shcr-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________

FORM 10-Q

_____________________________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2023


o			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 001-39535

SHARECARE, INC.

(Exact name of registrant as specified in its charter)


Delaware						85-1365053
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

255 East Paces Ferry Road NE, Suite 700 Atlanta, Georgia						30305
(Address of Principal Executive Offices)						(Zip Code)

(404) 671-4000

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	SHCR	The Nasdaq Stock Market LLC
Warrants, each warrant exercisable for one share of common stock, each at an exercise price of $11.50 per share	SHCRW	The Nasdaq Stock Market LLC

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 x No o

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-(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	x

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. o

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

As of May 5, 2023, there were 357,421,363 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Table of Contents

Sharecare, Inc.

Table of Contents


		Page
Part I. Financial Information
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (unaudited)	1
	Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2023 and 2022 (unaudited)	2
	Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27

Part II. Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
Signatures		30

Table of Contents

Part I - Financial Information

ITEM 1. FINANCIAL STATEMENTS

SHARECARE, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)


	As of March 31, 2023		As of December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	154,430	$	182,508
Accounts receivable, net (net of allowance for doubtful accounts of $8,426 and $7,197, respectively)	116,282		116,877
Other receivables	2,204		4,114
Prepaid expenses	14,309		12,612
Other current assets	5,068		4,515
Total current assets	292,293		320,626
Property and equipment, net	5,001		5,082
Other long-term assets	21,939		20,362
Intangible assets, net	157,417		163,114
Goodwill	191,917		191,817
Total assets	$	668,567	$	701,001
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	23,054	$	8,838
Accrued expenses and other current liabilities (Note 3)	65,610		81,627
Deferred revenue	9,735		9,032
Contract liabilities, current	1,152		1,535
Total current liabilities	99,551		101,032
Warrant liabilities	2,441		2,441
Long-term debt	224		—
Other long-term liabilities	11,124		16,723
Total liabilities	113,340		120,196
Commitments and contingencies (Note 7)
Series A redeemable convertible preferred stock, $0.0001 par value; 5,000,000 shares authorized; 5,000,000 shares issued and outstanding, aggregate liquidation preference of $50,000 as of March 31, 2023 and December 31, 2022	58,205		58,205
Stockholders’ equity:
Common stock $0.0001 par value; 600,000,000 and 600,000,000 shares authorized; 356,289,293 and 354,463,620 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	35		35
Additional paid-in capital	1,130,199		1,120,024
Accumulated other comprehensive loss	(2,544)		(2,794)
Accumulated deficit	(631,534)		(595,820)
Total Sharecare, Inc. stockholders’ equity	496,156		521,445
Noncontrolling interest in subsidiaries	866		1,155
Total stockholders’ equity	497,022		522,600
Total liabilities, redeemable convertible preferred stock and stockholders’ equity	$	668,567	$	701,001

The accompanying notes are an integral part of these consolidated financial statements.

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SHARECARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended March 31,
	2023		2022
Revenue (inclusive of related party revenue of $18,790 and $7,568, respectively)	$	116,295	$	100,710
Costs and operating expenses:
Costs of revenue (exclusive of depreciation and amortization; inclusive of related party costs of $10,863 and $0, respectively)	67,890		51,492
Sales and marketing	15,348		14,511
Product and technology	20,808		19,420
General and administrative	34,121		55,998
Depreciation and amortization	14,781		9,878
Total costs and operating expenses	152,948		151,299
Loss from operations	(36,653)		(50,589)
Other income (expense):
Interest income	1,680		29
Interest expense	(430)		(492)
Other income	429		12,845
Total other income	1,679		12,382
Loss before income tax expense	(34,974)		(38,207)
Income tax expense	(31)		(92)
Net loss	(35,005)		(38,299)
Net loss attributable to noncontrolling interest in subsidiaries	(346)		(98)
Net loss attributable to Sharecare, Inc.	$	(34,659)	$	(38,201)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.10)	$	(0.11)
Weighted-average common shares outstanding, basic and diluted	352,923,217		344,891,335

Net loss	$	(35,005)	$	(38,299)
Other comprehensive loss adjustments:
Foreign currency translation	307		231
Comprehensive loss	(34,698)		(38,068)
Comprehensive income (loss) attributable to noncontrolling interest in subsidiaries	(289)		202
Comprehensive loss attributable to Sharecare, Inc.	$	(34,409)	$	(38,270)

The accompanying notes are an integral part of these consolidated financial statements.

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SHARECARE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share amounts)


	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Noncontrolling Interest		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	5,000,000	$	58,205	354,463,620	$	35	$	1,120,024	$	(2,794)	$	(595,820)	$	1,155	$	522,600
Stock options exercised	—	—		281,042	—		282		—		—		—		282
Common stock issued upon vesting of restricted stock units	—	—		1,759,615	—		—		—		—		—		—
Issuance of warrants in connection with debt and revenue arrangements	—	—		—	—		14		—		—		—		14
Cumulative effect of adopting ASU 2016-13	—	—		—	—		—		—		(1,055)		—		(1,055)
Share-based compensation	—	—		—	—		10,406		—		—		—		10,406
Net income (loss) attributable to noncontrolling interest in subsidiaries	—	—		—	—		—		—		—		(346)		(346)
Currency translation adjustment	—	—		—	—		—		250		—		57		307
Repurchased shares of common stock related to exercise of employee stock options	—	—		(214,984)	—		(396)		—		—		—		(396)
Net income (loss) attributable to Sharecare, Inc.	—	—		—	—		—		—		(34,659)		—		(34,659)
Other	—	—		—	—		(131)		—		—		—		(131)
Balance at March 31, 2023	5,000,000	$	58,205	356,289,293	$	35	$	1,130,199	$	(2,544)	$	(631,534)	$	866	$	497,022

The accompanying notes are an integral part of these consolidated financial statements.

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SHARECARE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share amounts)


	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Noncontrolling Interest		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	5,000,000	$	58,205	345,788,707	$	35	$	1,042,164	$	(2,061)	$	(477,113)	$	1,811	$	564,836
Stock options exercised	—	—		2,414,986	—		2,337		—		—		—		2,337
Common stock issued upon vesting of restricted stock units	—	—		73,617	—		—		—		—		—		—
Issuance of warrants in connection with debt and revenue arrangements	—	—		–	—		19		—		—		—		19
Issuance of stock for WhitehatAI earnout	—	—		132,587	—		—		—		—		—		—
Issuance of stock for doc.ai escrow shares	—	—		677,680	—		—		—		—		—		—
Share-based compensation	—	—		–	—		33,681		—		—		—		33,681
Net income (loss) attributable to noncontrolling interest in subsidiaries	—	—		–	—		—		—		—		(98)		(98)
Currency translation adjustment	—	—		–	—		—		(69)		—		300		231
Net income (loss) attributable to Sharecare, Inc.	—	—		–	—		—		—		(38,201)		—		(38,201)
Other	—	—		(5,097)	—		—		—		—		—		—
Balance at March 31, 2022	5,000,000	$	58,205	349,082,480	$	35	$	1,078,201	$	(2,130)	$	(515,314)	$	2,013	$	562,805

The accompanying notes are an integral part of these consolidated financial statements.

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SHARECARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(35,005)	$	(38,299)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense	14,781		9,878
Non-cash interest expense	254		233
Amortization of contract liabilities	(451)		(1,095)
Accretion of contract liabilities	68		220
Lease right-of-use assets expense	1,138		1,503
Change in fair value of warrant liability and contingent consideration	(138)		(12,368)
Share-based compensation	9,969		33,110
Deferred income taxes	59		175
Other	2,120		846
Changes in operating assets and liabilities:
Accounts receivable, net	(1,387)		7,931
Prepaid expenses and other assets	(5,795)		(1,624)
Accounts payable and accrued expenses	(10,608)		(11,640)
Operating lease liabilities	794		(1,810)
Deferred revenue	703		848
Net cash used in operating activities	(23,498)		(12,092)
Cash flows from investing activities:
Purchases of property and equipment	(368)		(548)
Capitalized internal-use software costs	(4,806)		(7,462)
Net cash used in investing activities	(5,174)		(8,010)
Cash flows from financing activities:
Payments for shares repurchased	(131)		—
Proceeds from exercise of common stock options	1,023		2,337
Payments on financing lease obligations	(370)		(84)
Net cash provided by financing activities	522		2,253
Effect of exchange rates on cash and cash equivalents	72		50
Net (decrease) increase in cash and cash equivalents	(28,078)		(17,799)
Cash and cash equivalents at beginning of period	182,508		271,105
Cash and cash equivalents at end of period	$	154,430	$	253,306
Supplemental disclosure of cash flow information:
Cash paid for interest	$	236	$	258
Cash paid for amounts included in the measurement of lease liabilities	$	1,336	$	1,896
Assets obtained in exchange for lease obligations	$	1,695	$	849

The accompanying notes are an integral part of these consolidated financial statements.

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

1.Nature of Business and Significant Accounting Policies

Nature of Business

Sharecare, Inc. (“Sharecare” or the “Company”) was founded in 2009 to develop an interactive health and wellness platform and began operations in October 2010. Sharecare’s virtual health platform is designed to help people, patients, providers, employers, health plans, government organizations, and communities optimize individual and population-wide well-being by driving positive behavior change. The platform is designed to connect each stakeholder to the health management tools they need to drive engagement, establish sustained participation, increase satisfaction, reduce costs, and improve outcomes. Sharecare bridges scientifically validated clinical programs with content to deliver a personalized experience for its members, beginning with the RealAge® test, Sharecare’s health risk assessment that shows members the true age of their body, capitalizing on people’s innate curiosity of how “young” they are to draw them into the platform. The Sharecare platform provides members with a personalized action plan to guide and educate them on the habits and behaviors making the biggest impact, both positive and negative, on their RealAge. Sharecare provides the resources members need to manage their health through lifestyle or disease management and coaching programs, such as diabetes management and smoking cessation, well-being solutions, such as financial health and anxiety management; care navigation tools such as find-a-doctor, prescription savings, clinical decision support, medical records, home health, and more. Sharecare recently launched Sharecare+, a digital-first, comprehensive advocacy solution designed to deliver value through benefits navigation, clinical engagement, virtual care, and chronic case and utilization management. Additionally, Sharecare provides secure, automated release of information, audit and business consulting services to streamline the medical records process for medical facilities. Sharecare delivers value via its provider, enterprise, and life sciences channels.

Basis of Presentation and Consolidation Policy

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of Sharecare, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Segment Information

The Company operates as a single operating segment. The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources for the entire company.

Unaudited Interim Financial Information

The accompanying interim Consolidated Balance Sheets as of March 31, 2023 and the Consolidated Statements of Operations and Comprehensive Loss, Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit), and Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 are unaudited. These unaudited interim consolidated financial statements are presented in accordance with the rules and regulations of the SEC and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2023 and the Company’s consolidated results of operations and cash flows for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full fiscal year or any other future interim or annual periods. The information contained within the unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s annual financial statements for the year ended December 31, 2022.

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

Use of Estimates

The preparation of these unaudited interim consolidated financial statements in conformity with GAAP requires the use of management estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include revenue recognition and income taxes. The Company bases its estimates on historical experience, known trends, and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

Concentration of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company’s cash deposits are held with well-known financial institutions and may exceed federally insured limits. The Company grants credit to its customers during the normal course of business and generally requires no collateral from its customers.

Fair Value Measurements

The carrying value of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximates fair value due to their short-term nature.

The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires management to maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

•Level 1 — Quoted prices in active markets for identical assets or liabilities

•Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

•Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability

Assets and Liabilities that are Measured at Fair Value on a Non-recurring Basis

Assets and liabilities that may be measured at fair value on a non-recurring basis relate primarily to the Company’s tangible fixed assets and other intangible assets. For these assets, the Company does not periodically adjust the carrying value to fair value except in the event of an impairment. When the Company determines that an impairment has occurred, the carrying value of the asset is reduced to its fair value and an impairment charge is recorded within operating income in the Consolidated Statements of Operations and Comprehensive Loss.

Further, in connection with business combinations and asset acquisitions, the values of certain assets acquired have been recorded at fair value using Level 3 inputs. The fair values of definite-lived intangible assets acquired in these acquisitions were estimated primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that an asset is expected to generate in the future. The Company develops internal estimates for the expected cash flows from acquired assets and estimates of discount rates used in the present value calculations. In certain instances, the Company also e

SEC Form 10-Q filed by Sharecare Inc.