UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37888

Tabula Rasa HealthCare, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State of incorporation)	46-5726437 (I.R.S. Employer Identification No.)
228 Strawbridge Drive, Suite 100 Moorestown, NJ 08057 (Address of Principal Executive Offices, including Zip Code)	(866) 648 - 2767 (Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, par value $0.0001 per share	TRHC	The Nasdaq Stock Market
~~Preferred Stock Purchase Rights~~		~~The Nasdaq Stock Market~~

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


Large accelerated filer ☒☐	Accelerated filer ☐	Non-accelerated filer ☐☒	Smaller reporting company ☐☒

			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 15, 2022,~~July 28, 2023, the Registrant had ~~27,124,287~~27,054,536 shares of Common Stock outstanding.

Table of Contents

TABULA RASA HEALTHCARE, INC.

QUARTERLY REPORT ON FORM 10-Q

For the period ended ~~September~~June 30, ~~2022~~2023

TABLE OF CONTENTS

		Page
		Number

PART I	Financial Information	3
Item 1.	Financial Statements	3
	Unaudited Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022	3
	Unaudited Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	4
	Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	5
	Unaudited Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	76
	Notes to Unaudited Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3433
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5047
Item 4.	Controls and Procedures	5047

PART II	Other Information	51
Item 1.	Legal Proceedings	5148
Item 1A.	Risk Factors	5148
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5249
Item 3.	Defaults Upon Senior Securities	5249
Item 4.	Mine Safety Disclosures	5249
Item 5.	Other Information	5249
Item 6.	Exhibits	5350

Signatures		5551

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Assets
Current assets:
Cash	$	80,783	$	9,395
Cash and cash equivalents					$	62,811	$	70,017
Restricted cash		7,389		6,038		10,400		12,372
Accounts receivable, net of allowance of $107 and $110, respectively		18,960		21,405
Accounts receivable, net of allowance of $935 and $368, respectively						18,610		19,252
Inventories		5,735		5,444		8,659		6,566
Prepaid expenses		3,484		3,812		3,581		4,664
Client claims receivable		16,193		11,257		16,415		16,377
Divestiture-related note receivable						3,527		—
Other current assets		20,439		18,033		22,678		18,187
Current assets of discontinued operations		26,861		14,511		—		22,825
Total current assets		179,844		89,895		146,681		170,260
Contingent consideration receivable		7,000		—
Property and equipment, net		10,038		11,778		9,369		9,158
Operating lease right-of-use assets		14,069		16,323		10,149		10,483
Software development costs, net		32,606		29,254		33,077		32,592
Goodwill		115,323		115,323		115,323		115,323
Intangible assets, net		40,275		45,358		35,129		38,326
Contingent consideration receivable						—		3,350
Other assets		4,691		3,929		6,209		4,657
Noncurrent assets of discontinued operations		—		187,558
Total assets	$	403,846	$	499,418	$	355,937	$	384,149

Liabilities and stockholders’ equity (deficit)
Liabilities and stockholders’ deficit
Current liabilities:
Current operating lease liabilities	$	3,195	$	3,275	$	2,982	$	2,708
Accounts payable		14,685		8,870		20,623		19,459
Client claims payable		9,537		8,398		10,981		10,781
Accrued expenses and other liabilities		59,507		40,997		59,105		55,745
Current liabilities of discontinued operations		11,132		12,380		—		13,389
Total current liabilities		98,056		73,920		93,691		102,082
Line of credit		—		29,500
Long-term debt, net of discount of $3,404 and $5,701, respectively		231,868		319,299
Long-term debt – related party, net of discount of $1,299 and $0, respectively		88,429		—
Long-term debt, net of discount of $2,669 and $3,160, respectively						232,603		232,112
Long-term debt – related party, net of discount of $1,019 and $1,206, respectively						88,709		88,522
Noncurrent operating lease liabilities		13,223		15,792		12,102		12,786
Deferred income tax liability, net		889		1,402		1,507		1,380
Other long-term liabilities		3,032		176		5,404		4,298
Noncurrent liabilities of discontinued operations		—		3,573
Total liabilities		435,497		443,662		434,016		441,180

Commitments and contingencies (Note 15)
Commitments and contingencies (Note 16)

Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock, $0.0001 par value; 100,000,000 shares authorized, 27,967,305 and 26,036,236 shares issued and 27,081,443 and 25,666,434 shares outstanding at September 30, 2022 and December 31, 2021, respectively		3		3
Treasury stock, at cost; 885,862 and 369,802 shares at September 30, 2022 and December 31, 2021, respectively		(3,350)		(4,292)
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2023 and December 31, 2022						—		—
Common stock, $0.0001 par value; 100,000,000 shares authorized, 28,360,785 and 28,031,616 shares issued and 27,058,420 and 27,129,096 shares outstanding at June 30, 2023 and December 31, 2022, respectively						3		3
Treasury stock, at cost; 1,302,365 and 902,520 shares at June 30, 2023 and December 31, 2022, respectively						(4,049)		(3,391)
Additional paid-in capital		349,911		320,392		359,573		354,214
Accumulated deficit		(378,215)		(260,347)		(433,606)		(407,857)
Total stockholders’ equity (deficit)		(31,651)		55,756
Total liabilities and stockholders’ equity (deficit)	$	403,846	$	499,418
Total stockholders’ deficit						(78,079)		(57,031)
Total liabilities and stockholders’ deficit					$	355,937	$	384,149

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,


2022

2021

2022

2021
Revenue:

Product revenue

$
59,780

$
50,321

$
166,645

$
139,021
Service revenue

17,321

17,589

50,163

51,964
Total revenue

77,101

67,910

216,808

190,985
Cost of revenue, exclusive of depreciation and amortization shown below:

Product cost

46,221

38,518

129,157

104,939
Service cost

14,014

12,697

40,430

37,875
Total cost of revenue, exclusive of depreciation and amortization

60,235

51,215

169,587

142,814
Operating expenses:

Research and development

4,018

3,699

11,226

11,069
Sales and marketing

2,857

2,719

7,678

8,225
General and administrative

27,917

14,393

58,945

45,725
Long-lived asset impairment charge

—

—

4,062

—
Depreciation and amortization

5,723

5,328

16,954

15,109
Total operating expenses

40,515

26,139

98,865

80,128
Loss from operations

(23,649)

(9,444)

(51,644)

(31,957)
Other income (expense):

Interest expense, net

(2,717)

(2,230)

(7,430)

(6,959)
Other income

479

—

479

—
Total other expense, net

(2,238)

(2,230)

(6,951)

(6,959)
Loss from continuing operations before income taxes

(25,887)

(11,674)

(58,595)

(38,916)
Income tax (benefit) expense

(7)

82

368

284
Net loss from continuing operations

(25,880)

(11,756)

(58,963)

(39,200)
Net loss from discontinued operations, net of tax

(14,185)

(5,355)

(58,905)

(18,484)
Net loss

$
(40,065)

$
(17,111)

$
(117,868)

$
(57,684)

Net loss per share:

Net loss per share from continuing operations, basic and diluted

$
(1.07)

$
(0.50)

$
(2.45)

$
(1.68)
Net loss per share from discontinued operations, basic and diluted

(0.58)

(0.23)

(2.45)

(0.80)
Total net loss per share, basic and diluted

$
(1.65)

$
(0.73)

$
(4.90)

$
(2.48)

Weighted average common shares outstanding, basic and diluted

24,350,182

23,407,391

24,075,666

23,230,138


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Revenue:
Medication revenue	$	69,626	$	55,892	$	138,376	$	106,865
Technology-enabled solutions revenue		20,410		16,705		39,937		32,842
Total revenue		90,036		72,597		178,313		139,707
Cost of revenue, exclusive of depreciation and amortization shown below:
Cost of medication revenue		53,554		43,384		106,636		82,936
Cost of technology-enabled solutions revenue		13,953		13,247		28,395		26,416
Total cost of revenue, exclusive of depreciation and amortization		67,507		56,631		135,031		109,352
Operating expenses:
Research and development		1,777		3,243		3,056		7,208
Sales and marketing		2,732		2,172		5,185		4,821
General and administrative		17,599		15,150		34,176		31,028
Change in fair value of contingent consideration receivable		3,350		—		3,750		—
Long-lived asset impairment charge		—		—		—		4,062
Depreciation and amortization		6,103		5,489		12,303		11,231
Total operating expenses		31,561		26,054		58,470		58,350
Loss from operations		(9,032)		(10,088)		(15,188)		(27,995)
Other income (expense):
Interest expense, net		(1,144)		(2,444)		(2,409)		(4,713)
Other income		566		—		1,018		—
Total other expense, net		(578)		(2,444)		(1,391)		(4,713)
Loss from continuing operations before income taxes		(9,610)		(12,532)		(16,579)		(32,708)
Income tax expense		133		159		238		375
Net loss from continuing operations		(9,743)		(12,691)		(16,817)		(33,083)
Net loss from discontinued operations, net of tax		(108)		(36,919)		(8,932)		(44,720)
Net loss	$	(9,851)	$	(49,610)	$	(25,749)	$	(77,803)

Net loss per share:
Net loss per share from continuing operations, basic and diluted	$	(0.38)	$	(0.53)	$	(0.66)	$	(1.38)
Net loss per share from discontinued operations, basic and diluted		—		(1.54)		(0.35)		(1.87)
Total net loss per share, basic and diluted	$	(0.38)	$	(2.07)	$	(1.01)	$	(3.25)

Weighted average common shares outstanding, basic and diluted		25,422,032		23,959,726		25,333,137		23,913,050

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share amounts)


	Stockholders' Equity (Deficit)												Stockholders' Equity (Deficit)
	Nine Months Ended September 30, 2022												Six Months Ended June 30, 2023
	Common Stock			Treasury Stock			Additional		Accumulated		Stockholders'		Common Stock			Treasury Stock			Additional		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Equity (Deficit)		Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Equity (Deficit)
Balance, January 1, 2022	26,036,236	$	3	(369,802)	$	(4,292)	$	320,392	$	(260,347)	$	55,756
Issuance of common stock awards	16,471		—	—		—		—		—		—
Issuance of restricted stock	297,434		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(138,882)		—		—		—		—
Exercise of stock options, net of shares withheld	11,646		—	—		—		60		—		60
Stock-based compensation expense	—		—	—		—		8,609		—		8,609
Net loss	—		—	—		—		—		(28,193)		(28,193)
Balance, March 31, 2022	26,361,787		3	(508,684)		(4,292)		329,061		(288,540)		36,232
Issuance of common stock awards	12,262		—	—		—		—		—		—
Issuance of restricted stock	424,540		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(30,542)		—		—		—		—
Exercise of stock options, net of shares withheld	927		—	(109)		—		3		—		3
Stock-based compensation expense	—		—	—		—		6,692		—		6,692
Net loss	—		—	—		—		—		(49,610)		(49,610)
Balance, June 30, 2022	26,799,516		3	(539,335)		(4,292)		335,756		(338,150)		(6,683)
Issuance of common stock awards	—		—	615,066		3,082		(3,082)		—		—
Balance, January 1, 2023													28,031,616	$	3	(902,520)	$	(3,391)	$	354,214	$	(407,857)	$	(57,031)
Issuance of restricted stock	1,167,532		—	—		—		—		—		—	25,167		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(507,299)		—		—		—		—	—		—	(232,208)		—		—		—		—
Exercise of stock options, net of shares withheld	257		—	—		—		1		—		1	71,562		—	—		—		219		—		219
Shares withheld for payment of employee taxes	—		—	(454,294)		(2,140)		—		—		(2,140)	—		—	(125,088)		(622)		—		—		(622)
Stock-based compensation expense	—		—	—		—		17,236		—		17,236	—		—	—		—		2,468		—		2,468
Net loss	—		—	—		—		—		(40,065)		(40,065)	—		—	—		—		—		(15,898)		(15,898)
Balance, September 30, 2022	27,967,305	$	3	(885,862)	$	(3,350)	$	349,911	$	(378,215)	$	(31,651)
Balance, March 31, 2023													28,128,345		3	(1,259,816)		(4,013)		356,901		(423,755)		(70,864)
Issuance of restricted stock													205,128		—	—		—		—		—		—
Forfeitures of restricted shares													—		—	(36,307)		—		—		—		—
Exercise of stock options, net of shares withheld													27,312		—	—		—		(98)		—		(98)
Shares withheld for payment of employee taxes													—		—	(6,242)		(36)		—		—		(36)
Stock-based compensation expense													—		—	—		—		2,770		—		2,770
Net loss													—		—	—		—		—		(9,851)		(9,851)
Balance, June 30, 2023													28,360,785	$	3	(1,302,365)	$	(4,049)	$	359,573	$	(433,606)	$	(78,079)

See accompanying notes to unaudited consolidated financial statements.

~~Table of Contents~~


	Stockholders' Equity												Stockholders' Equity (Deficit)
	Nine Months Ended September 30, 2021												Six Months Ended June 30, 2022
	Common Stock			Treasury Stock			Additional		Accumulated		Stockholders'		Common Stock			Treasury Stock			Additional		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Equity		Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Equity (Deficit)
Balance, January 1, 2021	24,222,674	$	2	(217,778)	$	(4,018)	$	352,445	$	(179,900)	$	168,529
Cumulative effect of change in accounting policy	—		—	—		—		(74,850)		(1,392)		(76,242)
Balance, January 1, 2022													26,036,236	$	3	(369,802)	$	(4,292)	$	320,392	$	(260,347)	$	55,756
Issuance of common stock awards	1,416		—	—		—		—		—		—	16,471		—	—		—		—		—		—
Issuance of restricted stock	629,088		—	—		—		—		—		—	297,434		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(12,880)		—		—		—		—	—		—	(138,882)		—		—		—		—
Exercise of stock options, net of shares withheld	224,503		—	(6,218)		(274)		2,501		—		2,227	11,646		—	—		—		60		—		60
Stock-based compensation expense	—		—	—		—		8,602		—		8,602	—		—	—		—		8,609		—		8,609
Net loss	—		—	—		—		—		(19,492)		(19,492)	—		—	—		—		—		(28,193)		(28,193)
Balance, March 31, 2021	25,077,681		2	(236,876)		(4,292)		288,698		(200,784)		83,624
Balance, March 31, 2022													26,361,787		3	(508,684)		(4,292)		329,061		(288,540)		36,232
Issuance of common stock awards													12,262		—	—		—		—		—		—
Issuance of restricted stock	120,598		—	—		—		—		—		—	424,540		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(22,913)		—		—		—		—	—		—	(30,542)		—		—		—		—
Exercise of stock options, net of shares withheld	84,396		—	—		—		885		—		885	927		—	(109)		—		3		—		3
Stock-based compensation expense	—		—	—		—		12,349		—		12,349	—		—	—		—		6,692		—		6,692
Net loss	—		—	—		—		—		(21,081)		(21,081)	—		—	—		—		—		(49,610)		(49,610)
Balance, June 30, 2021	25,282,675		2	(259,789)		(4,292)		301,932		(221,865)		75,777
Issuance of restricted stock	13,290		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(30,986)		—		—		—		—
Exercise of stock options, net of shares withheld	27,122		—	—		—		571		—		571
Stock-based compensation expense	—		—	—		—		8,011		—		8,011
Net loss	—		—	—		—		—		(17,111)		(17,111)
Balance, September 30, 2021	25,323,087	$	2	(290,775)	$	(4,292)	$	310,514	$	(238,976)	$	67,248
Balance, June 30, 2022													26,799,516	$	3	(539,335)	$	(4,292)	$	335,756	$	(338,150)	$	(6,683)

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Nine Months Ended				Six Months Ended
	September 30,				June 30,
	2022		2021		2023		2022
Cash flows from operating activities:
Net loss	$	(117,868)	$	(57,684)	$	(25,749)	$	(77,803)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		24,285		35,343		12,303		18,562
Amortization of deferred financing costs and debt discount		1,972		1,714		678		939
Deferred taxes		(513)		337		127		(368)
Stock-based compensation		32,537		28,962		5,238		15,301
Acquisition-related contingent consideration paid		—		(67)
Change in fair value of contingent consideration receivable						3,750		—
Impairment charges		46,355		—		363		40,510
Loss on divestiture of business		2,879		—
Net loss on divestiture of businesses						4,888		—
Other noncash items		(9)		9		292		(54)
Changes in operating assets and liabilities, net of effect of divestiture:
Changes in operating assets and liabilities, net of effect of divestitures:
Accounts receivable, net		5,107		789		514		2,979
Inventories		(291)		(866)		(2,093)		(354)
Prepaid expenses and other current assets		(1,375)		(6,084)		(3,829)		(7,916)
Client claims receivables		(4,936)		(872)		(38)		(3,162)
Other assets		(1,357)		(2,604)		3		(769)
Accounts payable		5,074		1,587		(1,222)		9,295
Accrued expenses and other liabilities		13,534		2,138		374		9,188
Client claims payables		1,139		423		200		353
Other long-term liabilities		3,220		(108)		554		2,139
Net cash provided by operating activities		9,753		3,017
Net cash (used in) provided by operating activities						(3,647)		8,840

Cash flows from investing activities:
Purchases of property and equipment		(1,021)		(1,611)		(1,310)		(471)
Software development costs		(23,860)		(22,649)		(7,187)		(17,870)
Proceeds from divestiture of business ⁽¹⁾		118,561		—
Net cash provided by (used in) investing activities		93,680		(24,260)
Proceeds from divestiture of businesses						3,384		—
Net cash used in investing activities						(5,113)		(18,341)

Cash flows from financing activities:
Proceeds from exercise of stock options		64		3,683		219		60
Payments for employee taxes for shares withheld		(1,112)		—		(655)		—
Payments for debt financing costs		(350)		(8)		—		(350)
Borrowings on line of credit		27,700		17,500		—		27,700
Repayments of line of credit		(57,200)		—
Payment of acquisition-related notes payable		—		(13,000)
Payments of acquisition-related contingent consideration		—		(99)
Repayments of long-term debt and finance leases		—		(4)
Net cash (used in) provided by financing activities		(30,898)		8,072		(436)		27,410

Net increase (decrease) in cash and restricted cash		72,535		(13,171)
Cash and restricted cash, beginning of period		15,706		28,532
Cash and restricted cash, end of period ⁽²⁾	$	88,241	$	15,361
Net (decrease) increase in cash, cash equivalents and restricted cash						(9,196)		17,909
Cash, cash equivalents and restricted cash, beginning of period						82,407		15,706
Cash, cash equivalents and restricted cash, end of period ⁽¹⁾					$	73,211	$	33,615

Supplemental disclosure of cash flow information:
Purchases of property and equipment and software development included in accounts payable and accrued expenses	$	1,082	$	370	$	2,762	$	2,693
Purchases of property and equipment and software development through vendor financing arrangements					$	881	$	—
Cash paid for interest	$	7,204	$	8,169	$	2,844	$	3,882
Cash paid for taxes	$	137	$	44
Cash paid for taxes, net					$	30	$	137
Interest costs capitalized to software development costs	$	257	$	216	$	24	$	202
Employee taxes for shares withheld included in accrued expenses	$	1,028	$	—	$	3	$	—

Reconciliation of cash and restricted cash:
Cash	$	80,783	$	10,757
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents					$	62,811	$	26,522
Restricted cash		7,389		4,014		10,400		7,062
Cash from discontinued operations		69		590		—		31
Total cash and restricted cash	$	88,241	$	15,361
Total cash, cash equivalents and restricted cash					$	73,211	$	33,615

(1)

The cash proceeds received from divestiture of business do not include $1,477 of additional consideration subsequently received by the Company in October 2022 due to customary post-closing adjustments or $3,000 of transaction costs incurred as of the sale date and expected to be paid in the fourth quarter of 2022. See Note 3 for additional information.

~~(2)~~

The cash flows related to discontinued operations have not been segregated. Accordingly, the unaudited consolidated statements of cash flows include the results of continuing and discontinued operations. ~~As a result of the divestiture, the changes in operating assets and liabilities for the nine months ended September 30, 2022 exclude changes related to the divested business.~~ See Note 3 for discussion of discontinued ~~operations and divestiture of business.~~operations.

See accompanying notes to unaudited consolidated financial statements.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

1. Nature of Business

Tabula Rasa HealthCare, Inc. (the “Company”) is a healthcare technology company ~~advancing~~enabling simplified and individualized care that improves the ~~safe use~~health of medications by creating solutions designed to empower pharmacists, providers, and patients to optimize medication regimens, combating medication overload and reducing adverse drug events. The Company’s advanced proprietary technology solutions, including MedWise®, identify causes of and risks for medication-related problems so healthcare professionals can minimize harm and reduce medication-related risks. The Company’s software and services help improve patient outcomes and lower healthcare costs through reduced hospitalizations, emergency department visits, and healthcare utilization.those the Company serves. The Company ~~serves~~offers comprehensive pharmacy services that include personalized, precision medication management and delivery, as well as a ~~number~~suite of ~~different organizations within the healthcare industry, including~~clinical and business management tools that help health plans and at-risk provider groups ~~the majority of which are organizations with Programs of All-Inclusive Care for the Elderly (“PACE”).~~optimize utilization and improve patient health.

2. Basis of Presentation, Summary of Significant Accounting Policies, and Recent Accounting Pronouncements

(a)Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly the Company’s interim consolidated financial position for the periods indicated. The interim results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of results to be expected for the year ending December 31, ~~2022,~~2023, any other interim periods, or any future year or period. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s ~~Annual Report~~annual report on Form 10-K filed with the SEC on ~~February 25, 2022~~March 10, 2023 (the ~~“2021~~“2022 Form 10-K”).

Except as described below, there have been no material changes to the Company’s significant accounting policies described in the ~~2021~~2022 Form 10-K that have a material impact on the Company’s accompanying unaudited consolidated financial statements and related notes.

(b)Segment Reporting

The Company previously operated its business through two segments, CareVention HealthCare and MedWise HealthCare. During the first quarter of 2022, the Company announced plans to evaluate non-core assets, refocus its corporate strategy, and increase stockholder value. As a result, the Company commenced plans to sell the SinfoníaRx, DoseMe, and PrescribeWellness Businesses (as defined below), which the Company acquired in September 2017, January 2019, and March 2019, respectively. The Company completed the sales of its unincorporated PrescribeWellness business (the “PrescribeWellness Business”), DoseMe business (the “DoseMe Business”), and SinfoníaRx business (the “SinfoníaRx Business”) in August 2022, January 2023, and March 2023, respectively. The completed sales of these businesses represented a strategic business shift, having a significant effect on the Company’s operations and financial results. As a result, the Company determined that these businesses met such requirements to be classified as held for sale and discontinued operations as of March 31, 2022, and subsequently continued to meet the requirements through their respective sale dates. Accordingly, unless otherwise indicated, the accompanying consolidated financial statements reflect the assets, liabilities, revenue, and expenses related to these businesses as discontinued operations for all periods presented. Unless otherwise noted, amounts and disclosures throughout the notes to the consolidated financial statements relate to the Company’s continuing operations.

The PrescribeWellness, DoseMe, and SinfoníaRx Businesses collectively comprised the majority of the Company’s MedWise HealthCare segment. As a result of the sales of these businesses, the Company reevaluated its operating segments with respect to the CareVention HealthCare segment and the remaining MedWise HealthCare segment. Subsequent to the sales of these businesses, the Company’s chief operating decision maker (“CODM”), who is the Chief Executive Officer, evaluates performance and allocates resources based on the consolidated results of the Company. Therefore, the Company consolidated its two operating segments to one segment by merging the CareVention HealthCare segment and the remaining MedWise HealthCare segment. The Company now operates its business as one

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

segment effective as of March 31, 2023. Prior comparative periods have been revised to conform with the current period segment presentation.

See Note 3 for further information on the Company’s discontinued operations and the Company’s sales of the PrescribeWellness, DoseMe, and SinfoníaRx Businesses.

(c)Assets and Liabilities Held for Sale and Discontinued Operations

A long-lived asset (or disposal group) is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable within a year. A long-lived asset (or disposal group) classified as held for sale is initially measured at the lower of its carrying amount or fair value less costs to sell. An impairment loss is recognized for any initial or subsequent write-down of the long-lived asset (or disposal group) to fair value less costs to sell. A gain or loss not previously recognized by the date of the sale of the long-lived asset (or disposal group) is recognized at the date of derecognition.

Long-lived assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale. Long-lived assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

~~Unless otherwise noted, amounts and disclosures throughout the notes to the unaudited consolidated financial statements relate to the Company’s continuing operations.~~

Additional details surrounding the Company’s assets and liabilities held for sale and discontinued operations are included in Note 3.

~~Table of Contents~~

~~TABULA RASA HEALTHCARE, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Amounts in thousands, except share and per share data)~~

~~(c)~~(d)Cloud Computing Arrangements

Costs to implement cloud computing arrangements that are hosted by third-party vendors are capitalized when incurred during the application development phase. Capitalized implementation costs are included in prepaid expenses and other assets on the Company’s consolidated balance sheets, and are amortized on a straight-line basis over the reasonably certain term of the hosting arrangement, beginning when the service is ready for its intended use. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, capitalized implementation costs ~~of $882~~were $2,178 and ~~$747, respectively, were included in prepaid expenses, and $1,276 and $0, respectively, were included in other assets on the Company’s consolidated balance sheets.~~$2,158, respectively. Accumulated amortization for these arrangements was ~~$554~~$775 and ~~$398~~$590 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Amortization expense for the three months ended ~~September~~June 30, 2023 and 2022, was $63 and ~~2021, was $51 and $53,~~$52, respectively. Amortization expense for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, was $185 and ~~2021, was $156 and $155,~~$105, respectively.

~~(d)~~(e)Vendor Financing Arrangements

On February 24, 2022, the Company expanded its existing relationship with a third-party service provider for business process outsourcing and technology services for its third-party administration services and electronic health records solutions. As a result, the third-party provider hired approximately 180 employees from the Company, hired to fill existing open positions, and ~~will augment~~augmented with additional resources to meet client demand. The agreement term is seven years and includes total estimated fees of $115,300.

The arrangement includes extended payment terms for cloud computing implementation costs, internally developed software support, and business process support. In order to determine the present value of the commitment, the Company used an imputed interest rate of 9.5%, which was reflective of its estimated uncollateralized borrowing rate at signing. As of ~~September~~June 30, 2023 and December 31, 2022, the outstanding principal balance of the financing arrangement was ~~$3,772~~$6,500 and $5,169, respectively, with an unamortized discount of ~~$876,~~$1,546 and $1,239, respectively, which was included in accrued expenses and other liabilities and other long-term liabilities on the Company’s consolidated balance ~~sheet.~~ sheets.

On October 1, 2022, the Company entered into a purchase arrangement with a third-party software support and service provider to purchase software licenses for total fees of $1,065. The purchased software licenses were delivered to the Company on the purchase date. The arrangement allows the Company to pay the fees over 36 monthly installment

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

payments. The Company used an imputed interest rate of 10.0%, which was reflective of its estimated collateralized borrowing rate on the purchase date. As of June 30, 2023 and December 31, 2022, the outstanding principal balance of the financing arrangement was $749 and $916, respectively, with an unamortized discount of $129 and $138, respectively, which was included in accrued expenses and other liabilities and other long-term liabilities on the Company’s consolidated balance sheets.

Imputed interest expense from ~~the arrangement~~vendor financing arrangements was ~~$53~~$118 and ~~$89~~$30 for the three ~~and nine~~ months ended ~~September~~June 30, 2023 and 2022, respectively, and $222 and $36 for the six months ended June 30, 2023 and 2022, respectively.

~~(e)~~(f)Allowance for Credit Losses

The Company maintains an allowance for credit losses to provide for expected credit losses on its divestiture-related notes receivable. The allowance for credit losses is based on the Company’s analysis of the expected future cash flows, as well as an assessment of the debtor’s credit quality. All losses are charged to the allowance when the loss occurs or when a determination is made that such a loss is likely and can be reasonably estimated. Recoveries are credited to the allowance at the time of recovery. The Company evaluates its allowance for credit losses quarterly. As of June 30, 2023, the allowance for credit losses on the divestiture-related notes receivable was $149. See Note 7 for additional information on the Company’s divestiture-related notes receivable.

(g)Concentrations of Credit Risk

The Company is subject to concentrations of credit risk related to cash, cash equivalents, restricted cash, accounts receivable, and client claims receivable. While the Company maintains its cash, cash equivalents and restricted cash with financial institutions with high credit ratings, it often maintains these deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any realized losses on cash, cash equivalents or restricted cash to date.

The Company’s medication fulfillment services clients are sponsors of the federal Medicare Part D plan (prescription drug coverage plan) and, therefore, subject to the payment regulations established by the Centers for Medicare & Medicaid Services (“CMS”). Under CMS guidelines, Medicare Part D sponsors are required to remit payment for claims within 14 calendar days of the date on which an ~~electronically-submitted~~electronically submitted claim is received and within 30 days of the date on which non-electronically-submitted claims are received. The Company extends credit to clients based upon such terms, as well as management’s evaluation of creditworthiness, and generally collateral is not required.

The Company’s clients also include health plans and other healthcare providers. Credit associated with these accounts is extended based upon management’s evaluation of creditworthiness and is monitored on an on-going basis.

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, no client represented more than 10% of net accounts receivable.

As of ~~September~~June 30, ~~2022~~2023, one client represented ~~21%~~18% of client claims receivable. As of December 31, ~~2021, two clients~~2022, one client represented ~~13% and 11%, respectively,~~14% of client claims receivable.

One client accounted for 13% and 16% of total revenue for the three months ended June 30, 2023 and 2022, respectively, and 13% and 17% of total revenue for the six months ended June 30, 2023 and 2022, respectively.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

One client accounted for 15% and 13% of total revenue for the three months ended September 30, 2022 and 2021, respectively, and 16% and 14% of total revenue for the nine months ended September 30, 2022 and 2021, respectively.

~~(f)~~(h)Recent Accounting Pronouncement

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ~~(“ASU”)~~ 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under ~~ASC~~FASB Accounting Standards Codification Topic 606 (Revenue from Contracts with Customers) in order to align the recognition of a contract liability with the definition of performance obligation. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. ASU 2021-08 is effective for financial statements issued for fiscal years beginning after December 15, 2022; early adoption is permitted. The Company ~~plans to adopt~~adopted ASU 2021-08 on January 1, 2023 and ~~does~~determined that it did not ~~expect it to~~ have a significant impact on the consolidated financial statements.

3. Discontinued Operations

In February 2022, the Company announced plans to evaluate non-core assets, refocus its corporate strategy, and increase stockholder value, and the Company commenced a plan to sell the DoseMe business, which the Company acquired in January 2019. In March 2022, the Company completed its evaluation of additional divestiture opportunities and commenced plans to sell the SinfoníaRx and PrescribeWellness businesses, which were acquired in September 2017 and March 2019, respectively. As described below, the Company completed the sale of its unincorporated PrescribeWellness business division (the “PrescribeWellness Business”) in August 2022.

~~The DoseMe, SinfoníaRx, and PrescribeWellness businesses comprised the majority~~Divestiture of the ~~Company’s MedWise HealthCare segment. The Company’s completed sale of the~~ PrescribeWellness Business and plan of sale with respect to DoseMe and SinfoníaRx represent a strategic business shift having a significant effect on the Company’s operations and financial results. As a result, the Company determined that these businesses met such requirements to be classified as held for sale and discontinued operations as of March 31, 2022 and continued to meet the requirements as of September 30, 2022. Accordingly, unless otherwise indicated, the accompanying consolidated financial statements have been recast for all periods presented to reflect the assets, liabilities, revenue, and expenses related to these businesses as discontinued operations.

~~Divestiture of~~ Business

On August 1, 2022 (the ~~“Sale~~“PW Sale Date”), the Company completed the sale of its PrescribeWellness Business, including the assets, properties, and rights that were primarily used or held for use in connection with the PrescribeWellness Business, as well as the KD Assets (as defined below) to Transaction Data Systems, Inc. (“TDS”). On the PW Sale Date, the Company also completed the acquisition of certain intellectual property from karmadata, Inc. (“KD”) that had historically been licensed to the Company, (the “KD Assets”). The KD Assets acquired were simultaneously transferred to TDS on the PW Sale Date. The purchase consideration included $125,000 in cash, subject to certain customary post-closing adjustments, of which $118,561 was paid directly to the Company and $5,900 was paid to KD on the PW Sale Date. In October 2022, TDS also paid the Company $1,477 for certain customary post-closing adjustments ~~subsequent to~~after the PW Sale Date. The Company is also entitled to receive up to $15,000 of contingent consideration ~~to be paid by TDS~~ based upon the PrescribeWellness Business’s achievement of certain performance-based metrics during the fiscal years ending December 31, 2023 and 2024. The contingent consideration had an estimated fair value of $7,000 on the PW Sale Date. See Note 1415 for additional discussion on the fair value assessment of the contingent consideration receivable.

In connection with the sale of the PrescribeWellness Business, the Company entered into a transition services agreement (the “PW TSA”) with TDS, pursuant to which the Company provided services, including, but not limited to, business support services for the PrescribeWellness Business after the sale through January 2023. The Company recognized $4 of income related to the PW TSA for the six months ended June 30, 2023, which is reported in other income in the Company’s consolidated statement of operations.

During the three and six months ended June 30, 2022, as a result of the Company’s intention to sell the PrescribeWellness Business, the Company prepared impairment tests on the related net assets held for sale. Using a market approach to determine fair value, the Company concluded that the fair value less costs to sell did not exceed the carrying value of the net assets held for sale for the PrescribeWellness Business. As a result, the Company recorded goodwill impairment charges of $12,145 and impairment charges of $8,500 on net assets held for sale for the three and six months ended June 30, 2022.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

The following table summarizes the results of operations of the PrescribeWellness Business, which are included in loss from discontinued operations, net of tax in the consolidated statements of operations:


	Three Months Ended		Six Months Ended
	June 30, 2022		June 30, 2022
Revenue	$	7,885	$	16,769
Cost of revenue, exclusive of depreciation and amortization		3,348		6,518
Operating expenses		5,104		12,594
Impairment charges		20,645		20,645
Loss from discontinued operations before income taxes		(21,212)		(22,988)
Income tax benefit		(315)		(288)
Net loss from discontinued operations, net of tax	$	(20,897)	$	(22,700)

The following table summarizes the significant operating noncash items and investing activities of the PrescribeWellness Business:


	Six Months Ended
	June 30, 2022
Depreciation and amortization	$	4,551
Impairment charges		20,645
Stock-based compensation		969
Purchases of property and equipment		(21)
Software development costs		(3,790)

Divestiture of the DoseMe Business

On January 20, 2023 (the “DoseMe Sale Date”), the Company completed the sale of its DoseMe Business, including the assets, properties, and rights that were primarily used or held for use in connection with the DoseMe Business, to DoseMe Operations Inc. (“DoseMe Operations”). The purchase consideration included $2,000 in cash, subject to certain customary post-closing adjustments, of which $1,984 was paid directly to the Company on the DoseMe Sale Date. The purchase consideration also includes a note receivable of $3,000 with an annual interest rate of 7%, which matures on January 20, 2027. See Note 7 for additional information on the divestiture-related note receivable.

In connection with the sale of the ~~PrescribeWellness~~DoseMe Business, the Company entered into a transition services agreement (“~~TSA)”~~DoseMe TSA”) with ~~TDS~~DoseMe Operations, pursuant to which the Company is providing services, including, but not limited to, business support services for the ~~PrescribeWellness business~~DoseMe Business after the sale through ~~April~~October 2023. ~~The~~For the three and six months ended June 30, 2023, the Company recognized ~~$479~~$51 and $101 of income related to the DoseMe TSA, ~~for the three and nine months ended September 2022,~~respectively, which is reported in other income onin the Company’s consolidated statement of operations.

During the three and six months ended June 30, 2022, as a result of the Company’s intention to sell the ~~PrescribeWellness~~DoseMe Business, the Company prepared an impairment ~~test~~tests on the related net assets held for sale. Using a market approach to determine fair value, the Company concluded that the fair value less costs to sell did not exceed the carrying value of the net assets held for sale for the ~~PrescribeWellness Business did not exceed its fair value, less costs to sell.~~DoseMe Business. As a result, the Company recorded goodwill impairment charges of ~~$12,145~~$740 and impairment charges of ~~$8,500~~$3,835 on net assets held for sale ~~summarized in~~for the ~~results of~~six months ended June 30, 2022. For the ~~PrescribeWellness business presented below. On August 1,~~three months ended June 30, 2022, the Company recorded ~~an additional $2,879~~$3,735 of impairment charges on the net assets held for sale. During the six months ended June 30, 2023, the Company recorded a final ~~loss~~gain of $211 on the sale of the ~~PrescribeWellness Business, resulting in an aggregate loss of $11,379 on the net assets sold for the nine months ended September 30, 2022.~~DoseMe Business.

~~The following table summarizes the net assets sold as finally reported on the sale date of August 1, 2022 and as of December 31, 2021,~~ ~~classified as discontinued operations on the consolidated balance sheets as of December 31, 2021:~~

August 1,

December 31,

2022

2021
Accounts receivable, net
$
5,020

8,002
Prepaid expenses and other assets

1,751

1,038
Property and equipment, net

371

—
Operating lease right-of-use assets

1,252

—
Software development costs, net

14,536

—
Goodwill

35,314

—
Intangible assets, net

81,504

—
Impairment of carrying value

(8,500)

—
Total current assets of discontinued operations
$
131,248

$
9,040

Property and equipment, net
$
—

$
412
Operating lease right-of-use assets

—

1,434
Software development costs, net

—

11,474
Goodwill

—

47,459
Intangible assets, net

—

84,617
Other assets

—

64
Total noncurrent assets of discontinued operations
$
—

$
145,460

Operating lease liabilities
$
1,086

$
620
Accounts payable

491

913
Accrued expenses and other liabilities

2,754

3,529
Total current liabilities of discontinued operations
$
4,331

$
5,062

Noncurrent operating lease liabilities
$
—

$
830
Other long-term liabilities

—

135
Total noncurrent liabilities of discontinued operations
$
—

$
965

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

The following table summarizes the assets and liabilities classified as discontinued operations on the consolidated balance sheets as of December 31, 2022:


	December 31,
	2022
Cash	$	18
Accounts receivable, net		530
Prepaid expenses and other assets		43
Property and equipment, net		30
Software development costs, net		421
Goodwill		1,927
Intangible assets, net		9,372
Impairment of carrying value		(7,730)
Total current assets of discontinued operations	$	4,611

Accounts payable	$	42
Accrued expenses and other liabilities		1,231
Total current liabilities of discontinued operations	$	1,273

The following table summarizes the results of operations of the ~~PrescribeWellness~~DoseMe Business, which are included in loss from discontinued operations, net of tax in the consolidated statements of ~~operations for the three and nine months ended September 30, 2022 and 2021:~~operations:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Revenue	$	2,537	$	10,533	$	19,306	$	27,629	$	—	$	407	$	64	$	778
Cost of revenue, exclusive of depreciation and amortization		1,229		3,426		7,747		9,883		—		47		3		88
Operating expenses		2,336		8,373		14,930		24,427		—		782		432		2,165
Impairment charges		—		—		20,645		—		—		3,735		—		4,575
Loss on disposal of business		2,879		—		2,879		—
Loss (gain) on divestiture of business										11		—		(211)		—
Loss from discontinued operations before income taxes		(3,907)		(1,266)		(26,895)		(6,681)		(11)		(4,157)		(160)		(6,050)
Income tax (benefit) expense		(11)		12		(299)		66		(44)		(105)		10		(76)
Net loss from discontinued operations, net of tax	$	(3,896)	$	(1,278)	$	(26,596)	$	(6,747)
Net income (loss) from discontinued operations, net of tax									$	33	$	(4,052)	$	(170)	$	(5,974)

The following table summarizes the significant operating ~~non-cash~~noncash items and investing activities of ~~PrescribeWellness~~the DoseMe Business:


	Nine Months Ended				Six Months Ended
	September 30,				June 30,
	2022		2021		2023		2022
Depreciation and amortization	$	4,551	$	12,059	$	—	$	655
Impairment charges		20,645		—		—		4,575
Stock-based compensation		1,697		2,352		1		345
Loss on disposal of business		2,879		—
Gain on divestiture of business						211		—
Purchases of property and equipment		(22)		(305)		—		(6)
Software development costs		(4,443)		(9,783)		—		(145)

~~Held for Sale~~12

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

Divestiture of the SinfoníaRx Business

On March 2, 2023 (the “SinfoníaRx Sale Date”), the Company completed the sale of its SinfoníaRx Business, including the assets, properties, and rights that were primarily used or held for use in connection with the SinfoníaRx Business to Symphony Clinic, LLC (“Symphony”). The purchase consideration included $1,400 in cash, subject to certain customary post-closing adjustments, which was paid directly to the Company on the SinfoníaRx Sale Date. The purchase consideration also includes a note receivable of $3,600 with an annual interest rate of 3%, which matures on December 31, 2023. The Company ~~considers~~may also be entitled to receive up to $1,000 in contingent consideration based upon potential regulatory changes affecting the SinfoníaRx Business. The contingent consideration had an estimated fair value of $500 on the SinfoníaRx Sale Date. See Note 7 for additional discussion on the divestiture-related note receivable and Note 15 for additional discussion on the fair value assessment of the contingent consideration receivable.

In connection with the sale of the ~~DoseMe~~SinfoníaRx Business, the Company entered into a transition services agreement (“SinfoníaRx TSA”) with Symphony, pursuant to which the Company is providing services, including, but not limited to, business support services for the SinfoníaRx Business after the sale through December 2023. For the three and six months ended June 30, 2023, the Company recognized $515 and $913 of income related to the SinfoníaRx ~~businesses to be highly probable within one year.~~ TSA, respectively, which is reported in other income in the Company’s consolidated statement of operations.

During the three and ~~nine~~six months ended ~~September~~June 30, 2022, as a result of the Company’s intention to sell the ~~DoseMe and~~ SinfoníaRx ~~businesses,~~Business, the Company prepared an impairment ~~test~~tests on the related net assets held for sale. Using a market approach to determine fair value, the Company concluded that the fair value less costs to sell did not exceed the carrying ~~values~~value of the net assets held for sale for the SinfoníaRx ~~and DoseMe businesses did not exceed their fair values, less costs to sell.~~Business. As a result, the Company recorded goodwill impairment charges of ~~$6,127~~$5,387 and ~~$15,521 of~~ impairment charges of $5,841 on ~~the~~ net assets held for sale ~~related to the DoseMe and SinfoníaRx businesses~~ for the ~~nine~~three and six months ended ~~September~~June 30, 2022. ~~For~~During the ~~three~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company recorded ~~$5,845 of impairment charges~~an additional $5,099 for the final loss on the ~~net assets held for~~ sale ~~related to~~of the ~~DoseMe and~~ SinfoníaRx ~~businesses. No goodwill impairment charges related to the DoseMe and SinfoníaRx businesses were recorded for the three months ended September 30, 2022.~~Business.

The following table s~~ummarizes~~summarizes the ~~results of operations of the~~ ~~DoseMe~~assets and ~~SinfoníaRx~~ ~~businesses, which are included in loss from~~liabilities classified as discontinued operations ~~net of tax in~~on the consolidated ~~statements~~balance sheets as of ~~operations for the three and nine months ended September 30, 2022 and 2021~~December 31, 2022:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021
Revenue
$
6,407

$
8,143

$
23,094

$
26,961
Cost of revenue, exclusive of depreciation and amortization

7,055

6,521

20,479

19,755
Operating expenses

3,879

5,659

13,639

18,827
Impairment charges

5,845

—

21,648

—
Loss from discontinued operations before income taxes

(10,372)

(4,037)

(32,672)

(11,621)
Income tax (benefit) expense

(83)

40

(363)

116
Net loss from discontinued operations, net of tax
$
(10,289)

$
(4,077)

$
(32,309)

$
(11,737)


	December 31,
	2022
Accounts receivable, net	$	3,707
Prepaid expenses and other assets		2,174
Property and equipment, net		1,320
Operating lease right-of-use assets		3,991
Software development costs, net		7,142
Intangible assets, net		13,263
Impairment of carrying value		(13,383)
Total current assets of discontinued operations	$	18,214

Operating lease liabilities	$	3,525
Accounts payable		3,188
Accrued expenses and other liabilities		5,403
Total current liabilities of discontinued operations	$	12,116

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

The following table summarizes the DoseMe and SinfoníaRx businesses’ current and noncurrent assets and liabilities classified as discontinued operations on the consolidated balance sheets as of September 30, 2022 and December 31, 2021:

September 30,

December 31,

2022

2021
Cash
$
69

$
273
Accounts receivable, net

4,964

4,644
Prepaid expenses and other assets

796

554
Property and equipment, net

1,349

—
Operating lease right-of-use assets

3,732

—
Software development costs, net

6,910

—
Goodwill

1,927

—
Intangible assets, net

22,635

—
Impairment of carrying value

(15,521)

—
Total current assets of discontinued operations
$
26,861

$
5,471

Property and equipment, net
$
—

$
1,485
Operating lease right-of-use assets

—

3,296
Software development costs, net

—

4,466
Goodwill

—

8,053
Intangible assets, net

—

24,675
Other assets

—

123
Total noncurrent assets of discontinued operations
$
—

$
42,098

Operating lease liabilities
$
3,458

$
793
Accounts payable

3,077

3,395
Accrued expenses and other liabilities

4,597

3,130
Total current liabilities of discontinued operations
$
11,132

$
7,318

Noncurrent operating lease liabilities

—

$
2,608
Other long-term liabilities

—

—
Total noncurrent liabilities of discontinued operations
$
—

$
2,608

The following table summarizes the ~~DoseMe and~~results of operations of the SinfoníaRx ~~businesses’~~Business, which are included in loss from discontinued operations, net of tax in the consolidated statements of operations:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Revenue	$	—	$	8,669	$	3,536	$	15,909
Cost of revenue, exclusive of depreciation and amortization		—		6,802		4,919		13,336
Operating expenses		—		2,875		1,917		7,595
Impairment charges		—		11,228		363		11,228
Loss on divestiture of business		141		—		5,099		—
Loss from discontinued operations before income taxes		(141)		(12,236)		(8,762)		(16,250)
Income tax benefit		—		(266)		—		(204)
Net loss from discontinued operations, net of tax	$	(141)	$	(11,970)	$	(8,762)	$	(16,046)

The following table summarizes the significant operating ~~non-cash~~noncash items and investing activities of ~~discontinued operations:~~the SinfoníaRx Business:

Nine Months Ended

September 30,

2022

2021
Depreciation and amortization

$
2,780

$
8,175
Impairment charges

21,648

—
Stock-based compensation

2,667

2,510
Purchases of property and equipment

(50)

(1,323)
Software development costs

(2,998)

(6,155)


	Six Months Ended
	June 30,
	2023		2022
Depreciation and amortization	$	—	$	2,125
Impairment charges		363		11,228
Stock-based compensation		37		1,192
Loss on divestiture of business		5,099		—
Purchases of property and equipment		—		(32)
Software development costs		(358)		(2,071)

4. Revenue

The Company generates ~~the majority of its~~ revenue from ~~its CareVention HealthCare segment.~~medication fulfillment pharmacy services provided to PACE organizations and technology-enabled solutions tailored to the specific needs of the healthcare organizations that it serves.

Client contracts generally have a term of one to five years and generally renew at the end of the initial term. In most cases, clients may terminate their contracts with a notice period ranging from 0zero to 180 days without cause, thereby limiting the term in which the Company has enforceable rights and obligations. Revenue is recognized in an amount that reflects the consideration that is expected in exchange for the goods or ~~services.~~services provided. Generally, there are not significant differences between the timing of revenue recognition and billing. Consequently, the Company has determined that client contracts do not include a financing component.

The Company does not disclose the amount of variable consideration that the Company expects to recognize in future periods, as the variable consideration in the Company’s contracts is allocated entirely to a wholly unsatisfied

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~~TABULA RASA HEALTHCARE, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Amounts in thousands, except share and per share data)~~

performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation, and the terms of that variable consideration relate specifically to the Company’s efforts to transfer the distinct service, or to a specific outcome from transferring the distinct service. The Company’s contracts primarily include monthly fees associated with unspecified quantities of medications, members, claims, medication safety reviews, or user subscriptions that fluctuate throughout the contract. See below for a description of the Company’s revenues.

~~CareVention HealthCare~~14

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(Amounts in thousands, except share and per share data)

~~PACE Product~~Medication Revenue

The Company provides medication fulfillment pharmacy services to PACE organizations. While the majority of medications are routinely filled in order to treat chronic conditions, the mix and quantity of medications can vary. Revenue from medication fulfillment services is generally billed monthly or weekly, depending on whether the PACE organization is contracted with a pharmacy benefit manager, and is recognized when medications are delivered and control has passed to the client. At the time of delivery, the Company has performed substantially all of its performance obligations under its client contracts. The Company does not experience a significant level of returns or reshipments.

Technology-Enabled Solutions Revenue

~~PACE~~Value-Based Care Solutions

The Company provides medication safety services and health plan management services to PACE organizations. These services primarily include medication reviews, risk adjustment services, third-party administration services, and pharmacy benefit management (“PBM”) ~~solutions, and electronic health records software.~~solutions. Revenue related to these services primarily consists of a fixed monthly fee assessed based on number of members served (“per member, per month”), a fee for each claim adjudicated, and subscription fees. These fees are recognized when the Company satisfies its performance obligation to stand ready to provide PACE services, which occurs when the Company’s clients have access to the PACE services. The Company generally bills for PACE services on a monthly basis.

For client contracts for which the Company performs both medication fulfillment and PBM services, the Company recognizes revenue using the gross method at the contract price negotiated with its clients and when the Company has concluded it controls the prescription drug before it is transferred to the client plan members. The Company controls prescription drugs dispensed indirectly through its retail pharmacy network because it has separate contractual arrangements with those pharmacies, has discretion in setting the price for the transaction, and assumes primary responsibility for fulfilling the promise to provide prescription drugs to its client plan members while performing the related PBM services. These factors indicate that the Company is the principal and, as such, the Company recognizes the total prescription price contracted with clients in revenue.

~~MedWise HealthCare~~

~~Medication Safety Services~~

The Company also provides medication safety services to other healthcare organizations, which include identification of high-risk individuals, medication regimen reviews, including patient and prescriber counseling, and targeted interventions to increase adherence and close gaps in care. Revenue related to these services primarily consists of per member, per month fees and fees for each medication review and clinical assessment completed. Revenue is recognized when the Company satisfies its performance obligation to stand ready to provide medication safety services, which occurs when the Company’s clients have access to the medication safety services and when medication reviews and clinical assessments are completed. The Company generally bills for the medication reviews and clinical assessments when they are completed. The Company generally bills for the medication safety services on a monthly basis.

Software Subscription and Services

The Company provides software as a service (“SaaS”) solutions which include electronic health records software and solutions that allow for the identification of individuals with high medication-related risk and for optimizing medication therapy. Revenues related to these SaaS solutions primarily consist of monthly subscription fees and are recognized monthly as the Company meets its performance obligation to provide access to the software. Revenue for implementation and set-up services is generally recognized over the contract term as the software services are provided. The Company generally bills for the software services on a monthly basis.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

~~Software Subscription and Services~~

The Company provides software as a service (“SaaS”) solutions which allow for the identification of individuals with high medication-related risk and for optimizing medication therapy. Revenues related to these software services primarily consist of monthly subscription fees and are recognized monthly as the Company meets its performance obligation to provide access to the software. Revenue for implementation and set-up services is generally recognized over the contract term as the software services are provided. The Company generally bills for the software services on a monthly basis.

Disaggregation of Revenue

~~In the~~The following table disaggregates the Company’s revenue ~~is disaggregated~~ by ~~operating segment.~~major revenue category. Substantially all of the Company’s revenue is recognized in the U.S.


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
		2022		2021		2022		2021		2023		2022		2023		2022
CareVention HealthCare:
PACE product revenue	$	59,780	$	50,321	$	166,645	$	139,021
PACE solutions		16,416		14,707		47,604		42,973
	$	76,196	$	65,028	$	214,249	$	181,994
MedWise HealthCare:
Medication safety services	$	843	$	2,820	$	2,336	$	8,817
Medication revenue									$	69,626	$	55,892	$	138,376	$	106,865
Technology-enabled solutions revenue:
Value-based care solutions										16,089		13,336		31,400		26,105
Software subscription and services		62		62		223		174		4,321		3,369		8,537		6,737
	$	905	$	2,882	$	2,559	$	8,991
Total revenue	$	77,101	$	67,910	$	216,808	$	190,985	$	90,036	$	72,597	$	178,313	$	139,707

Contract Balances

Assets and liabilities related to the Company’s contracts are reported on a contract-by-contract basis at the end of each reporting period. Contract balances consist of contract assets and contract liabilities. Contract assets are recorded when the right to consideration for services is conditional on something other than the passage of time. Contract assets relating to unbilled receivables are transferred to accounts receivable when the right to consideration becomes unconditional. Contract assets are classified as current or non-current based on the timing of the Company’s rights to the unconditional payments. Contract assets are generally classified as current and recorded within other current assets on the Company’s consolidated balance sheets.

Contract liabilities include advance customer payments and billings in excess of revenue recognized. The Company generally classifies contract liabilities in accrued expenses and other current liabilities and in other long-term liabilities on the Company’s consolidated balance sheets. The Company anticipates that it will satisfy most of its performance obligations associated with its contract liabilities within one year.

The following table provides information about the Company’s contract assets and contract liabilities from contracts with clients as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Contract assets	$	15,072	$	12,695	$	18,389	$	15,115
Contract liabilities		4,110		2,191		2,767		3,435

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

Significant changes in the contract assets and the contract liabilities balances during the ~~period~~six months ended June 30, 2023 are as follows:



	September 30,		June 30,
	2022		2023
Contract assets:
Contract assets, beginning of period	$	12,695	$	15,115
Decreases due to cash received		(12,466)		(15,393)
Changes to the contract assets at the beginning of the period as a result of changes in estimates		451		820
Changes during the year, net of reclassifications to receivables		14,392
Changes during the period, net of reclassifications to receivables				17,847
Contract assets, end of period	$	15,072	$	18,389

Contract liabilities:
Contract liabilities, beginning of period	$	2,191	$	3,435
Revenue recognized that was included in the contract liabilities balance at the beginning of the period		(1,903)		(2,481)
Increases due to cash received, excluding amounts recognized as revenue during the year		3,822
Increases due to cash received, excluding amounts recognized as revenue during the period				1,813
Contract liabilities, end of period	$	4,110	$	2,767

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company recognized ~~$1,404~~$1,810 of revenue that was included in the December 31, ~~2020~~2021 contract liability balance of ~~$1,982.~~$2,191.

5. Net Loss per Share

Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock of the Company outstanding during the period.

The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Numerator (basic and diluted):
Net loss from continuing operations	$	(25,880)	$	(11,756)	$	(58,963)	$	(39,200)	$	(9,743)	$	(12,691)	$	(16,817)	$	(33,083)
Net loss from discontinued operations		(14,185)		(5,355)		(58,905)		(18,484)		(108)		(36,919)		(8,932)		(44,720)
Net loss	$	(40,065)	$	(17,111)	$	(117,868)	$	(57,684)	$	(9,851)	$	(49,610)	$	(25,749)	$	(77,803)
Denominator (basic and diluted):
Weighted average shares of common stock outstanding, basic and diluted		24,350,182		23,407,391		24,075,666		23,230,138		25,422,032		23,959,726		25,333,137		23,913,050

Net loss per share from continuing operations, basic and diluted	$	(1.07)	$	(0.50)	$	(2.45)	$	(1.68)	$	(0.38)	$	(0.53)	$	(0.66)	$	(1.38)
Net loss per share from discontinued operations, basic and diluted		(0.58)		(0.23)		(2.45)		(0.80)		—		(1.54)		(0.35)		(1.87)
Total net loss per share, basic and diluted	$	(1.65)	$	(0.73)	$	(4.90)	$	(2.48)	$	(0.38)	$	(2.07)	$	(1.01)	$	(3.25)

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

The following potential common shares, presented based on amounts outstanding as of ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect.


	September 30,		June 30,
	2022	2021	2023	2022
Stock options to purchase common stock	1,402,931	1,671,680	798,896	1,448,537
Unvested restricted stock and restricted stock units	2,217,033	1,624,523	2,314,917	2,324,497
Unvested performance stock units			103,409	—
Common stock warrants	4,646,393	4,646,393	4,646,393	4,646,393
Conversion of convertible senior subordinated notes	4,646,393	4,646,393	4,646,393	4,646,393
	12,912,750	12,588,989	12,510,008	13,065,820

~~For the three~~As of June 30, 2023 and ~~nine months ended September 30,~~ 2022, ~~and 2021,~~ shares related to the conversion of the convertible senior subordinated notes were included in the table above using the if-converted method.

~~For~~As of June 30, 2023, all shares related to performance stock units granted on April 27, 2021 and June 1, 2023 were excluded from the ~~three and nine months~~table above, as the performance conditions were unmet as of June 30, 2023 (see Note 14).

As of ended ~~September~~June 30, 2022, all shares related to performance stock units were excluded from the table above, as the performance conditions were unmet as of ~~September~~June 30, 2022 (see Note ~~13)~~14).

6. Other Current Assets

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, other current assets consisted of the following:


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Contract assets	$	15,072	$	12,695	$	18,389	$	15,115
Divestiture-related contingent consideration receivable						100		—
Non-trade receivables		1,235		3,289		445		719
Divestiture related consideration receivables		1,477		—
Other		2,655		2,049		3,744		2,353
Total other current assets	$	20,439	$	18,033	$	22,678	$	18,187

7. Divestiture-Related Notes Receivable

In connection with the sale of the DoseMe Business on January 20, 2023, the Company and DoseMe Operations executed a note receivable with principal of $3,000 and an annual interest rate of 7.0%, which matures on January 20, 2027. Pursuant to the terms of the sale agreement, the principal of the note receivable was adjusted for certain customary post-closing adjustments to $2,884 as of June 30, 2023. The note receivable was recorded at the estimated fair value of $1,598, adjusted for certain customary post-closing adjustments, on the DoseMe Sale Date of January 20, 2023 utilizing an imputed interest rate of 21.2%, which considers the risk-free rate corresponding to the term of the note receivable and risk premium attributed to the buyer’s credit rating for a secured or collateralized instrument. The divestiture-related note receivable is recorded in other assets on the Company’s consolidated balance sheet.

In connection with the sale of the SinfoníaRx Business on March 2, 2023, the Company and Symphony executed a note receivable with principal of $3,600 and an annual interest rate of 3.0%, which matures on December 31, 2023. The note receivable was recorded at the estimated fair value of $3,480 on the SinfoníaRx Sale Date of March 2, 2023 utilizing an imputed interest rate of 7.0%, which considers the risk-free rate corresponding to the term of the note receivable and risk premium attributed to the buyer’s credit rating for a secured or collateralized instrument.

On the DoseMe Sale Date and SinfoníaRx Sale Date, the Company estimated an aggregate allowance for credit losses of $151 on divestiture-related notes receivable based on the expected future cash flows and assessment of debtor’s

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

credit quality. The Company recorded a $2 decrease to the allowance for credit losses for the three months ended June 30, 2023 due to a change in the estimated fair value of the divestiture-related note receivables as a result of certain customary post-closing adjustments.

The following summarizes the divestiture-related notes receivable balances as of June 30, 2023:


			Allowance for		Balance as of
	Amortized Cost		Credit Losses		June 30, 2023
Divestiture-related note receivable current	$	3,527	$	—	$	3,527
Divestiture-related note receivable long-term		1,654		(149)		1,505
Total	$	5,181	$	(149)	$	5,032

The following summarizes changes in the allowance for expected credit losses:


	Allowance for
	Credit Losses
Balance at January 1, 2023	$	—
Provision for credit losses		(151)
Change in provision for expected credit losses		2
Balance at June 30, 2023	$	(149)

8. Property and Equipment

Accumulated depreciation was ~~$18,890~~$20,658 and ~~$17,427~~$19,024 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Depreciation expense on property and equipment for the three months ended ~~September~~June 30, 2023 and 2022 was $790 and ~~2021 was $801 and $825,~~$1,214, respectively. Depreciation expense on property and equipment for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 was $1,716 and ~~2021 was $2,862 and $2,672,~~$2,061, respectively.

8.9. Software Development Costs

The Company capitalizes certain costs incurred in connection with obtaining or developing its proprietary software platforms, which are used to support its ~~product and~~ service ~~contracts. These~~contracts, including external direct costs ~~include~~of third-party ~~contractors and~~professional services, payroll costs for employees directly involved with the software development, ~~including external direct costs of material and services,~~ and interest expense related to the borrowings attributable to software development. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, capitalized software costs consisted of the following:


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Software development costs	$	51,305	$	49,481	$	62,729	$	54,853
Less: accumulated amortization		(18,699)		(20,227)		(29,652)		(22,261)
Software development costs, net	$	32,606	$	29,254	$	33,077	$	32,592

Capitalized software development costs included above not yet subject to amortization	$	4,505	$	5,328	$	8,246	$	4,997

Amortization expense for the three months ended June 30, 2023 and 2022 was $3,715 and $2,581, respectively. Amortization expense for the six months ended June 30, 2023 and 2022 was $7,390 and $5,781, respectively.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

Amortization expense for the three months ended September 30, 2022 and 2021 was $3,224 and $2,579, respectively. Amortization expense for the nine months ended September 30, 2022 and 2021 was $9,005 and $6,682, respectively.

During the first quarter of 2022, the Company became aware of changes in circumstances impacting the future ~~functionality~~application of certain capitalized software development costs ~~in the MedWise HealthCare segment~~ and determined an indicator of impairment was present. The Company evaluated the recoverability of the related long-lived assets by comparing their carrying amount to the future net undiscounted cash flows expected to be generated by the assets to determine if the carrying value was not recoverable. The recoverability test indicated that certain capitalized software development costs were ~~impaired and, as~~impaired. As a result, the Company ~~used~~recognized an ~~income approach~~impairment charge equal to ~~measure the fair value of the assets and recognized non-cash impairment charges of~~ $4,062 for the ~~nine~~six months ended ~~September~~June 30, 2022. There were no identified circumstances that would impact the future functionality of capitalized software development costs during the ~~three~~six months ended ~~September~~June 30, ~~2022.~~2023.

9.10. Goodwill and Intangible Assets

The Company’s goodwill as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$115,323, which relates to the Company’s CareVention HealthCare segment.~~$115,323.

During the first and second quarters of 2022, the Company experienced a sustained decline in the market price of its common stock and determined that an indicator of impairment was present. The Company performed a quantitative goodwill impairment assessment as of June 30, 2022, estimating the fair value of the Company’s reporting unit using a market approach. Based on the analysis performed, the Company determined that the estimated fair value of the Company’s reporting unit exceeded its carrying value, and, as a result, goodwill was not impaired as of June 30, 2022. No indicators of impairment were identified ~~for~~during the ~~three~~six months ended ~~September~~June 30, ~~2022.~~2023.

Intangible assets consisted of the following as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


	Weighted Average							Weighted Average
	Amortization Period			Accumulated		Intangible		Amortization Period			Accumulated		Intangible
	(in years)	Gross Value		Amortization		Assets, net		(in years)	Gross Value		Amortization		Assets, net
September 30, 2022
June 30, 2023
Trade names	2.6	$	1,340	$	(982)	$	358	2.6	$	1,340	$	(1,035)	$	305
Client relationships	11.7		51,264		(14,438)		36,826	11.7		51,264		(17,939)		33,325
Non-competition agreements	5.0		1,640		(1,221)		419	5.0		1,640		(1,466)		174
Developed technology	6.2		14,720		(12,076)		2,644	6.2		14,720		(13,419)		1,301
Domain name	10.0		59		(31)		28	10.0		59		(35)		24
Total intangible assets		$	69,023	$	(28,748)	$	40,275		$	69,023	$	(33,894)	$	35,129


	Weighted Average							Weighted Average
	Amortization Period			Accumulated		Intangible		Amortization Period			Accumulated		Intangible
	(in years)	Gross Value		Amortization		Assets, net		(in years)	Gross Value		Amortization		Assets, net
December 31, 2021
December 31, 2022
Trade names	2.9	$	1,340	$	(853)	$	487	2.6	$	1,340	$	(1,000)	$	340
Client relationships	11.7		51,264		(11,042)		40,222	11.7		51,264		(15,781)		35,483
Non-competition agreements	5.0		1,640		(975)		665	5.0		1,640		(1,303)		337
Developed technology	6.2		14,720		(10,768)		3,952	6.2		14,720		(12,580)		2,140
Domain name	10.0		59		(27)		32	10.0		59		(33)		26
Total intangible assets		$	69,023	$	(23,665)	$	45,358		$	69,023	$	(30,697)	$	38,326

Amortization expense for intangible assets for the three months ended ~~September~~June 30, 2023 and 2022 was $1,598 and ~~2021 was $1,694 and $1,907,~~$1,695, respectively. Amortization expense for intangible assets for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 was $3,197 and ~~2021 was $5,083 and $5,738,~~$3,389, respectively.

1820

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

The estimated amortization expense for the remainder of ~~2022~~2023 and each of the next five years and thereafter is as follows:


Years Ending December 31,
2022 (October 1 – December 31)	$	1,669
2023		6,162
2023 (July 1 – December 31)			$	2,685
2024		4,684		4,684
2025		4,466		4,466
2026		4,338		4,338
2027		4,271		4,271
2028				3,681
Thereafter		14,685		11,004
Total estimated amortization expense	$	40,275	$	35,129

~~10.~~11. Accrued Expenses and Other Liabilities

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, accrued expenses and other liabilities consisted of the following:


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Employee related expenses	$	8,961	$	8,595	$	10,257	$	10,780
Contract liability		3,864		2,015		2,311		3,309
Customer deposits		903		904		904		904
Client funds obligations*		7,389		6,038		10,400		12,372
Contract labor		2,852		838
Divestiture closing fees		3,000		—
Interest		711		2,281		2,133		2,133
Vendor financing arrangements		176		—		627		568
Professional fees		2,161		1,327
Professional fees and contract labor						2,605		751
Consideration payable to customer		24,500		15,971		24,015		20,311
Income and non-income taxes payable		95		15		106		8
Other expenses		4,895		3,013		5,747		4,609
Total accrued expenses and other liabilities	$	59,507	$	40,997	$	59,105	$	55,745

*This amount represents client funds held by the Company, with an offsetting amount included in restricted cash.

~~11.~~12. Line of Credit and Long-Term Debt

(a) Line of Credit

On December 18, 2020, the Company and its subsidiaries entered into a Loan and Security Agreement (the “2020 Credit Facility”), with Western Alliance Bank (“WAB”). The 2020 Credit Facility provided for a $120,000 secured revolving credit facility, with a $1,000 sublimit for cash management services and letters of credit and foreign exchange transactions.

Amounts under the 2020 Credit Facility could be borrowed, repaid, and re-borrowed from time to time until the maturity date on May 16, 2025, and were permitted to be used for, among other things, working capital and other general corporate purposes. Loans under the 2020 Credit Facility bore interest at a rate equal to the LIBOR rate plus 3.25%. The obligations under the 2020 Credit Facility were secured by all of the assets of the borrowers, subject to certain exceptions and exclusions as set forth in the 2020 Credit Facility. The 2020 Credit Facility was subject to a commitment fee of 0.50% of the total commitment amount payable on the closing date and 0.25% of the total commitment amount payable on each anniversary thereafter. Additionally, the 2020 Credit Facility was subject to an unused line fee.

1921

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

On August 1, 2022, the Company entered into a payoff letter with WAB with respect to the 2020 Credit Facility, pursuant to which the Company voluntarily elected to pay all amounts outstanding, including principal and interest, under the 2020 Credit Facility and related loan documents (the “Pay Off”) using cash on hand and proceeds from the sale of the PrescribeWellness Business. Accordingly, the Company paid a total of $57,406 to WAB for the Pay Off and terminated the 2020 Credit Facility and related loan documents (the “Termination”). The Company did not incur any prepayment or early termination penalties in connection with either the Pay Off or the Termination. Upon the Termination and in connection with the Pay Off, all security interests and pledges granted to the secured parties thereunder were terminated and released.

Interest expense on the 2020 Credit Facility was $266 and $1,363 for the three and nine months ended September 30, 2022, respectively. Interest expense on the 2020 Credit Facility was $314 and $842 for the three and nine months ended September 30, 2021, respectively.

In connection with the 2020 Credit Facility, the Company recorded deferred financing costs of $1,534. The Company amortized the ~~associated~~ deferred financing costs associated with the 2020 Credit Facility to interest expense using the effective-interest method over the ~~term of~~term. The Company amortized $138 and $275 to interest expense for the ~~agreement.~~three and six months ended June 30, 2022, respectively, for deferred financing costs. On August 1, 2022, in connection with the Termination, the remaining balance of deferred financing costs was amortized to interest expense. ~~The Company amortized $698~~Interest expense on the 2020 Credit Facility was $637 and ~~$973 to interest expense~~$1,097 for the three and ~~nine~~six months ended ~~September~~June 30, 2022, respectively, for deferred financing costs. The Company amortized $136 and $404 to interest expense during the three and nine months ended September 30, 2021, respectively, for deferred financing costs.respectively.

(b) Convertible Senior Subordinated Notes

On February 12, 2019, the Company issued and sold an aggregate principal amount of $325,000 of 1.75% convertible senior subordinated notes (the “2026 Notes”) in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2026 Notes bear interest at a rate of 1.75% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019. The 2026 Notes will mature on February 15, 2026, unless earlier converted or repurchased. The initial conversion rate for the ~~notes~~2026 Notes is 14.2966 shares of the Company’s common stock per $1 principal amount of the 2026 Notes. This conversion rate is equal to an initial conversion price of approximately $69.95 per share of the Company’s common stock. Net proceeds from the 2026 Notes were used to pay the cost of convertible note hedge transactions (described below), repay amounts outstanding under the Company’s 2015 Line of Credit, fund the PrescribeWellness acquisition, fund the payment of the acquisition-related contingent consideration liabilities, and for general corporate purposes.

Holders may convert all or any portion of their 2026 Notes at any time prior to the close of business on the business day immediately preceding August 15, 2025 only under the following circumstances: (1) during any calendar quarter commencing after March 31, 2019 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price (as defined in the indenture governing the 2026 Notes) per $1 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental change or make-whole fundamental change (as defined in the indenture governing the 2026 Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets. On or after August 15, 2025 until the close of business on the first scheduled trading day immediately preceding the maturity date, a holder may convert all or any portion of its 2026 Notes regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver shares of ~~our~~its common stock, cash, or a combination thereof at the Company’s option. As of ~~September~~June 30, ~~2022,~~2023, none of the conditions allowing holders of the 2026 Notes to convert had been met. Debt issuance costs related to the 2026 Notes of $9,372 are being amortized to interest expense using the effective interest method over the contractual term, resulting in an effective interest rate of 2.20%.

During the three months ended June 30, 2023, the Company recognized $1,762 of interest expense related to the 2026 Notes, of which $1,422 was paid or accrued and $340 was noncash accretion of the debt discounts recorded. During the six months ended June 30, 2023, the Company recognized $3,522 of interest expense related to the 2026 Notes, of which $2,844 was paid or accrued and $678 was noncash accretion of the debt discounts recorded.

2022

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

During the three months ended ~~September~~June 30, 2022, the Company recognized ~~$1,757~~$1,755 of interest expense related to the 2026 Notes, of which $1,422 was paid or accrued and ~~$335~~$333 was ~~non-cash~~noncash accretion of the debt discounts recorded. During the ~~nine~~six months ended ~~September~~June 30, 2022, the Company recognized ~~$5,265~~$3,508 of interest expense related to the 2026 Notes, of which ~~$4,266~~$2,844 was paid or accrued and ~~$999~~$664 was ~~non-cash~~noncash accretion of the debt discounts recorded.

During the three months ended September 30, 2021, the Company recognized $1,750 of interest expense related to the 2026 Notes, of which $1,423 was paid or accrued, and $327 was non-cash accretion of the debt discounts recorded. During the nine months ended September 30, 2021, the Company recognized $5,243 of interest expense related to the 2026 Notes, of which $4,266 was paid or accrued, and $977 was non-cash accretion of the debt discounts recorded. In addition, unpaid additional interest payable as a result of the failure to remove the restrictive legend on the 2026 Notes had accrued on the 2026 Notes from and including February 17, 2020, but ceased accruing on February 16, 2021 as a result of the restrictive legend being removed. The Company recorded $212 of additional interest expense for the nine months ended September 30, 2021.

As of ~~September~~June 30, ~~2022,~~2023, total accrued interest payable related to the 2026 Notes was ~~$711,~~$2,133, which is included in accrued expenses and other liabilities on the consolidated balance sheets. The 2026 Notes have a carrying value of ~~$320,297~~$321,312 as of ~~September~~June 30, ~~2022.~~2023. The 2026 Notes are classified as long-term debt on the Company’s consolidated balance sheets, and will be until such 2026 Notes are within one year of maturity.

In connection with the offering of the 2026 Notes, the Company entered into convertible note hedge transactions with affiliates of certain of the initial purchasers (the “option counterparties”) of the 2026 Notes pursuant to the terms of call option confirmations. The Company has the option to purchase a total of 4,646,393 shares of its common stock at a price of approximately $69.95 per share. The total premiums paid for the note hedges were $101,660. The Company also entered into warrant transactions with the option counterparties whereby they have the option to purchase 4,646,393 shares of the Company’s common stock at a price of $105.58 per share. The Company received $65,910 in cash proceeds from the sale of the warrants. As these instruments are considered indexed to the Company's own stock and are considered equity classified, the convertible note hedges and warrants are recorded in stockholders’ equity (deficit), are not accounted for as derivatives and are not remeasured each reporting period. The net costs incurred in connection with the convertible note hedge and warrant transactions were recorded as a reduction to additional paid-in capital on the Company’s consolidated balance sheets.

The convertible note hedge transactions are expected generally to reduce the potential dilution to the Company’s common stock upon conversion of the 2026 Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted 2026 Notes, as the case may be. The warrant transactions could separately have a dilutive effect on the Company’s common stock to the extent that the market price per share of the Company’s common stock exceeds the strike price of the warrants.

As of ~~September~~June 30, ~~2022,~~2023, no warrants ~~have~~had been exercised and all warrants to purchase shares of the Company’s common stock were outstanding.

(d) Long-Term Debt

The following table represents the total long-term debt obligations of the Company at June 30, 2023 and December 31, 2022:


	June 30, 2023		December 31, 2022
Convertible senior subordinated notes	$	235,272	$	235,272
Convertible senior subordinated notes - related party		89,728		89,728
Unamortized discount, including debt issuance costs, on convertible senior subordinated notes		(3,688)		(4,366)
Total long-term debt, net	$	321,312	$	320,634

13. Income Taxes

For the three months ended June 30, 2023 and 2022, the Company recorded income tax expense of $133 and $159, respectively, which resulted in effective tax rates of (1.4)% and (1.3)%, respectively.

For the six months ended June 30, 2023 and 2022, the Company recorded income tax expense of $238 and $375, respectively, which resulted in effective tax rates of (1.4)% and (1.1)%, respectively.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

~~(d) Long-Term Debt~~

~~The following table represents the total long-term debt obligations of the Company at September 30, 2022 and December 31, 2021:~~

September 30, 2022

December 31, 2021
Convertible senior subordinated notes

$
235,272

$
325,000
Convertible senior subordinated notes - related party

89,728

—
Unamortized discount, including debt issuance costs, on convertible senior subordinated notes

(4,703)

(5,701)
Total long-term debt, net

$
320,297

$
319,299

~~12. Income Taxes~~

For the three months ended September 30, 2022 and 2021, the Company recorded income tax benefit of $7 and income tax expense of $82, respectively, which resulted in effective tax rates of 0.0% and (0.7)%, respectively.

For the nine months ended September 30, 2022 and 2021, the Company recorded income tax expense of $368 and $284, respectively, which resulted in effective tax rates of (0.6)% and (0.7)%, respectively.

The effective tax rates differ from the U.S. statutory tax rate primarily due to the full valuation allowance recorded that is currently limiting the realizability of the Company’s net deferred tax assets as of the end of the periods presented. As of ~~September~~June 30, 2023 and 2022, the Company has recorded a full valuation allowance against its deferred tax assets. Accordingly, the tax benefit was limited due to unbenefited losses in the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company calculates its provision for income taxes during its interim periods by applying the estimated annual effective tax rate for the full year ordinary income or loss to the respective reporting period’s year to date income or loss, while also adding any income tax expense or benefit related to discrete items occurring within that interim period.

On February 12, 2021, the Company received a private letter ruling from the Internal Revenue Service, which determined, based on information submitted and representations made by the Company, that the Company met the requirements to deduct the interest expense resulting from the amortization of the debt discount associated with the 2026 Notes. As a result, the Company recorded a deferred tax asset of $26,313 and a corresponding $26,313 increase to its valuation allowance.

~~13.~~14. Stock-Based Compensation

In September 2016, the Company adopted the 2016 Equity Compensation Plan (“2016 Plan”). During the term of the 2016 Plan, the share reserve will automatically increase on the first trading day in January of each calendar year by an amount equal to the lesser of 5% of the total number of outstanding shares of common stock on the last trading day in December of the prior calendar year or such other number set by the ~~Company’s~~ Board of Directors (the “Board”). In accordance with the terms of the 2016 Plan, the share reserve increased by ~~1,283,321~~1,356,454 shares on ~~February 25, 2022.~~March 10, 2023. As of ~~September~~June 30, ~~2022, 1,123,371~~2023, 2,236,092 shares were available for future grants under the 2016 Plan.

The ~~following~~ stock-based compensation information disclosed below includes results of both continuing and discontinued operations.

Restricted Stock Awards

The Company issues restricted stock awards pursuant to the 2016 Plan to employees and non-employee directors. Restricted stock awards generally vest over a one to four-year period and the unvested portion of these awards is forfeited if the employee or non-employee director leaves the Company before the vesting period is completed. The grant-date fair value of restricted stock awards is determined using the Company’s closing stock price at grant date.

The following table summarizes the aggregate restricted stock award activity, inclusive of performance-based restricted stock awards, under the 2016 Plan for the six months ended June 30, 2023:


		Weighted
		average
	Number	grant-date
	of shares	fair value
Outstanding at December 31, 2022	2,193,444	$	18.33
Granted	230,295		6.71
Vested	(707,195)		20.35
Forfeited	(268,515)		31.69
Outstanding at June 30, 2023	1,448,029	$	13.02

For the three months ended June 30, 2023 and 2022, $2,139 and $5,578, respectively, of expense was recognized related to restricted stock awards, excluding performance-based restricted stock awards described below. For the six months ended June 30, 2023 and 2022, $4,339 and $12,847, respectively, of expense was recognized related to restricted stock awards, excluding performance-based restricted stock awards described below.

As of June 30, 2023, there was unrecognized compensation expense of $14,531 related to unvested restricted stock awards, excluding performance-based restricted stock awards described below, under the 2016 Plan, which are expected to be recognized over a weighted average period of 1.8 years.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

~~Restricted Common Stock and~~ Restricted Stock Units

The Company issues ~~restricted stock awards and~~ restricted stock units pursuant to the 2016 Plan to employees and non-employee directors. Restricted stock ~~awards and restricted stock~~ units generally vest over a one- to four-year period and the unvested portion of these awards is forfeited if the employee or non-employee director leaves the Company before the vesting period is completed. The grant-date fair value of restricted stock ~~awards and restricted stock~~ units is determined using the Company’s closing stock price at the grant date.

The following table summarizes the aggregate restricted stock ~~award activity, inclusive of performance based restricted stock awards, and restricted stock~~ unit activity under the 2016 Plan for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:


		Weighted			Weighted
		average			average
	Number	grant-date		Number	grant-date
	of shares	fair value		of shares	fair value
Outstanding at December 31, 2021	2,196,566	$	40.19
Outstanding at December 31, 2022				109,453	$	6.71
Granted	1,935,883		4.44	811,396		5.44
Vested	(1,224,471)		34.32
Forfeited	(676,723)		16.40
Outstanding at September 30, 2022	2,231,255	$	19.61
Outstanding at June 30, 2023				920,849	$	5.59

The table above includes ~~14,222~~53,961 restricted stock units which had vested but had not been issued as of ~~September~~June 30, ~~2022.~~2023.

For the three months ended ~~September~~June 30, 2023 and 2022, $332 and ~~2021, an aggregate of $13,061 and $6,447~~$103, respectively, of expense ~~respectively,~~ was recognized related to restricted stock ~~awards and restricted stock units, excluding performance-based restricted stock awards described below.~~

units. For the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, $389 and ~~2021, an aggregate of $26,129 and $22,846~~$221, respectively, of expense ~~respectively,~~ was recognized related to restricted stock ~~awards and restricted stock units, excluding performance-based restricted stock awards as described below.~~ units.

As of ~~September~~June 30, ~~2022,~~2023, there was unrecognized compensation expense of ~~$30,976~~$4,345 related to unvested restricted stock ~~awards and unvested restricted stock~~ units, ~~excluding performance-based restricted stock awards described below,~~ under the 2016 Plan, which isare expected to be recognized over a weighted average period of ~~2.4~~3.5 years.

Expense related to restricted stock awards for the three and nine months ended September 30, 2022 includes $8,143 for the accelerated vesting of unvested shares of restricted stock related to separation agreements with two retired named executive officers. See Note 17 for additional information.

Performance-Based Equity Awards

On October 29, 2020, pursuant to the 2016 Plan, the Board approved grants totaling 26,400 shares of restricted stock to certain employees, of which 1,400 expired on April 30, 2021 and 12,500 expired on December 31, 2021. The remaining 12,500 shares fully vested subject to the achievement of certain milestones on December 31, 2021. The awards had a grant-date fair value of $35.95 per share based on the Company’s closing stock price on the grant date. Stock-based compensation costs associated with these grants were recognized over the service period based upon the Company’s assessment of the probability that the performance conditions would be achieved. The Company recognized $194 and $556 of stock-based compensation expense related to these grants for the three and nine months ended September 30, 2021, respectively.

~~Table of Contents~~

~~TABULA RASA HEALTHCARE, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Amounts in thousands, except share and per share data)~~

On April 27, 2021, pursuant to the 2016 Plan, the Board approved awards of performance stock units to certain employees. Each award reflects a target number of shares (“Target 2021 Shares”) that may be issued to the award recipient. The awards are earned upon the Company’s achievement of certain revenue performance targets during the three-year performance period ending December 31, 2023. Depending on the results achieved during the performance period, the actual number of shares that a grant recipient may receive at the end of the performance period may range from 0% to 200% of the Target 2021 Shares granted. The performance stock unit awards have a grant-date fair value of $44.13 per share based on the Company’s closing stock price on the grant date. Stock-based compensation costs associated with these grants are recognized over the performance period based upon the Company’s assessment of the probability that the performance targets will be achieved. The Company did not recognize any stock-based compensation expense related to the performance stock units for the three and ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, as the achievement of the underlying performance targets was considered unlikely. During the ~~nine~~six months ended ~~September~~June 30, ~~2022, 47,175~~2023, 14,650 performance stock units expired. As of ~~September~~June 30, ~~2022,~~2023, the number of Target 2021 Shares was ~~45,550 shares. As of September 30, 2022,~~30,900 shares, the maximum number of achievable performance stock units was ~~91,100~~61,800 and the maximum unrecognized compensation expense was ~~$4,020.~~$2,727.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

On August 22, 2022, pursuant to the 2016 Plan, the Board approved awards of performance stock units to certain executives. Each award reflects a target number of shares (“Target 2022 Shares”) that may be issued to the award recipient. The awards are earned upon the Company’s achievement of certain market performance targets during the three-year performance period ending December 31, 2024. Depending on the results achieved during the performance period, the actual number of shares that a grant recipient may receive at the end of the performance period may range from 0% to 200% of the Target 2022 Shares granted. The performance stock unit awards have a grant-date fair value of $4.38 per share based on the fair value of the Company’s stock price at grant date and the expected vesting units, taking into consideration the possibilities of all possible performance achievement levels. Stock-based compensation costs associated with these grants are recognized over the performance period. The Company recognized ~~$69~~$162 and $322, respectively, of stock-based compensation expense related to the performance stock units for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023. As of ~~September~~June 30, ~~2022,~~2023, the number of Target 2022 Shares was 350,000 ~~shares. As of September 30, 2022,~~shares, the maximum number of achievable performance stock units was 700,000, and the remaining unrecognized compensation expense was ~~$1,463.~~$978.

On June 1, 2023, pursuant to the 2016 Plan, the Board approved awards of performance stock units to certain employees. Each award reflects a target number of shares (“Target 2023 Shares”) that may be issued to the award recipient. The awards are earned based upon the Company’s achievement of certain performance targets during the three-year performance period ending December 31, 2025. Depending on the results achieved during the performance period, the actual number of shares that a grant recipient may receive at the end of the performance period may range from 0% to 200% of the Target 2023 Shares granted. The performance stock unit awards have a grant-date fair value of $5.44 per share based on the Company’s closing stock price on the grant date. Stock-based compensation costs associated with these grants are recognized over the performance period based upon the Company’s assessment of the probability that the performance targets will be achieved. The Company recognized $125 of stock-based compensation expense related to the performance stock units for the three and six months ended June 30, 2023. As of June 30, 2023, the number of Target 2023 Shares was 618,055 shares, the maximum number of achievable performance stock units was 1,236,110, and the maximum unrecognized compensation expense was $6,600.

Other Stock Awards

During the first quarter of 2021, the Board approved the grant of stock awards to certain non-employee directors and to a consultant pursuant to the 2016 Plan. The awards provided for the issuance of 1,416 shares of the Company’s common stock, which immediately vested on the grant date. These grants had a weighted average grant-date fair value of $40.85 per share. For the nine months ended September 30, 2021, the Company recorded $58 of expense related to these stock awards.

During the first quarter of 2022, the Board approved grants of stock awards to certain non-employee directors and employees pursuant to the 2016 Plan. The awards provided for the issuance of 16,471 shares of the Company’s common stock, which immediately vested on the grant date. These grants had a weighted average grant-date fair value of $5.57 per share. For the ~~nine~~six months ended ~~September~~June 30, 2022, the Company recorded $92 of expense related to these stock awards.

During the second quarter of 2022, the Board approved grants of stock awards to certain non-employee directors pursuant to the 2016 Plan. The awards provided for the issuance of 12,262 shares of the Company’s common stock, which immediately vested on the grant date. These grants had a weighted average grant-date fair value of $3.64 per share. For both the ~~nine~~three and six months ended ~~September~~June 30, 2022, the Company recorded $45 of expense related to these stock awards.

~~During the third quarter of 2022, the Board approved grants of stock awards to certain employees pursuant to the 2016 Plan.~~ Stock Options

The awards provided for the issuance of 615,066 shares of the Company’s common stock, which immediately vested on the grant date. These grants had a weighted average grant-date fair value of $5.01 per share. For the three and nine months ended September 30, 2022, the Company recorded ~~$3,081~~$12 and $966 of stock-based compensation expense related to ~~these~~the vesting of employee and non-employee director stock ~~awards.~~options for the three months ended June 30, 2023 and 2022, respectively. The Company recorded $63 and $2,096 of stock-based compensation expense related to the vesting of employee and non-employee director stock options for the six months ended June 30, 2023 and 2022, respectively. The Company records forfeitures as they occur.

No grants for employee and non-employee director stock options were made during the six months ended June 30, 2023 and 2022.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

~~Stock Options~~

The Company recorded $1,025 and $1,586 of stock-based compensation expense related to employee and non-employee director stock options for the three months ended September 30, 2022 and 2021, respectively. The Company recorded $3,121 and $5,502 of stock-based compensation expense related to employee and non-employee stock options for the nine months ended September 30, 2022 and 2021, respectively. The Company records forfeitures as they occur.

No grants for employee and non-employee stock options were made during the nine months ended September 30, 2022. The table below sets forth the weighted average assumptions for employee grants during the nine months ended September 30, 2021:


	~~Nine Months Ended~~
~~Valuation assumptions:~~	~~September 30, 2021~~
~~Expected volatility~~	~~58.57~~	%
~~Expected term (years)~~	~~5.48~~
~~Risk-free interest rate~~	~~0.50~~	%
~~Dividend yield~~	—

~~The weighted average grant date fair value of employee options granted during the nine months ended September 30, 2021 was $28.26 per share.~~

The following table summarizes stock option activity under the 2016 Plan for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:


				Weighted						Weighted
		Weighted		average				Weighted		average
		average		remaining	Aggregate			average		remaining	Aggregate
	Number	exercise		contractual	intrinsic		Number	exercise		contractual	intrinsic
	of shares	price		term	value		of shares	price		term	value
Outstanding at December 31, 2021	1,604,226	$	29.90
Outstanding at December 31, 2022							1,177,805	$	28.39
Exercised	(12,830)		4.96				(138,715)		3.11
Forfeited	(188,465)		44.18				(240,194)		29.63
Outstanding at September 30, 2022	1,402,931	$	28.21	3.8	$	260
Options vested and expected to vest at September 30, 2022	1,402,931	$	28.21	3.8	$	260
Exercisable at September 30, 2022	1,370,302	$	27.57	3.8	$	260
Outstanding at June 30, 2023							798,896	$	32.40	4.3	$	96
Options vested and expected to vest at June 30, 2023							798,896	$	32.40	4.3	$	96
Exercisable at June 30, 2023							798,434	$	32.39	4.3	$	96

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the Company’s closing stock price or estimated fair value on the last trading day of the fiscal quarter for those stock options that had exercise prices lower than the fair value of the ~~Company's~~Company’s common stock. This amount changes based on the fair market value of the Company’s stock. The total intrinsic value of options exercised during the ~~nine~~six months ended ~~September,~~June 30, 2023 and 2022 was $458 and ~~2021 was $109 and $11,113,~~$2, respectively.

As of ~~September~~June 30, ~~2022,~~2023, there was ~~$867~~$9 of total unrecognized compensation cost related to ~~nonvested~~unvested stock options granted under the 2016 Plan, which is expected to be recognized over a weighted average period of ~~0.4~~0.3 years.

Cash received from option exercises for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 was $219 and ~~2021 was $64 and $3,683,~~$60, respectively.

~~Table~~During the six months ended June 30, 2023, restricted share award holders delivered 131,330 shares of ~~Contents~~

~~TABULA RASA HEALTHCARE, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Amounts in thousands, except share and per share data)~~common stock, with a fair value of $658, for employee payroll taxes owed for the vesting of restricted stock awards.

The Company recorded total stock-based compensation expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 in the following expense categories of its consolidated statements of operations:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Cost of revenue - product	$	331	$	256	$	778	$	852
Cost of revenue - service		793		883		2,264		2,631
Cost of medication revenue									$	127	$	223	$	239	$	447
Cost of technology-enabled solutions revenue										378		570		745		1,471
Research and development		1,741		1,261		4,021		4,533		206		761		407		2,280
Sales and marketing		285		209		593		1,251		102		50		188		308
General and administrative		12,228		4,292		20,517		14,833		1,957		3,488		3,621		8,289
Discontinued operations		1,858		1,110		4,364		4,862		—		1,600		38		2,506
Total stock-based compensation expense	$	17,236	$	8,011	$	32,537	$	28,962	$	2,770	$	6,692	$	5,238	$	15,301

Employee Stock Purchase Plan

In February 2021, the Board, subject to stockholder approval, adopted the Tabula Rasa HealthCare, Inc. Employee Stock Purchase Plan (the “ESPP”), which allows eligible employees to purchase common shares of Company stock through payroll deductions at a 15% discount off the lower of (i) the fair market value per share of common stock on the start date of the applicable offering period or (ii) the fair market value per share of common stock on the purchase date. The ESPP was approved by the Company’s stockholders at the 2021 annual meeting of stockholders in June 2021. The number of shares of common stock reserved for issuance under the ESPP will initially be 480,097 shares, subject to adjustment as provided in the ESPP, all of which remained available as of ~~September~~June 30, ~~2022.~~2023.In connection with the

Table of Contents

TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

proposed Merger, as defined and further described in Note 19, the Company has suspended the ESPP, which will be terminated contingent upon, and effective immediately prior to, the closing of the Merger.

~~14.~~15. Fair Value Measurements

The Company’s financial instruments consist of money market funds, accounts receivable, client claims receivables, contract assets, contingent consideration receivable, accounts payable, client claims payable, contract liabilities, accrued expenses, vendor financing arrangements, and long-term debt, which includes the Company’s convertible senior subordinated notes. The carrying values of accounts receivable, client claims receivables, contract assets, accounts payable, client claims payable, contract liabilities, and accrued expenses are representative of their fair values due to the relatively short-term nature of those instruments. Vendor financing arrangements are recorded at net carrying value, which approximates fair value. See below for additional information on the Company’s contingent consideration receivable and convertible senior subordinated notes.

The Company had classified assets measured at fair value on a recurring basis at ~~September~~June 30, ~~2022~~2023 as follows:


	Fair Value Measurement								Fair Value Measurement
	at Reporting Date Using								at Reporting Date Using
							Balance as of								Balance as of
	Level 1		Level 2		Level 3		September 30, 2022		Level 1		Level 2		Level 3		June 30, 2023
Assets
Contingent consideration receivable - long-term	$	—	$	—	$	7,000	$	7,000
Money market funds									$	48,264	$	—	$	—	$	48,264
Contingent consideration receivable - current										—		—		100		100
Total									$	48,264	$	—	$	100	$	48,364

Level 1 instruments include investments in money market funds with an original maturity of three months or less and are valued based on quoted prices in active markets at the measurement date.

In connection with the sale of the PrescribeWellness Business on August 1, 2022, additional consideration (“PW Contingent Consideration Receivable”) may be payable to the Company based on the achievement of certain customer and revenue metrics, as defined in the corresponding purchase agreement, for the ~~periods~~years ending December 31, 2023 and 2024. See Note 3 for additional information regarding the sale of the PrescribeWellness Business.

In connection with the sale of the SinfoníaRx Business on March 2, 2023, additional consideration (“SinfoníaRx Contingent Consideration Receivable”) may be payable to the Company based upon potential regulatory changes affecting the business, as defined in the corresponding purchase agreement. See Note 3 for additional information regarding the sale of the SinfoníaRx Business.

The contingent consideration isreceivables are classified as a current or noncurrent asset based on their expected payment dates, and they are subject to remeasurement at each balance sheet date. The contingent consideration receivables are measured at fair value on a recurring basis and may include the use of significant unobservable inputs, hence these instruments represent Level 3 measurements within the fair value hierarchy. All changes in contingent consideration subsequent to the initial sale-date measurement are recorded in net income or loss.

The fair value of the PW Contingent Consideration Receivable was determined using a Monte Carlo simulation with the assistance of a third-party appraiser. The contingent consideration receivable was recorded at the estimated fair value of $7,000 at the sale date of August 1, 2022. During the three and six months ended June 30, 2023, the Company recorded a charge of $3,350 to decrease the fair value of the contingent consideration receivable to zero based on updated estimates utilized in the contingent consideration valuation.

The fair value of the SinfoníaRx Contingent Consideration Receivable was determined using a scenario-based method. The contingent consideration receivable was recorded at the estimated fair value of $500 at the sale date of March 2, 2023. During the six months ended June 30, 2023, the Company recorded a charge of $400 to decrease the fair value of the SinfoníaRx Contingent Consideration Receivable primarily due to updated estimates used in the contingent

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

consideration valuation. The estimated fair value of the SinfoníaRx Contingent Consideration Receivable was $100 as of June 30, 2023 and was included in other current assets on the Company’s consolidated balance sheet.

The changes in fair value of the Company’s contingent consideration ~~receivable was determined using an income-approach based on projections~~receivables for the ~~achievement of the performance metrics. Changes in the projected customer and revenue metrics or discount rate may result in higher or lower fair value measurements.The contingent consideration receivable~~six months ended June 30, 2023 was ~~recorded at the estimated fair value of $7,000 at the sale date of August 1, 2022, and the estimated fair value remained $7,000~~ as ~~of September 30, 2022.~~follows:


Balance at December 31, 2022	$	3,350
Fair value of SinfoníaRx Contingent Consideration Receivable		500
Adjustments to fair value measurement		(3,750)
Balance at June 30, 2023	$	100

The following table presents the financial instruments that are not carried at fair value but require fair value disclosure as of ~~September~~June 30, ~~2022:~~2023:


	Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value
1.75% Convertible Senior Subordinated Notes due 2026	$	325,000	$	320,297	$	258,131	$	325,000	$	321,312	$	271,255

The fair value of the 2026 Notes at each balance sheet date is determined based on recent quoted market prices for these notes which is a Level 2 measurement. As discussed in Note ~~11,~~12, the 2026 Notes are carried at their aggregate face value of $325,000, less any unamortized debt issuance costs.

~~15.~~16. Commitments and Contingencies

(a) Employment Agreements

The Company has change-in-control and severance agreements with each of the Company’s named executive officers and other key members of management that provide for, among other things, salary, performance bonuses, or other incentive compensation, payments in the event of termination of the executives upon the occurrence of a change in control, and restrictive covenants pursuant to which the employees have agreed to refrain from competing with the Company or soliciting the Company’s employees or clients for a period following the employee’s termination of employment.

(b) Legal Proceedings

~~The~~As of June 30, 2023, the Company iswas not ~~currently~~ involved in any significant claims or legal actions that, in the opinion of management, ~~are expected to~~would have a material adverse impact on the Company.

On March 29, 2019, the Company entered into an Affiliated Pharmacy Agreement and Pharmaceutical Program Supply Agreement (the “Prior Thrifty Drug Agreements”) with Thrifty Drug Stores, Inc. (“Thrifty Drug”). On July 1, 2020, the Company entered into a new Affiliated Pharmacy Agreement and Pharmaceutical Program Supply Agreement with Thrifty Drug (the “Thrifty Drug Agreements”) to replace the Prior Thrifty Drug Agreements, which, among other things, extended the Company’s agreement with Thrifty Drug through ~~September 30, 2023.~~March 31, 2024. Pursuant to the terms of the Thrifty Drug Agreements, the Company has agreed to purchase not less than 98% of the Company’s total prescription product requirements from Thrifty Drug. The Company commenced purchasing prescription products under the Prior Thrifty Drug Agreements in May 2019 and has continued to do so under the Thrifty Drug Agreements beginning in July 2020. Both the Prior Thrifty Drug Agreements and the Thrifty Drug Agreements authorize Thrifty Drug to hold a security interest in all of the products purchased by the Company under the respective agreements.

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 the Company had ~~$1,993~~$2,172 and ~~$1,854,~~$4,608, respectively, due to Thrifty Drug ~~as a result of~~for prescription drug purchases.

In December 2019, the Company entered into an updated agreement with its data aggregation partner related to the Company’s pharmacy cost management services. The agreement is effective January 1, 2020 with a three-year term expiring December 31, 2022 and commits the Company to a monthly minimum purchase obligation of $30.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

In June 2021 and October 2021, the Company entered into agreements with a provider for cloud hosting and support services. The June 2021 agreement was effective as of June 3, 2021 and ~~expires~~will expire on April 28, 2024. Pursuant to the June 2021 agreement, the Company is committed to a minimum purchase obligation of $1,272 over the term of the agreement. The October 2021 agreement was effective as of October 1, 2021 and ~~expires~~will expire on September 30, 2024. Pursuant to the October 2021 agreement, the Company is committed to a minimum purchase obligation of $7,050 over the term of the agreement. Commitments under the October 2021 agreement are inclusive of commitments under the June 2021 agreement. As of ~~September~~June 30, ~~2022,~~2023, the Company had a remaining commitment of ~~$4,700~~$2,350 under the October 2021 agreement, of which ~~$691~~$253 pertained to the June 2021 agreement.

In August 2021, the Company entered into an agreement with a third party to provide enterprise support and information technology services. The agreement iswas effective as of November 1, 2021 and ~~expires~~will expire on October 31, 2026 and commits the Company to a minimum purchase obligation of $8,960 through October 31, 2024. As of ~~September~~June 30, ~~2022,~~2023, the Company had a remaining commitment of ~~$6,222.~~

In November 2021, the Company entered into an agreement with a provider for cloud hosting services. The agreement is effective November 25, 2021 and expires on November 25, 2022 and commits the Company to a minimum purchase obligation of $1,598 over the contract term. As of September 30, 2022, the Company had a remaining commitment of $243.$3,876.

~~16. Segment Reporting~~

~~The Company operates its business through two segments. As discussed in Note 3 above, the divestiture of the PrescribeWellness Business and the planned~~ ~~divestitures of the DoseMe and~~ ~~SinfoníaRx businesses, which collectively comprised the majority of the Company’s MedWise HealthCare segment,~~ represent a strategic business shift in the Company’s operations. The Company determined that these businesses met the requirements of discontinued operations as of March 31, 2022 and continued to meet the requirements as of September 30, 2022. As a result, these businesses are excluded from the Company’s segment reporting. The Company presents continuing operations of the remaining components of the MedWise HealthCare segment combined with its shared services as Shared Services and Other.

The Company's chief operating decision maker (“CODM”), the Chief Executive Officer, allocates resources and assesses performance based upon financial information at the reportable segment level. Substantially all revenues are generated and substantially all tangible assets are held in the U.S.

CareVention HealthCare primarily provides services to PACE organizations that include medication fulfillment pharmacy services and PACE solutions, such as medication safety services, PBM solutions, and health plan management services.

~~MedWise HealthCare primarily generates revenues from~~ ~~medication safety services and software subscription solutions,~~ ~~which identify individuals with high medication-related risk and optimize medication therapy.~~

Shared services primarily consist of unallocated corporate sales and marketing expenses and general and administrative expenses associated with the management and administration of the Company’s business objectives.

~~The CODM uses revenue in accordance with GAAP and Adjusted EBITDA as the relevant segment performance measures to evaluate the performance of the segments and allocate resources.~~

Adjusted EBITDA is a segment performance financial measure that offers a useful view of the overall operation of the Company’s businesses and may be different from similarly titled segment performance financial measures used by other companies.

~~Table of Contents~~

~~TABULA RASA HEALTHCARE, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Amounts in thousands, except share and per share data)~~

Adjusted EBITDA consists of net loss plus certain other expenses, which include interest expense, provision for income taxes, depreciation and amortization, impairment charges, business optimization expenses, severance costs, executive transition costs, cooperation agreement costs, divestiture-related expense, acquisition-related expense, stock-based compensation expense, loss on disposal of business, and settlement costs. The Company considers business optimization expenses to include contract termination payments, severance, retention payments, and other employee and non-recurring vendor costs incurred related to its business optimization initiatives during 2022. The Company considers severance costs to include severance payments related to the realignment of its resources. The Company considers executive transition costs to include nonrecurring costs related to the hiring and onboarding of new named executive officers and separation costs related to former named executive officers. The Company considers cooperation agreement costs to include legal, professional services, and other non-recurring costs related to the Company’s cooperation agreement with Indaba Capital Management. The Company considers divestiture-related expense to include nonrecurring direct transaction costs. The Company considers acquisition-related expense to include nonrecurring direct transaction and integration costs. The Company considers loss on disposal of business to include nonrecurring loss resulting from the sale of PrescribeWellness Business. The Company considers settlement costs to include amounts payable by the Company or reductions to amounts owed to the Company as a result of a contractual settlement.

Management considers revenue and Adjusted EBITDA to be the appropriate metric to evaluate and compare the ongoing operating performance of the Company’s segments on a consistent basis across reporting periods as it eliminates the effect of items which are not indicative of each segment’s core operating performance.

~~Table of Contents~~

~~TABULA RASA HEALTHCARE, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Amounts in thousands, except share and per share data)~~

~~The following tables present the Company’s segment information:~~

CareVention HealthCare

Shared Services and Other

Consolidated
Revenue:

Three Months Ended September 30, 2022

Product revenue

$
59,780

$
—

$
59,780
Service revenue

PACE solutions

16,416

—

16,416
Medication safety services

—

843

843
Software subscription and services

—

62

62
Total service revenue

16,416

905

17,321
Total revenue

$
76,196

$
905

$
77,101

Three Months Ended September 30, 2021

Product revenue

$
50,321

$
—

$
50,321
Service revenue

PACE solutions

14,707

—

14,707
Medication safety services

—

2,820

2,820
Software subscription and services

—

62

62
Total service revenue

14,707

2,882

17,589
Total revenue

$
65,028

$
2,882

$
67,910

Nine Months Ended September 30, 2022

Product revenue

$
166,645

$
—

$
166,645
Service revenue

PACE solutions

47,604

—

47,604
Medication safety services

—

2,336

2,336
Software subscription and services

—

223

223
Total service revenue

47,604

2,559

50,163
Total revenue

$
214,249

$
2,559

$
216,808

Nine Months Ended September 30, 2021

Product revenue

$
139,021

$
—

$
139,021
Service revenue

PACE solutions

42,973

—

42,973
Medication safety services

—

8,817

8,817
Software subscription and services

—

174

174
Total service revenue

42,973

8,991

51,964
Total revenue

$
181,994

$
8,991

$
190,985

~~Table of Contents~~

~~TABULA RASA HEALTHCARE, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Amounts in thousands, except share and per share data)~~

CareVention HealthCare

Shared Services and Other

Consolidated
Adjusted EBITDA (loss) from Continuing Operations:

Three Months Ended September 30, 2022

Adjusted EBITDA (loss)

$
14,051

$
(11,998)

$
2,053

Three Months Ended September 30, 2021

Adjusted EBITDA (loss)

$
14,014

$
(10,875)

$
3,139

Nine Months Ended September 30, 2022

Adjusted EBITDA (loss)

$
39,531

$
(34,339)

$
5,192

Nine Months Ended September 30, 2021

Adjusted EBITDA (loss)

$
40,983

$
(32,998)

$
7,985

~~The following table presents the Company’s reconciliation net loss as presented in the consolidated statements of operations to the segments’ total Adjusted EBITDA:~~

Three Months Ended September 30,

Nine Months Ended September 30,


2022

2021

2022

2021
Reconciliation of Net Loss to Adjusted EBITDA from Continuing Operations

Net loss

$
(40,065)

$
(17,111)

$
(117,868)

$
(57,684)
Add:

Interest expense, net

2,717

2,230

7,430

6,959
Income tax (benefit) expense

(7)

82

368

284
Depreciation and amortization

5,723

5,328

16,954

15,109
Impairment charges

—

—

4,062

—
Business optimization expenses

—

—

787

—
Severance costs

122

354

697

516
Executive transition

1,821

—

1,971

—
Cooperation agreement costs

1,122

—

1,122

—
Divestiture-related expense

1,057

—

2,591

—
Acquisition-related expense

—

—

—

217
Stock-based compensation expense

15,378

6,901

28,173

24,100
Loss from discontinued operations

14,185

5,355

58,905

18,484
Adjusted EBITDA from continuing operations

$
2,053

$
3,139

$
5,192

$
7,985
Adjusted EBITDA (loss) from discontinued operations

(3,593)

2,578

(1,036)

7,294
Total Adjusted EBITDA (loss)

$
(1,540)

$
5,717

$
4,156

$
15,279

~~Table of Contents~~

~~TABULA RASA HEALTHCARE, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Amounts in thousands, except share and per share data)~~

Three Months Ended September 30,

Nine Months Ended September 30,


2022

2021

2022

2021
Reconciliation of Net Loss from Discontinued Operations, net of tax to Adjusted EBITDA (Loss) from Discontinued Operations

Net loss from discontinued operations, net of tax

$
(14,185)

$
(5,355)

$
(58,905)

$
(18,484)
Add:

Income tax (benefit) expense

(94)

52

(662)

182
Depreciation and amortization

—

6,771

7,331

20,234
Impairment charges

5,845

—

42,293

—
Loss on disposal of business

2,879

—

2,879

—
Settlement

—

—

1,448

500
Divestiture-related expense

104

—

216

—
Stock-based compensation expense

1,858

1,110

4,364

4,862
Adjusted EBITDA (loss) from discontinued operations

$
(3,593)

$
2,578

$
(1,036)

$
7,294

~~Asset information by segment is not a key measure of performance used by the CODM. Accordingly, the Company has not disclosed asset information by segment.~~

17. Related Party Transactions

The ~~Company’s CareVention HealthCare segment~~Company provides medication fulfillment pharmacy services and certain PACE solutions services to a client whose Chief Executive Officer is a member of the Board. For the three months ended ~~September~~June 30, 2023 and 2022, $1,854 and ~~2021, $1,894 and $1,679,~~$1,888, respectively, of revenue related to this client was included in the Company’s consolidated statements of operations. For the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, $3,730 and ~~2021, $5,541 and $4,834,~~$3,647, respectively, of revenue related to this client was included in the Company’s consolidated statements of operations. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, $225~~2022, $209 and ~~$67,~~$145, respectively, was included in accounts receivable, net, on the Company’s consolidated balance sheets.

During the second quarter of 2022, a holder of the Company’s convertible senior subordinated notes became a significant stockholder. The stockholder held approximately ~~$88,429~~$88,709 and $88,522 of the Company’s convertible senior subordinated notes, net of discount, which is presented on the Company’s consolidated balance ~~sheet~~sheets as of ~~September~~June 30, ~~2022.~~2023 and December 31, 2022, respectively. See Note 1112 for more information on the Company’s convertible senior subordinated notes.

On September 13, 2022, the Company entered into a cooperation agreement (the “Cooperation Agreement”) with a significant stockholder of the Company, pursuant to which, among other matters, the Company agreed to effect certain changes to its management team and the composition of the Board of Directors and implement certain corporate governance changes. In connection with the Cooperation Agreement, the Company agreed to reimburse the stockholder $464 of fees incurred, which are included within the accrued expenses and other liabilities on the Company’s consolidated balance sheet as of September 30, 2022.

On September 13, 2022, in connection with the entry into separation agreements with two retired named executive officers, the Company incurred $9,927 of separation costs, which included stock-based compensation related to the accelerated vesting of unvested shares of restricted stock, severance payments and benefits, relevant payroll taxes, and outplacement services. These costs ~~are~~were included within general and administrative expenses onin the Company’s consolidated statement of operations during the third quarter of ~~which $1,616 are~~2022. As of June 30, 2023, $787 is included within accrued expenses and other liabilities on the Company’s consolidated balance ~~sheet as of September 30, 2022.~~sheets.

~~Table of Contents~~

~~TABULA RASA HEALTHCARE, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Amounts~~As discussed in ~~thousands, except share and per share data)~~

~~On September 13, 2022,~~Note 19, on August 5, 2023, the Company entered into ~~consulting services agreements with two retired named executive officers to provide certain consulting and advisory services to~~ the ~~Company, including assisting~~Voting Agreement with the ~~transition~~Specified Stockholders, including a director of ~~key client relationships and strategic business partners and prospects. The consulting services agreements expire~~the Company. See Note 19 for more information on ~~December 31, 2022. The Company did not incur costs pursuant to these consulting services agreements during~~ the ~~three and nine months ended September 30, 2022.~~Voting Agreement.

18. Rights Plan

On July 25, 2022, the Board approved and adopted a Rights Agreement (the “Rights Agreement”), by and between the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent. Pursuant to the Rights Agreement, the Board declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share of common stock. The Rights are distributable to stockholders of record as of the close of business on August 5, 2022 and are not exercisable initially. If the Rights become exercisable, each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of a newly-designated series of preferred stock, Series A Junior Participating Preferred Stock, par value $0.0001 per share, of the Company, at an exercise price of $26.00, subject to adjustment. The Rights ~~expire at~~expired on July 25, 2023 in accordance with the ~~earlier of (a) the redemption or exchange~~terms of the Rights Agreement.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

19. Subsequent Event

MergerAgreement

On August 5, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Locke Buyer, LLC, a Delaware limited liability company (“Parent”), and Locke Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, on the terms and conditions set forth therein and in accordance with the Delaware General Corporation Law (the “DGCL”), Merger Sub will merge with and into the Company with the Company surviving the merger as ~~provided~~a wholly owned subsidiary of Parent (the “Merger”). Consummation of the Merger is subject to the approval of the Company’s stockholders, receipt of certain required regulatory approvals, and other customary closing conditions.

On the terms and subject to the conditions set forth in the ~~Rights~~Merger Agreement, which has been unanimously approved by the Board, at the effective time of the Merger (the “Effective Time”), each share of the Company’s common stock issued and outstanding immediately prior to the Effective Time (other than shares of Company common stock (i) owned by Parent or ~~(b) July 25, 2023.~~Merger Sub, (ii) owned by the Company as treasury shares or (iii) held by any person who properly exercises appraisal rights under the DGCL) shall be converted into the right to receive an amount in cash equal to $10.50 per share, without interest (the “Merger Consideration”).

In addition, on the terms and subject to the conditions set forth in the Merger Agreement, at the Effective Time, each outstanding (i)(A) restricted stock unit that is subject solely to time-based vesting conditions, whether vested or unvested, and (B) share of Company common stock that is subject to vesting, repurchase or forfeiture, and (ii) restricted stock unit that is subject to both performance-based and time-based vesting conditions (each, a “Company PSU”) that is vested as of immediately prior to the Effective Time but not yet settled or that automatically vests as a result of the Merger in accordance with its terms and without the exercise of discretion (each, a “Vested Company PSU”), in the case of each of clause (i) and (ii), will be canceled and the holder thereof will be entitled to receive an amount in cash equal to the Merger Consideration, provided that any Company PSU that does not constitute a Vested Company PSU will be forfeited and canceled for no consideration. Moreover, at the Effective Time, each outstanding option to purchase shares of Company common stock as of immediately prior to the Effective Time, whether vested or unvested, will be canceled and the holder thereof will be entitled to receive an amount in cash equal to the product of the number of shares of Company common stock subject to such option, multiplied by the excess of the Merger Consideration over the exercise price per share, provided that any such option with an exercise price per share equal to or greater than the Merger Consideration will be canceled for no consideration.

The consummation of the Merger is subject to certain closing conditions, including, among other things: (i) the approval of the Company’s stockholders; (ii) the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iii) the receipt of certain other regulatory approvals or consents; (iv) the absence of legal restraints prohibiting the Merger and(v) other customary conditions specified in the Merger Agreement.

The Merger Agreement contains certain termination rights for the Company and Parent, including, among others, the right of (i) either party to terminate the Merger Agreement if the Merger is not consummated by February 5, 2024, (ii) the Company to terminate the Merger Agreement in order to enter into a definitive acquisition agreement providing for a Superior Proposal (as defined in the Merger Agreement) and (iii) Parent to terminate the Merger Agreement if the Board changes its recommendation with respect to the Merger Agreement.

Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Parent a termination fee. If the termination fee becomes payable as a result of the Company terminating the Merger Agreement in order to enter into a definitive acquisition agreement (i) prior to August 26, 2023 or (ii) with an Excluded Party (as defined in the Merger Agreement) prior to September 5, 2023, the amount of the termination fee will be $5,285. If the termination fee becomes payable in other circumstances, the amount of the termination fee will be

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

$10,570. If the Company terminates the Merger Agreement because Parent fails to consummate the Merger when required by the Merger Agreement, the Company will be entitled to a termination fee of $21,140.

Voting and Support Agreement

Concurrently with the execution of the Merger Agreement, Parent and the Company entered into a voting and support agreement (the “Voting Agreement”) with Indaba Capital Management, L.P., Indaba Capital Fund, L.P., IC GP, LLC and Derek Schrier (collectively, the “Specified Stockholders”), who, directly or indirectly, collectively beneficially own approximately 25% of the outstanding shares of Company common stock (the “Covered Shares”), pursuant to which, among other things, each Specified Stockholder has (i) agreed to vote (or cause to be voted) all of its Covered Shares in favor of, among other things, approval of the Merger Agreement and the transactions contemplated by the Merger Agreement (including the Merger) and against any alternative Takeover Proposal and (ii) agreed, subject to certain exceptions, not to transfer its Covered Shares during the term of the Voting Agreement; provided, that the Voting Agreement will terminate in the event that, among other things, the Board changes its recommendation that the Company’s stockholders adopt the Merger Agreement.

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited consolidated financial statements and related notes and other financial information included in Part 1, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes thereto for the year ended December 31, ~~2021,~~2022, included in our ~~2021~~2022 Form 10-K.

Forward-Looking Statements

This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” ~~“potentially”~~“potentially,” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to, without limitation, our future plans, objectives, expectations, intentions, ~~the potential sales of the SinfoníaRx and DoseMe businesses of the Company and the timing and benefits thereof, and~~ financial performance, the proposed transaction with Locke Buyer, LLC, an affiliate of Nautic Partners, and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to: (i) ~~the overall macroeconomic environment,~~our expectations regarding industry and market trends, including the ~~effects of inflation, supply chain constraints,~~expected growth and ~~the impact of changes~~continued structural change and consolidation in ~~interest rates, on our business and results of operations; (ii) our ability to adapt to changes or trends within~~ the market for healthcare in the ~~U.S.;~~United States; (ii) our expectations about the growth of Programs of All-Inclusive Care for the Elderly (“PACE”) organizations; (iii) ~~a significant increase in competition~~our expectations about private payers establishing their own at-risk programs; (iv) the advantages of our solutions as compared to those of competitors; (v) our estimates about our financial performance; (vi) the visibility into future cash flows from a variety of companies in the healthcare industry; (iv) developments and changes in laws and regulations, including increased regulation of the healthcare industry through legislative action and revised rules and standards; (v) the extent to which we are successful in gaining new long-term relationships with clients or retaining existing clients; (vi) clients demands for our ~~services and~~business model; (vii) our ability to ~~fulfill client demands; (vii) the growth and success~~reduce expenses as a result of our ~~clients,~~disposition of non-core businesses; (viii) our growth strategy, including our ability to grow our client base; (ix) our plans to further penetrate existing markets and enter new markets; (x) expectations of earnings, revenue, and other financial items; (xi) plans, strategies, and objectives of management for future operations; (xii) our ability to establish and maintain intellectual property rights; (xiii) our ability to retain and hire necessary associates and appropriately staff our operations; (xiv) future capital expenditures; (xv) future economic conditions or performance; (xvi) our plans to pursue strategic acquisitions and partnerships; (xvii) our plans to expand and enhance our solutions; (xviii) our estimates regarding capital requirements and needs for additional financing; (xix) the risk that the proposed transaction may not be completed in a timely manner or at all; (xx) the failure to receive, on a timely basis or otherwise, the required approval of the proposed transaction by our stockholders; (xxi) the possibility that any or all of the various conditions to the consummation of the proposed transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); (xxii) the possibility that competing offers or acquisition proposals for the Company will be made; (xxiii) the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the proposed transaction, including in circumstances which ~~is difficult~~would require the Company to ~~predict~~pay a termination fee; (xxiv) the effect of the announcement or pendency of the proposed transaction on our ability to attract, motivate or retain key executives and ~~is subject to factors outside of our control; (viii)~~employees, our ability to maintain relationships with ~~a specified drug wholesaler; (ix) increasing consolidation in the healthcare industry; (x) managing~~ our ~~growth effectively; (xi) fluctuations in~~customers, vendors, service providers and others with whom we do business, or our operating ~~results; (xii) our ability to manage our cash flows; (xiii) failure or disruption of our information technology~~results and security systems; (xiv) dependence on or changes to our senior management and key employees; (xv) changes in our strategy as a result of our entry into the Cooperation Agreement with Indaba; (xvi) our future indebtedness and our ability to obtain additional financing, reduce expenses, or generate funds when necessary; (xvii) our ability to execute on our planned divestitures of our SinfoníaRx and DoseMe businesses, the costs associated therewith, andbusiness generally; (xxv) risks related to the proposed transaction diverting management’s attention from our ongoing business operations; ~~(xviii) risks related to~~(xxvi) the ~~volatility~~risk of shareholder litigation in ~~our stock price; (xix)~~connection with the ~~impacts of the ongoing COVID-19 pandemic~~proposed transaction, including resulting expense or delay; and ~~other health epidemics; and (xx)~~(xxvii) the risks described in Part I, Item 1A of our ~~2021~~2022 Form 10-K, filed with the SEC on March 10, 2023, and our other filings and reports filed with or furnished to the Securities and Exchange Commission. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments, except as required by applicable law. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Overview

Tabula Rasa HealthCare, Inc. (the “Company,” “we,” “us,” and “our”) is a healthcare technology company ~~advancing~~enabling simplified and individualized care that improves the ~~safe use~~health of ~~medications by creating solutions designed to empower pharmacists, providers,~~those we serve. We offer comprehensive

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pharmacy services that include personalized, precision medication management and ~~patients to~~delivery, as well as a suite of clinical and business management tools that help health plans and at-risk provider groups optimize ~~medication regimens. Our advanced proprietary technology, MedWise®, identifies causes of~~utilization and ~~risks for medication-related problems, including adverse drug events (“ADEs”), so healthcare professionals can minimize harm and reduce medication-related risks. Our software and services help~~ improve patient ~~outcomes and lower healthcare costs through reduced hospitalizations, emergency department visits, and healthcare utilization.~~health. Our vision and mission are supported by our experienced leadership team, our significant investments in our technology, services, and ~~collaborations~~people, and partnerships with our healthcare clients, including health plans and provider organizations, to ~~advance precision pharmacotherapy research~~manage the most complex and ~~its application in clinical practice, and our culture.~~vulnerable individuals.

We ~~operate~~provide our ~~business through two segments, CareVention HealthCare~~clients, primarily organizations with PACE, with medication fulfillment services, cloud-based software, pharmacy benefit management (“PBM”) solutions, and ~~MedWise HealthCare.~~

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~~CareVention HealthCare primarily~~clinical pharmacist services at the point-of-care. PACE ~~which~~ is a Centers for Medicare & Medicaid Services (“CMS”) sponsored program providing comprehensive medical and social services to adults ~~age~~aged 55 and older who need a nursing facility level of care but can live safely in community settings. Our clients include ArchCare Senior Life, Trinity Health, Palm Beach PACE, St. Paul’s PACE, and Welbe Health. We access the market through a number of different service lines and brands, including CareKinesis®, Capstone Risk Adjustment Services, CareVention Consulting™, PACElogic™, TruChart®, PeakTPA, PersonifilRx®, and Pharmastar®. We serve more than 150 healthcare organizations.

Our largest ~~CareVention HealthCare revenue~~service offering is our medication fulfillment services, which isare built around our ~~novel and~~advanced proprietary ~~MedWise®~~MedWise technology, designed to enable clinicians to increase patient safety, create individualized medication regimens, promote adherence, and eliminate unnecessary prescriptions.Our medication fulfillment and adherence packaging services utilize MedWise technology to reduce medication-related risk for the high-cost, high-risk PACE population. ~~The CareVention HealthCare suite of offerings~~Our medication revenue model is primarily based on payments for charges and dispensing fees for medication fulfillment.

We also ~~includes~~offer technology-enabled solutions, which include risk adjustment services, ~~pharmacy benefit management (“PBM”)~~PBM solutions, cloud-based electronic health records ~~(“EHR”)~~ solutions, and third-party administration services ~~which are all~~ specifically tailored to the PACE market. ~~Our CareVention HealthCare segment serves more than 150~~We also provide technology-enabled solutions that promote medication safety and adherence to improve patient outcomes and reduce healthcare ~~organizations.~~

costs. The ~~CareVention HealthCare segment~~technology-enabled solutions revenue model is primarily based on payments on a per-member, per-month (“PMPM”) basis, payments on a subscription basis, payments on a ~~transaction~~per claim basis, or payments on a fee-for-service basis for each medication safety review and ~~payments~~clinical assessment completed.

On August 5, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Locke Buyer, LLC, a Delaware limited liability company (“Parent”), and Locke Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, subject to the terms and conditions thereof and in accordance with the Delaware General Corporation Law (the “DGCL”), Merger Sub will merge with and into the Company with the Company surviving the merger as a wholly owned subsidiary of Parent (the “Merger”). Consummation of the Merger is subject to the approval of the Company’s stockholders, receipt of certain required regulatory approvals, and other customary closing conditions. See Note 19 in the notes to our consolidated financial statements as reported in this Quarterly Report on Form 10-Q for ~~medication charges and dispensing fees for medication fulfillment.~~additional information.

Divestiture of Non-Core Businesses and Segment Change

~~In February~~During first quarter of 2022, we announced plans to evaluate non-core assets to refocus our corporate strategy and increase stockholder value, and we commenced ~~an initial plan~~plans to sell the PrescribeWellness, DoseMe ~~business,~~and SinfoníaRx Businesses (as defined below), which we acquired in January ~~2019. In~~2019, March ~~2022,~~2019, and September 2017, respectively. As described further below, we completed our ~~evaluation~~sales of ~~additional divestiture opportunities~~the PrescribeWellness, DoseMe and ~~commenced plans to sell~~ ~~the~~ SinfoníaRx ~~and~~ ~~PrescribeWellness businesses, acquired~~Businesses in ~~September 2017~~August 2022, January 2023, and March ~~2019,~~2023, respectively. We determined that these businesses met the requirements to be classified as held for sale and discontinued operations as of March 31, 2022 and continued to meet the requirements through the dates of their respective sales. Accordingly, the assets, liabilities, revenue, and expenses related to these businesses are reflected as discontinued operations in the accompanying consolidated financial statements for all periods presented in this Quarterly Report on Form 10-Q.

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On August 1, 2022 (the ~~“Sale~~“PW Sale Date”), we completed the sale of our unincorporated PrescribeWellness business division (the “PrescribeWellness Business”), and the assets, properties, and rights that were primarily used or held for use in connection with the PrescribeWellness Business, and the KD Assets (as defined below), to Transaction Data Systems, Inc. (“TDS”). On the PW Sale Date, we also completed the acquisition of certain intellectual property from karmadata, Inc. (“KD”), which had historically been licensed to ~~the Company~~us (the “KD Assets”). The KD Assets acquired were simultaneously transferred to TDS on the PW Sale Date. The purchase consideration included $125 million in cash, subject to certain customary post-closing adjustments, of which $118.6 million was paid directly to us and $5.9 million was paid to KD on the PW Sale Date. In October 2022, TDS also paid us $1.5 million for certain customary post-closing adjustments. We are also entitled to receive up to $15.0 million in contingent consideration ~~to be paid by TDS~~ based upon the PrescribeWellness Business’s achievement of certain performance-based metrics during the fiscal years ending December 31, 2023 and 2024.

On January 20, 2023 (the “DoseMe Sale Date”), we entered into a Share and Asset Purchase Agreement with DoseMe Operations Inc. (“DoseMe Operations”) and completed the ~~Sale Date, we~~sale of our unincorporated DoseMe business (the “DoseMe Business”), and the assets, properties, and rights that are primarily used or held for use in connection with the DoseMe Business. The purchase consideration included $2.0 million in cash, subject to certain customary post-closing adjustments, which was paid directly to us in January 2023. The purchase consideration also ~~announced~~included a ~~strategic partnership to offer our proprietary MedWise® Science,~~note receivable of $3.0 million with an ~~accumulative, simultaneous, multi-drug analysis tool that identifies medication related risk, into TDS’s pharmacy management systems.~~annual interest rate of 7.0%, which matures on January 20, 2027.

On March 2, 2023 (the “SinfoníaRx Sale Date”), we entered into an Asset Purchase Agreement with Symphony Clinic, LLC (“Symphony”) and completed the sale of our unincorporated SinfoníaRx business (the “SinfoníaRx Business”), and the assets, properties, and rights that are primarily used or held for use in connection with the SinfoníaRx Business. The purchase consideration included $1.4 million in cash, subject to certain customary post-closing adjustments, which was paid directly to us on the SinfoníaRx Sale Date. The purchase consideration also included a note receivable of $3.6 million with an annual interest rate of 3.0%, which matures on December 31, 2023. We may also be entitled to receive up to $1.0 million in contingent consideration based upon potential regulatory changes affecting the SinfoníaRx Business.

We previously operated our business through two segments, CareVention HealthCare and MedWise HealthCare. When ~~the Company~~we commenced plans to sell the PrescribeWellness, DoseMe and SinfoníaRx ~~and PrescribeWellness businesses,~~Businesses, these businesses collectively comprised the majority of our MedWise HealthCare segment, with PrescribeWellness Business representing the most significant portion of this segment. ~~Our sale~~The disposition of these non-core businesses represented the completion of our previously-announced strategic business shift. Subsequent to the sales of these business, our chief operating decision maker (“CODM”), who is our Chief Executive Officer, evaluates performance and allocates resources based on the consolidated results of the ~~PrescribeWellness Business~~Company. Therefore, we consolidated our two operating segments to one segment by merging the CareVention HealthCare segment and ~~plans to sell~~ the ~~DoseMe and SinfoníaRx businesses represent a strategic~~remaining MedWise HealthCare segment. We now operate our business ~~shift having a significant effect on our Company’s operations and financial results. As a result, we determined that these businesses met the requirements to be classified~~ as ~~held for sale and discontinued operations~~one segment effective as of March 31, 2022, and the remaining two businesses continued to meet such requirements as of September 30, 2022. Accordingly, the accompanying consolidated financial statements in this Quarterly Report on Form 10-Q2023. Prior comparative periods have been ~~recast for all periods presented~~revised to ~~reflect~~conform with the ~~assets, liabilities, revenue, and expenses related to these businesses as discontinued operations.~~current period segment presentation.

The continuing operations of the remaining components of our MedWise HealthCare segment promote medication safety and adherence to improve patient outcomes and reduce healthcare costs. The MedWise HealthCare segment revenue model is primarily based on payments on a PMPM basis, payments on a subscription basis, and payments on a fee-for-service basis for each medication safety review and clinical assessment completed.

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Unless otherwise noted, management’s discussion and analysis of our Company’s results of operations relate to our Company’s continuing operations.

Substantially all of our revenue is recognized in the U.S. and substantially all of our long-lived assets are located in the U.S.

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Key Business Metrics

We continually monitor certain corporate metrics, including the following key metrics, that we believe are useful in evaluating and managing our operating performance as compared to that of other companies in our industry.


	Three Months Ended								Three Months Ended
	September 30,				Change				June 30,				Change
	2022		2021		$		%		2023		2022		$		%

		(Dollars in thousands)								(Dollars in thousands)
Revenues from continuing operations	$	77,101	$	67,910	$	9,191	14	%	$	90,036	$	72,597	$	17,439	24	%
Net loss from continuing operations		(25,880)		(11,756)		(14,124)	120			(9,743)		(12,691)		2,948	23
Adjusted EBITDA from continuing operations		2,053		3,139		(1,086)	(35)

	Nine Months Ended								Six Months Ended
	September 30,				Change				June 30,				Change
	2022		2021		$		%		2023		2022		$		%

		(Dollars in thousands)								(Dollars in thousands)
Revenues from continuing operations	$	216,808	$	190,985	$	25,823	14	%	$	178,313	$	139,707	$	38,606	28	%
Net loss from continuing operations		(58,963)		(39,200)		(19,763)	50			(16,817)		(33,083)		16,266	49
Adjusted EBITDA from continuing operations		5,192		7,985		(2,793)	(35)

We monitor the key metrics set forth in the preceding table to help us evaluate trends, establish budgets, and measure the effectiveness and efficiency of our ~~operations, and gauge our cash generation. We discuss Adjusted EBITDA in more detail in “Non-GAAP Financial Measures.”~~operations. We also monitor revenue retention rate on an annual basis, which is described in our ~~2021~~2022 Form 10-K.

Factors Affecting our Future Performance

General

We believe that our future success depends on many factors, including our ability to maintain and grow our relationships with existing clients, expand our client base, continue to enter new markets, and expand our offerings to meet evolving market needs. While these areas present significant ~~opportunity,~~opportunities, they also present risks that we must manage to ensure successful results. ~~Please~~For additional information about risks and uncertainties that may impact our future success, please refer to “Item 1A – Risk Factors” in our ~~2021~~2022 Form 10-K ~~for a discussion of certain risks and uncertainties that may impact our future success.~~

~~Divestitures of Non-Core Businesses~~as supplemented by the additional factors set forth under “Item 1A – Risk Factors” included in this Quarterly Report on Form 10-Q.

As described above, ~~on August 1, 2022~~ we completed the ~~sale~~sales of the PrescribeWellness, ~~Business and are engaged in efforts to sell~~ ~~the~~ DoseMe and SinfoníaRx ~~businesses.~~Businesses in 2022 and the first quarter of 2023. We used the cash proceeds from the sale of the PrescribeWellness Business to pay off our line of credit with Western Alliance Bank (the “2020 Credit Facility”) and increase our ~~liquidity, and the~~liquidity. The remaining cash proceeds, along with ~~those anticipated~~cash proceeds received and promissory notes from ~~divestiture~~the divestitures of the ~~remaining two businesses,~~DoseMe and SinfoníaRx Businesses, will provide ~~our Company~~us with the financial flexibility to optimize our capital structure, as well as to focus on our core value-based care business and our MedWise science, including our offerings targeted at the PACE market ~~and our MedWise science.~~.

Components of Our Results of Operations

Revenue

Our revenue is derived from our ~~product sales~~medication revenue and ~~service activities under our CareVention HealthCare and MedWise HealthCare segments.~~technology-enabled solutions revenue. For both the three months ended ~~September~~June 30, 2023 and 2022, medication revenue represented 77% of our total revenue from continuing operations, and ~~2021, product~~technology-enabled solutions revenue represented 23%, of our total revenue from continuing operations. For the six months ended June 30, 2023 and 2022, medication revenue represented 78% and ~~74%~~76%, respectively, of our total revenue ~~respectively,~~from continuing operations, and ~~service~~technology-enabled solutions revenue represented 22% and ~~26%~~24%, respectively, of our total revenue

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respectively. For the nine months ended September 30, 2022 and 2021, product revenue represented 77% and 73% of our total revenue, respectively, and service revenue represented 23% and 27% of our total revenue, respectively. from continuing operations.

~~CareVention HealthCare~~Medication Revenue

~~PACE Product Revenue~~

We provide medication fulfillment pharmacy services to PACE organizations. While the majority of medications are routinely filled in order to treat chronic conditions, the mix and quantity of medications can vary. Revenue from medication fulfillment services is generally billed monthly or weekly, depending on whether the PACE

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organization is contracted with a pharmacy benefit manager, and is recognized when medications are delivered and control has passed to the client. At the time of delivery, we have performed substantially all of our performance obligations under our client contracts. We do not experience a significant level of returns or reshipments.

Technology-Enabled Solutions Revenue

~~PACE~~Value-Based Care Solutions

We provide medication safety services and health plan management services to PACE organizations. These services primarily include medication safety services, risk adjustment services, PBM ~~solutions, EHR~~ solutions, and third-party administration services. Revenue related to these services primarily consists of a fixed monthly fee assessed on a PMPM basis, a fee for each claim adjudicated, and subscription fees. These fees are recognized when we satisfy our performance obligation to stand ready to provide PACE services, which occurs when our clients have access to the PACE services. We generally bill for PACE services on a monthly basis as the services are provided.

~~MedWise HealthCare~~

~~Medication Safety Services~~

We also provide medication safety services to other healthcare organizations, which include identification of high-risk individuals, medication regimen reviews, including patient and prescriber counseling, and targeted interventions to increase adherence and close gaps in care. Revenue related to these services primarily consists of PMPM fees and fees for each medication review and clinical assessment completed. Revenue is recognized when we satisfy our performance obligation to stand ready to provide medication safety services, which occurs when our clients have access to the medication safety services and when medication reviews and clinical assessments are completed. We generally bill for the medication safety services on a monthly basis.

Software Subscription and Services

We provide software as a service (“SaaS”) solutions, which include electronic health records software and solutions which allow for the identification of individuals with high medication-related risk. Revenues related to ~~these software services~~SaaS solutions primarily consist of monthly subscription fees and are recognized monthly as we meet our performance obligation to provide access to the software. Revenue for implementation and set-up services is generally recognized over the contract term as the software services are provided. We generally bill for the software services on a monthly basis.

Cost of Revenue (exclusive of depreciation and amortization)

~~Product~~ Cost of Medication Revenue

Cost of ~~product~~medication revenue includes all costs directly related to the fulfillment and distribution of ~~medications under our CareVention HealthCare offerings. Costs~~medications. These costs consist primarily of the purchase price of the ~~prescription~~ medications we dispense, which for the three months ended September 30, 2022 and 2021, represented 81% and 82%, respectively, of our total product costs. For each of the nine months ended September 30, 2022 and 2021, medication costs represented 81% of our total product costs. In addition to costs incurred to purchase the medications we dispense, other costs include shipping; packaging;shipping, packaging, expenses associated with operating our medication fulfillment centers, including ~~salaries~~employment costs and ~~related costs, such as~~ stock-based compensation, ~~for personnel;~~and technology ~~expenses;~~expenses. Such costs also include direct overhead ~~expenses;~~expenses and allocated indirect overhead costs. We allocate indirect overhead costs among functions based on employee headcount. For the three months ended June 30, 2023 and 2022, the purchase price of medications represented 82% and 80%, respectively, of our total cost of medication revenue. For the six months ended June 30, 2023 and 2022, the purchase price of medications represented 82% and 81%, respectively, of our total cost of medication revenue.

~~Table~~Cost of ~~Contents~~

~~Service Cost~~Technology-Enabled Solutions Revenue

Cost of ~~service~~technology-enabled solutions revenue includes all costs directly related to servicing our ~~CareVention HealthCare~~technology service contracts and ~~MedWise HealthCare service contracts. These costs~~ primarily ~~consist~~consists of ~~labor~~employment costs, including stock-based compensation, outside contractors, expenses related to supporting our software platforms, direct overhead expenses, and allocated indirect overhead costs. We allocate indirect overhead costs among functions based on employee headcount.

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Research and Development Expenses

Our research and development expenses consist primarily of ~~salaries and related~~employment costs, including stock-based compensation, for ~~personnel in our research and development functions. This personnel includes~~ employees engaged in scientific research, healthcare analytics, the design and development of new scientific algorithms, and the enhancement of our software and technology platforms. Research and development expenses also include fees paid to third-party consultants, costs related to quality assurance and testing, and other allocated facility-related overhead and expenses.

We capitalize certain costs incurred in connection with obtaining or developing the proprietary software platforms that support our ~~product~~medication and technology service contracts, including third-party contractors and payroll costs for employees directly involved with the software development. Capitalized software development costs are amortized beginning when the software project is substantially completed and when the asset is ready for its intended use. Costs incurred during the preliminary project stage and ~~post implementation~~post-implementation stage, as well as maintenance and training costs, are expensed as incurred. We continue to focus our research and development efforts on adding new features and applications to increase the functionality and enhance the ease of use of our existing suite of software solutions.

We believe that continued investment in our software solutions is important for our future growth. We expect that our research and development expenses will fluctuate in the ~~near term~~short-term as we refocus on our core business but will decrease as a percentage of revenue in the ~~long term.~~long-term.

Sales and Marketing Expenses

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

We expect our sales and marketing expenses to fluctuate in the ~~near term~~short-term as we refocus on our core business but decrease as a percentage of revenue in the ~~long term.~~long-term.

General and Administrative Expenses

General and administrative expenses consist principally of ~~employee-related expenses,~~employment costs, including ~~salaries, benefits, and~~ stock-based compensation, for employees who are responsible for information systems, administration, human resources, finance, strategy, legal and executive management, as well as other corporate expenses associated with these functional areas. General and administrative expenses also include professional fees for legal, consulting, and accounting services and allocated overhead. General and administrative expenses are expensed when incurred.

We expect that our general and administrative expenses will fluctuate in the ~~near term~~short-term as we refocus on our core business but decrease as a percentage of revenue in the ~~long term.~~long-term.

Change in Fair Value of Contingent Consideration Receivable

In connection with the sales of the PrescribeWellness Business on August 1, 2022 and the SinfoníaRx Business on March 2, 2023, we may be entitled to additional consideration based on the achievement of certain customer and revenue metrics and based upon potential regulatory changes affecting the business, respectively. The contingent consideration receivables are classified as a current or noncurrent asset based on their expected payment dates, and they are subject to remeasurement at each balance sheet date. Any change in the fair value of the contingent consideration receivables is reflected in our consolidated statements of operations as a change in fair value of the receivables. We adjust the carrying value of the contingent consideration receivables until the contingencies are finally determined or final payment is received.

Long-Lived Asset Impairment Charge

Long-lived assets consist of property and equipment, operating lease right-of-use assets, software development costs, and definite-lived intangible assets. Long-lived assets to be held and used are tested for recoverability whenever

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events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that we consider in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for recoverability, we compare forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying

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value. An impairment loss may be recognized when estimated undiscounted future cash flows expected to result from the use and disposition of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows or a combination of income and market approaches.

Depreciation and Amortization Expenses

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

Interest Expense, Net

Interest expense, net is primarily attributable to interest expense associated with our convertible senior subordinated notes (the “2026 Notes”), and interest expense associated with our Loan and Security Agreement with Western Alliance Bank (the “2020 Credit Facility”) prior to its termination on August 1, ~~2022, and the promissory notes related to the purchase consideration for the acquisition of Personica, LLC.~~2022. Interest expense also includes the amortization of debt discount and debt issuance costs related to our various debt arrangements and imputed ~~interest.~~interest on our vendor financing arrangements. Interest expense, net includes interest income earned on our investments in money market funds and on divestiture-related notes receivable.

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Results of Operations

The following table summarizes our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


	Three Months Ended								Nine Months Ended								Three Months Ended								Six Months Ended
	September 30,				Change				September 30,				Change				June 30,				Change				June 30,				Change
	2022		2021		$		%		2022		2021		$		%		2023		2022		$		%		2023		2022		$		%
Revenue:
Product revenue	$	59,780	$	50,321	$	9,459	19	%	$	166,645	$	139,021	$	27,624	20	%
Service revenue		17,321		17,589		(268)	(2)			50,163		51,964		(1,801)	(3)
Medication revenue																	$	69,626	$	55,892	$	13,734	25	%	$	138,376	$	106,865	$	31,511	29	%
Technology-enabled solutions revenue																		20,410		16,705		3,705	22			39,937		32,842		7,095	22
Total revenue		77,101		67,910		9,191	14			216,808		190,985		25,823	14			90,036		72,597		17,439	24			178,313		139,707		38,606	28
Cost of revenue, exclusive of depreciation and amortization shown below:
Product cost		46,221		38,518		7,703	20			129,157		104,939		24,218	23
Service cost		14,014		12,697		1,317	10			40,430		37,875		2,555	7
Cost of medication revenue																		53,554		43,384		10,170	23			106,636		82,936		23,700	29
Cost of technology-enabled solutions revenue																		13,953		13,247		706	5			28,395		26,416		1,979	7
Total cost of revenue, exclusive of depreciation and amortization		60,235		51,215		9,020	18			169,587		142,814		26,773	19			67,507		56,631		10,876	19			135,031		109,352		25,679	23
Operating expenses:
Research and development		4,018		3,699		319	9			11,226		11,069		157	1			1,777		3,243		(1,466)	(45)			3,056		7,208		(4,152)	(58)
Sales and marketing		2,857		2,719		138	5			7,678		8,225		(547)	(7)			2,732		2,172		560	26			5,185		4,821		364	8
General and administrative		27,917		14,393		13,524	94			58,945		45,725		13,220	29			17,599		15,150		2,449	16			34,176		31,028		3,148	10
Change in fair value of contingent consideration receivable																		3,350		—		3,350	100			3,750		—		3,750	100
Long-lived asset impairment charge		—		—		—	—			4,062		—		4,062	100			—		—		—	100			—		4,062		(4,062)	(100)
Depreciation and amortization		5,723		5,328		395	7			16,954		15,109		1,845	12			6,103		5,489		614	11			12,303		11,231		1,072	10
Total operating expenses		40,515		26,139		14,376	55			98,865		80,128		18,737	23			31,561		26,054		5,507	21			58,470		58,350		120	0
Loss from operations		(23,649)		(9,444)		(14,205)	150			(51,644)		(31,957)		(19,687)	62			(9,032)		(10,088)		1,056	10			(15,188)		(27,995)		12,807	46
Other income (expense):
Interest expense, net		(2,717)		(2,230)		(487)	22			(7,430)		(6,959)		(471)	7			(1,144)		(2,444)		(1,300)	(53)			(2,409)		(4,713)		(2,304)	(49)
Other income		479		—		479	100			479		—		479	100			566		—		566	100			1,018		—		1,018	100
Total other expense		(2,238)		(2,230)		(8)	—			(6,951)		(6,959)		8	—
Total other expense, net																		(578)		(2,444)		1,866	76			(1,391)		(4,713)		3,322	70
Loss from continuing operations before income taxes		(25,887)		(11,674)		(14,213)	122			(58,595)		(38,916)		(19,679)	51			(9,610)		(12,532)		2,922	23			(16,579)		(32,708)		16,129	49
Income tax (benefit) expense		(7)		82		(89)	(109)			368		284		84	30
Income tax expense																		133		159		(26)	(16)			238		375		(137)	(37)
Net loss from continuing operations		(25,880)		(11,756)		(14,124)	120			(58,963)		(39,200)		(19,763)	50			(9,743)		(12,691)		2,948	23			(16,817)		(33,083)		16,266	49
Net loss from discontinued operations, net of tax		(14,185)		(5,355)		(8,830)	165			(58,905)		(18,484)		(40,421)	219			(108)		(36,919)		36,811	100			(8,932)		(44,720)		35,788	80
Net loss	$	(40,065)	$	(17,111)	$	(22,954)	134		$	(117,868)	$	(57,684)	$	(60,184)	104		$	(9,851)	$	(49,610)	$	39,759	80	%	$	(25,749)	$	(77,803)	$	52,054	67	%

Comparison of the Three Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (Continuing Operations)

~~Product~~Medication Revenue

~~Product~~Medication revenue increased ~~$9.5~~$13.7 million, or ~~19%~~25%, to ~~$59.8~~$69.6 million for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. Increased medication fulfillment volume from growth in the number of patients served by our existing clients, medication mix of prescriptions filled, and payer mix contributed ~~$4.8~~$10.7 million to the increase. ~~New CareVention HealthCare~~In addition, new clients that started services after the end of the ~~third~~second quarter ~~in 2021~~of 2022 contributed ~~$4.0~~$3.0 million to the ~~increase. The remaining~~ increase in ~~product~~medication revenue ~~was due to medications dispensed by our community pharmacy network on behalf of CareVention HealthCare as a result of amended client agreements.~~during 2023.

~~Service~~Technology-Enabled Solutions Revenue

~~Service revenue decreased $0.3~~Revenue generated from technology-enabled solutions increased $3.7 million, or 2%22%, to ~~$17.3~~$20.4 million for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~

~~Medication safety services revenue decreased $2.0 million, or 70%, during the three months ended September 30, 2022, as compared to the same period in 2021.~~2022. The ~~decrease was primarily due to the conclusion of the Enhanced Medication Therapy Management (“EMTM”) pilot program on December 31, 2021, which contributed $2.3~~increase included $2.7 million of revenue during the three months ended September 31, 2021. As a result, no revenues related to the EMTM program were recognized after December 31, 2021. This decrease was partially offset by the addition of new clients since the third quarter of 2021, which contributed $0.3 million of revenue during the nine months ended September 30, 2022.

The decrease in medication safety services was partially offset by an increase in CareVention HealthCare PACE solutions revenue of approximately $1.7 million, or 12%, to $16.4 million for the three months ended September 30, 2022, as compared to the same period in 2021. The increase was attributable to the addition of new clients and growth ~~with~~within existing clients ~~since the third quarter of 2021,~~ primarily ~~within~~in our PBM solutions, third-party administration services, and risk adjustment ~~services.~~services, and $1.0 million related to new clients added after the end of the second quarter of 2022.

Cost of Medication Revenue

Cost of medication revenue increased $10.2 million, or 23%, to $53.6 million for the three months ended June 30, 2023, as compared to the same period in 2022. Medication costs increased $9.2 million primarily due to growth in the number of patients served, of which $1.8 million is attributable to new clients that started services after the end of the second quarter of 2022. Employee compensation costs also increased $0.8 million due to an increase in employee headcount to support revenue growth.

Cost of Technology-Enabled Solutions Revenue

Cost of technology-enabled solutions revenue increased $0.7 million, or 5%, to $14.0 million for the three months ended June 30, 2023, as compared to the same period in 2022. The increase was primarily comprised of a $0.8 million increase in professional services related to our vendor arrangement for business process support and technology services for our third-party administration services and electronic health records solutions.

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~~Cost of Product Revenue~~

Cost of product revenue increased $7.7 million, or 20%, to $46.2 million for the three months ended September 30, 2022, as compared to the same period in 2021. Increased medication volume from growth in the number of patients served by our customers contributed approximately $5.7 million to the change, of which $2.6 million was attributable to new clients and $0.7M was attributable to medications dispensed by our community pharmacy network on behalf of CareVention HealthCare as a result of amended client agreements. The increase in cost of product revenue was also due to a $1.0 million increase in distribution charges related to higher shipping costs and volume for the medications we fulfilled. The remaining $1.0 million increase was primarily due to employee compensation costs, including stock-based compensation, due to an increase in employee headcount.

~~Cost of Service Revenue~~

Cost of service revenue increased $1.3 million, or 10%, to $14.0 million for the three months ended September 30, 2022, as compared to the same period in 2021. The increase was primarily comprised of $3.4 million of costs related to a new vendor arrangement for business process support and technology services. These increases were partially offset by a $1.4 million reduction in employee compensation costs, including stock-based compensation, for the employees hired by the third-party provider and a $0.6 million reduction in resources contracted to deliver medication safety services due to the conclusion of the EMTM program on December 31, 2021.

Research and Development Expenses

Research and development expenses ~~increased $0.3~~decreased by $1.5 million, or 9%45%, to ~~$4.0~~$1.8 million for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. The ~~increase~~decrease was primarily ~~related~~due to a ~~$0.5~~$0.7 million ~~increase~~decrease in employee compensation costs, of which $0.6 million related to stock-based compensation expense, as a result of ~~more outstanding awards during 2022 compared to 2021. This increase~~decreased headcount. The decrease in research and development expenses was ~~partially offset~~also driven by a ~~$0.1 million decrease in publication expenses and $0.1~~$0.4 million decrease in rent ~~expense.~~and overhead costs as a result of a reduced real estate footprint in our development centers in New Jersey, South Carolina, and Florida. The remaining decrease was due to an aggregate $0.3 million decrease in professional services and information technology spend.

Sales and Marketing Expenses

Sales and marketing expenses increased ~~$0.1~~$0.6 million, or 5%26%, to ~~$2.9~~$2.7 million for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. The increase was primarily ~~attributable~~due to a ~~$0.3~~$0.7 million increase in employee compensation costs, ~~which included $0.1 million in~~including stock-based compensation ~~expense. This increase was partially offset by a $0.2 million decrease in professional consulting services~~expense and commissions expense related to ~~executing our branding and marketing strategies.~~new clients added since the second quarter of 2022.

General and Administrative Expenses

General and administrative expenses increased ~~$13.5~~$2.4 million, or ~~94%~~16%, to ~~$27.9~~$17.6 million for the three months ended ~~September~~June 30, ~~2022,~~2023 as compared to the same period in 2021. The increase was primarily attributable to a $8.7 million increase in employee compensation costs compared to 2021, of which $7.9 million was stock-based compensation primarily due to vesting of restricted stock awards related to the retirement of former named executive officers as well as additional grants outstanding during 2022 as compared to 2021.2022. The increase in general and administrative expenses also included executive transition expenses of $1.8 million incurred during 2022 related to the separation and transition of retired named executive officers and $1.1 million of legal and advisory costs related to a stockholder cooperation agreement. The remaining increase in general and administrative costs was primarily due to ~~$0.9 million of divestiture related costs and~~ a ~~$0.8~~$1.9 million increase in professional services ~~primarily related~~and a $0.4 million increase in information technology spend.

Change in Fair Value of Contingent Consideration Receivable

In connection with the sale of the PrescribeWellness Business on August 1, 2022, we may be entitled to receive additional consideration based on the achievement of certain customer and revenue metrics for the years ending December 31, 2023 and 2024. During the three months ended June 30, 2023, we recorded a ~~new provider~~$3.4 million charge to decrease the fair value of ~~enterprise support services~~the contingent consideration receivable to zero due to updated estimates utilized in the contingent consideration valuation.

In connection with the sale of the SinfoníaRx Business on March 2, 2023, we ~~engaged during~~may be entitled to receive additional consideration based upon the ~~fourth quarter~~approval of ~~2021~~potential regulatory changes affecting the SinfoníaRx Business. During the three months ended June 30, 2023, no change was recorded to the fair value of the contingent consideration receivable. The fair value of the contingent consideration receivable was $0.1 million as ~~part~~ of ~~business optimization initiatives.~~June 30, 2023.

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased ~~$0.4~~$0.6 million, or 7%11%, to ~~$5.7~~$6.1 million for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. This increase was ~~primarily~~ due to a ~~$0.6~~$1.1 million increase in the amortization of capitalized software related to new software functionality placed into service after the end of the ~~third~~second quarter in ~~2021 to support our business.~~2022. The increase was partially offset by a ~~$0.2~~$0.4 million decrease in ~~amortization~~depreciation of property and equipment, which have been fully depreciated since the end of the second quarter of 2022.

Interest Expense, Net

Interest expense for the three months ended June 30, 2023 was $1.1 million, a decrease of $1.3 million, or 53%, as compared to the same period in 2022. The decrease in interest expense was primarily due to the repayment and termination of the 2020 Credit Facility on August 1, 2022. For the three months ended June 30, 2022, we incurred $0.6 million of interest expense related to the 2020 Credit Facility. The decrease in interest expense was also due to $0.7 million of interest income earned on our investments in money market funds. The decrease in interest expense was partially offset by an increase in imputed interest expense related to our vendor financing arrangements.

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~~expense related to definite-lived intangible assets which have been fully amortized since the end of the first quarter in 2021.~~

~~Interest Expense~~Other Income

~~Interest expense~~In connection with the sales of the PrescribeWellness Business, DoseMe Business, and SinfoníaRx Business, we entered into transition services agreements (“TSAs”), pursuant to which we provided or are providing business support services after their sales. We recognized $0.6 million of income related to the TSAs for the three months ended ~~September~~June 30, ~~2022 was $2.7 million, an increase~~2023, which is reported in other income in our consolidated statement of $0.5 million, or 22%, as compared to the same period in 2021. The increase was primarily attributable to a $0.6 million increase in interest expense on the 2020 Credit Facility due to increased borrowings and an increase in interest rates in 2022 compared to 2021. The increase in interest expense was also due to amortization of the remaining balance of deferred financing costs to interest expense as a result of terminating the 2020 Credit Facility. As discussed under Liquidity and Capital Resources below, the Company fully repaid and terminated the 2020 Credit Facility on August 1, 2022.

The increase in interest expense was partially offset by the full satisfaction of the acquisition-related notes payable in October 2021 related to the October 2020 acquisition of Personica, LLC. Approximately $0.1 million of interest expense was recognized for the three months ended September 30, 2021 related to the acquisition-related notes payable.operations.

Income Taxes

For the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, we recorded income tax ~~benefit of $7 thousand and income tax~~ expense of ~~$82 thousand,~~$0.1 million and $0.2 million, respectively, which resulted in effective tax rates of ~~0.0%~~(1.4)% and ~~(0.7%)~~(1.3)%, respectively. Income tax expense was primarily related to indefinite-lived deferred tax liabilities for goodwill amortization. The effective tax rates differ from the U.S. statutory tax rate primarily due to the full valuation allowance recorded that ~~was currently limiting~~limited the realizability of our net deferred tax assets as of ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. Accordingly, the tax benefit was limited due to unbenefited losses in the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. We calculate the provision for income taxes during interim periods by applying the estimated annual effective tax rate for the full year ordinary income or loss to the respective reporting period’s year-to-date income or loss, while also adding any income tax expense or benefit related to discrete items occurring within that interim period.

~~Other Income~~

In connection with the sale of the PrescribeWellness Business, we entered into a transition services agreement (“TSA)” with TDS pursuant to which we are providing business support services for the PrescribeWellness Business after the sale. We recognized $479 of income related to the TSA for the three months ended September 2022, which is reported in other income on our consolidated statement of operation.

Net Loss from Discontinued Operations, Net of Tax

During the first quarter of 2022, we announced plans to evaluate non-core assets and commenced plans to sell the SinfoníaRx, PrescribeWellness, and DoseMe ~~businesses,~~Businesses, which were acquired in September 2017, March 2019, and January 2019, respectively. We completed the sales of the PrescribeWellnessOn, DoseMe,and SinfoníaRx Businesses on August 1, 2022, ~~we completed the sale~~January 20, 2023 and March 2, 2023, respectively. Our sales of ~~the PrescribeWellness~~ ~~Business. Our completed sale of the PrescribeWellness Business and plan of sale with respect to DoseMe and SinfoníaRx represent~~these businesses represented a strategic business shift having a significant effect on our operations and financial results. As a result, we determined that these businesses met such requirements to be classified as held for sale and discontinued operations as of March 31, 2022 and ~~continued to meet the requirements as of September 30, 2022.~~through their respective sale dates. Accordingly, al~~all~~l related assets and liabilities and the results of operations for all periods presented are classified as discontinued operations in the consolidated financial statements.

Net loss from discontinued operations, net of tax, for the SinfoníaRx ~~and DoseMe businesses~~Business was ~~$10.3 million and $4.1~~$0.1 million for the three months ended ~~September~~June 30, ~~2022 and 2021, respectively.~~2023. Net loss from discontinued operations, net of tax, for the PrescribeWellness, DoseMe,~~PrescribeWellness~~and SinfoníaRx Businesses ~~Business~~ was ~~$3.9~~$20.9 million, $4.1 million, and ~~$1.3~~$12.0 million, respectively, for the three months ended ~~September~~June 30, ~~2022 and 2021, respectively.~~2022. See Note 3 in the notes to our consolidated financial statements as reported in this Quarterly Report on Form 10-Q for additional information.

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Comparison of the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (Continuing Operations)

~~Product~~Medication Revenue

~~Product~~Medication revenue increased ~~$27.6~~$31.5 million, or ~~20%~~29%, to ~~$166.6~~$138.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. Increased medication fulfillment volume from growth in the number of patients served by our existing clients, medication mix of prescriptions filled, and payer mix contributed ~~$17.1~~$26.0 million to the increase. ~~Medications dispensed on behalf of CareVention HealthCare by our community pharmacy network increased $5.4 million resulting from amended client agreements.~~ In addition, new ~~CareVention HealthCare~~ clients that started services after the end of the ~~third~~second quarter ~~in 2021~~of 2022 contributed ~~$5.1~~$5.5 million to the increase in ~~product~~medication revenue during ~~2022.~~2023.

~~Service~~Technology-Enabled Solutions Revenue

~~Service revenue decreased $1.8~~Technology-enabled solutions increased $7.1 million, or 3%22%, to ~~$50.2~~$39.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~

~~Medication safety services revenue decreased $6.5 million, or 74%, during the nine months ended September 30,~~ 2022, ~~as compared to the same period in 2021. The decrease was~~ primarily due to ~~the conclusion of the EMTM pilot program on December 31, 2021, which contributed $6.9~~$5.1 million of revenues during the nine months ended September 30, 2021. As a result, no revenues related to the EMTM program were recognized after December 31, 2021. This decrease was partially offset by the addition of new clients since the third quarter of 2021, which contributed $0.8 million of revenue during the nine months ended September 30, 2022.

~~The decrease~~ in medication safety services was partially offset by a $4.6 million, or 11%, increase in CareVention HealthCare PACE solutions revenue to $47.6 million for the nine months ended September 30, 2022, as compared to the same period in 2021. The increase was attributable to the addition of new clients and growth ~~with~~within existing clients ~~since the third quarter of 2021, primarily within~~in our PBM solutions, third-party administration services, and risk adjustment services. In addition, new clients that started services after the end of the second quarter of 2022 contributed $2.0 million to the increase in technology-enabled solutions revenue during 2023.

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Cost of Medication Revenue

Cost of ~~Product Revenue~~

~~Cost of product~~medication revenue increased ~~$24.2~~$23.7 million, or ~~23%~~29%, to ~~$129.2~~$106.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to the same period in ~~2021. Increased medication volume from~~2022. Medication costs increased $20.6 million primarily due to growth in the number of patients served, ~~by our customers contributed approximately $19.2 million to the change,~~ of which ~~new clients contributed $3.2 million and $5.4~~$3.4 million was attributable to ~~medications dispensed by our community pharmacy network on behalf~~new clients that started services after the end of ~~CareVention HealthCare as a result~~the second quarter of amended client agreements. The increase in cost of product revenue was also due to a $3.0 million increase in distribution charges related to higher shipping costs and volume for the medications we fulfilled. Cost of product revenue also increased $1.8 million due to employee2022. Employee compensation costs, including stock-based compensation expense, also increased $1.9 million due to an increase in employee ~~headcount.~~headcount to support revenue growth. Additionally, shipping and distribution charges increased by $1.0 million due to the volume of medications fulfilled.

Cost of ~~Service~~Technology-Enabled Solutions Revenue

Cost of ~~service~~technology-enabled solutions revenue increased ~~$2.6~~$2.0 million, or 7%, to ~~$40.4~~$28.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, as compared to the same period in ~~2021.~~2022. The increase was primarily comprised of ~~$8.3~~a $3.3 million ~~of costs~~increase in professional services primarily related to ~~a new~~our vendor arrangement for business process support and technology services for our third-party administration services and anelectronic health records solutions. This increase ~~in information technology expenses of $0.7 million. These increases were~~was partially offset by a ~~$4.7~~$1.5 million reduction in employee compensation costs, including stock-based compensation, primarily for the employees hired by the third-party ~~provider and a $1.7 million reduction in resources contracted to deliver medication safety services due to the conclusion of the EMTM program on December 31, 2021.~~provider.

Research and Development Expenses

Research and development expenses ~~increased $0.1~~decreased by $4.2 million, or 1%58%, to ~~$11.2~~$3.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, as compared to the same period in ~~2021.~~2022. The ~~increase~~decrease was primarily ~~attributable~~due to ~~investments~~a $2.3 million decrease in ~~information technology spend~~employee compensation costs, of ~~$0.4~~which $1.9 million related to stock-based compensation expense, due to decreased headcount. The decrease in research and development expenses was also driven by a $1.0 million decrease in rent and overhead costs as a result of a reduced real estate footprint in our development centers in New Jersey, South Carolina, and Florida. The remaining decrease was due to $0.4 million of expenses related to non-recurring business

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optimization initiatives during 2022 ~~specifically efforts~~ associated with consolidating our electronic health records solutions ~~platforms. The increase in research~~platforms, and ~~development expenses was partially offset by~~ a ~~$0.7~~$0.3 million decrease in ~~employee compensation costs compared to 2021, of which $0.5 million represented stock-based compensation expense.~~professional services.

Sales and Marketing Expenses

Sales and marketing expenses ~~decreased $0.5~~increased $0.4 million, or 7%8%, to ~~$7.7~~$5.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, as compared to the same period in ~~2021.~~2022. The ~~decrease~~increase was primarily ~~attributable~~due to a ~~$0.7~~$0.8 million ~~decrease~~increase in ~~stock-based~~employee compensation costs, including commissions expense ~~compared~~related to ~~2021.~~new clients added since the end of the second quarter of 2022. This ~~decrease~~increase was partially offset by ~~an aggregate increase of $0.2~~a $0.4 million decrease in ~~conference related travel expenses and~~ professional consulting services related to executing our branding and marketing ~~strategies.~~strategies, public relations costs, and advertising costs.

General and Administrative Expenses

General and administrative expenses increased ~~$13.2~~$3.1 million, or ~~29%~~10%, to ~~$58.9~~$34.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to the same period in 2021. The increase was primarily attributable to a $5.7 million increase in stock-based compensation expense compared to 2021 as a result of vesting of restricted stock awards related to the retirement of former named executive officers and additional grants outstanding during 2022 as compared to 2021. Professional services expense increased by $2.3 million related to a new provider of enterprise support services we engaged during the fourth quarter of 2021 as part of our business optimization initiatives and $0.7 million related to other professional services.2022. The increase in general and administrative expenses ~~also included $2.3 million of divestiture related costs, $2.0 million of executive transition costs~~was primarily ~~related to the retirement and transition of former named executive officers, and $1.1 million of legal and advisory costs related~~due to a ~~stockholder cooperation agreement. Additionally, the~~$2.4 million increase in ~~general~~professional services, a $0.6 million increase in bad debt expense, and ~~administrative expenses was~~a $0.4 million increase in corporate insurance costs. These increases were partially offset by a ~~$1.1~~$0.3 million decrease in ~~employee compensation~~divestiture-related costs ~~primarily due to a decrease in employee headcount as a result of the Company’s business optimization initiative to outsource the enterprise support services previously mentioned.~~and executive transition expenses.

Change in Fair Value of Contingent Consideration Receivable

In connection with the sale of the PrescribeWellness Business on August 1, 2022, we may be entitled to receive additional consideration based on the achievement of certain customer and revenue metrics for the years ending December 31, 2023 and 2024. During the six months ended June 30, 2023, we recorded a $3.4 million charge to decrease the fair value of the contingent consideration receivable to zero due to updated estimates utilized in the contingent consideration valuation.

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In connection with the sale of the SinfoníaRx Business on March 2, 2023, we may be entitled to receive additional consideration based upon the approval of potential regulatory changes affecting the SinfoníaRx Business. During the six months ended June 30, 2023, we recorded a $0.4 million charge to decrease the fair value of the contingent consideration receivable due to updated estimates utilized in the contingent consideration valuation. The fair value of the contingent consideration receivable was $0.1 million as of June 30, 2023.

Long-Lived Asset Impairment Charge

During the ~~nine~~six months ended ~~September~~June 30, 2022, we recorded a $4.1 million long-lived asset impairment charge related to certain capitalized software development costs. During the first quarter of 2022, we became aware of changes in circumstances impacting the future application of certain capitalized software development costs and evaluated the recoverability of the related long-lived assets by comparing their carrying amount to the future net undiscounted cash flows expected to be generated by the assets to determine if the carrying value was not recoverable. The recoverability test indicated that certain capitalized software development costs were impaired. As a result, we recognized an impairment loss equal to $4.1 million for the ~~nine~~six months ended ~~September~~June 30, 2022. We did not record any long-lived asset impairment charges ~~in 2021.~~for the six months ended June 30, 2023.

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased ~~$1.8~~$1.1 million, or ~~12%~~10%, to ~~$16.9~~$12.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022 from $15.1 million for~~2023, as compared to the ~~nine months ended September 30, 2021.~~same period in 2022. This increase was ~~primarily~~ due to a ~~$2.3~~$1.6 million increase in the amortization of capitalized software related to new software functionality placed into service after the end of the second quarter ~~of 2021 to support our business. This~~in 2022. The increase was partially offset by a $0.5 million decrease ~~in amortization expense of $0.7 million~~ primarily due to property and equipment and definite-lived ~~intangible assets~~intangibles, which have been fully depreciated or amortized, respectively, since the end of the ~~first~~second quarter inof 2022.

Interest Expense, Net

Interest expense ~~increased $0.5 million to approximately $7.4 million~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 was $2.4 million, a decrease of $2.3 million, or 49%, as compared to the same period in ~~2021.~~2022. The ~~increase was primarily attributable to a $1.1 million increase~~decrease in interest expense onwas primarily due to the repayment and termination of the 2020 Credit Facility ~~due~~on August 1, 2022. For the six months ended June 30, 2022, we incurred $1.1 million of interest expense related to ~~an increase in borrowings~~the 2020 Credit Facility and ~~interest rates in 2022 compared to 2021.~~$0.3 million of amortization of associated deferred financing costs. The ~~increase~~decrease in interest expense was also due to ~~amortization~~$1.2 million of ~~the remaining balance of deferred financing costs to~~ interest ~~expense as a result of terminating the 2020 Credit Facility. As discussed under Liquidity and Capital Resources below, the Company repaid and terminated the 2020 Credit Facility~~income earned on ~~August 1, 2022.~~

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our investments in money market funds. The ~~increase~~decrease in interest expense was partially offset by ~~the full satisfaction of the acquisition-related notes payable~~an increase in ~~October 2021~~imputed interest expense related to the October 2020 acquisition of Personica, LLC. Approximately $0.5 million of interest expense was recognized for the nine months ended September 30, 2021 related to the acquisition-related notes payable.our vendor financing arrangements.

Other Income

In connection with the ~~sale~~sales of the PrescribeWellness Business, DoseMe Business, and SinfoníaRx Business, we entered into a transition services ~~agreement~~agreements (“~~TSA)” with TDS~~TSAs”), pursuant to which we provided or are providing business support services ~~for the PrescribeWellness Business~~ after ~~the sale.~~their sales. We recognized ~~$479~~$1.0 million of income related to the ~~TSA~~TSAs for the ~~nine~~six months ended ~~September 2022,~~June 30, 2023, which is reported in other income onin our consolidated statement of ~~operation.~~operations.

Income Taxes

For the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, we recorded income tax expense of ~~$0.4~~$0.2 million and ~~$0.3~~$0.4 million, respectively, which resulted in effective tax rates of ~~(0.6%)~~(1.4)% and ~~(0.7%)~~(1.1)%, respectively. Income tax expense was primarily related to indefinite-lived deferred tax liabilities for goodwill amortization. The effective tax rates differ from the U.S. statutory tax rate primarily due to the full valuation allowance recorded that ~~was currently limiting~~limited the realizability of our net deferred tax assets as of ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. Accordingly, the tax benefit was limited due to unbenefited losses in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. We calculate the provision for income taxes during interim periods by applying the estimated annual effective tax rate for the full year ordinary income or loss to the respective reporting period’s year-to-date income or loss, while also adding any income tax expense or benefit related to discrete items occurring within that interim period.

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Net Loss from Discontinued Operations, Net of Tax

Net loss from discontinued operations, net of tax, for the DoseMeand SinfoníaRx ~~and DoseMe businesses~~Businesses was ~~$32.3~~$0.2 million and ~~$11.7~~$8.8 million, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2022 and 2021, respectively.~~2023. Net loss from discontinued operations, net of tax, for the PrescribeWellness, DoseMe,~~PrescribeWellness~~and SinfoníaRx Businesses ~~Business~~ was ~~$26.6~~$22.7 million, $6.0 million, and ~~$6.7~~$16.0 million, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2022 and 2021, respectively.~~2022. See Note 3 in the notes to our consolidated financial statements as reported in this Quarterly Report on Form 10-Q for additional information.

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~~NON-GAAP FINANCIAL MEASURES~~

~~Adjusted EBITDA~~

To provide investors with additional information about our financial results, we disclose Adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA consists of net loss plus certain other expenses, which include interest expense, provision for income taxes, depreciation and amortization, impairment charges, settlement costs, business optimization expenses, severance costs, executive transition costs, cooperation agreement costs, divestiture-related expense, acquisition-related expense, loss on disposal of business, and stock-based compensation expense. We consider settlement costs to include amounts payable by us or reductions to amounts owed to us as a result of a contractual settlement. We consider business optimization expenses to include contract termination payments, severance, retention payments, and other employee and non-recurring vendor costs incurred related to our business optimization initiatives during 2022. We consider severance costs to include severance payments related to the realignment of our resources. We consider executive transition costs to include nonrecurring costs related to the hiring and onboarding of new named executive officers and separation costs related to former named executive officers. We consider cooperation agreement costs to include legal, professional services, and other non-recurring costs related to our cooperation agreement with Indaba Capital Management. We consider divestiture-related expense to include nonrecurring direct transaction costs. We consider acquisition-related expense to include nonrecurring direct transaction and integration costs. We consider loss on disposal of business to include the nonrecurring loss resulting from the sale of the PrescribeWellness Business. We present Adjusted EBITDA because it is one of the measures used by our management and Board of Directors to understand and evaluate our core operating performance, and we consider it an important supplemental measure of performance. We believe this metric is commonly used by the financial community, and we present it to enhance investors’ understanding of our operating performance. We believe Adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance.

~~Our management uses Adjusted EBITDA:~~

● ~~as a measure of operating performance to assist in comparing performance from period to period on a consistent basis;~~
● ~~to prepare and approve our annual budget; and~~
● ~~to develop short- and long-term operational plans.~~

Adjusted EBITDA is not in accordance with, or an alternative to, measures prepared in accordance with GAAP. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. As a non-GAAP measure, Adjusted EBITDA has limitations in that it does not reflect all the amounts associated with our results of operations as determined in accordance with GAAP. In particular:

● although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future. Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
● ~~Adjusted EBITDA does not reflect cash interest income or expense;~~
● ~~Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;~~
● ~~Adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation and related employer taxes;~~
● ~~Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;~~
● ~~Adjusted EBITDA does not reflect costs incurred in connection with our business optimization initiatives during 2022;~~

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●

~~Adjusted EBITDA does not reflect severance costs related to the realignment of our resources; and~~

●

~~Adjusted EBITDA does not reflect executive transition costs related to the hiring and onboarding of new named executive officers and separation costs related to former named executive officers;~~

●

~~Adjusted EBITDA does not reflect costs related to our cooperation agreement with Indaba Capital Management;~~

●

~~Adjusted EBITDA does not reflect costs incurred in connection with our plans to divest non-core businesses;~~

●

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

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

~~The following is a reconciliation of our net loss to Adjusted EBITDA for the periods presented:~~

Three Months Ended September 30,

Nine Months Ended September 30,


2022

2021

2022

2021


Reconciliation of Net Loss to Adjusted EBITDA (loss)

Net loss

$
(40,065)

$
(17,111)

$
(117,868)

$
(57,684)

Add:

Interest expense, net

2,717

2,230

7,430

6,959

Income tax (benefit) expense

(101)

134

(294)

466

Depreciation and amortization

5,723

12,099

24,285

35,343

Impairment charges

5,845

—

46,355

—

Settlement

—

—

1,448

500

Business optimization expenses

—

—

787

—

Severance costs

122

354

697

516

Executive transition

1,821

—

1,971

—

Cooperation agreement costs

1,122

—

1,122

—

Divestiture-related expense

1,161

—

2,807

—

Loss on disposal of business

2,879

—

2,879

—

Acquisition-related expense

—

—

—

217

Stock-based compensation expense

17,236

8,011

32,537

28,962

Adjusted EBITDA (loss) ⁽¹⁾

$
(1,540)

$
5,717

$
4,156

$
15,279

~~(1)~~ The financial results and Adjusted EBITDA related to discontinued operations have not been segregated. The table above includes the results of continuing and discontinued operations. See Note 3 and Note 16 in the notes to the consolidated financial statements in this Quarterly Report on Form 10-Q for discussion of discontinued operations and segment reporting for continuing operations, respectively.

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Liquidity and Capital Resources

We incurred a net loss of ~~$117.9~~$25.7 million and ~~$57.7~~$77.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Our primary liquidity and capital requirements are for software development, research and development, sales and marketing, general and administrative expenses, and debt service obligations. We have funded our operations, working capital needs, and investments with cash generated through operations, proceeds from the divestiture of a non-core ~~business,~~businesses, issuance of stock, and ~~prior~~ borrowings under ~~the terminated 2020 Credit Facility. At September~~our credit facilities. As of June 30, ~~2022,~~2023, we had unrestricted cash and cash equivalents of ~~$80.8~~$62.8 million.

Summary of Cash Flows

The following table shows a summary of our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


	Nine Months Ended				Six Months Ended
	September 30,				June 30,
	2022		2021		2023		2022
Net cash provided by operating activities	$	9,753	$	3,017
Net cash provided by (used in) investing activities		93,680		(24,260)
Net cash (used in) provided by operating activities					$	(3,647)	$	8,840
Net cash used in investing activities						(5,113)		(18,341)
Net cash (used in) provided by financing activities		(30,898)		8,072		(436)		27,410
Net increase (decrease) in cash and restricted cash ⁽¹⁾	$	72,535	$	(13,171)
Net (decrease) increase in cash, cash equivalents and restricted cash ⁽¹⁾					$	(9,196)	$	17,909

(1)

The cash flows related to discontinued operations have not been segregated. Accordingly, the consolidated statements of cash flows and the following discussions include the results of continuing and discontinued operations. See Note 3 in the notes to the consolidated financial statements ~~as reported in~~of this Quarterly Report on Form 10-Q.

Operating Activities

Net cash ~~provided by~~used in operating activities was ~~$9.8~~$3.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and consisted of our net loss of ~~$117.9~~$25.7 million ~~offset by~~and changes in our operating assets and liabilities totaling ~~$20.1~~$5.5 million, ~~and~~offset by the addition of noncash items of ~~$107.5~~$27.6 million. The noncash items primarily included ~~$46.4 million of impairment charges primarily related to our long-lived assets and goodwill, $32.5 million of stock-based compensation expense, $24.3~~$12.3 million of depreciation and amortization expense, $5.2 million of stock-based compensation expense, a ~~$2.9~~$4.9 million net loss related to the ~~sale~~sales of the ~~PrescribeWellness Business,~~DoseMe and ~~$2.0~~SinfoníaRx Businesses, a $3.8 million change in fair value of contingent consideration receivable, $0.7 million of amortization of deferred financing costs and debt discounts ~~primarily~~ related to the 2026 Notes, ~~partially offset by~~and a ~~$0.5~~$0.4 million ~~change in net deferred taxes.~~impairment charge related to our operating lease right-of-use assets. The change in operating assets and liabilities was primarily due to an increase in ~~accrued~~prepaid expenses and other ~~liabilities and~~current assets, an increase in inventories, and a decrease in accounts payable. The increase in prepaid expenses and other current assets was primarily due to an increase in contract assets related torebate administration services under our PBM solutions. The increase in inventories was primarily due to growth in our fulfillment services, and the decrease in accounts payable was primarily due to the timing of vendor ~~payments and an increase in consideration payable to customers of our PBM solutions.~~payments. The change in operating assets and liabilities was ~~also due to~~partially offset by a decrease in accounts ~~receivable,~~receivables primarily ~~as a result of~~due to improved collections, and an increase in other long-term liabilities due to the vendor financing

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arrangement entered into in February 2022 related to business process outsourcing and technology services for our third-party administration services and electronic health records solutions. ~~The change in operating assets and liabilities was partially offset by an increase in client claims receivable due to increased growth in PBM services utilized by our pharmacy clients.~~

Net cash provided by operating activities was ~~$3.0~~$8.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and consisted ~~primarily~~ of our net loss of ~~$57.7~~$77.8 million ~~and~~offset by changes in our operating assets and liabilities totaling ~~$5.6~~$11.8 million ~~offset by~~and the addition of noncash items of ~~$66.3~~$74.9 million. The noncash items primarily included ~~$35.3~~$40.5 million of impairment charges primarily related to our long-lived assets and goodwill, $18.6 million of depreciation and amortization expense, ~~$29.0~~$15.3 million of stock-based compensation expense, ~~$1.7~~and $0.9 million of amortization of deferred financing costs and debt discounts primarily related to the 2026 Notes, ~~and acquisition-related notes payable, and~~partially offset by a ~~$0.3~~$0.4 million change in net deferred ~~taxes, offset by acquisition-related contingent consideration paid of $0.1 million related to the acquisition of Cognify in 2018.~~taxes. The change in operating assets and liabilities was primarily due to an increase in accounts payable, an increase in accrued expenses and other liabilities, and other long-term liabilities, and a decrease in accounts receivable, which were partially offset by an increase in prepaid expenses and other current assets and client claims receivable. The increase in accounts payable and accrued expenses and other liabilities was primarily due to the timing of vendor payments and an increase in ~~other assets.~~consideration payable to customers of our PBM solutions. The increase in prepaid expenses and other current assets was primarily due to an increase in contract assets related to rebate administration services under our PBM solutions. The increase in other assets was primarily due to an increase in nontrade receivables. The change in operating assets and liabilities was partially offset by an increase in accounts payable and accrued expenses and other liabilities.

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~~Investing Activities~~

Net cash provided by investing activities was $93.7 million for the nine months ended September 30, 2022 and consisted primarily of $118.6 million of proceeds received from the sale of PrescribeWellness Business, which were offset by $23.9 million in software development costs for our CareVention HealthCare and MedWise HealthCare technologies and $1.0 million in purchases of property and equipment to support technology-related needs and infrastructure for our pharmacies and health plan management services.Investing Activities

Net cash used in investing activities was ~~$24.3~~$5.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021, which included $22.6~~2023 and consisted of $7.2 million in software development costs for our ~~CareVention HealthCare~~technologies and ~~MedWise HealthCare technologies. Net cash used in investing activities also included $1.6~~$1.3 million in purchases of property and equipment primarily to support technology-related needs and infrastructure at our pharmacies, call center locations, and Moorestown, New Jersey headquarters, and improvements for our office space in Eden Prairie, Minnesota to support our ~~health plan management services.~~medication fulfillment services, which were offset by $3.4 million of cash received from the sales of the DoseMe and SinfoníaRx Businesses.

Net cash used in investing activities was $18.3 million for the six months ended June 30, 2022 and included $17.9 million in software development costs for our technologies and $0.5 million in purchases of property and equipment to support our operations.

Financing Activities

Net cash used in financing activities was ~~$30.9~~$0.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and consisted primarily of ~~$57.2 million of principal repayments on our 2020 Credit Facility, which was terminated on August 1, 2022, $1.1~~$0.7 million of payments on employee taxes for shares withheld, ~~and $0.4~~offset by $0.2 million of ~~payments~~proceeds received from the exercise of ~~debt financing costs. The~~stock options.

Net cash ~~used in~~provided by financing activities was $27.4 million for the ~~nine~~six months ended ~~September~~June 30, 2022 ~~was partially offset by~~and consisted of $27.7 million of borrowings on our 2020 Credit Facility to support business operations and initiatives and $0.1 million of proceeds received from the exercise of stock options.

Net cash provided by financing activities ~~was $8.1 million~~ for the ~~nine~~six months ended ~~September~~June 30, 2021 and included $17.5 million of borrowings on our 2020 Credit Facility to fund the repayment of the first and second promissory notes in connection with the October 2020 acquisition of Personica, LLC and $3.7 million of proceeds received from the exercise of stock options. Net cash provided by financing activities2022 was partially offset by ~~repayments~~$0.4 million of ~~$13.0 million related to the first and second promissory notes in connection with the Personica, LLC acquisition and $0.1 million for the final payment~~payments of ~~the contingent purchase price consideration in connection with the 2018 acquisition of the Cognify business.~~debt financing costs.

Funding Requirements

On December 18, 2020, we entered into the 2020 Credit Facility with Western Alliance Bank (“WAB”), which provided for a $120.0 million secured revolving credit facility, with a $1.0 million sublimit for cash management services and letters of credit and foreign exchange transactions. The 2020 Credit Facility was scheduled to mature on May 16, 2025.

~~On August 1, 2022,~~ ~~we entered into a payoff letter with WAB with respect to the~~ 2020 Credit Facility, pursuant to which we voluntarily elected to pay all amounts outstanding, including principal and interest, under the 2020 Credit Facility and related loan documents (the “Pay Off”) using cash on hand and proceeds from the sale of PrescribeWellness Business. Accordingly, on August 1, 2022, we paid a total of $57.4 million to WAB for the Pay Off, and terminated the 2020 Credit Facility and related loan documents.

We believe that our unrestricted cash and cash equivalents of ~~$80.8~~$62.8 million as of ~~September~~June 30, ~~2022,~~2023 and expected cash flows from continuing operations ~~and anticipated proceeds from the sales of the SinfoníaRx and DoseMe businesses~~ will be sufficient to fund our planned operations through at least ~~November 2023.~~August 2024. Our ability to maintain successful operations will depend on, among other things, new business, the retention of clients, and the effectiveness of sales and marketing initiatives.

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

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Contractual Obligations and Commitments

During the ~~three and nine~~six months ended ~~September~~June 30, ~~2022,~~2023, there were no material changes to our contractual obligations and commitments as compared to those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our ~~2021~~2022 Form 10-K.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are 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 may differ from these estimates under different assumptions or conditions.

Except as disclosed in Note 2 in the notes to our unaudited consolidated financial statements in this Quarterly Report on Form 10-Q, there have been no material changes in our critical accounting policies during the ~~three and nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our ~~2021~~2022 Form 10-K.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

There have been no material changes in our primary market risk exposures or how those exposures are managed from the information disclosed in our ~~2021~~2022 Form 10-K ~~for~~in the ~~three~~“Quantitative and ~~nine~~Qualitative Disclosures About Market Risk” section of Item 7A during the six months ended ~~September~~June 30, ~~2022.~~2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our principal executive officer and our principal financial officer, conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of ~~September~~June 30, ~~2022,~~2023, our disclosure controls and procedures are effective at the reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Inherent Limitations on Effectiveness of Controls and Procedures

Internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

5047

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Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the ~~third~~second quarter of fiscal ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently party to any material legal proceedings. From time to time, however, we may be a party to litigation and subject to claims in the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors

Stockholders and potential investors in our securities should carefully consider the risk factors set forth in Part I, “Item 1A. Risk Factors” of our ~~2021~~2022 Form 10-K for the year ended December 31, ~~2021,~~2022, which was filed with the Securities and Exchange Commission on ~~February 25, 2022.~~March 10, 2023. We have identified these risk factors as important factors that could cause our actual results to differ materially from those contained in any written or oral forward-looking statements made by us or on our behalf. Except as set forth below, there have been no material changes to such risk factors previously disclosed in our ~~2021~~2022 Form 10-K.

Risks Related to the Proposed Merger
~~Actions~~
The Merger may not be completed on the terms or timeline currently contemplated or at all, which could adversely affect our stock price, business, financial condition and results of ~~activist stockholders against us~~operations.
On August 5, 2023, we entered into the Merger Agreement, pursuant to which the Merger is subject to certain conditions, including (i) the approval of our stockholders; (ii) the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iii) the receipt of certain other regulatory approvals or consents; (iv) the absence of legal restraints prohibiting the Merger and(v) other customary conditions specified in the Merger Agreement. While it is currently anticipated that the Merger will be consummated during the fourth quarter of 2023, there can be no assurance that the foregoing conditions will be satisfied in a timely manner or at all, or that an effect, event, development or change will not transpire that could delay or prevent these conditions from being satisfied.
If the Merger is not consummated for any reason, the trading price of our common stock may decline to the extent that the market price of the common stock reflects positive market assumptions that the Merger will be consummated and the related benefits will be realized. We may also be subject to additional risks if the Merger is not completed, including the requirement in the Merger Agreement that, under certain circumstances, we pay Parent a termination fee of $10.6 million or $5.3 million, as applicable, in cash; incurring substantial costs related to the Merger, such as legal, accounting and financial advisory that have already been incurred or will continue to be incurred until closing; limitations on our ability to retain and hire key personnel; reputational harm including relationships with investors, clients and business partners due to the adverse perception of any failure to successfully complete the Merger; and potential disruption to our business and distraction of our workforce and management team to pursue other opportunities that could be ~~disruptive~~beneficial to us, in each case without realizing any of the benefits of having the Merger completed.
Until the completion of the Merger or the termination of the Merger Agreement in accordance with its terms, we are prohibited from entering into certain transactions and ~~costly. The possibility~~taking certain actions that ~~activist stockholders may wage proxy contests or seek representation on our Board could cause uncertainty about~~might otherwise be beneficial to the ~~strategic direction of our business.~~Company and its stockholders.

~~Stockholders may~~From and after the date of the Merger Agreement and prior to completion of the Merger, the Merger Agreement restricts us from ~~time to time engage in proxy solicitations, advance stockholder proposals or board nominations or otherwise attempt to effect changes, assert influence or acquire some level~~taking specified actions without the consent of ~~control over us.~~

~~We recently engaged in a process with one~~Parent and requires that the business of our ~~significant stockholders, which culminated in our entering into a cooperation agreement (the “Cooperation Agreement”) with that stockholder~~Company and several resulting changes in our management and corporate governance. The stockholder also agreed to customary standstill provisions during the term of the Cooperation Agreement which extends until the date that is forty-five (45) days before the nomination window closes under the Bylaws for the Company’s 2023 Annual Meeting.

~~That stockholder, following the termination of the standstill provisions~~its subsidiaries be conducted in the ~~Cooperation Agreement, or another activist stockholder,~~ordinary course in all material respects. These restrictions may ~~attempt to effect additional changes in our strategic direction, and in furtherance thereof, seek changes in how our company is governed, through further~~prevent us from making appropriate changes to ~~our Board of Directors~~its business or otherwise. While our Board and management team will continue to strive to maintain constructive, ongoing communications with our stockholders, including Indaba Capital Management, and welcomes their views and opinions with the goal of enhancing value for all stockholders, if that stockholder takes further action,organizational structure or ~~if another stockholder were to launch an activist campaign that seeks to further replace members of our Board or changes in our strategic direction, it could have an adverse effect on us because:~~

● Responding to actions by activist stockholders can disrupt our operations, are costly and time-consuming, and divert the attention of our Board and senior management team from the pursuit of business strategies, which could adversely affect our results of operations and financial condition;

● Perceived uncertainties as to our future direction as a result of changes to the composition of our Board or changes to our stockholder base may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, may result in the loss of potentialfrom pursuing attractive business opportunities ~~cause concern for our client base, and make it more difficult to attract and retain qualified personnel and business partners;~~

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●

These types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business; and

that may arise prior to the completion of the Merger, and could have the effect of delaying or preventing other strategic transactions. Adverse effects arising from these restrictions during the pendency of the Merger could be exacerbated by any delays in consummation of the Merger or termination of the Merger Agreement.

●

~~If individuals are elected to our Board with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and to create additional value for our stockholders.~~

~~Our stockholder rights plan,~~The announcement of the Merger Agreement and pendency of the Merger could negatively impact our business, financial condition and results of operations.

The announcement or ~~“poison pill,” includes terms~~pendency of the Merger could adversely affect our business, financial condition and ~~conditions that~~results of operations and may result in our inability to hire or the departure of key personnel. In connection with the Merger, some of our clients and business partners may delay or defer decisions or may end their relationships with us, which could ~~discourage a takeover~~negatively affect our revenues, earnings and cash flows, regardless of whether the Merger is completed. In addition, we have undertaken certain covenants in the Merger restricting the conduct of our business prior to consummating the Merger even if such actions would prove beneficial to us. Similarly, our current and prospective employees may experience uncertainty about their future roles with us following the Merger, which may materially adversely affect our ability to attract and retain key personnel during the pendency of the Merger.

Litigation challenging the Merger Agreement may prevent the Merger from being consummated within the expected timeframe or at all.

Lawsuits may be filed against us, the Board or other ~~transaction that stockholders may consider favorable.~~

On July 25, 2022, our Board approved and adopted a Rights Agreement, dated as of July 25, 2022 (the “Rights Agreement”), by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. Pursuantparties to the ~~Rights~~Merger Agreement, ~~the Board declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share of~~challenging our ~~common stock (the “Common Shares”). The Rights are distributable~~acquisition by Parent, or making other claims in connection therewith. Such lawsuits may be brought by our purported stockholders and may seek, among other things, to ~~stockholders of record as~~enjoin consummation of the ~~close of business on August 5, 2022 (the “Record Date”).~~Merger. One Right also will be issued together with each Common Share issued by the Company after the Record Date, but before the Distribution Date (as defined in the Rights Agreement) (or the earlier redemption or expiration of the ~~Rights) and, in certain circumstances, after~~conditions to the ~~Distribution Date.~~

~~Generally, the Rights Agreement works by causing substantial dilution to any person or group that acquires beneficial ownership of ten percent (10%) or more~~consummation of the ~~Common Shares without~~Merger is the ~~approval~~absence of legal restraints prohibiting the ~~Board.~~Merger. As ~~a result,~~such, if the ~~overall effect of~~plaintiffs in such potential lawsuits are successful in obtaining an injunction prohibiting the ~~Rights Agreement and~~defendants from completing the ~~issuance of~~Merger on the ~~Rights~~agreed upon terms, then such injunction may be to render more difficult or discourage a merger, tender, or exchange offer or other business combination involving the Company that is not approved by the Board. The Rights Agreement is not intended to interfere with any merger, tender, or exchange offer or other business combination approved by the Board. The Rights Agreement also does not prevent the ~~Board~~Merger from ~~considering any offer that it considers to be in~~becoming effective within the ~~best interest of its stockholders. The description and terms of the Rights are set forth in the Rights Agreement, which has previously been filed as an exhibit to our public reports.~~

As discussed above, the Rights have certain anti-takeover effects, including potentially discouraging a takeover that stockholders may consider favorable. The Rights will cause substantial dilution to a personexpected timeframe or ~~group that attempts to acquire us on terms not approved by the Board.~~at all.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities during the three months ended ~~September~~June 30, ~~2022.~~2023.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable. The Company does not currently have any plans or arrangements in place under Rule 10b5-1 that would require disclosure under Item 408 of Regulation S-K.

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Item 6. Exhibits

Incorporated by Reference

Filed Herewith
Exhibit
No.

Exhibit Description

Form

Filing Date

Exhibit Number












3.1

Amended and Restated Certificate of Incorporation of Tabula Rasa HealthCare, Inc.

8-K

10/4/2016

3.1


3.2

Certificate of Designation of Series A Junior Participating Preferred Stock of Tabula Rasa HealthCare, Inc.

8-K

7/26/2022

3.1

3.3

Amended and Restated Bylaws of Tabula Rasa HealthCare, Inc.

8-K

10/4/2016

3.2

4.1

Rights Agreement, dated as of July 25, 2022, by and between Tabula Rasa HealthCare, Inc. and American Stock Transfer & Trust Company, LLC, as rights agent

8-K

7/26/2022

4.1

10.1††

Asset Purchase Agreement, by and among Tabula Rasa HealthCare Group, Inc., Transaction Data Systems, Inc., and Tabula Rasa HealthCare, Inc., dated as of June 18, 2022

8-K

6/21/2022

2.1

10.2††

Asset Purchase Agreement, by and between Tabula Rasa HealthCare Group, Inc., and karmadata, Inc., dated as of June 18, 2022

8-K

6/21/2022

2.2

10.3

Cooperation Agreement, by and between Tabula Rasa HealthCare, Inc. and Indaba Capital Management, L.P., dated as of September 13, 2022

8-K

9/14/2022

10.1

10.4

Executive Transition and Separation Agreement, by and between Tabula Rasa HealthCare, Inc. and Dr. C. Knowlton, dated as of September 13, 2022

8-K

9/14/2022

10.2

10.5

Executive Transition and Separation Agreement, by and between Tabula Rasa HealthCare, Inc. and Dr. O. Knowlton, dated as of September 13, 2022

8-K

9/14/2022

10.3

10.6

Consulting Agreement, by and between Tabula Rasa HealthCare, Inc. and Dr. C. Knowlton, dated as of September 13, 2022

8-K

9/14/2022

10.4

10.7

Consulting Agreement, by and between Tabula Rasa HealthCare, Inc. and Dr. O. Knowlton, dated as of September 13, 2022

8-K

9/14/2022

10.5

10.8

Form of 2022 Performance Stock Unit Award Agreement

X
10.9

Indemnification Agreement, by and between Tabula Rasa HealthCare, Inc. and Jonathan Schwartz, dated as of September 13, 2022

X
31.1

Certification of Chief Executive Officer (Principal Executive Officer) required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X
31.2

Certification of Chief Financial Officer (Principal Financial Officer) required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

32.1**

Certification of Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X
101.INS

Inline XBRL Instance Document







X
101.SCH

Inline XBRL Schema Document







X
101.CAL

Inline XBRL Calculation Linkbase







X
101.DEF

Inline XBRL Definition Linkbase







X
101.LAB

Inline XBRL Label Linkbase







X
101.PRE

Inline XBRL Presentation Linkbase







X
104

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL (contained in Exhibit 101)

X

Incorporated by Reference

Filed Herewith
Exhibit
No.

Exhibit Description

Form

Filing Date

Exhibit Number












2.1#

Agreement and Plan of Merger, dated as of August 5, 2023, by and among Tabula Rasa HealthCare, Inc., Locke Buyer, LLC and Locke Merger Sub, Inc.

8-K

8/7/2023

2.1

3.1

Amended and Restated Certificate of Incorporation of Tabula Rasa HealthCare, Inc.

8-K

10/4/2016

3.1


3.2

Certificate of Designation of Series A Junior Participating Preferred Stock of Tabula Rasa HealthCare, Inc.

8-K

7/26/2022

3.1

3.3

Amended and Restated Bylaws of Tabula Rasa HealthCare, Inc.

8-K

10/4/2016

3.2

4.1

Rights Agreement, dated as of July 25, 2022, by and between Tabula Rasa HealthCare, Inc. and American Stock Transfer & Trust Company, LLC, as rights agent

8-K

7/26/2022

4.1

10.1

Asset Purchase Agreement, by and among Tabula Rasa HealthCare Group, Inc., Transaction Data Systems, Inc., and Tabula Rasa HealthCare, Inc., dated as of June 18, 2022

8-K

6/21/2022

2.1

10.2

Asset Purchase Agreement, by and between Tabula Rasa HealthCare Group, Inc., and karmadata, Inc., dated as of June 18, 2022

8-K

6/21/2022

2.2

10.3#

Share and Asset Purchase Agreement, dated as of January 20, 2023, by and between Tabula Rasa HealthCare Group, Inc. and DoseMe Operations Inc.

10-K

3/10/2023

10.59

10.4#

Asset Purchase Agreement, dated as of March 2, 2023, by and between Tabula Rasa HealthCare Group, Inc. and Symphony Clinic, LLC

10-K

3/10/2023

10.60

10.5*

Form of Performance Stock Unit Award Agreement

X
10.6*

Form of Change in Control and Severance Agreement

X
10.7

Voting and Support Agreement, dated as of August 5, 2023, by and among Tabula Rasa HealthCare, Inc., Locke Buyer, LLC and the stockholders party thereto

8-K

8/7/2023

10.1

31.1

Certification of Chief Executive Officer (Principal Executive Officer) required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X
31.2

Certification of Chief Financial Officer (Principal Financial Officer) required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

32.1**

Certification of Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X
101.INS

Inline XBRL Instance Document







X
101.SCH

Inline XBRL Schema Document







X
101.CAL

Inline XBRL Calculation Linkbase







X
101.DEF

Inline XBRL Definition Linkbase







X
101.LAB

Inline XBRL Label Linkbase







X
101.PRE

Inline XBRL Presentation Linkbase







X
104

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL (contained in Exhibit 101)

X

* Represents management contract or compensatory plan or arrangement.

** This certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Tabula Rasa HealthCare, Inc. under the Securities Act

~~Table of Contents~~

of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this Form 10-Q), irrespective of any general incorporation language contained in such filing.

††# Certain ~~of the~~schedules and exhibits ~~and schedules~~ to this exhibit ~~are~~have been omitted pursuant to Item 601(a)(5) or 601(b)(2) of Regulation ~~S-K.~~S-K, as applicable. The Company ~~agrees to~~will furnish ~~supplementally~~the omitted schedules and exhibits to the ~~SEC,~~Securities and Exchange Commission upon ~~request, a copy of any omitted schedule or exhibit.~~request.

5450

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TABULA RASA HEALTHCARE, INC.

Date: ~~November 4, 2022~~August 8, 2023
By:
/s/ BRIAN W. ADAMS

Name:
Brian W. Adams

Title:
~~Interim~~ Chief Executive Officer
(Principal Executive Officer)

Date: ~~November 4, 2022~~August 8, 2023
By:
/s/ THOMAS J. CANCRO

Name:
Thomas J. Cancro

Title:
Chief Financial Officer

(Principal Financial ~~and Accounting~~ Officer)

Date: August 8, 2023
By:
/s/ MICHAEL A. BRUNO

Name:
Michael A. Bruno

Title:
Chief Accounting Officer

(Principal Accounting Officer)

5551


	August 1,		December 31,
	2022		2021
Accounts receivable, net	$	5,020		8,002
Prepaid expenses and other assets		1,751		1,038
Property and equipment, net		371		—
Operating lease right-of-use assets		1,252		—
Software development costs, net		14,536		—
Goodwill		35,314		—
Intangible assets, net		81,504		—
Impairment of carrying value		(8,500)		—
Total current assets of discontinued operations	$	131,248	$	9,040

Property and equipment, net	$	—	$	412
Operating lease right-of-use assets		—		1,434
Software development costs, net		—		11,474
Goodwill		—		47,459
Intangible assets, net		—		84,617
Other assets		—		64
Total noncurrent assets of discontinued operations	$	—	$	145,460

Operating lease liabilities	$	1,086	$	620
Accounts payable		491		913
Accrued expenses and other liabilities		2,754		3,529
Total current liabilities of discontinued operations	$	4,331	$	5,062

Noncurrent operating lease liabilities	$	—	$	830
Other long-term liabilities		—		135
Total noncurrent liabilities of discontinued operations	$	—	$	965


	CareVention HealthCare		Shared Services and Other		Consolidated
Revenue:
Three Months Ended September 30, 2022
Product revenue	$	59,780	$	—	$	59,780
Service revenue
PACE solutions		16,416		—		16,416
Medication safety services		—		843		843
Software subscription and services		—		62		62
Total service revenue		16,416		905		17,321
Total revenue	$	76,196	$	905	$	77,101

Three Months Ended September 30, 2021
Product revenue	$	50,321	$	—	$	50,321
Service revenue
PACE solutions		14,707		—		14,707
Medication safety services		—		2,820		2,820
Software subscription and services		—		62		62
Total service revenue		14,707		2,882		17,589
Total revenue	$	65,028	$	2,882	$	67,910

Nine Months Ended September 30, 2022
Product revenue	$	166,645	$	—	$	166,645
Service revenue
PACE solutions		47,604		—		47,604
Medication safety services		—		2,336		2,336
Software subscription and services		—		223		223
Total service revenue		47,604		2,559		50,163
Total revenue	$	214,249	$	2,559	$	216,808

Nine Months Ended September 30, 2021
Product revenue	$	139,021	$	—	$	139,021
Service revenue
PACE solutions		42,973		—		42,973
Medication safety services		—		8,817		8,817
Software subscription and services		—		174		174
Total service revenue		42,973		8,991		51,964
Total revenue	$	181,994	$	8,991	$	190,985


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Reconciliation of Net Loss to Adjusted EBITDA from Continuing Operations
Net loss	$	(40,065)	$	(17,111)	$	(117,868)	$	(57,684)
Add:
Interest expense, net		2,717		2,230		7,430		6,959
Income tax (benefit) expense		(7)		82		368		284
Depreciation and amortization		5,723		5,328		16,954		15,109
Impairment charges		—		—		4,062		—
Business optimization expenses		—		—		787		—
Severance costs		122		354		697		516
Executive transition		1,821		—		1,971		—
Cooperation agreement costs		1,122		—		1,122		—
Divestiture-related expense		1,057		—		2,591		—
Acquisition-related expense		—		—		—		217
Stock-based compensation expense		15,378		6,901		28,173		24,100
Loss from discontinued operations		14,185		5,355		58,905		18,484
Adjusted EBITDA from continuing operations	$	2,053	$	3,139	$	5,192	$	7,985
Adjusted EBITDA (loss) from discontinued operations		(3,593)		2,578		(1,036)		7,294
Total Adjusted EBITDA (loss)	$	(1,540)	$	5,717	$	4,156	$	15,279


		Incorporated by Reference			Filed Herewith
Exhibit No.	Exhibit Description	Form	Filing Date	Exhibit Number

3.1	Amended and Restated Certificate of Incorporation of Tabula Rasa HealthCare, Inc.	8-K	10/4/2016	3.1
3.2	Certificate of Designation of Series A Junior Participating Preferred Stock of Tabula Rasa HealthCare, Inc.	8-K	7/26/2022	3.1
3.3	Amended and Restated Bylaws of Tabula Rasa HealthCare, Inc.	8-K	10/4/2016	3.2
4.1	Rights Agreement, dated as of July 25, 2022, by and between Tabula Rasa HealthCare, Inc. and American Stock Transfer & Trust Company, LLC, as rights agent	8-K	7/26/2022	4.1
10.1††	Asset Purchase Agreement, by and among Tabula Rasa HealthCare Group, Inc., Transaction Data Systems, Inc., and Tabula Rasa HealthCare, Inc., dated as of June 18, 2022	8-K	6/21/2022	2.1
10.2††	Asset Purchase Agreement, by and between Tabula Rasa HealthCare Group, Inc., and karmadata, Inc., dated as of June 18, 2022	8-K	6/21/2022	2.2
10.3	Cooperation Agreement, by and between Tabula Rasa HealthCare, Inc. and Indaba Capital Management, L.P., dated as of September 13, 2022	8-K	9/14/2022	10.1
10.4	Executive Transition and Separation Agreement, by and between Tabula Rasa HealthCare, Inc. and Dr. C. Knowlton, dated as of September 13, 2022	8-K	9/14/2022	10.2
10.5	Executive Transition and Separation Agreement, by and between Tabula Rasa HealthCare, Inc. and Dr. O. Knowlton, dated as of September 13, 2022	8-K	9/14/2022	10.3
10.6	Consulting Agreement, by and between Tabula Rasa HealthCare, Inc. and Dr. C. Knowlton, dated as of September 13, 2022	8-K	9/14/2022	10.4
10.7	Consulting Agreement, by and between Tabula Rasa HealthCare, Inc. and Dr. O. Knowlton, dated as of September 13, 2022	8-K	9/14/2022	10.5
10.8	Form of 2022 Performance Stock Unit Award Agreement				X
10.9	Indemnification Agreement, by and between Tabula Rasa HealthCare, Inc. and Jonathan Schwartz, dated as of September 13, 2022				X
31.1	Certification of Chief Executive Officer (Principal Executive Officer) required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
31.2	Certification of Chief Financial Officer (Principal Financial Officer) required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X

32.1**	Certification of Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
101.INS	Inline XBRL Instance Document				X
101.SCH	Inline XBRL Schema Document				X
101.CAL	Inline XBRL Calculation Linkbase				X
101.DEF	Inline XBRL Definition Linkbase				X
101.LAB	Inline XBRL Label Linkbase				X
101.PRE	Inline XBRL Presentation Linkbase				X
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL (contained in Exhibit 101)				X


	TABULA RASA HEALTHCARE, INC.

Date: ~~November 4, 2022~~August 8, 2023	By:	/s/ BRIAN W. ADAMS
	Name:	Brian W. Adams
	Title:	~~Interim~~ Chief Executive Officer (Principal Executive Officer)

Date: ~~November 4, 2022~~August 8, 2023	By:	/s/ THOMAS J. CANCRO
	Name:	Thomas J. Cancro
	Title:	Chief Financial Officer
		(Principal Financial ~~and Accounting~~ Officer)

Date: August 8, 2023	By:	/s/ MICHAEL A. BRUNO
	Name:	Michael A. Bruno
	Title:	Chief Accounting Officer


		(Principal Accounting Officer)