The Centers for Medicare & Medicaid Services, or CMS, projected that more than $2.0 trillion was spent on healthcare in 2005, representing 16% of the U.S. Gross Domestic Product, or GDP. CMS estimates that spending will grow to $4.0 trillion by 2015, or 20% of the GDP, representing 7.2% annual growth since 2004. Healthcare costs are increasing in part due to improvements in medical technology and medical treatments, but also because of increases in general utilization of healthcare products and services.

Rising healthcare costs negatively impact a wide array of constituencies, including federal and state governments, employers, consumers and healthcare providers. However, it is believed that the broad array of healthcare payers is the most directly impacted. Payers include federal and state government programs like Medicare, Medicaid and public employee health benefit plans, large commercial insurers and numerous other national, regional and local health plans and administrators and self-insured corporations. Rising healthcare costs consistently threaten to negatively impact these payers.

According to a Gartner survey entitled “Healthcare Payers’ IT Budgets Continue to Climb,” published on April 17, 2006, health plans’ information technology budgets increased by over 25% on a per member basis from 2002 to 2004.

A wide array of medical organizations, such as the American Medical Association, American Diabetes Association and American Heart Association, consistently update clinical best practices for treatment of medical conditions and chronic diseases. Although providers have access to this information, based on a RAND study published in the New England Journal of Medicine in June 2003, it is believed that clinical best practices are not employed approximately 45% of the time. Failure to apply clinical best practices can raise healthcare costs by decreasing the quality and cost effectiveness of the treatment.

The Company’s solution is built around a suite of modular and easily configurable software applications and utilizes the Internet to link the payer customers to their members and their members’ chosen healthcare providers.

The Company’s Collaborative Care Management solution is comprised of two related suites of products – Integrated Medical Management and Collaborative Data Exchange.

The Company’s Integrated Medical Management suite is a seamless payer-based care management system that analyzes, applies, administers and automates healthcare programs based on actionable intelligence. It assembles current and historical data and transforms it into an easily understood format.

The Company’s Integrated Medical Management suite also provides comprehensive, automated tools to ensure the most efficient handling of the information and consistent application of rules throughout the collaborative care management decision making process.

The Company’s Collaborative Data Exchange suite enables providers to obtain a Patient Clinical Summary, which includes the patient’s demographic information, medical conditions, medications, providers and treatment opportunities in an on-demand, easy to use format.

Cost of revenue increased 5% to $11.2 million for the nine months ended September 30, 2006 from $10.7 million for the nine months ended September 30, 2005.

Gross margin increased 65% to $22.3 million for the nine months ended September 30, 2006 from $13.5 million for the nine months ended September 30, 2005.

Sales and marketing expenses increased 45% to $7.7 million for the nine months ended September 30, 2006 from $5.3 million for the nine months ended September 30, 2005.

Interest expense, net increased 50% to $0.3 million for the nine months ended September 30, 2006 from $0.2 million for the nine months ended September 30, 2005.

Net loss was $2.6 million for the nine months ended September 30, 2006 compared to a net loss of $0.8 million for the nine months ended September 30, 2005.