, Inc. (which we refer to in this prospectus as the “Strategic Investor”) from August 2012 until September 2015 and as Executive Vice President, President Commercial Business Unit of the Strategic Investor from October 2007 until August 2012. Prior to that, he also served as Senior Vice President, President of National Accounts and National Sales & Account Management at the Strategic Investor (previously known as WellPoint, Inc.) from September 2006 until October 2007. During his time at the Strategic Investor, Mr. Goulet’s responsibilities included Strategy, Marketing, Product, Medical Management, Provider Engagement & Contracting and Service Operations. He successfully led the Strategic Investor through the industry’s turbulent transition to the Affordable Care Act, developing and executing the strategy and implementation of Public Exchanges. In addition, he successfully advanced Provider Collaboration strategies across the enterprise;

 

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integrated and grew the Strategic Investor’s Specialty Companies and organically grew the Strategic Investor’s Commercial Business. Before joining the Strategic Investor, Mr. Goulet spent 23 years at CIGNA Corporation where he held a number of management, sales and operations positions.

Mr. Goulet also has experience serving on a number of public and private company boards, including his current position as member of the board of directors of CHP Merger Corp. (Nasdaq: CHPMU), as well as positions on the board of several privately held companies within the healthcare industry, including Behavioral Health Group, EmpiRx, IPG, OODA Health, Quartet Health and Sharecare. He also sits on the advisory boards of Brave Health, Carecentrix and NationsHearing. From December 2015 until August 2018, Mr. Goulet served on the board of directors of Cotiviti (NYSE: COTV), prior to its acquisition by Veritas Capital. From April 2016 until March 2017, Mr. Goulet served on the board of Surgical Care Affiliates (Nasdaq: SCAI), prior to its acquisition by UnitedHealth’s Optum. Mr. Goulet received a Bachelor’s degree in economics from Trinity College in Hartford, Connecticut.

We believe Mr. Goulet is qualified to serve on the Sharecare Board due, among other things, to his extensive experience leading organizations as a senior executive in the digital healthcare space.

Dr. Veronica Mallett is the President and Chief Executive Officer of Meharry Medical College Ventures, a wholly-owned subsidiary of Meharry Medical College (“MMC”). She has held this position since April 2021. In addition, Dr. Mallett also serves as the Executive Director for the Center for Women’s Health Research. For the prior three years she served as the Senior Vice President of Health Affairs and Dean at Meharry Medical College School of Medicine, a position she has held since March 2020. As a leader, clinician, educator, and researcher, Dr. Mallett has authored over 100 articles, book chapters and abstracts combined. Dr. Mallett has served on the Faculty of Northwestern University, Wayne State University (“WSU”), University of Tennessee Health Science Center, Texas Tech Health Science Center El Paso (“Texas Tech”), holding leadership positions in each of these schools. She has over twenty years of leadership experience, as Fellowship Director and Residency Program Director at WSU, Director of Healthcare Excellence and Department Chair both at the University of Tennessee Memphis and Texas Tech where she served as founding Chair of the department of Obstetrics and Gynecology and Practice Plan Director from February 2011 to February 2017. She served as SVP and Dean of MMC School of Medicine for three years from March 2017 to March 2020, where she ran all clinical operations for the college.

Dr. Mallett attended Barnard College, Columbia University followed by medical school at Michigan State University, College of Human Medicine. Following medical school, she completed residency in Obstetrics and Gynecology and Fellowship in Urological Gynecology, now a board-certified subspecialty of Ob/Gyn, called Female Pelvic Medicine and Reconstructive Pelvic Surgery, at WSU in Detroit. She completed a Research and Surgical Fellowship in Electrophysiology of the Pelvic Floor/Reconstructive Surgery at St. Mary’s Hospital, Manchester, England. She is board certified in both Obstetrics and Gynecology and Female Pelvic Medicine and Reconstructive Pelvic Surgery. She has a master’s degree in Medical Management from Carnegie Mellon in Pittsburgh.

We believe Dr. Mallett is qualified to serve on the Sharecare Board due, among other things, to her extensive expertise in, and significant contributions to, the field of medicine.

Alan G. Mnuchin is a director of Sharecare. Mr. Mnuchin served as Chief Executive Officer and Chairman of FCAC from June 5, 2020 until the closing of the Business Combination. Mr. Mnuchin founded and has been the chief executive officer of Ariliam Group, a principal investment and strategic consulting firm, since 2019. Mr. Mnuchin has invested in various media and technology companies prior to and since founding Ariliam Group. Since May 2020, Mr. Mnuchin has served as a member of the board of directors of Flying Eagle. Mr. Mnuchin served as a member of the board of directors of Target Hospitality Corp. (Nasdaq: TH) from January 2019 to March 2019. In 2003, Mr. Mnuchin formed the boutique investment bank AGM Partners LLC, through which he has acted as a strategic M&A advisor to leading corporate, entrepreneurial and private equity clients on transactions totaling over $80 billion. Prior to founding AGM Partners, Mr. Mnuchin was the global

 

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head of the media group of Lehman Brothers from 2000 to 2003. Previously, Mr. Mnuchin was head of the media and entertainment group at Bear Stearns from 1996 to 2000. Prior to joining Bear Stearns, Mr. Mnuchin was a senior member of the communications, media and entertainment group at The Goldman Sachs Group, Inc. (NYSE: GS), where he started his career in 1984, with primary responsibility for the group’s media industry efforts. Mr. Mnuchin earned an MBA from the University of Chicago and a B.S. from the Wharton School at the University of Pennsylvania.

We believe Mr. Mnuchin is qualified to serve on the Sharecare Board due, among other things, to his extensive leadership experience as an officer and director of public companies, including as Chief Executive Officer and Chairman of FCAC prior to the Business Combination.

Rajeev Ronanki has served as the Senior Vice President & Chief Digital Officer of the Strategic Investor since June 2018, where he leads the execution of the Strategic Investor’s Digital, Artificial Intelligence, Exponential Technology and Innovation portfolios. His experience spans over 20 years of innovation-driven industry and social change across healthcare and technology. Prior to joining the Strategic Investor, Mr. Ronanki was a Partner at Deloitte Consulting, LLC from June 2008 to June 2018, where he established and led Deloitte’s Life Sciences and Healthcare Advanced Analytics, Artificial Intelligence and Innovation practices. Additionally, he was instrumental in shaping Deloitte’s blockchain and cryptocurrency solutions and authored pieces on various exponential technology topics. Mr. Ronanki also led Deloitte’s strategic partnerships across a wide range of innovation programs, such as doc. ai, Singularity University, Exponential Conference Series and MIT Media Labs, that seek to evangelize disruptive technologies like artificial intelligenc