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As filed with the Securities and Exchange Commission on July 15, 2011

Registration Statement No. 333-      


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


Greenway Medical Technologies, Inc.

(Exact name of Registrant as specified in its charter)


Georgia (before reincorporation)
Delaware (after reincorporation)
           
7373
   
58-2412516
(State or other jurisdiction of
incorporation or organization)
           
(Primary Standard Industrial
Classification Code Number)
   
(I.R.S. Employer
Identification Number)
 

121 Greenway Boulevard
Carrollton, GA 30117
(770) 836-3100

(Address, including zip code, and telephone number, including area code, of Registrants’ principal executive offices)


James A. Cochran
Chief Financial Officer
Greenway Medical Technologies, Inc.
121 Greenway Boulevard
Carrollton, GA 30117
(770) 836-3100

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


Copies to:

Reinaldo Pascual
Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, N.E., Suite 2400
Atlanta, GA 30308
(404) 815-2227
Facsimile — (404) 685-5227
           
Christian O. Nagler
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
(212) 446-4660
Facsimile — (212) 446-4900
 


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

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

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

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

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

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b- 2 of the Exchange Act.
Large accelerated filer  [  ]
           
Accelerated filer  [  ]
   
Non-accelerated filer  [X]
(Do not check if a smaller reporting company)
   
Smaller reporting company  [  ]
 


CALCULATION OF REGISTRATION FEE(1)


Title of Each Class of Securities
to be Registered


  
Proposed Maximum Aggregate
Offering Price(2)(3)
  
Amount of Registration Fee
Common Stock, par value $0.0001 per share
              $ 100,000,000          $ 11,610   
 


(1)  
  In accordance with Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”), the number of shares being registered and the proposed maximum offering price per share are not included in this table.

(2)  
  Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act.

(3)  
  Includes shares to be sold upon exercise of the underwriters’ over-allotment option.

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






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

Prospectus (Subject to Completion)
Dated July 15, 2011

          Shares



 
    

Greenway Medical Technologies, Inc.

Common Stock

This is the initial public offering of shares of common stock of Greenway Medical Technologies, Inc.

Greenway is offering        of the shares to be sold in the offering. The selling stockholders identified in this prospectus are offering an additional        shares. Greenway will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders.

Prior to this offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $      and $     . Greenway intends to list the common stock on the                              under the symbol “GWAY.”

        Per share
    Total
Initial public offering price
              $                 $          
Underwriting discount
              $           $    
Proceeds, before expenses, to Greenway
              $           $    
Proceeds, before expenses, to the selling stockholders
              $           $    
 

To the extent that the underwriters sell more than        shares of common stock, the underwriters have the option to purchase up to an additional        shares from        at the initial public offering price less the underwriting discount.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 11.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

This is a firm commitment underwritten offering. The underwriters expect to deliver the shares against payment in New York, New York on             , 2011.
J.P. Morgan
           
Morgan Stanley
William Blair & Company
   
 

 
                       
Piper Jaffray
           
Raymond James
 

                            , 2011



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TABLE OF CONTENTS

        Page
Prospectus Summary
                 1    
The Offering
                 7    
Risk Factors
                 11    
Special Note Regarding Forward-Looking Statements
                 24    
Use Of Proceeds
                 25    
Dividend Policy
                 26    
Capitalization
                 27    
Dilution
                 28    
Selected Financial Data
                 30    
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
                 32    
Business
                 45   
Management And Board Of Directors
                 61    
Executive Compensation
                 67    
Principal And Selling Stockholders
                 80    
Certain Relationships And Related Party Transactions
                 82    
Description Of Capital Stock
                 85    
Shares Eligible For Future Sale
                 90    
Material U.S. Federal Tax Considerations
                 92    
Underwriting
                 96    
Legal Matters
                 100    
Experts
                 100    
Where You Can Find More Information
                 100    
Index To Financial Statements
                 F-1    
 


Through and including             , 2011 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

We and the selling stockholders have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. Neither we nor the selling stockholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

Industry and market data used throughout this prospectus were obtained through our research and surveys and studies conducted by third-parties as well as industry and general publications. Some data and other information are also based on our good faith estimates, which are derived from our review of internal surveys and independent sources. Although we believe that these sources are credible, we have not independently verified any of the data from third-party sources nor have we ascertained any underlying economic assumptions relied upon therein. While we are not aware of any misstatements regarding the industry and market data presented herein, estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors.”

Greenway®, PrimeSUITE®, PrimePATIENT®, and PrimeRCM® are registered trademarks of Greenway Medical Technologies, Inc. We also use the following trademarks in our business: PrimeENTERPRISETM, PrimeEXCHANGETM, PrimeMOBILETM, PrimeRESEARCHTM, PrimeSPEECHTM, PrimeIMAGETM and PrimeDATACLOUDTM. Solely for convenience, our trademarks may appear in this prospectus without the ® or TM symbols, but such references are not intended, to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our trademark rights.

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PROSPECTUS SUMMARY

This summary highlights certain information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should carefully read the entire prospectus, including the section entitled “Risk Factors” and our financial statements and related notes, before you decide whether to invest in our common stock. If you invest in our common stock, you are assuming a high degree of risk. See the section entitled “Risk Factors.” References to “we,” “our,” “us,” “Company,” or “Greenway” refer to Greenway Medical Technologies, Inc. Unless otherwise indicated, industry data are derived from publicly available sources, which we have not independently verified.

Overview

We are a leading provider of integrated information technology solutions and managed business services to ambulatory healthcare providers throughout the United States. At the core of our suite of solutions and services is PrimeSUITE, our award-winning, fully-integrated electronic healthcare record (“EHR”), practice management (“PM”) and interoperability solution. PrimeSUITE integrates clinical, financial and administrative data in a single database to enable comprehensive views of the patient record, support efficient workflows throughout each patient encounter, reduce clinical and administrative errors and allow for the seamless exchange of data between our provider customers and the broader healthcare community. We augment our solutions by offering managed business services, including clinically-driven revenue cycle management (“RCM”) and EHR-enabled research services. By integrating clinical, financial and administrative data and processes, our solutions and services are designed to enable providers to deliver more advanced care and improve their efficiency and profitability. Over 33,000 providers use our solutions and services to deliver care to and manage the clinical, financial and administrative information of over 20 million patients.

Our technology solutions and services are designed to address the needs of providers in all ambulatory settings: independent physician practices, multi-specialty group practices, hospital-affiliated and hospital-owned clinics and practices, retail clinics, employer clinics, university and academic health centers, federally-qualified health centers (“FQHC”), community health centers (“CHC”), integrated delivery networks (“IDN”), accountable care communities (“ACC”) and accountable care organizations (“ACO”). Our single database technology platform, which reflects over 12 years of development, is available in either a cloud-based or premise-based model and is scalable to serve the needs of ambulatory providers of any size. As providers’ needs evolve, our platform allows for the efficient development and integration of new solutions, which we refer to as our innovation platform.

Our integrated EHR/PM solution is consistently rated among the best in the industry. Since 2004, PrimeSUITE has received 11 “Best in KLAS” awards in ambulatory EHR and PM categories. We have achieved a customer retention rate of approximately 95% in a market where, according to KLAS, 35% of providers who have adopted EHR technologies, are considering replacing their current vendors. We believe this success is a reflection of our historical and continuing focus on usability at the point of care as our foremost development priority and our commitment to customer service from initial implementation and training to on-going support.

The ambulatory EHR market has historically been underpenetrated and installed systems have been underutilized. Adoption of these technologies has been low for several reasons including providers’ resistance to making the required investment and concerns that creating and managing electronic records may disrupt clinical and administrative workflows. Adoption of EHR solutions is accelerating as more providers realize the benefits of using technology solutions, including the potential return on investment from adoption of solutions such as PrimeSUITE. Government initiatives and legislation have provided additional financial incentives and implementation support for ambulatory providers to adopt EHR solutions. Finally, macro-trends such as increasing consumerism, the shift to quality-based reimbursement and the emerging focus on improving the coordination of care, are creating strong incentives for providers to implement technologies that help them meet the needs of the changing ambulatory healthcare environment.

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We estimate the current market for our solutions and services to be approximately $33 billion. We believe our potential customer base includes approximately 550,000 physicians at over 230,000 practices, as well as approximately 3,500 retail and employer based clinics that contain an additional 8,000 providers. Our core EHR/PM solution, PrimeSUITE, serves an estimated $9 billion market. While 41% of the EHR/PM market is penetrated, only 10% of providers fully utilize their installed EHR solution. The markets for certain of our other solutions include $14 billion for our RCM services, $3.5 billion for our data exchange solution, and $2 billion for our speech understanding solution.

We believe we are competitively positioned to penetrate this market opportunity and to take advantage of emerging trends in ambulatory care including demand for interoperability, mobility, consumerism and data liquidity.

During our fiscal year ended June 30, 2010, total revenue was $64.6 million, compared to $48.7 million for fiscal 2009. Total revenue was $60.4 million for the nine months ended March 31, 2011 compared to $44.5 million for the nine months ended March 31, 2010. From fiscal year 2006 to fiscal year 2010, our revenue has increased at a compound annual growth rate of 29.9%.

Industry Overview

Ambulatory providers in the United States are expected to face increasing patient visits and financial and operating challenges. Factors driving these trends include (i) payer initiatives to shift patients away from acute care into ambulatory settings; (ii) increasing access to health insurance coverage; (iii) downward pressure on reimbursement rates; (iv) intensifying regulatory requirements; and (v) increasing complexity of the reimbursement process. In an effort to align provider incentives with improved quality of care and cost efficiencies, payers are introducing new payment methodologies that tie reimbursement to providers’ ability to coordinate care and improve patient outcomes. Technology solutions are a critical component of ambulatory providers’ ability to respond and succeed in this environment.

Ambulatory providers have traditionally used PM systems to manage their financial and administrative functions, but clinical workflows are still largely managed on paper charts. Use of paper records can restrict the throughput of the provider and prevent the efficient collection and sharing of critical information. This can cause clinical errors such as adverse drug interactions and result in failure to charge accurately for services rendered and lead to a greater rate of denied claims. Despite the advantages of EHR solutions, their adoption rates by ambulatory providers have been substantially lower than those of PM solutions. Adoption of these technologies has been low for several reasons including the cost of acquiring, implementing and supporting the technology as well as the fear of disrupting clinical and administrative workflows.

We believe several factors are encouraging adoption of EHR/PM solutions and related technologies and services by ambulatory providers and will serve to drive the growth of our business.
•  
  Compelling Return on Investment. We believe providers are becoming increasingly aware of and comfortable with the potential benefits of using integrated EHR/PM solutions, including helping them practice more advanced medicine and deliver higher quality care, while simultaneously improving revenue generation, reducing cost and increasing efficiency. Providers are recognizing the potential of integrated EHR/PM solutions to significantly improve their operations and profitability.

•  
  Government Initiatives and Incentives. Over the last several years, the government has enacted initiatives to drive the adoption of certified EHR solutions. Most importantly, the recently enacted Health Information Technology for Economic and Clinical Health Act (“HITECH Act”) provides more than $19 billion of provider incentives through Medicare and Medicaid programs to encourage the adoption of certified EHR solutions. An eligible professional that qualifies for incentives can receive up to an aggregate of $44,000 from Medicare or $63,750 from Medicaid. Additional initiatives include certification programs, such as the Certification Commission for Health Information Technology (“CCHIT”), and the $650 million in grants allocated to create Regional Extension Centers (“RECs”), both of which encourage and support ambulatory providers in the implementation of certified EHR solutions.

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•  
  Trends in the Evolving Ambulatory Market. Three major trends impacting ambulatory providers are greater electronification of health data, growing consumerism and initiatives aimed at improving population health. Ambulatory providers now understand that the adoption of integrated EHR/PM and related technology solutions can help them succeed in this evolving and complex market by taking advantage of these key trends.

We believe many existing EHR and PM technology vendors do not adequately meet the needs of the ambulatory healthcare market. EHR systems are often difficult to use and disruptive to provider workflows. Additionally, many EHR/PM systems are not integrated, which creates inefficiencies between the delivery and documentation of patient care and the administrative and financial processes of the provider. Lack of interoperability with IT systems in other care settings prevents the exchange of clinical, financial and administrative data with the rest of the healthcare community. Finally, many vendors have multiple versions of their software installed across their customer bases, which reduces their ability to provide effective service and support to ambulatory providers. Due in part to these dynamics, 35% of providers recently surveyed by KLAS who have adopted EHR solutions indicated that they are considering replacing their existing EHR systems.

Our Solutions

The foundation of our offering is an integrated suite of technology solutions designed for the unique needs and workflows of ambulatory providers with usability at the point of care as the foremost priority. At the core of our suite of solutions and services is PrimeSUITE, our award-winning, fully-integrated EHR, PM and interoperability solution. Its intuitive design and built-in clinical decision support capabilities are designed to help providers improve patient safety, quality of care and efficiency. PrimeSUITE has over 3,200 clinical templates, designed for the needs of over 30 specialties and subspecialties, that offer data capture layouts that are intuitive to providers and make it easier to enter patient health information at the point of care. Unlike many of our competitors, our EHR and PM solutions were designed to be fully-integrated and house clinical, financial, and administrative data within a single database. This allows the EHR and PM systems to operate seamlessly and creates efficiencies between the process of delivering and documenting care and the process of billing and collecting for services.

Since the initial release of PrimeSUITE, we have introduced additional solutions to enhance data liquidity, mobility and productivity of providers. PrimeEXCHANGE facilitates data liquidity by enabling interoperability of clinical and financial data between providers and the broader healthcare community. PrimePATIENT is our provider portal that allows patients to schedule appointments, complete administrative forms, exchange their personal health record information with providers and pay their healthcare bills online. PrimePATIENT also enables e-visits, which are web-enabled consultations between patients and physicians that can supplement or replace traditional in-person office visits, save time for patients and increase revenue for physicians. PrimeMOBILE allows providers to access PrimeSUITE from their mobile devices when working remotely. Finally, our new PrimeSPEECH solution is a sophisticated speech understanding software that simplifies data entry into PrimeSUITE, which reduces workflow disruption and saves time and money providers currently spend on transcription services.

We have also developed several managed business service offerings that leverage our technology solutions and the integrated PrimeSUITE database. These include PrimeRCM, our clinically-driven revenue cycle management services, and PrimeRESEARCH, our EHR-enabled research service that allows providers to participate in clinical research and contribute to population health initiatives.

We believe these innovative solutions and services differentiate us from our competition and enable us to act as long-term partners in the success of our customers by providing them the following key benefits:
•  
  Enable the Delivery of Higher-Quality Care and More Advanced Medicine. Our provider customers can deliver higher-quality care and practice more advanced medicine due to PrimeSUITE’s clinical decision- support capabilities, clinical alerts and reminders, electronic order entry and tracking and active device controls that integrate data from peripheral medical devices directly into the patient’s record. Clinical encounter data captured in PrimeSUITE over time creates a comprehensive electronic healthcare record that enables providers to more effectively identify and proactively address emerging trends in a patient’s health.

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•  
  Deliver Improved Financial Performance. Our solutions enhance provider economics by increasing revenue, improving receivables collection, and reducing administrative costs. Automated reporting of key metrics supports the generation of additional revenue by helping the provider track progress towards qualification for available incentive payments, such as those based on improvement in quality measures or for demonstrating use of e-prescribing and certified EHR technology. Reduced administrative costs are realized through reduction or elimination of transcription, paper chart, administrative staff and other costs. A series of case studies conducted on our behalf indicate that customers can significantly increase cash flow following implementation of PrimeSUITE.

•  
  Enhance the Workflow of the Provider. PrimeSUITE has been developed to accommodate and support the unique clinical workflows of providers in over 30 specialties and subspecialties and the financial and administrative workflows of their staff. PrimeSUITE and our suite of solutions adapt to a provider’s workflow, which encourages quick adoption and overcomes their aversion to switch to electronic systems from traditional paper-based records. Clinical information captured during the patient encounter automatically generates recommended evaluation and management (“E&M”) codes for billing purposes. The integration of clinical, financial and administrative information and its availability to all providers and staff before, during and after patient visits can help providers improve their efficiency.

•  
  Position Providers for the Future of Healthcare. We believe the future of healthcare will require providers to deliver high-quality care in the most collaborative and cost-effective way possible, while dealing with increasing consumerism among patients and the desire to participate in the improvement of population health. Our integrated and interoperable solutions can help providers collaborate with the broader healthcare community, improve patient experience and satisfaction and increase their participation in clinical trials and population health initiatives.

Our Strengths

We believe we have the following key competitive strengths:
•  
  Proven, Long-Term Vision. We have succeeded in developing innovative solutions and services to help providers respond to the key trends in the ambulatory market, which we identified early in our history as electronification, consumerism and improving population health. We continuously monitor themes that will shape the future for providers and develop innovative solutions and services to help them succeed as the market evolves.

•  
  Differentiated Technology Model. Our technology architecture, based on Microsoft .NET, has proven to be mission-critical, secure and reliable for over 33,000 providers. All of our solutions and services are based on a single, integrated database that contains clinical, financial and administrative data and supports exceptional interoperability, data analytics and reporting. Our model enables rapid innovation, centralized support and deployment of updates, scalability to serve small and large customers and the ability to provide a cloud-based or premise-based model. This integrated, scalable and flexible technology architecture provides a range of benefits to our customers and forms a strong foundation for our business model.

•  
  Superior Customer Service and Support. We believe that successful adoption of our solutions requires partnering with our customers to empower them to utilize our technology to its maximum capability. Our high-quality customer service has contributed to our approximately 95% customer retention rate in a market where it is estimated that 35% of providers who have adopted EHR technology are considering replacing it.

•  
  Trusted Brand. We have a trusted and recognized brand with our customers and within our industry. Our PrimeSUITE solution has received 11 “Best in KLAS” awards since 2004. CCHIT has certified PrimeSUITE as a Complete EHR for 2011/2012 and granted it the highest usability rating of Five Stars. These accolades, combined with our continued involvement in industry initiatives, focus on innovation and high levels of customer service and support, drive increased brand recognition among customers and in our industry.

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•  
  Attractive Business Model. Our broad range of solutions and services and our high customer retention rate provide us with a powerful business model. This model has driven a compound annual growth rate of 29.9% over the past five years, and a growing percentage of recurring revenue that, combined with our backlog of new business sold, provides high revenue visibility. Our integrated EHR/PM solution provides operating leverage by allowing us to focus our research and development solely on innovation as opposed to integration of legacy technologies. Furthermore, our cost structure is also more efficient due to the ease of supporting and upgrading our technology platform. These factors help us drive predictable revenue growth and generate greater operating profit.

•  
  Experienced Management Team. Our management team has significant experience in our industry and a majority of our executives have worked together for more than 10 years. Our team’s vision of the market, which was developed in the late 1990’s and is now coming to fruition, has driven the design of our innovative suite of solutions and business services and our differentiated technology model. Our operational teams are organized around key growth areas and we have instilled a culture of innovation and customer service throughout the company.

Our Strategy

Our objective is to be the most trusted and effective provider of technology solutions and managed business services for ambulatory providers. Our principal strategies to meet our objective are:
•  
  Increase our Share of the Expanding Market for Ambulatory Technology Solutions. We plan to capitalize on the large and growing ambulatory technology market opportunity by leveraging our targeted and multi-pronged sales strategy. We intend to grow our business by attracting new customers and displacing existing and incumbent competitive products.

•  
  Generate Greater Revenue per Customer by Expanding Their Use of Our Suite of Solutions and Services. We will continue to cross-sell our integrated product and service offerings to customers already using PrimeSUITE. As our customers use more of our solutions and services, we become even more critical to their operating infrastructure, further solidifying our partnership with them and generating increased revenue per customer.

•  
  Develop Innovative Solutions for the Evolving Needs of Ambulatory Provider Market. We continuously monitor and work with our customers to understand the evolving technology needs of the ambulatory provider market. The insights we gather help drive our development of new and innovative solutions and services, including our recently introduced PrimeRESEARCH service and PrimeDATACLOUD solution, a collaborative care portal, that securely and cost effectively empowers population health through the sharing and aggregation of data across providers. We will continue to work closely with customers to develop solutions that position them to succeed as the ambulatory care market evolves.

•  
  Expand Margins by Leveraging our Operating Platform. We expect operating margins to increase as we continue to grow revenue by substantially leveraging our existing infrastructure and operations. We have made, and will continue to make, investments in our technology infrastructure and processes, which we believe will allow us to profitably grow our business as we add new customers and solutions.

•  
  Pursue Targeted Acquisitions. We intend to pursue acquisitions on a targeted basis, seeking out complementary and innovative technologies and services that augment and differentiate our current solutions.

Risks Associated with Our Business

Our business is subject to a number of risks which you should be aware of before making an investment decision. Those risks are discussed more fully in “Risk Factors” beginning on page 11. For example:
•  
  If we are unable to successfully introduce new technology solutions or services or fail to keep pace with advances in technology, our business, financial condition and results of operations will be adversely affected.

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•  
  If we fail to implement our growth strategy or manage future growth effectively, our business would be harmed, and our recent growth rates may not be indicative of our future growth rates.

•  
  If we lose members of our management team or other qualified personnel or if we are unable to attract, hire, integrate and retain other necessary employees, our business would be harmed.

•  
  Disruptions in service or damage to our third-party providers’ data centers could adversely affect our business.

•  
  We operate in a highly competitive industry, and our competitors may be able to compete more efficiently or evolve more rapidly than we do, which could have a material adverse effect on our business, revenue, growth rates and market share.

•  
  Government programs in the United States initiated to accelerate the adoption and utilization of health information technology and to counter the effects of the current economic situation, may not be effective in changing the behavior of providers or may not be fully implemented or fully funded by the government.

•  
  We must ensure our EHR systems are certified pursuant to HITECH Act standards, and failure to continue to provide solutions that are certified could put us at a competitive disadvantage.

•  
  Our technology solutions are required to meet the standards for interoperability, which could require us to incur substantial additional development costs.

Corporate Information

Simultaneously in connection with the closing of this offering, we will become a Delaware corporation (the “Reincorporation”) by way of a merger with and into a newly-formed wholly-owned Delaware subsidiary, with the Delaware subsidiary remaining as the surviving corporation with the name Greenway Medical Technologies, Inc. following the merger. We were originally incorporated in Georgia in September 1998. See “Business—Corporate Information.”

Our executive offices are located at 121 Greenway Boulevard, Carrollton, Georgia 30117 and our telephone number at this location is (770) 836-3100. Our website is www.greenwaymedical.com. Information included or referred to on, or otherwise accessible through, our website is not intended to form a part of or be incorporated by reference into this prospectus.

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THE OFFERING

Common stock offered by us
           
       Shares
Common stock offered by the selling stockholders
           
       Shares
Common stock to be outstanding after this offering
           
       Shares
Over-allotment option
           
       Shares
Directed Share Program
           
The underwriters have reserved for sale to our officers, directors and employees, immediate family members of the foregoing, and other persons selected by us, up to % of the shares of the common stock offered by this prospectus at the initial public offering price. We will offer these shares to the extent permitted under applicable regulations in the United States and in various countries. The number of shares available for sale to the general public in this offering will be reduced to the extent these persons purchase reserved shares. Any reserved shares not purchased will be offered by the underwriters to the general public on the same terms as the other shares. See the section entitled “Underwriting—Directed Share Program.”
Use of proceeds
           
We intend to use (a) approximately $ of the net proceeds of this offering to pay the preferred stock liquidation preference to holders of our outstanding preferred stock concurrently with the conversion of such shares into shares of common stock upon the closing of this offering, and (b) the balance for working capital and general corporate purposes, which may include financing our growth, developing new products and services, and funding capital expenditures, acquisitions and investments. We will not receive any proceeds from the sale of shares by the selling stockholders. See the section entitled “Use of Proceeds.”
Proposed trading symbol
           
“GWAY”
 

The number of shares of our common stock to be outstanding immediately after this offering is based on the number of shares outstanding as of June 30, 2011, after giving effect to the Reincorporation and the conversion of our preferred stock to common stock, and excludes:
  shares of common stock issuable upon the exercise of warrants outstanding as of 2011 at a weighted average exercise price of $   per share;

  shares of common stock issuable upon the exercise of stock options outstanding as of             , 2011 at a weighted average exercise price of $   per share; and

  shares of common stock available for future issuance under our equity compensation plans as of             , 2011.

Unless otherwise noted, the information contained in this prospectus reflects and assumes the following:
  an offering price of $   per share of common stock, which is the mid-point of the range set forth on the cover of this prospectus;

  the Reincorporation to a Delaware corporation;

  no exercise by the underwriters of their over-allotment option;

  the conversion of all outstanding shares of our preferred stock into shares of common stock which will happen in connection with the completion of this offering; and

  our issuance of        shares of common stock in this offering.

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SUMMARY FINANCIAL DATA

The following tables set forth, for the periods and at the dates indicated, our summary financial data. We derived the statement of operations data for the years ended June 30, 2008, 2009 and 2010 and the balance sheet data as of June 30, 2009 and 2010 from our audited financial statements, which are included in this prospectus.

The summary statements of operations for the nine months ended March 31, 2010 and 2011 and the summary balance sheet data as of March 31, 2011 are derived from our unaudited financial statements included elsewhere in this prospectus. Our unaudited financial statements have been prepared on the same basis as the audited financial statements and notes thereto and, in the opinion of our management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the information for the unaudited interim periods. Our historical results for prior interim periods are not necessarily indicative of results to be expected for a full year or for any future period.

The pro forma balance sheet data as of March 31, 2011 give effect to (1) the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock upon the closing of this offering and (2) the mandatory preferred stock preference payment of $             payable to the holders of outstanding preferred stock upon the completion of this offering. The pro forma balance sheet data as of March 31, 2011 give effect to (1) the items described in the preceding sentence, (2) our issuance and sale of        shares of common stock in this offering at an assumed initial public offering price of $   per share, the midpoint of the estimated price range shown on the cover of this prospectus, after deducting the estimated underwriting discounts, commissions and offering expenses payable by us and the application of the net proceeds therefrom as described in “Use of Proceeds.”

You should read the following information together with the more detailed information contained in “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the accompanying notes appearing elsewhere in this prospectus.

        For the years ended June 30,
    Nine months ended
March 31,

   
        2008
    2009
    2010
    2010
    2011
        (in thousands, except per share data)
    (Unaudited)    
Statements of operations data
                                                                                       
Revenue:
                                                                                       
System sales
              $ 24,205          $ 28,575          $ 36,035          $ 24,019          $ 31,983   
Software support services
                 8,457             11,421             16,031             11,522             16,011   
Electronic data interchange and business services
                 6,137             8,716             12,576             8,986             12,438   
Total revenue
                 38,799             48,712             64,642             44,527             60,432   
Cost of revenue:
                                                                                       
System sales(1)
                 10,551             12,208             14,904             10,428             14,671   
Software support services(1)
                 2,763             3,279             4,179             3,071             4,750   
Electronic data interchange and business services(1)
                 4,439             5,954             8,713             6,142             8,786   
Total cost of revenue
                 17,753             21,441             27,796             19,641             28,207   
Gross profit
                 21,046             27,271             36,846             24,886             32,225   
Operating expenses:
                                                                                       
Sales, general and administrative(1)
                 16,860             20,370             27,727             18,951             27,145   
Research and development(1)
                 5,356             5,767             5,991             4,338             5,628   
Total operating expenses
                 22,216             26,137             33,718             23,289             32,773   
Operating income (loss)
                 (1,170 )            1,134             3,128             1,597             (548 )  
Interest (income) expense and other expense, net
                 (244 )            153              115              85              19    
Income before income taxes
                 (926 )            981              3,013             1,512             (567 )  
Provision for income taxes
                              26              148              36              30,944   
Net income (loss)
                 (926 )            955              2,865             1,476             30,377   
Preferred stock dividends and accretion
                 (6,471 )            (9,014 )            (8,038 )            (7,677 )            (39,728 )  
Loss available to common stockholders
              $ (7,397 )         $ (8,059 )         $ (5,173 )         $ (6,201 )         $ (9,351 )  

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        For the years ended June 30,
    Nine months ended
March 31,

   
        2008
    2009
    2010
    2010
    2011
        (in thousands, except per share data)
    (Unaudited)    
Per share data:
                                                                                       
Net loss per share:
                                                                                       
Basic and diluted
              $ (0.74 )         $ (0.81 )         $ (0.48 )         $ (0.59 )         $ (0.81 )  
Weighted average number of common shares outstanding
                                                                                       
Basic and diluted
                 9,940             9,947             10,684             10,425             11,562   



(1)  Includes stock-based compensation in the following amounts:

Cost of revenue:
                                                                                       
System sales
                 78              57              72              65              81    
Software support services
                 100              14              23              22              37    
Electronic data interchange and business services
                 6              1              1              1              9    
Total cost of revenue
                 184              72              96              88              127    
Operating expenses:
                                                                                       
Sales, general and administrative
                 1,196             482              463              453              1,059   
Research and development
                 168              11              63              60              154    
Total operating expenses
                 1,364             493              526              513              1,213   
Total stock-compensation expense
                 1,548               565                 622                 601               1,340   
 

        As of June 30,
    As of
March 31,
    Pro forma
as
   
        2008
    2009
    2010
    2011
    adjusted(1)
        (Unaudited)     (in thousands)         (Unaudited)    
Balance sheet data
                                                                                     
Cash, cash equivalents, and short-term investments
              $ 8,161          $ 9,711          $ 19,179          $ 18,046                   
Working capital
                 8,564             9,861             16,966             16,481                   
Total assets
                 19,944             22,210             38,604             76,323                   
Deferred revenue
                 3,233             3,717             4,320             7,882                   
Long-term obligations
                 2,218             1,904                          359                    
Convertible preferred stock at fair value
                 87,360             95,818             103,855             143,583                   
Accumulated deficit
                 (134,791 )            (142,850 )            (148,024 )            (157,375 )                  
Total stockholders’ deficit
                 (77,056 )            (84,539 )            (79,996 )            (87,189 )                  
 


(1)  
  The pro forma as adjusted summary balance sheet data as of March 31, 2011 gives effect to the conversion of all outstanding shares of our convertible preferred stock into an aggregate of 8,842,104 shares of common stock upon the closing of this offering and the payment of aggregate preference due to holders of our convertible preferred stock upon conversion (approximately                      ) and gives further effect to the sale of shares of our common stock at an initial public offering price of $    per share after deducting underwriting discounts and estimated offering expenses payable by us.

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        For the years ended June 30,
    Nine months ended
March 31,

   
        2008
    2009
    2010
    2010
    2011
        (Unaudited)
(in thousands)
   
Adjusted EBITDA(1)
              $ 700           $ 2,029          $ 4,144          $ 2,497          $ 1,375   
Net cash provided by (used in) operating activities
                 (2,416 )            2,070             6,628             3,586             4,416   
Capital expenditures
                 3,128             325              2,784             1,562             2,660   
 


(1)  
  Adjusted EBITDA is an unaudited number and represents net income (loss) before interest (income) expense, net, benefit (provision) for income taxes, depreciation and amortization and stock-based compensation.

Adjusted EBITDA is not a measure of liquidity calculated in accordance with U.S. generally accepted accounting principles, or GAAP, and should be viewed as a supplement to—not a substitute for—our results of operations presented on the basis of GAAP. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by GAAP. Our statement of cash flows presents our cash flow activity in accordance with GAAP. Furthermore, Adjusted EBITDA is not necessarily comparable to similarly-titled measures reported by other companies.

We believe Adjusted EBITDA is used by and is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that:
•  
  EBITDA is widely used by investors to measure a company’s operating performance without regard to such items as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired; and

•  
  investors commonly adjust EBITDA information to eliminate the effect of stock-based compensation expenses and other charges, which can vary widely from company to company and impair comparability.

Our management uses Adjusted EBITDA:
•  
  as a measure of operating performance to assist in comparing performance from period to period on a consistent basis;

•  
  as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations;

•  
  in communications with the Board of Directors, stockholders, analysts and investors concerning our financial performance; and

•  
  historically, as a significant performance measurement included in our bonus plan.

The table below sets forth a reconciliation of net income (loss) to Adjusted EBITDA:

        For the years ended June 30,
    Nine months ended
March 31,

   
        2008
    2009
    2010
    2010
    2011
        (Unaudited)
(in thousands)
   
Reconciliation of net income (loss) to Adjusted EBITDA
                                                                                       
Net income (loss)
              $ (926 )         $ 955           $ 2,865          $ 1,476          $ 30,377   
Stock-based compensation
                 1,548             565              622              601              1,340   
Depreciation and amortization
                 334              406              432              313              635    
Interest (income) expense, net
                 (256 )            77              77              71              (33 )  
Provision for income taxes
                              26              148              36              (30,944 )  
Adjusted EBITDA
              $ 700           $ 2,029          $ 4,144          $ 2,497          $ 1,375   
 

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including our financial statements and related notes, before deciding whether to purchase shares of our common stock. If any of the following risks is realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment. Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including our financial statements and related notes, before deciding whether to purchase shares of our common stock. If any of the following risks is realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment.

Risks Related to Our Business

If we are unable to successfully introduce new technology solutions or services or fail to keep pace with advances in technology, our business, financial condition and results of operations will be adversely affected.

Our business depends on our ability to adapt to evolving technologies and industry standards and introduce new technology solutions and services accordingly. If we cannot adapt to changing technologies, our technology solutions and services may become obsolete, and our business would suffer. Because the healthcare information technology market is constantly evolving, our existing technology may become obsolete and fail to meet the requirements of current and potential customers. Our success will depend, in part, on our ability to continue to enhance our existing technology solutions and services, develop new technology that addresses the increasingly sophisticated and varied needs of our customers, license leading technologies and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of our proprietary technology entails significant technical and business risks. We may not be successful in developing, using, marketing, selling, or maintaining new technologies effectively or adapting our proprietary technology to evolving customer requirements or emerging industry standards, and, as a result, our business and reputation could suffer. We may not be able to introduce new technology solutions on schedule, or at all, or such solutions may not achieve market acceptance. Moreover, competitors may develop competitive products that could adversely affect our results of operations. A failure by us to introduce new products or to introduce these products on schedule could have an adverse effect on our business, financial condition and results of operations.

If we fail to implement our growth strategy or manage future growth effectively, our business would be harmed, and our recent growth rates may not be indicative of our future growth rates.

Our future success depends upon our ability to grow, and if we are unable to implement our growth strategy or manage our growth effectively, we may incur unexpected expenses and be unable to meet our customers’ requirements, all of which would negatively impact our ability to generate revenue as well as results of operations and financial condition.

To manage future growth, we will need to hire, train and retain highly skilled and motivated employees. We will also need to continue to improve our internal controls, reporting systems and procedures. If we do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, satisfy customer requirements or maintain high-quality service offerings.

Our systems, procedures, controls and existing space may not be adequate to support expansion of our operations. Our future operating results will depend on the ability of our management to manage a business that operates in a constantly changing industry and regulatory environment with increasing government involvement. Our future results will also depend on the ability of our management team to implement and improve our technical, administrative, financial control and reporting systems. We may not be able to expand and upgrade our systems and infrastructure to accommodate future growth. Inability to effectively manage future growth would have a significant negative impact on our business, financial condition, and results of operations and profitability because we may incur unexpected expenses and be unable to meet our customers’ needs, expectations and requirements.

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If we lose members of our management team or other employees or if we are unable to attract, hire, integrate and retain other necessary employees, our business would be harmed.

The future of our business is highly dependent on our ability to innovate. Further, our future success depends in part on our ability to attract, hire, integrate and retain the members of our management team and other qualified personnel, such as members of our innovation team. Our future success also depends on the continued contributions of our executive officers, each of whom may be difficult to replace. The loss of any of our executive officers or the inability to continue to attract qualified personnel could have a material adverse effect on our business. We do not have employment agreements with any of our executive officers. The replacement of any of these executives would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives. Competition for the caliber and number of employees we require is intense. We may face difficulty identifying and hiring qualified personnel at compensation levels consistent with our existing compensation and salary structure. In addition, we invest significant time and expense in training each of our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring, integrating and training their replacements and the quality of our services and our ability to serve our customers could diminish, resulting in a material adverse effect on our business.

We may not be able to maintain or increase our profitability.

We may not succeed in maintaining or increasing our profitability on an annual basis and could incur quarterly or annual losses in future periods. We expect to incur additional operating expenses associated with our new status as a public company and we intend to continue to increase our operating expenses as we grow our business. We also expect to continue to make investments in our proprietary technology solutions, sales and marketing, infrastructure, facilities and other resources as we seek to grow, thereby incurring additional costs. If our revenue does not increase to offset these increases in costs, our operating results would be negatively affected. You should not consider our historic revenue growth rates as indicative of future growth rates.

Disruptions in service or damage to our third-party providers’ data centers could adversely affect our business.

We rely on third-parties who provide access to data centers. Our information technologies and systems are vulnerable to damage or interruption from various causes, including (i) acts of God and other natural disasters, war and acts of terrorism and (ii) power losses, computer systems failures, Internet and telecommunications or data network failures, operator error, losses of and corruption of data and similar events. We conduct business continuity planning and work with our third-party providers to protect against fires, floods, other natural disasters and general business interruptions to mitigate the adverse effects of a disruption, relocation or change in operating environment at the data centers we utilize. The situations we plan for and the amount of insurance coverage we maintain may not be adequate in any particular case. In addition, the occurrence of any of these events could result in interruptions, delays or cessations in service to our customers. Any of these events could impair or prohibit our ability to provide our services, reduce the attractiveness of our services to current or potential customers and adversely impact our financial condition and results of operations.

In addition, despite the implementation of security measures, our infrastructure, data centers, or systems that we interface with, including the Internet and related systems, may be vulnerable to physical break-ins, hackers, improper employee or contractor access, computer viruses, programming errors, denial-of-service attacks or other attacks by third-parties seeking to disrupt operations or misappropriate information or similar physical or electronic breaches of security. Any of these can cause system failure, including network, software or hardware failure, which can result in service disruptions. As a result, we may be required to expend significant capital and other resources to protect against security breaches and hackers or to alleviate problems caused by such breaches.

We may be liable for use of content we provide.

We provide content for use by healthcare providers in treating patients. This content includes databases developed by third-parties. If this content in the third-party databases is incorrect or incomplete, adverse consequences, including death, may occur and give rise to product liability and other claims against us. A court or government agency may take the position that our delivery of health information directly, including through

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licensed practitioners, or delivery of information by a third-party site that a consumer accesses through our websites, exposes us to personal injury liability, or other liability for wrongful delivery or handling of healthcare services or erroneous health information. While we maintain product liability insurance coverage in an amount that we believe is sufficient for our business, this coverage may not be adequate or continue to be available on acceptable terms, if at all. A claim brought against us that is uninsured or under-insured could harm our business, financial condition and results of operations. Even unsuccessful claims could result in substantial costs and diversion of management resources.

We operate in a highly competitive industry, and our competitors may be able to compete more efficiently or evolve more rapidly than we do, which could have a material adverse effect on our business, revenue, growth rates and market share.

The market for EHR, PM and other healthcare information technologies is highly competitive and we expect competition to increase in the future. We face competition from existing and new entrants. We believe our most significant competitors in EHR and PM are Allscripts, athenahealth, Cerner, eClinicalWorks, Epic, GE, Quality Systems, and Sage. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, regulations or customer needs and requirements. Some of these competitors have longer operating histories, greater brand recognition and greater financial, marketing and other resources than us. Moreover, we expect that competition will continue to increase as a result of incentives provided by the HITECH Act, which was enacted in 2009 as part of the American Recovery Reinvestment Act (“ARRA”) and consolidation in both the information technology and healthcare industries. Further, if one or more of our competitors or potential competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. We may not be able to compete successfully with these companies, and these or other competitors may introduce technologies or services that render our technologies or services obsolete or less marketable. Even if our technology solutions and services are more effective than the offerings of our competitors, current or potential customers might prefer competitive technologies or services to our technology solutions and services. Increased competition could also result in pricing pressures, which would negatively impact our margins, growth rate or market share.

If providers do not purchase our technology solutions and services or delay in choosing our solutions or services, our business, financial condition and results of operations will be adversely affected.

Our business model depends on our ability to sell our technology solutions and services. Acceptance of our technology solutions and services may require providers to adopt different behavior patterns and new methods of conducting business and exchanging information. Providers may not integrate our technology solutions and services into their workflow and may not accept our solutions and services as a replacement for traditional methods of practicing medicine. Achieving market acceptance for our solutions and services will continue to require substantial sales and marketing efforts and the expenditure of significant financial and other resources to create awareness and demand by providers. If providers fail to broadly accept of our technology solutions and services, or if we fail to position our technology solutions and services as a preferred method for information management and healthcare delivery, our business, financial condition and results of operations will be adversely affected.

Government programs in the United States initiated to accelerate the adoption and utilization of health information technology and to counter the effects of the current economic situation, may not be effective in changing the behavior of providers or may not be fully implemented or fully funded by the government.

While government programs have been initiated to improve the efficiency and quality of the healthcare sector and also counter the effects of the current economic situation, including expenditures to stimulate business and accelerate the adoption and utilization of health care technology, these programs may not be fully implemented or fully funded and there is no guarantee that our customers will receive any of these funds. For example, the passage of the HITECH Act authorizes more than $19 billion in expenditures, to incentivize adoption of electronic health records. Although we believe that our technology solutions and services will meet the requirements of the HITECH Act, qualifying our customers for financial incentives, these financial incentives, may not apply to our technology solutions or services. Also, providers may be slow to adopt EHR systems in response to these government programs,

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may not select our technology solutions and services, or may decide not implement an EHR system at all. Any delay in the purchase of our EHR technology solutions and services in response to government programs, or the failure of providers to purchase an EHR system, could have an adverse effect on our business, growth rate, financial condition and results of operations. It is also possible that in light of the budget deficit or for other economic or political reasons, Congress may repeal or not fund the HITECH Act as originally planned or otherwise amend it in a manner that have an adverse effect on our business.

We must ensure our EHR systems are certified pursuant to the HITECH Act standards, and failure to continue to provide solutions that are certified could put us at a competitive disadvantage.

The HITECH Act provides financial incentives for healthcare providers that demonstrate “meaningful use” of EHR and mandates use of health information technology systems that are certified according to technical standards developed under the supervision of the U.S. Department of Health and Human Services (“HHS”). The HITECH Act also imposes certain requirements upon governmental agencies to use, and requires health care providers, health plans, and insurers contracting with such agencies to use, systems that are certified according to such standards. Such standards and implementation specifications that are being developed under the HITECH Act includes named standards, architectures, and software schemes for the authentication and security of individually identifiable health information and the creation of common solutions across disparate entities.

The HITECH Act’s certification requirements affect our business because we have invested and continue to invest in conforming our technology solutions to these standards. HHS has contracted with Certification Commission for Health Information Technology (“CCHIT”) to develop certification programs for electronic health records and health information exchanges. PrimeSUITE 2011 has been certified as a complete EHR by CCHIT, which indicates that our EHR solutions meet the 2011/2012 criteria to support Stage 1 “meaningful use” as required by HHS to assist providers in their efforts to meet the goals and objectives of “meaningful use,” making such providers and hospitals eligible for funding under the HITECH Act if our EHR is used appropriately. However, Stage 1 only refers to the first set of “meaningful use” objectives that must be met to be eligible for incentive payments. Stage 2 and Stage 3 requirements have yet to be defined. As the standards are developed, we may need to use additional resources to meet the newly defined requirements, which could lead to delays necessary to modify our technology solutions. We must ensure that our technology solutions are or will be certified according to applicable HITECH Act technical standards so that our customers have an opportunity to qualify for “meaningful use” incentive payments. Failure to comply could jeopardize our relationships with customers who are relying upon us to provide certified software. Lastly, if for some reason we are not able to comply with these applicable HITECH Act standards within the required timeframe, our products and services could be less attractive to customers than the offerings of other EHR vendors who have complied.

Our technology solutions are required to meet the standards for interoperability, which could require us to incur substantial additional development costs.

Our customers and the industry leaders enacting regulatory requirements are concerned with and often require that our technology solutions and healthcare devices be interoperable with other third-party healthcare information technology suppliers. Market forces or regulatory authorities could create software interoperability standards that would apply to our solutions, and if our technology solutions are not consistent with those standards, we could be forced to incur substantial additional development costs. CCHIT has developed a comprehensive set of criteria for the functionality, interoperability and security of various software modules in the healthcare information technology industry. CCHIT, however, continues to modify and refine those standards. Achieving and maintaining CCHIT certification is a competitive imperative that could result in larger than expected software development expenses and administrative expenses in order to conform to these requirements. These standards and specifications, once finalized, will be subject to interpretation by the entities designated to certify such technology. We will incur increased development costs in delivering solutions if we need to change or enhance our technology solutions to be in compliance with these varying and evolving standards, and delays may result in connection therewith. If our technology solutions are not consistent with these evolving standards, our market position and sales could be impaired and we may have to invest significantly in changes to our technology solutions. In addition, HHS may

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require other additional certifications from additional certifying bodies. If we are required to obtain certification from additional bodies, it would be costly and outcomes are unknown.

If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities.

Our services involve the storage and transmission of customers’ proprietary information and patient information, including health, financial, payment and other personal or confidential information. We rely on proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for processing, transmission and storage of such information. Because of the sensitivity of this information and due to requirements under applicable laws and regulations, the effectiveness of such security efforts is very important. If our security measures are breached or fail as a result of third-party action, employee error, malfeasance or otherwise, someone may be able to obtain unauthorized access to customer or patient data. Improper activities by third-parties, advances in computer and software capabilities and encryption technology, new tools and discoveries and other events or developments may facilitate or result in a compromise or breach of our computer systems. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, and we may be unable to anticipate these techniques or fail to implement adequate preventive measures. Our security measures may not be effective in preventing such unauthorized access. If a breach of our security occurs, we could face damages for contract breach, penalties for violation of applicable laws or regulations, possible lawsuits by individuals affected by the breach and significant remediation costs and efforts to prevent future occurrences. In addition, whether there is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be harmed and we could lose current or potential customers.

Our growth depends, in part, on establishing and maintaining strategic relationships.

We must continue to maintain our existing strategic relationships, such as we have with Walgreens and McGraw Hill. We also need to establish additional strategic relationships with leaders in a number of healthcare and health information technology industry segments. We believe that these relationships contribute towards our ability to increase exposure to our technology solutions to a larger number of healthcare providers and further enhance the Greenway brand. These relationships also assist us in developing and deploying new technology solutions and services, and generate sources of additional revenue and cash flows.

We must carefully manage these relationships as strategic partners may decide to compete with us in some or all of our markets. In addition, we may not be able to maintain or establish relationships with potential partners if we conduct business with their competitors. We depend, in part, on our strategic partners’ ability to generate increased acceptance and use of our technology and services. Many of these strategic relationships, such as Walgreens and McGraw Hill, are new and have yet to be fully developed. We may not fully realize the expected benefits of such relationships. Further, if we lose any of these strategic relationships or fail to establish additional relationships, or if our strategic relationships fail to benefit us as expected, we may not be able to execute our business plan, and our business, financial condition and results of operations may suffer.

We offer our services in many states and, therefore, may be subject to state and local taxes that could harm our business or that we may have inadvertently failed to pay.

We may lose sales or incur significant costs should various tax jurisdictions be successful in imposing taxes on a broader range of services. Imposition of such taxes on our services could result in substantial unplanned costs, would effectively increase the cost of such services to our customers and may adversely affect our ability to retain existing customers or to gain new customers in the areas in which such taxes are imposed.

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Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization expense.

Future acquisitions may result in dilutive issuances of equity securities, the incurrence of debt, the assumption of known and unknown liabilities, the write-off of software development costs and the amortization of expenses related to intangible assets, all of which could have an adverse effect on our business, financial condition and results of operations.

We may have difficulty integrating future acquisitions into our business.

We may from time to time acquire other companies or their businesses. As a result, we may be exposed to several risks relating to integrating these additional businesses, including those risks listed below, any of which may adversely affect our business or operating results:
  inability to integrate new operations, products, services and personnel;

  diversion of resources from our existing business;

  failure in client communication and branding awareness;

  inability to generate revenue from new products and services sufficient to offset associated acquisition costs;

  inability to maintain uniform standards, controls and policies;

  accounting issues that adversely affect our financial results;

  impairment of employee and customer relations as a result of any integration of new management personnel; and

  assumption of liabilities or other obligations associated with an acquired business.

We may be unable to adequately establish, protect or enforce our intellectual property.

Our success depends, in part, upon our ability to establish, protect and enforce our intellectual property and other proprietary rights. If we fail to establish, protect or enforce our intellectual property rights, we may lose an important advantage in the market in which we compete. We rely on a combination of patent, trademark, copyright and trade secret law and contractual obligations to protect our key intellectual property rights, all of which provide only limited protection. Our intellectual property rights may not be sufficient to help us maintain our position in the market and our competitive advantages. Although we have filed 18 U.S. patent applications, some or all of these patents may not be issued and therefore, may not provide us with the protection that we seek. We have been issued one U.S. patent, however, any patents issued to us could be challenged, invalidated or circumvented. Legal standards relating to the validity, enforceability and scope of protection of intellectual property are uncertain. Any patents that may be issued in the future from pending or future patent applications or our one issued patent may not provide sufficiently broad protection or may not prove to be enforceable in actions against alleged infringers. Also, any other intellectual property registrations may not be issued for pending or future applications and may not be enforceable or provide adequate protection of our proprietary rights.

We also rely on trade secrets to protect our proprietary technology. Trade secrets may not be protectable if not properly kept confidential. We strive to enter into non-disclosure agreements with our employees, customers, contractors and business partners to limit access to and disclosure of our proprietary information. The steps we have taken, however, may not be sufficient to prevent unauthorized use of our technology, and adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets and proprietary technology. Moreover, others may reverse engineer or independently develop technologies that are competitive to ours or infringe our intellectual property.

Accordingly, despite our efforts, we may be unable to prevent third-parties from using our intellectual property or our technology for their competitive advantage. Any such use could have a material adverse effect on our business, results of operations and financial condition. Monitoring unauthorized uses of and enforcing our intellectual

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property rights can be difficult and costly. Legal intellectual property actions are inherently uncertain and may not be successful, and may require a substantial amount of resources and divert our management’s attention.

Claims by others that we infringe their intellectual property could force us to incur significant costs or revise the way we conduct our business.

Our competitors protect their proprietary rights by means of patents, trade secrets, copyrights trademarks and other intellectual property. We have not conducted an independent review of patents and other intellectual property issued to third-parties. Because patent applications in the United States and many other jurisdictions are kept confidential for 18 months before they are published, we may be unaware of third parties patent applications, some which may relate to our proprietary technology. We may receive letters from third parties alleging, or inquiring about, possible infringement misappropriate or violation of their intellectual property rights. Any party asserting that we infringe misappropriate or violate proprietary rights may force us to defend ourselves, and potentially our customers, against the alleged claim. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and/or invalidation of our proprietary rights or interruption or cessation of our operations. The risk of such claims and lawsuits will likely increase as we increase in size, the scope of our services and technology platforms increase, our geographic presence and market share expand and the number of competitors in our market increases. Any such claims or lawsuit could:
  be time-consuming and expensive to defend, whether meritorious or not;

  require us to stop providing products or services that use the technology that infringes the other party’s intellectual property;

  divert the attention of our technical and managerial resources;

  require us to enter into royalty or licensing agreements with third-parties, which may not be available on terms that we deem acceptable;

  prevent us from operating all or a portion of our business or force us to redesign our products, services or technology platforms, which could be difficult and expensive and may make the performance or value of our product or service offerings less attractive;

  subject us to significant liability for damages or result in significant settlement payments; or

  require us to indemnify our customers, as certain of our customer contracts require us to indemnify the customer for certain claims of infringement or alleged infringement of third-party’s intellectual property rights resulting from customer’s use of our intellectual property.

Furthermore, during the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation could materially adversely affect our business. Some of our competitors may be able to sustain the costs of intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, any litigation could significantly harm our relationships with current and prospective customers. Any of the foregoing could disrupt our business and have a material adverse effect on our business, operating results and financial condition.

We may need additional capital to fund our operations and finance our growth, and we may not be able to secure such capital on terms acceptable to us, or at all.

In order for us to grow and successfully execute our business plan, we may require additional financing which may not be available or may not be available on acceptable terms. If such financing is available, it may dilute the existing stockholders’ ownership interests in the Company. Failure to obtain financing may have a material adverse effect on our financial position and may cause you to lose your entire investment in the Company. In addition, if we are unable to secure additional financing on acceptable terms or at all, it will impact our ability to conduct acquisitions.

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We depend upon third-party service providers for certain technologies. If these third-party providers fail to fulfill their contractual obligations to us, fail to maintain or support those technologies or choose not to sell them to us, our business and operations could be disrupted and our operating results would be harmed.

We have entered into certain arrangements with third-party service providers. Technologies provided by these providers support some of our solutions. If these technologies fail or are of poor quality, our business, reputation and operating results could be harmed. Failure of the service providers to perform satisfactorily could result in client dissatisfaction, disrupt our operations and adversely affect operating results. With respect to these service providers, we have significantly less control over the technologies they provide to us than if we maintained and operated them ourselves, which increases our risk. In some cases, functions necessary to some of our solutions are performed by these third-party technologies. If we need to find an alternative source for performing these functions, we may have to expend significant money, resources and time to develop the alternative, and if this development is not accomplished in a timely manner and without significant disruption to our business, we may be unable to fulfill our responsibilities to clients or the expectations of clients, with the attendant potential for liability claims and a loss of business reputation.

Demand by smaller providers could accelerate transition to a subscription pricing model which could reduce near-term revenue

The adoption of EHR by the large untapped market of smaller provider customers and their greater need to minimize capital outlays could accelerate adoption of subscription-based arrangements as opposed to perpetual licensing arrangements. While an increased amount of subscription arrangements will result in increased recurring revenue over a longer period of time than we have achieved historically, near-term revenue would be reduced as a result, while costs associated with these sales would still be expensed currently. If we fail to appropriately price our subscription fees, it could have an adverse effect on our business.

Regulatory Risks

The healthcare industry is heavily regulated. Our failure to comply with regulatory requirements could create liability for us, result in adverse publicity and negatively affect our business.

The healthcare industry is heavily regulated and is constantly evolving due to the changing political, legislative, regulatory landscape and other factors. Many healthcare laws are complex, and their application to specific services and relationships may not be clear. In particular, many existing healthcare laws and regulations, when enacted, did not anticipate or address the services that we provide. Further, healthcare laws differ from state to state and it is difficult to ensure our business complies with evolving laws in all states. Our operations may be adversely affected by enforcement initiatives. Our failure to accurately anticipate the application of these laws and regulations to our business, or any other failure to comply with regulatory requirements, could create liability for us, result in adverse publicity and negatively affect our business. Federal and state legislatures and agencies periodically consider proposals to revise aspects of the healthcare industry or to revise or create additional statutory and regulatory requirements. Such proposals, if implemented, could impact our operations, the use of our services and our ability to market new services, or could create unexpected liabilities for us. We cannot predict what changes to laws or regulations might be made in the future or how those changes could affect our business or our operating costs.

If a breach of our measures protecting personal data covered by HIPAA or the HITECH Act occurs, we may incur significant liabilities.

The Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), and the regulations that have been issued under it contain substantial restrictions and requirements with respect to the use, collection, storage and disclosure of individuals’ protected health information. Under HIPAA, covered entities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of electronic protected health information maintained or transmitted by them or by others on their behalf. In February 2009, HIPAA was amended by the HITECH Act to add provisions that impose certain of HIPAA is privacy and security requirements directly upon business associates of covered entities. The HITECH Act transferred enforcement authority of the security rule from the Centers for Medicaid and Medicare Services (“CMS”) to the

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Office for Civil Rights of HHS, thereby consolidating authority over the privacy and security rules under a single office within HHS.

The HITECH Act heightened enforcement of privacy and security rules, indicating that the imposition of penalties will likely be more common in the future and such penalties will be more severe. For example, the HITECH Act requires that the HHS fully investigate all complaints if a preliminary investigation of the facts indicates a possible violation due to “willful neglect” and impose penalties if such neglect is found. Further, where our liability as a business associate to our clients was previously merely contractual in nature, the HITECH Act now treats the breach of duty under a business associate agreement to carry the same liability as if the covered entity engaged in the breach. In other words, as a business associate, we are now directly responsible for complying with HIPAA. While we strive to adhere to strict policies and procedures, we may find ourselves subject to increased liability as a possible liable party and we may incur increased costs as we implement the various obligations between clients through these agreements.

Finally, regulations also require business associates to notify covered entities, who in turn must notify affected individuals and government authorities of data security breaches involving unsecured protected health information. Our customers are covered entities and we are a business associate of our customers under HIPAA and the HITECH Act as a result of our contractual obligations to perform certain functions on behalf of and provide certain services to those customers. We have performed an assessment of the potential risks and vulnerabilities to the confidentiality, integrity and availability of electronic health information. In response to this risk analysis, we implemented and maintain physical, technical and administrative safeguards intended to protect all personal data and have processes in place to assist us in complying with applicable laws and regulations regarding the protection of this data and properly responding to any security incidents. If we knowingly breach the HITECH Act’s requirements, we could be exposed to criminal liability. A breach of our safeguards and processes could expose us to civil penalties (up to $1.5 million for identical incidences) and the possibility of civil litigation.

If we or our customers fail to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers, we or our customers may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs.

As a participant in the healthcare industry, our operations and relationships, and those of our customers, are regulated by a number of federal, state and local governmental entities. The impact of these regulations can adversely affect us even though we may not be directly regulated by specific healthcare laws and regulations. We must ensure that our technology solutions can be used by our customers in a manner that complies with those laws and regulations. Inability of our customers to do so could affect the marketability of our technology solutions or our compliance with our customer contracts, or even expose us to direct liability under the theory that we had assisted our customers in a violation of healthcare laws or regulations. A number of federal and state laws, including anti-kickback restrictions and laws prohibiting the submission of false or fraudulent claims, apply to healthcare providers and others that make, offer, seek or receive referrals or payments for technology solutions or services that may be paid for through any federal or state healthcare program and, in some instances, any private program. These laws are complex and their application to our specific services and relationships may not be clear and may be applied to our business in ways that we do not anticipate. Federal and state regulatory and law enforcement authorities have recently increased enforcement activities with respect to Medicare and Medicaid fraud and abuse regulations and other healthcare reimbursement laws and rules. From time to time, participants in the healthcare industry receive inquiries or subpoenas to produce documents in connection with government investigations. We could be required to expend significant time and resources to comply with these requests, and the attention of our management team could be diverted by these efforts. The occurrence of any of these events could give our customers the right to terminate our contracts with us and result in significant harm to our business and financial condition.

These laws and regulations may change rapidly, and it is frequently unclear how they apply to our business. Any failure of our technology solutions or services to comply with these laws and regulations could result in substantial civil or criminal liability and could, among other things, adversely affect demand for our services, invalidate all or portions of some of our contracts with our customers, require us to change or terminate some portions of our business, require us to refund portions of our revenue, cause us to be disqualified from serving

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customers doing business with government payers, and give our customers the right to terminate our contracts with them, any one of which could have an adverse effect on our business.

Risks Related to this Offering and Ownership of Shares of Our Common Stock

Our securities have no prior market and our stock price may decline after the offering.

Prior to this offering, there has been no public market for shares of our common stock. An active public trading market for our common stock may not develop or, if it develops, may not be maintained after this offering. For example,                  imposes certain securities trading requirements, including minimum trading price, minimum number of stockholders and minimum market capitalization. We and the representatives of the underwriters negotiated to determine the initial public offering price. The initial public offering price may be higher than the trading price of our common stock following this offering. As a result, you could lose all or part of your investment.

The trading price of our common stock is likely to be volatile.

The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors. In addition to the risks described in this section, factors that may cause the market price of our common stock to fluctuate include:
  fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

  changes in estimates of our financial results or recommendations by securities analysts;

  investors’ general perception of us; and

  changes in general economic, industry and market conditions.

In addition, if the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations.

Some companies that have had volatile market prices for their securities have had securities class actions filed against them. If a suit were filed against us, regardless of its merits or outcome, it would likely result in substantial costs and divert management’s attention and resources. This could have a material adverse effect on our business, operating results and financial condition.

We will incur increased costs and demands upon our management and other personnel as a result of complying with the laws and regulations affecting public companies, which could harm our operating results.

We have never operated as a public company. As a public company, we will be required to ensure that we have the ability to prepare financial statements that comply with SEC reporting requirements on a timely basis. We will also be subject to other reporting and corporate governance requirements, including              listing standards and certain provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the regulations promulgated thereunder, which impose significant compliance obligations upon us. Specifically, we will be required to:
  prepare and distribute periodic reports and other stockholder communications in compliance with our obligations under the federal securities laws and applicable stock exchange rules;

  create or expand the roles and duties of our Board of Directors and committees of the board;

  institute compliance and internal audit functions that are more comprehensive;

  evaluate and maintain our system of internal control over financial reporting, and report on management’s assessment thereof, in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

  involve and retain outside legal counsel and accountants in connection with the activities listed above;

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  enhance our investor relations function; and

  maintain internal policies, including those relating to disclosure controls and procedures.

As a public company, we will be required to commit significant resources and management time and attention to the above-listed requirements, which will cause us to incur significant costs and which may place a strain on our systems and resources. As a result, our management’s attention might be diverted from other business concerns. In addition, we might not be successful in implementing these requirements. The cost of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders will cause our expenses to be higher than they would be if we remained a privately-held company.

In addition, the Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, significant resources and management oversight will be required. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. We expect to incur significant additional annual expenses related to these activities and, among other things, additional directors’ and officers’ liability insurance, director fees, reporting requirements, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act or our independent registered public accounting firm may not issue a favorable assessment. If either we are unable to conclude that we have effective internal control over financial reporting or our independent registered public accounting firm are unable to provide us with an unqualified report, investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

Future sales of shares by existing stockholders could cause our stock price to decline.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the contractual lock-up agreements described below expire and other restrictions on resale lapse, the trading price of our common stock could decline below the initial public offering price. Based on shares outstanding as of             , upon the closing of this offering, we will have outstanding        shares of common stock. Of these shares,        shares of common stock will be eligible for sale in the public market and        shares of common stock will be subject to a 180-day contractual lock-up with the underwriters.             , acting as representatives of the underwriters, may permit our officers, directors, employees and current stockholders who are subject to the contractual lock-up to sell shares prior to the expiration of the lock-up agreements. Upon expiration of the contractual lock-up agreements with the underwriters, and based on shares outstanding as of             , an additional        shares will be eligible for sale in the public market.

You will experience an immediate and substantial dilution of the net tangible book value of the common shares you purchase in this offering.

The initial public offering price per share of our common stock is substantially higher than our net tangible book value per common share immediately after this offering. For this purpose, the net tangible book value per share represents the total amount of the Company’s tangible assets, less the total amount of liabilities, divided by the total number of shares outstanding, and dilution is determined by subtracting the net tangible book value per share after the offering from the initial public offering price per share. As a result, you may pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. Investors who purchase common stock in this offering will be diluted by $   per share after giving effect to the sale of shares of common stock in this offering at an assumed initial public offering price of $   per share. If we grant options in the future to our employees, and those options are exercised or other issuances of common stock are made, there will be further dilution.

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Your ability to influence corporate matters may be limited because a small number of stockholders beneficially own a substantial amount of our common stock and will continue to have substantial control over us after the offering.

Upon completion of this offering, our officers, directors and principal stockholders (greater than 5% stockholders) collectively will beneficially own approximately    % of our issued and outstanding common stock. As a result, these stockholders will be able to exert significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our Company or its assets, and may have interests that are different from yours and may vote in a way with which you disagree and which may be adverse to your interests. In addition, this concentration of ownership may have the effect of preventing, discouraging or deferring a change of control, which could depress the market price of our common stock.

Transactions engaged in by our principal stockholders, our officers or directors involving our common stock may have an adverse effect on the price of our stock.

As described above, our officers, directors and principal stockholders (greater than 5% stockholders) collectively will control approximately    % of our issued and outstanding common stock upon completion of this offering. Subsequent sales of our shares by these stockholders could have the effect of lowering our stock price. The perceived risk associated with the possible sale of a large number of shares by these stockholders, or the adoption of significant short positions by hedge funds or other significant investors, could cause some of our stockholders to sell their stock, thus causing the price of our stock to decline. In addition, actual or anticipated downward pressure on our stock price due to actual or anticipated sales of stock by our directors or officers could cause other institutions or individuals to engage in short sales of our common stock, which may further cause the price of our stock to decline.

From time to time our directors and executive officers may sell shares of our common stock on the open market. These sales will be publicly disclosed in filings made with the SEC. In the future, our directors and executive officers may sell a significant number of shares for a variety of reasons unrelated to the performance of our business. Our stockholders may perceive these sales as a reflection on management’s view of the business and result in some stockholders selling their shares of our common stock. These sales could cause the price of our stock to drop.

Provisions in our Delaware certificate of incorporation, which will be in effect upon the completion of this offering, and Delaware law may discourage a takeover attempt.

Provisions contained in our Delaware certificate of incorporation, which will be in effect upon the completion of this offering, and Delaware law impose various procedural and other requirements, which could make it more difficult for a third-party to acquire us or for stockholders to effect certain corporate actions. For example, our certificate of incorporation will authorize our Board of Directors to determine the rights, preferences, privileges and restrictions of unissued series of preferred stock, without any vote or action by our stockholders. Therefore, the Board of Directors can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of our common stock. In addition, as of the closing of this offering, our certificate of incorporation and bylaws will provide for a staggered, or classified Board of Directors consisting of three classes of directors, each serving staggered three-year terms. These rights may have the effect of delaying or deterring a change of control of our Company. These provisions could limit the price that certain investors may be willing to pay in the future for shares of our common stock.

We will have broad discretion in using the proceeds of this offering, and we may not effectively expend the proceeds.

We intend to use approximately $                     of the net proceeds of this offering to pay the preferred stock liquidation preference to holders of our outstanding preferred stock concurrently with the conversion of such shares into shares of common stock upon the closing of this offering, and the balance for working capital and general corporate purposes, which may include financing our growth, developing new technology solutions and services, and funding capital expenditures, acquisitions and investments. We will not receive any proceeds from the sale of

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shares by the selling stockholders. We will have significant flexibility and broad discretion in applying the net proceeds of this offering and we may not apply the proceeds of this offering effectively. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

Your percentage ownership in us may be diluted by future issuances of capital stock or securities or instruments that are convertible into our capital stock, which could reduce your influence over matters on which stockholders vote.

Our Board of Directors has the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of common stock, including shares that may be issued to satisfy our obligations under our equity incentive plans, shares of our authorized but unissued preferred stock and securities and instruments that are convertible into our common stock. Issuances of common stock or voting preferred stock would reduce your influence over matters on which our stockholders vote and, in the case of issuances of preferred stock, likely would result in your interest in us being subject to the prior rights of holders of that preferred stock.

Further, we may need to raise additional funds in the future to finance our operations and/or acquire complimentary businesses. If we obtain capital in future offerings on a per-share basis that is less than the initial public offering price per share, the value of the price per share of your common stock will likely be reduced. In addition, if we issue additional equity securities in a future offering and you do not participate in such offering, there will effectively be dilution in your percentage ownership interest in the Company.

Under the Company’s 2011 Stock Plan and the Company’s previous stock incentive plans, the Company granted, and in the future intends to grant, awards of stock options to purchase common stock and other awards to our officers, directors, employees and consultants. As of             , we have granted stock options (excluding canceled stock options) with respect to        shares of common stock (of which, options to purchase        shares have been exercised as of          ).

We will in the future grant stock options and other awards to certain current or future officers, directors, employees and consultants of the Company under additional plans or individual agreements. The grant and exercise of these awards, as applicable, will have the effect of diluting your ownership interests in the Company. We may also issue additional equity securities in connection with other types of transactions, including shares issued as part of the purchase price for acquisitions of assets or other companies from time to time in connection with strategic partnerships or joint ventures, or as incentives to management or other providers of resources to the Company. Such additional issuances are likely to have the same dilutive effect.

We currently have no plans to pay dividends on our common stock, so you may not receive funds without selling your common stock.

We currently do not pay dividends on our common stock and we do not anticipate paying any dividends on our common stock in the foreseeable future. Any declaration and payment of future dividends to holders of our common stock may be limited by restrictive covenants of our debt agreements, and will be at the sole discretion of our Board of Directors and will depend on many factors, including our financial condition, results of operations, earnings, capital requirements, business expansion opportunities, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our Board of Directors deems relevant.

Further, we may not have sufficient surplus to be able to legally pay any dividends in the future. The absence of sufficient surplus may result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capital expenditures, or increases in reserves.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. Forward-looking statements convey our current expectations or forecasts of future events. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future results of operations and financial position, business strategy and plans, use of the net proceeds of this offering, and our objectives for future operations, are forward-looking. You can identify forward-looking statements by terminology such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” “can,” “continue,” or “may,” or the negative of these terms or other similar expressions that convey uncertainty of future events or outcomes. The following uncertainties and factors, among others (including the factors described in the section entitled “Risk Factors” in this prospectus), could affect our future performance and cause actual results to differ materially from those expressed or implied by forward-looking statements:
  our ability to adapt to evolving technology and industry standards;

  our ability to implement our growth strategy;

  our ability to retain management and other qualified personnel;

  failure to prevent disruptions in service or damage to our third-party providers’ data centers;

  failure to avoid liability for the use of content we provide;

  regulation of the healthcare information technology industry;

  our ability to ensure our solutions meet industry and government standards;

  failure to maintain adequate security measures for our customers confidential information and personal identifiable information and patient’s protected health information;

  our ability to obtain new provider clients;

  failure of the HITECH Act and other incentive programs to be fully implemented or funded by the government;

  our ability to implement our strategic relationships as currently intended;

  failure to establish, protect or enforce our intellectual property; and

  restrictions in our credit facility and future indebtedness.

There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include those that we discuss in this prospectus under the caption “Risk Factors.” You should read these factors and the other cautionary statements made in this prospectus as being applicable to all related forward-looking statements wherever they appear in this prospectus. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This prospectus also contains statistical data and estimates, including those relating to market size and growth rates of the markets in which we participate, that we obtained from industry publications and generated with internal analysis and estimates. These publications include forward-looking statements made by the authors of such reports. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions. Actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Some data and information are also based on our good faith estimates, which are derived from our review of internal surveys as well as the independent sources listed above. Although we believe these sources are reliable, we have not independently verified the information and cannot assure you of its accuracy or completeness.

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USE OF PROCEEDS

We estimate that our net proceeds from the sale of the shares of common stock by us will be approximately $   million, assuming an initial public offering price of $   per share, the mid-point of the range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, the net proceeds to us will be approximately $   million. We will not receive any of the proceeds from the sale of shares by the selling stockholders.

Assuming no change in the number of shares offered by us as set forth on the cover page of this prospectus, a $1.00 increase (decrease) in the assumed initial public offering price of $   per share would increase (decrease) the net proceeds to us from this offering by $   million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds of this offering to (a) pay approximately $             consisting of a preferred stock liquidation preference to holders of our outstanding preferred stock concurrently with the conversion of such shares into shares of common stock upon the closing of this offering, and (b) for working capital and general corporate purposes, which may include financing our growth, developing new technology solutions and services, and funding capital expenditures, acquisitions and investments. We will not receive any proceeds from the sale of shares by the selling stockholders. Pursuant to our Georgia articles of incorporation, which governs the terms of our outstanding Series A and Series B Preferred Stock, upon the consummation of this offering, all outstanding shares of Series A and Series B Preferred Stock will be converted into shares of common stock. In addition, each Series A Preferred stockholder will receive a payment of $6 per share and each Series B Preferred stockholder will receive $4.75 per share. Accordingly, simultaneously along with the closing of this offering, the holders of our Series A and Series B Preferred Stock will receive cash payments totaling approximately $                 as well as a total of        number of common shares pursuant to the conversion. Upon the closing of this offering, we will no longer have any preferred stock outstanding.

Pending the foregoing uses, we intend to invest the net proceeds in high-quality, investment grade U.S. government-backed obligations. The actual use of the proceeds may vary significantly and will depend on a number of factors, including our future revenue and cash generated by operations and other factors described in the section entitled “Risk Factors” appearing elsewhere in this prospectus. Accordingly, our management will have broad discretion in applying the net proceeds of this offering.

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DIVIDEND POLICY

Since our incorporation, we have not declared or paid any dividends on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business and do not anticipate paying cash dividends for the foreseeable future. Our existing credit facility prohibits us from paying cash dividends, and any future financing agreements may prohibit us from paying any type of dividends.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2011, as follows:
  on an actual basis; and

  on a pro forma as adjusted basis to reflect (1) the conversion of all outstanding shares of our Series A and Series B Preferred Stock into common stock simultaneously with the closing of this offering, as well as a liquidation preference payment to our preferred stockholders of approximately $                    , and (2) our issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $             per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds therefrom as described in “Use of Proceeds.”

The pro forma as adjusted information set forth in the table below is illustrative only and will adjust based on the actual initial public offering price and other terms of the offering determined at pricing.

You should read this information in conjunction with “Use of Proceeds,” our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.

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

            Actual     Pro forma
as adjusted
(In thousands, except share and per share amounts)
           
 
Cash and cash equivalents and short-term investments
                             $ 18,046                       
 
Convertible redeemable preferred stock, at fair value:
                                                       
 
Series A $0.01 par value, 3,458,333 shares authorized,
issued and outstanding actual
                 3,333,333             68,366                  
issued and outstanding pro forma as adjusted
                                                       
Series B $0.01 par value, 4,631,579 shares authorized,
issued and outstanding actual
                 4,631,579             75,217                  
issued and outstanding pro forma as adjusted
                                                       
 
Stockholders’ deficit
                                                       
 
Common stock, $1.00 par value, 25,000,000 shares, authorized,
issued and outstanding actual
                 11,606,520             11,428                  
issued and outstanding pro forma as adjusted
                                                       
 
Additional paid-in capital actual
                                58,758                  
 
Additional paid-in capital pro forma as adjusted
                                                       
 
Accumulated deficit
                                (157,375 )                 
Total stockholders’ deficit
                                (87,189 )                 
Total capitalization
                             $ 56,394                  
 

The table above does not include:
  shares of common stock issuable upon the exercise of warrants outstanding as of             , 2011 at a weighted average exercise price of $   per share;

  shares of common stock issuable upon the exercise of stock options outstanding as of             , 2011 at a weighted average exercise price of $   per share; and

  shares of common stock available for future issuance under our equity compensation plans as of             , 2011.

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the net tangible book value per share of our common stock after this offering. Dilution results from the fact that the initial public offering price per share of common stock is substantially in excess of the net tangible book value per share of our common stock attributable to existing stockholders for our presently outstanding shares of common stock. We calculate net tangible book value per share of our common stock by dividing the net tangible book value (total consolidated tangible assets less total consolidated liabilities) by the number of outstanding shares of our common stock, including shares of common stock issuable upon conversion of our preferred stock simultaneously with the completion of this offering. Our net tangible book value (deficit) as of June 30, 2011 was $   million, or $   per share of our common stock, based on shares of our common stock outstanding immediately prior to the closing of this offering. Net tangible book value represents the amount of total tangible assets less total liabilities. Dilution is determined by subtracting net tangible book value per share of our common stock from the assumed initial public offering price per share of our common stock.

After giving effect to the sale of        shares of our common stock in this offering assuming an initial public offering price of $   per share, less the underwriting discounts, commissions and estimated offering expenses payable by us, and without taking into account any other changes in such net tangible book value after June 30, 2011, our pro forma as adjusted net tangible book value as of June 30, 2011 would have been     or     per share. This represents an immediate increase in net tangible book value of $   per share of our common stock to the existing stockholders and an immediate dilution in net tangible book value of $   per share of our common stock, or    % of the estimated offering price of $  , to investors purchasing shares of our common stock in this offering. The following illustrates such dilution per share of our common stock:
Assumed initial public offering price per share
              $                          
Pro forma net tangible book value at June 30, 2011
                                      
Increase in pro forma net tangible book value per share attributable to new investors
                                      
Pro forma as adjusted net tangible book value per share after offering dilution per share to new investors
                                      
Dilution per share to new investors
                                      
 

A $1.00 increase (decrease) in the assumed initial public offering price of $   per share, which is the midpoint of the range listed on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $  , and dilution in pro forma net tangible book value per share to new investors by approximately $  , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise in full their over-allotment option, the pro forma as adjusted net tangible book value after the offering would be $   per share, the increase in pro forma net tangible book value to existing stockholders would be $   per shares and the dilution to new investors would be $   per share, in each case assuming an initial public offering price of $   per share, which is the midpoint of the range listed on the cover page of this prospectus.

The following table summarizes, as of June 30, 2011, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing stockholders and new investors paid. The calculation below is based on an assumed initial public offering price of $   per share, which is the midpoint of the range listed on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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        Shares purchased
    Total consideration
   
        Number
    Percent
    Amount
    Percent
    Average
per
share
Existing stockholders
                                %                             %                    
New investors
                                          %                                      %                   
Total
                                100 %                           %                    
 

A $1.00 increase or decrease in the assumed initial public offering price of $   per share would increase or decrease, as applicable, total consideration paid by investors in this offering and total consideration paid by all stockholders by $   million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

The discussion and tables above assume no exercise of the underwriters’ over-allotment option. If the underwriters’ over-allotment option is exercised in full:
  the number of shares of common stock held by existing stockholders will represent    % of the total number of shares of common stock to be outstanding after this offering; the number of shares of common stock held by investors participating in this offering will represent    % of the total number of shares of common stock to be outstanding after this offering; and

  our adjusted pro forma net tangible book value at June 30, 2011 will be $   million, or $   per share of common stock, representing an immediate increase in pro forma net tangible book value of $   per share of common stock to our existing stockholders and an immediate dilution of $   per share to investors purchasing shares in this offering.

The foregoing tables and calculations are based on the number of shares of our common stock outstanding as of June 30, 2011 after giving effect to the automatic conversion of all outstanding shares of our preferred stock simultaneously with the closing of this offering and, excludes:
  shares of common stock issuable upon the exercise of warrants outstanding as of             , 2011 at a weighted average exercise price of $   per share.

  shares of common stock issuable upon the exercise of stock options outstanding as of             , 2011 at a weighted average exercise price of $   per share.

  shares of common stock available for future issuance under our equity compensation plans as of             , 2011.

To the extent any of these outstanding options or warrants are exercised, there will be further dilution to new investors. To the extent all of such outstanding options and warrants had been exercised as of June 30, 2011, the pro forma as adjusted net tangible book value (deficit) per share after this offering would be $   and total dilution per share to new investors would be $  .

For a description of our equity incentive plan, see “Executive Compensation—Compensation Discussion and Analysis.”

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SELECTED FINANCIAL DATA

The following tables set forth, for the periods and at the dates indicated, our financial data. We derived the statement of operations data for the years ended June 30, 2008, 2009 and 2010 and the balance sheet data as of June 30, 2009 and 2010 from our audited financial statements, which are included in this prospectus. We derived the statement of operations data for the years ended June 30, 2006 and 2007 and the balance sheet data as of June 30, 2006, 2007 and 2008 from our audited financial statements, that were subsequently revised to conform to Regulation S-X and, as such, are now unaudited.

The summary statements of operations for the nine months ended March 31, 2010 and 2011 and the summary balance sheet data as of March 31, 2011 are derived from our unaudited financial statements included elsewhere in this prospectus. Our unaudited financial statements have been prepared on the same basis as the audited financial statements and notes thereto and, in the opinion of our management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the information for the unaudited interim periods. Our historical results for prior interim periods are not necessarily indicative of results to be expected for a full year or for any future period.

You should read the following information together with the more detailed information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.

        For the years ended June 30,

    Nine months ended
March 31,

   
        2006
    2007
    2008
    2009
    2010
    2010
    2011
(in thousands, except per share data)
        (unaudited)         (unaudited)    
Statements of operations data
                                                                                                                       
Revenue:
                                                                                                                      
System sales
              $ 17,513          $ 24,107          $ 24,205          $ 28,575          $ 36,035          $ 24,019          $ 31,983   
Software support services
                 3,980             6,081             8,457             11,421             16,031             11,522             16,011   
Electronic data interchange and business services
                 2,350             4,094             6,137             8,716             12,576             8,986             12,438   
Total revenue
                 23,843             34,282             38,799             48,712             64,642             44,527             60,432   
Cost of revenue:
                                                                                                                      
System sales(1)
                 9,998             11,445             10,551             12,208             14,904             10,428             14,671   
Software support services(1)
                 2,746             2,302             2,763             3,279             4,179             3,071             4,750   
Electronic data interchange and business services(1)
                 1,708             2,877             4,439             5,954             8,713             6,142             8,786   
Total cost of revenue
                 14,452             16,624             17,753             21,441             27,796             19,641             28,207   
Gross profit
                 9,391             17,658             21,046             27,271             36,846             24,886             32,225   
Operating expenses:
                                                                                                                      
Sales, general and administrative(1)
                 10,731             12,954             16,860             20,370             27,727             18,951             27,145   
Research and development(1)
                 5,350             4,867             5,356             5,767             5,991             4,338             5,628   
Total operating expenses
                 16,081             17,821             22,216             26,137             33,718             23,289             32,773   
Operating income (loss)
                 (6,690 )            (163 )            (1,170 )            1,134             3,128             1,597             (548 )  
Interest (income) expense and other expense, net
                 1,596             467              (244 )            153              115              85              19    
Income before income taxes
                 (8,286 )            (630 )            (926 )            981              3,013             1,512             (567 )  
Provision for income taxes
                                                        26              148              36              (30,944 )  
Net income (loss)
                 (8,286 )            (630 )            (926 )            955              2,865             1,476             30,377   
Preferred stock dividends and accretion
                 (5,481 )            (25,217 )            (6,471 )            (9,014 )            (8,038 )            (7,677 )            (39,728 )  
Loss available to common stockholders
              $ (13,767 )         $ (25,847 )         $ (7,397 )         $ (8,059 )         $ (5,173 )         $ (6,201 )         $ (9,351 )  

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        For the years ended June 30,

    Nine months ended
March 31,

   
        2006
    2007
    2008
    2009
    2010
    2010
    2011
(in thousands, except per share data)
        (unaudited)         (unaudited)    
Per share data:
                                                                                                                      
Net loss per share:
                                                                                                                       
Basic and diluted
              $ (1.39 )         $ (2.60 )         $ (0.74 )         $ (0.81 )         $ (0.48 )         $ (0.59 )         $ (0.81 )  
Weighted average number of common shares outstanding
                                                                                                                       
Basic and diluted
                 9,934             9,937             9,940             9,947             10,684             10,425             11,562   



(1)  Includes stock-based compensation in the following amounts:

Cost of revenue:
                                                                                                                      
System sales
                              27              78              57              72              65              81    
Software support services
                 5              12              100              14              23              22              37    
Electronic data interchange and business services
                 18              1              6              1              1              1              9    
Total cost of revenue
                 23              40              184              72              96              88              127    
Operating expenses:
                                                                                                                      
Sales, general and administrative
                 1              210              1,196             482              463              453              1,059   
Research and development
                 390              52              168              11              63              60              154    
Total operating expenses
                 391              262              1,364             493              526              513              1,213   
Total stock-compensation expense
                   414                302              1,548               565                 622                 601               1,340   
 

        As of June 30,
    As of
March 31,
    Pro forma
as
   
        2006
    2007
    2008
    2009
    2010
    2011
    adjusted(1)
(in thousands)
        (unaudited)         (unaudited)    
Balance sheet data
                                                                                                                
Cash, cash equivalents, and short-term investments
              $ 3,972          $ 11,376          $ 8,161          $ 9,711          $ 19,179          $ 18,046                   
Working capital
                 (5,912 )            8,613             8,564             9,861             16,966             16,481                   
Total assets
                 7,905             17,058             19,944             22,210             38,604             76,323                   
Deferred revenue
                 6,417             4,770             3,233             3,717             4,320             7,882                   
Long-term obligations
                 6,399             98              2,218             1,904                          359                    
Convertible preferred stock at fair value
                 37,980             81,151             87,360             95,818             103,855             143,583                   
Accumulated deficit
                 (101,547 )            (127,394 )            (134,791 )            (142,850 )            (148,024 )            (157,375 )                  
Total shareholders’ deficit
                 (49,598 )            (71,208 )            (77,056 )            (84,539 )            (79,996 )            (87,189 )                  
 


(1)  
  The pro forma as adjusted summary balance sheet data as of March 31, 2011 gives effect to the conversion of all outstanding shares of our convertible preferred stock an aggregate of 8,842,104 shares of common stock upon the closing of this offering and the payment of aggregate preference due to holders of our convertible preferred stock upon conversion (approximately $42.0 million) and gives further effect to the sale of shares of our common stock at an initial public offering price of $    per share after deducting underwriting discounts and estimated offering expenses payable by us.

        For the years ended June 30,
    Nine months ended
March 31,

   
        2006
    2007
    2008
    2009
    2010
    2010
    2011
(in thousands)
        (unaudited)     (unaudited)    
Adjusted EBITDA(1)
              $ (5,855 )         $ 199           $ 700           $ 2,029          $ 4,144          $ 2,497          $ 1,375   
Net cash provided by (used in) operating activities
                 (7,393 )            (2,493 )            (2,416 )            2,070             6,628             3,586             4,416   
Capital expenditures
                 33              307              3,128             325              2,784             1,562             2,660   
 


(1)  
  Adjusted EBITDA, a non-GAAP measure, is an unaudited number and represents net income (loss) before interest (income) expense, net, (benefit) provision, for income taxes, depreciation and amortization and stock-based compensation. See discussion of Adjusted EBITDA in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.”

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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 “Selected Consolidated Financial Data,” and our consolidated financial statements and the related notes and the other financial information appearing elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” All forward-looking statements in this document are based on information available to us as of the date hereof, and we assume no obligation to update any such forward-looking statements.

Business overview

We are a leading provider of integrated information technology solutions and managed business services to ambulatory healthcare providers throughout the United States. At the core of our suite of solutions and services is PrimeSUITE, our award-winning, fully-integrated electronic healthcare record (“EHR”), practice management (“PM”) and interoperability solution. PrimeSUITE integrates clinical, financial and administrative data in a single database to enable comprehensive views of patient records and efficient workflow throughout each patient encounter, reduce clinical and administrative errors, and allow for the seamless exchange of data between our customers and the broader healthcare community. We augment our solutions by offering managed business services such as clinically-driven revenue cycle and EHR-enabled research services. By integrating clinical, financial and administrative data processes, our solutions and services are designed to allow providers to deliver advanced care and improve their efficiency and profitability. Over 33,000 providers (which we define as physicians and their affiliated nurses, nurse practioners, physician assistants, and other clinical staff) use our solutions to deliver care to and capture the clinical, financial and administrative information of over 20 million patients.

Our technology solutions and services are designed to address the needs of providers in all ambulatory settings: independent physician practices, group practices, hospital-affiliated and hospital-owned clinics and practices, retail clinics, employer clinics, university and academic centers, federally-qualified health centers (“FQHC”), community health centers (“CHC”), accountable care communities (“ACC”) and accountable care organizations (“ACO”), and integrated delivery networks (“IDN”). Our single database technology platform, which reflects over 12 years of development, is scalable to serve the needs of ambulatory providers of any size. As providers’ needs evolve, our platform allows for the efficient development and integration of new solutions, which we refer to as our innovation platform. Our solutions are available on either a cloud-based or premise-based model.

The ambulatory EHR market has historically been underpenetrated and installed systems have been underutilized. Adoption of these technologies has been low for several reasons including providers’ resistance to making the required investment as well as concerns that electronic records would disrupt clinical and administrative workflows. Adoption of EHR solutions is accelerating as more providers realize the possible return on investment from adoption of solutions such as PrimeSUITE. Government initiatives and legislation have provided financial incentives and implementation support for ambulatory providers to adopt EHR solutions.

In order for us to continue to deliver on this commitment to our providers we are committed to investing in our innovation platform and managed business services to address the trends and challenges we believe will affect our providers now and in the future. We will invest in the development of new products and enhancements to existing products that we believe present opportunities for substantial efficiencies to ourselves and our providers’ businesses. In responding to the acceleration of EHR adoption, government regulations such as the HITECH Act and ARRA, and other market trends such as increasing consumerism, the shift to quality-based reimbursement and the focus on improving the coordination of care among providers, we face also the following opportunities, challenges and risks, which could impact our business:
•  
  Maintaining Adequate Capacity to Satisfy Potential Increased Demand. We have taken steps to position ourselves to take advantage of expected increased demand by increasing our direct sales force, enhancing our relationships with strategic alliance partners with established sales forces and increasing our systems

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  installation capacity by utilizing third-party training and implementation specialists certified in PrimeSUITE deployment. While we believe these steps are sufficient to satisfy expected demand, additional investments and steps may be required.

•  
  Ensuring Continued Certification of Our Solutions. In order to qualify for government incentives for EHR adoption, our solutions must continue to meet various and changing requirements for product certification and must enable our providers to achieve “meaningful use” as defined by existing and new regulations. We will continue to invest significant resources to ensure compliance of our solutions and to train and consult with our providers to enable them to navigate “meaningful use” regulations. Our ability to achieve certification under applicable standards from time to time and the length and cost of related solutions development and enhancement could materially impact our ability to take advantage of increased demand and require larger research and development investments than anticipated.

•  
  Ensuring Our Ability to Address Emerging Demand Trends. Trends toward community-based purchasing decisions where individuals, hospitals, health systems and IDNs subsidize the purchase of EHR solutions for their affiliated physicians in order to expand connectivity within their provider community, and government-funded providers and initiatives, such as RECs, to encourage and support the implementation of EHR, could result in longer sales cycles and installation periods. This may also increase the need for additional training and implementation specialists because of the size and complexity of those sales. As a result, while we expect these trends to result in increased demand for our solutions and managed business services, they may require additional investment by us and may have unintended or unexpected consequences that could impact our business.

•  
  Demand by Smaller Providers Could Accelerate Transition to Subscription Pricing Model. The adoption of EHR by the large untapped market of smaller provider customers and their greater need to minimize capital outlays could accelerate adoption of subscription-based arrangements as opposed to perpetual licensing arrangements. While additional subscription arrangements will result in increased recurring revenue over a longer period of time than we have achieved historically, near-term revenue would be reduced as a result while costs associated with these sales would still be expensed currently.

Sources of Revenue and Expenses

Revenue

We derive our revenue primarily from sales of our PrimeSUITE platform of proprietary solutions, related hardware and professional services to providers in ambulatory settings. Currently, a sizable percentage of our solution sales are made as perpetual licenses to our customers; however, our software is currently available in a cloud-based or a premise-based model.

We classify our revenue as: (1) Systems Sales, (2) Software Support Services, and (3) Electronic Data Interchange and Business Services. System Sales are comprised of license revenue, primarily PrimeSUITE, related hardware, and implementation and training services. Software Support Services includes solutions we offer on a transaction or per user basis, such as PrimeSUITE, support services, PrimeEXCHANGE services for connectivity to third-parties and third-party database charges. Electronic Data Interchange and Business Services includes third-party charges for patient claims, statements and eligibility, and clinically driven RCM and EHR-enabled research services.

As our installed customer base continues to grow, we anticipate that Software Support Services and Electronic Data Interchange and Business Services, which are recurring in nature, will expand as a percentage of our total revenue. There is moderate seasonality to our annual revenue. Typically, the smallest percentage of sales occur in the first fiscal quarter due primarily to provider purchasing patterns. See “Results of Operations” for more information.

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Cost of Revenue

Cost of revenue for System Sales consists primarily of compensation (including stock-based compensation) and benefits of our billable professionals and fees to third-party specialists for deployment, implementation and training, third-party hardware and software costs and travel costs. Cost of revenue for Software Support Services consists primarily of compensation (including stock-based compensation) and benefits of support specialists, and fees to third-parties for database and remote hosting services. Cost of revenue for Electronic Data Interchange consists primarily of fees to third-parties for processing claims, statements and eligibility requests; cost of revenue for Business Services consists primarily of compensation (including stock-based compensation) and benefits of personnel who deliver our revenue cycle management services and various third-party costs associated with our EHR-enabled clinical research services. As higher-margin recurring revenue increases as a percentage of total revenue, we believe overall gross margin will also increase over time.

Sales, General and Administrative Expenses

Sales, general and administrative (“SG&A”) expenses consist primarily of compensation (including stock-based compensation) and benefits, commissions, travel, professional fees, advertising and other administrative and general expenses, including depreciation and amortization of equipment and leasehold improvements, for the Company’s sales and marketing functions; executive offices, administration, human resources, corporate information technology support, legal, finance and accounting, and other corporate services. We intend to invest in our infrastructure as appropriate to expand our market share and accommodate our growing customer base. We expect to incur additional expenses associated with being a public company, including increased legal and accounting costs, investor relations costs and compliance costs in connection with Section 404 of the Sarbanes-Oxley Act. As a result, we expect SG&A expenses to increase as we grow, but remain relatively constant as a percentage of revenue and ultimately decline as we achieve leverage from our infrastructure investments.

Research and Development Expenses

Research and development expenses consist primarily of compensation (including stock-based compensation) and benefits, third-party contractor costs and other facility and administrative costs, including depreciation of equipment directly related to development of new products and upgrading and enhancing existing products. In accordance with GAAP, research and development costs related to new application development and enhancements to existing products are expensed until technological feasibility is established. Once technological feasibility is established such costs are capitalized until the product or enhancement is ready for market, at which point capitalization ceases. We capitalize research and development costs under these criteria including the compensation-related costs of personnel and related third-party contractors working directly on specific projects. We intend to invest in our innovation platform to maintain cutting-edge technology for the benefit of our customers as well as to meet evolving requirements of the market, including certifications and standards.

Provision for Income Taxes

In preparing our financial statements, we estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred income tax assets and liabilities.

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Statement of Operations Data

The following tables set forth our statements of operations data based on the amounts and percentage relationship of the items listed to net revenue for each period presented (in thousands):

        For the years ended
June 30,
    Nine months ended
March 31,
   
        2008
    2009
    2010
    2010
    2011
                    (Unaudited)    
Revenue:
                                                                                  
System Sales
              $ 24,205          $ 28,575          $ 36,035          $ 24,019          $ 31,983   
Software Support Services
                 8,457             11,421             16,031             11,522             16,011   
Electronic Data Interchange and Business Services
                 6,137             8,716             12,576             8,986             12,438   
Total Revenue
                 38,799             48,712             64,642             44,527             60,432   
 
Cost of Revenue:
                                                                                  
System Sales(1)
                 10,551             12,208             14,904             10,428             14,671   
Software Support Services(1)
                 2,763             3,279             4,179             3,071             4,750   
Electronic Data Interchange and Business Services
                 4,439             5,953             8,713             6,142             8,786   
Total Cost of Revenue
                 17,754             21,440             27,796             19,641             28,207   
 
Gross Profit
                 21,046             27,271             36,846             24,886             32,225   
 
Operating Expenses:
                                                                                  
Sales, General and Administrative(1)
                 16,860             20,370             27,727             18,951             27,145   
Research and Development(1)
                 5,356             5,767             5,991             4,338             5,628   
Total Operating Expenses
                 22,216             26,137             33,718             23,289             32,773   
 
Operating Income (Loss)
                 (1,170 )            1,134             3,128             1,597             (548 )  
 
Interest (Income)
                 (292 )            (53 )            (37 )            (24 )            (53 )  
Interest Expense
                 36              130              114              95              20    
Other Expense
                 12              76              38              14              52    
Income (Loss) Before Income Taxes
                 (926 )            981             3,013             1,512             (567 )  
 
Provision (Benefit) for Income Taxes
                              26              148              36              (30,944 )  
Net Income (Loss)
              $ (926 )         $ 955          $ 2,865          $ 1,476          $ 30,377   
 
Other Financial Data:
                                                                                  
Adjusted EBITDA(2)
              $ 700           $ 2,029          $ 4,144          $ 2,497          $ 1,375   



(1)  Includes Stock-Based Compensation of:

Cost of Revenue:
                                                                                  
System Sales
              $ 78           $ 57           $ 72           $ 65           $ 81    
Software Support Services
                 100              14              23              22              37    
Electronic Data Interchange and Business Services
                 6              1              1              1              9    
Total Cost of Revenue
              $ 184          $ 72          $ 96          $ 88          $ 127   
 
Operating Expenses:
                                                                                  
Sales, General and Administrative
                 1,196             482              463              453              1,059   
Research and Development
                 168              11              63              60              154    
Total Operating Expenses
              $ 1,364          $ 493          $ 526          $ 513          $ 1,213   
 
Total Stock-Based Compensation
              $  1,548          $    565          $    622          $    601          $  1,340   
 

(2)
  Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net income (loss) in the next section and is not a substitute for the GAAP equivalent.

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Adjusted EBITDA

Adjusted EBITDA is not a measure of liquidity calculated in accordance with GAAP, and should be viewed as a supplement to — not a substitute for — our results of operations presented on the basis of GAAP. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by GAAP. Our statement of cash flows presents our cash flow activity in accordance with GAAP. Furthermore, Adjusted EBITDA is not necessarily comparable to similarly-titled measures reported by other companies. Non-GAAP information should not be construed as an alternative to GAAP information, as the items excluded from the non-GAAP measures often have a material impact on our financial results. Management uses, and investors should use, non-GAAP measures in conjunction with our GAAP results.

In connection with the ongoing operation of our business, our management regularly reviews Adjusted EBITDA to assess our performance. We define Adjusted EBITDA as earnings before net interest (income) expense, taxes, depreciation, amortization, and stock-based compensation expenses. We believe that Adjusted EBITDA is an important measure of our operating performance because it allows management, lenders, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of changes to our capitalization structure, acquisition related costs, income tax status, and other items of a non-operational nature that affect comparability.

We believe that various forms of the Adjusted EBITDA metric are often used by analysts, investors and other interested parties to evaluate companies such as ours for the reasons discussed above. Additionally, Adjusted EBITDA is used to measure certain financial covenants in our credit facility. Adjusted EBITDA is also used for planning purposes and in presentations to our Board of Directors as well as in our incentive compensation programs.

The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP measure, for each of the periods indicated (in thousands):

        For the years ended
June 30,
    Nine months ended
March 31,
   
        2008
    2009
    2010
    2010
    2011
Reconciliation of Net Income (Loss) to Adjusted EBITDA
                                                                                  
Net Income (Loss)
              $ (926 )         $ 955           $ 2,865          $ 1,476          $ 30,377   
Stock-Based Compensation
                 1,548             565              622              601              1,340   
Depreciation and Amortization
                 334              406              432              313              635    
Interest (Income) Expense, Net
                 (256 )            77              77              71              (33 )  
Provision for Income Taxes
                              26              148              36              (30,944 )  
Adjusted EBITDA
              $ 700          $ 2,029          $ 4,144          $ 2,497          $ 1,375   
 

Comparison of Nine Months Ended March 31, 2011 to March 31, 2010

Revenue. Total revenue was $60.4 million for the nine months ended March 31, 2011 compared to $44.5 million for the nine months ended March 31, 2010, an increase of $15.9 million or 36%. System sales grew by 33% and accounted for $8.0 million, or 50% of total revenue growth during the period. Software support services and electronic data interchange and business services combined grew 39% during the period, accounting for the remaining 50% of growth in total revenue. System sales are one-time in nature and the substantial growth is attributable to our increased share in a growing market. Software support services, electronic data interchange and business services are recurring and growth in this revenue is largely attributable to our growing customer base. Our ability to sell additional products and services to our existing customer base also benefitted revenue growth in 2011 compared to the prior period.

Cost of Revenue. Total cost of revenue was $28.2 million for the nine months ended March 31, 2011 compared to $19.6 million for the nine months ended March 31, 2010 an increase of $8.6 million or 44%. On an overall basis, gross profit margins declined 260 basis points in the 2011 period as compared to 2010. This decline is attributable to: (1) a significant increase in deployment and training services necessitated the use of third-party specialists at net lower margins; (2) increased headcount and other direct costs for our software services related to meeting

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customers’ needs for “meaningful use” and to expand our capacity to deliver our software as a service, including transition costs for moving to a new hosting partner; and (3) increased competitiveness in the marketplace leading to greater discounting. A significant portion of the impact on gross margins is related to expenses incurred in assisting customers in meeting Stage 1 “meaningful use” standards. We do not expect a recurrence to the same extent for “meaningful use” standards for Stages 2 and 3.

Sales, General and Administrative. Total SG&A expenses were $27.1 million for the nine months ended March 31, 2011 compared to $18.9 million for the nine months ended March 31, 2010, an increase of $8.2 million or 43%. Growth in SG&A is largely a result of the required infrastructure to support the overall growth in the business. We increased headcount in our direct sales force and the significant growth in sales activity led to a substantial increase in commissions, incentive compensation and related expenditures such as travel. We also increased our investments in marketing and advertising, which combined with headcount growth in the sales force, positions us to capture increased market share in what we believe will be an expanding market over the next several years. We believe that these investments can be leveraged to maintain our sales growth in future years without a corresponding increase in cost.

Research and Development Expenses. Research and development expenses were $5.6 million for the nine months ended March 31, 2011 compared to $4.3 million for the nine months ended March 31, 2010, an increase of $1.3 million or 30%. Our innovation platform requires increased investment in research and development which continues to evolve to meet the needs of our customers, our market and industry regulators. In addition to research and development to support our innovation platform, we develop new products and enhanced functionality for existing products. These application development costs are capitalized once technological feasibility is attained and capitalization ceases once the technology is available for market. We capitalized $3.3 million and $0.9 million for software development for the nine months ended March 31, 2011 and 2010, respectively.

Interest and Other Expenses. Interest and other expense, net of interest income, was $19,000 for the nine months ended March 31, 2011 as compared to $85,000 for the nine months ended March 31, 2010. The change in net interest is related to availability of surplus cash to pay off existing indebtedness and invest. At March 31, 2011 the Company had $0 outstanding on its credit facility.

Income Taxes. The Company has available net operating losses and credits for research and development to offset taxable income and tax expense. These and other temporary differences have resulted in net deferred tax assets which have previously been fully reserved with a valuation allowance. As of March 31, 2011, the Company assessed the positive and negative evidence regarding its ability to realize its deferred tax assets and concluded that it is now more likely than not that these assets will be fully realized over the next several years. The Company’s historic operations have generated taxable income over the past 12 quarters utilizing a portion of its net operating loss carryforwards. On the basis of its near-term prospects, the Company anticipates utilizing another significant additional portion of these carryforwards for the year ending June 30, 2011. On the basis of our prospects for the next several years, we believe it is more likely than not that as of March 31, 2011, we will fully realize our deferred tax assets. Accordingly, the Company recorded a tax benefit of $31.0 million at March 31, 2011 to recognize the value of its net deferred tax assets. Tax expense for the nine months ended March 31, 2010 comprises estimated federal Alternative Minimum Tax and estimated provision for taxes to various states and jurisdictions in which the Company transacts business. Effective tax rate is not meaningful.

Comparison of Year Ended June 30, 2010 to June 30, 2009

Revenue. Total revenue was $64.6 million for the year ended June 30, 2010 compared to $48.7 million for the year ended June 30, 2009, an increase of $15.9 million or 33%. System sales grew by 26% and accounted for $7.5 million, or 47% of total revenue growth during the year. Software support services and electronic data interchange and business services combined grew 42% during the year, accounting for 53% of the growth in total revenue. System sales are one-time in nature and the substantial growth is attributable to increased order flow from customers, in part spurred by the federal incentives to implement EHR systems. Software support services, electronic data interchange and business services are recurring and the growth in this revenue is attributable primarily to our larger customer base. Our ability to sell additional products and services to our existing customer base also benefitted revenue growth in 2010 compared to the prior year.

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Cost of Revenue. Total cost of revenue was $27.8 million for the year ended June 30, 2010 compared to $21.4 million for the year ended June 30, 2009, an increase of $6.4 million or 30%. On an overall basis, gross profit margins increased 100 basis points in 2010 as compared to 2009. Gross margins improved slightly across all revenue categories, benefitting from the overall revenue growth.

Sales, General and Administrative. Total SG&A expenses were $27.7 million for the year ended June 30, 2010 compared to $20.4 million for the year ended June 30, 2009, an increase of $7.3 million or 36%. Growth in SG&A is largely a result of the required infrastructure to support the 33% overall growth in the business. Additionally, we invested in our growth initiatives by increasing headcount in our direct sales force and increasing our investments in marketing and advertising. We also added key leadership to fill various roles in support of new initiatives.

Research and Development Expenses. Research and development expenses were $6.0 million for the year ended June 30, 2010 compared to $5.8 million for the year ended June 30, 2009, an increase of $224,000 or 4%. Our innovation platform requires increased investment in research and development which continues to evolve to meet the needs of our customers, our market and industry regulators. Our commitment to maintaining cutting-edge technology requires continuing significant investment in research and development. Research and development expenses remained relatively constant during the period. However, for the year ended June 30, 2010 we also invested $1.2 million in development of new products and enhanced functionality for existing products. These application development costs are capitalized once technological feasibility is attained and capitalization ceases once the technology is available for market.

Interest and Other Expenses. Interest and other expense, net of interest income, was $115,000 for the year ended June 30, 2010 as compared to $153,000 for the year ended June 30, 2009. The change in net interest is due principally to the lower level of indebtedness in 2010 compared to 2009. At June 30, 2010 the Company repaid its existing indebtedness and was in negotiations for a new credit facility which was closed in 2011.

Income Taxes. The Company has available net operating losses to offset taxable income. Tax expense for the years ended June 30, 2010 and 2009 comprises estimated federal Alternative Minimum Tax and estimated provision for taxes to various states and jurisdictions in which the Company transacts business. Effective tax rate is not meaningful.

Comparison of Year Ended June 30, 2009 to June 30, 2008

Revenue. Total revenue was $48.7 million for the year ended June 30, 2009 compared to $38.8 million for the year ended June 30, 2008, an increase of $9.9 million or 26%. System sales grew by 18% and accounted for $4.4 million, or 44% of total revenue growth during the period. Software support services and electronic data interchange and business services combined grew by 38% during the period, accounting for the remaining 56% of growth in total revenue. System sales are one-time in nature and the substantial growth is attributable to our increased share in a growing market. Growth in this period essentially pre-dates the potential impact of the stimulus legislation and was driven by our investments in increasing our direct sales force and success in demonstrating to providers the ROI of our PrimeSUITE solution. Software support services, electronic data interchange and business services are recurring and growth in this revenue is attributable in large measure to our growing customer base. Our ability to sell additional products and services to our existing customer base also benefitted revenue growth in 2009 compared to the prior period.

Cost of Revenue. Total cost of revenue was $21.4 million for the year ended June 30, 2009 compared to $17.8 million for the year ended June 30, 2008, an increase of $3.6 million or 20%. On an overall basis, gross profit margins increased 190 basis points in 2009 as compared to 2008. Gross margins improved slightly across all revenue categories, benefitting from the overall growth in the scale of the business.

Sales, General and Administrative. Total SG&A expenses were $20.4 million for the year ended June 30, 2009 compared to $16.9 million for the year ended June 30, 2008, an increase of $3.5 million or 21%. Growth in SG&A is largely a result of building the required infrastructure to support the 26% overall revenue growth, including increasing headcount in our direct sales force, increasing investments in marketing and advertising, and ramping our administrative infrastructure.

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Research and Development Expenses. Research and development expenses were $5.8 million for the year ended June 30, 2009 compared to $5.4 million for the year ended June 30, 2008, an increase of $411,000 or 8%. Our innovation platform requires increased investment in research and development which continues to evolve to meet the needs of our customers, our market and industry regulators. Our commitment to keeping our innovation platform on the cutting edge requires continuing significant investment in research and development. Growth in research and development expenses for 2009 related primarily to increases in headcount to accomplish these goals. Application development in this timeframe consisted primarily of enhancements to existing applications for which the capitalizable costs were immaterial.

Interest and Other Expenses. Interest and other expense, net of interest income, was $153,000 net expense for the year ended June 30, 2009 as compared to $244,000 net income for the year ended June 30, 2008. The change in net interest is due principally to the combination of a greater level of resources in 2008 available for investment coupled with higher borrowing costs in 2009.

Income Taxes. The Company has available net operating losses to offset taxable income. Given the history of losses prior to 2009, a full valuation has been provided on the tax assets resulting from these NOLs and other net temporary differences. No tax provision was required for 2008 and tax expense for the year ended June 30, 2009 comprises estimated provision for taxes to various states and jurisdictions in which the Company transacts business. Effective tax rate is not meaningful.

Liquidity and Capital Resources

Our principal capital requirements are to fund operations. Since 2006, we have funded our capital needs from operating cash flow augmented by proceeds from exercise of warrants in connection with the completion of the tender offer made by our institutional investors in late 2009 which is described in the accompanying financial statements. We also repaid outstanding indebtedness and have obtained a new credit facility with more favorable terms upon which we have not drawn as the date hereof.

We are not a capital intensive business. We believe that our current cash, short-term investments and funds available under our credit facility combined with the proceeds of this offering will be sufficient to meet our working capital needs for the next 12 months and for a reasonable period thereafter.

Cash Flow Summary

Cash and cash equivalents were $19.2 million at June 30, 2010, as compared with $9.7 million at June 30, 2009, and $8.2 million at June 30, 2008. Cash and cash equivalents were $7.5 million at March 31, 2011 as compared to $19.2 million at June 30, 2010. As of March 31, 2011, we also had $10.5 million in short-term investments classified as available for sale.

Operating Activities

Cash provided by operating activities was $4.4 million for the nine months ended March 31, 2011, comprised primarily of a $548,000 operating loss offset by net stock compensation expense of $1.3 million, depreciation and amortization of $634,000 and provision for bad debts of $538,000. Additionally net working capital changes contributed $2.5 million to cash from operations attributable principally to increases in deferred revenue.

Cash provided by operating activities was $3.6 million for the nine months ended March 31, 2010, which was attributable primarily to net income of $1.5 million plus net stock compensation expense of $601,000, depreciation and amortization of $313,000 and provision for bad debts of $270,000; net changes in working capital contributed $925,000.

Cash provided by operating activities was $6.6 million in 2010, which was primarily attributable to net income of $2.9 million plus net stock compensation expense of $623,000, depreciation and amortization of $432,000 and provision for bad debts of $620,000. Net changes in working capital contributed $2.0 million to cash from operating activities; reduced prepaids accounted for $181,000, and increases in deferred revenue added $602,000, and increases in receivables and payables netted to a $1,100,000 contribution.

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Cash provided by operating activities was $2.1 million in 2009, primarily attributable to net income of $955,000 plus net stock compensation expense of $566,000, depreciation and amortization of $406,000 and provision for bad debts of $530,000. Net increases in working capital required $387,000 of operating cash flows.

Investing Activities

For the nine months ended March 31, 2011, we began investing surplus cash resources and had net purchases of short-term investments of $10.5 million. Our policy is to invest only in fixed income instruments denominated and payable in U.S. dollars, including obligations of the U.S. government and its agencies, money market instruments, commercial paper, certificates of deposit, bankers’ acceptances, corporate bonds of U.S. companies, municipal securities and asset backed securities. We do not invest in auction rate securities, futures contracts, or hedging instruments. Securities of a single issuer valued at cost at the time of purchase should not exceed 10% of the market value of the portfolio but securities issued by the U.S. Treasury and U.S. government agencies are specifically exempted from these restrictions. The final maturity of each security within the portfolio should not exceed 24 months. For the nine months ended March 31, 2011, we also purchased $2.6 million of property and equipment, including acquisition and renovation of a new building, and invested $3.3 million for capitalized software development of our innovation platform.

Net cash used in investing activities for the nine months ended March 31, 2010 was $2.5 million including $1.6 million for purchases of property and equipment and $916,000 for capitalized software development.

Net cash used in investing activities for 2010 was $4.0 million consisting of purchases of property and equipment of $2.8 million, primarily the acquisition and renovation of a new building placed in service in first quarter of 2011, and $1.2 million for capitalized software development.

Net cash used in investing activities for 2009 was $325,000 for purchases of property and equipment.

Financing Activities

For the nine months ended March 31, 2011, net cash provided by financing activities was $406,000 consisting of $418,000 proceeds from exercise of stock options and $12,000 in payments on capital leases.

For the nine months ended March 31, 2010, net cash provided by financing activities was $8.7 million including $9.0 million net proceeds from exercise of stock options and warrants, and $266,000 in payments on debt and capital leases.

For the year ended June 30, 2010, net cash from financing activities was $6.8 million comprised of $9.1 million net proceeds from exercise of stock options and warrants, and $2.3 million in payments on debt and capital leases.

For the year ended June 30, 2009, net cash used in financing activities was $195,000 consisting of payments, net of borrowings on debt arrangements of $164,000, payments on capital leases of $41,000 and proceeds from exercise of stock options of $10,000.

Contractual Obligations and Commitments

Our contractual cash payment commitments as of March 31, 2011 are set forth below (in thousands):
        Payments due by period
   
        Total
    April 1, 2011 –
June 30, 3011
    2012
    2013
    2014
    2015
    Thereafter
Operating leases
           
$1,993
   
$145
   
$583
   
$622
   
$369
   
$265
   
$9
 

We are also committed to payments on an obligation incurred in connection with acquisition of technology. At March 31, 2011, the total commitment was $359,000 and the payments are based on the sales of the product set into which the technology has been incorporated. We anticipate the amount will be liquidated within two years. The terms of the purchase agreement contemplate a potential reduction in the amount to be paid dependent on the results of a liquidity event for the Company if and when such an event should occur.

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Off-Balance Sheet Arrangements

We engage in no activities, obligations or exposure with off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based upon our financial statements and notes to our financial statements, which were prepared in accordance with GAAP. The preparation of the financial statements requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, stock-based compensation, capitalization of software development costs and the provision for income taxes. We base our estimates and judgments on our historical experience, knowledge of factors affecting our business and our belief as to what could occur in the future considering available information and assumptions that are believed to be reasonable under the circumstances.

The accounting estimates we use in the preparation of our financial statements will change as new events occur, more experience is acquired, additional information is obtained and our operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in our reported results of operations and, if material, the effects of changes in estimates are disclosed in the notes to our financial statements. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and actual results could differ materially from the amounts reported based on these estimates.

Revenue Recognition

The Company generates revenue from the following sources:
•  
  The sale of information systems, which includes software, hardware and peripherals, deployment and training

•  
  The provision of system support services, which includes software application support and hardware maintenance

•  
  The provision of outsourcing services, which includes the processing of medical claims, electronic patient statements and managed business services including clinically-driven revenue cycle management and our newly-developed EHR-enabled clinical research

The Company recognizes revenue in accordance with GAAP, principally ASC 985-605, Software Revenue Recognition, and ASC 605-25, Revenue Recognition, Multiple-Element Arrangements, both amended effective for our year beginning July 1, 2010. Our adoption of this revised guidance did not have a material impact on our financial statements.

The Company enters into contractual obligations to sell hardware, perpetual software licenses, deployment and training services, support services, outsourcing services and managed business services. Revenue recognized in accordance with ASC 605-25, as amended, requires elements of multiple-element arrangements be assigned relative values using (in order of preference) vendor specific objective evidence (“VSOE”), third-party evidence (“TPE”) or the best estimate of selling price (“BESP”).The tangible elements sold under our agreements are accounted for under this revised standard. The software elements will continue to be accounted for under ASC 985-605, as amended, also based on relative values using the same criteria. Software and hardware revenue is recognized upon shipment if persuasive evidence of an agreement exists, collection of the resulting receivable is probable, and the amount of fees to be paid is fixed or determinable. Services revenue is recognized as performed or ratably over the term of the arrangement as applicable.

The Company also generates revenue from providing its software products as a service under software subscription agreements. These agreements include the right to use the software and receive unspecified future product enhancements and upgrades when and if available for a specified term, usually 36 to 60 months. Support services are not sold separately in such arrangements. Revenue from all of the deliverables related to subscription

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agreements, including training and support services is recognized ratably over the life of the agreement. Any amounts invoiced or cash received in advance is recorded as deferred revenue.

Fair Value Considerations For Equity

Through March 31, 2011, our equity instruments consist of common stock and Convertible Preferred Stock Series A and B, which are reflected in our financial statements as temporary equity. We consider fair value of these instruments for purposes of recording share-based compensation expense and consideration of any adjustments to fair value of convertible preferred stock for each reporting period. Our consideration of value at or around each measurement date considers a number of factors, including:
•  
  company performance, our growth rate and financial condition

•  
  the value of companies that we consider peers based on a number of factors including, but not limited to, similarity to us with respect to industry, business model, stage of growth, financial risk or other factors;

•  
  changes in the Company and our prospects since the last time the Board of Directors approved option grants and/or made a determination of fair value;

•  
  amounts recently paid by investors for our common stock in arm’s-length transactions;

•  
  the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock;

•  
  the likelihood of achieving a liquidity event, such as an initial public offering or sale of all or a portion of the company;

•  
  future financial projections; and

•  
  valuations completed near the time of the grant.

From 2007 through June 30, 2010, we prepared valuations of our equity on at least an annual basis in a manner consistent with the method outlined in the AICPA Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. We had an interim valuation prepared as of December 31, 2009 to evaluate the impact of a tender offer transaction completed at time. These valuations used an option-pricing model for valuation of our equity based on income and market-comparable approaches to enterprise value of the Company. The market-comparable approach estimates the fair market value of a company by applying market multiples of publicly-traded firms in the same or similar lines of business to the results and projected results of the company being valued. When choosing the market-comparable companies to be used for the market-comparable approach, we focused on companies operating within the healthcare information technology space. The comparable companies remained largely unchanged during the valuation process. The income approach involves applying an appropriate risk-adjusted discount rate to projected debt free cash flows, based on forecasted revenue and costs. Allocation of value to our equity instruments has historically utilized an option-pricing model. In March 2011, we prepared an additional valuation using the probability weighted expected return model to reflect the change in our circumstances progressing toward a potential liquidity event.

We prepared financial forecasts for each valuation report date used in the computation of the enterprise value for both the market-comparable approach and the income approach. The financial forecasts were based on assumed revenue growth rates that took into account our past experience and contemporaneous future expectations. The risks associated with achieving these forecasts were assessed in selecting the appropriate cost of capital, which was 18% in 2007, 15% in 2008 and 2009, 13% in 2010 and 12% for the most recent valuation completed as of March 2011.

As an additional indicator of fair value, we considered the pricing of significant sales of our common stock for transactions occurring near the respective valuation dates. Early in our history from 1999 to 2004 shares were sold to accredited investors at prices ranging from $3 to $6. In May 2004, we sold 3.3 million shares of convertible, redeemable preferred shares to accredited investors for aggregate proceeds of $20 million and in October 2006, we sold 4.6 million shares of preferred shares to accredited investors for an aggregate price of $22 million. During the year ended December 31, 2009, our private equity investors completed a tender offer to purchase up to

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$25 million of common stock from existing stockholders for $8.50 per share. As previously noted, we had an interim valuation prepared to reflect the impact of this event.

While these transactions were not consummated in a liquid market, we do believe that the transactions provide an additional indicator of fair value based on the volume and number of buyers. These transaction prices have indicated, as additional support to our valuation analyses, that we have not historically determined fair market values below the indications of value for transactions in our common stock.

Share-Based Compensation

Estimated fair value of stock option grants is determined using the Black-Scholes options pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics not present in these employee stock options. Additionally, option valuation models require the input of highly subjective assumptions including the expected volatility of the stock price. Because the Company’s employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimates, in management’s opinion, the existing models may not provide a reliable single measure of the fair value of its share-based awards.

The following table summarizes stock-based compensation charges for the years ended June 30, 2008, 2009 and 2010 and for the nine months ended March 31, 2010 and 2011 (in thousands):

        For the years ended
June 30,
    Nine months ended
March 31,
   
        2008
    2009
    2010
    2010
    2011
            (Unaudited)    
Employee stock-based compensation
expense
              $ 1,251          $ 550           $ 616           $ 595           $ 1,333   
Stock-based compensation associated with outstanding repriced options
                 297              15              6              6              7    
Total stock-based compensation
              $ 1,548          $ 565           $ 622           $ 601           $ 1,340   
 

For options granted on or after July 1, 2006, stock-based compensation is measured at grant date based on the fair value of the award and is expensed on a straight-line basis over the requisite service period. For options granted prior to July 1, 2006, we continue to recognize compensation expense on the remaining unvested awards under the intrinsic value method unless such grants are materially modified.

We considered the fair value of our common stock and the exercise price of the grant as variables in the Black-Scholes option pricing model to determine employee stock-based compensation. This model requires the input of assumptions on each grant date, some of which are highly subjective, including the expected term of the option, expected stock price volatility and expected forfeitures.

We determined the expected term of our options based upon historical exercises, post-vesting cancellations and the contractual term of the option. We concluded that it was not practicable to calculate the volatility of our share price due to the fact that our securities are not publicly-traded and therefore there is no readily determinable market value for our stock. Therefore, we based expected volatility on the historical volatility of a publicly-traded peer entity for the same expected term of our options. We intend to continue to consistently apply this process using the same or similar entities until a sufficient amount of historical information regarding the volatility of our own share price becomes available, or unless circumstances change such that the identified entity is no longer similar to us. In this latter case, more suitable entities whose share prices are publicly available would be utilized in the calculation. We based the risk-free rate for the expected term of the option on the U.S. Treasury Constant Maturity Rate as of the grant date. We determined the forfeiture rate based upon our historical experience with pre-vesting option cancellations. If we had made different assumptions and estimates than those described above, the amount of our recognized and to be recognized stock-based compensation expense, net income (loss) and net income (loss) per share amounts could have been materially different.

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We believe that we have used reasonable methodologies, approaches and assumptions consistent with the AICPA Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, to determine the fair value of our common stock. We have reviewed key factors and events between each date below and have determined that the combination of the factors and events described above reflect a true measurement of the fair value of our common stock over an extended period of time and believe that the fair value of our common stock is appropriately reflected in the chart below.

Date of grant
        Options
granted
    Exercise
price
    Fair value
per share
September 1, 2009
                 3,000       
$5.19
   
$5.19
September 15, 2009
                 77,330       
$5.19
   
$5.19
September 18, 2009
                 3,000       
$5.19
   
$5.19
November 4, 2009
                 376,169       
$5.19
   
$5.19
November 18, 2009
                 6,000       
$5.19
   
$5.19
December 1, 2009
                 1,500       
$5.19
   
$5.19
December 6, 2009
                 12,500       
$5.19
   
$5.19
April 27, 2010
                 19,500       
$6.92
   
$6.92
June 30, 2010
                 104,453       
$6.92
   
$6.92
July 21, 2010
                 9,250       
$6.92
   
$6.92
September 14, 2010
                 9,000       
$6.92
   
$6.92
October 18, 2010
                 167,626       
$6.92
   
$6.92
November 12, 2010
                 22,500       
$7.09
   
$7.09
February 1, 2011
                 520,931       
$7.09
   
$7.09
March 15, 2011
                 3,000       
$7.09
   
$7.09
 

Valuation of Deferred Tax Assets

Our deferred tax assets are comprised primarily of net operating loss carryforwards (“NOLs”) and research and development credits. At June 30, 2010, we had NOLs of approximately $69.5 million which will begin to expire in 2020. At June 30, 2010, we had research tax credit carryforwards of $2.4 million which begin expiring in 2023.At June 30, 2010, we had federal alternative minimum tax (“AMT”), credit carryforwards of $77,000. The federal AMT credit carryforwards do not expire. A valuation allowance of $31 million had been recorded at June 30, 2010.

During the third quarter of 2011, we determined that it would be more likely than not that the cumulative net operating loss and other deferred tax benefits would be recoverable by us, creating a $31 million income tax benefit due to the deferred tax asset recorded on our balance sheet as of March 31, 2011. The determination of when to adjust the valuation allowance requires significant judgment on the part of management based on our historical experience, knowledge of current business factors and our belief of what could occur in the future. Although realization is not assured, we have concluded that it is more likely than not that the deferred tax assets as of March 31, 2011 for which a valuation allowance was determined to be unnecessary will be realized in the ordinary course of operations based on the available positive and negative evidence, primarily our history of cumulative profitability for the past 12 quarters coupled with recent projected earnings. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if actual future earnings are lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.

Quantitative and Qualitative Disclosures about Market Risk

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest in money market funds and high quality debt securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates, we invest in short-term securities and maintain an average portfolio duration of approximately one year.

Our operations consist of research and development and sales activities in the United States. As a result, our financial results are not affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets.

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BUSINESS

Overview

We are a leading provider of integrated information technology solutions and managed business services to ambulatory healthcare providers throughout the United States. At the core of our suite of solutions and services is PrimeSUITE, our award-winning, fully-integrated EHR, PM and interoperability solution. PrimeSUITE integrates clinical, financial and administrative data in a single database to enable comprehensive views of the patient record, support efficient workflows throughout each patient encounter, reduce clinical and administrative errors and allow for the seamless exchange of data between our provider customers and the broader healthcare community. We augment our solutions by offering managed business services, including clinically-driven RCM and EHR-enabled research services. By integrating clinical, financial and administrative data and processes, our solutions and services are designed to enable providers to deliver more advanced care and improve their efficiency and profitability. Over 33,000 providers, which we define as physicians and their affiliated nurses, nurse practioners, physician assistants, and other clinical staff, use our solutions and services to deliver care to and manage the clinical, financial and administrative information of over 20 million patients.

Our technology solutions and services are designed to address the needs of providers in all ambulatory settings: independent physician practices, multi-specialty group practices, hospital-affiliated and hospital-owned clinics and practices, retail clinics, employer clinics, university and academic health centers, FQHC, CHC, IDN, ACC and ACO. Our single database technology platform, which reflects over 12 years of development, is available in either a cloud-based or premise-based model and is scalable to serve the needs of ambulatory providers of any size. As providers’ needs evolve, our platform allows for the efficient development and integration of new solutions, which we refer to as our innovation platform.

The ambulatory EHR market has historically been underpenetrated and installed systems have been underutilized. Adoption of these technologies has been low for several reasons including providers’ resistance to making the required investment and concerns that creating and managing electronic records may disrupt clinical and administrative workflows. Adoption of EHR solutions is accelerating as more providers realize the benefits of using technology solutions, including the possible return on investment from adoption of solutions such as PrimeSUITE. Government initiatives and legislation have provided additional financial incentives and implementation support for ambulatory providers to adopt EHR solutions. Finally, macro-trends such as increasing consumerism, the shift to quality-based reimbursement and the emerging focus on improving the coordination of care, are creating strong incentives for providers to implement technologies that help them meet the needs of the changing ambulatory healthcare environment.

We believe we are competitively positioned to penetrate this market opportunity and to take advantage of emerging trends in ambulatory care including demand for interoperability, mobility, consumerism and data liquidity. Our integrated EHR/PM solution is consistently rated among the best in the industry. Since 2004, PrimeSUITE has received 11 “Best in KLAS” awards (an independent body that measures healthcare technology vendor performance) in ambulatory EHR and PM categories.

We have achieved a customer retention rate of approximately 95% in a market where, according to KLAS, 35% of providers who have adopted EHR technologies are considering replacing their current vendors. We believe this success is a reflection of our historical and continuing focus on usability at the point of care as our foremost development priority and our commitment and dedication to customer service from initial implementation and training to on-going support.

During our fiscal year ended June 30, 2010, total revenue was $64.6 million, compared to $48.7 million for fiscal 2009. Total revenue was $60.4 million for the nine months ended March 31, 2011 compared to $44.5 million for the nine months ended March 31, 2010. From fiscal year 2006 to fiscal year 2010, our revenue has increased at a compound annual growth rate of 29.9%.

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Industry Overview

Healthcare in the United States has historically been provided through two different settings, acute care, which is primarily hospitals, and ambulatory or outpatient care, which includes physician offices, retail clinics and outpatient surgery centers. There is an increasing focus on delivering high-quality care in the most cost-effective and convenient setting, which is causing a shift in care delivery from acute care to ambulatory providers. This shift is increasing the volume and changing the types of care delivered in the ambulatory setting. This pattern is expected to continue as a result of demographic trends and expanded health insurance coverage provided for by healthcare reform.

In addition to increased ambulatory care volume, providers face financial and operating challenges related to pressure on reimbursement rates and intensifying documentation, administration and regulatory requirements. Over the past several years, reimbursement has not grown at the same rate as the underlying cost of delivering care. Furthermore, the increasing complexity of the reimbursement process, such as the transition to the HIPAA ASC X12 5010 claims coding standard, as well as the proliferation of consumer-oriented health plan designs have led to added administrative burdens for providers. In an effort to align provider incentives with improved quality of care and cost efficiencies, payers are introducing new payment methodologies that tie reimbursement to providers’ ability to coordinate care and improve patient outcomes.

The significant burdens created by this changing environment have made the adoption of innovative software solutions critical to providers, as legacy systems may not adequately support their needs. Ambulatory providers have traditionally used PM systems to manage their financial and administrative functions, but clinical workflows are still largely managed on paper charts. Use of paper records can restrict the throughput of the provider and prevent the efficient collection and sharing of critical information. This can cause clinical errors such as adverse drug interactions and result in failure to charge accurately for services rendered and lead to a greater rate of denied claims. The ability to enter and store digitized clinical data in EHRs has become more important in recent years in order to address emerging industry trends including coordination of care and pay-for-performance, and quality reporting initiatives. Additionally, we believe the implementation of integrated EHR/PM solutions can provide compelling return on investment to providers by enhancing clinical and administrative workflow, improving the quality of care, reducing administrative staff, and repurposing large paper record rooms for revenue-generating activities.

Despite the advantages of EHR solutions, their adoption rates by ambulatory providers have been substantially lower than those of PM solutions. According to the U.S. Centers for Disease Control and Prevention in 2008, only 41% of providers had implemented EHR technology. It is estimated that a much smaller percentage of providers that have EHR systems fully utilize the technology in daily practice. Adoption of these technologies has been low for several reasons including the cost of acquiring, implementing and supporting the technology as well as the fear of disrupting clinical and administrative workflows. Importantly, since adoption of EHR technology has not historically been subsidized or required by payers, there has been little financial incentive for providers to adopt it.

Market Opportunity

The market for our solutions and services consists of providers of ambulatory healthcare including independent physician practices, multi-specialty group practices, hospital-affiliated and hospital-owned clinics and practices, retail clinics, employer clinics, university and academic health centers, FQHCs, CHCs, IDNs, ACCs, and ACOs.

We estimate the current market for our solutions and services to be approximately $33 billion. We believe our potential customer base includes approximately 550,000 physicians at over 230,000 practices as well as approximately 3,500 retail and employer based clinics that contain an additional 8,000 providers. Our core EHR/PM solution, PrimeSUITE, services an estimated $9 billion market. While 41% of the EHR/PM market is penetrated, only 10% of providers fully utilize their installed EHR solution. The markets for certain of our other solutions include $14 billion for our RCM services, $3.5 billion for our data exchange solution, and $2 billion for our speech understanding solution.

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We believe several factors are encouraging adoption of EHR/PM solutions and related technologies and services by ambulatory providers and will serve to drive the growth of our business.
  Compelling Return on Investment. We believe providers are becoming increasingly aware of and comfortable with the potential benefits of using integrated EHR/PM solutions including helping them practice more advanced medicine and deliver higher-quality care, while simultaneously improving revenue generation and operating and cost efficiency. These systems can help providers practice more advanced medicine and enhance the quality of the care they deliver, while increasing their efficiency and profitability. Through the adoption and proper use of these solutions, providers can increase revenue and reduce costs. Providers are recognizing the potential of EHR/PM solutions to significantly improve their operations and profitability.

  Government Initiatives and Incentives. Over the last several years, the government has enacted initiatives to drive the adoption of certified EHR solutions. Most importantly, the recently enacted HITECH Act, part of the American Recovery and Reinvestment Act certified (“ARRA”), specifically targeted healthcare by provides more than $19 billion of provider incentives through Medicare and Medicaid programs to encourage the adoption of certified EHR solutions. An eligible professional that qualifies for incentives can receive up to an aggregate of $44,000 from Medicare or $63,750 from Medicaid. In conjunction with the HITECH Act, $650 million in grants were allocated to create Regional Extension Centers (“RECs”) to encourage and support ambulatory providers in the implementation of certified EHR solutions.

  Trends in the Evolving Ambulatory Market. Three major trends impacting ambulatory providers are greater electronification of health data, growing consumerism and initiatives aimed at improving population health. Electronic capture and exchange of health information is becoming the standard within the ambulatory market, which has led to higher interest in and need for interoperable technology solutions that promote data liquidity. Furthermore, as patients are increasingly responsible for paying for the care they receive, they are becoming more engaged in decisions about which providers to use. Similar to consumers in other industries, they weigh factors such as cost, quality, convenience and overall experience when selecting where to receive their care. Finally, providers want to deliver the most advanced care possible and participate in the improvement of population health. This may include acting as investigators in clinical trials or contributing to health surveillance initiatives. Ambulatory providers now understand that the adoption of integrated EHR/PM and related technology solutions can help them succeed in this evolving and complex market by taking advantage of these key trends.

We believe many existing EHR and PM technology vendors do not adequately meet the needs of the ambulatory healthcare market. EHR systems are often difficult to use and disruptive to provider workflows. Additionally, many EHR/PM systems are not integrated, which creates inefficiencies between the delivery and documentation of patient care and the administrative and financial processes of the provider. Lack of interoperability with IT systems in other care settings prevents the exchange of clinical, financial and administrative data with the rest of the healthcare community. Finally, many vendors have multiple versions of their software installed across their customer bases, which reduces their ability to provide effective service and support to ambulatory providers. Due in part to these dynamics, 35% of providers recently surveyed by KLAS who have adopted EHR solutions indicated that they are considering replacing their existing EHR systems.

Our Solutions

The foundation of our offering is an integrated suite of technology solutions designed for the unique needs and workflows of ambulatory providers with usability at the point of care as the foremost priority. At the core of our suite of solutions and services is PrimeSUITE, our award-winning, fully-integrated EHR, PM and interoperability solution. Its intuitive design and built-in clinical decision support capabilities are designed to help providers improve patient safety, quality of care and efficiency. PrimeSUITE has over 3,200 clinical templates, designed for the needs of over 30 specialties and subspecialties, that offer data capture layouts that are intuitive to providers and make it easier to enter patient health information at the point of care. We believe PrimeSUITE’s ease of use has led to more than 90% of our provider customers making full use of PrimeSUITE’s functionality, which we believe is substantially higher than the estimated industry average of 10%. PrimeSUITE’s functionality

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is designed to address the core, day-to-day operations of providers that include documenting clinical information about patients, conditions and treatments, managing revenue collection and finances and conducting necessary administrative tasks. Unlike many of our competitors, our EHR and PM solutions were designed to be fully integrated and house clinical, financial, and administrative data within a single database. This allows the EHR and PM systems to operate seamlessly and creates efficiencies between the process of delivering and documenting care and the process of billing and collecting for services.

Since the initial release of PrimeSUITE, we have introduced additional solutions to enhance data liquidity, mobility and productivity of providers. PrimeEXCHANGE facilitates data liquidity by enabling interoperability of clinical and financial data between providers and the broader healthcare community. PrimePATIENT is our provider portal that allows patients to schedule appointments, complete administrative forms, exchange their personal health record information with providers and pay their healthcare bills online. PrimePATIENT also enables e-visits, which are web-enabled consultations between patients and physicians that can supplement or replace traditional in-person office visits, save time for patients and increase revenue for physicians. PrimeMOBILE allows providers to access PrimeSUITE from their mobile devices when working remotely. Finally, our new PrimeSPEECH solution is a sophisticated speech understanding software that simplifies data entry into PrimeSUITE, which reduces workflow disruption and saves time and money providers currently spend on transcription services.

We have also developed several managed business service offerings that leverage our technology solutions and the integrated PrimeSUITE database. These include PrimeRCM, our clinically-driven revenue cycle management services, and PrimeRESEARCH, our EHR-enabled research service that allows providers to participate in clinical research and contribute to population health initiatives. We believe these innovative solutions and services differentiate us from our competition and enable us to act as long-term partners in the success of our customers by providing them the following key benefits:
  Enable the Delivery of Higher-Quality Care and More Advanced Medicine. Our provider customers can deliver higher-quality care and practice more advanced medicine due to PrimeSUITE’s clinical decision- support capabilities, clinical alerts and reminders, electronic order entry and tracking and active device controls that integrate data from peripheral medical devices directly into the patient’s record. PrimeSUITE’s clinical decision support capabilities assist providers in patient evaluation and diagnosis, evidence-based treatment, error reductions and proper data capture. Our clinical alerts and reminders ensure care is delivered to patients in a timely manner by notifying providers if a patient is overdue for an exam or test and identifying potential drug contraindications based on the patient’s medical history. Our electronic order entry application increases the speed and accuracy of ordering, tracking and viewing results of prescriptions and lab tests. Active device controls capture and integrate data from peripheral medical devices, directly into the patient’s record. Clinical encounter data captured in PrimeSUITE over time creates a comprehensive electronic healthcare record that enables providers to more effectively identify and proactively address emerging trends in a patient’s health.

  Deliver Improved Financial Performance. Our solutions enhance provider economics by increasing revenue, improving receivables collection, and reducing administrative costs. They enable increased revenue capture at the point of care, whether in the office or working remotely on a mobile device, and the ability to see more patients due to more efficient workflows. Automated reporting of key metrics supports the generation of additional revenue by helping the provider track progress towards qualification for available incentive payments, such as those based on improvement in quality measures or for demonstrating use of e-prescribing and certified EHR technology. Reduced administrative costs are realized through reduction or elimination of transcription, paper chart, administrative staff and other costs. Additionally, space currently used to store paper records can be repurposed for revenue-generating activities, including additional exam and procedure rooms, which enhances revenue and profitability.

  A series of case studies, conducted on our behalf, studied the return on investment a select group of customers can realize following the implementation of PrimeSUITE. These studies indicate that customers can significantly increase cash flow following implementation of PrimeSUITE.

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  Enhance the Workflow of the Provider. PrimeSUITE has been developed to accommodate and support the unique clinical workflows of providers in over 30 specialties and subspecialties and the financial and administrative workflows of their staff. PrimeSUITE and our suite of solutions adapt to a provider’s workflow, which encourages quick adoption and overcomes their aversion to switch to electronic systems from traditional paper-based records.

  The PrimeSUITE database is designed to capture and display the relevant data to each provider or staff member during each step of the patient encounter. PrimeSUITE is designed to allow a patient’s clinical and administrative record to follow the patient from registration to the examination room to check-out and to be accessed and updated by multiple staff members simultaneously during the patient’s visit. Administrative staff use PrimeSUITE to schedule appointments and enter patient information at check-in. Alternatively, patients can use PrimePATIENT, our provider portal solution, to schedule appointments and enter their information online. All demographic, financial and clinical information identified during initial registration, check-in and triage are aggregated and presented to the provider at the point of care. A set of easy-to-use and highly customizable clinical templates capture the provider’s interaction with the patient. This information can be captured through a desktop or tablet when in the office or via a mobile device using PrimeMOBILE when working outside the office. PrimeSUITE enables providers to order prescriptions and lab tests electronically as well as track and view results, thus increasing the speed, quality and accuracy of the care delivered. Clinical information captured during the patient encounter automatically generates recommended E&M codes for billing purposes. The integration of clinical, financial and administrative information and its availability to all providers and staff before, during and after patient visits can help providers improve their efficiency.

  Position Providers for the Future of Healthcare. We believe the future of healthcare will require providers to deliver high-quality care in the most collaborative and cost-effective way possible, while dealing with increasing consumerism among patients and the desire to participate in the improvement of population health. We believe that in order to succeed in the future, providers will need an integrated EHR/PM platform that allows them to connect, communicate and collaborate electronically with patients, other providers and the broader healthcare community. We believe providers will also need the ability to satisfy increasing consumer demands and to be contributors to the improvement of population health. In addition, the emergence of pay-for-performance and value-based reimbursement models will require that providers not only enhance the quality of care and patient experience but also be able to quantify and report on various measures and adapt quickly to changes in the healthcare market.

Our vision of the future of healthcare is what has guided the development and success of our scalable and flexible PrimeSUITE platform for the last 12 years. Our technology enables the seamless creation and addition of new innovations and functionality designed to respond to emerging trends, therefore enhancing the value of our solutions to our customers. Since the initial introduction of PrimeSUITE we have developed and integrated into PrimeSUITE new solutions to address new trends and advances in technology, including the need for data liquidity and interoperability, patient portal, speech understanding and mobile technology. We have also developed managed business services that leverage the power of our technology solutions to provide clinically-driven revenue cycle services and allow providers to participate in clinical research and contribute to population health initiatives. We believe these innovative solutions and services differentiate us from our competition and enable us to act as long-term partners in the success of our customers.

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The following diagram visually represents our suite of technology solutions and managed business services centered around our core PrimeSUITE technology.

 

Our Strengths

We believe we have the following key competitive strengths:
  Proven, Long-Term Vision. We partner with ambulatory providers to enable them to meet the changing needs of the ambulatory market, which we identified early in our history to be electronification, consumerism and improving population health. We have succeeded in developing innovative solutions and services to help providers respond to the key trends in the ambulatory market, which we identified early in our history as electronification, consumerism and improving population health. Our solutions rely on core EHR and PM capabilities, are interoperable and enable easy aggregation and sharing of patient information, enhance physician-patient relationships by providing online self-service options for patients and allowing providers to participate in improving population health through clinical research, health surveillance and disease registries. We continuously monitor themes that will shape the future for providers and develop innovative solutions and services to help them succeed as the market evolves.

  Differentiated Technology Model. Our integrated, scalable and flexible technology provides a range of benefits to our customers while also providing us a strong foundation for a sustainable business model. Our Microsoft .NET based architecture has proven to be mission-critical, secure and reliable for over 33,000

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  providers. All of our solutions and services are based on a single, integrated database that contains clinical, financial and administrative data and supports exceptional interoperability, data analytics and reporting. We have and will continue to develop a technology model that supports rapid innovation. Using our Greenway Service Manager architecture, our centralized support team can easily update customers to new versions of our solutions and provide monitoring services remotely. Our technology architecture scales to support ambulatory providers ranging from single provider businesses to large enterprises. Our technology allows the customers the flexibility to choose the deployment option they prefer, including a cloud-based and premise-based model. Furthermore, our cloud-based internal technologies enable us to focus on innovative product and service development while outsourcing non-core activities, such as server hosting, server maintenance, application security and or other IT services. We believe this technology model differentiates us from our competitors and enables our innovative product and service development, our strong customer service and our efficient and centralized customer support model.

  Superior Customer Service and Support. We believe that successful adoption of our solutions requires partnering with our customers to empower them to utilize our technology to its maximum capability. As such, customer service and support are one of our core priorities. Our commitment to our customers’ success starts during the sales process and continues throughout our relationship, including initial implementation, training, ongoing education and support, as well as continuous development of new functionalities business services and technology upgrades. In addition to traditional training, we offer on-demand, web-based training options, webinars covering cutting-edge industry topics, such as how customers can meet “meaningful use” incentive criteria, and our annual user conference where customers meet one another, exchange ideas and learn how other customers have used our products and services to improve their businesses. We consider customer input critical to the development of new functionalities and a core part of customer service and support. Unlike our competitors, we deliver a single version of our technology platform to all of our customers, which enables us to deliver differentiated customer support. We also offer phone, email and web-based technical and business support twenty four hours a day and seven days a week, as well as remote monitoring and upgrade deployment services. We continuously improve our support processes, which leads to faster response and issue resolution times. Our high-quality customer service has contributed to our approximately 95% customer retention rate in a market where it is estimated that 35% of providers who have adopted EHR technology are considering replacing it.

  Trusted Brand. We have a trusted and recognized brand with our customers and within our industry. As ambulatory providers compare available EHR solutions across multiple vendors, our recognized brand and reputation for differentiated technology, solutions and services position us for success. Our PrimeSUITE solution has received 11 “Best in KLAS” awards since 2004. CCHIT has certified PrimeSUITE as a Complete EHR for 2011/2012 and granted it the highest usability rating of Five Stars. Furthermore, PrimeSUITE has been selected as a solution of choice or option by a substantial majority of RECs with established operations. We believe that word-of-mouth referrals are a significant source of bookings, showing that our customers trust our solutions and services and are willing to recommend us to colleagues. These accolades, combined with our continued involvement in industry initiatives, focus on innovation and high levels of customer service and support, drive increased brand recognition among customers and in our industry.

  Attractive Business Model. Our broad range of solutions and services and our high customer retention rate provide us with a powerful business model. This model has driven a compound annual growth rate of 29.9% over the past five years due to our continued ability to sell our core PrimeSUITE solution to new customers and then build upon its success by providing complementary technology solutions and business services. Our high customer retention leads to a growing percentage of recurring revenue from support services, business services such as revenue cycle management and subscription revenue. Recurring revenue represented 45% of revenue in 2010 and has grown at a compounded annual rate of 41.9% over the past five years. The combination of this recurring revenue with our backlog of new business sold provides high revenue visibility. Our integrated EHR/PM solution provides operating leverage by allowing us to focus our research and development solely on innovation as opposed to integration of legacy technologies. Furthermore, our cost

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  structure is also more efficient due to the ease of supporting and upgrading our technology platform. These factors help us drive predictable revenue growth and generate greater operating profit.

  Experienced Management Team. Our management team has significant experience in our industry and a majority of our executives have worked together for more than 10 years. In the late 1990’s, our team worked with ambulatory providers to develop a vision of the future of the healthcare market, including electronification, increasing consumerism and improved population health. Our team’s vision is now coming to fruition and has driven the design of our innovative suite of solutions and business services and our differentiated technology model. Our operational teams are organized around the key growth areas and we have instilled a culture of innovation and customer service throughout the Company. Furthermore, our management has been and remains heavily involved in the industry organizations that set policy and standards for healthcare information technology. These leadership efforts have built our reputation for consistent focus on developing solutions to meet both the current and future needs of providers in an evolving healthcare system.

Our Strategy

Our objective is to be the most trusted and effective provider of technology solutions and managed business services for ambulatory providers. Our principal strategies to meet our objective are:
  Increase our Share of the Expanding Market for Ambulatory Technology Solutions. We plan to capitalize on the large and growing ambulatory technology market opportunity by leveraging our targeted and multi-pronged sales strategy. We utilize a combination of direct, indirect and web sales teams in addition to strategic partners to attract new customers and drive penetration of PrimeSUITE. We believe our solutions address the most important clinical, financial and administrative needs of our large and growing customer base, and we are experiencing increasing demand for our solutions. Furthermore, as the ambulatory care market expands, we are offering our solutions to a wider range of customers, including FQHCs and employer and retail health clinics. Our market is underpenetrated and many customers are not satisfied with their current solutions. This dissatisfaction creates substantial opportunity to grow our business by attracting new customers and displacing existing and incumbent competitive products.

  Generate Greater Revenue per Customer by Expanding Their Use of Our Suite of Solutions and Services. We will continue to cross-sell our integrated product and service offerings to customers already using PrimeSUITE. As our customers successfully implement and utilize PrimeSUITE to improve efficiency and profitability of their practices, they increasingly adopt our complementary technologies and managed business services. These technologies include PrimeEXCHANGE, PrimePATIENT, PrimeENTERPRISE, PrimeDATACLOUD, PrimeMOBILE, PrimeSPEECH and PrimeIMAGE, and managed business services include PrimeRCM and PrimeRESEARCH. These solutions fully integrate with PrimeSUITE to provide additional technology capabilities, further positioning our customers at the forefront of technology innovation. As our customers use more of our solutions and services, we become even more critical to their operating infrastructure, further solidifying our partnership with them and generating increased revenue per customer.

  Develop Innovative Solutions for the Evolving Needs of Ambulatory Provider Market. We continuously monitor and work with our customers to understand the evolving technology needs of the ambulatory provider market. The insights we gather help drive our development of new and innovative solutions and services. Two recent and notable examples are our PrimeRESEARCH and PrimeDATACLOUD solutions. PrimeRESEARCH helps physicians identify opportunities to participate as investigators in clinical research studies which simultaneously increase revenue and provide access to cutting edge therapies for their patients. PrimeDATACLOUD is a collaborative care portal that securely and cost-effectively empowers population health through the sharing and aggregation of clinical, financial and administrative data across electronic health record systems in different provider settings. In both cases, these products are used in conjunction with PrimeSUITE and are highly complementary to one another. We will continue to work closely with customers to develop solutions that position them to succeed as the ambulatory care market evolves.

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  Expand Margins by Leveraging our Operating Platform. We expect operating margins to increase as we continue to grow revenue by substantially leveraging our existing infrastructure and operations. Our focused technology and business model enables us to efficiently deploy capital and resources in key areas such as sales and marketing and research and development. We have made, and will continue to make, investments in our technology infrastructure and processes, which we believe will allow us to profitably grow our business as we add new customers and solutions.

  Pursue Targeted Acquisitions. We intend to pursue acquisitions on a targeted basis, seeking out complementary and innovative technologies and services that augment and differentiate our current solutions.

Our Products and Services

Our technology solutions and services are fully integrated into PrimeSUITE to address the needs of providers in all ambulatory settings: independent physicians, group practices, hospital-affiliated and hospital-owned clinics and practices, retail clinics, employer clinics, university and academic health centers, FQHCs, CHCs, ACCs, ACOs, and IDNs to better serve patients and communities, more efficiently manage their practice and increase profitability.

PrimeSUITE. At the core of our solution is PrimeSUITE, which is a single integrated application with electronic health record, practice management and interoperability functionality. PrimeSUITE is comprised of EHR functionality including a patient chart, e-prescribing, clinical decision support, orders management, as well as practice management functionality with accounts receivable, registration, scheduling and reporting. Our fully integrated set of innovative ambulatory care technology solutions which build upon PrimeSUITE include the following:
  PrimeEXCHANGE. Greenway’s interoperability engine facilitates secure data exchange between physician practices and the entire healthcare and stakeholder community. Supported transactions include patient demographics, patient insurance, charges, lab results, microbiology reports, prescriptions, clinical summaries, transcriptions and radiology reports.

  PrimePATIENT. Greenway’s secure patient web portal enhances the patient-provider relationship through self-service clinical, financial and administrative online options in place of office visits or phone calls, leading to improved office efficiencies and healthier, more satisfied patients. Capabilities include appointment requests, on-line bill payment, on-line registration, prescription refills, secure messaging with care providers, clinical summary access and patient health record integration.

  PrimeENTERPRISE. A web-based application used by organizations such as management service organizations, billing services and ambulatory surgery centers, that need autonomy and separation among practices, while managing operations from a centralized location. Other groups, such as independent physician associations, may also use PrimeENTERPRISE to provide services, such as enterprise fee schedule updates, practice analysis, security configuration, master-file maintenance, broadcast reporting, clinical data sharing, and auditing.

  PrimeDATACLOUD. A collaborative care portal that empowers the aggregation of clinical, financial and administrative data across both related and disparate entities and electronic health record systems. This secure aggregation of data allows communities to manage population health, access longitudinal health records and report on quality outcomes.

  PrimeMOBILE. Provides the information providers need most at their convenience. Providers can access schedule and patient data or capture charges using an iPhone®, iPad®, AndroidTM or MS Mobile phone.

  PrimeSPEECH. Provides embedded speech understanding and generating discrete data in real time replacing traditional voice recognition and transcription services while improving accuracy and efficiency.

  PrimeIMAGE. Provides digital imagery and data capture within the patient’s chart. Compatible with ultrasound, endoscopies, laparoscopy, CT, MRI, NM, microscopy and surgical imagery to further streamline diagnostics and care coordination.

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We also provide certain ancillary services such as an electronic data interchange (“EDI”) which includes electronic claims processing, statement processing, eligibility verification, and database access fees. These services are delivered through our technology solutions and through various third-parties.

We augment our innovative technology solutions with the following managed business services for ambulatory providers:
  PrimeRESEARCH. An EHR-enabled service that allows our customers to deliver the most advanced medicine possible and provides our customers with access to a vast network of clinical trials (Phase II, III, IV, post-market and observation), registries, pharmaceutical research, remote monitoring services, benchmarking services, EDC integration, and clinical trial management software.

  PrimeRCM. A clinically-driven revenue cycle service that includes accounts receivable management, patient and insurance follow up, and financial performance benchmarking. PrimeRCM is driven to provide expertise and service to navigate our customers through the emerging changes in reimbursement models, quality care initiatives, and accountable care.

In addition to our technology solutions and managed business services, we provide certain professional services to our customers. Our client services team consists of well-trained and qualified members experienced in RN, LVN, practice management, certified coding, consulting, HIPAA compliance, project management and PMI certification. These individuals work together along with dedicated members of our customers’ organizations to ensure the success of the implementation of their PrimeSUITE solution infrastructure.

Our comprehensive technology solutions, managed business services and professional services support improved patient care and efficiency for ambulatory providers. We believe our capabilities represent a unique offering for the ambulatory market.

Our Customers

Our customers include independent physician practices, multi-specialty group practices, hospital-affiliated and hospital-owned clinics and practices, retail clinics, employer clinics, university and academic health centers, FQHCs, CHCs, IDNs, ACCs, and ACOs.

We derive our revenue primarily from sales of our PrimeSUITE software, related hardware and professional services to providers in ambulatory settings. While a sizable number of our software sales are made as perpetual licenses to our customers, our software is easily deployable as a subscription service and many of our applications are currently marketed in that manner. We also derive substantial revenue from our software related services platform, which we believe is more robust than typical software maintenance, and significant revenue from transaction processing services. These robust offerings yield a customer retention rate of approximately 95%. We have no significant customer concentration and no individual customer accounts for more than five percent of our revenue.

Sales and Marketing

We employ experienced and well-trained sales executives with extensive industry expertise. We primarily sell to our customers through our direct sales force. As of June 30, 2011, we employed approximately 120 sales and marketing employees. Given the experience of our sales team and the constant sharing of market data, competitive intelligence and other relevant information from around the industry, we believe our sales force provides us with a significant competitive advantage. Our sales force promotes and sells our services to new customers and expands the services we provide to our existing customer base. Our marketing efforts focus on creating a strong brand identity for Greenway through industry leadership, trade shows, web strategies, print media, social media and development of industry-related seminars.

To assist in our commitment to provide exemplary healthcare information technology services to our customers we work closely with several companies in our industry. Together, we deliver the solutions and integrate the tools our customers need to ensure data travels seamlessly throughout their healthcare community. These strategic alliances include relationships with industry leading companies such as Tech Data, CDW, Hewlett-Packard,

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Microsoft, Dell, and Take Care Health Systems. In addition, we have recently finalized the terms of a new relationship with Walgreens, pursuant to which Walgreens will utilize our EHR technology in its stores. We believe our relationship with Walgreens presents a tremendous opportunity to expand into a market we have not traditionally served, and to partner with one of the leading companies in the industry. We also have developed a relationship with McGraw-Hill Higher Education forming McGraw Hill’s Integrated Electronic Health Records: An Online Course and Worktext for Greenway Medical Technologies PrimeSUITE. This product is a comprehensive learning resource offered through McGraw Hill’s Connect Plus. Users will utilize PrimeSUITE in conjunction with patient data and the corresponding workbook to gain a better understanding of health information management, practice management, and EHRs. The alliance with McGraw-Hill and academic institutions throughout the nation are part of Greenway’s effort to aid in the creation of a national healthcare information technology workforce.

We pride ourselves on consistent industry leadership. Since our inception, our executives have filled leadership roles within industry trade groups and have supported public policy initiatives affecting the advancement and innovations of healthcare information technology. Highlights of these numerous executive positions include those within the national HIMSS Electronic Health Record Association (“EHR Association”), Health Information Management Systems Society (“HIMSS”), the CCHIT, Clinical Data Interchange Standards Consortium (“CDISC”), National Quality Forum (“NQF”) and the Integrating the Healthcare Enterprise (“IHE-USA”) Board of Directors. Additionally, since 2005, members of our leadership team have formally testified before Congress and the administration on numerous occasions and advised several presidential campaigns on healthcare information technology initiatives. This work has contributed to the advancement of critical industry initiatives such as the guidelines for EHR “meaningful use” and accountable care organizations.

Customer Support

Our Customer Support offering is the center piece of our value proposition which enables us to deliver differentiated support through our highly scalable platform. We strive to optimize our customers’ experience through our people and our innovative services, which we believe leads to a successful long-term partnership. We employ physicians and other certified healthcare and technology professionals are involved in the design, development, deployment and support of all of our services. This partnership of clinical and technical professionals and our innovative Greenway Service Manager technology enables us to offer industry leading service in a timely and efficient manner. Our customer support team currently has 63 employees who support our customers through phone, email, and web-based interactions 24 hours a day, seven days a week.

Technology and Development

Our innovation platform utilizes the latest mobile, web and cloud computing technologies, including Microsoft .NET, Microsoft Azure, Force.com and Apple iOS. This platform ensures data flows seamlessly from mobile and remote environments to the integrated EHR/PM and to various health information exchanges. This innovation integrates all clinical, financial and administrative data to promote information sharing and ensure quick user adoption through simple, intuitive and tools that optimize daily processes.

Greenway has developed solutions using sophisticated tools and technology platform. This approach permits remote access, reduces support costs and ensures cross-platform, multi-location and organizational compatibility.

Throughout our history, we have invested to stay at the forefront of technological trends and changes. We have made the transition to a cloud platform which we believe will provide the access, security and scalability needed for the future of ambulatory healthcare delivery and positions our Company and our customers well for the future.

Competition

The ambulatory EHR market is fragmented, with no single entrant having more than a 13% market share, according to the CapSite 2010 report. Our primary competitors in EHR and PM include Allscripts, athenahealth, Cerner, eClinicalWorks, Epic, GE, Quality Systems, and Sage. Companies compete on factors including price, delivery of new technology, service, quality of implementation and training, on-time implementation, quality of support provided, product response time, ease of use, enhanced workflow, whether the product works as promoted, and whether the product supports integration goals.

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We believe we differentiate ourselves relative to our competitors through innovation and customer service. Given the referral-based nature of the healthcare industry, our long term commitment to our customers has enabled us to build a strong reputation around integrity and trust.

Intellectual Property

Our success and ability to compete in our industry depend in part on our ability to establish, protect and enforce our intellectual property rights. We rely on a combination of patent, copyright, trademark, trade secret and other related laws and confidentiality policies and contractual provisions to protect, maintain and enforce our proprietary technology and intellectual property rights. We are the owner of 11 registered United States trademarks/servicemarks. We also have 4 pending United States trademarks. Our intellectual property portfolio includes various unregistered copyrights, intellectual property-related licenses, and Internet domain names. We currently own one issued United States patent and we have 18 filed patent applications in various stages of approval.

Government Regulation

As a participant in the healthcare industry, our operations and relationships with our customers and other medical professionals are subject to a variety of government regulations. These laws and regulations are broad in scope and they are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance and to alter one or more of our practices. We devote significant efforts to establish and maintain compliance with all regulatory requirements that we believe are applicable to our business and the services we offer. Specifically, but without limitation, the following laws and regulations may affect our operations and contractual relationships:

The HITECH Act

As discussed above, the HITECH Act provides funds to incentive providers to adopt EHR systems, which are to be allocated mostly between 2011 and 2015 to aid the development of an information technology (“IT”) infrastructure for healthcare and to assist providers and other entities in adopting and using healthcare information technology. CMS establishes and oversees the criteria that healthcare providers must meet to receive HITECH Act stimulus funding, while the Office of the National Coordinator for Health Information Technology (“ONC”) establishes and oversees the functionality that EHR systems must meet.

In order for our customers to qualify for funding under the HITECH Act, our technology must meet various requirements for product certification under the regulations, and must enable our customers to achieve “meaningful use,” as such term is defined under CMS regulations. CMS regulations provide for a phased approach to implementation of the “meaningful use” standards. CMS has defined Stage 1 which focuses on electronically capturing health information in a coded format, implementing decision support, sharing information with patients, testing the ability to change information, and initiating the reporting of clinical quality measurement to CMS. Stage 2 criteria, to take effect in 2013, or if a proposed delay is made effective, in 2014, would require more robust exchange of information and other high value use of EHRs. Stage 3 criteria, to take effect in 2015, would require physicians to demonstrate the use of EHR technology in ways that are reserved for future rulemaking based upon the experiences with Stage 1. Also, an interim final rule has been implemented by the ONC, to adopt an initial set of standards, implementation specifications, and certification criteria to enhance the use of health information technology and support its “meaningful use.” For providers to receive “meaningful use” incentive funds, EHRs must be certified per regulations put forth by the ONC. Currently, ONC recognizes a variety of Authorized Testing and Certification Bodies (“ATCBs”) eligible to test for and designate that EHRs are certified for “meaningful use” quality reporting. These ONC-ATCBs are the only organizations which can designate that an EHR is certified for “meaningful use” incentive capture. Greenway’s PrimeSUITE 2011 is an ONC-ATCB Complete EHR and is 2011/2012 compliant as certified by CCHIT, an ONC-ATCB. As such, PrimeSUITE supports the Stage 1 “meaningful use” measures required to qualify eligible professionals and hospitals for funding under the ARRA.

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Privacy and Security Laws

HIPAA. The Health Insurance Portability and Accountability Act of 1996, as amended (including by the HITECH Act), including the regulations issued and effective thereunder, which we collectively refer to as HIPAA, contains substantial restrictions and requirements with respect to the use and disclosure of individuals’ protected health information. HIPAA applies to covered entities, such as certain healthcare providers and health plans, as well as business associates that perform functions on behalf of or provide services to covered entities.

As a result of our dealings with clients and others in the medical industry which may be considered covered entities under or otherwise subject to the requirements of HIPAA, we are, in some circumstances, considered a business associate under HIPAA. As a business associate, we are subject to the HIPAA requirements relating to the privacy and security of protected health information. Among other things, HIPAA requires business associates to (i) maintain physical and technical and administrative safeguards to prevent protected health information from misuse, (ii) report security incidents and other inappropriate uses or disclosures of the information, including to individuals and governmental authorities, and (iii) assist covered entities from which we obtain health information with certain of their duties under HIPAA. We have policies and safeguards in place intended to protect health information as required by HIPAA and have processes in place to assist us in complying with applicable laws and regulations regarding the protection of this data and responding to any security incidents.

On July 14, 2010, the Department of Health and Human Services published a set of proposed regulations designed to modify and add provisions to HIPAA to reflect the requirements of the HITECH Act. If finalized, these proposed HITECH Act regulations could expand the applicability of HIPAA to our business. For example, the proposed HITECH Act regulations would, among other things:
  Expand the circumstances we could be considered a business associate subject to HIPAA (for example, regional health information organizations and health information exchanges that process or transmit data on behalf of covered entities are business associates if they require routine access to protected health information);

  Require us to comply directly with many of HIPAA’s privacy requirements for which currently we are only obligated to comply contractually via our agreements with covered entities and other business associates; and

  Require us to implement additional provisions in our agreements with our subcontractors.

We are monitoring these proposed changes to HIPAA with the goal of effecting compliance when and if any new regulations go into effect. Further, certain HITECH Act requirements are already in effect such as (1) the imposition of new civil and criminal penalties for violating privacy and security requirements on business associates that were only once imposed on covered entities and (2) breach notification procedures.

Other Laws. In addition to HIPAA, most states have enacted confidentiality laws that protect against the unauthorized disclosure of confidential health information, and many states have adopted or are considering further legislation in this area, including privacy safeguards, security standards and data security breach notification requirements. Such state laws, if more stringent than HIPAA requirements, are not preempted by the federal requirements, and we must comply with them even though they may be subject to different interpretations by various courts and other governmental authorities. In addition, numerous other state and federal laws govern the collection, dissemination, use, accesses to, confidentiality and retention of health information.

False or Fraudulent Claim Laws

There are numerous federal and state laws that forbid submission of false information or the failure to disclose information in connection with the submission and payment of physician claims for reimbursement. In some cases, these laws also forbid abuse of existing systems for such submission and payment, for example, by systematic over treatment or duplicate billing of the same services to collect increased or duplicate payments.

In particular, the federal False Claims Act, or the FCA, prohibits a person from knowingly presenting or causing to be presented a false or fraudulent claim for payment or approval by an officer, employee or agent of the United States. In addition, the FCA prohibits a person from knowingly making, using, or causing to be made or used a

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false record or statement material to such a claim. The FCA’s “reverse false claim” provision also creates liability for persons who knowingly and improperly conceal the retention of an overpayment of government money. Violations of the FCA may result in treble damages, significant monetary penalties, and other collateral consequences including, potentially, exclusion from participation in federally funded healthcare programs. The scope and implications of the recent amendments to the FCA pursuant to the Fraud Enforcement and Recovery Act of 2009, or FERA, have yet to be fully determined or adjudicated and as a result it is difficult to predict how future enforcement initiatives may impact our business. Pursuant to the healthcare reform legislation enacted in March 2010, a claim that includes items or services resulting from a violation of the federal anti-kickback law constitutes a false or fraudulent claim for purposes of the FCA. The scope and implications of the FERA amendments have yet to be fully determined or adjudicated and as a result it is difficult to predict how future enforcement initiatives may impact our business.

In addition, under the Civil Monetary Penalty Act of 1981, the HHS Office of Inspector General has the authority to impose administrative penalties and assessments against any person, including an organization or other entity, who, among other things, knowingly presents, or causes to be presented, to a state or federal government employee or agent certain false or otherwise improper claims.

Anti-Kickback Laws

There are numerous federal and state laws that govern patient referrals, physician financial relationships, and inducements to healthcare providers and patients. The federal healthcare anti-kickback law prohibits any person or entity from offering, paying, soliciting or receiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other federal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by these programs. Courts have interpreted the law to provide that a financial arrangement may violate this law if any one of the purposes of an arrangement is to encourage patient referrals or other federal healthcare program business, regardless of whether there are other legitimate purposes for the arrangement. There are several limited exclusions known as safe harbors that may protect some arrangements from enforcement penalties. Penalties for federal anti-kickback violations can be severe, and include imprisonment, criminal fines, civil money penalties with triple damages and exclusion from participation in federal healthcare programs. Many states have similar anti-kickback laws, some of which are not limited to items or services for which payment is made by a federal healthcare program.

Stark Law and Similar State Laws

The Ethics in Patient Referrals Act, also known as the Stark Law, prohibits certain types of referral arrangements between physicians and healthcare entities. Physicians are prohibited from referring patients for certain designated health services reimbursed under federally funded programs to entities with which they or their immediate family members have a financial relationship or an ownership interest, unless such referrals fall within a specific exception. Violations of the statute can result in civil monetary penalties and/or exclusion from the Medicare and Medicaid programs. Furthermore, reimbursement claims for care rendered under forbidden referrals may be deemed false or fraudulent, resulting in liability under other fraud and abuse laws. Laws in many states (which can vary widely) similarly forbid billing based on referrals between individuals and/or entities that have various financial, ownership, or other business relationships.

Healthcare Reform Law

The PPACA and related measures call for increased scrutiny of, and may impose requirements on, physicians and insurance companies, and their third-party contractors. While we do not directly provide healthcare to patients, these reforms may indirectly affect our business. The PPACA expands false claim laws, amends key provisions of other anti-fraud and abuse statutes, provides the government with new enforcement tools and funding for enforcement, and enhances both criminal and administrative penalties for noncompliance.

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Electronic Prescribing

States have differing prescription format and signature requirements, and many existing laws and regulations, when enacted, did not anticipate the methods of e-commerce now being developed. However, federal and state laws now allow the use of electronic prescriptions. On November 7, 2005, HHS published its final E-Prescribing and the Prescription Drug Program regulations, referred to herein as the E-Prescribing Regulations. These regulations are required by the Medicare Prescription Drug Improvement and Modernization Act of 2003 (“MMA”) and became effective beginning on January 1, 2006. The E-Prescribing Regulations consist of detailed standards and requirements, in addition to the HIPAA standards discussed previously, for prescription and other information transmitted electronically in connection with a drug benefit covered by the MMA’s Prescription Drug Benefit. These standards cover not only transactions between prescribers and dispensers for prescriptions but also electronic eligibility and benefits inquiries and drug formulary and benefit coverage information. The standards apply to prescription drug plans participating in the MMA’s Prescription Drug Benefit. Aspects of our services are affected by such regulation, as our clients need to comply with these requirements.

Anti-Tampering Laws

For certain prescriptions that cannot or may not be transmitted electronically from physician to pharmacy, both federal and state laws require that the written forms used exhibit anti-tampering features. For example, the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007 has since April 2008 required that most prescriptions covered by Medicaid must demonstrate security features that prevent copying, erasing, or counterfeiting of the written form. Because our clients will, on occasion, need to use printed forms, we must take these laws into consideration for purposes of the prescription functions of our solutions.

United States Food and Drug Administration

The U.S. Food and Drug Administration (“FDA”) has promulgated a draft policy for the regulation of software products as medical devices and a proposed rule for reclassification of medical device data systems under the federal Food, Drug and Cosmetic Act, as amended (“FDCA”). The FDA has taken the position that health information technology software is a medical device under the FDCA, and we anticipate the FDA’s increased attempt to become involved in regulation of our industry. If our software functionality is considered a medical device under the FDCA, we could be subject to the FDA requirements discussed below.

Medical devices are subject to extensive regulation by the FDA under the FDCA. Under the FDCA, medical devices include any instrument, apparatus, machine, contrivance, or other similar or related article that is intended for use in the diagnosis of disease or other conditions or in the cure, mitigation, treatment, or prevention of disease. FDA regulations govern, among other things, product development, testing, manufacture, packaging, labeling, storage, clearance or approval, advertising and promotion, sales and distribution, and import and export. FDA requirements with respect to devices that are determined to pose lesser risk to the public include:
  establishment registration and device listing with the FDA;

  the Quality System Regulation (“QSR)”, which requires manufacturers, including third-party or contract manufacturers, to follow stringent design, testing, control, documentation, and other quality assurance procedures during all aspects of manufacturing;

  labeling regulations and FDA prohibitions against the advertising and promotion of products for uncleared, unapproved off-label uses and other requirements related to advertising and promotional activities;

  medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;

  corrections and removal reporting regulations, which require that manufacturers report to the FDA any field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; and

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  post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.

Non-compliance with applicable FDA requirements can result in, among other things, public warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure of the FDA to grant marketing approvals, withdrawal of marketing approvals, a recommendation by the FDA to disallow us from entering into government contracts, and criminal prosecutions. The FDA also has the authority to request repair, replacement, or refund of the cost of any device.

Corporate Practice of Medicine Laws, Fee-Splitting Laws, and Anti-Assignment Laws

In many states, there are laws that prohibit non-licensed practitioners from practicing medicine, prevent corporations from being licensed as practitioners, and prohibit licensed medical practitioners from practicing medicine in partnership with non-physicians, such as business corporations. In some states, these prohibitions take the form of laws or regulations forbidding the splitting of physician fees with non-physicians or others. In some cases, these laws have been interpreted to prevent business service providers from charging their physician clients on the basis of a percentage of collections or charges. There are also federal and state laws that forbid or limit assignment of claims for reimbursement from government-funded programs. Some of these laws limit the manner in which business service companies may handle payments for such claims and prevent such companies from charging their physician clients on the basis of a percentage of collections or charges. The Medicare and Medicaid programs impose specific requirements on billing agents who receive payments on behalf of medical care providers.

Employees

We currently have approximately 500 full-time employees with approximately 350 of those based at our Carrollton, Georgia headquarters. We also utilize approximately 130 independent contractors. None of our employees are represented by a union or party to collective bargaining agreements. We believe our relationship with our employees is positive, which is a key component of our operating strategy.

Facilities

We lease our corporate headquarters of approximately 15,000 square feet, located at 121 Greenway Boulevard, Carrollton, Georgia 30117. We also lease several other properties, located in and around Carrollton for other business operations, such as research and development, client services, and network operations. In addition, we intend to build a new corporate headquarters, approximately 60,000 square feet, on several commercial lots we own that are located adjacent to our current corporate headquarters.

Legal Proceedings

From time to time, we are involved in various legal proceedings arising from the normal course of business activities. We are not presently a party to any material litigation.

Corporate Information

We were incorporated in Georgia in September 1998. Simultaneously in connection with the closing of this offering, we will become a Delaware corporation by way of a merger with and into a newly-formed wholly-owned Delaware subsidiary, with the Delaware subsidiary remaining as the surviving corporation with the name Greenway Medical Technologies, Inc. following the merger.

We have offices located at 121 Greenway Boulevard, Carrollton, Georgia 30117 and our telephone number at this location is (770) 836-3100. Our website address is www.greenwaymedical.com. The information contained in, or that can be accessed through, our website is not part of this prospectus.

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MANAGEMENT AND BOARD OF DIRECTORS

Our Executive Officers and Directors

The following table and descriptions set forth certain information concerning our executive officers and directors as of June 30, 2011:
Name

        Age
    Position

W. Thomas Green, Jr.
           
67
   
Chairman of the Board
Wyche T. “Tee” Green, III
           
39
   
President, Chief Executive Officer and Director
Gregory H. Schulenburg
           
45
   
Executive Vice President and Chief Operating Officer
James A. “Al” Cochran
           
63
   
Chief Financial Officer
William G. Esslinger, Jr.
           
40
   
Vice President, General Counsel and Secretary
Noah Walley
           
48
   
Director
Thomas T. Richards
           
70
   
Director
Walter Turek
           
58
   
Director
D. Neal Morrison
           
49
   
Director
 

W. Thomas Green, Jr. is the founder of the Company and has served as its Chairman since the Company’s inception in 1998. From 1998 until 2010, he also served as our Chief Executive Officer. From 2006 to 2010, Mr. Green was a director of the First National Bank of Georgia and WGNB Corporation in Carrollton, Georgia. Mr. Green is the father of Wyche T. “Tee” Green, III, the Company’s current President and Chief Executive Officer. Mr. Green is the past Chairman of the Tanner Medical Foundation. Mr. Green also formerly served as a board member and executive committee member of the State University of West Georgia Foundation. Mr. Green received a bachelor’s degree in business administration from the University of Georgia.

We believe Mr. Green’s qualifications to serve on our Board of Directors include, as the Company’s founder, his intricate knowledge of the Company and his visionary direction.

Wyche T. “Tee” Green, III has served as the Company’s President since 2000, as Chief Executive Officer since 2010, and has been a Director of the Company since 1999. Mr. Green is responsible for leading the Company’s strategic direction while managing day-to-day operations. Mr. Green first joined the Company in September 1999 as Vice-President of Sales and Marketing, working in that capacity one year before being promoted to President. From 2003 until May 2011, Mr. Green was a member of the board of directors of First Georgia Banking Company. Mr. Green is the son of W. Thomas Green Jr. and, through marriage, a first cousin of William G. Esslinger, Jr., the Company’s Vice President, General Counsel and Secretary. Mr. Green also serves on the Auburn University Research Council Board. Mr. Green received a bachelor’s degree in business administration management from Auburn University.

We believe Mr. Green’s qualifications to serve on our Board of Directors include his exemplary leadership skills, his knowledge of the Company and our industry, and his ability to bring management’s perspective to the Board.

Gregory H. Schulenburg has been our Executive Vice President and Chief Operating Officer since May 2004. Mr. Schulenburg oversees and manages the day-to-day operations of the Company. From joining the Company in March 1999 until May 2004, he served as Vice President of Research and Development, managing software development for the Company. Mr. Schulenburg received a bachelor’s degree in economics from the University of Georgia.

James A. “Al” Cochran joined the Company as Chief Financial Officer in November 2009 and oversees the Company’s financial reporting, accounting and internal control, and strategic planning. From February 2009 to October 2009, Mr. Cochran was pursuing personal interests. From October 2007 until its sale in January 2009, Mr. Cochran served as Senior Vice President, Corporate Strategy and Investor Relations of TurboChef Technologies, Inc. (“TurboChef”), a manufacturer of speed-cook commercial and residential ovens. In October 2003 Mr. Cochran joined TurboChef as Senior Vice President and Chief Financial Officer and served in that capacity until October 2007. In 2004 TurboChef issued restatements for fiscal years 2002 and 2003 to defer previously recognized revenue and for the first two quarters of 2004 to reflect the effect of the 2002 and 2003 restatements. In 2007, TurboChef

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restated its 2004 and 2005 financial statements, 2002 to 2003 selected financial data, and interim 2005 and 2006 financials to record non-cash stock-based compensation expense related to equity awards granted from 1994 through 2006. After an informal inquiry into the stock-based compensation matter, the staff of the SEC did not recommend any enforcement action. From its formation in August 2000 until its acquisition by the Eastman Kodak Company in October 2003, Mr. Cochran served as Chief Financial Officer of PracticeWorks, Inc., then a publicly-traded software company specializing in dental practice management. Mr. Cochran is a Certified Public Accountant and was a partner of the accounting firm BDO Seidman, LLP for five years. Mr. Cochran received a B.B.A. in Accounting and an M.B.A. in Corporate Finance from Georgia State University.

William G. Esslinger, Jr. has been our General Counsel (or Chief Legal Officer) since April 2000, our Vice President since July 2000, and Secretary since June 2004. Mr. Esslinger oversees all ongoing activities related to policies and procedures covering the privacy of and access to patient health information in compliance with federal and state laws, including HIPAA. By marriage, Mr. Esslinger is a first cousin of Wyche T. Green, III. Mr. Esslinger is a member of the State Bar of Georgia. Mr. Esslinger is also a member of the American Corporate Counsel Association, and a member of the International Association of Privacy Professionals. Prior to joining Greenway, Mr. Esslinger was in the private practice of law. Mr. Esslinger earned his bachelor’s degree in finance from the State University of West Georgia and his juris doctorate from the Georgia State University College of Law.

Noah Walley has been a Director of the Company since May 2004. Since April 2003, Mr. Walley has served as Head of North American Technology Investing of Investor Growth Capital, Inc., a venture capital firm. Prior to his tenure at Investor Growth Capital, Mr. Walley served as a General Partner with Morgan Stanley Venture Partners and, prior to joining Morgan Stanley, he worked for the venture capital firms of Bachow & Associates and Desai Capital Management, as well as the management consulting firm McKinsey & Company. Mr. Walley began his investment banking career in London for Chase Manhattan Bank and NM Rothschild & Sons, Ltd. Mr. Walley also serves on the board of directors of Tangoe, Inc., a provider of communications lifecycle management software and services to a wide range of enterprises. Mr. Walley holds a J.D. degree from Stanford Law School and as well as M.A. and B.A. degrees from Oxford University.

We believe that Mr. Walley’s qualifications include his experience serving on numerous boards of directors and his experience as a venture capital investor and management consultant which allows him to be a key contributor to our Board of Directors, particularly with respect to addressing our equity financing needs and mergers and acquisitions.

Thomas T. Richards has been a Director of the Company since its formation in 1998. Mr. Richards has also been president and owner of Richards Mortgage Servicing, Inc., a financial service company that owns and services single family mortgages, since 1996. From 1984 until 2010, Mr. Richards was a director of First National Bank of Georgia and WGNB Corporation. Mr. Richards is a board member of Tanner Medical Foundation. Mr. Richards is a graduate of the Georgia Institute of Technology and Harvard Business School.

We believe Mr. Richards’ qualifications to serve on our Board of Directors include his financial expertise and his longstanding knowledge of the Company.

Walter Turek has been a Director of the Company since January 2005. Prior to his retirement in June 2009, Mr. Turek was senior vice president of sales and marketing for Paychex, Inc. (“Paychex”), a national provider of payroll and human resource services. Mr. Turek was named to this position in 2002 and oversaw the company’s sales force of approximately 3,000 people. In addition, Mr. Turek oversaw the company’s international efforts. In addition, prior to his retirement in June 2009, Mr. Turek served as president of Stromberg, a provider of time and attendance solutions, and president of Rapid Payroll, Inc., a California-based payroll software company. Both companies are wholly-owned subsidiaries of Paychex. Mr. Turek serves on the board of directors of BlueTie.com, Mykonos Software and Adventive, all of which are private companies. Mr. Turek holds an associate’s degree in business from Monroe Community College.

We believe Mr. Turek’s qualifications to serve on our Board of Directors include his extensive experience as a senior executive officer of a publicly-traded company and his expertise in sales and marketing.

D. Neal Morrison has been a Director of the Company since October 2006. Since 1996, Mr. Morrison has been a Partner of Pamlico Capital (formerly Wachovia Capital Partners and previously First Union Capital Partners),

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a private equity firm focused on investments primarily in growth-oriented healthcare, business and technology services and communications companies. Mr. Morrison focuses on making investments in the healthcare industry. Prior to joining First Union Capital Partners, Mr. Morrison served as a director of First Union’s Healthcare Finance Group since 1987. Mr. Morrison was a director of US Radiosurgery LLC from 2003 to 2011, a director of American Renal Holdings, Inc. from 2004 to 2010, a director of A4 Health Systems, Inc. from 1999 to 2005, a director of excelleRx, Inc. from 2003 to 2005 and a director of Acist Medical Systems, Inc. from 2000 to 2001. Mr. Morrison received his undergraduate degree from the University of North Carolina at Chapel Hill in 1984 and his graduate degree from the Babcock Graduate School of Management at Wake Forest University in 1987.

We believe Mr. Morrison’s qualifications to serve on our Board of Directors include his knowledge of the healthcare industry and his experience financing, investing in and advising growth-oriented companies across all sectors of the healthcare industry, including companies in the healthcare information technology sector.

Our Board of Directors

Currently, there are six members of our Board of Directors. Pursuant to the Company’s existing articles of incorporation and the terms of a second amended and restated voting agreement dated October 30, 2006 (the “Voting Agreement”) by and among the Company and certain specified holders of the Company’s Common Stock, Series A Preferred Stock, and Series B Preferred Stock, the following directors were elected at the Company’s annual stockholders meeting held on October 18, 2010: (a) W. Thomas Green, Jr., and Wyche T. Green, III as nominees of the holders of Common Stock (b) Noah Walley, as a nominee of the holders of Series A Preferred Stock; (c) Neal Morrison as nominee of the holders of Series B Preferred Stock; and (d) Keith Aspinall, Thomas Richards, and Walter Turek as at-large nominees. Mr. Aspinall resigned as a director of the Company effective May 3, 2011. The Company’s currently existing articles of incorporation will no longer be in effect upon the closing of this offering and the effectiveness of the Reincorporation. The Voting Agreement will terminate by its terms upon the closing of this offering. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal. W. Thomas Green, Jr., our Chairman of the Board is the father of Wyche T. Green, III, our President and Chief Executive Officer.

As of the closing of this offering, our certificate of incorporation and bylaws will provide for a staggered, or classified, Board of Directors consisting of three classes of directors, each serving staggered three-year terms, as follows:
  the Class I directors will be                 , and their terms will expire at the annual meeting of stockholders to be held in 2012;

  the Class II directors will be                 , and their terms will expire at the annual meeting of stockholders to be held in 2013; and

  the Class III directors will be                 , and their terms will expire at the annual meeting of stockholders to be held in 2014.

Upon expiration of the term of a class of directors, directors for that class will be elected for three-year terms at the annual meeting of stockholders in the year in which that term expires. Each director’s term continues until the election and qualification of his successor, or his earlier death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our Board of Directors may have the effect of delaying or preventing changes in control of our Company.

Director Independence

Upon completion of this offering, our Board of Directors will consist of              members, a majority of whom will be independent under               rules. Pursuant to the corporate governance listing standards of              , a director employed by us cannot be deemed to be an “independent director”, and each other director will qualify as “independent” only if our Board of Directors affirmatively determines that he has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. Ownership of a significant amount of our stock, by itself, does not constitute a material relationship.

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Our Board of Directors has affirmatively determined that each of               is “independent” in accordance with               rules.

Board Committees

Our Board of Directors has established an Audit committee, a Compensation Committee, and a Nominations and Governance Committee. Our Board of Directors may also establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our certificate of incorporation and bylaws, which will be in effect upon the completion of this offering.

Audit Committee

Upon the closing of this offering, our audit committee will consist of                 , of which                  are “independent” as defined under the federal securities laws and               rules. Our Board of Directors has determined that each of the members who will serve on the audit committee upon the closing of this offering satisfy the requirements for financial literacy under the current               requirements. Our Board of Directors has determined that                  is an “audit committee financial expert,” as that term is defined by the SEC. The primary function of the audit committee is to assist the Board of Directors in monitoring (1) the integrity of our financial statements, (2) the qualifications, performance and independence of the independent registered public accounting firm, (3) the performance of the internal auditors, and (4) our compliance with regulatory and legal requirements. The audit committee has direct responsibility for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm, Grant Thornton LLP. In addition, approval of the audit committee is required prior to our entering into any related-party transaction. It is also responsible for “whistle-blowing” procedures and certain other compliance matters. The audit committee will adopt a new charter which will be posted on the Investor Relations section of our website upon or prior to the effectiveness of the registration statement of which this prospectus forms a part.

Compensation Committee

Upon the closing of this offering, our compensation committee will consist of             , of which              are “independent” as defined under the federal securities laws and               rules. In addition,                  are “outside directors” as defined under Section 162(m) of the Internal Revenue Code. Among other things, the Compensation Committee is required to review, and make recommendations to our Board of Directors regarding, the compensation and benefits of our executive officers. The Compensation Committee also administers the issuance of stock options and other awards under our equity incentive plans and will establish and review policies relating to the compensation and benefits of our employees and consultants. The compensation committee will adopt a new charter which will be posted on the Investor Relations section of our website upon or prior to the effectiveness of the registration statement of which this prospectus forms a part.

Nominations and Governance Committee

Upon the closing of this offering, our Nominations and Governance Committee will consist of,               of which               are “independent” as defined under the federal securities laws and               rules. The Nominations and Governance Committee is responsible for, among other things, developing and recommending to our Board of Directors our corporate governance guidelines, identifying individuals qualified to become board members, overseeing the evaluation of the performance of the Board of Directors, selecting the director nominees for the next annual meeting of stockholders, and selecting director candidates to fill any vacancies on our Board of Directors. The Nominations and Governance Committee will adopt a new charter which will be posted on the Investor Relations section of our website upon or prior to the effectiveness of the registration statement of which this prospectus forms a part.

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Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee has ever been an officer or employee of ours. None of our executive officers serves, or has served during the past fiscal year, as a member of the Board of Directors or compensation committee of any other company that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

The members of our compensation committee do not have any interlocking relationships as defined under SEC regulations.

Director Qualifications

The Nominations and Governance committee is responsible for identifying qualified individuals to become members of the Board of Directors. We select individuals as director nominees with the goal of creating a balance of knowledge, experience and interest on the Board of Directors. Candidates are evaluated for their character, judgment, business experience and acumen. We believe that, at a minimum, a director candidate must possess personal and professional integrity, sound judgment and forthrightness. A director candidate must also have sufficient time and energy to devote to the affairs of the Company and be free from conflicts of interest with the Company. The following criteria are also considered when reviewing a director candidate:
  The extent of the director candidate’s educational, business, non-profit or professional acumen and experience;

  Whether the director candidate assists in achieving a mix of Board members that represents a diversity of background, perspective and experience;

  Whether the director candidate meets the independence requirements of               listing standards; and

  Whether the director candidate possesses the ability to work as part of a team in an environment of trust.

Specific weights are not assigned to any particular criteria and no particular criterion is necessarily applicable to all prospective director candidates.

Board Leadership Structure

The Board of Directors determines what leadership structure it deems appropriate from time-to-time based on factors such as the experience of the Company’s Board members and executive officers, the current business environment of the Company and other relevant factors. After considering these factors, the Board has determined that the appropriate leadership structure for the Company at this time is a Board of Directors led by a Chairman of the Board (W. Thomas Green, Jr.) and a President and Chief Executive Officer (Wyche T. Green, III) who also serves on the Company’s Board. We believe that this structure provides strength to the Company by giving the Chief Executive Officer a respected voice on our Board, while at the same time giving leadership of the Board to another individual who, together with the other directors, provides active oversight of management and its implementation of our strategic plans.

Board’s Role in Risk Oversight

The Board of Directors is actively involved in oversight of risks that could affect our Company. This oversight is conducted primarily through committees of the Board of Directors, as disclosed in the descriptions of each of the Board committees, but the full Board has retained responsibility for general oversight of risks. The Board of Directors satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within the Company.

Risk Monitoring

Our compensation committee is responsible for assuring that our compensation structures for our executive officers and other employees do not encourage excessive or otherwise undesirable risk-taking.

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Code of Conduct and Ethics

Prior to the closing of this offering, our Board of Directors intends to adopt a new written code of business conduct and ethics that will apply to our directors, officers and employees, including our chief executive officer and senior financial officers. Following this offering, a copy of the code of business conduct and ethics will be posted on the Investor Relations section of our website. We intend to disclose future amendments to our code of conduct and ethics, or certain waivers of such provisions, at the same location on our website identified above and also in public filings.

Director Compensation

During the fiscal year ended June 30, 2011, none our non-employee directors received any cash fees for their services on the Board of Directors, but were entitled to reimbursement of all reasonable out-of-pocket expenses incurred in connection with their attendance at Board of Directors and Board committee meetings. However, our non-employee directors each received an award of 10,000 stock options on October 18, 2010. The compensation for W. Thomas Green, Jr. and Wyche T. Green, III is discussed below under “Executive Compensation.” We are in the process of reviewing ongoing compensation arrangements for our non-employee directors to be effective following the closing of this offering.
Name and
principal position
        Fees
earned
or paid
    Stock
awards
    Option
awards(1)(2)
$
    Non-equity
incentive plan
compensation
    Change in
pension
value and
NQDC
earnings
    All other
compensation
    Total
$
Noah Walley
                                           26,600                                                    26,600   
Thomas T. Richards
                                           26,600                                                    26,600   
Walter Turek
                                           26,600                                                    26,600   
D. Neal Morrison
                                           26,600                                                    26,600   
Keith Aspinall(3)
                                           26,600                                                    26,600   
 


(1)
  The amount represents the aggregate grant date fair value of option awards granted in the fiscal year valued in accordance with FASB ASC Topic 718. This amount does not represent our accounting expense for these awards during the year and does not correspond to the actual cash value recognized by the director when received.

(2)
  On October 18, 2010, Messrs. Walley, Richards, Turek, Morrison, and Aspinall received options to purchase 10,000 shares of common stock at an exercise price of $6.92. These options were 25% vested upon the date of the grant, and the remainder vested in equal monthly installments through June 30, 2011, subject to attendance at Board meetings. The aggregate number of option awards outstanding as of June 30, 2011 for each director was as follows: Mr. Walley, 10,000, Mr. Richards, 21,265, Mr. Turek, 100,000, and Mr. Morrison, 10,000.

(3)
  Mr. Aspinall resigned as a director of the Company effective May 3, 2011. Mr. Aspinall’s outstanding unvested options were forfeited upon his resignation.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This section discusses the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions. It provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our named executive officers (“NEOs”), and is intended to place in perspective the data presented in the tables and narrative that follow. Based on applicable securities laws, the following were our NEOs for the 2011fiscal year. For the biographical information of our NEOs, see “Management and Board of Directors.”
  Wyche T. Green, III, President and Chief Executive Officer

  James A. Cochran, Chief Financial Officer

  W. Thomas Green, Jr., Chairman of the Board

  Gregory H. Schulenburg, Executive Vice President and Chief Operating Officer

  William G. Esslinger, Jr., Vice President, General Counsel and Secretary

Our Compensation Committee, which currently consists of Mr. Walley (Chair), Mr. Morrison, and Mr. Turek, is responsible for the administration and oversight of our executive compensation program, and administers and oversees all elements of our executive compensation program, including the function and design of our cash bonus incentive plan and equity incentive programs. In connection with our transition to a public company, the Compensation Committee intends to evaluate the need for revisions to our executive compensation program to ensure our program is appropriate for a public company and is competitive with the companies with whom we compete for executive talent. As part of this process, the Compensation Committee will, among other things, consider the competitiveness of the elements of the compensation packages we offer to our executives, as well as their total compensation packages. While neither an independent compensation consultant nor peer group comparisons have been used to date in determining executive compensation, the Compensation Committee has retained an independent compensation consultant to assist it in this process for the 2012 fiscal year.

Overview

As a private company, hiring and retaining quality employees is a vital component to our innovative approach to the industry and ensures we are able to maintain our desire for growth. We seek to provide a compensation package for executives reasonably sufficient to attract and hold talented, experienced, innovative, and entrepreneurial-minded individuals for our key management positions. We balance offering compensation consistent with the executive marketplace and common sense affordability for a company of our size, revenue, market position and growth opportunities. Management strives to hire and maintain an executive workforce with individuals having the abilities and capacities to manage today as well as carry us through significant growth tomorrow and beyond. We also want to align the interests of our employees with the interests of our stockholders, so we follow a compensation strategy that includes a meaningful equity component for future value. Accordingly, our philosophy is to provide reasonably competitive salaries and potential cash bonuses with growth potential through equity incentives. While executive compensation structures and changes are typically initiated by senior management, our Compensation Committee, as delegated by our Board of Directors, reviews and approves salary, bonus and equity incentive for our NEOs proposals prior to implementation.

As with many private companies, our Compensation Committee, as delegated by our Board of Directors, generally analyzes compensation levels in the context of the experiences and individual knowledge of each Board member. This approach has called for our Board members to use their reasonable business judgment in determining compensation levels that would allow us to compete in hiring and retaining the best possible talent, without strict reliance on third-party survey data, which such data is not generally available in the private company context. We view base salary as a component of compensation designed to reflect the executive’s relative level of responsibilities and value to the organization and as a reflection of market competition for individuals with similar skill sets and experience. We are not tied to a specific ratio of amounts among the three main components of executive

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compensation, but believe base salary presents the threshold level necessary to compensate and retain qualified individuals before any consideration of the other components of compensation. Bonuses are also considered as no less important to encouraging and rewarding extraordinary performance and results. Finally, we believe an equity component of compensation provides a dual benefit of providing additional incentive opportunities to our executives as well as aligning the interests of executives with those of other stockholders.

Role of Management

Upon the completion of this offering, we expect our Compensation Committee will consist entirely of independent directors. Historically, our management team has made compensation recommendations to the Compensation Committee and the Board of Directors. In addition, our President and Chief Executive Officer has been, and will continue to be, involved in the determination of compensation for our other executive officers because of his daily involvement with our executive team’s efforts. However, he will not participate in discussions of the Compensation Committee where his own compensation is approved. Members of our human resources, finance and legal departments attend Compensation Committee meetings and provide background on materials presented to the Compensation Committee.

Base Salary

In recommending cash compensation levels for executives, senior management considers the qualifications of the executive, the current needs and expected future needs of the Company, the competitive opportunities for individuals with similar executive skill sets and experience and the expected budget. The Compensation Committee considers the salary recommendations of senior management in determining whether to adjust the salary component of overall compensation in light of the overall compensation package and how the balance of the components for an individual matches the Company’s overall compensation philosophy. Based on such analysis, and due to the transition of Wyche T. Green, III to the position of Chief Executive Officer, the Compensation Committee decided to increase his base salary from $270,000 for the 2010 fiscal year to $325,373 for the 2011 fiscal year. The Compensation Committee also increased, for the 2011 fiscal year, the base salary of Mr. Cochran from $225,160 to $247,676, the base salary of Mr. Schulenburg from $194,220 to $223,353, and the base salary of Mr. Esslinger, from $144,000 to $173,254.

Annual Cash Incentives

The Compensation Committee oversees an annual incentive bonus plan for which a cash bonus is paid to certain employees and officers, including the named executive officers. The 2011 Incentive Bonus Plan is designed to provide a financially attractive and equitable component to each named executive officer’s total compensation package, and to reward the participants for significantly contributing to the attainment of the Company’s corporate objectives and to enhance the Company’s presence in the marketplace. Each year, the 2011 Incentive Bonus Plan is approved by the Compensation Committee and adopted by the Board of Directors. The 2011 Incentive Bonus Plan contains three primary components: (i) Company sales bookings which constitutes 45% of the overall bonus consideration, (ii) Company revenue which constitutes 25% of the overall bonus consideration, and (iii) Company EBITDA which constitutes 30% of the overall bonus consideration. Together with senior management, at the beginning of the 2011 fiscal year, the Compensation Committee developed projected levels of the Company’s sales bookings, revenue, and EBITDA. Each participant’s target bonus amount is equal to 50% of his or her base salary, except for Mr. Esslinger, whose target bonus is 30% of his base salary. As a threshold matter, no bonuses are paid unless the Company achieves a minimum level of EBITDA (such EBITDA minimum to be calculated after taking into account all bonuses to be paid under the current year’s plan) as set by the Compensation Committee. Assuming such minimum EBITDA level is achieved, upon achievement of at least 90% of the sales bookings target, 45% of the named executive officer’s bonus would be awarded based upon the Company’s percentage achievement of the sales bookings target. In addition, assuming the minimum EBITDA level is achieved, upon the Company’s achievement of at least 90% of the revenue target, 25% of the named executive officer’s bonus would be awarded based upon the Company’s percentage achievement of the revenue target. Finally, assuming the Company achieves actual revenue of at least 90% of the revenue target, upon at least 85% achievement of the EBITDA target, 30% of the named executive officer’s bonus would be awarded depending on the Company’s percentage achievement

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of the EBITDA target. The maximum bonus payable to a named executive officer under the 2011 Incentive Bonus Plan is 200% of the target bonus, except for Mr. Esslinger whose maximum bonus amount is at the discretion of the Compensation Committee. As of the date of this filing, the final 2011 fiscal-year bonuses had not been determined by the Compensation Committee.

Equity Incentives

We view equity incentives as a means for aligning one aspect of executive compensation with stockholders’ interests. In addition, vesting of equity incentives over a continued period of employment can assist in our efforts to retain qualified executive personnel. The amount of an equity award given to an executive officer normally is proposed by senior management to the Compensation Committee for its consideration and approval. While equity incentives are viewed as longer term, forward-looking forms of compensation, the recommendation by senior management to award equity incentives, other than in connection with the hiring of a new executive, generally is based on past performance of the executive, on the needs of the Company to retain that executive and the expected contribution from that executive to the Company’s success going forward. Stock option awards in the 2011 fiscal year were made under and pursuant to the terms and conditions of the Company’s 2004 Stock Plan. See “Equity Incentive Plans” below. During the 2011 fiscal year, we granted stock options to the following named executive officers in the amount set forth next to such officer’s name:
Name
        Total number of
options granted(1)
Wyche T. Green, III
                 140,000   
W. Thomas Green, Jr.
                 16,875   
Gregory H. Schulenburg
                 92,508   
William G. Esslinger, Jr.
                 23,200   
 


(1)
  The total number of options granted in fiscal year 2011 to Mr. Schulenberg and Mr. Esslinger include a certain amount of options granted to replace options that expired during the fiscal year.

Perquisites

Other payments or benefits in the form of perquisites are not a significant component of executive compensation.

Employment Agreements

We have no employment agreements with any of our executive officers.

Impact of Accounting and Tax Considerations

We maintain awareness of the accounting and tax implications of Sections 162(m) and 409A of the Internal Revenue Code. Section 162(m) limits the Company’s deduction of certain non-performance based compensation paid to executive officers in excess of $1 million per year.

Base salary and bonuses are expensed by the Company when the services are rendered (base bonuses are expensed ratably and incentive bonuses are expensed when attainment of financial or operational goals is determinable).

Equity Incentive Plans

2011 Stock Plan

On                         , we adopted, and on                         , we received stockholder approval of, the Greenway Medical Technologies, Inc. 2011 Stock Plan, which we refer to herein as the Plan. Following our initial public offering we expect that equity awards will occur only under the Plan. No future awards will occur under our current incentive share plan, Greenway Medical Technologies, Inc. 2004 Stock Plan, or the Greenway Medical Technologies

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1999 Option Plan, approved by the stockholders of the Company on February 16, 2000, which has expired but still has options outstanding.

Stockholder approval of the Plan will primarily enable us to satisfy              listing requirements, and to make awards that qualify as performance-based compensation that is exempt from the deduction limitation set forth under Section 162(m) of the Internal Revenue Code of 1986, as amended, referred to herein as the Code. Section 162(m) which generally limits the corporate income tax deduction to $1,000,000 annually for the non performance-based compensation paid to each of the Chief Executive Officer and the three other highest paid executive officers of the Company (other than the Chief Financial Officer).

We do not anticipate that any awards under the Plan will occur before we complete our initial public offering. Although the amount and nature of future awards have not yet been determined, the Plan authorizes discretionary awards in the form of stock options, stock appreciation rights, or SARs, restricted shares or units, or RSUs, unrestricted shares, deferred share units, performance awards, and dividend equivalent rights. Our Board of Directors believes that the Plan will be an important factor in attracting, retaining and motivating employees, consultants, and directors of the Company and its affiliates, collectively referred to herein as eligible persons. Our Board of Directors believes that we need the flexibility, acting primarily through our compensation committee, both to have an ongoing reserve of common stock available for future equity-based awards, and to make future awards in a variety of forms.

Pursuant to the Plan, we may issue up to                   shares of our common stock. The total number of shares available for issuance under the Plan may be adjusted for future stock splits, stock dividends, recapitalizations, and other similar transactions. The shares of our common stock that are subject to any award that expires, or is forfeited, cancelled, settled, or becomes unexercisable without the issuance of shares, will again be available for subsequent awards. In addition, future awards may occur with respect to shares of our common stock that we refrain from otherwise delivering pursuant to an award as payment of either the exercise price of an award or applicable withholding and employment taxes. We generally receive no cash consideration for the granting of awards under the Plan. However, if a stock option were to be exercised, we would receive the exercise price for the shares being purchased, unless the exercise occurs pursuant to a cashless alternative that we approve. Any shares of common stock reacquired by us on the open market with cash proceeds received from the payment of the exercise price would be available for issuance under the Plan, but the increase in shares available may not exceed the amount of such proceeds received divided by the fair market value of a share of our common stock on the date the option was exercised.

Administration of the Plan will be carried out by our Compensation Committee; provided that our Board may act in lieu of the Compensation Committee at any time. Either our Compensation Committee or our Board of Directors may delegate its authority under the Plan to one or more officers but it may not delegate its authority with respect to making awards to individuals subject to Section 16 of the Exchange Act. As used in this summary, the term administrator means the compensation committee or the Board of Directors or its delegate, if any. With respect to decisions involving an award intended to satisfy the requirements of section 162(m) of the Internal Revenue Code, the administrator is to consist solely of two or more directors who are “outside directors” for purposes of that Code section, and with respect to awards to individuals subject to Section 16 of the Exchange Act, the administrator is to consist solely of two or more directors who are “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act. The Plan provides that we and our affiliates will indemnify members of the administrative committee and their delegates against any claims, liabilities, or costs arising from the good faith performance of their duties under the Plan. The Plan will release these individuals from liability for good faith actions associated with the Plan’s administration.

Subject to the terms of the Plan, the administrator has express authority to determine the eligible persons who will receive awards, the number of shares of our common stock to be covered by each award, and the terms and conditions of awards. The administrator has broad discretion to prescribe, amend, and rescind rules relating to the Plan and its administration, to interpret and construe the Plan and the terms of all award agreements, and to take all actions necessary or advisable to administer the Plan. Within the limits of the Plan, the administrator may accelerate the vesting of any awards, allow the exercise of unvested awards, and may modify, replace, cancel, or renew any awards. In addition, the administrator may buy-out, or replace, any award, including (but subject to

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applicable stockholder approval requirements as set forth in the Plan) a stock option or SAR having an exercise price that is above the current fair market value of the underlying shares.

The administrator may grant options that are intended to qualify as incentive stock options, which we refer to as ISOs, only to employees, if any, and may grant all other awards to eligible persons. Stock options granted under the Plan will provide award recipients, or participants, with the right to purchase shares of our common stock at a predetermined exercise price. The administrator may grant stock options that are intended to qualify as ISOs or that are not intended to so qualify, which we refer to as Non-ISOs. The Plan also provides that ISO treatment may not be available for stock options that become first exercisable in any calendar year to the extent the value of the shares that are the subject of the stock option exceed $100,000, based upon the fair market value of the shares of our common stock on the option grant date.

A SAR generally permits a participant who receives it to receive, upon exercise, cash and/or shares of our common stock equal in value to the excess of the fair market value, on the date of exercise, of the shares of our common stock with respect to which the SAR is being exercised, over the exercise price of the SAR for such shares. The administrator may grant SARs in tandem with options, or independently of them. SARs that are independent of options may limit the value payable on its exercise to a percentage.

The exercise price of ISOs, Non-ISOs, and SARs may not be less than 100% of the fair market value on the grant date of the shares of our common stock subject to the award, although the exercise price of ISOs may not be less than 110% of the fair market value on the grant date of the underlying shares of our common stock subject to the award for participants who own more than ten percent of our shares of common stock on the grant date. To the extent vested and exercisable in accordance with the agreement granting them, a stock option or SAR may be exercised in whole or in part, and from time to time during its term, subject to earlier termination relating to a holder’s termination of employment or service. With respect to stock options, unless otherwise provided in an award agreement, payment of the exercise price may be made in any of the following forms, or combination of them: cash or check in U.S. dollars, certain shares of our common stock, a net exercise or cashless exercise under a program the administrator approves.

The term over which participants may exercise stock options and SARs may not exceed ten years from the date of grant; five years in the case of ISOs granted to employees who, at the time of grant, own more than 10% of our outstanding shares of common stock. Under the Plan, no participant may receive stock options and SARs that relate to more than          % of the maximum number of shares of our common stock that are authorized for awards under the Plan as of its effective date.

Under the Plan, the administrator may grant restricted stock that is forfeitable until certain vesting requirements are met, may grant RSUs that represent the right to receive shares of our common stock after certain vesting requirements are met or cash under certain circumstances, and may grant unrestricted stock as to which the participant’s interest is immediately vested. For restricted awards, the Plan provides the administrator with discretion to determine the terms and conditions under which a participant’s interests in such awards become vested.

The Plan also authorizes awards of deferred share units in order to permit certain directors, officers, consultants, or select members of management to defer their receipt of compensation payable in cash or shares of our common stock, including shares that would otherwise be issued upon the vesting of restricted stock and RSUs. Deferred share units represent a future right to receive shares of our common stock.

The Plan authorizes the administrator to grant performance-based awards in the form of performance units that the administrator may, or may not, designate as “performance compensation awards” that are intended to be exempt from Internal Revenue Code Section 162(m) limitations. In either case, performance units will vest and/or become payable based upon the achievement, within the specified period of time, of performance objectives applicable to the individual, us, or any affiliate. Performance units will be payable in shares of common stock, cash, or some combination of the two, subject to an individual participant limit of $          (determined at the time of payout) and          % of the maximum number of shares of our common stock that are authorized for awards under the Plan. The administrator will decide the length of performance periods, but the periods may not be less than one fiscal year.

With respect to performance compensation awards, the Plan requires that the administrator specify in writing the performance period to which the award relates, and an objective formula by which to measure whether and the extent to which the award is earned on the basis of the level of performance achieved with respect to one or

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more performance measures. Once established for a performance period, the performance measures and performance formula applicable to the award may not be amended or modified in a manner that would cause the compensation payable under the award to fail to constitute performance-based compensation under Internal Revenue Code Section 162(m). Under the Plan, the possible performance measures for performance compensation awards may include one or more of the following, applied in total or on a per share basis:
  basic, diluted, or adjusted earnings per share;

  sales or revenue;

  earnings before interest, taxes, and other adjustments (in total or on a per share basis);

  basic or adjusted net income;

  returns on equity, assets, capital, revenue or similar measure;

  economic value added;

  working capital;

  total stockholder return; and

  product development, product market share, research, licensing, litigation, human resources, information services, mergers, acquisitions, sales of assets of affiliates or business units.

Each performance measure will be, to the extent applicable, determined in accordance with generally accepted accounting principles as consistently applied by us, or such other standard applied by the administrator and, if so determined by the administrator, and in the case of a performance compensation award, to the extent permitted under Internal Revenue Code Section 162(m), adjusted to omit the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles. Performance measures may vary from performance period to performance period, and from participant to participant, and may be established on a stand-alone basis, in tandem or in the alternative.

As a condition to the issuance of shares of our common stock pursuant to awards, the Plan requires satisfaction of any applicable federal, state, local, or foreign withholding tax obligations that may arise in connection with the award or the issuance of shares of our common stock.

Finally, the Plan authorizes the awarding of dividend equivalent rights to any eligible person. These rights may be independent of other awards, or attached to awards (other than stock options and SARs), and in all cases represent the participant’s right to collect any dividends that we declare and pay to our stockholders during the term of the dividend equivalent right. Unless an award agreement provides otherwise, dividend equivalent rights will be paid out (i) on the date dividends are paid to our stockholders if the award occurs on a stand-alone basis, and (ii) on the vesting or later settlement (or other designated date) of another award if the dividend equivalent right is granted as part of it.

Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of other than by will or the laws of descent and distribution, except to the extent the administrator permits lifetime transfers to charitable institutions, certain family members, or related trusts, or as otherwise approved by the administrator.

The administrator will equitably adjust the number of shares covered by each outstanding award, and the number of shares that have been authorized for issuance under the Plan, but as to which no awards have yet been granted or that have been returned to the Plan upon cancellation, forfeiture, or expiration of an award, as well as the price per share covered by each such outstanding award, to reflect any increase or decrease in the number of issued shares resulting from a stock split, reverse stock split, stock dividend, combination, recapitalization or reclassification of the shares of our common stock, or any other increase or decrease in the number of issued shares effected without receipt of consideration by us. In the event of any such transaction or event, the administrator may (and shall if the company is not the surviving entity or the shares are no longer outstanding) provide in substitution for any or all outstanding options under the Plan such alternative consideration, including securities of any surviving entity, as it may in good faith determine to be equitable under the circumstances and may require in connection

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therewith the surrender of all options so replaced. In any case, such substitution of securities will not require the consent of any person who is granted options pursuant to the Plan.

In addition, in the event or in anticipation of a change in control, as defined in the Plan, the administrator may at any time in its sole and absolute discretion and authority, without obtaining the approval or consent of our stockholders or any participant with respect to his or her outstanding awards, except to the extent an award provides otherwise, take one or more of the following actions: (a) accelerate the vesting of awards for any period so that awards shall vest (and, to the extent applicable, become exercisable) as to the shares of our common stock that otherwise would have been unvested and provide for our repurchase rights with respect to shares of our common stock issued pursuant to an award shall lapse as to the shares of our common stock subject to any repurchase right; (b) arrange or otherwise provide for payment of cash or other consideration to participants in exchange for the satisfaction and cancellation of outstanding awards and, if the consideration payable to us or our stockholders in connection with the change in control is all cash, vested options and SARs that have a per share exercise provide greater than fair market value per share immediately prior to the consummation of the change in control may be cancelled for zero consideration; or (c) terminate all or some awards upon the consummation of the transaction, provided that the committee shall provide for vesting of such awards in full as of a date immediately prior to consummation of the change in control. To the extent that an award is not exercised prior to consummation of a transaction in which the Award is not being assumed or substituted, such award shall terminate upon such consummation.

Notwithstanding the above, an award may provide that in the event a participant holding an award assumed or substituted by the successor corporation in a change in control is involuntarily terminated, as defined in the Plan, by the successor corporation in connection with, or within 12 months following consummation of, the change in control, then any assumed or substituted award held by the terminated participant at the time of termination shall accelerate and become fully vested, and exercisable in full in the case of options and SARs, and any repurchase right applicable to any shares of our common stock shall lapse in full. The acceleration of vesting and lapse of repurchase rights provided for in the previous sentence shall occur immediately prior to the effective date of the participant’s termination. Finally, if we dissolve or liquidate, all awards will immediately terminate, subject to the ability of our Board of Directors to exercise any discretion that the Board of Directors may exercise in the case of a change in control.

Our Board of Directors may from time to time, amend, alter, suspend, discontinue, or terminate the Plan; provided that no amendment, suspension, or termination of the Plan shall materially and adversely affect awards already granted unless it relates to an adjustment pursuant to certain transactions that change our capitalization or it is otherwise mutually agreed between the participant and the administrator. An amendment will not become effective without the approval of our stockholders if it increases the number of shares of common stock that may be issued under the Plan (other than changes to reflect certain corporate transactions and changes in capitalization as described above). Notwithstanding the foregoing, the administrator may amend the Plan to eliminate provisions which are no longer necessary as a result of changes in tax or securities laws or regulations, or in the interpretation thereof.

1999 Option Plan and 2004 Stock Plan

Certain of our employees and directors hold awards that were made and continue to be outstanding under the Greenway Medical Technologies 1999 Option Plan (the “1999 Plan”) which was originally adopted by our Board of Directors on January 12, 2000, and the Greenway Medical Technologies, Inc. 2004 Stock Plan which was adopted by our Board of Directors on June 15, 2004 (the “2004 Plan,” together the “Prior Plans”). The term of the 1999 Plan has expired but certain employees still hold outstanding awards under the 1999 Plan. All awards granted under the 1999 Plan are fully vested. The 2004 Plan will continue in effect until terminated by our Board of Directors in accordance with its terms; provided, however, that no awards will occur after our initial public offering because the Plan will be the sole source for future equity-based awards.

The 2004 Plan authorizes grants for 2,427,326 shares of our common stock, and as of June 30, 2011, awards with respect to 114,157 shares have been exercised and 35,886 shares were available for future grant. On July 14, 2011, the Board of Directors approved an amendment to the 2004 Plan to increase the number of authorized grants

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to 2,727,326 shares of our common stock. This amendment is subject to stockholder approval. Awards granted under the 2004 Plan generally consist of stock options which vest 25% after the first year, and the remainder vest in equal monthly installments over a period of 36 months. Terminations of employment for any reason generally result in the forfeiture of all unvested shares.

In the event of a reorganization or change of control event, as such terms are defined in the 2004 Plan, the plan administrator shall have the discretion to provide for any or all of the following: (a) cause any or all outstanding options to become vested and immediately exercisable, in whole or in part; (b) cause any restricted stock or restricted stock units to become non-forfeitable, in whole or in part; (c) cancel any option in exchange for a substitute option (d) cancel any restricted stock or restricted stock units in exchange for restricted stock or restricted stock units in respect of the capital stock of any successor corporation; (e) redeem any restricted stock for cash and/or substitute consideration; (f) cancel any restricted stock unit in exchange for cash and/or other substitute consideration; or (g) cancel any option in exchange for cash and/or other substitute consideration.

Our Board of Directors administers the Prior Plans. Such administration involves broad discretion to interpret the Prior Plans and to make all determinations that are necessary or advisable for their administration. Our Board of Directors may amend or terminate the 2004 Plan, subject to any applicable stockholder approval requirements. Outstanding awards under either Prior Plan may also be amended, but such amendments require the consent of any award holder who is adversely affected by the amendment.

Risk Assessment of Compensation Programs

We do not believe that our compensation programs create risks that are reasonably likely to have a material adverse effect on our company. We believe that the combination of different types of compensation as well as the overall amount of compensation, together with our internal controls and oversight by the Compensation Committee and Board of Directors, mitigates potential risks.

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Summary Compensation Table

The following table sets forth summary information concerning certain compensation awarded to, paid to, or earned by, our NEOs for all services rendered to us for fiscal year ended June 30, 2011.
Name and principal position
        Year
    Salary
($)
    Non-equity
incentive plan
compensation
($)
    Option
awards
($)(2)(3)
    All other
compensation
($)
    Total
($)(4)
Wyche T. Green, III,
President and Chief Executive Officer
                 2011              325,373                   (1)            392,400                          717,773   
James A. Cochran,
Chief Financial Officer
                 2011              247,676                   (1)                                      247,676   
W. Thomas Green, Jr.,
Chairman
                 2011