PART I

Item 1. Business

Overview

ATI Physical Therapy, Inc. and its subsidiaries (herein referred to as "we," "us," "our," "the Company." or "ATI") is the largest single-branded independent outpatient physical therapy provider in the United States by clinic count as of December 31, 2021. Our business specializes in outpatient rehabilitation and adjacent healthcare services, with 910 owned clinics (as well as 20 clinics under management service agreements) located in 25 states as of December 31, 2021. We operate with a commitment to providing our patients, medical provider partners, payors and employers with evidence-based, patient-centric care.

We offer a variety of services within our clinics, including physical therapy to treat spine, shoulder, knee and neck injuries or pain; work injury rehabilitation services, including work conditioning and work hardening; hand therapy; and other specialized treatment services. Our Company's team of professionals is dedicated to helping return patients to optimal physical health.

Physical therapy patients receive team-based care, leading-edge techniques and individualized treatment plans in an encouraging environment. To achieve optimal results, we use an extensive array of techniques including therapeutic exercise, manual therapy and strength training, among others. Our physical therapy model aims to deliver optimized outcomes and time to recovery for patients, insights and service satisfaction for referring providers and predictable costs and measurable value for payors.

In addition to providing services to physical therapy patients at outpatient rehabilitation clinics, we provide services through our ATI Worksite Solutions ("AWS") program, Management Service Agreements ("MSA"), and Sports Medicine arrangements. AWS provides an on-site team of healthcare professionals at employer worksites to promote work-related injury prevention, facilitate expedient and appropriate return-to-work follow-up and maintain the health and well-being of the workforce. Our MSA arrangements typically include the Company providing management and physical therapy-related services to physician-owned physical therapy clinics. Sports Medicine arrangements provide certified healthcare professionals to various schools, universities and other institutions to perform on-site physical therapy and rehabilitation services.

We believe our platform is advanced in the industry in terms of our team, our clinical systems, and our corporate infrastructure. We are leveraging our platform in an effort to address some of the most pressing challenges in the U.S. healthcare system, including high costs and poor clinical outcomes. Our mission is to exceed the expectations of the hundreds of thousands of patients we serve each year by providing high quality of care in a friendly and encouraging environment.

Our strategy includes:

•Exceeding customer expectations and providing the right care at the right place at the right time;

•Building new and strengthening existing relationships with referral sources, payors and employees;

•Allocating available capital to support growth initiatives related to same-clinic sales, de novo and acqui-novo clinic openings and selective mergers and acquisitions activity; and

•Integrating our services earlier in the overall process for the evaluation and treatment of musculoskeletal ("MSK") conditions.

Table of Contents

~~References in this Annual Report~~On June 16, 2021 (the “Closing Date”), a Business Combination transaction (the “Business Combination”) was finalized pursuant to ~~“we,” “us,” “company” or “our company” are to~~the Agreement and Plan of Merger ("Merger Agreement"), dated February 21, 2021 between the operating company, Wilco Holdco, Inc. (“Wilco Holdco”), and Fortress Value Acquisition Corp. II (herein referred to as "FAII" and "FVAC"), a ~~Delaware~~special purpose acquisition company. References to “management” or our “management team” are to our officers and directors. References to our “Sponsor” are to Fortress Acquisition Sponsor II LLC, a Delaware limited liability company. References to our “initial stockholders” are to the holders of our Founder Shares prior to our initial public offering.

~~Item 1. Business.~~

~~Introduction~~

We are a blank check company incorporated on June 10, 2020 as a Delaware corporation formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this Annual Report as our initial business combination. We have neither engaged in any operations nor generated any revenue to date. Based on our business activities, the Company is a “shell company” as defined under the Exchange Act of 1934 (the “Exchange Act”) because we have no operations.

In June 2020, we issued an aggregate of 8,625,000 shares of Class F common stock to the Sponsor (the “Founder Shares”) in exchange for an aggregate capital contribution of $25,000 or approximately $0.003 per share. In August 2020, the Sponsor transferred a total of 100,000 Founder Shares to four independent directors of the Company for the same per-share price initially paid for by the Sponsor. Subsequent to these transfers, the Sponsor held 8,525,000 Founder Shares. On August 14, 2020, we consummated our initial public offering (the “Initial Public Offering”) of 34,500,000 units, including the issuance of 4,500,000 units as a result of the underwriters’ exercise of their over-allotment option in full. Each unit consists of one share of Class A common stock and one-fifth of one redeemable warrant ("Public Warrant"). Each whole warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $345.0 million.

~~Substantially concurrently~~connection with the closing of the ~~Initial Public Offering, our Sponsor purchased an aggregate 5,933,333 warrants, at~~Business Combination, the Company changed its name from Fortress Value Acquisition Corp. II to ATI Physical Therapy, Inc. The Business Combination was accounted for as a ~~price of $1.50 per Private Placement Warrant, generating gross proceeds of $8.9 million, each exercisable to purchase one share of Class A~~reverse recapitalization in accordance with U.S. generally accepted accounting principles ("GAAP"). The Company’s common stock at $11.50 per share (the "Private Placement Warrants"). A portion of the proceeds from the sale of the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in a U.S.-based Trust Account ("Trust Account") at J.P. Morgan Chase Bank, N.A., maintained by Continental Stock Transfer & Trust Company, acting as trustee.

On September 29, 2020, the Company announced that, commencing October 2, 2020, the holders of the Company’s units may elect to separately trade the Class A common stock and warrants comprising the units. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Those units not separated will continue to tradeis listed on the New York Stock Exchange ~~(the "NYSE"~~("NYSE") under the symbol ~~“FAII.U,~~“ATIP.” ~~and each of the shares of Class A common stock and warrants that are separated will trade under the symbols “FAII” and “FAII WS,” respectively.~~

~~Recent Developments~~

On ~~February 21,~~August 25, 2021, the Company ~~and ATI Physical Therapy~~ entered into an ~~Agreement and Plan~~agreement to divest its Home Health service line. On October 1, 2021, the transaction closed with a sale price of ~~Merger (the “Merger Agreement”), to effect a Business Combination between FVAC Merger Corp. II, a Delaware corporation and a direct, wholly-owned subsidiary~~$7.3 million.

During the fourth quarter of 2021, the Company (“Merger Sub”), and Wilco Holdco, Inc., a Delaware corporation (“ATI”). The Merger Agreement and the transactions contemplated thereby will constitute a “Business Combination” as contemplated by the Company’s Amended and Restated Certificatecompleted 3 acquisitions consisting of ~~Incorporation. The Merger Agreement and the Business Combination were unanimously approved by the board of directors of~~7 total clinics. With these acquisitions, the Company ~~on February 21, 2021. For further information, refer to Item 9B of this Form 10-K~~expanded its footprint in both Michigan and ~~to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 22, 2021.~~Texas.

~~Business Strategy~~

Our acquisition and value creation strategy is to identify, acquire and, after our initial business combination, to build a company in the public markets. We are seeking a company in an industry that complements the experience and expertiseThis description of our ~~management team and is a~~ business that we think our transformative operating skills can help improve. Our selection process will leverage our team’s network of industry, private equity sponsor, credit fund sponsor and lending community relationships as well as relationships with management teams of public and private companies, investment bankers, restructuring advisers, attorneys and accountants, which we believe should provide us with a number of business combination opportunities. We are deploying a pro-active, thematic sourcing strategy and to focus on companies where we believe the combination of our operating experience, relationships, capital and capital markets expertise can be ~~catalysts to transform companies and can help accelerate the target business’ growth and performance.~~

In addition, we are utilizing the networks and industry experience of our management team and our board of directors in seeking an initial business combination. Over the course of their careers, the members of our management team and board of directors have developed a broad network of contacts and corporate relationships that we believe will serve as a useful source of acquisition opportunities. This group has experience in:

•~~operating companies, setting and changing strategies, and identifying, mentoring and recruiting world-class talent;~~

•~~developing and growing companies, both organically and through acquisitions and strategic transactions and expanding the product range and geographic footprint of a number of target businesses;~~

•~~sourcing, structuring, acquiring, and selling businesses;~~

•~~accessing the capital markets, including financing businesses and helping companies transition to public ownership;~~

•~~fostering relationships with sellers, capital providers and target management teams; and~~

•~~executing transactions in multiple geographies and under varying economic and financial market conditions.~~

We believe that the network of contacts and relationships of our management team is providing us with an important source of acquisition opportunities. In addition, given our profile and thematic approach, we anticipate that target business candidates may be brought to our attention from various unaffiliated sources, including investment market participants, private equity groups, investment banking firms, consultants, accounting firms and large business enterprises. Members of our management team communicate with their network of relationships to articulate our acquisition criteria, including the parameters of our search for a target business, and conduct the disciplined process of pursuing and reviewing promising leads.

~~Sourcing of Potential Business Combination Targets~~

We believe our management team’s significant operating and transaction experience and relationships with companies will provide us with a substantial number of potential business combination targets. Over the course of their careers, the members of our management team have developed a broad network of contacts and corporate relationships around the world. This network has grown through the activities of our management team sourcing, acquiring, financing and selling businesses, our management team’s relationships with sellers, financing sources and target management teams and the experience of our management team in executing transactions under varying economic and financial market conditions.

We believe that the network of contacts and relationships of our management team will provide us with important sources of acquisition opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to divest non-core assets or divisions.

We are not prohibited from pursuing an initial business combination with a business that is affiliated with our Sponsor, officers or directors, or making the acquisition through a joint venture or other form of shared ownership with our Sponsor, officers or directors. In the event we seek to complete an initial business combination with a business that is affiliated with our Sponsor, officers or directors, we, or a committee of independent and disinterested directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, that our initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.

As more fully discussed in “Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest,” if any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. All of our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.

~~Status as a Public Company~~

We believe our structure will make us an attractive business combination partner to target businesses. As an existing public company, we offer a target business an alternative to the traditional initial public offering through a merger or other business combination. In this situation, the owners of the target business would exchange their shares of stock in the target business for shares of our stock or for a combination of shares of our stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more certain and cost effective method to becoming a public company than the typical initial public offering. In a typical initial public offering, there are additional expenses incurred in marketing, road show and public reporting efforts that may not be present to the same extent in connection with a business combination with us.

Furthermore, once a proposed business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring. Once public, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests. It can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.

We are an “emerging growth company,” as defined in the JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year, if (1) the market value of our common stock owned by non-affiliates is less than $250 million, or (2) we have less than $100 million in annual revenues and the market value of our common stock owned by non-affiliates is less than $700 million. Market value is calculated as of the prior June 30th.

~~Financial Position~~

With funds available for a business combination initially in the amount of approximately $332,925,000 assuming no redemptions and after payment of $12,075,000 of deferred underwriting fees, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.

~~Effecting our Initial Business Combination~~

We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following the Initial Public Offering. We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering and the sale of the private placement warrants, our capital stock, debt or a combination of these as the consideration to be paid in our initial business combination. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.

If our initial business combination is paid for using equity or debt, or not all of the funds released from the Trust Account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our shares of Class A common stock, we may apply the balance of the cash released to us from the Trust Account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.

We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the Trust Account.

In the case of an initial business combination funded with assets other than the Trust Account assets, our tender offer documents or proxy materials disclosing the business combination would disclose the terms of the financing and, only if required by applicable law or we decide to do so for business or other reasons, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with our initial business combination. At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.

~~Selection of a Target Business and Structuring of our Initial Business Combination~~

The NYSE rules require that our initial business combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if any, and excluding the amount of any deferred underwriting discount held in trust) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market value of the target or targets will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, with respect to the satisfaction of such criteria. We do not currently intend to purchase multiple businesses in unrelated industriesread in conjunction with our initial business combination, although there is no assurance that will be the case. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination solely with another blank check company or a similar company with nominal operations.

In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the outstanding equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be valued for purposes of the 80% of net assets test. There is no basis for investors in the Initial Public Offering to evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination.

To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.

In evaluating a prospective target business, we expect to conduct a thorough due diligence review which may encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review ofconsolidated financial ~~operational, legal and other information which will be made available to us.~~

~~The time required to select and evaluate a target business and to structure and complete our initial business combination,~~statements and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.

~~Lack of Business Diversification~~

For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. By completing our initial business combination with only a single entity, our lack of diversification may:

•subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination; and

•~~cause us to depend on the marketing and sale of a single product or limited number of products or services.~~

~~Limited Ability to Evaluate the Target’s Management Team~~

Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.

We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.

Following our initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.

~~Stockholders May Not Have the Ability to Approve our Initial Business Combination~~

We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC subject to the provisions of our amended and restated certificate of incorporation. However, we will seek stockholder approval if it is required by applicable law or stock exchange rule, or we may decide to seek stockholder approval for business or other reasons.

~~Under the NYSE’s listing rules, stockholder approval would be required for our initial business combination if, for example:~~

•we issue (other than in a public offering for cash) shares of Class A common stock that will either (a) be equal to or in excess of 20% of the number of shares of Class A common stock then outstanding or (b) have voting power equal to or in excess of 20% of the voting power then outstanding;

•any of our directors, officers or substantial security holders (as defined by the NYSE rules) has a 5% or greater interest, directly or indirectly, in the target business or assets to be acquired and if the number of shares of common stock to be issued, or if the number of shares of common stock into which the securities may be convertible or exercisable, exceeds either (a) 1% of the number of shares of common stock or 1% of the voting power outstanding before the issuance in the case of any of our directors and officers or (b) 5% of the number of shares of common stock or 5% of the voting power outstanding before the issuance in the case of any substantial security holders; or

•~~the issuance or potential issuance of shares of common stock will result in our undergoing a change of control.~~

The decision as to whether we will seek stockholder approval of a proposed business combination in those instances in which stockholder approval is not required by applicable law or stock exchange listing requirements will be made by us, solely in our discretion, and will be based on business and legal reasons, which include a variety of factors, including, but not limited to:

• the timing of the transaction, including in the event we determine stockholder approval would require additional time and there is either not enough time to seek stockholder approval or doing so would place the company at a disadvantage in the transaction or result in other additional burdens on the company;

•~~the expected cost of holding a stockholder vote;~~

•~~the risk that the stockholders would fail to approve the proposed business combination;~~

•~~other time and budget constraints of the company; and~~

•~~additional legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders.~~

~~Permitted Purchases of our Securities~~

In the event we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our Sponsor, directors, officers, advisors or any of their affiliates may purchase shares or warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares or warrants such persons may purchase. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. In the event our Sponsor, directors, officers, advisors or any of their affiliates determine to make any such purchases at the time of a stockholder vote relating to our initial business combination, such purchases could have the effect of influencing the vote necessary to approve such transaction. None of the funds in the Trust Account will be used to purchase shares or warrants in such transactions. If they engage in such transactions, they will be restricted from making any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. We have adopted an insider trading policy which requires insiders to: (i) refrain from purchasing securities during certain blackout periods and when they are in possession of any material non-public information; and (ii) clear all trades with a designated officer prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary.

In the event that our Sponsor, directors, officers, advisors or any of their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.

The purpose of such purchases would be to (i) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of our initial business combination or (ii) to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. This may result in the completion of our initial business combination that may not otherwise have been possible.

In addition, if such purchases are made, the public “float” of our securities may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

Our Sponsor, officers, directors, advisors, and/or any of their affiliates anticipate that they may identify the stockholders with whom our Sponsor, officers, directors, advisors or any of their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our Sponsor, officers, directors, advisors or any of their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the Trust Account or vote against the business combination. Such persons would select the stockholders from whom to acquire shares based on the number of shares available, the negotiated price per share and such other factors as any such person may deem relevant at the time of purchase. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. Our Sponsor, officers, directors, advisors or any of their affiliates will be restricted from purchasing shares if such purchases do not comply with Regulation M under the Exchange Act and the other federal securities laws.

Any purchases by our Sponsor, officers, directors and/or any of their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our Sponsor, officers, directors and/or any of their affiliates will be restricted from making purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act.

~~Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination~~

We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the Trust Account is initially anticipated to be $10.00 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. The redemption rights will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. Our Sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any Founder Shares and any public shares held by them in connection with the completion of our initial business combination.

~~Manner of Conducting Redemptions~~

We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the applicable law or stock exchange listing requirement. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. We intend to conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by applicable law or stock exchange listing requirements or we choose to seek stockholder approval for business or other legal reasons.

~~If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other reasons, we will, pursuant to our amended and restated certificate of incorporation:~~

•~~conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and~~

•file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.

Upon the public announcement of our initial business combination, we and our Sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.

In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares which are not purchased by our Sponsor, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than $5,000,001 (so that we do not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may berelated notes contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete such initial business combination.

If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other reasons, we will, pursuant to our amended and restated certificate of incorporation:

•conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and

•~~file proxy materials with the SEC.~~

We expect that a final proxy statement would be mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Although we are not required to do so, we currently intend to comply with the substantive and procedural requirements of Regulation 14A in connection with any stockholder vote even if we are not able to maintain our NYSE listing or Exchange Act registration.

In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.

If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination (or, if the applicable rules of the NYSE then in effect require, a majority of the outstanding shares of common stock held by public stockholders are voted in favor of the business transaction). Unless restricted by NYSE rules, a quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding capital stock of the company entitled to vote at such a meeting. Unless restricted by NYSE rules, our initial stockholders will count toward this quorum. Pursuant to the terms of a letter agreement entered into with us, our Sponsor, officers and directors have agreed (and their permitted transferees will agree) to vote any Founder Shares and any public shares held by them in favor of our initial business combination. We expect that at the time of any stockholder vote relating to our initial business combination, our initial stockholders and their permitted transferees will own at least 20% of our outstanding common stock entitled to vote thereon. These quorum and voting thresholds and the letter agreement may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares without voting, and if it does vote, irrespective of whether it votes for or against the proposed transaction. In addition, our Sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any Founder Shares and any public shares held by them in connection with the completion of a business combination.

Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we do not then become subject to the SEC’s “penny stock” rules). Redemptions of our public shares may also be subject to a higher net tangible asset test or cash requirement pursuant to an agreement relating to our initial business combination. For example, the proposed business combination may require: (i) cash consideration to be paid to the target or its owners; (ii) cash to be transferred to the target for working capital or other general corporate purposes; or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternative business combination.

~~Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Stockholder Approval~~

Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to Excess Shares without our prior consent. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our Sponsor or its affiliates to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in the Initial Public Offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our Sponsor or its affiliates at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in the Initial Public Offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Our Sponsor, officers and directors have, pursuant to a letter agreement entered into with us, waived their right to have any Founder Shares or public shares held by them redeemed in connection with our initial business combination. Unless any of our other affiliates acquires Founder Shares through a permitted transfer from an initial stockholder, and thereby becomes subject to the letter agreement, no such affiliate is subject to this waiver. However, to the extent any such affiliate acquires public shares in the Initial Public Offering or thereafter through open market purchases, it would be a public stockholder and subject to the 15% limitation in connection with any such redemption right.

~~Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights~~

We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the scheduled vote on the proposal to approve the business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, rather than simply voting against the initial business combination. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements which will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two business days prior to the scheduled vote on the business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Pursuant to the tender offer rules, the tender offer period will be not less than 20 business days and, in the case of a stockholder vote, a final proxy statement would be mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker a fee of approximately $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.

The foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an initial business combination, and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the business combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the business combination during which he or she could monitor the price of the company’s shares in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion of the business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the business combination is approved.

Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or two business days prior to the date of the stockholder meeting set forth in our proxy materials, as applicable (unless we elect to allow additional withdrawal rights). Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.

If our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the Trust Account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.

If our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different target until 24 months from the closing of the Initial Public Offering.

~~Redemption of Public Shares and Liquidation if no Initial Business Combination~~

Our Sponsor, officers and directors have agreed that we will have only 24 months from the closing of the Initial Public Offering to complete our initial business combination. If we have not completed our initial business combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter subject to lawfully available funds therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 24-month time period.

Our Sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete our initial business combination within 24 months from the closing of the Initial Public Offering. However, if our Sponsor, officers and directors acquire public shares, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if we fail to complete our initial business combination within the allotted 24-month time period.

Our Sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our business combination within 24 months from the closing of the Initial Public Offering, or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we do not then become subject to the SEC’s “penny stock” rules).

We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the proceeds held outside the Trust Account, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the Trust Account not required to pay taxes, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.

If we were to expend all of the net proceeds of the Initial Public Offering and the sale of the private placement warrants, other than the proceeds deposited in the Trust Account, and without taking into account interest, if any, earned on the Trust Account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.00. The proceeds deposited in the Trust Account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.00. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.

Although we will seek to have all third parties, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business with, execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third-party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver.

In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our public shares, if we have not completed our initial business combination within the prescribed time frame, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Our Sponsor has agreed that it will be liable to us, if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company. Our Sponsor may not have sufficient funds available to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by third parties and prospective target businesses.

In the event that the proceeds in the Trust Account are reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, and our Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has have no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per share redemption price will not be substantially less than $10.00 per share.

We will seek to reduce the possibility that our Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all third parties, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business with, execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. Our Sponsor will also not be liable as to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our Trust Account could be liable for claims made by creditors.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.

Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we have not completed our initial business combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 24th month from the closing of the Initial Public Offering, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business with, execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the Trust Account is remote. Further, our Sponsor may be liable only to the extent necessary to ensure that the amounts in the Trust Account are not reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third-party claims.

If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, we cannot assure you we will be able to return $10.00 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.

Our public stockholders will be entitled to receive funds from the Trust Account only upon the earliest to occur of: (i) the completion of our initial business combination, and then only in connection with those public shares that such stockholder properly elected to redeem, subject to the limitations described herein; (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (iii) the redemption of all of our public shares if we have not completed our initial business combination within 24 months from the closing of the Initial Public Offering, subject to applicable law and as further described herein. In no other circumstances will a stockholder have any right or interest of any kind to or in the Trust Account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the Trust Account. Such stockholder must have also exercised its redemption rights described above.

~~Our Amended and Restated Certificate of Incorporation~~

Our amended and restated certificate of incorporation contains certain requirements and restrictions relating to the Initial Public Offering that will apply to us until the completion of our initial business combination. These provisions cannot be amended without the approval of the holders of at least 65% of our common stock.

Our initial stockholders, who collectively beneficially own 20% of our common stock upon the closing of the Initial Public Offering, may participate in any vote to amend our amended and restated certificate of incorporation and will have the discretion to vote in any manner they choose. Specifically, our amended and restated certificate of incorporation provide, among other things, that:

•if we are unable to complete our initial business combination within 24 months from the closing of the Initial Public Offering, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders' rights as stockholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law;

•prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the Trust Account or (ii) vote as a class with our public shares on any initial business combination;

•although we do not currently intend to enter into a business combination with a target business that is affiliated with our Sponsor, our directors or our officers, we are not prohibited from doing so. In the event we enter into such a transaction, we, or a committee of independent and disinterested directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, that such a business combination is fair to our company from a financial point of view;

•if a stockholder vote on our initial business combination is not required by applicable law or stock exchange listing requirements and we do not decide to hold a stockholder vote for business or other reasons, we will offer to redeem our public shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, and will file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about our initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act;

•in the event our securities are listed on the NYSE, our initial business combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if any, and excluding the amount of any deferred underwriting discount held in trust) at the time of our signing a definitive agreement in connection with our initial business combination;

• if our stockholders approve an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering or (B) with respect to any other provision relating to stockholders' rights or pre-initial business combination activity, we will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon such approval at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares; and

•~~we will not effectuate our initial business combination solely with another blank check company or a similar company with nominal operations.~~

In addition, our amended and restated certificate of incorporation provides that under no circumstances will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001.

~~Competition~~

In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these entities are well-established and have extensive experience identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Moreover, many of these competitors possess greater financial, technical, human and other resources or more local industry knowledge than we do. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.

~~Conflicts of Interest~~

Certain of our officers and directors have fiduciary and contractual duties to Fortress and its affiliates. As a result, certain of our officers and directors will have a duty to offer acquisition opportunities to certain Fortress funds and other entities and will have no duty to offer such opportunities to us unless presented to them in their capacity as our officer or director. As a result, Fortress or any of their respective affiliates may compete with us for acquisition opportunities in the same industries and sectors as we may target for our initial business combination. If any of them decide to pursue any such opportunity, we may be precluded from procuring such opportunities. In addition, investment ideas generated within Fortress or any of its affiliates, including by Mr. McKnight, Mr. Furstein, Mr. Gillette, Ms. Cowen, Mr. Pack, Mr. Bass, Mr. Kaplan and other persons who may make decisions for the company, may be suitable for both us and for Fortress or any of its affiliates or clients, including Fortress Credit blank check companies and any future Fortress PE blank check companies, and may directed initially to Fortress or such persons rather than to us. Our officers and directors, Fortress or any of its affiliates or members of our management team who are also employed by Fortress or any of its affiliates have any obligation to present us with any opportunity for a potential business combination of which they become aware unless it is offered to them solely in their capacity as our director or officer and after they have satisfied their contractual and fiduciary obligations to other parties. Fortress generally intends to offer investment opportunities that fit within the investment program of a Fortress fund to such fund before offering it to us, and may choose to allocate all or part of any such opportunity to any Fortress affiliate or client or any business in which a Fortress affiliate, including Fortress Credit blank check companies and any future Fortress PE blank check companies, has invested instead of offering such opportunity to us.

The potential conflicts described above may limit our ability to enter into a business combination or other transactions. Fortress and its affiliates engage, and in the future will engage, in a broad spectrum of activities, including direct investment activities and investment advisory activities, and have extensive investment activities (including principal investments by Fortress affiliates for their own account), on behalf of both persons or entities to which they provide investment advice and on a principal basis, that are independent from, and may from time to time conflict or compete with, our activities. These circumstances could give rise to numerous situations where interests may conflict. There can be no assurance that these or other conflicts of interest with the potential for adverse effects on us and investors will not arise.

Fortress Credit is currently sponsoring two other blank check companies, Fortress Value Acquisition Corp. III ("FVAC III") and Fortress Value Acquisition Corp. IV ("FVAC IV") and may continue to sponsor future blank check companies, each formed for the purpose of completing a business combination and, like us, each focused on identifying a business that may provide opportunities for attractive risk-adjusted returns. FVAC III completed its initial public offering in January 2021, in which it sold 23,000,000 units, each consisting of one share of Class A common stock and one-fifth of one redeemable warrant to purchase one share of Class A common stock, for an offering price of $10.00 per unit, generating gross proceeds of $230,000,000. FVAC III’s Class A common stock is traded on the New York Stock Exchange under the symbol "FVT", its warrants are traded under the symbol "FVT WS" and its units are traded under the symbol "FVT.U". FVAC III has not yet announced or completed its initial business combination. FVAC IV has not yet completed its initial public offering. We may compete with FVAC III, FVAC IV and future Fortress Credit blank check companies for business combination opportunities.

Fortress PE, which operates alongside Fortress Credit within the greater Fortress business, is currently sponsoring a blank check company, Fortress Capital Acquisition Corp. ("FCAC"), and may also sponsor future Fortress PE blank check companies formed for the purpose of completing a business combination and, like us, focused on identifying a business that may provide opportunities for attractive risk-adjusted returns. We may compete with future Fortress PE blank check companies for business combination opportunities. Further, Mr. Bass, our Chief Financial Officer, is the Chief Financial Officer of FCAC.

While we and any future Fortress PE blank check companies may share certain administrative functions provided by Fortress, our management team that will be involved in sourcing potential business combination targets will be different than the management teams of any future Fortress PE blank check companies. We anticipate that any potential business combination targets sourced through our management team, in their capacity as directors and officers of the company, will be first offered to the company before being offered to the Fortress Credit blank check companies or to any Fortress PE blank check companies and that any potential business combination opportunities that are sourced through the management teams of the Fortress PE blank check companies will be first offered to the Fortress PE blank check companies before being offered to us.

Fortress Credit and Fortress PE each have investment professionals that source transactions for their respective businesses and may compete with each other for investment opportunities that are appropriate for a blank check company like us. In making allocation decisions with respect to investment opportunities that could reasonably be expected to fit the investment objectives of one or more Fortress affiliates, Fortress anticipates that it will consider one or more of the following: the internal source of the investment opportunity; the objectives and investment programs of any such affiliate; any exclusive rights to investment opportunities that may have been granted to any such Fortress affiliate; the expected duration of the investment in light of a Fortress affiliate's objectives and investment program; the amount of available capital (including financing); the magnitude of the investment opportunity; regulatory and tax considerations; the degree of risk arising from an investment; the expected investment return; relative liquidity; likelihood of current income; regulatory requirements; and/or such other factors as Fortress deems to be appropriate. These factors provide substantial discretion to Fortress to resolve conflicts of interest arising from limited investment opportunities. The internal source of an investment opportunity will play a particularly important factor in allocation decisions and we anticipate that business combination opportunities sourced within Fortress Credit will be offered to us before such opportunities are offered to the Fortress PE blank check companies and that business combination opportunities sourced within Fortress PE will be offered to the Fortress PE blank check companies before they are offered to us.

We do not believe that any potential conflicts with any other Fortress Credit blank check company or any Fortress PE blank check company would materially affect our ability to complete our initial business combination. In addition, future Fortress Credit blank check companies may differ in size and therefore different business combination opportunities that require more or less capital might be appropriate for one Fortress Credit blank check company but not the other. Moreover, as discussed above, any future Fortress PE blank check company will be sponsored by Fortress PE, which is a separate and distinct business group from Fortress Credit, and our board of directors and the majority of our management team consist of different individuals than those that may be on the boards of directors and management teams of any future Fortress PE blank check companies.

In addition, Fortress and its affiliates, including our officers and directors who are affiliated with Fortress, may sponsor or form other blank check companies similar to ours during the period in which we are seeking an initial business combination. Any such companies may present additional conflicts of interest in pursuing an acquisition target. However, we do not believe that any such potential conflicts would materially affect our ability to complete our initial business combination.

Each of our officers and directors presently have, and any of them in the future may have additional, fiduciary or contractual obligations to other entities, including FVAC III, FVAC IV and FCAC pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor such fiduciary or contractual obligations to present such business combination opportunity to such entity. We expect that if an opportunity is presented to one of our officers or directors in his or her capacity as an officer or director of one of those other entities, such opportunity would be presented to such other entity and not to us. For more information on the entities to which our officers and directors currently have fiduciary or contractual obligations, please refer to “Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest.” Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our initial business combination.

~~Indemnity~~

Our Sponsor has agreed that it will be liable to us, if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether our Sponsor have sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company and, therefore, our Sponsor may not be able to satisfy those obligations. We have not asked our Sponsor to reserve for such eventuality. We believe the likelihood of our Sponsor having to indemnify the Trust Account is limited because we will endeavor to have all third parties, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business with, execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

~~Facilities~~

~~We currently maintain our executive offices at 1345 Avenue of the Americas, 46th Floor, New York, New York 10105. We consider our current office space adequate for our current operations.~~

~~Employees~~

We currently have four officers and do not intend to have any full-time employees prior to the completion of our initial business combination. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that members of our management will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the current stage of the business combination process.

~~Periodic Reporting and Financial Information~~

We have registered our units, Class A common stock and warrants under the Exchange Act and we have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual report contain financial statements audited and reported on by our independent registered public accounting firm.

We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. These financial statements may be required to be prepared in accordance with, or be reconciled to, U.S. GAAP, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will be material.

We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2021 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company, will we be required to have our internal control procedures audited. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.

We have filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

~~We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the~~

fifth anniversary of the completion of the Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

~~Additionally, we are a “smaller reporting company” as defined in~~Part II, Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year, if (1) the market value of our common stock owned by non-affiliates is less than $250 million, or (2) we have less than $100 million in annual revenues and the market value of our common stock owned by non-affiliates is less than $700 million. Market value is calculated as of the prior June 30th.

~~Legal Proceedings~~

~~There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.~~

~~Item 1A. Risk Factors.~~

~~Summary of Risk Factors~~

An investment in our securities involves a high degree of risk. Below is a summary of the principal risk factors that make an investment in our securities speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this summary of risk factors, and other risks that we face, can be founded below in “Risk Factors” and should be carefully considered, together with other information8 in this Annual Report on Form 10-K.

Our Operating Model

We have an operating model that we believe is unique in the industry. We operate under a single "ATI" brand and own nearly 100% of our clinics, which we believe enables us to more consistently align the clinical and patient experience, align incentives across our teams, track and analyze clinical outcome data, and promote efficiency in our operations. The key components of our operating model include:

•Patients. We are highly focused on providing the best possible patient experience. We believe our clinics are in convenient, attractive locations and we strive to maintain a consistently positive look, feel and experience. Additionally, we work to deliver functional outcomes that meet or exceed national physical therapy industry outcomes across all body regions, which enables patients to return to their normal activities. We are proud of our average Net Promoter Score (“NPS”) of 76 and our average Google Review rating of 4.9 stars across our clinics over the trailing four quarters as of December 31, 2021. We believe these metrics are indicative of our patients’ overall satisfaction with our services and the ATI brand.

•Medical Provider Partners. We believe our medical provider partners also benefit from our customer-driven culture, expansive patient outcomes database, and case management approach, which facilitate end-to-end patient care with MSK issues. Our proprietary EMR system includes a variety of custom tools and analytics to evaluate patient performance, providing medical partner providers with simple, intuitive reports on shared patients regarding functional outcomes and performance. These scorecards are used to drive continuous quality improvement and deliver more predictable results.

•Payors. We derive revenue from a diverse range of payor sources, including commercial health plans, government programs (i.e., Medicare and Medicaid), workers’ compensation insurance and auto/personal injury insurance. We believe we offer value to payors not only through quality outcomes that may reduce downstream costs, but also through our national footprint, convenient locations and high customer ratings, which help ensure patients are satisfied with their plan offerings and benefits.

•Employers. We offer our solutions directly to self-insured employers through our ATI First offering. In these arrangements, we educate employees on the benefits of physical therapy and reduce barriers to our services. Through our ATI First model, we aim to drive lower healthcare expenditures through early-intervention and treatment of MSK conditions and hope to improve workforce productivity through lower absenteeism resulting from such MSK conditions.

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Our Platform

Key elements of our platform include:

•Our People. Our business strategy relies on attracting, training, developing and retaining a skilled workforce. We experienced elevated levels of attrition during periods of 2021 and have taken swift actions in an effort to improve attrition levels. We operate on a team-based approach that works to match physical therapists, physical therapy assistants and operational support specialists with patients based on acuity to ensure patients can be seen in a timely fashion and in compliance with healthcare laws and regulations and licensure requirements. Our employees' success is measured primarily by patient outcomes and customer satisfaction. We have invested in clinical and leadership development programs offering our clinical and support staff opportunities to enhance their clinical skills and take on increasing leadership responsibilities. Combined with a competitive compensation model, we strive to be an attractive employer in the physical therapy industry.

•Our Clinical Systems & Data. Our proprietary, internally developed electronic medical records ("EMR") platform supports our clinical workflows and leverages our database of more than two and half million unique patient cases as well as peer-reviewed best practices guidelines and care protocols to maximize outcomes for our patients. Our EMR is purpose-built for physical therapy and has diagnosis-specific guidelines in place covering the majority of our patient cases. We believe that our ability to manage, deliver and track clinical outcomes positions us as an attractive partner for payors seeking to reduce downstream healthcare costs.

•Our Technology-Enabled Infrastructure. We strive to incorporate data and analytics into the ongoing management of our operations, including monitoring operating performance metrics at the clinic, clinician, and patient levels. We continually evaluate our technology and tools that support areas such as referral source relationship development, operational efficiency, consumer targeting and clinic location selection and management.

Our Services

Physical Therapy

To supplement our traditional outpatient physical therapy services, we introduced ATI Connect in early 2020, a tele-physical therapy offering which launched amidst state lockdowns nationwide in response to COVID-19 (as defined below). We believe that, while virtual visits will not fully replace the need for in-person treatment, ATI Connect serves as a convenient option for patients who either lack immediate access to a clinic or are looking to supplement traditional treatments. This offering also allows us to serve patients in locations where we do not have a physical presence today.

We also offer ATI First which leverages our existing clinic footprint and clinical expertise to unlock value for self-insured employers looking to reduce MSK costs, by integrating our services earlier in the overall process for evaluating and treating MSK conditions. ATI First educates employees around the benefits of physical therapy and encourages them to consider physical therapy services before undergoing a costlier procedure. While our ATI First solution is relatively small today, we intend to leverage our demonstrated success in generating savings under our existing contracts to target new contracts.

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ATI Worksite Solutions ("AWS")

AWS is an on-site service that provides customized cost-saving injury prevention programs, work-related injury assessment services, wellness offerings and consultations for employers, ranging from Fortune 100 companies to small local businesses. We staff athletic trainers, physical therapy assistants and other clinicians as Certified Early Intervention Specialists at the employer's site to provide early interventions and promote physical health and wellness.

Management Service Agreements ("MSA")

We partner with physician-owned practices to improve their performance, drive efficiencies and optimize patient outcomes. Utilizing our resources and infrastructure, we provide dedicated service teams to oversee the integration of our programs into physical therapy practices. This includes proprietary EMR integration, caseload management and continuing education in progressive therapies.

Sports Medicine

Our Sports Medicine athletic trainers work with athletes at all levels of competition to prevent, evaluate and treat sports injuries. We offer onsite sports physical therapy services, clinical evaluation and diagnosis, immediate and emergency care, nutrition programs and concussion management, among others.

Industry Factors and Competition

MSK conditions affect individuals of all ages and represent some of the most common causes of health problems in the United States. Physical therapy and related services are low-cost solutions that can address a variety of MSK conditions. We believe that the following factors, among others, affect the market and industry trends for outpatient physical therapy services:

•Outpatient physical therapy services growth. Outpatient physical therapy continues to play a key role in treating musculoskeletal conditions for patients. According to the Centers for Medicare & Medicaid Services ("CMS"), musculoskeletal conditions impact individuals of all ages and include some of the most common health issues in the U.S. As healthcare trends in the U.S. continue to evolve, with a growing focus on value-based care emphasizing up-front, conservative care to deliver better outcomes, quality healthcare services addressing such conditions in lower cost outpatient settings may continue increasing in prevalence.

•U.S. population demographics. The population of adults aged 65 and older in the U.S. is expected to continue to grow and thus expand the Company's market opportunity. According to the U.S. Census Bureau, the population of adults over the age of 65 is expected to grow 30% from 2020 through 2030.

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•Federal funding for Medicare and Medicaid. Federal and state funding of Medicare and Medicaid and the terms of access to these reimbursement programs affect demand for physical therapy services. Beginning in January 2021, the physical therapy industry observed a reduction of Medicare reimbursement rates of approximately 3% in accordance with the Medicare physician fee schedule for therapy services. The proposed 2022 budget, released by CMS in July 2021, called for an approximate 3.75% further reduction in reimbursement rates as well as a 15% decrease in payments for services performed by physical therapy assistants. However, in December 2021, the Protecting Medicare and American Farmers from Sequester Cuts Act was signed into law. As a result, the reimbursement rate reduction beginning in January 2022 was approximately 0.75%. The Act did not address the 15% decrease in payments for services performed by physical therapy assistants, which began on January 1, 2022. Additionally, a further reduction through resuming sequestration has been postponed. Sequestration reductions will resume at 1% after March 31, 2022, and by an additional 1% after June 30, 2022, which will result in an overall reduction of 2% in reimbursement rates by June 30, 2022 unless acted upon through a Congressional measure.

•Workers' compensation funding. Payments received under certain workers' compensation arrangements may be based on predetermined state fee schedules, which may be impacted by changes in state funding.

•Number of people with private health insurance. Physical therapy services are often covered by private health insurance. Individuals covered by private health insurance may be more likely to use healthcare services because it helps offset the cost of such services. As health insurance coverage rises, demand for physical therapy services tends to also increase.

The outpatient physical therapy market is highly fragmented, rapidly evolving and highly competitive. Competition within the industry may intensify in the future as existing competitors and new entrants introduce new physical therapy services and platforms and consolidation in the healthcare industry continues. We currently face competition from the following categories of principal competitors:

•National physical therapy providers;

•Regional physical therapy providers;

•Physician-owned physical therapy providers;

•Individual practitioners or local physical therapy operators, which number in the thousands across the nation; and

•Vertically integrated hospital systems and scaled physician practices.

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We believe the principal competitive factors in the outpatient physical therapy market include the quality of care, cost of care, treatment outcomes, breadth of location and geographic convenience, breadth of patient insurance coverage accepted by clinics, brand awareness and relations with referral sources and key industry participants. We compete in our existing markets by leveraging our unified brand, advertising to increase patient awareness, utilizing sales efforts to establish new and enhance existing relationships with referral sources, applying our team-based approach to care, leveraging our proprietary EMR and data-driven operating platform and striving for high quality of care expectations. Beginning in 2019, physical therapy providers were included in the CMS Quality Payment Program and were eligible to report quality metrics for the Merit-based Incentive Payment System ("MIPS"). We opted to report 2019 performance as an early adopter, and we received an 'exceptional' rating based on the data submitted across our platform and received a quality 'bonus' on 2021 billed CMS payments. Beginning in 2020, the CMS MIPS measures reporting became mandatory for all physical therapy providers. In November 2021, the 2020 scores were finalized and based on our performance we again received an 'exceptional' rating while scoring in the 99th percentile across all clinics and accordingly will receive the highest possible quality 'bonus' with respect to 2022 billed CMS payments. We believe the 'exceptional' rating by CMS reflects our commitment to delivering the highest quality of care and positions us as an industry leader as value-based care emerges. This is further exemplified as we have partnered with two different commercial payors on value-based contracts that pay based on quality performance. Additionally, we recently achieved Credentialing Accreditation status by the National Committee for Quality Assurance ("NCQA"). As an accredited organization, we have demonstrated that our credentialing processes are in accordance with the highest quality standards.

De Novo and Acqui-Novo Program

We have opened 144 standalone de novo and acqui-novo clinics over the three years ended December 31, 2021. We have built proprietary methods to identify future sites in urban and suburban, high-traffic areas. By incorporating various datasets, including CMS and census data, we are able to compile a comprehensive assessment of potential new locations. We leverage both bottoms-up and top-down analyses to address opportunities on a one-by-one square mile geocode and utilize a cross-functional team to assess the physical locations and develop a “go to market” strategy to determine the most attractive sites. Through our proprietary site-selection process we have identified significant actionable whitespace opportunity within our existing states today. As we enter new states organically or through acquisitions, we create new whitespace into which we can expand with de novo clinics.

In addition to our traditional approach to de novo growth, we have recently supplemented this initiative with our acqui-novo strategy, where we assume an existing clinic location in a target geography instead of developing anew. We believe that we are an attractive option for local physical therapy operators to exit their practice and join the Company due to our unified national brand, professional development opportunities and competitive compensation programs for clinical staff. Acqui-novo clinics have similar up-front costs compared to de novo clinics, but provide us with immediate presence, available staff, and referral relationships of the former owner within the surrounding areas. We view this as an alternative to a de novo build and may choose to expand our locations through either de novo or acqui-novo clinics.

Our Employees and Human Capital Resources

Our business strategy relies on attracting, training, developing, and retaining a skilled workforce. Our clinicians are a driving force for favorable patient outcomes and are key to our success. The Company has focused on increasing its clinical staffing levels by hiring clinicians and reducing levels of clinician attrition that were elevated in recent periods, which was caused, in part, by changes made during the COVID-19 pandemic related to compensation, staffing levels and support for clinicians. We have implemented a range of actions related to compensation, staffing levels, clinical and professional development and other initiatives in an effort to retain and attract therapists across our platform, and observed improvements in hiring and attrition levels to conclude 2021.

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We offer comprehensive Total Rewards in an effort to attract new candidates and retain existing employees. Our Total Rewards program includes, but is not limited to, incentive compensation plans, healthcare and insurance benefits, a 401(k) plan, paid time off and other work-life and wellness benefits. We have focused on adding greater efficiency and effectiveness around accountability and decision rights, acted swiftly and decisively in the advent of COVID-19 to continue our strong commitment to workplace safety and the health and welfare of our clinicians and patients and created differentiated leadership and development programs to support clinician career development and growth.

We are an equal opportunity employer and are committed to maintaining a diverse and inclusive work environment. Employees are treated with dignity and respect in an environment free from harassment and discrimination regardless of race, color, age, gender, disability, minority, sexual orientation or any other protected class. Our commitment to diversity and inclusion enables employees to realize their full potential and drives high performance through innovation and collaboration.

As of December 31, 2021, we had approximately 5,600 employees. This number is not inclusive of any contractors or temporary staff but does include our on-call clinicians. We do not have any employees who are represented by a labor union or are party to a collective bargaining agreement.

Impact of COVID-19

COVID-19 has had a significant impact on the outpatient physical therapy industry. In March 2020, as the pandemic began to affect all aspects of daily-life, hospitals and surgical centers began to postpone elective and non-essential surgeries, reducing the volume of individuals requiring physical therapy services. Additionally, closures of non-essential businesses, stay-at-home orders, and social-distancing guidelines all adversely impacted the flow of visits to clinics.

We kept the vast majority of our clinics open during this period to ensure that we continued to provide the convenience and services that our patients need. As a substitute to in-person visits, we also quickly introduced our ATI Connect offering to improve access for our patients that require physical therapy but were not comfortable with in-person sessions. In response to the suppressed volumes, we quickly down-sized our workforce to better match clinicians to demand at the local level. At the same time, we took significant measures to make sure our employees were cared for, including maintaining health benefits for furloughed workers and reducing executive compensation to establish an employee relief pool that provided assistance to our employees most in need.

In response to the COVID-19 crisis, the ATI Foundation, a 501(c)(3) charitable organization founded by our team, expanded its mission to include ATI Team Forward. Through the generosity of the Company’s executive leadership, the Company Board and Advent, the ATI Team Forward grant program assisted our team members with a variety of unforeseen difficulties and hardships created by the pandemic.

Governmental Regulations and Supervision

We are subject to extensive federal, state and local government laws and regulations, including Medicare and Medicaid reimbursement rules and regulations, anti-kickback laws, self-referral prohibition statutes, false claims statutes, exclusions statutes, civil monetary penalty statutes and associated regulations, among others. We are also subject to federal and state laws that regulate the reimbursement of our services and that are designed to prevent fraud and abuse, and impose state licensure and corporate practice of medicine restrictions, as well as federal and state laws and regulations relating to the privacy of individually identifiable information. We maintain a robust compliance program, have made significant investments around our controls across the organization, and we periodically conduct internal audits and reviews along with compliance training designed to keep our officers, directors and employees educated and up-to-date and to emphasize our policy of strict compliance.

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Reimbursement; Fraud and Abuse

We are subject to laws regulating reimbursement under various federal and state healthcare programs. The marketing, billing, documenting and other practices of healthcare companies are all subject to government scrutiny. To ensure compliance with Medicare, Medicaid and other regulations, health insurance carriers and state agencies often conduct audits and request customer records and other documents to support our claims submitted for payment of services rendered to customers. Similarly, government agencies and their contractors periodically open investigations and obtain information from us and from healthcare providers pursuant to the legal process. Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs, which could significantly impact our financial condition and results of operations.

Various federal and state laws prohibit the submission of false or fraudulent claims, including claims to obtain payment under Medicare, Medicaid, and other government healthcare programs. These laws include the federal False Claims Act, which prohibits persons or entities from knowingly submitting or causing to be submitted a claim that the person knew or should have known (i) to be false or fraudulent; (ii) for items or services not provided or provided as claimed; or (iii) was provided by an individual not otherwise qualified or who was excluded from participation in federal healthcare programs. The False Claims Act also imposes penalties for requests for payment that otherwise violate conditions of participation in federal healthcare programs or other healthcare compliance laws. In recent years, federal and state government agencies have increased the level of enforcement resources and activities targeted at the healthcare industry. Additionally, the False Claims Act and similar state statutes allow individuals to bring lawsuits on behalf of the government, in what are known as qui tam or “whistleblower” actions, and can result in civil and criminal fines, imprisonment, and exclusion from participation in federal and state healthcare programs. The use of these private enforcement actions against healthcare providers has increased dramatically in recent years, in part because the individual filing the initial complaint is entitled to share in a portion of any settlement or judgment. Revisions to the False Claims Act enacted in 2009 expanded significantly the scope of liability, provided for new investigative tools, and made it easier for whistleblowers to bring and maintain False Claims Act suits on behalf of the government.

Anti-Kickback Regulations

We are subject to federal and state laws regulating financial relationships involving federally-reimbursable healthcare services. These laws include Section 1128B(b) of the Social Security Act (the “Anti-Kickback Law”), under which civil and criminal penalties can be imposed upon persons who, among other things, offer, solicit, pay or receive remuneration in return for (i) the referral of patients for the rendering of any item or service for which payment may be made, in whole or in part, by a federal health care program (including Medicare and Medicaid); or (ii) purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, ordering any good, facility, service, or item for which payment may be made, in whole or in part, by a federal health care program (including Medicare and Medicaid). We believe that our business procedures and business arrangements are in compliance with these laws and regulations. However, the provisions are broadly written and the full extent of their specific application to specific facts and arrangements to which we are a party is uncertain and difficult to predict. In addition, several states have enacted state laws similar to the Anti-Kickback Law, many of which are more restrictive than the federal Anti-Kickback Law.

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The Office of the Inspector General (“OIG”) of the Health and Human Services Department has issued regulations describing compensation arrangements that fall within a “Safe Harbor” and, therefore, are not viewed as illegal remuneration under the Anti-Kickback Law. Failure to fall within a Safe Harbor does not mean that the Anti-Kickback Law has been violated; however, the OIG has indicated that failure to fall within a Safe Harbor may subject an arrangement to increased scrutiny under a “facts and circumstances” test. Federal case law provides limited guidance as to the application of the Anti-Kickback Law to these arrangements. However, we believe our arrangements, including our compensation and financial arrangements, comply with the Anti-Kickback Law. If our arrangements are found to violate the Anti-Kickback Law, it could have an adverse effect on our business, financial condition and results of operations. Penalties for violations include denial of payment for the services, significant criminal and civil monetary penalties, and exclusion from the Medicare and Medicaid programs. In addition, claims resulting from a violation of the Anti-Kickback Law are considered false for purposes of the False Claims Act.

Physician Self-Referral

Provisions of the Omnibus Budget Reconciliation Act of 1993 (42 U.S.C. § 1395nn) (the “Stark Law”) prohibit referrals by a physician of “designated health services” which are payable, in whole or in part, by Medicare or Medicaid, to an entity in which the physician or the physician’s immediate family member has an investment interest or other financial relationship, subject to several exceptions. The Stark Law is a strict liability statute and proof of intent to violate the Stark Law is not required. Physical therapy services are among the “designated health services” subject to the Stark Law. Further, the Stark Law has application to our management contracts with individual physicians and physician groups, as well as, any other financial relationship between us and referring physicians, including medical advisor arrangements and any financial transaction resulting from a clinic acquisition. The Stark Law also prohibits billing for services rendered pursuant to a prohibited referral. Several states have enacted laws similar to the Stark Law. These state laws may cover all (not just Medicare and Medicaid) patients. As with the Anti-Kickback Law, we consider the Stark Law in planning our clinics, establishing contractual and other arrangements with physicians, marketing and other activities, and believe that our operations are in compliance with the Stark Law. If we violate the Stark Law or any similar state laws, our financial results and operations could be adversely affected. Penalties for violations include denial of payment for the services, significant civil monetary penalties, and exclusion from the Medicare and Medicaid programs.

Corporate Practice; Fee-Splitting; Professional Licensure

The laws of some states restrict or prohibit the “corporate practice of medicine,” meaning business corporations cannot provide medical services through the direct employment of medical providers, or by exercising control over medical decisions by medical providers. In some states, the specific restrictions explicitly apply to physical therapy services, in others the specific restrictions have been interpreted to apply to physical therapy services or are not fully developed. The specific restrictions with respect to enforcement of the corporate practice of medicine or physical therapy vary from state to state and certain states in which we operate may present higher risk than others.

Many states also have laws that prohibit a non-physical therapy entity, individual, or provider fee-splitting. Generally, these laws restrict business arrangements that involve a physical therapist sharing professional fees with a referral source, but in some states, these laws have been interpreted to extend to management agreements between physical therapists and business entities under some circumstances.

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We believe that each of our facilities and medical provider partners comply with any current corporate practice and fee-splitting laws of the state in which they are located. However, such laws and regulations vary from state to state and are enforced by governmental, judicial, law enforcement or regulatory authorities with broad discretion. We cannot be certain that our interpretation of certain laws and regulations is correct with respect to how we have structured our operations, service agreements and other arrangements with physical therapists in the states in which we operate. Future interpretations of corporate practice and fee-splitting laws, the enactment of new legislation, or the adoption of new regulations relating to these laws could cause us to have to restructure our business operations or close our facilities in a particular state.

Health Information Practices

HIPAA required the Health and Human Services Department to adopt standards to protect the privacy and security of individually identifiable health-related information. HIPAA created a source of funding for fraud control to coordinate federal, state and local healthcare law enforcement programs, conduct investigations, provide guidance to the healthcare industry concerning fraudulent healthcare practices, and establish a national data bank to receive and report final adverse actions. HIPAA also criminalized certain forms of health fraud against all public and private payors. Additionally, HIPAA mandates the adoption of standards regarding the exchange of healthcare information in an effort to ensure the privacy and electronic security of patient information and standards relating to the privacy of health information. Sanctions for failing to comply with HIPAA include criminal penalties and civil sanctions. In February of 2009, the American Recovery and Reinvestment Act of 2009 (“ARRA”) was signed into law. Title XIII of ARRA, HITECH, provided for substantial Medicare and Medicaid incentives for providers to adopt electronic health records (“EHRs”) and grants for the development of health information exchange (“HIE”). Recognizing that HIE and EHR systems will not be implemented unless the public can be assured that the privacy and security of patient information in such systems is protected, HITECH also significantly expanded the scope of the privacy and security requirements under HIPAA. Most notable are the mandatory breach notification requirements and a heightened enforcement scheme that includes increased penalties, and which now apply to business associates as well as to covered entities. In addition to HIPAA, a number of states have adopted laws and/or regulations applicable in the use and disclosure of individually identifiable health information that can be more stringent than comparable provisions under HIPAA.

In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of personal information. State statutes and regulations vary from state to state, some of which are more stringent than HIPAA.

We believe that our operations comply with applicable standards for privacy and security of protected healthcare information. We cannot predict what negative effect, if any, HIPAA/HITECH or any applicable state law or regulation will have on our business.

Other Regulatory Factors

Political, economic and regulatory influences are fundamentally changing the healthcare industry in the United States. Congress, state legislatures and the private sector continue to review and assess alternative healthcare delivery and payment systems. Potential alternative approaches could include mandated basic healthcare benefits, controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, and price controls. Legislative debate is expected to continue in the future and market forces are expected to demand only modest increases or reduced costs. For instance, managed care entities are demanding lower reimbursement rates from healthcare providers and, in some cases, are requiring or encouraging providers to accept capitated payments that may not allow providers to cover their full costs or realize traditional levels of profitability. We cannot reasonably predict what impact the adoption of federal or state healthcare reform measures or future private sector reform may have on our business.

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Available Information

We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934 and, therefore, file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information are available on the SEC’s website at www.sec.gov.

Our website address is www.atipt.com. Our filings with the SEC, as well as other pertinent financial and Company information, are available at no cost on our website through the investor relations section as soon as reasonably practicable after the filing of such reports with the SEC. The information on our website is not incorporated as a part of this Annual Report.

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Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties ~~include, but are not limited to, the following risks, uncertainties and other factors:~~

•that could adversely affect our ~~being a recently incorporated company with no operating history and no revenues;~~

•~~our ability to select an appropriate target business or businesses;~~

•~~our ability to complete our initial business combination;~~

•~~our expectations around the performance of a prospective target business or businesses;~~

•~~our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;~~

•~~our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination;~~

•~~our potential ability to obtain additional financing to complete our initial business combination;~~

•~~our pool of prospective target businesses;~~

•~~our ability to consummate an initial business combination due to the uncertainty resulting from the recent COVID-19 pandemic;~~

• ~~the ability of our officers and directors to generate a number of potential business combination opportunities;~~

•~~our public securities' potential liquidity and trading;~~

~~Risk Factors~~

business. You should consider carefully ~~all of~~ the risks and uncertainties described below ~~together with the~~before deciding to invest in our Common Stock, in addition to other information contained in this Annual Report on Form 10-K, ~~the prospectus associated with~~including our ~~Initial Public Offering~~consolidated financial statements and ~~the registration statement of which such prospectus forms a part before making a decision to invest in our securities. If any of the following events occur, our business, financial condition~~related notes and ~~operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.~~

~~We are a recently incorporated company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.~~

We are a recently incorporated company with no operating results, and we will not commence operations until completing a business combination. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our initial business combination with one or more target businesses. We have no plans, arrangements or understandings with any prospective target business concerning a business combination and may be unable to complete our initial business combination. If we fail to complete our initial business combination, we will never generate any operating revenues.

Our public stockholders may not be afforded an opportunity to vote on our proposed business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination.

We may not hold a stockholder vote to approve our initial business combination unless the business combination would typically require stockholder approval under applicable law or stock exchange listing requirements or if we decide to hold a stockholder vote for business or other reasons. For instance, the NYSE rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore, if we were structuring a business combination that required us to issue more than 20% of our outstanding shares, we would seek stockholder approval of such business combination. However, except as required by applicable law or stock exchange listing requirements, the decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may consummate our initial business combination even if holders of a majority of our public shares do not approve of the business combination we consummate. Please see the section entitled “Stockholders May Not Have the Ability to Approve Our Initial Business Combination” for additional information.

If we seek stockholder approval of our initial business combination, our Sponsor, officers and directors have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote.

Unlike many other blank check companies in which the initial stockholders agree to vote their Founder Shares in accordance with the majority of the votes cast by the public stockholders in connection with an initial business combination, our Sponsor, officers and directors have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with us, to vote any Founder Shares and any public shares held by them, in favor of our initial business combination. As a result, in addition to our initial stockholders’ Founder Shares, we would need 12,937,501, or approximately 37.5% of 34,500,000 public shares sold in the Initial Public Offering to be voted in favor of a transaction (assuming all outstanding stock is voted) in order to have such initial business combination approved (or, if the applicable rules of the NYSE then in effect require approval by a majority of the votes cast by public stockholders, we would need 17,250,001 of public shares sold in the Initial Public Offering to be voted in favor of a transaction (assuming all outstanding stock is voted) in order to have such initial business combination approved). We expect that our initial stockholders and their permitted transferees will own at least 20% of our outstanding common stock at the time of any such stockholder vote. Accordingly, if we seek stockholder approval of our initial business combination, it is more likely that the necessary stockholder approval will be received than would be the case if such persons agreed to vote their Founder Shares in accordance with the majority of the votes cast by our public stockholders.

Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of such business combination.

At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of any target businesses. Since our board of directors may complete a business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the business combination, unless we seek such stockholder approval. Accordingly, if we do not seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial business combination.

The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target.

We may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the business combination. The amount of the deferred underwriting commissions payable to the underwriters will not be adjusted for any shares that are redeemed in connection with a business combination and such amount of deferred underwriting discount is not available for us to use as consideration in an initial business combination. If we are able to consummate an initial business combination, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay and the payment of the deferred underwriting commissions. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than $5,000,001 (so that we do not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a business combination transaction with us.

The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.

At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore we will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the Trust Account to meet such requirements, or arrange for third-party financing. In addition, if a larger number of shares is submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the Trust Account or arrange for third-party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure.

The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.

If our initial business combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful is increased. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the Trust Account until we liquidate the Trust Account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.

The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.

Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination within 24 months from the closing of the Initial Public Offering. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.

We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.

Our Sponsor, officers and directors have agreed that we must complete our initial business combination within 24 months from the closing of the Initial Public Offering. We may not be able to find a suitable target business and complete our initial business combination within such time period. Our ability to complete our initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. For example, the outbreak of COVID-19 continues to grow both in the United States and globally and, while the extent of the impact of the outbreak on us will depend on future developments, it could limit our ability to complete our initial business combination, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Additionally, the outbreak of COVID-19 may negatively impact businesses we may seek to acquire. If we have not completed our initial business combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless. See “—If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.

The securities in which we invest the proceeds held in the Trust Account could bear a negative rate of interest, which could reduce the interest income available for payment of taxes or reduce the value of the assets held in trust such that the per-share redemption amount received by stockholders may be less than $10.00 per share.

The net proceeds of the Initial Public Offering and certain proceeds from the sale of the private placement warrants, in the amount of $345,000,000, are held in an interest-bearing Trust Account. The proceeds held in the Trust Account may only be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. While short-term U.S. treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event of very low or negative yields, the amount of interest income (which we may use to pay our taxes, if any) would be reduced. In the event that we are unable to complete our initial business combination, our public stockholders are entitled to receive their pro-rata share of the proceeds then held in the Trust Account, plus any interest income (less up to $100,000 of interest to pay dissolution expenses). If the balance of the Trust Account is reduced below $345,000,000 as a result of negative interest rates, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.

If we seek stockholder approval of our initial business combination, our Sponsor, directors, officers, advisors or any of their affiliates may elect to purchase shares or warrants from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our securities.

If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our Sponsor, directors, officers, advisors or any of their affiliates may purchase shares or warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. The purpose of such purchases could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. This may result in the completion of our initial business combination that may not otherwise have been possible.

In addition, if such purchases are made, the public “float” of our securities and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.

We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem public shares. In the event that a stockholder fails to comply with these procedures, its shares may not be redeemed.

You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares or warrants, potentially at a loss.

Our public stockholders will be entitled to receive funds from the Trust Account only upon the earliest to occur of: (i) the completion of our initial business combination, and then only in connection with those public shares that such stockholder properly elected to redeem, subject to the limitations described herein; (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering or (B) with respect to any other provision relating to stockholders' rights or pre-initial business combination activity; and (iii) the redemption of all of our public shares if we have not completed our initial business combination within 24 months from the closing of the Initial Public Offering, subject to applicable law and as further described herein. In addition, if we have not completed our initial business combination within 24 months from the closing of the Initial Public Offering for any reason, compliance with Delaware law may require that we submit a plan of dissolution to our then existing stockholders for approval prior to the distribution of the proceeds held in our Trust Account. In that case, public stockholders may be forced to wait beyond 24 months from the closing of the Initial Public Offering before they receive funds from our Trust Account. In no other circumstances will a public stockholder have any right or interest of any kind in the Trust Account. Holders of warrants will not have any right to the proceeds held in the Trust Account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.

~~The NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.~~

Our units, Class A common stock and warrants are listed on the NYSE. We cannot assure you that our securities will be, or will continue to be, listed on the NYSE in the future or prior to our initial business combination. In order to continue listing our securities on the NYSE prior to our initial business combination, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum number of holders of our securities. Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements, in order to continue to maintain the listing of our securities on the NYSE. For instance, in order for our Class A common stock to be listed upon the consummation of our initial business combination, at such time, our share price would generally be required to be at least $4.00 per share, our total market capitalization would be required to be at least $200,000,000, the aggregate market value of publicly-held shares would be required to be at least $100,000,000 and we would be required to have at least 400 round lot holders. We cannot assure you that we will be able to meet those initial listing requirements at that time.

If the NYSE delists any of our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect such securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

•~~a limited availability of market quotations for our securities;~~

•~~reduced liquidity for our securities;~~

•a determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

•~~a limited amount of news and analyst coverage; and~~

•~~a decreased ability to issue additional securities or obtain additional financing in the future.~~

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Our units, our Class A common stock and warrants are listed on the NYSE, and as a result are covered securities. Although the states are preempted from regulating the sale of covered securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the state of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on the NYSE, our securities would not qualify as covered securities under such statute and we would be subject to regulation in each state in which we offer our securities.

~~You will not be entitled to protections normally afforded to investors of many other blank check companies.~~

Since the net proceeds of the Initial Public Offering and the sale of the private placement warrants are intended to be used to complete an initial business combination with a target business, which at the time of the Initial Public Offering had not been selected, we may be deemed to be a “blank check” company under the United States securities laws. However, because we have net tangible assets in excess of $5,000,000 and timely file Current Reports on Form 8-K, including an audited balance sheet of the company demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means our units will be immediately tradable and we will have a longer period of time to complete our initial business combination than do companies subject to Rule 419. Moreover, if the Initial Public Offering were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the Trust Account to us unless and until the funds in the Trust Account were released to us in connection with our completion of an initial business combination.

If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.

If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in the Initial Public Offering, which we refer to as the “Excess Shares,” without our prior consent. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our initial business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our initial business combination. As a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your shares in open market transactions, potentially at a loss.

Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on our redemption of their shares, and our warrants will expire worthless.

We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, if we are obligated to pay cash for the shares of Class A common stock which our public stockholders redeemed and, in the event we seek stockholder approval of our initial business combination, we make purchases of our Class A common stock, potentially reducing the resources available to us for our initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account, and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “—If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.

If the net proceeds of the Initial Public Offering and the sale of the private placement warrants not being held in the Trust Account are insufficient to allow us to operate for at least the 24 months following the closing of the Initial Public Offering, we may be unable to complete our initial business combination.

As of December 31, 2020, we had approximately $1.3 million of funds available to us outside of the Trust Account. The funds available to us outside of the Trust Account may not be sufficient to allow us to operate for at least the 24 months following the closing of the Initial Public Offering, assuming that our initial business combination is not completed during that time. We expect to incur significant costs in pursuit of our acquisition plans. Management’s plans to address this need for capital through the Initial Public Offering and potential loans from certain of our affiliates are discussed in the section of this Form 10-K titled “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations.~~” However, our affiliates~~"

The following risks and uncertainties are not ~~obligated~~the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our Common Stock could decline. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Notes Regarding Forward-Looking Statements.”

Risks Relating to ~~make loans~~our Business and Industry

We depend upon governmental payors through Medicare and Medicaid reimbursement and decreases in Medicare reimbursement rates may adversely affect our financial results.

A significant portion of our net patient revenue is derived from governmental third-party payors. In 2021, approximately 23.7% of our net patient revenue was derived from Medicare and Medicaid. In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program. Additional reforms or other changes to these payment systems may be proposed or adopted, either by the U.S. Congress (“Congress”) or by the Centers for Medicare & Medicaid Services (“CMS”), including bundled payments, outcomes-based payment methodologies and a shift away from traditional fee-for-service reimbursement. If revised regulations are adopted, the availability, methods and rates of Medicare reimbursements for services of the type furnished at our facilities could change. Some of these changes and proposed changes could adversely affect our business strategy, operations and financial results. The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). In the 2020 MPFS final rule, CMS proposed an increase to the code values for office / outpatient evaluation and management codes and cuts to other codes to maintain budget neutrality of the MPFS. This change in code valuations became effective January 1, 2021. Under the new code values, physical / occupational therapy services expected to see code reductions resulting in an estimated 9% decrease in payment. In December 2020, Congress passed the Consolidated Appropriations Act, which reduced the original approximately 9% reduction in reimbursement for physical and occupational therapy services in 2021 to approximately 3% and suspended a 2% sequestration deduction through the first quarter of 2021. On April 14, 2021, H.R. 1868 was signed into law. H.R. 1868 extended the suspension of the 2% Medicare sequestration reduction through 2021. The proposed 2022 budget, released by CMS in July 2021, called for an approximate 3.75% further reduction in reimbursement rates as well as a 15% decrease in payments for services performed by physical therapy assistants. However, in December 2021, the Protecting Medicare and American Farmers from Sequester Cuts Act was signed into law. As a result, the reimbursement rate reduction beginning in January 2022 was approximately 0.75%. The Protecting Medicare and American Farmers from Sequester Cuts Act did not address the 15% decrease in payments for services performed by physical therapy assistants, which began on January 1, 2022. Additionally, a further reduction through resuming sequestration has been postponed. Sequestration reductions will resume at 1% after March 31, 2022, and by an additional 1% after June 30, 2022, which will result in an overall reduction of 2% in reimbursement rates by June 30, 2022 unless acted upon through a Congressional measure.

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Statutes, regulations and payment rules governing the delivery of therapy services to Medicare and Medicaid beneficiaries are complex and subject to interpretation. Compliance with such laws and regulations requires significant expense and management attention and can be subject to future government review and interpretation, as well as significant regulatory actions, including fines, penalties and exclusion from the Medicare and Medicaid programs if we are found to be in non-compliance. Any required actions to return to compliance, or any challenges to such regulatory actions, could be costly and time consuming and may not result in a favorable reversal of any such fines, penalties or exclusions.

Given the history of frequent revisions to the Medicare and Medicaid programs and their complexity, reimbursement rates and rules, we may not continue to receive reimbursement rates from Medicare or Medicaid that sufficiently compensate us for services or, in some instances, cover operating costs. Limits on reimbursement rates or the scope of services being reimbursed could have a material adverse effect on our revenue, financial condition and results of operations. Additionally, any delay or default by the federal or state governments in making Medicare or Medicaid reimbursement payments could materially and adversely affect our business, financial condition and results of operations.

We anticipate the federal and state governments to continue their efforts to contain growth in Medicaid expenditures, which could adversely affect our revenue and profitability.

Medicaid spending has increased rapidly in recent years, becoming a significant component of state budgets. This, combined with slower state revenue growth, has led the federal government and many states to institute measures aimed at controlling the growth of Medicaid spending, and in some instances reducing aggregate Medicaid spending. We expect these state and federal efforts to continue for the foreseeable future. Furthermore, not all of the states in which we operate have elected to expand Medicaid as part of federal healthcare reform legislation. There can be no assurance that the program, on the current terms or otherwise, will continue for any particular period of time beyond the foreseeable future. Historically, state budget pressures have translated into reductions in state spending. In addition, an economic downturn, coupled with sustained unemployment, may also impact the number of enrollees in managed care programs as well as the profitability of managed care companies, which could result in reduced reimbursement rates. If Medicaid reimbursement rates are reduced or fail to increase as quickly as our costs, or if there are changes in the rules governing the Medicaid program that are disadvantageous to our business, our business and results of operations could be materially and adversely affected.

Payments we receive from Medicare and Medicaid are subject to potential retroactive reduction.

Payments we receive from Medicare and Medicaid can be retroactively adjusted during the claims settlement process or as a result of post-payment audits. Payors may disallow our requests for reimbursement, or recoup amounts previously reimbursed, based on determinations by the payors or their third-party audit contractors that certain costs are not reimbursable because the documentation provided was inadequate or because certain services were not covered or were deemed medically unnecessary. Significant adjustments, recoupments or repayments of our Medicare or Medicaid revenue, and the costs associated with complying with audits and investigations by regulatory and governmental authorities, could adversely affect our financial condition and results of operations.

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Additionally, from time to time we become aware, either based on information provided by third parties and/or the results of internal reviews, of payments from payor sources that were either wholly or partially in excess of the amount that we should have been paid for the services provided. We are also subject to regular post-payment inquiries, investigations and audits of the claims we submit to Medicare and Medicaid for payment for our services. These post-payment reviews have increased as a result of government cost-containment initiatives. Overpayments may result from a variety of factors, including insufficient documentation to support the services rendered or the medical necessity of such services, or other failures to document the satisfaction of the necessary conditions of payment. We are required by law in most instances to refund the full amount of the overpayment after becoming aware of it, and failure to do so within requisite time limits imposed by applicable law could lead to significant fines and penalties being imposed on us. Furthermore, initial billing of and payments for services that are unsupported by the requisite documentation and satisfaction of any other conditions of payment, regardless of our awareness of the failure at the time of the billing or payment, could expose us to significant fines and penalties. We and/or certain of our operating companies could also be subject to exclusion from participation in the Medicare or Medicaid programs in some circumstances, in addition to any monetary or other fines, penalties or sanctions that we may incur under applicable federal and/or state law. Our repayment of any overpayments, as well as any related fines, penalties or other sanctions that we may be subject to, and any costs incurred in responding to requests for records or pursuing the reversal of payment denials, could be significant and could have a material and adverse effect on our results of operations and financial condition.

From time to time we are also involved in various external governmental investigations, subpoenas, audits and reviews, including in connection with our claims for reimbursement and associated payments. Reviews, audits and investigations of this sort can lead to governmental subpoenas or other actions, which can result in the assessment of damages, civil or criminal fines or penalties, or other sanctions, including restrictions or changes in the way we conduct business, loss of licensure or exclusion from participation in government programs. Failure to comply with applicable laws, regulations and rules could have a material and adverse effect on our results of operations and financial condition. Furthermore, becoming subject to these governmental subpoenas, investigations, audits and reviews can require us to incur significant legal and document production expenses as we cooperate with the governmental authorities, regardless of whether the particular investigation, audit or review leads to the identification of underlying issues.

We depend upon reimbursement by third-party payors.

A significant portion of our revenue is derived from third-party payors. In 2021, approximately 56.3% of our net patient revenue was derived from commercial payors. These private third-party payors attempt to control healthcare costs by contracting with healthcare providers to obtain services on a discounted basis. We believe that this trend may continue and may limit reimbursement for healthcare services in the future. In addition, Company claims are closely scrutinized, and failure to submit accurate and complete clinical documentation, including specific documentation by the service provider, could result in adverse actions taken by the payor. Further, if insurers or managed care companies from whom we receive substantial payments were to reduce the amounts they pay for services, our profit margins may decline, or we may lose patients if we choose not to renew our contracts with these insurers at lower rates. In addition, in certain geographical areas, our clinics must be approved as providers by key health maintenance organizations and preferred provider plans. Failure to obtain or maintain these approvals would adversely affect our financial results.

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If payments from workers’ compensation payors are reduced or eliminated, our revenue and profitability could be adversely affected.

In 2021, approximately 14.3% of our net patient revenue was derived from workers’ compensation payors. State workers’ compensation laws and regulations vary and changes to state laws could result in decreased reimbursement by third-party payors for physical therapy services, which could have an adverse impact on our revenue. Further, payments received under certain workers’ compensation arrangements may be based on pre-determined state fee schedules, which may be impacted by changes in state funding. Any modification to such schedules that reduces our ability to receive payments from workers’ compensation payors could be significant and could have a material adverse effect on our results of operations and financial condition. We may continue to experience unfavorable changes in rates and payor and service mix shifts toward lower reimbursing payor classes as opposed to higher reimbursing classes such as workers' compensation and auto personal injury. These changes may reflect longer term trends in our markets. Adverse changes in payor mix and/or payor rates are likely to adversely affect our results of operations in future periods, which effects may be material.

Our payor contracts are subject to renegotiation or termination, which could result in a decrease in our revenue or profits.

The majority of our payor contracts are subject to termination by either party. Such contracts are routinely amended (sometimes through unilateral action by payors with respect to payment policies), renegotiated, subjected to bidding processes with our competitors, or terminated altogether. Oftentimes in the renegotiation process, certain lines of business may not be renewed or a payor may enlarge its provider network or otherwise change the way it conducts its business in a way that adversely impacts our revenue. In other cases, a payor may reduce its provider network in exchange for lower payment rates. Our revenue from a payor may also be adversely affected if the payor alters its utilization management expectations and/or administrative procedures for payments and audits, changes its order of preference among the providers to which it refers business or imposes a third-party administrator, network manager or other intermediary.

We are subject to risks associated with public health crises and epidemics / pandemics, such as COVID-19 (including variants and any future emerging variants).

Our operations expose us to risks associated with public health crises and epidemics / pandemics, such as the COVID-19 pandemic that has spread globally since early 2020.

The COVID-19 pandemic (including variants and any future emerging variants) has had, and may continue to have, a material and adverse impact on our operations, including through restrictions on the operation of physical locations, potential cancellations of physical therapy patient appointments, clinical staff unavailable to work due to sickness or exposure and a decline in the scheduling of new or additional patient appointments. Due to these impacts and measures, we have experienced, and may continue to experience, significant and unpredictable reductions and cancellations of patient visits.

The continued spread of COVID-19, and the related global, national and regional policy response has also led to disruption and volatility in the global capital markets, which increases economic uncertainty and the cost of, and adversely impacts access to, capital. The COVID-19 pandemic has caused economic impacts with potentially extended duration, and could directly or indirectly cause a global recession, continued elevated wage inflation, inflation in the cost of goods, services and other operating inputs, changes in the market interest rate environment and other economic impacts.

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The COVID-19 pandemic continues to impact the global economy and cause significant macroeconomic uncertainty. Infection rates vary across the country in which we operate. As we have experienced with recent variants, there may be additional waves of infection, which could be more contagious than prior waves. Governmental authorities continue to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, masking recommendations and mandates, vaccine recommendations and mandates, limits on gatherings, quarantines, shelter-in-place orders and business shutdowns. Government measures intended to address the COVID-19 pandemic, such as mandatory quarantines, vaccine mandates and regular testing requirements, could also impact the availability of our employees or other workers or could lead to attrition of key employees or reduced visits.

Our financial results have been, and are expected to continue to be, negatively impacted by the COVID-19 pandemic. Visits per day decreased approximately 50.5%, 27.9% and 24.4% in the quarters ended June 30, 2020, September 30, 2020 and December 31, 2020, respectively, in relation to the comparative prior year periods. We continue to experience lower aggregate patient volumes in many geographic areas in which we operate as compared to prior to the pandemic. The current economic conditions resulting from COVID-19 have significantly impacted consumer behavior, which have reduced, and could continue to reduce, customer spend on certain medical procedures, including physical therapy, in both the short- and medium-term. Furthermore, we are unable to predict the impact that COVID-19 may have going forward on our business, results of operations or financial position of any of our major payors, which could impact each payor to a varying degree and at different times and could ultimately impact our own financial performance. Certain of our competitors may also be better equipped to weather the impact of COVID-19 and be better able to address changes in customer demand.

Additionally, enhanced cleaning, sanitization and social distancing protocols, mask policy for all clinicians, patients and support staff and screening protocols for all employees and patients designed to identify possible COVID-19 symptoms, and initiatives we may take in the future, require expenditures of time and resources that we would otherwise be investing in growing the business and could result in slower growth and opportunity costs.

The COVID-19 pandemic could cause any of the impacts described above to recur or could cause other unpredictable events, including events that could impact our ability to access funds from financial institutions and capital markets on terms favorable to us, or at all, and there can be no assurance that the COVID-19 pandemic will not materially impact our results of operations and financial position in the future. Further, even though certain vaccines have been widely distributed and accepted in some geographies, there can be no assurance that the vaccines will ultimately be successful in limiting or stopping the spread of COVID-19, either over the long-term or against new, emerging variants of COVID-19. Even after the COVID-19 pandemic subsides, the U.S. economy and other major global economies may experience a recession, and we anticipate our business and operations could be materially adversely affected by a prolonged recession in the U.S. and other major markets. Therefore, it remains difficult to predict the ultimate impact of the pandemic on our results of operations and financial position. In addition to the extent that COVID-19 adversely affects our results of operations or financial position, it may also heighten the other risks described in this Item 1A. Risk Factors.

The full extent to which the COVID-19 pandemic and the various governmental responses to it impact our business, operations and financial results will depend on numerous other evolving factors that we may not be able to raise additional financing from unaffiliated parties necessary to fund our expenses. Any such event in the future may negatively impact the analysis regarding our ability to continue as a going concern at such time.accurately predict, including:

•the duration and scope of the pandemic;

•the effectiveness of vaccines against COVID-19 (including against emerging variant strains);

•governmental, business and individual actions that have been and continue to be taken in response to the pandemic, and the resulting impacts on our patient volumes and other aspects of our business;

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•the impact on our workforce of mandatory COVID-19 vaccination of employees;

•availability and size of the clinical labor force, competition for the employment of clinical labor and wage inflation related to clinical labor;

•our ability to comply with the requirements necessary to retain the Coronavirus Aid, Relief, and Economic Security Act provider relief funds we received;

~~We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.~~

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations

The following discussion and analysis of ATI Physical Therapy, Inc. and its subsidiaries (herein referred to as “we,” ”us,” “the Company,” “our Company,” or "ATI") should be read in conjunction with the Company’s consolidated financial statements and related notes thereto included elsewhere in this Annual Report. For management's discussion and analysis on the Company's financial condition and results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's amended S-1 registration statement filed with the SEC on July 28, 2021 (the "Amended S-1").

We make statements in this discussion that are forward-looking and involve risks and uncertainties. These statements contain forward-looking information relating to the financial condition, results of operations, plans, objectives, future performance and business of the Company. The forward-looking statements are based on our current views and assumptions, and actual results could differ materially from those anticipated in such forward-looking statements due to factors including, but not limited to, those discussed under “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors.”

Many factors are beyond our control. Given these uncertainties, you should not place undue reliance on our forward-looking statements. Our forward-looking statements represent our estimates and assumptions only as of the date of this Annual Report. Except as required by law, we are under no obligation to update any forward-looking statement, regardless of the reason the statement may no longer be accurate.

Certain amounts in this Management's Discussion and Analysis may not add due to rounding. All percentages have been calculated using unrounded amounts for the years ended December 31, 2021, 2020 and 2019.

All dollar amounts are presented in thousands, unless indicated otherwise.

Company Overview

~~References~~We are a nationally recognized outpatient physical therapy provider in the United States specializing in outpatient rehabilitation and adjacent healthcare services, with 910 owned clinics (as well as 20 clinics under management service agreements) located in 25 states as of December 31, 2021. We operate with a commitment to providing our patients, medical provider partners, payors and employers with evidence-based, patient-centric care.

We offer a variety of services within our clinics, including physical therapy to treat spine, shoulder, knee and neck injuries or pain; work injury rehabilitation services, including work conditioning and work hardening; hand therapy; and other specialized treatment services. Our Company’s team of professionals is dedicated to helping return patients to optimal physical health.

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In addition to providing services to physical therapy patients at outpatient rehabilitation clinics, we provide services through our ATI Worksite Solutions (“AWS”) program, Management Service Agreements (“MSA”) and Sports Medicine arrangements. AWS provides an on-site team of healthcare professionals at employer worksites to promote work-related injury prevention, facilitate expedient and appropriate return-to-work follow-up and maintain the health and well-being of the workforce. Our MSA arrangements typically include the Company providing management and physical therapy-related services to physician-owned physical therapy clinics. Sports Medicine arrangements provide certified healthcare professionals to various schools, universities and other institutions to perform on-site physical therapy and rehabilitation services.

The Business Combination

On June 16, 2021 (the “Closing Date”), a Business Combination transaction (the “Business Combination”) was finalized pursuant to the ~~“Company,” “our,” “us” or “we” refer to~~Agreement and Plan of Merger ("Merger Agreement"), dated February 21, 2021 between the operating company, Wilco Holdco, Inc. (“Wilco Holdco”), and Fortress Value Acquisition Corp. ~~II.~~II (herein referred to as "FAII" and "FVAC"), a special purpose acquisition company. In connection with the closing of the Business Combination, the Company changed its name from Fortress Value Acquisition Corp. II to ATI Physical Therapy, Inc. The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles ("GAAP"). The Company’s common stock is listed on the New York Stock Exchange ("NYSE") under the symbol “ATIP.”

At the time of the Business Combination, stockholders of Wilco Holdco, Inc. received 130.3 million shares of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”), for the outstanding shares of Wilco Holdco common stock, par value $0.01 per share, that such stockholders owned. Immediately following the Business Combination, there were 207.3 million issued shares of Class A common stock of ATI Physical Therapy, Inc.

As part of the Business Combination, the Company received cash of $345.0 million from cash in trust with FAII and $300.0 million of cash from the PIPE investment, net of $89.9 million of cash used for redemptions and Wilco Holdco and FAII transaction costs. The funds received by the Company were used for full repayment of the second lien term loan of $231.3 million, partial repayment of the first lien term loan of $216.7 million, cash payment to Wilco Holdco preferred stockholders of $59.0 million and Wilco Holdco transaction costs. Refer to Note 3 - Business Combinations and Divestiture in the consolidated financial statements for further details.

The Company had outstanding Public Warrants to purchase an aggregate of 6.9 million shares of the Company’s Class A common stock and outstanding Private Placement Warrants to purchase an aggregate of 3.0 million shares of the Company's Class A common stock immediately following the closing of the Business Combination. Refer to Note 13 - Warrant Liability in the consolidated financial statements for further details.

In addition, certain stockholders may receive up to 15.0 million Earnout Shares and 8.6 million Vesting Shares if the price of Class A common stock trading on the New York Stock Exchange exceeds certain thresholds during the ten-year period following the completion of the Business Combination. Refer to Note 14 - Contingent Common Shares Liabilityin the consolidated financial statements for further details.

Home Health divestiture

On August 25, 2021, the Company entered into an agreement to divest its Home Health service line. On October 1, 2021, the transaction closed with a sale price of $7.3 million, and the Company recognized a gain of $5.8 million in other expense (income), net in its consolidated statement of operations. The major classes of assets and liabilities associated with the Home Health service line consisted of predominantly accounts receivable, accrued expenses and other liabilities which were not material.

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2021 acquisitions

Recent changes in company CEO and CHRO leadership

Effective July 23, 2021, Cedric Coco, Chief Human Resources Officer ("CHRO"), resigned from the Company. The Company and Mr. Coco entered into a mutual release pursuant to which Mr. Coco is eligible for the payments and benefits in accordance with Mr. Coco's employment agreement.

Effective August 7, 2021, Labeed Diab stepped down from his positions as Chief Executive Officer ("CEO") of the Company and as a member of the board of directors of the Company. The Company and Mr. Diab entered into a mutual release pursuant to which Mr. Diab is eligible for the payments and benefits in accordance with Mr. Diab's employment agreement.

Effective August 9, 2021, John (Jack) Larsen was named Executive Chairman of the Company and has taken an active role in leading the Company. The Company is conducting a national search for a new Chief Executive Officer with the assistance of an executive search firm.

Trends and Factors Affecting the Company’s Future Performance and Comparability of Results

As a result of developing trends in our business, our results for 2021 were significantly adversely affected as compared to our prior historical periods and prior expectations, including in respect of revenue, net (loss) income and Adjusted EBITDA. These trends may continue to have adverse effects on us in future periods as well.

We believe that these adverse effects are attributable to a combination of factors, which include:

•The attrition of our workforce during periods of 2021 caused, in part, by changes made during the COVID-19 pandemic related to compensation, staffing levels and support for clinicians. We have taken swift actions to offset those changes, but the impact of attrition has impacted overall profitability for the year.

•Labor market dynamics increased competition for the available physical therapy providers in the workforce, creating wage inflation and elevated employee attrition at ATI.

•Decrease in rate per visit primarily driven by continuing less favorable payor and state mix when compared to pre-pandemic profile, with general shift from workers' compensation and auto personal injury to commercial and government, and further impacted by mix-shift out of higher reimbursement states.

•Lower than expected referral and patient visit volumes caused, in part, by volume softness in certain regions and states and the increase in COVID-19 cases during the fourth quarter of 2021, which has continued into the beginning of 2022, due to the outbreak of additional variants.

Our ability to achieve our business plan depends upon a number of factors, including the success of a number of continued steps being taken related to clinical staffing levels and increasing visit volumes.

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The Company determined that the revision to its forecast in late July 2021, including the factors related to the revision of its forecast, constituted an interim triggering event that required further analysis with respect to potential impairment to goodwill, trade name indefinite-lived intangible and other assets. Accordingly, the Company performed interim quantitative impairment testing and determined that the fair value amounts were below the respective carrying amounts. As a result, the Company recorded non-cash impairment charges of $419.4 million related to goodwill and $33.7 million related to the trade name indefinite-lived intangible asset as of the June 30, 2021 balance sheet date. These charges are non-cash in nature and do not affect our liquidity or debt covenants.

In October 2021, the Company reported a further revision to its forecast to reflect lower than expected patient visit volume. The Company determined that the factors related to the revision of its forecast that were present as of September 30, 2021 constituted an interim triggering event that required further analysis with respect to potential impairment to goodwill, trade name indefinite-lived intangible and other assets. Accordingly, the Company performed interim quantitative impairment testing and determined that the fair value amounts were below the respective carrying amounts. As a result, the Company recorded non-cash impairment charges of $307.4 million related to goodwill and $200.6 million related to the trade name indefinite-lived intangible asset as of the September 30, 2021 balance sheet date. These charges are non-cash in nature and do not affect our liquidity or debt covenants. Refer to Note 5 - Goodwill, Trade Name and Other Intangible Assets in the consolidated financial statements for further details.

COVID-19 pandemic and volume impacts

As a result of the COVID-19 pandemic, visits per day ("VPD") decreased to a low point of 12,643 during the quarter ended June 30, 2020. Since then, quarterly VPD was 18,159, 19,441, 19,520, 21,569, 20,674 and 20,649 in the quarters ended September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021, respectively, as local restrictions in certain markets, referral levels and individual routines evolved compared to prior periods. During the fourth quarter of 2021, we observed volume softness caused, in part, by the recent increase in COVID-19 cases due to the outbreak of additional variants, which has continued to impact visit volumes in the beginning of 2022.

As demand for physical therapy services has increased in the market since its low-point during the quarter ended June 30, 2020, the Company has focused on increasing its clinical staffing levels by hiring clinicians and reducing levels of clinician attrition that have been elevated relative to historical levels. The elevated levels of attrition were caused, in part, by changes made during the COVID-19 pandemic related to compensation, staffing levels and support for clinicians. We have implemented a range of actions related to compensation, staffing levels, clinical and professional development and other initiatives in an effort to retain and attract therapists across our platform, which has increased our current and future expectations for labor costs. As we improve our staffing levels, we are working toward improving labor productivity as we onboard newly hired clinicians. In an effort to drive more volume and visits per day, in addition to integrating our new team members, we are working to strengthen relationships with our partner providers and other referral sources across our geographic footprint.

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The chart below reflects the quarterly trend in VPD.

The COVID-19 pandemic is still evolving and the full extent of its future impact remains unknown and difficult to predict. The future impact of the COVID-19 pandemic on our performance will depend on certain developments, including the duration and spread of the virus and its newly identified strains, effectiveness and adoption rates of vaccines and other therapeutic remedies, the potential for continued or reinstated restrictive policies enforced by federal, state and local governments, and the impact of the virus and vaccination requirements on our workforce, all of which create uncertainty and cannot be predicted. While we expect the disruption caused by COVID-19 and resulting impacts to diminish over time, we cannot predict the length of such impacts, and if such impacts continue for an extended period, it could have a continued effect on the Company’s results of operations, financial condition and cash flows, which could be material.

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CARES Act

On March 27, 2020, the CARES Act was signed into law providing reimbursement, grants, waivers and other funds to assist health care providers during the COVID-19 pandemic. The Company has realized benefits under the CARES Act including, but not limited to, the following:

•In 2020, the Company received approximately $91.5 million of general distribution payments under the Provider Relief Fund. These payments have been recognized as other income in the consolidated statements of operations throughout 2020 in a manner commensurate with the reporting and eligibility requirements issued by HHS. Based on the terms and conditions of the program, including reporting guidance issued by HHS in 2021, the Company believes that it has met the applicable terms and conditions. This includes, but is not limited to, the fact that the Company’s COVID-19 related expenses and lost revenues for the year ended December 31, 2020 exceeded the amount of funds received. To the extent that reporting requirements and terms and conditions are subsequently modified, it may affect the Company’s ability to comply and ability to retain the funds. The following table summarizes the quarterly recognition of general distribution payments recognized in other expense (income), net in the Company's 2020 consolidated statements of operations (in millions):


Three Months Ended
March 31, 2020		June 30, 2020		September 30, 2020		December 31, 2020		Total
$	—	$	(44.3)	$	(23.1)	$	(24.1)	$	(91.5)

•The Company applied for and obtained approval to receive $26.7 million of Medicare Accelerated and Advance Payment Program ("MAAPP") funds during the quarter ended June 30, 2020. During the year ended December 31, 2021, the Company applied $12.6 million in MAAPP funds and transferred $1.8 million in MAAPP funds as part of the divestiture of its Home Health service line. The remaining amounts are required to be applied or repaid by the quarter ending September 30, 2022. Because the Company has not yet met all required performance obligations or performed the services related to the remaining funds, as of December 31, 2021 and December 31, 2020, $12.3 million and $15.5 million of the funds are recorded in accrued expenses and other liabilities, respectively, and zero and $11.2 million of the funds are recorded in other non-current liabilities, respectively. The Company expects the remaining advanced payments to be applied by the quarter ending September 30, 2022.

•The Company elected to defer depositing the employer portion of Social Security taxes for payments due from March 27, 2020 through December 31, 2020, interest-free and penalty-free. Related to these payments, as of December 31, 2021 and December 31, 2020, $5.9 million and $5.5 million is included in accrued expenses and other liabilities, respectively, and zero and $5.5 million is included in other non-current liabilities, respectively.

Market and industry trends and factors

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•U.S. population demographics. The population of adults aged 65 and older in the U.S. is expected to continue to grow and thus expand the Company’s market opportunity. According to the U.S. Census Bureau, the population of adults over the age of 65 is expected to grow 30% from 2020 through 2030.

•Workers’ compensation funding. Payments received under certain workers’ compensation arrangements may be based on predetermined state fee schedules, which may be impacted by changes in state funding.

Key Components of Operating Results

Net patient revenue. Net patient revenues are recorded for physical therapy services that the Company provides to patients including physical therapy, work conditioning, hand therapy, aquatic therapy and functional capacity assessment. Net patient revenue is recognized based on contracted amounts with payors or other established rates, adjusted for the estimated effects of any variable consideration, such as contractual allowances and implicit price concessions. Visit volume is primarily driven by conversion of physician referrals and marketing efforts.

Other revenue. Other revenue consists of revenue generated by our AWS, MSA and Sports Medicine service lines.

Salaries and related costs. Salaries and related costs consist primarily of wages and benefits for our healthcare professionals engaged directly and indirectly in providing services to patients.

Rent, clinic supplies, contract labor and other. Comprised of non-salary, clinic related expenses consisting of rent, clinic supplies, contract labor and other costs including travel expenses and depreciation at our clinics.

Provision for doubtful accounts. Provision for doubtful accounts represents the Company’s estimate of accounts receivable recorded during the period that may ultimately prove uncollectible based upon several factors, including the age of outstanding receivables, the historical experience of collections, the impact of economic conditions and, in some cases, the specific customer account's ability to pay.

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Selling, general and administrative expenses. Selling, general and administrative expenses consist primarily of wages and benefits for corporate personnel, corporate outside services, marketing costs, depreciation of corporate fixed assets, amortization of intangible assets and certain corporate level professional fees, including those related to legal, accounting and payroll.

Goodwill and intangible asset impairment charges. Goodwill and intangible asset impairment charges represent non-cash charges associated with the write-down of both goodwill and trade name indefinite-lived intangible assets.

Change in fair value of warrant liability. Represents non-cash amounts related to the change in the estimated fair value of Public Warrants and Private Placement Warrants.

Change in fair value of contingent common shares liability. Represents non-cash amounts related to the change in the estimated fair value of Earnout Shares and Vesting Shares.

Loss on settlement of redeemable preferred stock. Represents the loss on settlement of the redeemable preferred stock liability based on the value of cash and equity provided to preferred stockholders in relation to the outstanding redeemable preferred stock liability at the time of the closing of the Business Combination.

Interest expense, net. Interest expense includes the cost of borrowing under the Company’s credit facility and amortization of deferred financing costs.

Interest expense on redeemable preferred stock. Represents interest expense related to accruing dividends on the Company’s redeemable preferred stock based on contract terms.

Other expense (income).Other expense (income) is comprised of income statement activity not related to the core operations of the Company.

Key Business Metrics

When evaluating the results of operations, management has identified a number of metrics that allow for specific evaluation of performance on a more detailed basis. See “Results of Operations” for further discussion on financial statement metrics such as net operating revenue, net income, EBITDA and Adjusted EBITDA.

Patient visits

As the main operations of the Company are driven by physical therapy services provided to patients, management considers total patient visits to be a key volume measure of such services. In addition to total patient visits, management analyzes (1) average VPD calculated as total patient visits divided by business days for the period, as this allows for comparability between time periods with an unequal number of business days, and (2) average VPD per clinic, calculated as average VPD divided by the average number of owned clinics open during the period.

Net patient revenue ("NPR") per visit

The Company calculates net patient revenue per visit, its most significant reimbursement metric, by dividing net patient revenue in a period by total patient visits in the same period.

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Clinics

To better understand geographical and location-based trends, the Company evaluates metrics based on the 910 owned and 20 managed clinic locations as of December 31, 2021. De novo clinics represent organic new clinics opened during the current period based on sophisticated site selection analytics. Acqui-novo clinics represent an existing clinic, not previously owned by the Company, in a target geography that provides the Company with an immediate presence, available staff and referral relationships of the former owner within the surrounding areas. Same clinic revenue growth rate identifies revenue growth year over year on clinics that have been owned and operating for over one year. This metric is determined by isolating the population of clinics that have been open for at least 12 months and calculating the percentage change in revenue of this population between the current and prior period.

The following table presents selected operating and financial data that we believe are key indicators of our operating performance:


	Year Ended
		December 31, 2021			December 31, 2020			December 31, 2019
Number of clinics owned (end of period)		910			875			872
Number of clinics managed (end of period)		20			22			27
New clinics during the period		58			23			71
Business days		257			257			255
Average visits per day		20,608			18,274			25,152
Average visits per day per clinic		23.1			21.0			30.0
Total patient visits		5,296,161			4,696,475			6,413,697
Net patient revenue per visit		$	105.94		$	112.76		$	111.88
Same clinic revenue growth rate		4.6		%	(26.9)		%	2.8		%

The following table provides a rollforward of activity related to the number of clinics owned during the corresponding periods:


	Year Ended
		December 31, 2021	December 31, 2020	December 31, 2019
Number of clinics owned (beginning of period)		875	872	810
Add: New clinics opened during the period		51	23	70
Add: Clinics acquired during the period		7	—	1
Less: Clinics closed/sold during the period		23	20	9
Number of clinics owned (end of period)		910	875	872

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Results of Operations

Year ended December 31, 2021 compared to year ended December 31, 2020

The following table summarizes the Company’s consolidated results of operations for the year ended December 31, 2021 and 2020:


	Year Ended December 31,
	2021				2020				Increase/(Decrease)
($ in thousands, except percentages)	$		% of Revenue		$		% of Revenue		$		%
Net patient revenue	$	561,080	89.4	%	$	529,585	89.4	%	$	31,495	5.9	%
Other revenue	66,791		10.6	%	62,668		10.6	%	4,123		6.6	%
Net operating revenue	627,871		100.0	%	592,253		100.0	%	35,618		6.0	%
Cost of services:
Salaries and related costs	336,496		53.6	%	306,471		51.7	%	30,025		9.8	%
Rent, clinic supplies, contract labor and other	180,932		28.8	%	166,144		28.1	%	14,788		8.9	%
Provision for doubtful accounts	16,369		2.6	%	16,231		2.7	%	138		0.9	%
Total cost of services	533,797		85.0	%	488,846		82.5	%	44,951		9.2	%
Selling, general and administrative expenses	111,809		17.8	%	104,320		17.6	%	7,489		7.2	%
Goodwill and intangible asset impairment charges	962,303		153.3	%	—		—	%	962,303		n/m
Operating loss	(980,038)		(156.1)	%	(913)		(0.2)	%	(979,125)		n/m
Change in fair value of warrant liability	(22,595)		(3.6)	%	—		—	%	(22,595)		n/m
Change in fair value of contingent common shares liability	(175,140)		(27.9)	%	—		—	%	(175,140)		n/m
Loss on settlement of redeemable preferred stock	14,037		2.2	%	—		—	%	14,037		n/m
Interest expense, net	46,320		7.4	%	69,291		11.7	%	(22,971)		(33.2)	%
Interest expense on redeemable preferred stock	10,087		1.6	%	19,031		3.2	%	(8,944)		(47.0)	%
Other expense (income), net	241		—	%	(91,002)		(15.4)	%	91,243		(100.3)	%
(Loss) income before taxes	(852,988)		(135.9)	%	1,767		0.3	%	(854,755)		n/m
Income tax (benefit) expense	(70,960)		(11.3)	%	2,065		0.3	%	(73,025)		n/m
Net loss	(782,028)		(124.6)	%	(298)		(0.1)	%	(781,730)		n/m

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Net patient revenue. Net patient revenue for the year ended December 31, 2021 was $561.1 million compared to $529.6 million for the year ended December 31, 2020, an increase of $31.5 million or 5.9%.

The increase in net patient revenue was primarily driven by increased visit volumes as a result of COVID-19 restrictions in local markets and referral levels evolving, partially offset by unfavorable net patient revenue per visit in the current period. Total patient visits increased by approximately 0.6 million visits, or 12.8%, driving an increase in average visits per day of 2,334, or 12.8%. Net patient revenue per visit decreased $6.82, or 6.0%, to $105.94 for the year ended December 31, 2021. The decrease in net patient revenue per visit during the year ended December 31, 2021 was primarily driven by unfavorable mix shifts related to payor classes, states and services.

The following chart reflects additional detail with respect to drivers of the change in net patient revenue (in millions):

Other revenue. Other revenue for the year ended December 31, 2021 was $66.8 million compared to $62.7 million for the year ended December 31, 2020, an increase of $4.1 million or 6.6%. The increase in other revenue was primarily driven by higher volumes in the Sports Medicine service line as a result of the evolution of COVID-19 related restrictions, as well as higher volumes in the AWS service line as a result of the evolution of COVID-19 related restrictions and expanded offerings in new locations. This was partially offset by lower Home Health service line revenue as a result of its divestiture on October 1, 2021.

Salaries and related costs. Salaries and related costs for the year ended December 31, 2021 were $336.5 million compared to $306.5 million for the year ended December 31, 2020, an increase of $30.0 million or 9.8%. Salaries and related costs as a percentage of net operating revenue was 53.6% and 51.7% for the year ended December 31, 2021 and 2020, respectively. The increase of $30.0 million was primarily due to the higher level of wages and benefits as the Company increased its clinician and support staff labor supply as a result of higher visit volumes. The increase as a percentage of net operating revenue was primarily driven by higher compensation due to wage inflation for clinic labor during the year ended December 31, 2021.

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Rent, clinic supplies, contract labor and other. Rent, clinic supplies, contract labor and other costs for the year ended December 31, 2021 were $180.9 million compared to $166.1 million for the year ended December 31, 2020, an increase of $14.8 million or 8.9%. Rent, clinic supplies, contract labor and other costs as a percentage of net operating revenue was 28.8% and 28.1% for the year ended December 31, 2021 and 2020, respectively. The increase of $14.8 million and increase as a percentage of net operating revenue was primarily driven by a higher clinic count and higher contract labor costs during the year ended December 31, 2021.

Provision for doubtful accounts. Provision for doubtful accounts for the year ended December 31, 2021 was $16.4 million compared to $16.2 million for the year ended December 31, 2020, an increase of approximately $0.1 million or 0.9%. Provision for doubtful accounts for the year ended December 31, 2021 and 2020 remained relatively consistent year over year.

Selling, general and administrative expenses. Selling, general and administrative expenses for the year ended December 31, 2021 were $111.8 million compared to $104.3 million for the year ended December 31, 2020, an increase of $7.5 million or 7.2%. Selling, general and administrative expenses as a percentage of net operating revenue was 17.8% and 17.6% for the year ended December 31, 2021 and 2020, respectively. The increase of $7.5 million was primarily due to higher transaction costs, share-based compensation, public company operating costs and non-ordinary legal and regulatory costs, partially offset by lower business optimization, reorganization and severance costs during the year ended December 31, 2021. Selling, general and administrative expenses as a percentage of net operating revenue was relatively consistent year over year.

Goodwill and intangible asset impairment charges. Goodwill and intangible asset impairment charges for the year ended December 31, 2021 was $962.3 million. The amount relates to the non-cash write-down of both goodwill and trade name indefinite-lived intangible assets triggered by lower than expected patient visit volumes, the acceleration of clinician attrition, competition for clinicians in the labor market and net patient revenue per visit decreases primarily driven by unfavorable payor, state and service mix shifts. Refer to Note 5 - Goodwill, Trade Name and Other Intangible Assets in the consolidated financial statements for further details.

Change in fair value of warrant liability. Change in fair value of warrant liability for the year ended December 31, 2021 was $22.6 million. The amount relates to the change in the estimated fair value of the Company’s Private Placement Warrants and Public Warrants between June 16, 2021, the date that the liabilities were established in connection with the closing of the Business Combination, and December 31, 2021.

Change in fair value of contingent common shares liability. Change in fair value of contingent common shares liability for the year ended December 31, 2021 was $175.1 million. The amount relates to the change in the estimated fair value of the Company’s Earnout Shares and Vesting Shares between June 16, 2021, the date that the liabilities were established in connection with the closing of the Business Combination, and December 31, 2021.

Loss on settlement of redeemable preferred stock. Loss on settlement of redeemable preferred stock for the year ended December 31, 2021 was $14.0 million. The loss is based on the value of cash and equity provided to preferred stockholders in relation to the outstanding redeemable preferred stock liability at the time of the closing of the Business Combination.

Interest expense, net. Interest expense, net for the year ended December 31, 2021 was $46.3 million compared to $69.3 million for the year ended December 31, 2020, a decrease of $23.0 million or 33.2%. The decrease in interest expense was primarily driven by lower outstanding principal balances and lower weighted average interest rates under the Company’s first and second lien credit agreements during the year ended December 31, 2021.

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Interest expense on redeemable preferred stock. Interest expense on redeemable preferred stock for the year ended December 31, 2021 was $10.1 million compared to $19.0 million for the year ended December 31, 2020, a decrease of $8.9 million or 47.0%. The decrease was driven by the settlement of the redeemable preferred stock in June 2021.

Other expense (income), net. Other expense, net for the year ended December 31, 2021 was $0.2 million compared to $91.0 million of income for the year ended December 31, 2020, a change of $91.2 million. The change was driven by $91.5 million of income related to general distribution payments under the Provider Relief Fund of the CARES Act in the year ended December 31, 2020 that did not recur in 2021. In addition, during the year ended December 31, 2021, the Company recorded $5.5 million of charges related to the loss on debt extinguishment associated with the partial and full repayment of the first and second lien term loans, respectively, and recorded a $5.8 million gain on the sale of its Home Health service line.

Income tax (benefit) expense.Income tax benefit for the year ended December 31, 2021 was $71.0 million compared to $2.1 million of expense for the year ended December 31, 2020, a change of $73.0 million. The change was primarily driven by the difference in the effective tax rate for the respective periods. The effective tax rate was different between the respective periods primarily due to nondeductible impairment charges, nondeductible transaction costs, nondeductible loss on settlement of redeemable preferred stock, fair value adjustments related to liability-classified share-based instruments and increases in valuation allowances for the year ended December 31, 2021, and the tax-effect of income related to general distribution payments recognized under the Provider Relief Fund of the CARES Act for the year ended December 31, 2020.

Net loss.Net loss for the year ended December 31, 2021 was $782.0 million compared to $0.3 million for the year ended December 31, 2020, an increase in loss of $781.7 million. The comparatively higher loss was primarily driven by goodwill and intangible asset impairment charges, partially offset by the change in fair value of warrant liability and change in fair value of contingent common shares liability for the year ended December 31, 2021.

Non-GAAP Financial Measures

The following table reconciles the supplemental non-GAAP financial measures, as defined under the rules of the SEC, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company has provided the non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. EBITDA and Adjusted EBITDA are defined as net income from continuing operations calculated in accordance with GAAP, less net income attributable to non-controlling interests, plus the sum of income tax expense, interest expense, net, depreciation and amortization (“EBITDA”) and further adjusted to exclude certain items of a significant or unusual nature, including but not limited to, goodwill and intangible asset impairment charges, changes in fair value of warrant liability and contingent common shares liability, loss on debt extinguishment, loss on settlement of redeemable preferred stock, business optimization costs, reorganization and severance costs, transaction and integration costs, charges related to lease terminations, share-based compensation, pre-opening de novo costs, gain on sale of Home Health service line and non-ordinary legal and regulatory matters (“Adjusted EBITDA”).

We present EBITDA and Adjusted EBITDA because they are key measures used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions. The Company believes EBITDA and Adjusted EBITDA are useful to investors for the purposes of comparing our results period-to-period and alongside peers and understanding and evaluating our operating results in the same manner as our management team and board of directors.

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These supplemental measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented. In addition, since these non-GAAP measures are not determined in accordance with GAAP, they are susceptible to varying calculations and may not be comparable to other similarly titled non-GAAP measures of other companies.

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)

The following is a reconciliation of net (loss) income, the most directly comparable GAAP financial measure, to EBITDA and Adjusted EBITDA (each of which is a non-GAAP financial measure) for each of the periods indicated. For additional information on these non-GAAP financial measures, see “Non-GAAP Financial Measures” above.


	Year Ended
($ in thousands)		December 31, 2021		December 31, 2020		December 31, 2019
Net (loss) income		$	(782,028)	$	(298)	$	9,749
Plus (minus):
Net loss (income) attributable to non-controlling interest		3,700		(5,073)		(4,400)
Interest expense, net		46,320		69,291		76,972
Interest expense on redeemable preferred stock		10,087		19,031		15,511
Income tax (benefit) expense		(70,960)		2,065		(44,019)
Depreciation and amortization expense		37,995		39,700		39,104
EBITDA		$	(754,886)	$	124,716	$	92,917
Goodwill and intangible asset impairment charges(1)		962,303		—		—
Goodwill and intangible asset impairment charges attributable to non-controlling interest(1)		(7,949)		—		—
Changes in fair value of warrant liability and contingent common shares liability(2)		(197,735)		—		—
Loss on settlement of redeemable preferred stock(3)		14,037		—		—
Transaction and integration costs(4)		9,788		4,790		4,535
Gain on sale of Home Health service line, net		(5,846)		—		—
Share-based compensation		5,769		1,936		1,822
Loss on debt extinguishment(5)		5,534		—		—
Reorganization and severance costs(6)		3,913		7,512		8,331
Non-ordinary legal and regulatory matters(7)		2,914		—		—
Pre-opening de novo costs(8)		1,929		1,565		2,275
Business optimization costs(9)		—		10,377		18,512
Charges related to lease terminations(10)		—		4,253		—
Adjusted EBITDA		$	39,771	$	155,149	$	128,392

(1)Represents non-cash charges related to the write-down of goodwill and trade name indefinite-lived intangible assets. Refer to Note 5 of the accompanying consolidated financial statements for further details.

(2)Represents non-cash amounts related to the change in the estimated fair value of Warrants, Earnout Shares and Vesting Shares. Refer to Notes 3, 13 and 14 of the accompanying consolidated financial statements for further details.

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(3)Represents loss on settlement of redeemable preferred stock based on the value of cash and equity provided to preferred stockholders in relation to the outstanding redeemable preferred stock liability at the time of the closing of the Business Combination.

(4)Represents costs related to the Business Combination, non-capitalizable debt transaction costs, clinic acquisitions and acquisition-related integration and consulting and planning costs related to preparation to operate as a public company.

(5)Represents charges related to the derecognition of the proportionate amount of remaining unamortized deferred financing costs and original issuance discount associated with the partial repayment of the first lien term loan and derecognition of the unamortized original issuance discount associated with the full repayment of the subordinated second lien term loan. Refer to Note 8 of the accompanying consolidated financial statements for further details.

(6)Represents severance, consulting and other costs related to discrete initiatives focused on reorganization and delayering of the Company’s labor model, management structure and support functions.

(7)Represents non-ordinary course legal costs related to the previously-disclosed ATIP shareholder class action complaints, derivative complaint and SEC inquiry. Refer to Note 18 of the accompanying consolidated financial statements for further details.

(8)Represents expenses associated with renovation, equipment and marketing costs relating to the start-up and launch of new locations incurred prior to opening.

(9)Represents non-recurring costs to optimize our platform and ATI transformative initiatives. Costs primarily relate to duplicate costs driven by IT and Revenue Cycle Management conversions, labor related costs during the transition of key positions and other incremental costs of driving optimization initiatives.

(10)Represents charges related to lease terminations prior to the end of term for corporate facilities no longer in use.

Liquidity and Capital Resources

Our principal sources of liquidity are operating cash flows, borrowings under our credit agreements and proceeds from equity issuances. We have used these funds for our short-term and long-term capital uses, which include salaries, benefits and other employee-related expenses, rent, clinical supplies, outside services, capital expenditures, acquisitions, de novos and acqui-novos and debt service. Our capital expenditure, acquisition, de novo and acqui-novo spend will depend on many factors, including the targeted number of new clinic openings, patient volumes, revenue growth rates and level of operating cash flows.

As of December 31, 2021 and December 31, 2020, we had $48.6 million and $142.1 million in cash and cash equivalents, respectively. As of December 31, 2020, we had $70.0 million available under our revolving credit facility, less $1.2 million of outstanding letters of credit. As of December 31, 2021, we had approximately $21.0 million available under our revolving credit facility, less $1.2 million of outstanding letters of credit, as a result of our ratio of consolidated first lien net debt to consolidated adjusted EBITDA, as defined in the Credit Agreement, exceeding 6.25:1.00.

For the year ended December 31, 2021, we had operating cash outflows of $42.1 million driven by items including expenses related to activity associated with the Business Combination, payments on credit balances due to patients and payors, payment of transaction-related amount due to former owners, partial application of MAAPP funds and partial repayment of deferred employer Social Security taxes. Our ability to generate future operating cash flows depends on many factors, including patient volumes and revenue growth rates.

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As of December 31, 2021 and December 31, 2020, the Company had $12.3 million and $26.7 million of MAAPP funds included in the balance of cash and cash equivalents, respectively. In addition, as of December 31, 2021 and December 31, 2020, the Company had $5.9 million and $11.0 million of deferred Social Security taxes included in the balance of cash and cash equivalents. The Company began applying MAAPP funds to Medicare billings in the second quarter of 2021 and remitted payments on its deferred employer Social Security taxes in the third and fourth quarters of 2021. The MAAPP funds and deferred employer Social Security taxes are required to be applied or repaid prior to the end of 2022, which together with other operational activity, may result in a net operating cash outflow for 2022. As noted previously, during the year ended December 31, 2020, the Company received approximately $91.5 million of general distribution payments under the Provider Relief Fund of the CARES Act.

We make reasonable and appropriate efforts to collect accounts receivable, including payor amounts and applicable patient deductibles, co-payments and co-insurance, in a consistent manner for all payor types. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements. When possible, we submit our claims electronically. The collection process is time consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon the payment of another payor. Claims under litigation and vehicular incidents can take a year or longer to collect.

2022 credit agreement, Series A Senior Preferred Stock and warrants

On February 24, 2022, ATI Holdings Acquisition, Inc., an indirect subsidiary of ATI Physical Therapy, Inc., refinanced its outstanding debt by entering into a new 2022 credit agreement. The Company's outstanding 2016 first lien term loan had a principal balance of $555.0 million which was paid down in its entirety on the refinancing date. The new 2022 credit agreement includes a senior secured term loan with a principal balance of $500.0 million which matures on February 24, 2028. Borrowings on the new senior secured term loan initially bear interest at a rate equal to the Secured Overnight Financing Rate ("SOFR"), subject to a 1.0% floor, plus 7.25%, and includes step-downs based on the Company's net leverage ratio. The Company may elect to pay 2.0% interest in-kind at a 0.5% premium during the first year under the agreement. The 2022 credit agreement contains customary covenants and restrictions, including financial and non-financial covenants. The financial covenants require the Company to maintain $30.0 million of minimum liquidity through the first quarter of 2024. Additionally, beginning in the second quarter of 2024, the Company must maintain a net leverage ratio, as defined in the agreements, not to exceed 7.00:1.00. The net leverage ratio covenant contains a step-down in the third quarter of 2024 to 6.75:1.00 and an additional step-down in the first quarter of 2025 to 6.25:1.00, which remains applicable through maturity.

The 2022 credit agreement includes a super priority revolving credit facility which has a maximum borrowing capacity of $50.0 million and matures on February 24, 2027. Borrowings on the new revolving credit facility bear interest, at the Company's election, at a base interest rate of the ABR, as defined in the agreement, plus a credit spread or SOFR plus an applicable credit spread adjustment plus 4.0%. The interest rate related to borrowings on the revolving credit facility includes step-downs based on the Company's net leverage ratio.

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On February 24, 2022, the Company issued, in the aggregate, 165,000 shares of non-convertible Series A Senior Preferred Stock with an initial stated value of $1,000 per share, or $165.0 million of stated value in the aggregate ("Series A Preferred Stock"), which includes warrants to purchase up to 11.5 million shares of the Company's common stock. The Series A Preferred Stock has priority over the Class A common stock with respect to distribution rights, liquidation rights and dividend rights. The holders of the Series A Preferred Stock are entitled to cumulative dividends on the preferred shares at an initial dividend rate of 12.0%, which are payable in-kind, increasing 1.0% per annum on the first day following the fifth anniversary of the issuance and each one-year anniversary thereafter. However, from and after the third anniversary of the issuance of such preferred equity, the Company has the option to pay such dividends in cash at an interest rate of 1.0% lower than the paid-in-kind rate. The Series A Preferred Stock is perpetual and is mandatorily redeemable in certain circumstances such as a change of control, liquidation, winding up or dissolution, bankruptcy or other insolvency event, restructuring or capitalization transaction, or event of noncompliance.

The Series A Preferred Stock includes approximately 11.5 million detachable warrants. Each warrant entitles the holder to purchase one share of the Company's Class A common stock. The warrants are exercisable within 5 years from issuance. The strike price is $3.00 for 5.2 million of the issued warrants, and the strike price is $0.01 for 6.3 million of the issued warrants.

As a result of the debt refinancing transactions and issuance of Series A Preferred Stock, the Company added approximately $77.3 million of cash to its balance sheet. We believe our operating cash flow, combined with our existing cash, cash equivalents and credit facility will continue to be sufficient to fund our operations for the next 12 months.

2016 first and second lien credit agreements (prior to refinancing in February 2022)

On May 10, 2016, ATI Holdings Acquisition, Inc. (the “Borrower”) entered into (a) a First Lien Credit Agreement (the “First Lien Credit Agreement”) with, among others, the lenders party thereto and Barclays Bank PLC, as administrative agent, and (b) a Second Lien Credit Agreement (the “Second Lien Credit Agreement” and, together with the First Lien Credit Agreement, the “Credit Agreements” and each, a “Credit Agreement”) with, among others, the lenders party thereto and Wilmington Trust, National Association, as administrative agent.

In connection with the Business Combination on June 16, 2021, the Company paid down $216.7 million under its first lien term loan and paid $231.3 million to settle its second lien subordinated term loan.

The aggregate outstanding principal amount under the First Lien Credit Agreement was $552.0 million as of December 31, 2021 and the aggregate outstanding principal under the Credit Agreements was $999.6 million as of December 31, 2020. The term loan under the First Lien Credit Agreement is payable in quarterly installments and matures on May 10, 2023.

The First Lien Credit Agreement includes a revolving credit facility with a maximum borrowing capacity of $70.0 million, including $15.0 million sub-limit for swingline loans and amounts available for letters of credit. The issuance of such letters of credit and the making of swingline loans reduces the amount available under the applicable revolving credit facility. The Borrower may make draws under the revolving credit facility for general corporate purposes until the maturity date of the revolving credit facility.

The revolving facility under the First Lien Credit Agreement matures on May 10, 2023 unless (a) as of February 9, 2023 (the “Springing Maturity Date”), either (i) more than $100.0 million of first lien term loans remain outstanding on the Springing Maturity Date or (ii) the debt incurred to refinance any portion of the first lien term loans in excess of $100.0 million does not satisfy specified parameters, in which case the first lien revolving facility will mature on February 9, 2023, or (b) the Borrower makes certain prohibited restricted payments, in which case the first lien revolving facility will mature on the date of such restricted payment.

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The 2016 first lien credit arrangement is guaranteed by Wilco Intermediate Holdings, Inc. and its domestic subsidiaries, subject to customary exceptions (collectively, the “Guarantors”) and secured by substantially all of the assets of the Borrower and Guarantors.

The borrowings under the Credit Agreement bear interest, at the Borrower’s election, at a base interest rate of the Alternate Base Rate (“ABR”) or London InterBank Offered Rate (“LIBOR”) plus an interest rate spread, as defined in the Credit Agreement. The ABR is the highest of (i) the federal funds rate plus 0.5%, (ii) one-month LIBOR plus 1.0%, and (iii) the prime rate. The LIBOR term may be one, two, three, or six months (or, to the extent available, 12 months or a shorter period).

The per annum interest rate spread for revolving and swingline loans are based on a pricing grid with applicable margin determined by the first lien leverage ratio. As of December 31, 2021, the applicable interest rate spreads were 3.5% for ABR revolving loans and 4.5% for LIBOR revolving loans. In addition to the stated interest rate on borrowings under the revolving credit facility, we are required to pay a commitment fee of between 0.25% and 0.5% per annum on any unused portion of the revolving credit facility based on the pricing grid and our first lien leverage ratio.

The per annum interest rate spread for first lien term loan is (a) 2.5% for ABR loans and (b) 3.5% for LIBOR loans. As of December 31, 2021 and December 31, 2020, the effective interest rate for the first lien term loan was 4.9%.

The 2016 Credit Agreement contains covenants with which the Borrower must comply. For the First Lien Credit Agreement, the Borrower must maintain, as of the last day of each fiscal quarter when the sum of the outstanding balance of revolving loans, swingline loans and certain letters of credit exceeds 30% of the total revolving credit facility commitment, a ratio of consolidated first lien net debt to consolidated adjusted EBITDA, as defined in the Credit Agreement, not to exceed 6.25:1.00. As of December 31, 2021, the ratio exceeded 6.25:1.00. As a result, the sum of the outstanding balance of revolving loans, swingline loans and certain letters of credit is effectively limited to 30%, or approximately $21.0 million, of the total revolving credit facility commitment. As of December 31, 2021 and December 31, 2020, the Borrower was in compliance with the covenants contained in the First Lien Credit Agreement.

Consolidated Cash Flows

The following table presents selected data from our consolidated statements of cash flows:


	Year Ended
($ in thousands)	December 31, 2021		December 31, 2020

Net cash (used in) provided by operating activities	(42,100)		138,604
Net cash used in investing activities	(39,889)		(21,809)
Net cash used in financing activities	(11,523)		(12,970)
Net (decrease) increase in cash and cash equivalents	(93,512)		103,825
Cash and cash equivalents at beginning of period	142,128		38,303
Cash and cash equivalents at end of period	$	48,616	$	142,128

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Year ended December 31, 2021 compared to year ended December 31, 2020

Net cash used in operating activities for the year ended December 31, 2021 was $42.1 million compared to $138.6 million provided by operating activities for the year ended December 31, 2020 a change of $180.7 million. The change was primarily the result of approximately $5.5 million in cash outflows from expenses related to activity associated with the Business Combination, $5.4 million in payments on credit balances due to patients and payors, a $3.6 million payment of transaction-related amount due to former owners, $12.6 million of partial application of MAAPP funds, $5.1 million of partial repayments of deferred employer Social Security taxes, $6.9 million in year-over-year collection of accounts receivable, the 2020 inflow of $26.7 million of MAAPP funds not recurring in 2021, and the 2020 inflow of $91.5 million of general distribution payments under the Provider Relief Fund of the CARES Act not recurring in 2021.

Net cash used in investing activities for the year ended December 31, 2021 was $39.9 million compared to $21.8 million for the year ended December 31, 2020, an increase of $18.1 million. The increase is primarily driven by $19.8 million of higher capital expenditures during the year ended December 31, 2021 as a result of a higher number of new clinics in the current period.

Net cash used in financing activities for the year ended December 31, 2021 was $11.5 million compared to $13.0 million of cash used in financing activities for the year ended December 31, 2020, a decrease of $1.5 million. The decrease in cash used was primarily driven by net cash inflows related to the Business Combination (refer to Note 3 - Business Combinations and Divestiture for further details) partially offset by higher distributions to non-controlling interest during the year ended December 31, 2021.

Commitments and Contingencies

The Company may be subject to loss contingencies, such as legal proceedings and claims arising out of its business. The Company records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. As of December 31, 2021, the Company did not record any accruals related to the outcomes of the legal matters described in Note 18 - Commitments and Contingencies. Refer to Note 18 to our consolidated financial statements included elsewhere in this Annual Report for further information.

We enter into contractual obligations and commitments from time to time in the normal course of business, primarily related to our debt financing and operating leases. Refer to Notes 8 and 17 to our consolidated financial statements included elsewhere in this Annual Report for further information. As noted previously, we have commitments related to MAAPP funds and deferred Social Security taxes which are required to be applied or repaid prior to the end of 2022. Additionally, the Company has contractual commitments related to cloud computing and telecommunication services agreements. Refer to Note 18 to our consolidated financial statements included elsewhere in this Annual Report for further information.

Off-Balance Sheet Arrangements

As of December 31, 2021 and December 31, 2020, the Company did not have any off-balance sheet arrangements.

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Critical Accounting Estimates

The discussion and analysis of the Company’s financial condition and results of operations ~~should be read in conjunction with~~is based upon the Company’s consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of the Company’s consolidated financial statements requires its management to make estimates and judgments that affect the ~~notes thereto contained elsewhere in this report. Certain information contained~~reported amounts of assets, liabilities, revenue and expenses and related disclosures. The Company’s management bases its estimates, assumptions and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Different assumptions and judgments would change the estimates used in the ~~discussion and analysis set forth below includes forward-looking~~preparation of the Company’s consolidated financial statements ~~that involve risks and uncertainties. Our~~which, in turn, could change the results from those reported. In addition, actual results may differ ~~materially~~ from these estimates and such differences could be material to the Company’s financial position and results of operations.

Critical accounting estimates are those ~~anticipated in these forward-looking statements as a result~~that the Company’s management considers the most important to the portrayal of ~~many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors”~~the Company’s financial condition and ~~elsewhere in this Annual Report on Form 10-K.~~

~~Overview~~

~~We are a blank check company incorporated on June 10, 2020 as a Delaware corporation formed for the purpose~~results of ~~effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization~~operations because they require management's most difficult, subjective or similar business combination with one or more businesses ("Business Combination"). Although we may pursue an acquisition in any industry or geography, we intend to capitalize on the ability of our management team and the broader Fortress platform to identify, acquire and operate a business that may provide opportunities for attractive risk-adjusted returns. Our Sponsor is Fortress Acquisition Sponsor II LLC (the "Sponsor").

Our registration statement for the initial public offering (the "Initial Public Offering") was declared effective on August 11, 2020. On August 14, 2020, we consummated the Initial Public Offering of 34,500,000 units (“Units"), including the issuance of 4,500,000 unitscomplex judgments, often as a result of the ~~underwriters’ exercise~~need to make estimates about the effect of ~~their over-allotment option~~matters that are inherently uncertain. The Company’s critical accounting estimates in ~~full, at $10.00 per Unit, generating gross proceeds~~relation to its consolidated financial statements include those related to:

•Patient revenue recognition and allowance for doubtful accounts

•Realization of ~~$345.0 million~~deferred tax assets

•Goodwill and ~~incurring offering costs~~intangible assets

Additional information related to our critical accounting estimates can be found in Note 2 - Basis of ~~approximately $19.4 million, inclusive~~Presentation and Summary of ~~approximately $12.1 million~~Significant Accounting Policies of our audited consolidated financial statements included elsewhere in ~~deferred underwriting commissions.~~

Substantially concurrently with the closing of the Initial Public Offering, we consummated a private placement (“Private Placement”) of 5,933,333 warrants (the “Private Placement Warrants”), at a price of $1.50 per private placement warrant, with our Sponsor, generating gross proceeds of $8.9 million.

Upon the closing of the Initial Public Offering and Private Placement, $345.0 million ($10.00 per Unit) of the aggregate net cash proceeds of the sale of the Units in the Initial Public Offering and the Private Placement was placed in a U.S.-based Trust Account (“Trust Account”) at J.P. Morgan Chase Bank, N.A., maintained by Continental Stock Transfer & Trust Company, acting as trustee. The cash proceeds held in the Trust Account have been invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by us meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust account as described below.

this Annual Report.

Patient revenue recognition and allowance for doubtful accounts

Net patient revenue

We provide an array of services to our patients including physical therapy, work conditioning, hand therapy, aquatic therapy, functional capacity assessment, sports medicine and wellness programs. Net patient revenue consists of these physical therapy services.

Net patient revenue is recognized at an amount equal to the consideration the Company expects to receive from third-party payors, patients and others for services rendered when the performance obligations under the terms of the contract are satisfied.

There is an implied contract between the Company and the patient upon each patient visit resulting in the Company’s patient service performance obligation. Generally, the performance obligation is satisfied at a point in time, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company ~~will seek~~has separate contractual agreements with third-party payors (e.g., insurers, managed care programs, government programs, workers' compensation) that provide for payments to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all third parties, service providers (other than the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company ~~does business, execute~~at amounts different from its established rates. While these agreements are not considered contracts with the ~~Company waiving any right, title, interest or claim~~customer, they are used for determining the transaction price for services provided to the patients covered by the third-party payors. The payor contracts do not indicate performance obligations of ~~any kind in or to monies held in the Trust Account.~~

~~On September 29, 2020,~~ the Company ~~announced that, commencing October 2, 2020,~~but indicate reimbursement rates for patients who are covered by those payors when the holders of the Company’s units may elect to separately trade the Class A common stock and warrants comprising the units. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Those units not separated will continue to trade on the New York Stock Exchange under the symbol “FAII.U,” and each of the shares of Class A common stock and warrants thatservices are ~~separated will trade on the New York Stock Exchange under the symbols “FAII” and “FAII WS,” respectively.~~

~~Results of Operations~~

Since the Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination, and we will not be generating any operating revenues until the closing and completion of our initial Business Combination. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with completing a Business Combination.

For the period from June 10, 2020 (inception) through December 31, 2020, we had a net loss of $1,588,639, which consisted of $18,957 in interest income, offset by $1,495,574 in general and administrative expenses and $112,022 in franchise tax expense. General and administrative expenses of $1,495,574 is primarily comprised of legal and due diligence fees.

~~Liquidity and Capital Resources~~

~~As indicated in the accompanying financial statements, as of December 31, 2020, we had approximately $1.3 million in our operating bank account and working capital deficit of approximately $26,000.~~

Through our Initial Public Offering, our liquidity needs have been satisfied through receipt of a $25,000 capital contribution from our Sponsor in exchange for the issuance of the Founder Shares (as defined below) to our Sponsor, up to $300,000 in loans from our Sponsor and the proceeds not held in the Trust Account, which resulted from the consummation of the initial public offering and the sale of private placement warrants to the Sponsor. Following the closing of the Initial Public Offering, the exercise of the over-allotment option, and the sale of Private Placement Warrants, which resulted in $345.0 million ($10.00 per Unit) being placed into a Trust Account and payment of expenses, we had approximately $1.3 million as of December 31, 2020 in cash held outside of the Trust Account, which we intend to use for working capital purposes.

provided.

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~~In addition, in order~~To determine the transaction price associated with the implied contract, the Company includes the estimated effects of any variable consideration, such as contractual allowances and implicit price concessions. When the Company has contracts with negotiated prices for services provided (contracted payors), the Company considers the contractual rates when estimating contractual allowances. Variable consideration is estimated using a portfolio approach that incorporates whether or not the Company has historical differences from negotiated rates due to ~~finance~~non-compliance with contract provisions. Historical results indicate that it is probable that negotiated prices less variable consideration will be realized; therefore, this amount is deemed the transaction ~~costs in connection~~price and recorded as revenue. The Company records an estimated provision for doubtful accounts based on historical collections for claims with ~~a business combination,~~similar characteristics, such as location of service and type of third-party payor, at the ~~Sponsor or an affiliate~~time of recognition. Any subsequent impairment of the ~~Sponsor, or certain~~related receivable is recorded as provision for doubtful accounts.

For non-contracted payors, the Company determines the transaction price by applying established rates to the services provided and adjusting for contractual allowances provided to third-party payors and implicit price concessions. The Company estimates the contractual allowances and implicit price concessions using a portfolio approach based on historical collections for claims with similar characteristics, such as location of ~~our officers~~service and ~~directors may, but are not obligated~~type of third-party payor, in relation to ~~loan us funds as may be required (“Working Capital Loans”).~~

In connection with the Company’s assessment of going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” as of December 31, 2020established rates, because the Company does not have ~~sufficient liquidity~~a contract with the underlying payor. Any subsequent changes in estimate on the realization of the receivable is recorded as a revenue adjustment. Management believes that calculating at the portfolio level would not differ materially from considering each patient account separately.

The Company continually reviews the revenue transaction price estimation process to ~~meet its current obligations. However, management has determined~~consider updates to laws and regulations and changes in third-party payor contractual terms that result from contract renegotiations and renewals. Due to complexities involved in determining amounts ultimately due under reimbursement arrangements with third-party payorsand government entities, which are often subject to interpretation, the Company ~~has access to funds~~may receive reimbursement for healthcare services that is different from the ~~Sponsor,~~estimates, and ~~the Sponsor has the financial wherewithal to fund the Company, that are sufficient to fund the working capital needs~~such differences could be material.

In its evaluation of the ~~Company until~~revenue transaction price, management assesses historical collection experience in relation to contracted rates, or for non-contracted payors, established rates. The practice of applying historical collection experience to determine the ~~earlier~~revenue transaction price for current transactions involves significant judgment and estimation. Management subsequently monitors the appropriateness of ~~the consummation~~its estimates for claims on a date of ~~the Business Combination and a minimum one year~~service basis as cash collections on previous periods mature. Actual cash collections upon maturity may differ from the ~~date of issuance of these financial statements. Over this time period, we will~~transaction price estimated upon initial recognition, and such differences could be ~~using these funds for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling~~material. If initial revenue recognition estimates increased or decreased by 100 basis points, the impact to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.

If our estimates of the costs of undertaking in-depth due diligence and negotiating our initial Business Combination is less than the actual amount necessary to do so, or the amount of interest available to us from the Trust Account is less than we expectannual net patient revenue would be approximately $5.6 million. Management believes subsequent changes in estimate as a result of maturity of claims with dates of service in 2018, 2019 and 2020 have not been material to the ~~current interest rate environment, we~~consolidated statements of operations.

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The following table disaggregates net patient revenue for each associated payor class for the periods indicated below:


	Year Ended
		December 31, 2021		December 31, 2020		December 31, 2019
Commercial		56.3	%	53.1	%	51.5	%
Government		23.7	%	22.2	%	23.6	%
Workers’ Compensation		14.3	%	17.6	%	17.2	%
Other (1)		5.7	%	7.1	%	7.7	%
		100.0	%	100.0	%	100.0	%

(1) Other is primarily comprised of net patient revenue related to auto personal injury which by its nature may have ~~insufficient funds available~~longer-term collection characteristics relative to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to consummate our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial Business Combination. Following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.other payor classes.

~~Related Party Transactions~~

~~Founder shares~~The following table disaggregates accounts receivable, net associated with net patient revenue for each associated payor class as of:

~~In June 2020, we issued~~


	December 31, 2021		December 31, 2020
Commercial	40.3	%	42.8	%
Government	9.1	%	11.2	%
Workers’ Compensation	18.1	%	18.6	%
Other (1)	32.5	%	27.4	%
	100.0	%	100.0	%

(1) Other is primarily comprised of accounts receivable associated with net patient revenue related to auto personal injury.

Allowance for doubtful accounts

The allowance for doubtful accounts is based on estimates of losses related to receivable balances. The risk of collection varies based upon the service, the payor class and the patient’s ability to pay the amounts not reimbursed by the payor. The Company estimates the allowance for doubtful accounts based upon several factors, including the age of the outstanding receivables, the historical experience of collections, the impact of economic conditions and, in some cases, evaluating specific customer accounts for the ability to pay. Management judgment is used to assess the collectability of accounts and the ability of the Company’s customers to pay. The provision for doubtful accounts is included in cost of services in the consolidated statements of operations. When it is determined that a customer account is uncollectible, that balance is written off against the existing allowance.

Realization of deferred tax assets

The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in operations in the period that includes the enactment date.

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We evaluate the realizability of deferred tax assets and reduce those assets using a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Among the factors used to assess the likelihood of realization are projections of future taxable income streams and the expected timing of the reversals of existing temporary differences. The judgments made at any point in time may be impacted by changes in tax codes, statutory tax rates or future taxable income levels. This could materially impact our assessment of the need for valuation allowance reserves and could cause our provision for income taxes to vary significantly from period to period.

Goodwill and intangible assets

The cost of acquired businesses is allocated first to its identifiable assets, both tangible and intangible, based on estimated fair values. Costs allocated to finite-lived identifiable intangible assets are generally amortized on a straight-line basis over the remaining estimated useful lives of the assets. The excess of the purchase price over the fair value of identifiable assets acquired, net of liabilities assumed, is recorded as goodwill.

Goodwill and intangible assets with indefinite lives are not amortized but must be reviewed at least annually for impairment. If the impairment test indicates that the carrying value of an ~~aggregate~~intangible asset exceeds its fair value, then an impairment loss should be recognized in the consolidated statements of ~~8,625,000 shares of Founder Shares to our Sponsor (the “Founder Shares”)~~operations in ~~exchange for~~ an ~~aggregate capital contribution of $25,000. The Sponsor agreed to forfeit an aggregate of up to 1,125,000 Founder Shares~~amount equal to the ~~extent~~excess carrying value over fair value. Fair value is determined using valuation techniques based on estimates, judgments and assumptions the Company believes are appropriate in the circumstances. The Company completed the interim and annual impairment analyses of goodwill as of June 30, 2021, September 30, 2021 and October 1, 2021 using an average of a discounted cash flow analysis and comparable public company analysis. The Company concluded that no goodwill impairment occurred during the fourth quarter of 2021. The key assumptions associated with determining the estimated fair value include projected revenue growth rates, EBITDA margins, the terminal growth rate, the discount rate and relevant market multiples.

The Company completed the interim and annual impairment analyses of indefinite lived intangible assets as of June 30, 2021, September 30, 2021 and October 1, 2021 using the relief from royalty method. The Company concluded that no indefinite lived intangible asset impairment occurred during the fourth quarter of 2021. The key assumptions associated with determining the estimated fair value include projected revenue growth rates, the royalty rate, the discount rate and the terminal growth rate.

The Company has one reporting unit for purposes of the Company’s goodwill impairment tests. The Company concluded that no goodwill impairment occurred during the years ended December 31, 2020 and 2019.

In July 2021, the Company determined that the ~~over-allotment option was not exercised in full by~~revision to its forecast, including factors related to the ~~underwriters. On August 14, 2020,~~revision to its forecast, constituted an interim triggering event that required further analysis with respect to potential impairment to goodwill, trade name indefinite-lived intangible and other assets. Accordingly, the ~~underwriters exercised their over-allotment option in full.~~Company performed interim quantitative impairment testing and determined that the fair value amounts were below the respective carrying amounts. As a result, the ~~1,125,000 Founder Shares were no longer subject~~Company recorded non-cash impairment charges of $419.4 million related to ~~forfeiture. The Founder Shares will automatically convert into Class A common stock upon~~goodwill and $33.7 million related to the ~~consummation of a business combination, or earlier at~~trade name indefinite-lived intangible asset during the ~~option of the holder, on a one-for-one basis, subject to adjustment.~~

period ended June 30, 2021.

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~~Promissory note—related party~~

In October 2021, the Company reported a further revision to its forecast to reflect lower than expected patient visit volume. The ~~Sponsor had loaned us an aggregate of $97,250 to cover expenses~~Company determined that the factors related to the ~~Initial Public Offering pursuant~~revision to a promissory note. The loan was non-interest bearing, unsecured and due on the earlier of April 30, 2021 or the closing of the Initial Public Offering. We repaid the promissory note on August 14, 2020.

~~Related party loans~~

~~In order to finance transaction costs in connection with a business combination, the Sponsor or~~its forecast constituted an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, provide Working Capital Loans to us as may be required. If we complete a business combination, we would repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In theinterim triggering event that a business combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans, other than the interest on such proceeds that may be released for working capital purposes. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements existrequired further analysis with respect to ~~such loans. The Working Capital Loans would either be repaid upon consummation~~potential impairment to goodwill, trade name indefinite-lived intangible and other assets. Accordingly, the Company performed interim quantitative impairment testing and determined that the fair value amounts were below the respective carrying amounts. As a result, the Company recorded non-cash impairment charges of ~~a business combination, without interest, or, at~~$307.4 million related to goodwill and $200.6 million related to the ~~lender’s discretion, up~~trade name indefinite-lived intangible asset during the period ended September 30, 2021. Refer to ~~$1,500,000 of such Working Capital Loans may be convertible into warrants~~Note 5 - Goodwill, Trade Name and Other Intangible Assets in the consolidated financial statements for further details.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating the fair value of the post business combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. There were no Working Capital Loans outstanding as of December 31, 2020.

~~Office space~~Company’s reporting unit and ~~related support services~~

~~During August 2020, we entered into an agreement with an affiliate of our Sponsor a monthly fee of $20,000 for office space and related support services.~~

We had incurred approximately $93,000 in expenses for the period from June 10, 2020 (inception) through December 31, 2020, respectively, as reflected in the accompanying Statements of Operations for services provided by related parties in connection with these aforementioned agreements with related parties. As of December 31, 2020, the Company had $20,000 in accrued expenses for services provided by an affiliate, as reflected in the accompanying balance sheet.

~~Contractual Obligations~~

~~Registration rights~~

The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to a registration rights agreement signed prior to the closing date of the Initial Public Offering. The holders of these securities are entitledindefinite-lived intangible assets requires us to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummationassumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include projected revenue growth rates, EBITDA margins, terminal growth rates, discount rates, relevant market multiples, royalty rates and other market factors. If current expectations of ~~a Business Combination. However, the registration rights agreement provides that the Company will~~future growth rates, margins and cash flows are not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

~~Underwriting agreement~~

~~The underwriters are entitled to a deferred underwriting discount of $0.35 per unit,~~met, or approximately $12.1 million, which will be payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes a Business Combination, subject to the terms of the underwriting agreement.

~~Critical Accounting Policies and Estimates~~

~~Class A common stock subject to possible redemption~~

We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to beif market factors outside of our control change significantly, then our reporting unit or indefinite-lived intangible assets might become impaired in the future, negatively impacting our operating results and ~~subject~~financial position. As the carrying amounts of goodwill and the Company’s trade name indefinite-lived intangible asset were impaired as of June 30, 2021 and September 30, 2021 and written down to fair value, those amounts are more susceptible to an impairment risk if there are unfavorable changes in assumptions and estimates. Additionally, goodwill and indefinite-lived intangible assets associated with acquisitions that may occur in the future are recorded on the balance sheet at their estimated acquisition date fair values, those amounts are more susceptible to impairment risk if business operating results or market conditions deteriorate.

To further illustrate sensitivity of the valuation models, if we had changed the assumptions used to estimate the fair value of our goodwill reporting unit and trade name indefinite-lived intangible asset in our most recent quantitative analysis, these isolated changes, which are reasonably possible to occur, would have led to the ~~occurrence of uncertain future events. Accordingly, at December 31, 2020, 32,791,826 shares of Class A common stock subject to possible redemption at~~following approximate increase/(decrease) in the ~~redemption amount are presented as temporary equity, outside~~aggregate fair value of the ~~stockholders’ equity section~~reporting unit under the discounted cash flow analysis or trade name indefinite-lived intangible asset (in thousands):


	Discount rate		Terminal growth rate(1)		EBITDA margin		Royalty rate
	50 basis points		50 basis points		100 basis points		50 basis points
	Increase	Decrease	Increase	Decrease	Increase	Decrease	Increase	Decrease
Goodwill	$(50,000)	$60,000	$30,000	$(20,000)	$70,000	$(70,000)
Trade name	$(30,000)	$30,000	$20,000	$(20,000)			$50,000	$(50,000)

(1) An increase of 100 basis points to our assumed non-terminal revenue growth rates would result in approximately $60 million of an estimated increase to the fair value of our ~~balance sheet.~~

~~Net loss per share~~

~~The Company’s statement~~goodwill reporting unit, whereas, a 100 basis point decrease would result in approximately $100 million of ~~operations includes a presentation of income per share for common stock subject to redemption in a manner similar~~an estimated decrease to the ~~two-class method~~fair value of ~~income per share.~~our goodwill reporting unit.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, refer to

Note

2 -

~~Net income (loss) per common stock, basic~~Basis of Presentation and ~~diluted for Class A common stock for the period from June 10, 2020 (inception) through December 31, 2020 were calculated by (i) dividing the interest income earned on the Trust Account~~Summary of $18,957 less funds available to be withdrawn from the Trust Account for taxes of $18,957 which resulted in net income of none, respectively, by (ii) the weighted average number of Class A common stock outstanding for the period.

Significant Accounting Policies

Net income (loss) per common stock, basic and diluted for Class F common stock for the period from June 10, 2020 (inception) through December 31, 2020 were calculated by dividing (i) the net income less income attributable to Class A common stock by (ii) the weighted average number of Class F common stock outstanding for the respective period.

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per share of common stock is computed by dividing net loss applicable to common stockholders by the weighted average number of common stock outstanding for the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering (including the consummation of the over-allotment) and Private Placement to purchase an aggregate of 12,833,333 shares of Class A common stock in the calculation of diluted loss per share, since their inclusion would be anti-dilutive under the treasury stock method as of December 31, 2020.

accompanying consolidated financial statements.

~~Recent accounting pronouncements~~

~~Our management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our balance sheet.~~

~~Off-Balance Sheet Arrangements~~

~~As of December 31, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.~~

~~JOBS Act~~

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates.

Item 7A. Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk

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~~We are a smaller reporting company~~As of December 31, 2021, the Company is exposed to interest rate variability with regard to existing variable-rate debt instruments, which exposure primarily relates to movements in various interest rates, such as ~~defined by Rule 12b-2~~prime and LIBOR. The Company utilizes derivative instruments such as interest rate swaps for purposes of hedging exposures related to such variability. Management believes that the result of its interest rate swap reduces the risk of interest rate variability to an immaterial amount. As of December 31, 2021, the fair value of the ~~Exchange Act~~Company’s derivative instrument consisted of a $0.3 million non-current asset and $0.3 million current liability.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This standard is optional and may be applied by entities after March 12, 2020, but no later than December 31, 2022. As of December 31, 2021, the Company has certain debt instruments for which the interest rates are ~~not required~~indexed to ~~provide~~LIBOR, and as a result, is currently evaluating the ~~information otherwise required under~~effect that implementation of this ~~item.~~standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.

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Item 8. Financial Statements and Supplementary ~~Data.~~Data

ATI Physical Therapy, Inc.

Index to Consolidated Financial Statements


		Page
	Report of Independent Registered Public Accounting Firm (PCAOB ID 238)	8971

Financial Statements:
Consolidated Balance Sheets	75
Consolidated Statements of Operations	76
Consolidated Statements of Comprehensive Income (Loss)	77
Consolidated Statements of Changes in Stockholders' Equity	78
Consolidated Statements of Cash Flows	79
Notes to Consolidated Financial Statements	81


	~~Financial Statements:~~

~~Balance Sheet as of December 31, 2020~~		90

~~Statement of Operations for the period from June 10, 2020 (inception) through December 31, 2020~~		91

~~Statement of Changes in Stockholder's Equity for the period from June 10, 2020 (inception) through~~ ~~December 31, 2020~~		92

~~Statement of Cash Flows for the period from June 10, 2020 (inception) through December 31, 2020~~		93

~~Notes to Financial Statements~~		94

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Report of Independent Registered Public Accounting Firm

To ~~the Stockholders and~~ the Board of Directors and Stockholders of

~~Fortress Value Acquisition Corp. II~~

ATI Physical Therapy, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance ~~sheet~~sheets of ~~Fortress Value Acquisition Corp. II~~ATI Physical Therapy, Inc. and its subsidiaries (the “Company”), as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income (loss), of changes in stockholders’ equity, and of cash flows for each of the three years in the period ~~from June 10, 2020 (inception) through~~ended December 31, ~~2020, and~~2021, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2021 listed under Item 15 (collectively referred to as the ~~“financial~~“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ~~from June 10, 2020 (inception) through~~ended December 31, ~~2020,~~2021 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2020.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the ~~Company's~~Company’s consolidated financial statements based on our ~~audit.~~audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~(“PCAOB”)~~(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our ~~audit~~audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the ~~audit~~audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our ~~audit~~audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our ~~audit~~audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our ~~audit provides~~audits provide a reasonable basis for our opinion.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of patient service revenue and related accounts receivable - contractual allowances

As described in Notes 2 and 4 to the consolidated financial statements, net patient revenue is recognized at an amount equal to the consideration the Company expects to receive from third-party payors, patients and others for services rendered when the performance obligations under the terms of the contract are satisfied. For the year ended December 31, 2021, net patient service revenue was $561.1 million and related accounts receivable was $82.5 million as of December 31, 2021. There is an implied contract between the Company and the patient upon each patient visit resulting in the Company’s patient service performance obligation. To determine the transaction price associated with the implied contract, management includes the estimated effects of any variable consideration, such as contractual allowances and implicit price concessions. When the Company has contracts with negotiated prices for services provided, management considers the contractual rates when recording revenue and adjusts for any variable consideration to the transaction price to arrive at revenue. For non-contracted payors, management determines the transaction price by applying established rates to the services provided and adjusting for contractual allowances provided to third-party payors and implicit price concessions. Management estimates the contractual allowances and implicit price concessions using a portfolio approach based on historical collections for claims with similar characteristics, such as location of service and type of third-party payor, in relation to established rates, because the Company does not have a contract with the underlying payor. Any subsequent changes in estimate on the realization of the receivable is recorded as a revenue adjustment. Management continually reviews the revenue transaction price estimation process to consider updates to laws and regulations and changes in third-party payor contractual terms that result from contract renegotiations and renewals.

The principal considerations for our determination that performing procedures relating to the valuation of patient service revenue and related accounts receivable for contractual allowances is a critical audit matter are (i) the significant judgment by management in estimating the value of patient service revenue and related accounts receivable for contractual allowances and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the contractual allowances.

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Goodwill and indefinite-lived intangible assets impairment assessments

As described in Notes 2 and 5 to the consolidated financial statements, the Company’s consolidated goodwill and indefinite-lived intangible assets balances were $608.8 million and $409.4 million, respectively, as of December 31, 2021. Goodwill and intangible assets with indefinite lives are not amortized but must be reviewed at least annually for impairment, or whenever events or circumstances indicate that impairment may exist. If the impairment test indicates that the carrying value of goodwill of the single reporting unit or an intangible asset exceeds its fair value, then an impairment loss should be recognized in the consolidated statements of operations in an amount equal to the excess carrying value over fair value. Management completed the interim and annual impairment analyses of goodwill as of June 30, 2021, September 30, 2021 and October 1, 2021 by estimating the fair value of the single reporting unit using an average of a discounted cash flow analysis and comparable public company analysis. The key assumptions associated with determining the estimated fair value of the reporting unit include projected revenue growth rates, EBITDA margins, the terminal growth rate, the discount rate, and relevant market multiples. Management completed the interim and annual impairment analyses of indefinite-lived intangible assets as of June 30, 2021, September 30, 2021 and October 1, 2021 by estimating the fair value of the indefinite-lived intangible assets using the relief from royalty method. The key assumptions associated with determining the estimated fair value of the indefinite-lived intangible assets include projected revenue growth rates, the royalty rate, the terminal growth rate and the discount rate. During the year ended December 31, 2021, the Company recorded $726.8 million and $234.3 million of total impairment charges related to goodwill and indefinite-lived intangible assets, respectively.

The principal considerations for our determination that performing procedures relating to the goodwill and indefinite-lived intangible assets impairment assessments is a critical audit matter are (i) the significant judgment by management when developing the fair value measurements of the reporting unit and indefinite-lived intangibles, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected revenue growth rates, EBITDA margins, the terminal growth rate, the discount rate and relevant market multiples, related to goodwill and projected revenue growth rates, the royalty rate, the terminal growth rate, and the discount rate related to indefinite-lived intangible assets, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for developing the fair value estimates, (ii) evaluating the appropriateness of management’s fair value analyses, (iii) testing the completeness, accuracy and relevance of the underlying data used in the analyses, and (iv) evaluating significant assumptions used by management related to the projected revenue growth rates, EBITDA margins, the terminal growth rate, the discount rate, and relevant market multiples related to goodwill and projected revenue growth rates, the royalty rate, the terminal growth rate and the discount rate related to indefinite-lived intangible assets. Evaluating management’s assumptions related to projected revenue growth rates and EBITDA margins involved evaluating whether the assumptions were reasonable considering past performance of the Company, the consistency with external data from other sources, and whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the discounted cash flow analysis, comparable public company analysis and relief from royalty method, and the discount rates, terminal growth rate, the royalty rate, and relevant market multiples assumptions.

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/s/ ~~WithumSmith+Brown, PC~~PricewaterhouseCoopers LLP

Chicago, Illinois

March 1, 2022

We have served as the Company's auditor since ~~2020.~~2021.

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ATI Physical Therapy, Inc.

Consolidated Balance Sheets

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

~~New York, New York~~


	December 31, 2021		December 31, 2020
Assets:
Current assets:
Cash and cash equivalents	$	48,616	$	142,128
Accounts receivable (net of allowance for doubtful accounts of $53,533 and $69,693 at December 31, 2021 and December 31, 2020, respectively)	82,455		90,707
Prepaid expenses	9,303		3,859
Other current assets	3,204		2,168
Total current assets	143,578		238,862

Property and equipment, net	139,730		137,174
Operating lease right-of-use assets	256,646		258,227
Goodwill, net	608,811		1,330,085
Trade name and other intangible assets, net	411,696		644,339
Other non-current assets	2,233		1,685
Total assets	$	1,562,694	$	2,610,372

Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable	$	15,146	$	12,148
Accrued expenses and other liabilities	64,584		70,690
Current portion of operating lease liabilities	49,433		52,395
Current portion of long-term debt	8,167		8,167
Total current liabilities	137,330		143,400

Long-term debt, net	543,799		991,418
Redeemable preferred stock	—		163,329
Warrant liability	4,341		—
Contingent common shares liability	45,360		—
Deferred income tax liabilities	67,459		138,547
Operating lease liabilities	250,597		253,990
Other non-current liabilities	2,301		18,571
Total liabilities	1,051,187		1,709,255

Commitments and contingencies (Note 18)	0		0

Stockholders' equity:
Preferred stock, $0.0001 par value; 1.0 million shares authorized; none issued and outstanding at December 31, 2021 and December 31, 2020	—		—
Class A common stock, $0.0001 par value; 470.0 million shares authorized; 207.4 million shares issued, 197.4 million shares outstanding at December 31, 2021; 138.9 million shares issued, 128.3 million shares outstanding at December 31, 2020	20		13
Treasury stock, at cost, 0.03 million shares and none at December 31, 2021 and 2020, respectively	(95)		—
Additional paid-in capital	1,351,597		954,728
Accumulated other comprehensive income (loss)	28		(1,907)
Accumulated deficit	(847,132)		(68,804)
Total ATI Physical Therapy, Inc. equity	504,418		884,030
Non-controlling interests	7,089		17,087
Total stockholders' equity	511,507		901,117
Total liabilities and stockholders' equity	$	1,562,694	$	2,610,372

~~March 8, 2021~~

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

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ATI Physical Therapy, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)


	Year Ended
		December 31, 2021		December 31, 2020		December 31, 2019

Net patient revenue		$	561,080	$	529,585	$	717,596
Other revenue		66,791		62,668		67,862
Net operating revenue		627,871		592,253		785,458

Cost of services:
Salaries and related costs		336,496		306,471		414,492
Rent, clinic supplies, contract labor and other		180,932		166,144		170,516
Provision for doubtful accounts		16,369		16,231		22,191
Total cost of services		533,797		488,846		607,199
Selling, general and administrative expenses		111,809		104,320		119,221
Goodwill and intangible asset impairment charges		962,303		—		—
Operating (loss) income		(980,038)		(913)		59,038
Change in fair value of warrant liability (Note 13)		(22,595)		—		—
Change in fair value of contingent common shares liability (Note 14)		(175,140)		—		—
Loss on settlement of redeemable preferred stock		14,037		—		—
Interest expense, net		46,320		69,291		76,972
Interest expense on redeemable preferred stock		10,087		19,031		15,511
Other expense (income), net		241		(91,002)		825
(Loss) income before taxes		(852,988)		1,767		(34,270)
Income tax (benefit) expense		(70,960)		2,065		(44,019)
Net (loss) income		(782,028)		(298)		9,749
Net (loss) income attributable to non-controlling interest		(3,700)		5,073		4,400
Net (loss) income attributable to ATI Physical Therapy, Inc.		$	(778,328)	$	(5,371)	$	5,349

(Loss) earnings per share of Class A common stock:
Basic		$	(4.69)	$	(0.04)	$	0.04
Diluted		$	(4.69)	$	(0.04)	$	0.04
Weighted average shares outstanding:
Basic and diluted		165,805		128,286		128,286

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

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ATI Physical Therapy, Inc.

Consolidated Statements of Comprehensive Income (Loss)

($ in thousands)


	Year Ended
		December 31, 2021		December 31, 2020		December 31, 2019

Net (loss) income		$	(782,028)	$	(298)	$	9,749
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate swap		1,935		(582)		(16)
Comprehensive (loss) income		$	(780,093)	$	(880)	$	9,733
Net (loss) income attributable to non-controlling interest		(3,700)		5,073		4,400
Comprehensive (loss) income attributable to ATI Physical Therapy, Inc.		$	(776,393)	$	(5,953)	$	5,333

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

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ATI Physical Therapy, Inc.

Consolidated Statements of Changes in Stockholders' Equity

($ in thousands, except share data)


	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Non-Controlling Interest		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at January 1, 2019	938,557	$	9	—	$	—	$	950,774	$	(1,309)	$	(68,377)	$	16,929	$	898,026
Retrospective application of reverse recapitalization	127,346,957	4		—	—		(4)		—		—		—		—
Adjusted balance at January 1, 2019	128,285,514	$	13	—	$	—	$	950,770	$	(1,309)	$	(68,377)	$	16,929	$	898,026
Share-based compensation	—	—		—	—		1,822		—		—		—		1,822
Contributions related to acquisitions	—	—		—	—		200		—		—		—		200
Other comprehensive loss (1)	—	—		—	—		—		(16)		—		—		(16)
Distribution to non-controlling interest holder	—	—		—	—		—		—		—		(4,862)		(4,862)
Net income attributable to non-controlling interest	—	—		—	—		—		—		—		4,400		4,400
Net income attributable to ATI Physical Therapy, Inc.	—	—		—	—		—		—		5,349		—		5,349
Balance at December 31, 2019	128,285,514	$	13	—	$	—	$	952,792	$	(1,325)	$	(63,028)	$	16,467	$	904,919
Share-based compensation	—	—		—	—		1,936		—		—		—		1,936
Cumulative impact of ASC 842 adoption	—	—		—	—		—		—		(405)		—		(405)
Other comprehensive loss (1)	—	—		—	—		—		(582)		—		—		(582)
Distribution to non-controlling interest holder	—	—		—	—		—		—		—		(4,453)		(4,453)
Net income attributable to non-controlling interest	—	—		—	—		—		—		—		5,073		5,073
Net loss attributable to ATI Physical Therapy, Inc.	—	—		—	—		—		—		(5,371)		—		(5,371)
Balance at December 31, 2020	128,285,514	$	13	—	$	—	$	954,728	$	(1,907)	$	(68,804)	$	17,087	$	901,117
























Net proceeds from FAII in Business Combination	25,512,254	3		—	—		210,102		—		—		—		210,105
Shares issued through PIPE investment	30,000,000	3		—	—		299,997		—		—		—		300,000
Shares issued to Wilco Holdco Series A Preferred stockholders	12,845,282	1		—	—		128,452		—		—		—		128,453
Warrant liability recognized upon the closing of the Business Combination	—	—		—	—		(26,936)		—		—		—		(26,936)
Contingent common shares liability recognized upon the closing of the Business Combination	—	—		—	—		(220,500)		—		—		—		(220,500)
Vesting of restricted shares distributed to holders of ICUs	691,232	—		—	—		—		—		—		—		—
Issuance of common stock upon vesting of restricted stock awards	105,473	—		—	—		—		—		—		—		—
Tax withholdings related to net share settlement of restricted stock awards	(29,791)	—		29,791	(95)		—		—		—		—		(95)
Share-based compensation	—	—		—	—		5,754		—		—		—		5,754
Other comprehensive income (1)	—	—		—	—		—		1,935		—		—		1,935
Distribution to non-controlling interest holder	—	—		—	—		—		—		—		(6,298)		(6,298)
Net loss attributable to non-controlling interest	—	—		—	—		—		—		—		(3,700)		(3,700)
Net loss attributable to ATI Physical Therapy, Inc.	—	—		—	—		—		—		(778,328)		—		(778,328)
Balance at December 31, 2021	197,409,964	$	20	29,791	$	(95)	$	1,351,597	$	28	$	(847,132)	$	7,089	$	511,507

(1)Other comprehensive income (loss) related to unrealized gain (loss) on interest rate swap

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

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ATI Physical Therapy, Inc.

Consolidated Statements of Cash Flows

($ in thousands)


	Year Ended
	December 31, 2021		December 31, 2020		December 31, 2019
Operating activities:
Net (loss) income	$	(782,028)	$	(298)	$	9,749
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Goodwill and intangible asset impairment charges	962,303		—		—
Depreciation and amortization	37,995		39,700		39,104
Provision for doubtful accounts	16,369		16,231		22,191
Deferred income tax provision	(71,088)		1,814		(44,033)
Amortization of right-of-use assets	45,536		44,526		—
Share-based compensation	5,754		1,936		1,822
Amortization of debt issuance costs and original issue discount	3,252		4,109		3,197
Non-cash interest expense	—		6,335		—
Non-cash interest expense on redeemable preferred stock	10,087		19,031		15,511
Loss on extinguishment of debt	5,534		—		—
Loss on settlement of redeemable preferred stock	14,037		—		—
(Gain) loss on disposal and impairment of assets	(5,189)		469		1,870
Loss on lease terminations and impairment	—		3,863		—
Change in fair value of warrant liability	(22,595)		—		—
Change in fair value of contingent common shares liability	(175,140)		—		—
Changes in:
Accounts receivable, net	(10,201)		(3,307)		(11,929)
Prepaid expenses and other current assets	(6,688)		4,841		283
Other non-current assets	(284)		413		36
Accounts payable	1,831		798		(1,908)
Accrued expenses and other liabilities	(5,288)		9,174		9,543
Operating lease liabilities	(50,942)		(42,819)		—
Other non-current liabilities	861		5,056		2,508
Medicare Accelerated and Advance Payment Program Funds	(12,605)		26,732		—

Transaction-related amount due to former owners	(3,611)		—		—
Net cash (used in) provided by operating activities	(42,100)		138,604		47,944

Investing activities:
Purchases of property and equipment	(40,293)		(21,887)		(41,227)
Purchases of intangible assets	(1,675)		(250)		—
Proceeds from sale of property and equipment	223		328		397
Proceeds from sale of clinics	248		—		—
Proceeds from sale of Home Health service line	6,131		—		—
Business acquisitions, net of cash acquired	(4,523)		—		(1,848)
Net cash used in investing activities	(39,889)		(21,809)		(42,678)

8979

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~~FORTRESS VALUE ACQUISITION CORP. II~~

~~BALANCE SHEET~~

~~December 31, 2020~~


~~Assets:~~
~~Current assets:~~
~~Cash~~	$	~~1,313,454~~
~~Prepaid expenses~~	~~345,938~~
~~Total current assets~~	~~1,659,392~~
~~Investments held in Trust Account~~	~~345,018,957~~
~~Total Assets~~	$	~~346,678,349~~

~~Liabilities and Stockholders' Equity:~~
~~Current liabilities:~~
~~Accounts payable and accrued expenses~~	$	~~1,573,061~~
~~Franchise tax payable~~	~~112,022~~
~~Total current liabilities~~	~~1,685,083~~
~~Deferred underwriting commissions payable~~	~~12,075,000~~
~~Total Liabilities~~	~~13,760,083~~

~~Commitments and Contingencies~~

~~Class A common stock, $0.0001 par value; 32,791,826 shares subject to possible redemption~~	~~327,918,260~~

~~Stockholders' Equity:~~
~~Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding~~	0
~~Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,708,174 issued and~~ ~~outstanding (excluding 32,791,826 shares subject to possible redemption)~~	~~171~~
~~Class F common stock, $0.0001 par value; 20,000,000 shares authorized; 8,625,000 shares~~ ~~issued and outstanding~~	~~863~~
~~Additional paid-in capital~~	~~6,587,611~~
~~Accumulated deficit~~	~~(1,588,639)~~
~~Total Stockholders' Equity~~	~~5,000,006~~
~~Total Liabilities and Stockholders' Equity~~	$	~~346,678,349~~


Financing activities:
Deferred financing costs	—		(350)		—
Principal payments on long-term debt	(456,202)		(8,167)		(8,167)
Proceeds from revolving line of credit	—		68,750		—
Payments on revolving line of credit	—		(68,750)		—
Cash inflow from Business Combination	229,338		—		—
Payments to Series A Preferred stockholders	(59,000)		—		—
Proceeds from shares issued through PIPE investment	300,000		—		—
Payments for equity issuance costs	(19,233)		—		—

Taxes paid on behalf of employees for shares withheld	(128)		—		—
Distribution to non-controlling interest holder	(6,298)		(4,453)		(4,862)
Net cash used in financing activities	(11,523)		(12,970)		(13,029)

Changes in cash and cash equivalents:
Net (decrease) increase in cash and cash equivalents	(93,512)		103,825		(7,763)
Cash and cash equivalents at beginning of period	142,128		38,303		46,066
Cash and cash equivalents at end of period	$	48,616	$	142,128	$	38,303

Supplemental noncash disclosures:
Derivative changes in fair value	$	(1,935)	$	582	$	16
Purchases of property and equipment in accounts payable	$	4,177	$	3,010	$	2,106
Warrant liability recognized upon the closing of the Business Combination	$	(26,936)	$	—	$	—
Contingent common shares liability recognized upon the closing of the Business Combination	$	(220,500)	$	—	$	—
Shares issued to Wilco Holdco Series A Preferred stockholders	$	128,453	$	—	$	—


Other supplemental disclosures:
Cash paid for interest	$	41,937	$	58,421	$	76,636
Cash paid for (received from) taxes	$	81	$	(1,098)	$	(1,092)

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

9080

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~STATEMENT OF OPERATIONS~~


	For the period from June 10, 2020 (inception) through December 31, 2020

~~General and administrative expenses~~	$	~~1,495,574~~
~~Franchise tax expense~~	~~112,022~~
~~Loss from operations~~	~~(1,607,596)~~
~~Interest income~~	~~18,957~~
~~Net loss~~	$	~~(1,588,639)~~

~~Weighted average shares outstanding - Class A common stock~~	~~34,500,000~~
~~Basic and diluted net loss per share, Class A common stock~~	$	~~(0.00)~~

~~Weighted average shares outstanding - Class F common stock~~	~~8,625,000~~
~~Basic and diluted net loss per share, Class F common stock~~	$	~~(0.18)~~

~~The accompanying notes are an integral part~~Ta ble of ~~these financial statements.~~

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY~~

~~For the period from June 10, 2020 (inception) through December 31, 2020~~

Common stock Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity
Class A Class F
Shares Amount Shares Amount
Balance - June 10, 2020 (inception) 0 $ 0 0 $ 0 $ 0 $ 0 $ 0
Issuance of Class F common stock to the
Sponsor
— — 8,625,000 863 24,137 — 25,000
Sale of units in initial public offering, net
of offering costs
34,500,000 3,450 — — 325,578,455 — 325,581,905
Sale of private placement warrants to
the Sponsor
— — — — 8,900,000 — 8,900,000
Class A common stock subject to
possible redemption
(32,791,826) (3,279) — — (327,914,981) — (327,918,260)
Net loss — — — — — (1,588,639) (1,588,639)
Balance - December 31, 2020 1,708,174 $ 171 8,625,000 $ 863 $ 6,587,611 $ (1,588,639) $ 5,000,006

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

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~STATEMENT OF CASH FLOWS~~

~~For the period from June 10, 2020 (inception) through December 31, 2020~~


~~Cash Flows from Operating Activities:~~
~~Net loss~~	$	~~(1,588,639)~~
~~Adjustments to reconcile net loss to net cash used in operating activities:~~
~~Interest income from investments held in Trust Account~~	~~(18,957)~~
~~Changes in operating assets and liabilities:~~
~~Prepaid expenses~~	~~(345,938)~~
~~Accounts payable and accrued expenses~~	~~1,284,393~~
~~Franchise tax payable~~	~~112,022~~
~~Net cash used in operating activities~~	~~(557,119)~~

~~Cash Flows from Investing Activities:~~
~~Cash deposited in Trust Account~~	~~(345,000,000)~~
~~Net cash used in investing activities~~	~~(345,000,000)~~

~~Cash Flows from Financing Activities:~~
~~Proceeds from issuance of Class F common stock to the Sponsor~~	~~25,000~~
~~Proceeds received under loan from the Sponsor~~	~~97,250~~
~~Repayment of loan from the Sponsor~~	~~(97,250)~~
~~Proceeds received from initial public offering, net of underwriting commission~~	~~338,100,000~~
~~Payment of offering costs~~	~~(154,427)~~
~~Proceeds received from private placement~~	~~8,900,000~~
~~Net cash provided by financing activities~~	~~346,870,573~~

~~Net change in cash~~	~~1,313,454~~
~~Cash - beginning of the period~~	0
~~Cash - end of the period~~	$	~~1,313,454~~

~~Supplemental disclosure of non-cash financing activities:~~
~~Offering costs included in accounts payable and accrued expenses~~	$	~~288,668~~
~~Deferred underwriting commissions payable in connection with the initial public offering~~	$	~~12,075,000~~
~~Value of Class A common stock subject to possible redemption~~	$	~~327,918,260~~

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

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

Contents

Note 1. ~~Description~~Overview of ~~Organization~~the Company

ATI Physical Therapy, Inc., together with its subsidiaries (herein referred to as “we,” “the Company,” “ATI Physical Therapy” and “ATI”), is a nationally recognized healthcare company, specializing in outpatient rehabilitation and adjacent healthcare services. The Company provides outpatient physical therapy services under the name ATI Physical Therapy and, as of December 31, 2021, had 910 clinics (as well as 20 clinics under management service agreements) located in 25 states. The Company offers a variety of services within its clinics, including physical therapy to treat spine, shoulder, knee and neck injuries or pain; work injury rehabilitation services, including work conditioning and work hardening; hand therapy; and other specialized treatment services. The Company’s direct and indirect wholly-owned subsidiaries include, but are not limited to, Wilco Holdco, Inc., ATI Holdings Acquisition, Inc. and ATI Holdings, LLC.

On June 16, 2021 (the “Closing Date”), a Business ~~Operations~~

Combination transaction (the “Business Combination”) was finalized pursuant to the Agreement and Plan of Merger ("Merger Agreement"), dated February 21, 2021 between the operating company, Wilco Holdco, Inc. (“Wilco Holdco”), and Fortress Value Acquisition Corp. II ~~(the “Company”~~(herein referred to as "FAII" and "FVAC") is, a ~~blank check company incorporated in Delaware on June 10, 2020. The Company was formed for the~~special purpose ~~of effecting a merger, capital stock exchange, asset~~ acquisition stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to capitalize on the ability of its management team to identify, acquire and operate a business that may provide opportunities for attractive risk-adjusted returns.

All activity from June 10, 2020 (inception) through December 31, 2020 relates to the Company’s formation, completion of the initial public offering ("Initial Public Offering"), and since the closing of the Initial Public Offering, the search for a Business Combination candidate. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.

The registration statement for the Company’s Initial Public Offering was declared effective on August 11, 2020. On August 14, 2020, the Company consummated its Initial Public Offering of 34,500,000 units (“Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), which included the issuance of 4,500,000 Units as a result of the underwriters’ exercise of their over-allotment option in full, at $10.00 per Unit, generating gross proceeds of $345.0 million and incurring offering costs of approximately $19.4 million, inclusive of approximately $12.1 million in deferred underwriting commissions (Note 5).

~~Substantially concurrently~~company. In connection with the closing of the ~~Initial Public Offering,~~Business Combination, the Company ~~consummated~~changed its name from Fortress Value Acquisition Corp. II to ATI Physical Therapy, Inc. The Company’s common stock is listed on the New York Stock Exchange ("NYSE") under the symbol “ATIP.”

The Business Combination is accounted for as a ~~private placement (“Private Placement”~~reverse recapitalization in accordance with U.S. generally accepted accounting principles ("GAAP"). Under this method of ~~5,933,333 warrants (the “Private Placement Warrants”),~~accounting, FAII is treated as the acquired company and Wilco Holdco is treated as the acquirer for financial statement reporting and accounting purposes. As a result, the historical operations of Wilco Holdco are deemed to be those of the Company. Therefore, the financial statements included in this report reflect (i) the historical operating results of Wilco Holdco prior to the Business Combination; (ii) the combined results of FAII and Wilco Holdco following the Business Combination on June 16, 2021; (iii) the assets and liabilities of Wilco Holdco at ~~a price~~their historical cost; and (iv) the Company’s equity structure for all periods presented. The recapitalization of ~~$1.50~~the number of shares of common stock attributable to the Business Combination is reflected retroactively to the earliest period presented and will be utilized for calculating earnings per ~~Private Placement Warrant,~~share in all prior periods presented. No step-up basis of intangible assets or goodwill was recorded in the Business Combination consistent with the treatment of the transaction as a reverse recapitalization of Wilco Holdco, Inc. Refer to Note 3 - Business Combinations and Divestiture for additional information.

Impact of COVID-19 and CARES Act

The coronavirus ("COVID-19") pandemic in the United States resulted in changes to our operating environment. We continue to closely monitor the impact of COVID-19 on all aspects of our business, and our priorities remain protecting the health and safety of employees and patients, maximizing the availability of services to satisfy patient needs and improving the operational and financial stability of our business. While we expect the disruption caused by COVID-19 and resulting impacts to diminish over time, we cannot predict the length of such impacts, and if such impacts continue for an extended period, it could have a continued effect on the Company’s ~~Sponsor, Fortress Acquisition Sponsor II LLC~~results of operations, financial condition and cash flows, which could be material.

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On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the ~~“Sponsor”~~“CARES Act”) was signed into law providing reimbursement, grants, waivers and other funds to assist health care providers during the COVID-19 pandemic. The Company has realized benefits under the CARES Act including, but not limited to, the following:

•In 2020, the Company received approximately $91.5 million of general distribution payments under the Provider Relief Fund. These payments have been recognized as other income in the consolidated statements of operations throughout 2020 in a manner commensurate with the reporting and eligibility requirements issued by HHS. Based on the terms and conditions of the program, including reporting guidance issued by HHS in 2021, the Company believes that it has met the applicable terms and conditions. This includes, but is not limited to, the fact that the Company’s COVID-19 related expenses and lost revenues for the year ended December 31, 2020 exceeded the amount of funds received. To the extent that reporting requirements and terms and conditions are subsequently modified, it may affect the Company’s ability to comply and ability to retain the funds. The following table summarizes the quarterly recognition of general distribution payments recognized in other expense (income), ~~generating gross proceeds~~net in the Company's 2020 consolidated statements of ~~$8.9 million (Note 4).~~operations (in millions):

Upon the closing of the Initial Public Offering and Private Placement, $345.0 million ($10.00 per Unit) of the aggregate net cash proceeds of the sale of the Units in the Initial Public Offering and the Private Placement was placed in a U.S.-based Trust Account (“Trust Account”) at J.P. Morgan Chase Bank, N.A., maintained by Continental Stock Transfer & Trust Company, acting as trustee. The cash proceeds held in the Trust Account were subsequently invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account as described below.

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

As of December 31, 2020, the Company had approximately $1.3 million in cash held outside of the Trust Account. The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company's initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if any, and excluding the amount of any deferred underwriting discount held in trust) at the time of the Company signing a definitive agreement in connection with its initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act.

On February 21, 2021, the Company and ATI Physical Therapy entered into an Agreement and Plan of Merger (the “Merger Agreement”), to effect a Business Combination between FVAC Merger Corp. II, a Delaware corporation and a direct, wholly-owned subsidiary of the Company (“Merger Sub”), and Wilco Holdco, Inc., a Delaware corporation (“ATI”). The Merger Agreement and the transactions contemplated thereby will constitute a “Business Combination” as contemplated by the Company’s Amended and Restated Certificate of Incorporation. The Merger Agreement and the Business Combination were unanimously approved by the board of directors of the Company on February 21, 2021. For further information, refer to Item 9B of this Form 10-K and to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 22, 2021.


Three Months Ended
March 31, 2020		June 30, 2020		September 30, 2020		December 31, 2020		Total
$	—	$	(44.3)	$	(23.1)	$	(24.1)	$	(91.5)

•The Company applied for and obtained approval to receive $26.7 million of Medicare Accelerated and Advance Payment Program ("MAAPP") funds during the quarter ended June 30, 2020. During the year ended December 31, 2021, the Company applied $12.6 million in MAAPP funds and transferred $1.8 million in MAAPP funds as part of the divestiture of its Home Health service line. Because the Company has not yet met all required performance obligations or performed the services related to the remaining funds, as of December 31, 2021 and December 31, 2020, $12.3 million and $15.5 million of the funds are recorded in accrued expenses and other liabilities, respectively, and zero and $11.2 million of the funds are recorded in other non-current liabilities, respectively.

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying consolidated financial statements of the Company ~~will provide its stockholders of Public Shares (“Public Stockholders”~~were prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and in accordance with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. If, however, stockholder approvalrules and regulations of the transaction is required by applicable law or stock exchange listing requirement, or the Company decides to obtain stockholder approval for business or other reasons, it will: (i) conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and (ii) file proxy materials with theU.S. Securities and Exchange Commission (“SEC”). The ~~public stockholders will be entitled~~Company's indirect wholly-owned subsidiaries include, but are not limited to, ~~redeem their Public Shares for a pro rata portion~~ATI Holdings Acquisition, Inc. and ATI Holdings, LLC.

Principles of consolidation

The consolidated financial statements incorporate the financial statements of the ~~amount in the Trust Account (approximately $10.00 per share as of December 31, 2020) , plus any pro rata interest earned on the funds held in the Trust Account and not previously released to~~Company, its subsidiaries, entities for which the Company ~~to pay~~has a controlling financial interest, and variable interest entities ("VIEs") for which the ~~Company’s tax obligations, calculated as of two business days prior to~~Company is the ~~consummation of the Business Combination. The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be~~primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation, and net earnings are reduced by the ~~deferred underwriting commissions the Company will pay~~portion of net earnings attributable to the underwriters (as discussed in Note 5). The Company's amended and restated certificate of incorporation provides that in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of the initial business combination and after payment of the deferred underwriting commissions. In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate of incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC, and file tender offer documents with the SEC prior to completing a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) have agreed to vote their Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.

Notwithstanding the foregoing, the Company’s amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class A common stock sold in the Initial Public Offering, without the prior consent of the Company.

noncontrolling interests.

9682

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

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Variable interest entities

The Company’s Sponsor, officers and directors (the “initial stockholders”) have agreed not to propose an amendment to the Company’s amended and restated certificate of incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company ~~does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Class A common stock in conjunction with any such amendment.~~

Ifconsolidates all variable interest entities where the Company is ~~unable~~the primary beneficiary. The Company identifies the primary beneficiary of a VIE as the enterprise that has both: (i) the power to ~~complete a Business Combination within 24 months (August 2022) from~~direct the ~~closing~~activities of the ~~Initial Public Offering (the “Combination Period”),~~VIE that most significantly impact the ~~Company will (i) cease all operations except for~~entity's economic performance; and (ii) the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding Public Shares which redemption will completely extinguish public stockholders' rights as stockholders (includingobligation to absorb losses or the right to receive ~~further liquidation distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject~~benefits of the VIE that could be significant to the ~~approval~~entity. The Company may change the original assessment of a VIE upon subsequent events such as the modification of contractual agreements.

The Company has an investment in RSFH-ATI Physical Therapy, LLC ("RSFH") that qualifies as a VIE. Based on the provisions of the ~~remaining stockholder and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of~~RSFH agreement, the Company ~~subject~~manages the entity and handles all day-to-day operating decisions in ~~each case to~~exchange for management fees and may receive distributions proportionate with its ~~obligations to provide for claims~~level of ~~creditors and the requirements of applicable law.~~

In connection with the redemption of 100% of the Company’s outstanding Public Shares for a portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses).

The initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares.

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account (or less than that in certain circumstances). In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company, if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with whichownership. Accordingly, the Company has ~~discussed entering into a transaction agreement, reduce~~ the ~~amount of funds in~~decision-making power over the ~~Trust Account. This liability will not apply with respect~~activities that most significantly impact the entity's economic performance and the obligation to ~~any claims by a third party who executed a waiver of any~~absorb losses or the right ~~title, interest or claim of any kind in or~~ to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the eventreceive benefits that ~~an executed waiver is deemed to~~could be ~~unenforceable against a third party, the Sponsor will not be responsible~~significant to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all third parties, service providers (other than the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

On September 29, 2020, the Company announced that, commencing October 2, 2020, the holders of the Company’s units may elect to separately trade the Class A common stock and warrants comprising the units. NaN fractional warrants will be issued upon separation of the units and only whole warrants will trade. Those units not separated will continue to trade on the New York Stock Exchange under the symbol “FAII.U,” and each of the shares of Class A common stock and warrants that are separated will trade on the New York Stock Exchange under the symbols “FAII” and “FAII WS,” respectively.

~~Liquidity~~

entity.

As of December 31, 2021 and 2020, total assets of RSFH were $13.3 million and $19.7 million, respectively, and total liabilities were $6.5 million and $6.5 million, respectively. In general, the ~~Company had approximately $1.3 million in its operating bank account, $18,957~~assets are available primarily for the settlement of ~~interest income available in the Trust Account to pay for taxes and working capital deficit~~obligations of approximately $26,000. In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”) (see Note 4). In connection with the Company’s assessment of going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” as of December 31, 2020 the Company does not have sufficient liquidity to meet its current obligations. However, management has determined that the Company has access to funds from the Sponsor, and the Sponsor has the financial wherewithal to fund the Company, that are sufficient to fund the working capital needs of the Company until the earlier of the consummation of the Business Combination and a minimum one year from the date of issuance of these financial statements. Over this time period, the Company will be using these funds for paying existing accounts payable, and transaction expenses related to the Company's proposed Business Combination.RSFH.

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~An outbreak~~se of respiratory disease which caused a global pandemic continues to impact global markets. This coronavirus has resulted in enhanced health screenings, healthcare service preparation and delivery, quarantines, cancellations, disruptions to markets, supply chains and customer activity, as well as general concern and uncertainty. The impact of this coronavirus continues to evolve and is affecting the economies of many nations, individual companies and markets in general and may continue to last for an extended period of time.

Management will continue to evaluate the impact of the COVID-19 pandemic and while the virus could have an adverse effect on the future financial results, cash flows and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~2. Summary of Significant Accounting Policies~~

~~Basis of presentation~~

The accompanying financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

~~Emerging growth company~~

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

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

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

~~Use of~~ estimates

The preparation of ~~the~~ financial statements in ~~conformity~~accordance with ~~U.S.~~ GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of ~~revenues~~revenue and expenses during the reporting period.

~~Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate~~ Actual results could differ from those estimates. The effect of the ~~effect of a condition, situation or set of circumstances that existed as of December 31, 2020, which management considered in formulating its estimate, could~~ change in the ~~near term due to one or more future confirming events. Accordingly,~~estimates will be recognized in the ~~actual results could differ significantly from those estimates.~~current period of the change.

Segment reporting

The Company reports segment information based on the management approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments. All of the Company’s operations are conducted within the United States. Our chief operating decision maker (“CODM”) is our Chief Executive Officer (or in the absence of a Chief Executive Officer, the leadership team fulfilling the role of Principal Executive Officer), who reviews financial information presented on a consolidated basis for purposes of making decisions, assessing financial performance and allocating resources. We operate our business as 1 operating segment and therefore we have 1 reportable segment.

Cash and cash equivalents

~~The Company considers~~Cash and cash equivalents include all ~~short-term~~cash balances and highly liquid investments with an original ~~maturity~~maturities of three months or less when issued.

Accounts receivable

The Company's accounts receivable are reported net of contractual adjustments and allowances for doubtful accounts. The majority of accounts receivable are due from commercial insurance companies, workers' compensation plans, auto personal injury claims and government health programs, such as Medicare or Medicaid. The Company reports accounts receivable at an amount equal to the consideration the Company expects to receive in exchange for providing healthcare services to its patients.

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Allowance for doubtful accounts

Concentrations of business risk

The Company provides physical therapy services to a large number of patients who participate in government healthcare programs, resulting in a customer concentration relating to Medicare and Medicaid’s service reimbursement programs. The Company believes that the concentration of credit risk with respect to other patient accounts receivable is limited due to the large number of patients that make up the Company’s patient base and the dispersion across many different insurance companies, preferred provider organizations and individuals.

Net patient revenue

Net patient revenue consists of revenue for physical therapy services. Net patient revenue is recognized at an amount equal to the consideration the Company expects to receive from third-party payors, patients and others for services rendered when the performance obligations under the terms of the contract are satisfied.

There is an implied contract between the Company and the patient upon each patient visit resulting in the Company’s patient service performance obligation. Generally, the performance obligation is satisfied at a point in time, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has separate contractual agreements with third-party payors (e.g., insurers, managed care programs, government programs, workers' compensation) that provide for payments to the Company at amounts different from its established rates. While these agreements are not considered contracts with the customer, they are used for determining the transaction price for services provided to the patients covered by the third-party payors. The payor contracts do not indicate performance obligations of the Company but indicate reimbursement rates for patients who are covered by those payors when the services are provided.

To determine the transaction price associated with the implied contract, the Company includes the estimated effects of any variable consideration, such as contractual allowances and implicit price concessions. When the Company has contracts with negotiated prices for services provided (contracted payors), the Company considers the contractual rates when recording revenue and adjusts for any variable consideration to the transaction price to arrive at revenue. Variable consideration is estimated using a portfolio approach that incorporates whether or not the Company has historical differences from negotiated rates due to non-compliance with contract provisions. Historical results indicate that it is probable that negotiated prices less variable consideration will be realized; therefore, this amount is deemed the transaction price and recorded as revenue. The Company records an estimated provision for doubtful accounts based on historical collections for claims with similar characteristics, such as location of service and type of third-party payor, at the time of recognition. Any subsequent impairment of the related receivable is recorded as provision for doubtful accounts.

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For non-contracted payors, the Company determines the transaction price by applying established rates to the services provided and adjusting for contractual allowances provided to third-party payors and implicit price concessions. The Company estimates the contractual allowances and implicit price concessions using a portfolio approach based on historical collections for claims with similar characteristics, such as location of service and type of third-party payor, in relation to established rates, because the Company does not have a contract with the underlying payor. Any subsequent changes in estimate on the realization of the receivable is recorded as a revenue adjustment. Management believes that calculating at the portfolio level would not differ materially from considering each patient account separately.

The Company continually reviews the revenue transaction price estimation process to consider updates to laws and regulations and changes in third-party payor contractual terms that result from contract renegotiations and renewals. Due to complexities involved in determining amounts ultimately due under reimbursement arrangements with third-party payors and government entities, which are often subject to interpretation, the Company may receive reimbursement for healthcare services that is different from the estimates, and such differences could be material.

Other revenue

Revenue from the ATI Worksite Solutions business is derived from onsite services provided to clients’ employees including injury prevention, rehabilitation, ergonomic assessments and performance optimization. Revenue is determined based on the number of hours and respective rate for services provided.

Revenues from Management Service Agreements (“MSA”) are derived from contractual arrangements whereby the Company manages a non-controlled clinic or clinics for third party owners. The Company does not have any ownership interest in these clinics. Typically, revenue is determined based on the number of visits conducted at the clinic and recognized when services are performed. Costs, primarily salaries for the Company’s employees, are recorded when incurred.

Other revenue includes physical or occupational therapy services and athletic training provided on-site, such as at schools and industrial worksites. Contract terms and rates are agreed to in advance between the Company and the third parties. Services are typically performed over the contract period, and revenue is recorded in accordance with the contract terms. If the services are paid in advance, revenue is deferred and recognized as the services are performed.

Property and equipment

Property and equipment acquired is recorded at cost less accumulated depreciation, except during an acquisition of a business, in which case the assets are recorded at fair value. Depreciation is calculated using the straight-line method and is provided in amounts sufficient to attribute the cost of depreciable assets to operations over the estimated useful lives. The approximate useful life of each class of property and equipment is as follows:


Equipment			3 - 5 years
Furniture & fixtures			5 - 7 years
Automobiles			3 - 5 years
Software			3 - 5 years
Buildings			40 years
Leasehold improvements			Lesser of lease term or estimated useful lives of the assets (generally 5 - 15 years)

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Major repairs that extend the useful life of an asset are capitalized to the property and equipment account. Routine maintenance and repairs are charged to rent, clinic supplies, contract labor and other expense and selling, general and administrative expenses. Gains or losses associated with property and equipment retired or sold are included in earnings.

Computer software is included in property and equipment and consists of purchased software and internally developed software. The Company capitalizes application-stage development costs for significant internally developed software projects. Once the software is ready for its intended use, these costs are amortized on a straight-line basis over the software’s estimated useful life. Costs recognized in the preliminary project phase and the post-implementation phase, as well as maintenance and training costs, are expensed as incurred.

Impairment of long-lived assets

The Company reviews the recoverability of long-lived assets whenever events or circumstances occur indicating that the carrying value of the asset may not be recoverable. If the undiscounted cash flows related to the long-lived asset or asset group are not sufficient to recover the remaining carrying value of such asset or asset group, an impairment charge is recognized for the excess carrying amount over the fair value of the asset or asset group. Impairment of deferred leasehold interests relating to asset write-offs from clinic closings are recorded to cost of services.

Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. The Company accounts for goodwill and indefinite-lived intangible assets under Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other, which requires the Company to test goodwill and other indefinite-lived assets for impairment annually or whenever events or circumstances indicate that impairment may exist. The Company noted triggering events during the current year which resulted in the recording of impairment losses. Refer to Note 5 - Goodwill, Trade Name and Other Intangible Assets for further details. The Company did not note any triggering events during the prior presented years that resulted in the recording of an impairment loss. Due to the current economic uncertainty resulting from the COVID-19 pandemic and other factors, the Company will continue to review the carrying amounts of goodwill and indefinite-lived assets for potential triggering events.

The cost of acquired businesses is allocated first to its identifiable assets, both tangible and intangible, based on estimated fair values. Costs allocated to finite-lived identifiable intangible assets are generally amortized on a straight-line basis over the remaining estimated useful lives of the assets. The excess of purchase price over the fair value of identifiable assets acquired, net of liabilities assumed, is recorded as goodwill.

The approximate useful life of each class of intangible asset is as follows:


ATI Physical Therapy trade name/trademarks			Indefinite
Non-compete agreements			2 - 5 years
Other intangible assets			15 years

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Goodwill and intangible assets with indefinite lives are not amortized but must be reviewed at least annually for impairment. If the impairment test indicates that the carrying value of an intangible asset exceeds its fair value, then an impairment loss should be recognized in the consolidated statements of operations in an amount equal to the excess carrying value over fair value. Fair value is determined using valuation techniques based on estimates, judgments and assumptions the Company believes are appropriate in the circumstances. The Company completed the interim and annual impairment analyses of goodwill as of June 30, 2021, September 30, 2021 and October 1, 2021 by estimating its fair value using an average of a discounted cash ~~equivalents.~~ flow analysis and comparable public company analysis. The key assumptions associated with determining the estimated fair value include projected revenue growth rates, EBITDA margins, the terminal growth rate, the discount rate and relevant market multiples. The Company completed the interim and annual impairment analyses of indefinite-lived intangible assets as of June 30, 2021, September 30, 2021 and October 1, 2021 by estimating its fair value using the relief from royalty method. The key assumptions associated with determining the estimated fair value include projected revenue growth rates, the royalty rate, the discount rate and the terminal growth rate.

Deferred financing costs

Original debt issuance discounts and costs incurred related to debt financing are recorded as a reduction to debt and amortized ratably over the term of the related debt agreement, using the effective interest method. Deferred financing costs related to revolving credit facilities are recognized as assets and amortized ratably over the term of the related agreement using the effective interest method. Deferred financing costs are amortized to interest expense, net in the Company’s consolidated statements of operations. The Company recognized amortization of deferred debt issuance costs of $2.3 million, $3.0 million and $2.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. The Company recognized amortization of original debt issuance discounts of $1.0 million, $1.0 million and $0.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Preferred stock

Preferred stock is classified as debt, equity or mezzanine equity based on its redemption features. Preferred stock with redemption features outside of the control of the issuer, such as contingent redemption features, is classified as mezzanine equity. Preferred stock with mandatory redemption features is classified as debt. Preferred stock with no redemption features, or redemption features over which the issuer has control, is classified as equity.

The Company had ~~0 cash equivalents~~preferred stock that was classified as ~~of December 31, 2020.~~

~~Investments held in trust account~~

~~As of December 31, 2020, the Company had approximately $345.0 million in investments held~~debt (redeemable preferred stock) in the ~~Trust Account.~~

Company’s consolidated balance sheets, prior to its redemption as part of the Business Combination. Refer to Note 12 -
Redeemable Preferred Stock for more information about the Company’s previously outstanding preferred stock.

Treasury stock

~~100~~

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Offering costs~~

~~Offering costs consisted~~Treasury stock amounts are accounted for under the cost method whereby the entire cost of ~~legal, accounting, underwriting fees~~the acquired stock is recorded as treasury stock. Gains and ~~other costs incurred that~~losses on the subsequent reissuance of shares are ~~directly related to the Initial Public Offering and totaled approximately $19.4 million, inclusive of approximately $12.1 million in deferred underwriting commissions. Offering costs were~~credited or charged to ~~stockholders' equity upon~~paid-in capital in excess of par value using the ~~completion of the Initial Public Offering in August 2020.~~average-cost method.

Warrant liability

~~Income taxes~~

The Company complies with the accounting and reporting requirements of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the United States of America is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were 0 unrecognized tax benefits and 0 amounts accrued for interest and penalties as of December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

~~Class A common stock subject to possible redemption~~

The Company accounts for its ~~Class A common stock~~outstanding Public Warrants and Private Placement Warrants in accordance with the guidance contained in Accounting Standards Codification 815-40, Derivatives and Hedging - Contracts on an Entity’s Own Equity, (“ASC 815-40”) and determined that the Warrants do not meet the criteria for equity treatment thereunder. As such, each Warrant must be recorded as a liability and is subject to ~~possible redemption~~re-measurement at each balance sheet date. Changes in fair value are recognized in change in fair value of warrant liability in the Company’s consolidated statements of operations.

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Contingent common shares liability

The Company accounts for its potential Earnout Shares and Vesting Shares as a liability in accordance with the guidance in ~~FASB~~ ASC ~~Topic~~ 480, ~~“Distinguishing~~Distinguishing Liabilities from ~~Equity.” Class A common stock~~Equity, and ASC 815, Derivatives and Hedging, and is subject to ~~mandatory redemption (if any)~~re-measurement at each balance sheet date. Changes in fair value are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely withinrecognized in the Company’s ~~control) are classified as temporary equity. At~~consolidated statements of operations.

Noncontrolling interests in consolidated affiliates

The consolidated financial statements include all ~~other times, Class A common stock are classified as stockholders’ equity.~~assets, liabilities, revenues and expenses of less-than-100%-owned affiliates where the Company has a controlling financial investment. The ~~Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject~~Company has separately reflected net income attributable to the occurrence of uncertain future events. Accordingly, as of December 31, 2020, 32,791,826 shares of Class A common stock subject to possible redemption at the redemption amount are presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.

~~101~~

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Net loss per share~~

~~The Company’s statement of operations includes a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share.~~

Net income (loss) per common stock, basic and diluted for Class A common stock for the period from June 10, 2020 (inception) through December 31, 2020 were calculated by (i) dividing the interest income earned on the Trust Account of $18,957 less funds available to be withdrawn from the Trust Account for taxes of $18,957 which resultednoncontrolling interests in net income ~~of NaN, respectively, by (ii) the weighted average number of Class A common stock outstanding for the period.~~

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per share of common stock is computed by dividing net loss applicable to common stockholders by the weighted average number of common stock outstanding for the period. The Company has not considered the effect of the warrants sold in the ~~Initial Public Offering (including the consummation~~consolidated statements of the over-allotment) and Private Placement to purchase an aggregate of 12,833,333 shares of Class A common stock in the calculation of diluted loss per share, since their inclusion would be anti-dilutive under the treasury stock method as of December 31, 2020.

~~Concentration of credit risk~~

Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which at times may exceed the Federal depository insurance coverage of $250,000. As of December 31, 2020, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

operations.

Fair value of financial instruments

The Company determines fair value ofmeasurements used in its consolidated financial statements based upon the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.

~~102~~

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Fair value measurements~~

~~Fair value is defined as the~~exit price that would be received ~~for sale of~~to sell an asset or paid ~~for~~to transfer of a liability in an orderly transaction between market participants exclusive of any transaction costs, as determined by either the principal market or the most advantageous market at the measurement date. ~~GAAP establishes~~

Inputs used in the valuation techniques to derive fair values are classified based on a ~~three-tier~~three-level hierarchy. The basis for fair value measurements for each level within the hierarchy ~~which prioritizes the inputs used in measuring fair value. The hierarchy gives~~is described below with Level 1 having the highest priority toand Level 3 having the lowest.

•Level 1: Observable inputs, which include unadjusted quoted prices in active markets for identical ~~assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:~~

instruments.

•Level 2: Observable inputs other than Level 1 ~~defined as observable~~ inputs, such as quoted prices ~~(unadjusted) for identical instruments in active markets;~~

•Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not ~~active; and~~

active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instruments.

•Level ~~3, defined as unobservable~~3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Refer to Note 15 - Fair Value Measurements for valuation techniques and inputs related to the Company's financial instruments and share-based liabilities.

Income taxes

The Company accounts for income taxes in accordance with ASC Topic 740 (“ASC 740”), Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in operations in the period that includes the enactment date.

ASC 740 provides guidance on how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are more likely than not of being sustained by the applicable tax authority. Tax positions deemed to not meet a more-likely-than-not threshold may not be recognized in the financial statements. The Company reviews these tax uncertainties in light of changing facts and circumstances, such as the progress of tax audits, and if any tax uncertainties were identified, the Company would recognize them accordingly.

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Cost of services

Cost of services consist of salaries specific to the Company’s clinic operations along with rent, clinic supplies expense, depreciation and advertising costs. In addition, cost of services includes the provision for doubtful accounts.

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of wages and benefits for corporate personnel, corporate outside services, marketing costs, depreciation of corporate fixed assets, amortization of intangible assets and certain corporate level professional fees, including those related to legal, accounting and payroll.

Advertising costs

Advertising costs are expensed as incurred or when services are rendered. Advertising costs included in cost of services were $3.2 million, $2.3 million and $4.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. Advertising costs included in selling, general and administrative expenses were $5.1 million, $4.8 million and $6.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Share-based compensation

The Company applies the guidance in ASC Topic 718, Compensation - Stock Compensation, in its accounting for share-based compensation. The Company recognizes compensation expense for all share-based compensation awarded to employees, net of forfeitures, using a fair value-based method. The grant-date fair value of each award is amortized to expense on a straight-line basis over the award’s vesting period. Compensation expense associated with share-based awards is included in salaries and related costs and selling, general and administrative expenses in the accompanying consolidated statements of operations, depending on whether the award recipient is a clinic-level or corporate employee, respectively. Share-based compensation expense is adjusted for forfeitures as incurred.

(Loss) earnings per share

The Company applies the guidance in ASC Topic 260, Earnings Per Share, in its computation of (loss) earnings per share. Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares and dilutive common share equivalents outstanding. Refer to Note 19 - (Loss) Earnings per Share for more information.

Leases

The Company applies the guidance in ASC Topic 842 (“ASC 842”), Leases, to classify individual leases of assets as either operating or finance leases at contract inception. All leased assets have been classified as operating lease arrangements, and the Company’s classes of leased assets include real estate and equipment. The Company adopted ASC 842 on January 1, 2020 using the alternative transition method.

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Operating lease balances are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities and operating lease liabilities in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, adjusted for prepaid or accrued lease payments and lease incentives. The Company’s lease terms include the impact of options to extend or terminate the lease when it is reasonably certain that the options will be exercised or not exercised, as appropriate. When discount rates implicit in leases cannot be readily determined, the Company uses the applicable incremental borrowing rate at lease commencement to perform lease classification tests on lease components and to measure lease liabilities and ROU assets. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

The ROU asset is subject to testing for impairment if there is an indicator for impairment, as is the case for owned assets. The Company noted triggering events during the current year which resulted in the recording of impairment losses, which were not material. The Company did not note any triggering events during the prior presented years that resulted in the recording of an impairment loss. The amortization of operating lease ROU assets and the accretion of operating lease liabilities are reported together as fixed lease expense. The fixed lease expense is recognized on a straight-line basis over the life of the lease. Some of the Company’s operating leases include variable lease payments. To the extent they are not included in operating lease liabilities and operating lease ROU assets, these variable lease payments are recognized as incurred.

Recently adopted accounting guidance

In February 2016, the FASB established ASC Topic 842, Leases, by issuing ASU No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. ASC 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; ASU No. 2018-11, Targeted Improvements; ASU No. 2019-01, Codification Improvements; and ASU No. 2019-10, Leases (Topic 842). ASC 842 establishes a right-of-use model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

ASC 842 is effective for the Company on January 1, 2021, with early adoption permitted. The Company elected to early adopt this standard on January 1, 2020 using the alternative transition method provided by ASC 842. Under the alternative transition method, the effects of initially applying the new guidance are recognized as a cumulative-effect adjustment to retained earnings at the date of initial application, which is January 1, 2020, and prior periods are not restated.

As part of transitioning to ASC 842, the Company has elected to apply the package of transition practical expedients, which allows the Company to not reassess under ASC 842 prior conclusions about lease identification, lease classification and initial direct costs. As a result of adopting ASC 842 and election of the transition practical expedients, the Company recognized ROU assets and lease liabilities for those leases classified as operating leases under ASC 840 that continued to be classified as operating leases under ASC 842 at the date of initial application. Leases classified as capital under ASC 840 are classified as finance under ASC 842. As of the date of transition to ASC 842, the Company did not have any capital leases under ASC 840.

The Company has elected the practical expedient within ASC 842 to not separate lease and non-lease components within lease transactions for all classes of assets. Additionally, the Company has elected the short-term lease exception for all classes of assets.

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In applying the alternative modified retrospective transition method, the Company measured lease liabilities at the present value of the sum of remaining minimum lease payments. The Company’s operating lease liabilities have been measured using the Company’s incremental borrowing rates as of January 1, 2020 (the date of initial application). Additionally, the Company’s operating lease ROU assets have been measured as the initial measurement of applicable lease liabilities adjusted for any unamortized initial direct costs, prepaid/accrued rent, unamortized lease incentives and any liabilities on account of exit or disposal cost obligations.

Adoption of ASC 842 at January 1, 2020, and application of the alternative modified retrospective transition method resulted in the recognition of:

(1) operating lease ROU assets of $263.2 million;

(2) operating lease liabilities of $306.4 million;

(3) the cumulative effect adjustment to increase the opening balance of the accumulated deficit by $0.4 million;

Adoption of this standard did not have a material impact on the Company’s consolidated statements of operations and consolidated statements of cash flows. Refer to Note 17 - Leases for more information about the Company’s lease related obligations.

In ~~some circumstances,~~December 2019, the ~~inputs used~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to ~~measure fair~~the general principles in Topic 740 and simplifies the accounting for income taxes. This ASU is effective for the Company on January 1, 2022, with early adoption permitted. The Company early adopted this new accounting standard effective January 1, 2021. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Recent accounting pronouncements

Based on our public float as of June 30, 2021, the Company became a large accelerated filer and lost emerging growth company status as of December 31, 2021. As of December 31, 2021, the Company will be required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This standard was subsequently amended by ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. This standard is optional and may be applied by entities after March 12, 2020, but no later than December 31, 2022. As of December 31, 2021, the Company has certain debt instruments for which the interest rates are indexed to the London InterBank Offered Rate (“LIBOR”), and as a result, is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers, which provides guidance to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice. This ASU is effective for the Company on January 1, 2023, with early adoption permitted, and shall be applied on a prospective basis to business combinations that occur on or after the adoption date. The Company is evaluating the effect that the implementation of this standard may have on the Company's consolidated financial statements, but does not currently expect the impact to be material.

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In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which provides guidance to increase the transparency of government assistance transactions with business entities that are accounted for by applying a grant or contribution accounting model. This ASU is effective for the Company's annual financial statements to be issued for the year ended December 31, 2022, with early adoption permitted. The Company expects to adopt this new accounting standard in its Annual Report on Form 10-K for the year ended December 31, 2022, and does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.

Note 3. Business Combinations and Divestiture

The Business Combination

As discussed in Note 1 - Overview of the Company, on June 16, 2021, a business combination between Wilco Holdco and FAII was consummated, which was accounted for as a reverse recapitalization of Wilco Holdco, Inc. At the time of the Business Combination, stockholders of Wilco Holdco, Inc. received 130.3 million shares of the Company’s Class A common stock, par value ~~might~~$0.0001 per share (the “Common Stock”), for the outstanding shares of Wilco Holdco common stock, par value $0.01 per share, that such stockholders owned. Upon distribution of shares of Common Stock to holders of vested and unvested Incentive Common Units (“ICUs”) granted prior to the Business Combination under the Wilco Acquisition, LP 2016 Equity Incentive Plan, 2.0 million of these shares were restricted subject to vesting requirements, resulting in total unrestricted shares of 128.3 million and an exchange ratio of 136.7 unrestricted shares of ATI Physical Therapy, Inc. for every previously outstanding Wilco Holdco share.

Immediately following the Business Combination, there were 207.3 million shares issued and 196.6 million outstanding shares of common stock of ATI Physical Therapy, Inc., consisting of the following (in thousands):


			Class A Common Shares
FAII Class A common stock prior to Business Combination			34,500
FAII Class F common stock prior to Business Combination(1)			8,625
Less: FAII Class A common stock redemptions			(8,988)
FAII common shares (Class A and Class F)			34,137
Add: Shares issued to Wilco Holdco stockholders(2, 3)			130,300
Add: Shares issued through PIPE investment			30,000
Add: Shares issued to Wilco Holdco Series A Preferred stockholders			12,845
Total shares issued as of the Closing Date of the Business Combination(4)			207,282
Less: Vesting Shares(1)			(8,625)
Less: Restricted shares(3)			(2,014)
Total shares outstanding as of the Closing Date of the Business Combination(4)			196,643

(1) Per the Merger Agreement, as of the closing of the Business Combination, all Class F shares converted into the equivalent number of Class A common shares and became subject to certain vesting and forfeiture provisions ("Vesting Shares") as detailed in Note 14 - Contingent Common Shares Liability.

(2) Includes 1.2 million unrestricted shares upon distribution to holders of vested ICUs under the Wilco Acquisition, LP 2016 Equity Incentive Plan. Refer to Note 10 - Share-Based Compensation for further details.

(3)Includes 2.0 million restricted shares upon distribution to holders of unvested ICUs under the Wilco Acquisition, LP 2016 Equity Incentive Plan. Refer to Note 10 - Share-Based Compensation for further details.

(4) Excludes 15.0 million Earnout Shares, 6.9 million Public Warrants and 3.0 million Private Placement Warrants to purchase Class A common stock. Refer to Note 13 - Warrant Liability and Note 14 - Contingent Common Shares Liabilityfor further details.

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PIPE investment

Concurrently with the closing of the Business Combination, pursuant to Subscription Agreements executed between FAII and certain investors, 30.0 million shares of Class A common stock (the “PIPE” investment) were newly issued in a private placement at a purchase price of $10.00 per share for an aggregate purchase price of $300.0 million. The initial PIPE investment included 7.5 million shares of Class A common stock newly issued to certain investment funds managed by affiliates of Fortress Investment Group LLC (“Fortress”) at a purchase price of $10.00 per share for an aggregate purchase price of $75.0 million.

Wilco Holdco Series A Preferred Stock

Immediately following the Business Combination, all holders of the previously outstanding shares of Wilco Holdco Series A Preferred Stock received a proportionate share of $59.0 million and 12.8 million shares of ATI Physical Therapy, Inc. Class A common stock based on the terms of the Merger Agreement. Refer to Note 12 - Redeemable Preferred Stock for further details.

Earnout Shares

Subject to the terms and conditions of the Merger Agreement, certain stockholders of Wilco Holdco, Inc. were provided the contingent right to receive, in the aggregate, up to 15.0 million shares of Class A common stock that may be ~~categorized within different levels~~issued pursuant to an earnout arrangement if certain Class A common stock price targets are achieved between the Closing Date and the 10 year anniversary of the Closing Date (“Earnout Shares”). The Earnout Shares are subject to acceleration in the event of a sale or other change in control if the holders of Class A common stock would receive a per share price in excess of the applicable Earnout Shares price target.

On the date of the Business Combination, the Company recorded a liability related to the Earnout Shares of $140.0 million. During the period from June 16, 2021 to December 31, 2021, the fair value ~~hierarchy. In those instances,~~of the Earnout Shares decreased to $28.8 million, resulting in a gain of $111.2 million for the year ended December 31, 2021, recorded as a component of change in fair value of contingent common shares liability in the consolidated statements of operations. Refer to Note 14 - Contingent Common Shares Liabilityand Note 15 - Fair Value Measurements for further details.

Vesting Shares

Pursuant to the Sponsor Letter Agreement executed in connection with the Merger Agreement, 8.6 million shares of Class F common stock of FAII outstanding immediately prior to the Business Combination converted to potential Class A common shares and became subject to certain vesting and forfeiture provisions (“Vesting Shares”). The Vesting Shares are subject to acceleration in the event of a sale or other change in control if the holders of Class A common stock would receive a per share price in excess of the applicable Vesting Shares price target.

On the date of the Business Combination, the Company recorded a liability related to the Vesting Shares of $80.5 million. During the period from June 16, 2021 to December 31, 2021, the fair value of the Vesting Shares decreased to $16.6 million, resulting in a gain of $63.9 million for the year ended December 31, 2021, recorded as a component of change in fair value of contingent common shares liability in the consolidated statements of operations. Refer to Note 14 - Contingent Common Shares Liabilityand Note 15 - Fair Value Measurements for further details.

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Warrants

Immediately following the Business Combination, the Company had outstanding Public Warrants to purchase an aggregate of 6.9 million shares of the Company’s Class A common stock ("Public Warrants") and outstanding Private Placement Warrants to purchase an aggregate of 3.0 million shares of the Company's Class A common stock ("Private Placement Warrants") (collectively, the “Warrants”). In conjunction with the Business Combination, 3.0 million Private Placement Warrants were transferred and surrendered for no consideration based on terms of the Sponsor Letter Agreement.

On the date of the Business Combination, the Company recorded a liability related to the Warrants of $26.9 million. During the period from June 16, 2021 toDecember 31, 2021, the fair value of the Warrants decreased to $4.3 million, resulting in a gain of $22.6 million for the year ended December 31, 2021, recorded as change in fair value of warrant liability in the consolidated statements of operations. Refer to Note 13 - Warrant Liability and Note 15 - Fair Value Measurementsfor further details.

The following table reflects the components of cash movement related to the Business Combination, PIPE investment and debt repayments (in thousands):


Cash in trust with FAII as of the Closing Date of the Business Combination	$	345,036
Cash used for redemptions of FAII Class A common stock	(89,877)
FAII transaction costs paid at closing	(25,821)
Cash inflow from Business Combination	229,338
Wilco Holdco, Inc. transaction costs offset against proceeds	(19,233)
Net proceeds from FAII in Business Combination	210,105
Cash proceeds from PIPE investment	300,000
Repayment of second lien subordinated loan	(231,335)
Partial repayment of first lien term loan	(216,700)
Cash payment to Wilco Holdco Series A Preferred stockholders	(59,000)
Wilco Holdco, Inc. transaction costs expensed during the year ended December 31, 2021	(5,543)
Net decrease in cash related to Business Combination, PIPE investment and debt repayments	$	(2,473)

For the year ended December 31, 2021, the Company expensed $5.5 million in transaction costs related to the Business Combination, which are classified as selling, general and administrative expenses in the consolidated statement of operations. In addition, $19.2 million of Wilco Holdco, Inc. transaction costs related to the Business Combination were offset against additional paid-in capital in the consolidated statements of changes in stockholders’ equity as these costs were determined to be directly attributable to the recapitalization.

Home Health divestiture

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2021 acquisitions

During the fourth quarter of 2021, the Company completed 3 acquisitions consisting of 7 total clinics. The Company paid approximately $4.5 million in cash and $1.4 million in future payment consideration, subject to certain time or performance conditions set out in the purchase agreements, to complete the acquisitions. The acquisitions qualified for purchase accounting treatment under ASC Topic 805, Business Combinations, whereby the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the respective acquisition dates. Of the total amount of consideration, $5.5 million was allocated to goodwill based on management's valuations, which are preliminary and subject to completion of the Company's valuation analysis through the 12 month measurement period. Goodwill represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized, such as assembled workforce, synergies, and location. The entire amount of goodwill recorded from these purchases will be deductible for income tax purposes. Acquisition-related costs to complete the transactions, net operating revenue and net income recognized in 2021 related to the acquisitions were not material, individually and in the aggregate. Unaudited proforma consolidated financial information for the acquisitions have not been included as the results are not material, individually and in the aggregate.

Note 4. Revenue from Contracts with Customers

The following table disaggregates net operating revenue by major service line for the periods indicated below (in thousands):


	Year Ended
		December 31, 2021		December 31, 2020		December 31, 2019
Net patient revenue		$	561,080	$	529,585	$	717,596
ATI Worksite Solutions (1)		34,583		30,864		27,662
Management Service Agreements (1)		15,246		15,837		17,363
Other revenue (1)		16,962		15,967		22,837
		$	627,871	$	592,253	$	785,458

(1)ATI Worksite Solutions, Management Service Agreements and Other revenue are included within other revenue on the face of the consolidated statements of operations.

The following table disaggregates net patient revenue for each associated payor class as a percentage of total net patient revenue for the periods indicated below:


	Year Ended
		December 31, 2021		December 31, 2020		December 31, 2019
Commercial		56.3	%	53.1	%	51.5	%
Government		23.7	%	22.2	%	23.6	%
Workers’ compensation		14.3	%	17.6	%	17.2	%
Other (1)		5.7	%	7.1	%	7.7	%
		100.0	%	100.0	%	100.0	%

(1) Other is ~~categorized~~primarily comprised of net patient revenue related to auto personal injury.

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Note 5. Goodwill, Trade Name and Other Intangible Assets

Our indefinite-lived intangible assets consist of certain trade names. We test indefinite-lived intangible assets for impairment on an annual basis as of October 1. The Company concluded that no indefinite-lived intangible asset impairment existed at the time of annual impairment tests performed for the years ended December 31, 2021, 2020 and 2019. The Company noted interim triggering events during the current year which resulted in the recording of impairment losses.

The Company has 1 reporting unit for purposes of the Company’s goodwill impairment test, which is completed as of October 1. The Company concluded that no goodwill impairment existed at the time of the annual impairment test performed for the years ended December 31, 2021, 2020 and 2019. The Company noted interim triggering events during the current year which resulted in the recording of impairment losses.

The Company has not identified any triggering events occurring after the annual testing date that would impact the impairment testing results obtained but will continue to monitor the fair value of the Company. If the estimated cash flows decrease or market factors change, impairment charges may need to be recorded in the future. Factors that could result in the cash flows being lower than the current estimates include decreased revenue caused by unforeseen changes in the healthcare market or the Company's business, or the inability to achieve the estimated operating margins in the forecasts due to unforeseen factors. Additionally, changes in the broader economic environments could cause changes to the estimated discount rates and comparable company valuation indicators which may impact the estimated fair values.

Changes in the carrying amount of goodwill consisted of the following (in thousands):


	Year Ended
	December 31, 2021		December 31, 2020
Beginning balance	$	1,330,085	$	1,330,085
Reductions - impairment charges	(726,798)		—
Additions – acquisitions	5,524		—
Ending balance	$	608,811	$	1,330,085

The table below summarizes the Company’s carrying amount of trade name and other intangible assets at December 31, 2021 and December 31, 2020 (in thousands):


	December 31, 2021		December 31, 2020
Gross intangible assets:
ATI trade name (1)	$	409,360	$	643,700
Non-compete agreements	2,405		4,678
Other intangible assets	640		640
Accumulated amortization:
Accumulated amortization – non-compete agreements	(425)		(4,437)
Accumulated amortization – other intangible assets	(284)		(242)
Total trade name and other intangible assets, net	$	411,696	$	644,339

(1)Not subject to amortization. The Company recorded $234.3 million of impairment charges related to the trade name indefinite-lived intangible asset during year ended December 31, 2021.

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Amortization expense for the years ended December 31, 2021, 2020 and 2019 was immaterial. The Company estimates that amortization expense related to intangible assets is expected to be immaterial over the next five fiscal years and thereafter.

Interim impairment testing as of June 30, 2021

In late July 2021, the Company revised its earnings forecast to reflect (i) the impact of clinician attrition on both volume and operating cost expectations and (ii) payor, state and service mix shift impacts on net patient revenue per visit expectations. These factors accelerated in the second quarter and continued into the third quarter. The Company determined that the revision to its forecast, including factors related to the revision of the forecast, constituted an interim triggering event that required further analysis with respect to potential impairment to goodwill, trade name indefinite-lived intangible and other assets.

As it was determined that it was more likely than not that the fair value of our trade name indefinite-lived intangible asset was below its carrying value, the Company performed an interim quantitative impairment test as of the June 30, 2021 balance sheet date. The Company utilized the relief from royalty method to estimate the fair value of the trade name indefinite-lived intangible asset. The key assumptions associated with determining the estimated fair value include projected revenue growth rates, the royalty rate, the discount rate and the terminal growth rate. As a result of the analysis, the Company recognized a $33.7 million non-cash interim impairment in the line item goodwill and intangible asset impairment charges in its consolidated statements of operations, which represents the difference between the estimated fair value of the Company’s trade name indefinite-lived intangible asset and its carrying value.

The Company evaluated its asset groups, including operating lease right-of-use assets that were evaluated based on clinic-level cash flows and clinic-specific market factors, noting no material impairment.

As it was determined that it was more likely than not that the fair value of our single reporting unit was below its carrying value, the Company performed an interim quantitative impairment test. In order to determine the fair value of our single reporting unit, the Company utilized an average of a discounted cash flow analysis and comparable public company analysis. The key assumptions associated with determining the estimated fair value include projected revenue growth rates, earnings before interest, taxes, depreciation and amortization ("EBITDA") margins, the terminal growth rate, the discount rate and relevant market multiples. As a result of the analysis, the Company recognized a $419.4 million non-cash interim impairment in the line item goodwill and intangible asset impairment charges in its consolidated statements of operations, which represented the difference between the estimated fair value of the Company’s single reporting unit and its carrying value.

Interim impairment testing as of September 30, 2021

In October 2021, the Company further revised its forecast to reflect lower than expected patient visit volume. The Company determined that the factors related to the revision of the forecast constituted an interim triggering event that required further analysis with respect to potential impairment to goodwill, trade name indefinite-lived intangible and other assets.

As it was determined more likely than not that the fair value of our trade name indefinite-lived intangible asset was below its carrying value, the Company performed an interim quantitative impairment test. The Company utilized the relief from royalty method to estimate the fair value of the trade name indefinite-lived intangible asset. The key assumptions associated with determining the estimated fair value include projected revenue growth rates, the royalty rate, the discount rate and the terminal growth rate. As a result of the changes in these assumptions, the Company recognized a $200.6 million non-cash interim impairment in the line item goodwill and intangible asset impairment charges in its consolidated statements of operations, which represents the difference between the estimated fair value of the Company’s trade name indefinite-lived intangible asset and its carrying value.

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As it was determined that it was more likely than not that the fair value of our single reporting unit was below its carrying value, the Company performed an interim quantitative impairment test. In order to determine the fair value of our single reporting unit, the Company utilized an average of a discounted cash flow analysis and comparable public company analysis. The key assumptions associated with determining the estimated fair value include projected revenue growth rates, earnings before interest, taxes, depreciation and amortization ("EBITDA") margins, the terminal growth rate, the discount rate and relevant market multiples. As a result of the changes in these assumptions, the Company recognized a $307.4 million non-cash interim impairment in the line item goodwill and intangible asset impairment charges in its consolidated statements of operations, which represents the difference between the estimated fair value of the Company’s single reporting unit and its carrying value.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating the fair value of the Company’s reporting unit and indefinite-lived intangible assets requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include projected revenue growth rates, EBITDA margins, terminal growth rates, discount rates, relevant market multiples, royalty rates and other market factors. If current expectations of future growth rates,margins and cash flows are not met, or if market factors outside of our control change significantly, then our reporting unit or indefinite-lived intangible assets might become impaired in the future, negatively impacting our operating results and financial position. As the carrying amounts of goodwill and the Company’s trade name indefinite-lived intangible asset have been impaired as of June 30, 2021 and September 30, 2021 and written down to fair value, those amounts are more susceptible to an impairment risk if there are unfavorable changes in assumptions and estimates.

Note 6. Property and Equipment

Property and equipment consisted of the following at December 31, 2021 and December 31, 2020 (in thousands):


	December 31, 2021		December 31, 2020

Equipment	$	36,278	$	32,978
Furniture and fixtures	17,141		17,247
Leasehold improvements	183,542		162,853
Automobiles	19		19
Computer equipment and software	95,362		77,390
Construction-in-progress	3,793		9,594
	336,135		300,081
Accumulated depreciation and amortization	(196,405)		(162,907)
Property and equipment, net	$	139,730	$	137,174

Property and equipment includes internally developed computer software costs in the amount of $58.7 million and $50.8 million as of December 31, 2021 and 2020, respectively. The related amortization expense was $6.8 million, $9.8 million and $9.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Depreciation and amortization expense is recorded within rent, clinic supplies, contract labor and other and selling, general and administrative expenses within the consolidated statements of operations, depending on the use of the underlying fixed assets. The depreciation expense recorded in cost of services relates to revenue-generating assets, which primarily includes clinic leasehold improvements and therapy equipment. The depreciation expense included in selling, general and administrative expenses is related to infrastructure items, such as corporate leasehold improvements, computer equipment and software.

The following table presents the amount of depreciation expense recorded in rent, clinic supplies, contract labor and other and selling, general and administrative expenses in the Company’s consolidated statements of operations for the periods indicated below (in thousands):


	Year Ended
		December 31, 2021		December 31, 2020		December 31, 2019

Rent, clinic supplies, contract labor and other		$	26,664	$	25,409	$	25,007
Selling, general and administrative expenses		10,873		14,101		15,112
Total depreciation expense		$	37,537	$	39,510	$	40,119

Note 7. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following at December 31, 2021 and December 31, 2020 (in thousands):


	December 31, 2021		December 31, 2020

Salaries and related costs	$	27,257	$	21,387
CARES Act funds (1)	18,179		21,031
Accrued professional fees	4,574		2,049
Credit balance due to patients and payors	4,240		9,635
Revenue cycle management costs	1,075		2,469
Transaction-related costs (2)	349		2,547
Transaction-related amount due to former owners (3)	—		3,611
Other payables and accrued expenses	8,910		7,961
Total	$	64,584	$	70,690

(1) Includes current portion of MAAPP funds received and deferred employer Social Security tax payments.

(2) Represents costs related to public readiness initiatives and corporate transactions.

(3) Represents the amount due to former owners related to the Company’s utilization of net operating loss carryforwards generated prior to its acquisition of ATI Holdings Acquisition, Inc.

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Note 8. Borrowings

Long-term debt consisted of the following at December 31, 2021 and December 31, 2020 (in thousands):


	December 31, 2021		December 31, 2020
First lien term loan (1) (due May 10, 2023, with principal payable in quarterly installments)	$	555,048	$	779,915
Second lien subordinated loan (2)	—		231,335
Less: unamortized debt issuance costs	(1,935)		(8,933)
Less: unamortized original issue discount	(1,147)		(2,732)
Total debt, net	$	551,966	$	999,585
Less: current portion of long-term debt	(8,167)		(8,167)
Long-term debt, net	$	543,799	$	991,418

(1) Interest rate of 4.5% at December 31, 2021 and December 31, 2020, with interest payable in designated installments (dependent upon the base interest rate election) at a variable interest rate. The effective interest rate for the first lien term loan was 4.9% at December 31, 2021 and December 31, 2020.

(2) Loan balance was repaid in its entirety on June 16, 2021 as part of the Business Combination. The effective interest rate for the second lien term loan was 10.9% at December 31, 2020.

2016 first and second lien credit agreements

In connection with the Business Combination on June 16, 2021, the Company paid down $216.7 million of its first lien term loan. The Company recognized $1.7 million in charges related to the derecognition of the proportionate amount of remaining unamortized deferred financing costs and unamortized original issue discount associated with the partial debt repayment.

In connection with the Business Combination on June 16, 2021, the Company paid $231.3 million to settle its second lien subordinated term loan. The Company recognized $3.8 million in charges related to the derecognition of the remaining unamortized deferred financing costs in conjunction with the debt repayment.

The total loss on debt extinguishment associated with the partial repayment of the first lien term loan and the settlement of the second lien subordinated term loan was $5.5 million for the year ended December 31, 2021. This amount has been reflected in other expense (income), net in the ~~fair value hierarchy~~consolidated statements of operations.

The 2016 first lien credit arrangement is guaranteed by Wilco Intermediate and its domestic subsidiaries, subject to customary exceptions (collectively, the “Guarantors”) and secured by substantially all of the assets of ATI Holdings Acquisition, Inc. (the “Borrower”) and Guarantors. The 2016 first lien borrowing bears interest, at the Borrower’s election, at a base interest rate of the Alternate Base Rate (“ABR”) or LIBOR plus an interest rate spread, as defined in the first lien credit agreement. The ABR is the highest of (i) the federal funds rate plus 0.5%, (ii) one-month LIBOR plus 1.0% and (iii) the prime rate. The LIBOR term may be one, two, three or six months (or, to the extent available, twelve months or a shorter period). The per annum interest rate spread for first lien term loans is (a) 2.5% for ABR loans and (b) 3.5% for LIBOR loans.

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The Company’s credit agreements contain covenants with which the Borrower must comply. For the 2016 first lien credit agreement, the Borrower must maintain, as of the last day of each fiscal quarter when the sum of the outstanding balance of revolving loans, swingline loans and certain letters of credit exceeds 30% of the total revolving credit facility commitment, a ratio of consolidated first lien net debt to consolidated adjusted EBITDA, as defined in the agreements, not to exceed 6.25:1.00. As of December 31, 2021, the ratio exceeded 6.25:1.00. As a result, the sum of the outstanding balance of revolving loans, swingline loans and certain letters of credit is effectively limited to 30% of the total revolving credit facility commitment. Additionally, the agreements are subject to subjective acceleration clauses, effective upon a material adverse change in the Company’s business or financial condition. As of December 31, 2021, the Borrower was in compliance with the covenants contained in the first lien agreement.

Revolving credit facility

The 2016 first lien agreement includes a revolving credit facility with a maximum borrowing capacity of $70.0 million, including $15.0 million sub-limit for swingline loans and amounts available for letters of credit. The issuance of such letters of credit and the making of swingline loans reduces the amount available under the applicable revolving credit facility.

The Borrower may make draws under the revolving credit facility for general corporate purposes until the maturity date of the revolving credit facility. The first lien revolving facility matures on May 10, 2023 unless (a) as of February 9, 2023 (the “Springing Maturity Date”), either (i) more than $100.0 million of first lien term loans remain outstanding on the Springing Maturity Date or (ii) the debt incurred to refinance any portion of the first lien term loans in excess of $100.0 million does not satisfy specified parameters, in which case the first lien revolving facility will mature on February 9, 2023, or (b) the Borrower makes certain prohibited restricted payments as defined in the agreement, in which case the first lien revolving facility will mature on the date of such restricted payment.

The per annum interest rate spread for first lien revolving loans is (a) 3.5% for ABR loans and (b) 4.5% for LIBOR loans, with stepdowns based on the ~~lowest level input that is significant~~first lien leverage ratio. The applicable interest rate spreads were 3.5% and 3.0% for ABR revolving borrowings, and 4.5% and 4.0% for LIBOR revolving borrowings at December 31, 2021 and 2020, respectively. In addition to the stated interest rate on borrowings under the revolving credit facility, the Company is required to pay a commitment fee of between 0.25% and 0.5% per annum on any unused portion of the revolving credit facility based on the Company’s first lien leverage ratio. The fee was 0.5% at December 31, 2021.

The Company drew amounts of $19.0 million and $49.8 million under its revolving credit facility in March and April 2020, respectively. The Company repaid the borrowed amounts in full in June 2020. As of December 31, 2021 and December 31, 2020, no borrowings were outstanding under the revolving credit facility.

The Company had letters of credit totaling $1.2 million under the letter of credit sub-facility on the revolving credit facilities as of December 31, 2021 and December 31, 2020, respectively. The letters of credit auto-renew on an annual basis and are pledged to insurance carriers as collateral.

Aggregate maturities of long-term debt at December 31, 2021 are as follows (in thousands):



2022	$	8,167
2023	546,881

Total future maturities	555,048
Unamortized original issue discount and debt issuance costs	(3,082)
Total debt, net	$	551,966

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Note 9. Employee Benefit Plans

The Company maintains a defined contribution 401(k) retirement plan for its full-time employees. The plan allows all participants to make elective pretax contributions of up to 100% of their compensation, up to a maximum amount as limited by law. The Company makes matching contributions to the plan on behalf of the employee in the amount of 50% of the first 6% of the contributing participant’s elective deferral contribution. Matching contributions to the plan were $4.6 million, $4.7 million and $5.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The following table presents the Company’s matching contributions to the plan recorded in cost of services and selling, general and administrative expenses in the consolidated statements of operations for the periods indicated below (in thousands):


	Year Ended
	December 31, 2021		December 31, 2020		December 31, 2019

Salaries and related costs	$	4,102	$	4,206	$	4,965
Selling, general and administrative expenses	532		520		504
Total	$	4,634	$	4,726	$	5,469

Note 10. Share-Based Compensation

The Company recognizes compensation expense for all share-based compensation awarded to employees, net of forfeitures, using a fair value-based method. The grant-date fair value ~~measurement.~~of each award is amortized to expense on a straight-line basis over the award’s vesting period. Compensation expense associated with share-based awards is included in salaries and related costs and selling, general and administrative expenses in the accompanying consolidated statements of operations, depending on whether the award recipient is a clinic-level or corporate employee, respectively. Share-based compensation expense is adjusted for forfeitures as incurred.

Wilco Acquisition, LP 2016 Equity Incentive Plan

Prior to the Business Combination, Wilco Acquisition, LP was the parent company of Wilco Holdco, Inc. and its subsidiaries.In 2016, the Company adopted the Wilco Acquisition, LP 2016 Equity Incentive Plan (the “2016 Plan”) under which, prior to the Business Combination, it granted profit interests of Wilco Acquisition, LP in the form of Incentive Common Units, to members of management, key employees and independent directors of Wilco Acquisition, LP and its subsidiaries.

Service-based vesting

Prior to the Business Combination, Wilco Acquisition, LP granted Incentive Common Units, subject to service-based vesting, to members of management, key employees and independent directors. Following the closing of the Business Combination, holders of service-based ICUs were entitled to a distribution of a number of Class A common shares of ATI Physical Therapy, Inc. based on the distribution priorities under the Wilco Acquisition, LP limited partnership agreement. The shares related to vested service-based ICUs were distributed as unrestricted Class A common shares of ATI. The shares related to unvested service-based ICUs were distributed as restricted Class A common shares of ATI eligible to vest over the shorter of: (a) the existing vesting schedule applicable to the underlying ICUs, or (b) in installments on each quarterly anniversary of the closing over three years post-closing, subject to the grantee's continued service through each vesting date.

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Pursuant to the 2016 Plan, total share-based compensation expense related to service-based awards recognized in the years ended December 31, 2021, 2020 and 2019 was $2.7 million, $1.9 million and $1.8 million, respectively.

For the year ended December 31, 2021, 0.4 million shares distributed to holders of service-based ICUs vested, and forfeitures related to shares distributed to holders of service-based ICUs were immaterial. There were no service-based awards granted under the 2016 Plan during the year ended December 31, 2021.

As of December 31, 2021, the remaining unvested restricted shares distributed to holders of service-based ICUs totaled 0.3 million Class A common shares, with unrecognized compensation expense of $1.8 million to be recognized over a weighted-average period of 2.3 years.

Performance-based vesting

Prior to the Business Combination, Wilco Acquisition, LP granted Incentive Common Units, subject to performance-based vesting, to members of management, key employees and independent directors. Following the closing of the Business Combination, holders of performance-based ICUs were entitled to a distribution of a number of Class A common shares of ATI Physical Therapy, Inc. based on the distribution priorities under the Wilco Acquisition, LP limited partnership agreement. The shares related to performance-based ICUs were distributed to holders as restricted Class A common shares of ATI eligible to vest in installments on each quarterly anniversary of the closing over the shorter of: (a) the eight-year period from the original grant date of the underlying ICUs, or (b) three years post-closing, subject to the grantee’s continued service through each vesting date.

Based on the terms of the performance-based ICUs, commencement of vesting is generally contingent upon the occurrence of certain events, such as a change-in-control subject to the achievement of specified investment returns of certain Wilco Acquisition, LP unit holders, or an initial public offering (“IPO”). Under the terms of the award agreements, in the event of an IPO, the performance-based vesting requirements convert to service-based vesting requirements. The performance-based awards follow the treatment of an IPO as a result of the Business Combination and, therefore, converted to service-based vesting requirements.

Prior to the Business Combination, no share-based compensation expense was recognized related to the performance-based awards, as a change-in-control or IPO cannot be assessed as probable prior to its occurrence. Following the closing of the Business Combination, the Company began recognizing share-based compensation expense associated with the performance-based awards. Recognition of such expense follows a straight-line expense allocation based on the original grant date and the shorter of (a) the eight-year period from the original grant date of the underlying ICUs, or (b) three years post-closing of the Business Combination. For the year ended December 31, 2021, the Company recognized $2.5 million of share-based compensation expense related to the performance-based awards.

For the year ended December 31, 2021, 0.4 million shares distributed to holders of performance-based ICUs vested, and 0.3 million shares distributed to holders of performance-based ICUs were forfeited. There were no performance-based awards granted under the 2016 Plan during the year ended December 31, 2021.

As of December 31, 2021, the remaining unvested restricted shares distributed to holders of performance-based ICUs totaled 0.5 million shares, with unrecognized compensation expense of $1.5 million to be recognized over a weighted-average period of 2.4 years.

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Unallocated and forfeited Incentive Common Units

ATI and Wilco Acquisition, LP intend to cancel approximately 0.6 million Class A common shares of ATI received by Wilco Acquisition, LP in connection with the Business Combination in respect of the remaining unallocated ICU pool. ATI intends to amend, subject to stockholder approval, the ATI Physical Therapy 2021 Equity Incentive Plan (the "2021 Plan") to increase the share reserve by approximately 0.6 million Class A common shares of ATI.

If any restricted shares of ATI are forfeited following the closing of the Business Combination and prior to vesting, such shares will be cancelled and ATI intends to amend the 2021 Plan to permit such shares to be reissued as awards under the 2021 Plan.

ATI 2021 Equity Incentive Plan

The Company adopted the ATI Physical Therapy 2021 Equity Incentive Plan under which it may grant equity interests of ATI Physical Therapy, Inc., in the form of stock options, stock appreciation rights, restricted stock awards and restricted stock units, to members of management, key employees and independent directors of the Company and its subsidiaries. The Compensation Committee is authorized to make grants and to make various other decisions under the 2021 Plan. The maximum number of shares reserved for issuance under the 2021 Plan is approximately 20.7 million. As of December 31, 2021, approximately 19.0 million shares were available for future grant.

Stock options

The Company grants stock options to members of management, key employees and independent directors. Stock options typically vest in equal annual installments over a service period ranging from three to four years from the date of grant, depending on the term of the agreement. All options have a maximum term of 10 years from the date of grant and may be exercised for one share of Class A common stock.

Pursuant to the 2021 Plan, total share-based compensation expense related to stock options recognized in the year ended December 31, 2021 was approximately $0.1 million. No share-based compensation expense was recognized in the years ended December 31, 2020 and 2019 related to stock options.

The following table summarizes the activity of stock options for the year ended December 31, 2021 (aggregate intrinsic value in thousands):


	Number of Options	Weighted-Average Exercise Price		Weighted-Average Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding, January 1, 2021	—	$	—	—	$	—
Granted	774,796	3.41		N/A	N/A
Exercised	—	—		N/A	—
Forfeited/Cancelled	—	—		N/A	N/A
Outstanding, December 31, 2021	774,796	$	3.41	9.9	$	9

Exercisable, December 31, 2021	—	$	—	—	$	—

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The fair values of each stock option granted was determined using the Black-Scholes option-pricing model. The following weighted-average assumptions were used for the options granted in 2021. As the Company does not have sufficient historical share option exercise experience for such "plain-vanilla" awards, the expected option term was determined using the simplified method, which is the average of the option's vesting and contractual term. Volatility is measured using the historical volatility of certain comparable companies, using daily log-returns of stock prices, as adjusted for the impact of financial leverage. The risk-free interest rate reflects the U.S. Treasury yield curve in effect at the time of the grant. No stock options were granted under the 2021 Plan during the years ended December 31, 2020 and 2019.


			2021
Weighted-average grant-date fair value			$1.69
Risk-free interest rate			1.45%
Term (years)			6.0
Volatility			51.67%
Expected dividend			—%

As of December 31, 2021, the unrecognized compensation expense related to stock options was $1.2 million, to be recognized over a weighted-average period of 2.9 years.

Restricted stock units

The Company grants restricted stock units (“RSUs”) to members of management, key employees and independent directors. RSUs are time-based vesting awards and are subject to the continued service of the employee or non-employee director over the vesting period. RSUs typically vest in equal annual installments over one to three years from the date of grant, based on the terms of the agreement. The fair value of RSUs was based on the price of the Company’s common stock on the grant date.

Pursuant to the 2021 Plan, total share-based compensation expense related to RSUs recognized in the year ended December 31, 2021 was $0.1 million. No share-based compensation expense was recognized in the years ended December 31, 2020 and 2019 related to RSUs.

The following table summarizes the activity of unvested RSUs and the respective weighted-average grant date fair value per RSU for the year ended December 31, 2021. No RSUs were outstanding for the years ended December 31, 2020 and 2019.


	2021
	RSUs	Weighted-Average Grant Date Fair Value
Outstanding and unvested, beginning of year	—	$	—
Granted	404,235	3.41
Vested	—	—
Forfeited	—	—
Outstanding and unvested, end of year	404,235	$	3.41

As of December 31, ~~2020,~~2021, the ~~recorded values~~unrecognized compensation expense related to RSUs was $1.3 million, to be recognized over a weighted-average period of ~~cash, accounts payable~~2.5 years.

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Restricted stock awards

The Company grants restricted stock awards (“RSAs”) to members of management and ~~accrued expenses~~key employees. RSAs are time-based vesting awards and ~~franchise tax payable approximate their fair values due~~are subject to the ~~short-term nature~~continued service of ~~these instruments.~~the employee over the vesting period. RSAs typically vest in equal quarterly installments over a service period of 3 years from the grant date. The vesting start date for the RSAs granted in 2021 is the Closing Date. The fair value of restricted stock was based on the price of the Company’s common stock on the grant date.

Pursuant to the 2021 Plan, total share-based compensation expense related to RSAs recognized in the year ended December 31, 2021 was $0.4 million. No share-based compensation expense was recognized in the years ended December 31, 2020 and 2019 related to RSAs.

The following table summarizes the activity of unvested RSAs and respective weighted-average grant date fair value per RSA for the year ended December 31, 2021. No RSAs were outstanding for the years ended December 31, 2020 and 2019.


	2021
	RSAs	Weighted-Average Grant Date Fair Value
Outstanding and unvested, beginning of year	—	$	—
Granted	557,334	3.42
Vested	(105,473)	3.42
Forfeited	(4,130)	3.42
Outstanding and unvested, end of year	447,731	$	3.42

As of December 31, 2021, the unrecognized compensation expense related to RSAs was $1.5 million, to be recognized over a weighted-average period of 2.5 years.

~~Recent accounting pronouncements~~

Note 11. Stockholders' Equity

ATI Physical Therapy, Inc. preferred stock

The Company is authorized to issue 1.0 million shares of preferred stock with a par value of $0.0001 per share. As of December 31, 2021, there was no preferred stock issued or outstanding.

~~Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.~~

Class A common stock

~~3. Initial Public Offering~~

~~On August 14, 2020, the~~The Company sold 34,500,000 Units, including the issuance of 4,500,000 Units as a result of the underwriters' exercise of their over-allotment option in full, at a price of $10.00 per Unit. Each Unit consists of 1 shareis authorized to issue 470.0 million shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to 1 vote for each share on each matter on which they are entitled to vote. At December 31, 2021, there were 207.4 million shares of Class A common stock issued and ~~one-fifth~~197.4 million shares outstanding.

As a result of ~~one~~the recapitalization associated with the Business Combination, shares are reflected as if they were issued and outstanding as of the earliest reported period to reflect the new capital structure. At the time of the Business Combination, stockholders of Wilco Holdco, Inc. received 130.3 million shares of the Company’s Class A common stock, par value $0.0001 per share, for the outstanding shares of Wilco Holdco common stock, par value $0.01 per share, that such stockholders owned. Upon distribution of shares to holders of unvested Incentive Common Units granted prior to the Business Combination under the Wilco Acquisition, LP 2016 Equity Incentive Plan, 2.0 million of these shares were restricted subject to vesting requirements, resulting in total unrestricted shares of 128.3 million and an exchange ratio of 136.7 unrestricted shares of ATI Physical Therapy, Inc. for every previously outstanding Wilco Holdco share.

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As of December 31, 2021, shares of Class A common stock reserved for potential future issuance, on an as-if converted basis, were as follows (in thousands):


			December 31, 2021
Shares available for grant under the ATI 2021 Equity Incentive Plan			18,996
Earnout Shares reserved			15,000

Class A common stock Warrants outstanding			9,867
Vesting Shares reserved(1)			8,625
Restricted shares(1,2)			1,323
Total shares of common stock reserved			53,811

(1) Represents shares of Class A common stock legally issued, but not outstanding, as of December 31, 2021.

(2) Represents a portion of the 2.0 million restricted shares distributed following the Business Combination to holders of unvested Incentive Common Units under the Wilco Acquisition, LP 2016 Equity Incentive Plan. Refer to Note 10 - Share-Based Compensation for further details.

Treasury stock

During the year ended December 31, 2021, the Company net settled 0.03 million shares of its Class A common stock related to employee tax withholding obligations associated with the Company's share-based compensation program. These shares are reflected at cost as treasury stock in the consolidated financial statements.

Note 12. Redeemable Preferred Stock

On May 10, 2016, Wilco Holdco, Inc. issued shares of Series A Preferred Stock (the “preferred stock”) for a total consideration value of $98.0 million. Prior to the Business Combination, the preferred stock was a class of equity that had priority over the Common Stock with respect to distribution rights, liquidation rights and dividend rights.

The preferred stockholders, from and after issuance, were entitled to cumulative preferred dividends at an annual rate per share equal to 10.25% of the original issue price. The dividend rate of the preferred stock increased by 0.25% at the end of each fiscal quarter beginning after the second anniversary of the issuance of the preferred stock.

Based on the terms of the preferred stockholder agreement, Wilco Holdco, Inc. was required to redeem all outstanding shares of preferred stock upon the occurrence of certain events, such as those related to full repayment of the first and second lien credit agreements or a deemed liquidating event.Based on these redemption requirements, the preferred stock was classified as debt (redeemable preferred stock) in the Company’s historical consolidated balance sheets.

Cumulative dividends related to the preferred stock were accrued as preferred dividends that increased the balance of the redeemable preferred stock on the Company’s consolidated balance sheets and were recognized as interest expense on redeemable preferred stock in the Company’s consolidated statements of operations. For the years ended December 31, 2021, 2020 and 2019, the Company incurred cumulative preferred dividends related to the preferred stock of $10.1 million, $19.0 million and $15.5 million, respectively. No dividends were paid related to the preferred stock.

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In connection with the Business Combination, holders of the outstanding shares of Series A Preferred Stock received a proportionate share of $59.0 million and 12.8 million shares of Class A common stock based on the settlement terms in the Merger Agreement. The Company recorded a loss on settlement of redeemable preferred stock in the consolidated statement of operations of $14.0 million based on the value of the cash and equity provided to preferred stockholders in relation to the outstanding redeemable preferred stock liability. The balance of redeemable preferred stock was zero and $163.3 million as of December 31, 2021 and December 31, 2020, respectively.

Note 13. Warrant Liability

The Company has outstanding Public Warrants to purchase an aggregate of 6.9 million shares of the Company’s Class A common stock and outstanding Private Placement Warrants to purchase an aggregate of 3.0 million shares of the Company's Class A common stock. There were no warrants exercised during the year ended December 31, 2021.

The Company accounts for its outstanding Public Warrants and Private Placement Warrants in accordance with the guidance contained in Accounting Standards Codification 815-40, “Derivatives and Hedging - Contracts on an Entity’s Own Equity” and determined that the Warrants do not meet the criteria for equity treatment thereunder. As such, each Warrant must be recorded as a liability and is subject to re-measurement at each balance sheet date. Refer to Note 15 - Fair Value Measurements for further details. Changes in fair value are recognized in change in fair value of warrant ~~("Public Warrant").~~ liability in the Company’s consolidated statements of operations.

The following table presents the change in the fair value of warrant liability, since the Closing Date of the Business Combination, that is recognized in the consolidated statement of operations for the respective periods (in thousands):


	Private Placement Warrants		Public Warrants		Warrant Liability
Fair value as of Business Combination, June 16, 2021	$	8,099	$	18,837	$	26,936
Changes in fair value	(6,794)		(15,801)		(22,595)
Fair value as of December 31, 2021	$	1,305	$	3,036	$	4,341

Each ~~whole~~ Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to ~~adjustment (see Note 6).~~

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~~NOTES TO FINANCIAL STATEMENTS~~

~~4. Related Party Transactions~~

~~Founder shares~~

~~In June 2020, the Company issued an aggregate of 8,625,000 shares of Class F common stock to the Sponsor (the “Founder Shares”) in exchange for an aggregate capital contribution of $25,000.~~adjustment. The Sponsor had agreed to forfeit an aggregate of up to 1,125,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On August 14, 2020, the underwriters exercised their over-allotment option in full. As a result, the 1,125,000 Founder Shares were no longer subject to forfeiture. The Founder Shares will automatically convert into Class A common stock upon the consummation of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment (see Note 6).

The initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earliest of (a) one year after the completion of the initial Business Combination, (b) subsequent to the initial Business Combination, if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, and (c) following the completion of the initial Business Combination, such future date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company's public stockholders having the right to exchange their shares of common stock for cash, securities or other property. In August 2020, the Sponsor transferred a total of 100,000 Founder Shares to 4 independent directors of the Company for the same per-share price initially paid for by the Sponsor. Subsequent to these transfers, the Sponsor held 8,525,000 Founder Shares.

~~Private placement warrants~~

~~Substantially concurrently with the closing of the Initial~~ Public ~~Offering, the Sponsor purchased an aggregate 5,933,333 Private Placement~~ Warrants ~~in the Private Placement. Each Private Placement Warrant is~~became exercisable to purchase one share of Class A common stock at $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Sponsor and the Company's officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the Business ~~Combination.~~

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~~NOTES TO FINANCIAL STATEMENTS~~

~~Promissory note—related party~~

~~Prior~~Combination, subject to the Initial Public Offering, the Sponsor loaned the Company an aggregate of $97,250 to cover expenses related to the Initial Public Offering pursuant to a promissory note. The promissory note was non-interest bearing, unsecured and due on the earlier of April 30, 2021 and the closing of the Initial Public Offering. The Company repaid the promissory note in full on August 14, 2020.

~~Office space and related support services~~

During August 2020, the Company entered into an agreement with an affiliate of the Sponsor to pay a monthly fee of $20,000 for office space and related support services. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. During the period from June 10, 2020 (inception) through December 31, 2020 the Company incurred approximately $93,000 in expenses for services provided by an affiliate of the Sponsor in connection with the aforementioned agreement. As of December 31, 2020, the Company accrued $20,000 in connection with this agreement, as reflected in the accompanying balance sheet.

~~Related party loans~~

~~In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or~~ certain of the Company's officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. As of December 31, 2020, 0 Working Capital Loans were outstanding.

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~~NOTES TO FINANCIAL STATEMENTS~~

~~5. Commitments and Contingencies~~

~~Registration rights~~

The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to a registration rights agreement signed prior to the closing date of the Initial Public Offering. The holders of these securities are entitled to make up to 3 demands, excluding short form demands,conditions, including that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

~~Underwriting agreement~~

The Company granted the underwriters a 45-day option from the date of the Initial Public Offering to purchase up to 4,500,000 additional Units to cover over-allotments, if any, at the price paid by the underwriters in the Initial Public Offering. The underwriters exercised this over-allotment in full concurrently with the closing of the Initial Public Offering. The underwriters were entitled to an underwriting discount of $0.20 per unit, or $6.9 million paid upon the closing of the Initial Public Offering. Additionally, a deferred underwriting discount of $0.35 per unit, or approximately $12.1 million will be payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes a Business Combination, subject to the terms of the underwriting agreement.

~~6. Stockholders' Equity~~

~~Class A common stock~~—The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share on each matter on which they are entitled to vote. As of December 31, 2020, there were 34,500,000 shares of Class A common stock issued and outstanding, including 32,791,826 shares of Class A common stock subject to possible redemption.

~~Class F common stock~~—The Company is authorized to issue 20,000,000 shares of Class F common stock with a par value of $0.0001 per share. Holders of the Company’s Class F common stock are entitled to one vote for each share on each matter on which they are entitled to vote. The Class F common stock will automatically convert into Class A common stock at the time of the consummation of the initial Business Combination, or earlier at the option of the holder, on a one-for-one basis. As of December 31, 2020, there were 8,625,000 of Class F common stock outstanding.

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~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

Only holders of the Founder Shares will have the right to elect all of the Company’s directors prior to the initial Business Combination. Otherwise, holders of Class A common stock and Class F common stock will vote together as a single class on all matters submitted to a vote of stockholders except as required by law or the applicable rules of the New York Stock Exchange then in effect.

In the case that additional Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which the Class F common stock shall convert into Class A common stock will be adjusted (unless the holders of a majority of the outstanding Class F common stock agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A common stock issuable upon conversion of all Class F common stock will equal, in the aggregate, 20% of the sum of the total number of all common stock outstanding upon the completion of the Initial Public Offering plus all Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination.

~~Preferred stock—The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of December 31, 2020, there were 0 preferred stock issued or outstanding.~~

~~Warrants~~—Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company hasmaintains an effective registration statement under the Securities Act covering the Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the issuance of shares of Class A common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective within 60 business days after the closing of the initial Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the warrants in accordance with the provisions of the warrant agreement. If the Class A common stock, at the time of any exercise of a warrant, is not listed on a national securities exchange such that it satisfies the definition of a "covered security" under Section (18)(b)(1) of the Securities Act, the Company may require warrant holders who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. The Public Warrants will expire five years after the completion of athe Business Combination or earlier upon redemption or liquidation.

The Company may call the Public Warrants for redemption for cash or for Class A common stock under certain circumstances.

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~~NOTES TO FINANCIAL STATEMENTS~~

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The Private Placement Warrants are identical to the Public Warrants, ~~underlying the Units sold in the Initial Public Offering,~~ except that (i) the Private Placement Warrants and the Class A common stock issuable upon exercise of the Private Placement Warrants ~~will~~were not be transferable, assignable or salable until 30 days after the completion of athe Business Combination, subject to certain limited exceptions, (ii) the Private Placement Warrants ~~will be~~are non-redeemable (except under ~~scenario 2 below)~~certain circumstances) so long as they are held by the initial purchasers or such purchasers’ permitted transferees, (iii) the Private Placement Warrants may be exercised by the holders on a cashless basis, and (iv) the Private Placement Warrants and the Class A common stock issuable upon exercise of the Private Placement Warrants are entitled to registration rights. If the Private Placement Warrants are held by someone other than the initial stockholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by such holders on the same basis as the Public Warrants.

~~The Company may call the Public Warrants for redemption:~~

1.~~For cash:~~

▪~~in whole and not in part;~~

▪~~at a price of $0.01 per warrant;~~

▪~~upon a minimum of 30 days' prior written notice of redemption; and~~

▪if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

2.~~For class A common stock (commencing 90 days after the warrants become exercisable):~~

▪~~in whole and not in part;~~

▪at $0.10 per warrant upon a minimum of 30 days' prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock to be determined by reference to a table included in the warrant agreement, based on the redemption date and the fair market value of Class A common stock;

▪if, and only if, the last reported sale price of the Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to warrant holders.

▪~~if, and only if, the Private Placement Warrants are also concurrently exchanged at the same price (equal to a number of shares of Class A common stock) as the outstanding Public Warrants; and~~

▪if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the 30-day period after written notice of redemption is given.

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~~NOTES TO FINANCIAL STATEMENTS~~

If the Company calls the Public Warrants for redemption, under scenario 1 above, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a "cashless basis," as described in the warrant agreement.

The exercise price and number of Class A common stock issuable upon exercise of the ~~warrants~~Warrants may be adjusted in certain circumstances including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation. If

Note 14. Contingent Common Shares Liability

Earnout Shares

Subject to the terms and conditions of the Merger Agreement, certain stockholders of Wilco Holdco, Inc. were provided the contingent right to receive, in the aggregate, up to 15.0 million shares of Class A common stock if, from the closing of the Business Combination until the 10th anniversary thereof, the dollar volume-weighted average price (“VWAP”) of Class A common stock exceeds certain thresholds:

–The first issuance of 5.0 million Earnout Shares will occur if the VWAP exceeds $12.00 for any 5 trading days within any consecutive 10 trading day period.

–The second issuance of 5.0 million Earnout Shares will occur if the VWAP exceeds $14.00 for any 5 trading days within any consecutive 10 trading day period.

–The third issuance of 5.0 million Earnout Shares will occur if the VWAP exceeds $16.00 for any 5 trading days within any consecutive 10 trading day period.

The Earnout Shares are subject to acceleration in the event of a sale or other change in control if the holders of Class A common stock would receive a per share price in excess of the applicable Earnout Shares price target.

The Company accounts for the potential Earnout Shares as a liability in accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and is subject to re-measurement at each balance sheet date. Changes in fair value are recognized in the Company’s consolidated statements of operations. On June 16, 2021, the Company ~~issues additional~~estimated the fair value of the potential Earnout Shares to be $140.0 million. As of December 31, 2021, no Earnout Shares have been issued as none of the corresponding share price thresholds have been met.

During the period from June 16, 2021 to December 31, 2021, the fair value of the Earnout Shares decreased to $28.8 million, resulting in a gain of $111.2 million for the year ended December 31, 2021, respectively, recorded as a component of change in fair value of contingent common shares liability in the consolidated statement of operations.

The fair value of the Earnout Shares as of December 31, 2021 was $28.8 million and was recorded as a component of contingent common ~~stock or equity-linked securities~~shares liability in the consolidated balance sheets. Refer to Note 15 - Fair Value Measurements for ~~capital raising purposes~~further details.

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Vesting Shares

Subject to the terms and conditions of the Sponsor Letter Agreement that was executed in connection with the ~~closing~~Merger Agreement, 8.6 million shares of Class F common stock of FAII outstanding immediately prior to the ~~initial~~ Business Combination ~~at a newly issued~~converted to potential Class A common shares and became subject to vesting and forfeiture provisions. The Vesting Shares vest in 3 equal tranches of 2.9 million shares each if the trading price ~~of less than $9.20 per share~~ of common stock ~~the exercise price~~exceeds certain thresholds within 10 years of the ~~warrants~~Closing Date:

–The first issuance of 2.9 million Vesting Shares will ~~be adjusted~~occur if the VWAP exceeds $12.00 for any 5 trading days within any consecutive 10 trading day period.

–The second issuance of 2.9 million Vesting Shares will occur if the VWAP exceeds $14.00 for any 5 trading days within any consecutive 10 trading day period.

–The third issuance of 2.9 million Vesting Shares will occur if the VWAP exceeds $16.00 for any 5 trading days within any consecutive 10 trading day period.

The Vesting Shares are subject to acceleration in the event of a sale or other change in control if the holders of Class A common stock would receive a per share price in excess of the applicable Vesting Shares price target.

The Company accounts for the Vesting Shares as a liability in accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and is subject to re-measurement at each balance sheet date. Changes in fair value are recognized in the Company’s consolidated statements of operations. On June 16, 2021, the Company estimated the fair value of the Vesting Shares to be ~~equal to 115%~~$80.5 million. As of December 31, 2021, no Vesting Shares are outstanding as none of the ~~newly issued price. Additionally,~~corresponding share price thresholds have been met.

During the period from June 16, 2021 to December 31, 2021, the fair value of the Vesting Shares decreased to $16.6 million, resulting in ~~no event will the Company be required to net cash settle the warrants. If the Company is unable to complete~~ a ~~Business Combination within the Combination Period and the Company liquidates the funds held~~gain of $63.9 million for the year ended December 31, 2021, respectively, recorded as a component of change in fair value of contingent common shares liability in the ~~Trust Account, holders~~consolidated statements of ~~warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside~~operations.

The fair value of the ~~Trust Account with~~Vesting Shares as of December 31, 2021 was $16.6 million and was recorded as a component of contingent common shares liability in the ~~respect~~consolidated balance sheets. Refer to ~~such warrants. In such a situation, the warrants would expire worthless.~~Note 15 - Fair Value Measurements for further details.

7.Note 15. Fair Value Measurements

The Company determines fair value measurements used in its consolidated financial statements based upon the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels, with Level 1 having the highest priority and Level 3 having the lowest.

•Level 1: Observable inputs, which include unadjusted quoted prices in active markets for identical instruments.

•Level 2: Observable inputs other than Level 1 inputs, such as quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instruments.

•Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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As of December 31, 2021 and December 31, 2020, respectively, the recorded values of cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued expenses and deferred revenue approximate their fair values due to the short-term nature of these items.

The Company's term loan and revolving line of credit are Level 2 fair value measures which have variable interest rates and, as of December 31, 2021 and December 31, 2020, the recorded amounts approximate fair value. The Company utilizes the market approach valuation technique based on interest rates that are currently available to the Company for issuance of debt with similar terms or maturities.

Fair value measurement of share-based financial liabilities

The Company determined the fair value of the Public Warrant liability using Level 1 inputs.

The Company determined the fair value of the Private Placement Warrant liability using the price of the Public Warrants as a Level 2 input.

The Company determined the fair value of the Earnout Shares liability and Vesting Shares liability using Level 3 inputs. The contingent common shares contain specific market conditions to determine whether the shares vest based on the Company’s common stock price over a specified measurement period. Given the path-dependent nature of the requirement in which the shares are earned, a Monte-Carlo simulation was used to estimate the fair value of the liability. The Company’s common stock price was simulated to each measurement period based on the above methodology. In each iteration, the simulated stock price was compared to the conditions under which the shares vest. In iterations where the stock price corresponded to shares vesting, the future value of the vesting shares was discounted back to present value. The fair value of the liability was estimated based on the average of all iterations of the simulation.

Inherent in a Monte Carlo valuation model are assumptions related to expected stock-price volatility, expected term, risk-free interest rate and dividend yield. The Company estimates the volatility based on the historical volatility of certain guideline companies as of the valuation date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected term of the Earnout Shares and Vesting Shares. The dividend yield percentage is zero based on the Company's current expectations related to the payment of dividends during the expected term of the Earnout Shares or Vesting Shares.

The key inputs into the Monte Carlo option pricing model were as follows as of the Closing Date and December 31, 2021 for the respective Level 3 instruments:


	Earnout Shares		Vesting Shares
	June 16, 2021	December 31, 2021	June 16, 2021	December 31, 2021
Risk-free interest rate	1.56%	1.50%	1.56%	1.50%
Volatility	39.03%	44.86%	39.03%	44.86%
Dividend yield	—%	—%	—%	—%
Expected term (years)	10.0	9.5	10.0	9.5
Share price	$10.28	$3.39	$10.28	$3.39

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The following table presents the changes in the fair value for the respective Level 3 instruments, since the Closing Date of the Business Combination, that is recognized in change in fair value of contingent common shares liability in the consolidated statements of operations for the respective periods (in thousands):


	Earnout Shares Liability		Vesting Shares Liability
Fair value as of Business Combination, June 16, 2021	$	140,000	$	80,500
Changes in fair value	(111,200)		(63,940)
Fair value as of December 31, 2021	$	28,800	$	16,560

Note 16. Income Taxes

The Company's (loss) income before taxes consists of only domestic operations. The details of the Company's income tax (benefit) expense for the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands):


	2021		2020		2019
Current:
Federal	$	—	$	—	$	—
State	128		251		14
Total current	128		251		14
Deferred:
Federal	(60,002)		3,514		(30,305)
State	(11,086)		(1,700)		(13,728)
Total deferred	(71,088)		1,814		(44,033)
Total income tax (benefit) expense	$	(70,960)	$	2,065	$	(44,019)

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The effective tax rate for the years ended December 31, 2021, 2020 and 2019 was 8.3%, (62.5)% and 113.8%, respectively. The Company's effective income tax rate varies from the federal statutory rate due to various items, such as state income taxes, valuation allowances and nondeductible items such as interest expense on redeemable preferred stock, fair value adjustments related to liability-classified share-based instruments and impairment charges. The differences between the federal tax rate and the Company's effective tax rate for the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands):


	2021				2020				2019
Federal income tax benefit at statutory rate	$	(179,128)	21.0	%	$	(694)	21.0	%	$	(8,121)	21.0	%
State income tax (benefit) expense, net of federal tax benefit	(25,814)		3.0	%	1,248		(37.8)	%	(3,741)		9.7	%
Change in state tax rate	34		—	%	(2,551)		77.1	%	(1,197)		3.1	%
Prior period adjustments and other	1,515		(0.2)	%	(105)		3.2	%	(51)		—	%
Valuation allowance	35,731		(4.2)	%	(981)		29.7	%	(34,943)		90.4	%
Interest expense on redeemable preferred stock	2,118		(0.2)	%	3,997		(120.9)	%	3,257		(8.4)	%
Changes in fair value of warrant liability and contingent common shares liability	(41,524)		4.9	%	—		—	%	—		—	%
Goodwill and intangible asset impairment charges	132,447		(15.5)	%	—		—	%	—		—	%
Other permanent differences, net	3,661		(0.5)	%	1,151		(34.8)	%	777		(2.0)	%
Total income tax (benefit) expense	$	(70,960)	8.3	%	$	2,065	(62.5)	%	$	(44,019)	113.8	%

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Deferred income taxes have been provided on temporary differences, which consist of the following at December 31, 2021 and 2020 (in thousands):


	2021		2020
Deferred income tax assets:
Accrued liabilities	$	10,420	$	14,423
Provision for bad debt	12,530		16,472
Operating lease liabilities	74,115		75,141
Acquisition and transaction costs	3,770		4,262
Net operating losses	82,304		54,655
Interest expense	33,163		21,903
Other deferred tax assets	4,798		4,205
Total gross deferred income tax assets	221,100		191,061
Valuation allowance	(58,312)		(22,581)
Total gross deferred income tax assets, net of valuation allowance	162,788		168,480
Deferred income tax liabilities:
Goodwill	26,563		36,374
Trade name/trademark	114,451		179,503
Operating right-of-use assets	63,252		63,531
Depreciation	22,089		24,188
Other deferred tax liabilities	3,892		3,431
Total gross deferred income tax liabilities	230,247		307,027
Net deferred income tax liabilities	$	67,459	$	138,547

Deferred tax assets include federal net operating losses of $237.3 million and $153.3 million at December 31, 2021 and 2020, respectively, and state net operating losses of $577.3 million and $440.5 million at December 31, 2021 and 2020, respectively. Deferred tax assets are expected to be used in the reduction of taxable earnings of future tax years unless it is determined they are more likely than not to be realized based on the weight of available evidence. The earliest net operating loss will expire by statute in 2022 for state net operating losses, and in 2036 for federal net operating losses.

In evaluating the Company's ability to recover deferred income tax assets, all available positive and negative evidence is considered, including scheduled reversal of deferred tax liabilities, operating results and forecasts of future taxable income in each of the jurisdictions in which the Company operates. As of December 31, 2021, the Company determined that a significant portion of its federal and state net operating loss carryforwards with definite carryforward periods and certain deferred tax assets are not more likely than not to be realized based on the weight of available evidence. As a result, the Company recorded an increase of $22.5 million to its valuation allowance related to federal net operating loss carryforwards and an increase of $13.3 million to its valuation allowance related to state net operating loss carryforwards and certain deferred tax assets. These amounts were recorded during the year ended December 31, 2021 in income tax (benefit) expense in the consolidated statement of operations.

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For the year ended December 31, 2019, the Company reached the conclusion that it was appropriate to release its valuation allowance related to a significant portion of its federal and state deferred tax assets due to the expectation of current and future taxable income, which is partly attributable to interest limitation addbacks. As a result of the release, the Company’s valuation allowance related to federal net operating loss carryforwards decreased approximately $26.0 million, and the Company’s valuation allowance related to state net operating loss carryforwards and state credits decreased approximately $8.9 million. For the year ended December 31, 2020, the Company reached the conclusion that it was more likely than not that the Company’s federal and certain state deferred income tax assets were expected to be realized, and the Company maintained a valuation allowance mainly related to certain state net operating losses.

The Company is routinely audited by the tax authorities in various U.S. states and is currently not subject to examination. The statute remains open for most state jurisdictions for periods beginning in 2017. For federal tax purposes, tax years through 2017 are closed for examination by the Internal Revenue Service. Any interest and penalties related to the tax uncertainties are recorded in income tax expense.

As reflected in the following table (in thousands), the Company had an uncertain tax position related to the tax treatment of tenant improvement allowances. Due to the Company's net operating loss position, there were no accrued interest and penalties related to the unrecognized tax benefits in any year. Our gross unrecognized tax benefits were reduced by $3.0 million during the year ended December 31, 2021 due to tax filings. Of the gross unrecognized tax benefits, none were recognized as liabilities in the consolidated balance sheets in any year due to tax attribute carryforwards available to offset a potential tax liability.


	2021		2020		2019
Balance at beginning of period	$	3,027	$	2,341	$	884
Increases for positions taken during the year	—		686		1,457
Decreases for positions taken in prior years	(3,027)		—		—
Balance at end of period	$	—	$	3,027	$	2,341

Note 17. Leases

The Company leases various facilities and office equipment for its physical therapy operations and administrative support functions under operating leases. The Company’s initial operating lease terms are generally between 7 and 10 years, and typically contain options to renew for varying terms. Right-of-use ("ROU") assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The amortization of operating lease ROU assets and the accretion of operating lease liabilities are reported together as fixed lease expense. The fixed lease expense is recognized on a straight-line basis over the life of the lease. Refer to Note 2 - Basis of Presentation and Summary of Significant Accounting Policies for more information about the Company's lease accounting policies and ASC 842 adoption.

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Lease costs are included as components of cost of services and selling, general and administrative expenses on the consolidated statements of operations. Lease costs incurred by lease type were as follows for the periods indicated below (in thousands):


	Year Ended
		December 31, 2021		December 31, 2020
Lease cost
Operating lease cost		$	65,555	$	67,279
Variable lease cost (1)		20,045		18,689
Total lease cost (2)		$	85,600	$	85,968

(1) Includes short term lease costs, which are not material.

(2) Sublease income was not material.

During the year ended December 31, 2020, the Company terminated certain lease agreements primarily related to corporate facilities no longer in use. These terminations resulted in net charges of $4.3 million, comprised of $3.9 million in loss on lease terminations and impairment and $0.4 million in other costs associated with the terminations. The charges are recorded in selling, general and administrative expenses in the Company's consolidated statements of operations. The Company paid approximately $4.6 million related to these terminations during the year ended December 31, 2021.

During the years ended December 31, 2021 and 2020, the Company modified the lease terms for a significant number of its real estate leases. Modifications during the years ended December 31, 2021 and 2020 resulted in an increase to the Company’s operating lease ROU assets ~~that are measured on a recurring basis~~and operating lease liabilities of approximately $18.4 million and $29.3 million, respectively.

Other supplemental quantitative disclosures were as follows for the periods indicated below (in thousands):


	Year Ended
	December 31, 2021		December 31, 2020
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	65,678	$	61,993
Cash payments related to lease terminations	$	4,570	$	—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	28,759	$	14,067

Average lease terms and discount rates as of December 31, 2021 and December 31, 2020 were as follows:


	December 31, 2021	December 31, 2020
Weighted-average remaining lease term:
Operating leases	6.4 years	6.7 years
Weighted-average discount rate:
Operating leases	6.5%	6.5%

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Estimated undiscounted future lease payments under non-cancellable operating leases, along with a reconciliation of the undiscounted cash flows to operating lease liabilities, respectively, at December 31, 2021 were as follows (in thousands):


Year

2022	$	66,916
2023	64,314
2024	57,370
2025	48,508
2026	42,278
Thereafter	92,133
Total undiscounted future cash flows	$	371,519
Less: Imputed Interest	(71,489)
Present value of future cash flows	$	300,030
Presentation on Balance Sheet
Current	$	49,433
Non-current	$	250,597

Note 18. Commitments and Contingencies

The Company has contractual commitments that are not required to be recognized in the consolidated financial statements related to cloud computing and telecommunication services agreements. Minimum amounts due under these agreements are approximately $4.8 million through March of 2024 subject to customary business terms and conditions.

From time to time, the Company is a party to legal proceedings, governmental audits and investigations that arise in the ordinary course of business. Management is not aware of any legal proceedings, governmental audits and investigations of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require disclosure of the contingency and the possible range of loss. The outcome of any litigation and claims against the Company cannot be predicted with certainty, and the resolution of current or future claims could materially affect our future results of operations, cash flows, or financial position.

Shareholder class action complaints

On August 16, 2021, two purported ATI shareholders, Kevin Burbige and Ziyang Nie, filed a putative class action complaint in the U.S. District Court for the Northern District of Illinois against ATI; Labeed Diab, Joe Jordan, and Drew McKnight (collectively, the “ATI Individual Defendants”); and Joshua Pack, Marc Furstein, Leslee Cowen, Aaron Hood, Carmen Policy, Rakefet Russak-Aminoach, and Sunil Gulati (collectively, the “FVAC Defendants”). The Burbige/Nie complaint asserted claims against: (i) ATI and the ATI Individual Defendants under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”); (ii) the ATI Individual Defendants under Section 20(a) of the Exchange Act; and (iii) all defendants under Section 14(a) of the Exchange Act. Plaintiffs Burbige and Nie purported to assert their claims on behalf of those ATI shareholders who purchased or otherwise acquired their ATI shares between April 1, 2021 and July 23, 2021, inclusive, and/or held FVAC Class A common shares as of May 24, 2021 and were eligible to vote at FVAC’s June 15, 2021 special meeting.

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On October 7, 2021, another purported ATI shareholder, City of Melbourne Firefighters' Retirement System ("City of Melbourne"), filed a putative class action complaint in the U.S. District Court for the Northern District of Illinois against ATI, the ATI Individual Defendants, and the FVAC Defendants. Like the Burbige/Nie complaint, the City of Melbourne complaint asserted claims against (i) ATI and the ATI Individual Defendants under Section 10(b) of the Exchange Act; (ii) the ATI Individual Defendants under Section 20(a) of the Exchange Act; and (iii) all defendants under Section 14(a) of the Exchange Act. City of Melbourne purported to assert its claims on behalf of those ATI shareholders who purchased or otherwise acquired their ATI shares between February 22, 2021 and July 23, 2021, inclusive, and/or held FVAC Class A common shares as of May 24, 2021 and were eligible to vote at FVAC’s June 15, 2021 special meeting.

On November 18, 2021, the court consolidated the cases and appointed The Phoenix Insurance Company Ltd. and The Phoenix Pension & Provident Funds as Lead Plaintiffs (“Lead Plaintiffs”) and Pomerantz LLP as Lead Counsel. On February 8, 2022, Lead Plaintiffs filed a consolidated amended complaint against ATI, the ATI Individual Defendants, and the FVAC Defendants, which asserts claims against (i) ATI and the ATI Individual Defendants under Section 10(b) of the Exchange Act; (ii) the ATI Individual Defendants under Section 20(a) of the Exchange Act (in connection with the Section 10(b) claim); (iii) all defendants under Section 14(a) of the Exchange Act; and (iv) the ATI Individual Defendants and the FVAC Defendants under Section 20(a) of the Exchange Act (in connection with the Section 14(a) claim). Lead Plaintiffs purport to assert these claims on behalf of those ATI shareholders who purchased or otherwise acquired their ATI shares between February 22, 2021 and October 19, 2021, inclusive, and/or held FVAC Class A common shares as of May 24, 2021 and were eligible to vote at FVAC’s June 15, 2021 special meeting. The consolidated amended complaint, like the predecessor Burbige/Nie and City of Melbourne complaints, generally alleges that the proxy materials for the FVAC/ATI merger, as well as other ATI disclosures (including the press release announcing ATI’s financial results for the first quarter of 2021), were false and misleading (and, thus, in violation of Sections 10(b) and 14(a) of the Exchange Act) because they failed to disclose that: (i) ATI was experiencing attrition among its physical therapists; (ii) ATI faced increasing competition for clinicians in the labor market; (iii) as a result, ATI faced difficulty retaining therapists and incurred increased labor costs; (iv) also as a result, ATI would open fewer new clinics; and (v) also as a result, the defendants’ positive statements about ATI’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis. Lead Plaintiffs, on behalf of themselves and the putative class, seek money damages in an unspecified amount and costs and expenses, including attorneys’ and experts’ fees. Defendants have not yet responded to the consolidated amended complaint. As of December 31, 2021, the Company has determined that potential liabilities related to the consolidated amended complaint are not considered probable or reasonably estimable at this time.

Shareholder derivative complaint

On December 1, 2021, another purported ATI shareholder, Hamza Ghaith, filed a derivative action, purportedly on behalf of ATI, in the U.S. District Court for the Northern District of Illinois against Labeed Diab, Joe Jordan, John Larsen, John Maldonado, Carmine Petrone, Joanne Burns, Christopher Krubert, James Parisi, Drew McKnight, Joshua Pack, Aaron Hood, Carmen Policy, Marc Furstein, Leslee Cowen, Rafeket Russak-Aminoach, and Sunil Gulati (collectively, the “Individual Defendants”). The Ghaith complaint asserts claims on behalf of ATI against: (i) the Individual Defendants for breach of fiduciary duty; (ii) Labeed Diab, Joe Jordan, and Drew McKnight for contribution under Sections 10(b) and 21(d) of the Exchange Act; and (iii) Drew McKnight, Joshua Pack, Aaron Hood, Carmen Policy, Marc Furstein, Leslee Cowen, Rafeket Russak-Aminoach, and Sunil Gulati under Section 14(a) of the Exchange Act. Plaintiff Ghaith’s allegations generally mirror those asserted in the securities complaints described above, and the Ghaith complaint seeks damages in an unspecified amount, certain corporate governance reforms, restitution from the Individual Defendants and disgorgement of all of their compensation, and costs and expenses, including attorneys’ and experts’ fees. As of December 31, 2021, the Company has determined that potential liabilities related to the Ghaith complaint are not considered probable or reasonably estimable at this time. Defendants have not yet responded to the Ghaith complaint.

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Regulatory matters

On November 5, 2021, the Company received from the SEC a voluntary request for the production of documents relating to the earnings forecast and financial information referenced in the Company's July 26, 2021 Form 8-K and related matters. The Company is cooperating with the SEC in connection with this request.

Indemnifications

The Company has agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by them in any action or proceeding to which any of them are, or are threatened to be, made a party by reason of their service as a director or officer. The Company maintains director and officer insurance coverage that would generally enable it to recover a portion of any future amounts paid. The ultimate cost of potential future litigation may exceed the Company’s current insurance coverages and may have a material adverse impact on our results of operations, cash flows and financial condition. The Company also may be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.

Note 19. (Loss) Earnings per Share

Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. For the years ended December 31, 2020 and ~~indicates~~2019, preferred shares are treated as participating securities and therefore are included in computing earnings per common share using the ~~fair value hierarchy~~two-class method. The two-class method is an earnings allocation formula that calculates basic and diluted net earnings per common share for each class of common stock separately based on dividends declared and participation rights in undistributed earnings as if the earnings for the year had been distributed. As the preferred stockholders do not participate in losses, for any periods with a net loss, there is no allocation to participating securities in the period.

No undistributed earnings or losses were allocated to the preferred shares for the year ended December 31, 2021. As of the ~~valuation techniques that the Company utilized to determine such fair value. Transfers to/from Levels 1, 2 and 3 are recognized at the end~~closing of the ~~reporting period.~~ Business Combination, the Wilco Holdco Series A Preferred shares were no longer outstanding.

The calculation of both basic and diluted (loss) earnings per share for the periods indicated below was as follows (in thousands, except per share data):


	Year Ended
		December 31, 2021		December 31, 2020		December 31, 2019
Basic and diluted (loss) earnings per share:
Net (loss) income		$	(782,028)	$	(298)	$	9,749
Less: Net (loss) income attributable to non-controlling interest		(3,700)		5,073		4,400
Less: Income allocated to participating securities		—		—		535
(Loss) income available to common stockholders		$	(778,328)	$	(5,371)	$	4,814

Weighted average shares outstanding(1)		165,805		128,286		128,286

Basic and diluted (loss) earnings per share		$	(4.69)	$	(0.04)	$	0.04

(1) The weighted-average number of shares outstanding in periods presented prior to the closing of the Business Combination has been retrospectively adjusted based on the exchange ratio established through the transaction.

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There were no ~~transfers between levels for~~preferred or other dividends declared during any period presented.

For the ~~period from June 10, 2020 (inception) through December 31, 2020.~~periods presented, the following securities were not required to be included in the computation of diluted shares outstanding, as their impact would have been anti-dilutive. Figures presented are based on the number of underlying Class A common shares following the Business Combination (in thousands):


~~Description~~	~~Quoted Prices in Active Markets (Level 1)~~
~~Trust Account - U.S. Treasury Securities Money Market Fund~~	$	~~345,018,957~~

~~None of the balance in the Trust Account was held in cash as of December 31, 2020.~~

~~8. Income Tax~~

~~The Company did not have any significant deferred tax assets or liabilities as of December 31, 2020.~~

~~The Company’s net deferred tax assets are as follows:~~

~~December 31, 2020~~Year Ended

~~Deferred tax asset~~

~~Organizational costs and net operating loss~~

~~333,614~~

~~Total deferred tax asset~~

~~333,614~~

~~Valuation allowance~~

~~(333,614)~~

~~Deferred tax asset, net of allowance~~

~~109~~

~~FORTRESS VALUE ACQUISITION CORP. II~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~The income tax provision consists of the following:~~

December 31, 2021

December 31, 2020

~~Federal:~~December 31, 2019

~~Current~~Warrants

~~Deferred~~

~~(333,614)~~

~~State:~~

~~Current~~

~~Deferred~~

~~Change in valuation allowance~~

~~333,614~~

~~Income tax provision~~

~~As of December 31, 2020, the Company had U.S. federal net operating loss carryovers of $93,065 available to offset future taxable income.~~

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the period from June 10, 2020 (inception) through December 31, 2020, the change in the valuation allowance was $333,614.

~~A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2020 is as follows:~~

	9,867		—		—
Restricted shares(1)		~~December 31, 2020~~1,323		—		—
~~Statutory federal income tax rate~~Stock options		~~21.0~~ 775		%—		—
~~State taxes, net of federal tax benefit~~RSUs		~~0.0~~ 404		%—		—
~~Change in valuation allowance~~RSAs		~~(21.0)~~448		%—		—
~~Income tax provision~~Total		~~0.0~~ 12,817		%—		—

(1) Represents a portion of the 2.0 million restricted shares distributed following the Business Combination to holders of unvested Incentive Common Units under the Wilco Acquisition, LP 2016 Equity Incentive Plan. Refer to Note 10 - Share-Based Compensation for further details.

~~The Company files income tax returns in~~15.0 million Earnout Shares and 8.6 million Vesting Shares were excluded from the ~~U.S. federal jurisdiction~~calculation of basic and ~~is subject to examination by~~diluted per share calculations as the ~~relevant taxing authority.~~vesting thresholds have not yet been met as of the end of the reporting period.

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~~NOTES TO FINANCIAL STATEMENTS~~

~~9. Subsequent Events~~

The notes to the financial statements include a discussion of material events, which have occurred subsequent to December 31, 2020 (referred to as "subsequent events") through the date these financial statements were issued on March 8, 2021 (see Note 1). Management has evaluated the subsequent events through this date and has concluded that no other material subsequent events have occurred that require additional adjustment or disclosure in the financial statements.

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Note 20. Selected Quarterly Financial Data (Unaudited)

Presented below is selected quarterly financial data for fiscal year 2021, which was prepared on the same basis as the audited consolidated financial statements and includes all adjustments necessary to present fairly, in all material respects, the information set forth therein on a consistent basis (in thousands, except per share data):


	Three Months Ended								Year Ended
	March 31, 2021		June 30, 2021(1)		September 30, 2021(1)		December 31, 2021		December 31, 2021



Net operating revenue	$	149,062	$	164,033	$	159,013	$	155,763	$	627,871





Total cost of services	131,121		128,581		136,117		137,978		533,797
Selling, general and administrative expenses	24,726		26,391		30,795		29,897		111,809
Goodwill and intangible asset impairment charges(1)	—		453,331		508,972		—		962,303
Operating loss(1)	(6,785)		(444,270)		(516,871)		(12,112)		(980,038)







Loss before taxes(1)	(28,333)		(458,857)		(362,107)		(3,691)		(852,988)
Income tax benefit(1)	(10,515)		(19,731)		(35,333)		(5,381)		(70,960)
Net (loss) income(1)	(17,818)		(439,126)		(326,774)		1,690		(782,028)
Net income (loss) attributable to non-controlling interest	1,309		(3,769)		(2,109)		869		(3,700)
Net (loss) income attributable to ATI Physical Therapy, Inc.(1)	$	(19,127)	$	(435,357)	$	(324,665)	$	821	$	(778,328)

(Loss) earnings per share of Class A common stock:
Basic(1)(2)	$	(0.15)	$	(3.12)	$	(1.65)	$	0.00	$	(4.69)
Diluted(1)(2)	$	(0.15)	$	(3.12)	$	(1.65)	$	0.00	$	(4.69)
Weighted average shares outstanding:
Basic	128,286		139,553		196,996		197,285		165,805
Diluted	128,286		139,553		196,996		197,446		165,805

(1) Amounts are presented as revised for immaterial prior period revisions. Refer to discussion below.

(2) Basic and diluted (loss) earnings per share are computed independently for each of the periods presented. Accordingly, the sum of the quarterly (loss) earnings per share amounts may not agree to the total for the year.

Immaterial revisions to prior periods

We identified and previously disclosed an immaterial prior period revision with respect to the amount of the non-cash goodwill impairment charge recorded for the three and six months ended June 30, 2021, specifically related to the assumed benefit to enterprise value as of June 30, 2021 associated with the Company’s net operating loss carryforwards. We evaluated the effects of this error on our previously-issued condensed consolidated financial statements in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections, ASC Topic 250-10-S99-1, Assessing Materiality, and ASC Topic 250-10-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (collectively, "ASC Topic 250"), and concluded that no prior period is materially misstated. The revision decreased accumulated deficit by $13.3 million as of June 30, 2021. The impacted periods will be revised in future filings as applicable.

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A summary of the effect of the revision on the condensed consolidated statements of operations for the three and six months ended June 30, 2021 is as follows (in thousands):


Three months ended June 30, 2021	As reported		Revision		As revised
Goodwill and intangible asset impairment charges	$	467,118	$	(13,787)	$	453,331
Operating loss	$	(458,057)	$	13,787	$	(444,270)
Loss before taxes	$	(472,644)	$	13,787	$	(458,857)
Income tax benefit	$	(20,183)	$	452	$	(19,731)
Net loss	$	(452,461)	$	13,335	$	(439,126)
Net loss attributable to ATI Physical Therapy, Inc.	$	(448,692)	$	13,335	$	(435,357)
Loss per share, Basic	$	(3.22)	$	0.10	$	(3.12)
Loss per share, Diluted	$	(3.22)	$	0.10	$	(3.12)


Six months ended June 30, 2021	As reported		Revision		As revised
Goodwill and intangible asset impairment charges	$	467,118	$	(13,787)	$	453,331
Operating loss	$	(464,842)	$	13,787	$	(451,055)
Loss before taxes	$	(500,977)	$	13,787	$	(487,190)
Income tax benefit	$	(30,698)	$	452	$	(30,246)
Net loss	$	(470,279)	$	13,335	$	(456,944)
Net loss attributable to ATI Physical Therapy, Inc.	$	(467,819)	$	13,335	$	(454,484)
Loss per share, Basic	$	(3.49)	$	0.10	$	(3.39)
Loss per share, Diluted	$	(3.49)	$	0.10	$	(3.39)

In addition, we identified an immaterial prior period error with respect to the amount of income tax benefit recorded for the three and nine months ended September 30, 2021, specifically related to the impact of federal and state valuation allowances. We evaluated the effects of this error on our previously-issued condensed consolidated financial statements in accordance with the guidance in ASC Topic 250, and concluded that no prior period is materially misstated. The revision increased income tax benefit by $7.0 million for the three and nine months ended September 30, 2021, from $28.3 million to $35.3 million and $58.5 million to $65.6 million, respectively. The revision decreased net loss by $7.0 million for the three and nine months ended September 30, 2021, from $333.8 million to $326.8 million and $790.8 million to $783.7 million, respectively. The revision decreased loss per share from $1.68 to $1.65, and $5.07 to $5.02 for the three and nine months ended September 30, 2021, respectively. The impacted periods will be revised in future filings as applicable.

Note 21. Subsequent Events

In January 2022, the Company granted approximately 1.1 million RSUs to certain employees under the 2021 Plan. The awards will vest in equal installments on each of the first three anniversaries of the Closing Date, subject to the participant's continued service through the applicable vesting dates. Based on the grant date fair value of the awards, the Company expects to recognize approximately $4.2 million of share-based compensation expense in salaries and related costs in the consolidated statements of operations over the vesting period.

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The Series A Preferred Stock includes approximately 11.5 million detachable warrants. Each warrant entitles the holder to purchase 1 share of the Company's Class A common stock. The warrants are exercisable within 5 years from issuance. The strike price is $3.00 for 5.2 million of the issued warrants, and the strike price is $0.01 for 6.3 million of the issued warrants.

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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial ~~Disclosure.~~Disclosures

~~None.~~

Not applicable.

Item 9A. Controls and ~~Procedures.~~Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the ~~Securities~~ Exchange Act ~~of 1934, as amended (the “Exchange Act”)~~ is recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management ~~including our Chief Executive Officer and Chief Financial Officer,~~ to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our leadership team (the Executive Chairman, the Chief Operating Officer, and the Chief Financial Officer) fulfilling the role of Principal Executive Officer and our Principal Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. Based upon their evaluation, our Principal Executive Officer and our Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of December 31, 2021 due to the material weaknesses in internal control over financial reporting described below.

Management concluded that notwithstanding the existence of the material weaknesses, the consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company's financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Management's Annual Report on Internal Control ~~over~~Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) as allowed by the SEC for reverse acquisitions between an issuer and a private operating company when it is not possible to conduct an assessment of the private operating company’s internal control over financial reporting in the period between the consummation date of the reverse acquisition and the date of management’s assessment of internal control over financial reporting (pursuant to Section 215.02 of the SEC Division of Corporation Finance’s Regulation S-K Compliance & Disclosure Interpretations).

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As discussed elsewhere in this report, on June 16, 2021, the Business Combination was completed between the operating company, Wilco Holdco, Inc., and Fortress Value Acquisition Corp. II, a special purpose acquisition company. Prior to the Business Combination, the issuer was a special purpose acquisition company formed for the purpose of effecting a merger or similar business combination with one or more businesses. As a result, previously existing internal controls are no longer applicable or comprehensive enough as of the assessment date as our operations prior to the Business Combination were insignificant compared to those of the consolidated entity post-Business Combination. The design of our internal control over financial reporting has required significant time and resources from management and other personnel. As a result, management was unable, without incurring unreasonable effort or expense, to conduct an ~~attestation report~~assessment regarding our internal control over financial reporting as of December 31, 2021.

Material Weaknesses in Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's ~~registered public accounting firm due to~~annual or interim financial statements will not be prevented or detected on a ~~transition period established by rules~~timely basis.

In connection with the preparation of the ~~SEC for new public companies.~~

~~During~~Company's consolidated financial statements, material weaknesses related to the ~~most recently completed fiscal quarter, there has been no change~~income tax provision were identified in our internal control over financial reporting as of December 31, 2021. The Company did not design and maintain an effective control environment commensurate with our financial reporting requirements as we did not maintain a sufficient complement of tax personnel with the appropriate mix of competent resources and financial reporting experience. Additionally, the Company did not design and maintain effective controls related to the income tax provision, including controls related to valuation allowances associated with the realizability of deferred tax assets

These material weaknesses resulted in adjustments to income tax (benefit) expense and deferred income taxes and related disclosures as of and for the year ended December 31, 2021. Additionally, these material weaknesses could result in misstatements of the aforementioned account balances or disclosures that would result in a material misstatement to the Company's annual or interim consolidated financial statements that would not be prevented or detected.

Remediation Efforts with Respect to the Material Weaknesses

The Company's management, under the oversight of the Audit Committee, is in the process of developing a remediation plan to remediate the material weaknesses which is expected to include the following measures:

•hire additional tax personnel to bolster the capabilities and capacity of the Company's in-house tax department;

•refine the scope of the Company's external tax advisors to provide advice related to complex or unusual items;

•enhance the design and precision of the Company's controls related to the income tax provision calculations and documentation, including controls related to the valuation allowance assessment.

The material weaknesses will not be considered remediated until management completes the remediation plan above and the enhanced controls operate for a sufficient period of time and management has concluded, through testing, that the related controls are effective. The Company will monitor the effectiveness of its remediation plan and will refine its remediation plan as appropriate.

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Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2021 that have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other ~~Information.~~Information

~~Business Combination with ATI~~None.

On February 21, 2021, the Company and ATI Physical Therapy announced entry into an Agreement and Plan of Merger (the “Merger Agreement”), to effect a Business Combination between FVAC Merger Corp. II, a Delaware corporation and a direct, wholly-owned subsidiary of the Company (“Merger Sub”), and Wilco Holdco, Inc., a Delaware corporation (“ ATI”). The Merger Agreement and the transactions contemplated thereby will constitute a “ Business Combination” as contemplated by the Company’s Amended and Restated Certificate of Incorporation. The Merger Agreement and the Business Combination were unanimously approved by the board of directors of the Company on February 21, 2021.Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

~~112~~

Subject to the terms and conditions of the Merger Agreement, the consideration to be paid in respect of each share of common stock of ATI issued and outstanding (other than any such shares held by ATI’s treasury or held, directly or indirectly, by the Company, Merger Sub or any direct, wholly-owned subsidiary of ATI) will be (a) a number of shares of Class A common stock of the Company (with each share valued at $10.00), par value $0.0001 per share (“ Company Class A Stock”), equal in value to (i) $1,303,000,000, divided by (ii) the number of such issued and outstanding shares of ATI, and (b) the contingent right to receive a certain number of shares of Company Class A Stock that may be issued pursuant to an earnout payable to Wilco Acquisition, LP (the sole holder of common stock of ATI as of the date of the Merger Agreement) or its designees, if certain price targets for one share of the Company’s Class A Stock are achieved any time between the Closing and the 10 year anniversary of the Closing. The consideration to be paid in respect of each share of preferred stock of ATI issued and outstanding (other than any such shares held by ATI’s treasury or held, directly or indirectly, by the Company, Merger Sub or any direct, wholly-owned subsidiary of ATI) will be (a) an amount in cash, equal to $59,000,000, divided by the number of such issued and outstanding shares of preferred stock of ATI (the “Preferred Cash Consideration”), and (b) a number of shares of Company Class A Stock equal in value to (i) the product of (A) (x) the aggregate Liquidation Amount (as defined in ATI’s Certificate of Incorporation (the “ATI Charter”)) as of the date on which the closing occurs with respect to ATI’s preferred stock (after reducing such Liquidation Amount by the Preferred Cash Consideration) (the “Preferred Stock Adjusted Base”) plus (y) an aggregate accrued amount, calculated based on the Preferred Stock Adjusted Base, at the Dividend Rate (as defined in the ATI Charter) from the Closing Date through the date that is 180 days from the date on which the closing occurs, multiplied by (B) 1.05, divided by (ii) the number of issued and outstanding shares of ATI preferred stock.

The consummation of the Business Combination contemplated by the Merger Agreement is subject to customary closing conditions for special purpose acquisition companies, including, among others: (a) approval by the Company’s stockholders and ATI’s stockholders (which, with respect to ATI’s stockholders, was satisfied immediately following the execution of the Merger Agreement); (b) the Company having at least $5,000,001 of net tangible assets after giving effect to the Company’s stockholder redemptions, if any; (c) the expiration or termination of the waiting period under the HSR Act; (d) the listing of the shares of the Company’s Class A Stock to be issued in connection with the closing on the NYSE; and (e) the Company having at least $472,500,000 in available cash immediately prior to the effective time of the merger (after taking into account (i) payments required to satisfy the Company’s stockholder redemptions and (ii) the net proceeds from the subscription agreements entered into with certain investors (pursuant to which such investors have committed to purchase an aggregate amount of at least $300,000,000 in shares of Company Class A Stock at a purchase price of $10.00 per share, substantially concurrent with, and contingent upon, the consummation of the Business Combination) (the “Available Cash”).

Each of the Company, Merger Sub and ATI have made representations, warranties and covenants that are customary for a transaction of this nature. The representations and warranties contained in the Merger Agreement terminate and are of no further force or effect as of the consummation of the Business Combination.

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The Merger Agreement may be terminated under certain customary and limited circumstances prior to the consummation of the Business Combination, including (a) by mutual written consent of the parties, (b) by either ATI or the Company if (i) the consummation of the Business Combination has not occurred on or prior to August 23, 2021 (the “Outside Date”), (ii) a final and nonappealable order has been issued or governmental action permanently makes consummation of the transactions illegal or otherwise prevents or prohibits the Business Combination or (iii) the Company’s stockholder approval is not obtained at the special meeting of the Company’s stockholders, (c) by ATI (i) upon a breach by the Company or Merger Sub if such breach gives rise to a failure of a closing condition and has not been cured within 30 days’ notice by ATI or cannot be cured prior to the Outside Date, (ii) if the board of directors of the Company does not recommend in favor of the Business Combination in the Proxy Statement or makes any change in its recommendation or (iii) if the Available Cash is less than $472,500,000 and (d) by the Company upon a breach by ATI if such breach gives rise to a failure of a closing condition and has not been cured within 30 days’ notice by the Company or cannot be cured by the Outside Date.

~~Upon closing of the Business Combination, and subject to the terms of the Merger Agreement, ATI will become a wholly-owned subsidiary of the Company.~~

The foregoing description of the Merger Agreement and the Business Combination does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which was filed as Exhibit 2.1 on our Current Report on Form 8-K filed with the SEC on February 22, 2021.

For more information about the Merger Agreement and the proposed Business Combination, please see our Current Report on Form 8-K filed with the SEC on February 22, 2021 and the proxy materials that we will file with the SEC. Unless specifically stated, this Annual Report does not give effect to the proposed Business Combination and does not contain the risks associated with the proposed Business Combination. Such risks and effects relating to the proposed Business Combination will be included in the proxy materials filed with the SEC.

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PART III

~~PART III.~~

Item 10. Directors, Executive Officers and Corporate ~~Governance.~~Governance

~~Our current directors~~Executive Officers and Directors

The following persons are the members of our Board and our executive officers ~~are~~ as ~~follows:~~of the date of this Annual Report on Form 10-K:

Name

Age

Title

~~Joshua A. Pack~~John L. Larsen

Member of the leadership team fulfilling the role of Principal Executive Officer; Executive Chair; Director

Joseph Jordan

Member of the leadership team fulfilling the role of Principal Executive Officer; Chief Financial Officer

Ray Wahl

Member of the leadership team fulfilling the role of Principal Executive Officer; Chief Operating Officer

Diana Chafey

Chief Legal Officer and Corporate Secretary

Augustus Oakes

~~Chairman~~Chief Information Officer

Joe Zavalishin

Chief Development Officer

Joanne Burns

Director

Daniel Dourney

Director

John Maldonado

Director

Andrew A. McKnight

4344

~~Chief Executive Officer,~~ Director

~~Daniel N. Bass~~James E. Parisi

5457

~~Chief Financial Officer~~Director

~~Micah B. Kaplan~~Carmine Petrone

3539

~~Chief Operating Officer~~Director

~~Alexander P. Gillette~~

~~General Counsel~~

~~Marc Furstein~~Teresa Sparks

Director

~~Leslee Cowen~~

~~Director~~

~~Aaron F. Hood~~

~~Director~~

~~Carmen A. Policy~~

~~Director~~

~~Rakefet Russak-Aminoach~~

~~Director~~

~~Sunil Gulati~~

~~Director~~

~~Joshua A. Pack~~John L. Larsen. ~~serves~~Mr. Larsen has served on the Company Board since 2018 and has served as ~~Chairman~~the Chair of the company’s board of directors. Mr. Pack is a Managing Partner of the Credit Funds business at Fortress. Mr. Pack has 20 years of credit investment and workout experience through multiple credit cycles.Company Board since 2021. He ~~is based in Los Angeles and heads the illiquid credit investment strategies at Fortress,~~currently also serves ~~on the investment committee for the Credit Funds business at Fortress and is~~as a member of the ~~Management Committee~~leadership team fulfilling the role of ~~Fortress. Since joining~~Principal Executive Officer. Mr. Larsen's role at the ~~Credit Funds business~~Company has primarily been to work alongside executives and board members, participating in and nurturing broad networks of alliances with others. Mr. Larsen is an executive at ~~Fortress~~Bridgeway Partners LLC ("Bridgeway"). Prior to forming Bridgeway in 2020, Mr. Larsen served in various roles at ~~its inception~~UnitedHealth Group from 2005 until 2018. Mr. Larsen was also an executive at Gondola Eye, LLC from 2019 until 2020.

Joseph Jordan. Mr. Jordan was named Chief Financial Officer of the Company in ~~2002,~~2019. He currently also serves as a member of the leadership team fulfilling the role of Principal Executive Officer. Prior to assuming his role as Chief Financial Officer, Mr. ~~Pack has analyzed, structured~~Jordan served as the Company's Senior Vice President and ~~negotiated hundreds of lending, structured equity and real estate transactions.~~Chief Accounting Officer beginning in 2018. Prior to joining ~~Fortress,~~the Company, Mr. ~~Pack was a~~Jordan spent approximately two years at Sears Holding Corporation ("Sears"), first as Assistant Controller and later as Vice President ~~with Wells Fargo~~and Corporate Controller. Mr. Jordan began his career in 2003 and held various positions at Deloitte & ~~Co.~~Touche LLP and Sun Coke Energy prior to joining Sears. Mr. Jordan received his B.S. in Accounting from Purdue University.

Ray Wahl. Mr. Wahl became Chief Operating Officer of the capital markets group. Before that, Mr. Pack was a Vice President with American Commercial Capital, an independent specialty finance company focused on corporate and real estate lending to middle market businesses that was subsequently acquired by Wells Fargo & Co.Company in ~~2001.~~2019. He currently also serves as a ~~director on multiple corporate Boards and is~~member of the leadership team fulfilling the role of Principal Executive Officer. Previously, Mr. Wahl served on the ~~Board~~Company's leadership team as East Division President, overseeing operations in Delaware, Maryland, Pennsylvania, Michigan, Ohio, North Carolina, South Carolina and Georgia. Mr. Wahl joined the Company in 2006 and has held various leadership positions, overseeing growth through new clinic opportunities, acquisitions and strategic partnerships. Prior to joining the Company, Mr. Wahl was an Athletic Trainer from 1996 until 2000 with Plaza Physical Therapy. Mr. Wahl received his doctorate of physical therapy from Temple University and his M.B.A. from Northwestern University Kellogg School of Management.

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Diana Chafey. Ms. Chafey joined the Company as its Chief Legal Officer and Corporate Secretary in 2018. Prior to joining the Company, Ms. Chafey served as Executive Vice President, General Counsel and Corporate Secretary of the Warranty Group between 2013 and 2018, where she oversaw global legal, compliance, risk management, regulatory and corporate governance matters and related affairs. Ms. Chafey also previously held roles as partner at DLA Piper US LLP until 2013 and associate at McGuire Woods LLP from 2002 until 2003, representing clients in domestic and global regulatory and transactional matters. Ms. Chafey received her B.A. from Arizona State University and her J.D. from Valparaiso University School of Law.

Augustus Oakes. Mr. Oakes joined the Company as Vice President of Business Technology in 2018 and currently serves as Chief Information Officer. Prior to joining the Company, Mr. Oakes serves as an IT strategy consultant at KPMG LLP from 2013 until 2018, where he helped clients build modern IT operating models and prepare for digital disruption. Mr. Oakes also served in various IT leadership roles at Walgreen Company, d/b/a Walgreens ("Walgreens") and as a management consultant with Accenture plc. Mr. Oakes holds a degree from Loyola University Chicago.

Joe Zavalishin. Mr. Zavalishin joined the Company as Chief Development Officer in 2019. Prior to joining the Company, Mr. Zavalishin served as a Senior Vice President at OptumRx, a large manager of pharmacy benefits ("Optum"), where he was responsible for network development and strategy, payor and provider relationships, and pricing from 2016 until 2019. Prior to Optum, Mr. Zavalishin served as Executive Vice President of AxelaCare Health, a national provider of home infusion pharmacy and nursing services ("Axela"), overseeing operations including pricing and strategy from 2013 through 2015 when Axela was acquired by Optum. Mr. Zavalishin's role was greatly expanded in connection with the acquisition of Axela by Optum. Prior to that time, Mr. Zavalishin served as Vice President of Contracts & Pricing Development at Walgreens from 2009 until 2013. Mr. Zavalishin also served as Vice President of Pharmacy Network and Operations and as Head of Planning and Business Strategy for Medical Products at Aetna Inc. from 2004 until 2009. Mr. Zavalishin received his B.A. from the University of Connecticut and an M.B.A. in Finance and Strategy from Rensselaer Polytechnic Institute.

Joanne M. Burns. Ms. Burns joined the Company Board in 2021. Prior to serving on the Company Board, Ms. Burns served as the Chief Strategy Officer for Cerner Corporation, a healthcare IT company. Ms. Burns serves on the board of directors of Availity, a healthcare claims clearinghouse, as the chair of the performance and compensation committee and a member of the finance committee. Ms. Burns also serves on the board of directors of Innara Health, a neonatal medical device company, and she is chair of the board of directors and the compensation committee of SNOMED International, an international non-profit organization focused on clinical terminology used in electronic health records. Ms. Burns received her B.S. from the State University of New York College at Plattsburgh and her M.P.A. from the University of San ~~Diego Zoo Global Foundation.~~Francisco.

Daniel Dourney. Mr. ~~Pack previously~~Dourney joined the Company Board in February 2022. From April 2019 to June 2021, Mr. Dourney served as President and Chief Executive Officer ("CEO") of Professional PT, LLC, a provider of outpatient physical and hand therapy and rehabilitation services. Previously, from May 2016 to March 2019, he was the President and Chief Operations Officer ("COO") of OptimisCorp, a medical technology provider, and, prior to that was the COO of Physiotherapy Associates, an outpatient physical and occupational rehabilitation service and health and wellness program provider, from May 2014 to March 2016. Mr. Dourney has served on the board of directors of ~~Mosaic~~OptimisCorp since May 2016. Mr. Dourney received a bachelor's degree from ~~2017~~State University of New York Upstate Medical University and is a physical therapist.

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John Maldonado. Mr. Maldonado has served on the Company Board since 2016. Mr. Maldonado is a Managing Partner at Advent. Prior to ~~2020~~joining Advent in 2006, he worked at Bain Capital, Parthenon Capital and ~~has~~the Parthenon Group. He also ~~served as~~currently serves on the ~~Chairman of FVAC I’s~~ board of directors ~~since April 2020 until consummation~~ of ~~its initial business combination~~AccentCare, Inc., a provider in ~~November 2020,~~post-acute healthcare services ("AccentCare"), Definitive Healthcare, LLC, a healthcare data provider, RxBenefits, a pharmacy adviser to employee benefits consultants, Healthcare Private Equity Association, an association that supports the ~~chairman of FVAC III's board of directors since January 2021~~healthcare private equity community, and ~~serves as director of FVAC IV and will serve as Chief Executive Officer of FVAC IV.~~Syneos Health, a biopharmaceutical solutions organization. Mr. ~~Pack attended the United States Air Force Academy and~~Maldonado received ahis B.A. in ~~Economics~~mathematics, summa cum laude, from ~~California State University, San Marcos. Mr. Pack’s significant investment~~Dartmouth College and ~~financial expertise make him well qualified to serve~~his M.B.A., with high distinction, as a ~~member of our board of directors.~~Baker Scholar from Harvard Business School.

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Andrew A. ~~McKnight~~McKnight. ~~serves as a director and as~~Mr. McKnight has served on the ~~company’s Chief Executive Officer.~~Company Board since June 2020. Mr. McKnight is a Managing Partner of the Credit Funds business at Fortress. Mr. McKnight is based in ~~San Francisco~~Dallas and heads the liquid credit investment strategies at Fortress, serves on the investment committee for the Credit Funds business at Fortress and is a member of the ~~Management Committee~~management committee of Fortress. Mr. McKnight previously served on the board of directors of Mosaic Acquisition Corp. from 2017 to 2020. Mr. McKnight has also served on the board of directors and as the Chief Executive Officer of FVAC I since its inception in January 2020 and continues to serve on the board of directors of MP Materials where he is a member of the ~~Compensation Committee,~~compensation committee. Additionally, Mr. McKnight has served as a director and Chief Executive Officer of FVAC III since its inception in August 2020, and as Chairman of the FVAC ~~IV's board of directors.~~IV board. Prior to joining Fortress in ~~February~~Feburary 2005, he was the trader for Fir Tree Partners ("Fir Tree") where he was responsible for analyzing and trading high yield and convertible bonds, bank debt, derivatives and equities for the value-based hedge fund. Prior to Fir Tree, Mr. McKnight worked on Goldman, Sachs & Co.’s's ("Goldman") distressed bank debt trading desk. Mr. McKnight received a B.A. in Economics from the University of Virginia.

James E. Parisi. Mr. ~~McKnight’s significant investment and financial expertise make him well qualified to serve~~Parisi joined the Company Board in 2021. Mr. Parisi currently serves on the board of directors of Cboe Global Markets, Inc., a global exchange operator, as the chair of the audit committee, a member of ~~our~~the compensation committee and a member of the Alternative Trading System oversight committee. Previously, Mr. Parisi served on the board of ~~directors.~~

~~Daniel N. Bass~~ ~~serves~~directors of Cotiviti Inc., a clinical and financial analytics company, as the ~~company’s Chief Financial Officer.~~Chair of the audit committee and a member of the board strategy committee from 2015 until 2018. Mr. ~~Bass has~~Parisi also served on the board of directors for Cboe Futures Inc., a futures exchange, where he was a member of the regulatory oversight committee from 2016 until 2018 and served on the board of directors of Pursuant Health, Inc., a provider of self-service health and wellness testing kiosks, as the chair of the audit committee from 2014 until 2021. Mr. Parisi served as Chief Financial Officer of ~~Fortress since 2003, leading the firm’s finance, accounting, tax, corporate real estate, information technology, HR and corporate development functions. At Fortress,~~CME Group Inc., a publicly traded company, from 2004 through 2014. Mr. Bass supported the business growth in AUM from $3 billion to $80 billion. Mr. Bass was the Chief Financial Officer of Fortress for the entire time it was a public company (NYSE:FIG) (2007-2017). Mr. Bass also co-led the completed merger with SoftBank which closed in December 2017. Prior to joining Fortress, Mr. Bass was the Chief Financial Officer of the Corporate Investments division at Deutsche Bank. The division housed over $100 billion in firm assets worldwide. Also, while at Deutsche Bank, Mr. Bass was the global Business Area Controller of the Investment Banking division. In this capacity, he supported growth of the bank’s global investment banking division, including integration of the Banker’s Trust accounting team upon acquisition. Prior to Deutsche Bank, Mr. Bass was with PricewaterhouseCoopers LLP’s international tax practice where he advised multi-national & international banks on US & global tax matters. Mr. Bass is a board member of the Real Estate Center at Florida State University. Mr. Bass has also served as the Chief Financial Officer of FVAC I since its inception in January 2020 until the consummation of its business combination in November 2020, as the Chief Financial Officer of FVAC III since its inception in August 2020, as the Chief Financial Officer of FCAC since September 2020 and will serve as the Chief Financial Officer of FVAC IV. Mr. BassParisi received ~~both a~~his B.S. ~~and a Masters in Accounting from Florida State University.~~

~~Micah B. Kaplan~~ serves as the company’s Chief Operating Officer. Mr. Kaplan is a Managing Director in the Corporate Debt and Securities Group at Fortress, where he is responsible for the sourcing, underwriting and execution of public and private debt and equity investments across a broad range of industries. Mr. Kaplan has also served as the Chief Operating Officer of FVAC I since its inception in January 2020 until the consummation of its business combination in November 2020, has served as the Chief Operating Officer of FVAC III since its inception in August 2020 and will serve as the Chief Operating Officer of FVAC IV. Prior to joining Fortress in July 2011, Mr. Kaplan was a research analyst at Bank of America Merrill Lynch, where he analyzed and published research on high yield issuers. Mr. Kaplan received a B.A. in Political Science from the University of ~~Pennsylvania.~~

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~~Alexander P. Gillette~~ ~~serves as the Company’s General Counsel. Mr. Gillette is the Deputy General Counsel~~Illinois at Urbana-Champaign and a Managing Director of Fortress. He joined Fortress in 2008 after six years at Cleary Gottlieb Steen & Hamilton LLP, where he specialized in mergers and acquisitions, private equity, venture capital and other corporate transactions. Additionally, Mr. Gillette has served as the General Counsel of FVAC III since its inception in August 2020 and will serve as General Counsel of FVAC IV. Mr. Gillette received a B.A with high distinction in the distinguished major in political and social thought from the University of Virginia and a J.D. with honorshis M.B.A. from the University of Chicago ~~Law School.~~Booth School of Business.

~~Marc Furstein~~Carmine Petrone. ~~serves as a director of the company.~~ Mr. ~~Furstein is the President of Credit Funds at Fortress and is also a member of the firm’s Management Committee. Mr. Furstein~~Petrone has served ason the Company Board since 2016. Mr. Petrone is a ~~director of FVAC III since January 2021 and will serve as a director of FVAC IV.~~Managing Director at Advent, focused on investments in the healthcare sector. Prior to joining ~~Fortress~~Advent in ~~July 2001,~~2010, Mr. ~~Furstein co-founded and~~Petrone was an associate at Thomas H. Lee Partners from 2006 to 2008. Mr. Petrone currently serves on the ~~Chief Operating Officer~~board of American Commercial Capital (a specialty finance company) and Coronado Advisors (an SEC registered broker dealer). Both companies were sold to Wells Fargo in 2001. Prior to that, Mr. Furstein was co-managerdirectors of the opportunistic real estate loan business of Goldman, Sachs & Co. In that position, he structured and negotiated senior and mezzanine commercial loans and acquisition facilities. Mr. Furstein was also involved in the acquisition of distressed business, consumer and real estate loans and had responsibility for the management of such assets. In this role, he designed and oversaw the implementation of financial reporting, tax, compliance and asset management systems, policies and procedures. Mr. Furstein started his career in Goldman’s Financial Institutions Group, where he focused on M&A transactions and corporate finance. Mr. Furstein receivedAccentCare. He holds a B.A. in Economics from ~~Columbia~~the John Hopkins University and an M.B.A. from Harvard Business School.

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Teresa Sparks. Ms. Sparks has served on the ~~Wharton School~~Company Board since 2021. Ms. Sparks served as Chief Financial Officer ("CFO") and Executive Vice President of Envision Healthcare, a leading provider of physician-led services and post-acute care services in addition to ambulatory surgery services, from 2018 to 2020. Previously, she was the interim CFO at Brookdale Senior Living, and, prior to that, was the ~~University of Pennsylvania. Mr. Furstein’s significant investment, financial~~CFO at Surgery Partners and ~~infrastructure expertise~~its predecessor company, Symbion, Inc., from 2014 to ~~serve as a member of our~~2018. Ms. Sparks currently serves on the board of ~~directors.~~

~~Leslee Cowen~~ ~~serves as~~directors of Harrow Health, Inc., a ~~director~~publicly traded ophthalmic-focused healthcare company, where she is chair of the company. Additionally, Ms. Cowen has served as a director of FVAC III since January 2021 and will serve as director of FVAC IV. Ms. Cowen is a Managing Director in the Credit Funds business at Fortress, co-head of the liquid credit investment strategies,audit committee and a member of the ~~investment committee.~~nominating and governance and compensation committees. Ms. ~~Cowen~~Sparks also serves on the ~~Management Committee~~board of ~~Fortress. Prior to joining Fortress~~directors and as chair of the audit committee of several other private companies. Ms. Sparks received a bachelor's degree in ~~2002, Ms. Cowen was~~Business Administration and Accounting, graduating Summa Cum Laude from Trevecca Nazarene University.

Family Relationships

There are no family relationships among any of our executive officers or directors.

Board Structure

Our Board consists of eight (8) members:

Class I directors: Andrew A. McKnight and Teresa Sparks, and their terms will expire at the ~~Baupost Group,~~first annual meeting of stockholders;

Class II directors: Joanne Burns, John Maldonado and Jamie Parisi, and their terms will expire at the second annual meeting of stockholders;

Class III directors: Daniel Dourney, John Larsen and Carmine Petrone, and their terms will expire at the third annual meeting of stockholders.

On February 18, 2022, Christopher Krubert resigned from the Company's Board and each committee of which he was a ~~value investment~~member, effective February 24, 2022. Mr. Krubert’s decision to resign was not a result of any disagreement with the Company or the Board on any matter relating to the Company’s operations, policies or practices.

In accordance with our Second Amended and Restated Certificate of Incorporation, we have a classified Board of Directors, which divides our Board into three classes with staggered three-year terms, with only one class of directors being elected in each year.

At each succeeding annual meeting of the stockholders, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term or until the election and qualification of their respective successors in office, subject to their earlier death, resignation or removal.

The Board has determined that each of Ms. Burns, Mr. Dourney, Mr. Parisi and Ms. Sparks are independent directors under applicable SEC and NYSE rules.

Role of the Board in Risk Oversight

The Board is responsible for overseeing our risk management process. The Board will focus on our general risk management strategy, the most significant risks facing us, and oversee the implementation of risk mitigation strategies by management. Our Audit Committee is also responsible for discussing our policies with respect to risk assessment and risk management.

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Nomination Rights

In connection with the execution of the Merger Agreement, FAII entered into the Stockholders Agreement with certain entities affiliated with Advent party thereto, (the "Advent Stockholders") which became effective upon the Closing Date. Pursuant to the terms of the Stockholders Agreement, the Advent Stockholders have the right to designate director nominees for election to the Board at any meeting of our stockholders ("Advent Directors"). The number of nominees that the Advent Stockholders are entitled to nominate pursuant to the Stockholders Agreement is dependent on the aggregate number of shares of our common stock (including any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), shares of our common stock, including options and warrants) held by Advent Stockholders. For so long as the Advent Stockholders own (i) 50% or more of our common stock, the Advent Stockholders are entitled to designate five Advent Directors, (ii) 38% or more (but less than 50%) of our common stock, the Advent Stockholders are entitled to designate four Advent Directors, (iii) 26% or more (but less than 38%) of our common stock, the Advent Stockholders are entitled to designate three Advent Directors, (iv) 13% or more (but less than 26%) of our common stock, the Advent Stockholders are entitled to designate two Advent Directors, (v) 5% or more (but less than 13%) of our common stock, the Advent Stockholders are entitled to designate one Advent Director and (vi) less than 5%, the Advent Stockholders are not entitled to designate any Advent Directors.

In addition, holders of Series A Preferred Stock, voting as a separate class, have the right to designate and elect one director to serve on the Company's Board until such time that (i) as of any applicable fiscal quarter end, the Company's 12-month Consolidated Adjusted EBITDA (as defined in the Certificate of Designation for the Series A Preferred Stock) exceeds $100,000,000, or (ii) the Lead Purchaser (as defined in the Certificate of Designation for the Series A Preferred Stock) ceases to hold at least 50.1% of the Series A Preferred Stock originally held by it.

Controlled Company Exemption

Because Advent beneficially owns a majority of the voting power of our outstanding common stock, we are a "controlled company" under the listing rules of the NYSE. As a controlled company, we are exempt from certain NYSE governance requirements that would otherwise apply to the composition and function of our Board. For example, we are not required to comply with certain rules that would otherwise require, among other things, (i) the compensation of our executive officers to be determined by a majority of the independent directors or a committee of independent directors, and (ii) director nominees to be selected or recommended either by a majority of the independent directors or a committee of independent directors. Notwithstanding our status as a controlled company, we remain subject to the requirements that our independent directors hold regular executive sessions and that our Audit Committee consist entirely of independent directors.

If at any time we cease to be a controlled company, we will take all action necessary to comply with the NYSE listing rules, including ensuring that our Compensation Committee and our Nominating and Corporate Governance Committee are each composed entirely of independent directors, subject to any permitted "phase-in" periods. We will no longer qualify as a controlled company once Advent ceases to own a majority of the voting power of our outstanding common stock.

Committees of the Board of Directors

We have four standing committees - an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Healthcare Compliance Committee. The Board may from time to time establish other committees. Each of the committees will report to the Board as it deems appropriate and as the Board may request. The composition, duties and responsibilities of these committees are set forth below.

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Audit Committee

Joanne Burns, Jamie Parisi and Teresa Sparks are members of the Audit Committee. Jamie Parisi is the Chair of the Audit Committee. Each member of the Audit Committee qualifies as an independent director under the NYSE corporate governance standards and the independence requirements of Rule 10A-3 of the Exchange Act. In addition, each of Ms. Burns, Mr. Parisi and Ms. Sparks is an "audit committee financial expert" within the meaning of 407(d) of Regulation S-K promulgated under the Securities Act.

Pursuant to the Stockholders Agreement and subject to the terms therein, as long as there are two or more Advent Directors on the Board, the investors party thereto have the right to require at least a majority of the members of the Audit Committee be Advent Directors.

Under its charter, the functions of the Audit Committee include:

•the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm ~~where she was~~engaged by ATI;

•the pre-approval of all non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by ATI;

•setting clear hiring policies for employees or former employees of the independent registered public accounting firm;

•obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor's internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

•reviewing and discussing the Company's annual audited and quarterly financial statements;

•discussing the Company's earnings press releases as well as financial information and earnings guidance provided to analysts and rating agencies;

•reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC;

•discussing with management and the independent auditor, as appropriate, any audit problems or difficulties and management's response, and the Company's risk assessment and risk management policies, including the Company's major financial risk exposure and steps taken by management to monitor and mitigate such exposure; and

•reviewing the Company's financial reporting and accounting standards and principles, significant changes in such standards or principles or in their application and the key accounting decisions affecting ATI's financial statements, including alternatives to, and the rationale for, the decisions made.

Compensation Committee

Joanne Burns, John Larsen and Carmine Petrone are members of the Compensation Committee. Carmine Petrone is Chair of the Compensation Committee.

Pursuant to the Stockholders Agreement and subject to the terms therein, as long as there are two or more Advent Directors on the Company's Board, the investors party thereto have the right to require at least a majority of the members of the Compensation Committee be Advent Directors.

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Under its charter, the functions of the Compensation Committee include:

•reviewing and approving annually corporate goals and objectives relating to the compensation of the Chief Executive Officer ("CEO"), evaluating performance of the CEO in light of those goals and reviewing and establishing the CEO's annual compensation and incentive plan participation levels and bases of participation;

•reviewing and recommending to the Board non-CEO executive officer compensation; evaluating, reviewing and recommending to the Company's Board any changes to, or additional stock-based and other incentive compensation plans in the annual proxy statement and annual report on Form 10-K to be filed with the SEC; and

•reviewing and recommending annually for approval by the Board, the form and amount of non-management director compensation and benefits.

The Compensation Committee charter also provides that the Compensation Committee shall have the sole authority to retain or obtain the advice of a compensation consultant, legal counsel or other adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the Compensation Committee will consider the independence of each such adviser, including the factors required by the NYSE and the SEC.

Nominating and Corporate Governance Committee

John Larsen, John Maldonado and Jamie Parisi are members of the Nominating and Corporate Governance Committee. John Larsen is Chair of the Nominating and Corporate Governance Committee.

Under its charter, the functions of the Nominating and Corporate Governance Committee include:

•identifying individuals qualified to become Board members and recommending to the Board the director nominees for the next annual meeting of shareholders;

•developing and recommending to the Board the corporate governance guidelines applicable to the Company;

•leading the Board in its annual review of the performance of (a) the Board, (b) the Board committees and (c) management; and

•recommending to the Board nominees for each Board committee.

The Nominating and Corporate Governance Committee shall have the sole authority to retain and terminate any search firm to be used to identify director candidates and shall have sole authority to approve the search firm's fees and other retention terms.

Health Care Compliance Committee

John Maldonado and Andrew A. McKnight are members of the Health Care Compliance Committee.

Under its charter, the functions of the Health Care Compliance Committee include:

•being knowledgeable about compliance issues facing the health care industry;

•primary responsibility for oversight of health care compliance matters, including assisting the Board and Audit Committee with oversight of enterprise risk management and health care compliance matters;

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•overseeing ATI's health care regulatory compliance program and monitoring performance; and

•providing an avenue of communication among management, those persons responsible for the ~~acquisition~~internal compliance function, and the Board.

Code of Ethics

ATI has adopted a Code of Conduct & Compliance Program Guide applicable to its directors, executive officers and employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions that complies with the rules and regulations of the NYSE. A copy of the Code of Ethics has been filed with the SEC and will be provided without charge upon written request to Diana Chafey, Chief Legal Officer and Corporate Secretary, in writing at our principal executive offices at 790 Remington Boulevard, Bolingbrook, Illinois 60440. We intend to disclose on any amendments or waivers of certain provisions of our Code of Ethics.

Compensation of Directors

For information on director compensation, see Item 11. Executive Compensation.

Delinquent Section 16(a) Reports

To our knowledge, based solely on a review of the copies of the reports required pursuant to Section 16(a) of the Exchange Act that have been furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2021, all Section 16(a) filing requirements applicable to our directors, executive officers, and greater than 10% beneficial owners have been met, except for the Form 3 for Ms. Sparks filed in connection with her appointment to the Board and Form 4s for each of Ms. Chafey and Mr. Rhodes related to net settlement upon vesting of previously disclosed awards, which were each inadvertently delayed.

Item 11. Executive Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes the material components of our executive compensation program during fiscal year 2021 and provides an overview of our compensation philosophy and objectives for our named executive officers (“NEOs”).

Our executive compensation program is designed to align total compensation with Company performance, while enabling us to attract, retain, and motivate individuals who can achieve sustained long-term growth and strong financial performance for our stockholders. Our pay-for-performance driven compensation philosophy and practices are directly tied to increased stockholder value. As a result, NEO compensation is heavily weighted towards providing equity awards and incenting for long-term stock price appreciation.

Our NEOs for 2021 consisted of:


Name						Title
John Larsen(1)						Executive Chairman and Office of the CEO
Joseph Jordan						Chief Financial Officer and Office of the CEO
Ray Wahl						Chief Operating Officer and Office of the CEO
Diana Chafey						Chief Legal Officer and Corporate Secretary
Joseph Zavalishin						Chief Development Officer
Augustus Oakes						Chief Information Officer
Labeed Diab						Former Chief Executive Officer

(1) Interim role beginning August 9, 2021

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Oversight of Executive Compensation

Our Compensation Committee is responsible for oversight of our executive compensation program, which is regularly reviewed and discussed with management to ensure alignment with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for talent.

Role of Compensation Committee

Our Compensation Committee is primarily responsible for establishing executive compensation. It does so with the goals of motivating NEOs to achieve our business goals and objectives and enhance long-term stockholder value, while rewarding them for their contribution in achieving these goals and objectives. Our Compensation Committee considers the interests of stockholders and overall Company performance in establishing compensation for our NEOs. Our Compensation Committee and management reference national surveys and publicly available executive officer data for similar companies and general industry as an input for compensation decisions.

Role of Management

Management assists our Compensation Committee in establishing NEO compensation by providing information on Company and individual performance, market data, and business needs, strategy and objectives. Our Compensation Committee also considers our Chief Executive Officer’s recommendations regarding adjustments to NEO compensation components (other than with respect to his own compensation, for which he recuses himself from all discussions and recommendations).

Use of a Peer Group

Our Compensation Committee evaluates our executive compensation programs in comparison to those of a select peer group, which in 2021 consisted of 16 similarly sized public health care facilities companies. Our Compensation Committee uses the peer group to compare total direct compensation and ~~private distressed debt~~the mix of compensation elements for each named executive officer against positions at peer group companies with similar responsibilities. Our Compensation Committee also uses the peer group to review executive pay programs and practices at those companies. For 2021 the peer group consisted of the following companies, which our Compensation Committee determined will continue to be used for 2022:


Acadia Healthcare Company, Inc.						National HealthCare Corporation
Addus HomeCare Corporation						National Vision Holdings Corporation
Amedisys, Inc.						Option Care Health, Inc.
Brookdale Senior Living Inc.						RadNet, Inc.
Encompass Health Corporation						Select Medical Holdings Corporation
Hanger, Inc.						Surgery Partners, Inc.
LHC Group, Inc.						The Ensign Group, Inc.
MEDNAX, Inc.						U.S. Physical Therapy, Inc.

In setting compensation, the Committee considers the peer group companies with which we directly compete for executive talent and stockholder investment. Our Compensation Committee also relies on its general knowledge of executive compensation levels and practices. Most of the Company’s executive search and leadership advisory competitors, from which executive talent is often recruited, are privately held and therefore not included in the above list of our public peer group companies as information on their compensation practices is difficult to obtain.

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We do not set a specific, relative percentile positioning for total direct compensation, or the elements of total direct compensation, as a target for named executive officer pay levels. Rather, we review the total direct compensation range for each position and the mix of elements to ensure that compensation is adequate to attract and retain key named executive officers. Our named executive officer compensation program is also designed to ensure that a significant proportion of the named executive officer’s compensation is delivered in equity ~~securities,~~and thus aligned with the interests of our stockholders.

Compensation Philosophy

ATI is a purpose-drive company focused on extraordinary patient outcomes. We value fair pay for our high-performing talent in a fast-paced, exciting culture. We aim to build and evolve our business with individuals who are committed to improving the lives of others. We seek leaders who are passionate about this mission and want to join our culture of excellence. Our Total Rewards approach to compensation is designed to attract, incentivize, and retain high-quality talent as well as the acquisition of non-performing loan portfolios. Previously, Ms. Cowen was an associate at the Argentum Group, a venture capital firm, where she was involved in several roll-up transactions. Ms. Cowen started her career as an analyst at The Blackstone Group in the private equity and M&A groups. Currently she serves on multiple non-profit boards. Ms. Cowen received a B.S. degree from the Wharton School at the University of Pennsylvania with concentrations in finance, accounting and multinational management. Ms. Cowen’s significant financial and investment expertise makes her well qualified to serve as a memberpromote our unique corporate culture.

Elements of our ~~board~~NEOs' Compensation

Our executive compensation program for our NEOs is comprised of ~~directors.~~the following key components:

Base Salary

Annual Incentive Bonus Plan

Long-Term Equity Incentives

Additional NEO Compensation

Objective

Provides minimum pay for base duties and responsibilities for each position, reflecting market factors, as well as individual experience, performance and level of responsibility.

Provides a reward for short-term performance.

Provides an incentive for longer-term performance, and aligns compensation with the creation of long-term stockholder value. Retains talent through multi-year vesting.

Provides financial and health and welfare peace of mind, allowing executives to focus on company performance.

Key Features

Fixed compensation designed to attract and retain NEOs.

At risk pay based on the performance achieved during the year.

At risk pay based on the performance achieved over the course of many years.

Executive pay based on role.

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Base Salary

Base salary is a standard element of compensation required to attract and retain talent and provide executives with a base level of cash income. Our Compensation Committee reviews and determines base salary adjustments as part of its annual NEO compensation review, as well as when an NEO is promoted into a new position. In connection with our SPAC transaction, and the change to a public company, our Board increased the base salaries of our NEOs, which led to the following base salaries for the NEOs as of the beginning and the end of 2021, as follows:


Name	Beginning 2021 Annualized Base Salary	Ending 2021 Annualized Base Salary
John Larsen(1)	NA	$1,440,000
Joseph Jordan	$384,750	$450,000
Ray Wahl	$410,400	$450,000
Diana Chafey	$359,100	$359,100
Joseph Zavalishin	$359,100	$359,100
Augustus Oakes	$300,000	$325,000

(1) In connection with Mr. Larsen's appointment as Executive Chair, the Company determined to compensate him by paying him an additional $720,000, paid over six months. Mr. Larsen's annualized salary of $1,440,000 was set to 85% of ATI's previous CEO cash compensation inclusive of base and target bonus.

Annual Incentive Bonus Plan

The Company maintains the Annual Incentive Bonus ("AIB") Plan for our NEOs. The intent of the AIB Plan is to reward high performance aligned with the Company’s strategic mission. NEOs, in addition to key corporate staff, are eligible to participate in the AIB Plan. Annual cash awards will be forfeited for employees who are terminated prior to the payout of such bonus under the AIB Plan.

The bonus payouts under the AIB Plan are designed to incentivize achievement of the Company's EBITDA target as set by our Board at the beginning of each fiscal year. The Company provided updated financial EBITDA guidance later in 2021, which was lower than the EBITDA target set by the Board for purposes of the AIB plan. Considering the Company's challenges and leadership transitions, despite the Company's underperformance, the Compensation Committee approved 50% funding for annual incentive bonuses in recognition of performance efforts during a challenging year to retain ATI's talent at all eligible levels.

Accordingly, the Compensation Committee approved bonus payouts to the NEOs consistent with the Company's key corporate staff and other employees as follows:


Name	2021 Base Salary ($)	2021 AIB Target (% of Base Salary)	2021 AIB Target Opportunity ($)	Discretionary 2021 Annual Bonus Earned ($)
John Larsen	$1,440,000	NA	NA	NA
Joseph Jordan	$450,000	75%	$337,500	$168,750
Ray Wahl	$450,000	75%	$337,500	$168,750
Diana Chafey	$359,100	75%	$269,325	$134,663
Joseph Zavalishin	$359,100	75%	$269,325	$134,663
Augustus Oakes	$325,000	50%	$162,500	$81,250

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Long-Term Equity Incentives

In connection with the closing of the Business Combination, our Board and stockholders approved the ATI Physical Therapy 2021 Equity Incentive Plan (the “2021 Plan”). Effective as of the consummation of the Business Combination, approximately 20.7 million shares of Common Stock were reserved for issuance under the 2021 Plan.

For 2021, the Compensation Committee granted restricted stock units ("RSUs") and stock options to our NEOs, as follows:


		Restricted Stock Units		Stock Options
Name	Target LTI Value ($)	Value ($)	Number of Units (#)	Value ($)	Number of Options (#)
John Larsen	$480,000	$240,000	70,175	$240,000	134,216
Joseph Jordan	$500,000	$250,000	73,099	$250,000	139,808
Ray Wahl	$500,000	$250,000	73,099	$250,000	139,808
Diana Chafey	$250,000	$125,000	36,550	$125,000	69,604
Joseph Zavalishin	$250,000	$125,000	36,550	$125,000	69,904
Augustus Oakes	$250,000	$125,000	36,550	$125,000	69,904

The Compensation Committee decided on this mix of long-term incentives to balance numerous goals, including attracting, motivating, and retaining our NEOs, while aligning them with the long-term interests of our stockholders.

RSUs granted as part of the 2021 annual equity grant vest one-third on each of the first three anniversaries of the date of the grant, and stock options granted as part of the 2021 annual equity grant vest one-third on each of the first three anniversaries of the date of the grant.

Wilco Acquisition, LP 2016 Equity Incentive Plan

Prior to the Business Combination, Wilco Acquisition, LP adopted the Wilco Acquisition, LP 2016 Equity Incentive Plan (the "2016 Plan"), granting Incentive Common Units ("ICUs"), subject to time-based and performance-based vesting. In connection with the Business Combination, ICU holders received distributions of shares of common stock and restricted shares of common stock ("Restricted Shares") from Wilco Acquisition, LP based upon the distribution priorities under the Wilco Acquisition, LP limited partnership agreement. Any Restricted Shares are subject to certain vesting provisions of Restricted Stock Agreements executed by such holders and the terms of the 2021 Plan. See Note 10 - Share-Based Compensation to the Company's consolidated financial statements in Part II, Item 8, of this Annual Report on Form 10-K for a description of the terms applicable to the restricted shares of common stock, and see the "Beneficial Ownership of Our Common Stock," "Outstanding Equity Awards at Fiscal Year-End" and "Agreements with Executive Officers" herein for additional information on the outstanding shares of common stock and restricted shares of common stock held by named executive officers and directors.

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~~Aaron F. Hood~~Additionally, pursuant to the 2016 Plan, ATI Management was permitted to allocate a pool of unallocated ICUs and ICUs returned due to forfeitures. In lieu of a distribution of shares of common stock held by Wilco Acquisition, LP, the Company granted restricted shares of common stock from the 2021 Plan with the consent of Wilco Acquisition, LP to cancel an equal number of shares of common stock held by the partnership. The Company and Wilco Acquisition, LP intend to cancel such restricted shares and the Company intends to amend, subject to stockholder approval, the 2021 Plan to increase the share reserve by an equal number of Class A common shares of ATI. These restricted shares were awarded to certain senior leaders, including 41,385 restricted shares of common stock awarded to Ms. Chafey for her work on the Business Combination (the "Chafey Restricted Shares"). These restricted shares are subject to certain vesting provisions of Restricted Stock Agreements executed by the holders of such shares and the terms of the 2021 Plan. See Note 10 - ~~serves~~Share-Based Compensation to the Company's consolidated financial statements in Part II, Item 8, of this Annual Report on Form 10-K for a description of the terms applicable to the restricted shares of common stock, and see "Summary Compensation Table," "Stock Vested,""Outstanding Equity Awards at Fiscal Year-End" and "Agreements with Executive Officers" herein for additional information on the Chafey Restricted Shares.

Additional NEO Compensation

401(k) plan

The Company maintains a tax-qualified 401(k) savings plan (the “401(k) Plan”), in which all of our employees, including our NEOs, are eligible to participate. The 401(k) Plan allows participants to contribute up to 80% of base salary on a pre-tax basis (or on a post-tax basis, with respect to elective Roth deferrals) into individual retirement accounts, subject to any maximum annual limits set by the Internal Revenue Service. The Company provides for per pay period matches to employees of up to 50% of an employee’s first 6% of contributions to the 401(k) Plan. Participants are immediately, fully vested in their own contributions and any Company matches once eligible for match. Participants become eligible for the Company match after one year of service with the Company during which they performed at least 1,000 hours of service.

Employee benefits and perquisites

Our NEOs are eligible to receive the same employee benefits that are generally available to all of our full-time employees, subject to the satisfaction of certain eligibility requirements. This includes medical, dental and vision benefits, flexibility spending accounts, short-term and long-term disability, life insurance, and accidental death and dismemberment insurance.

Our NEOs also receive certain additional perquisites, includingexecutive physicals and cell phone service reimbursement. We do not view perquisites or personal benefits as a ~~director~~significant component of our executive compensation program. But we have provided such benefits in limited circumstances where we believe it is appropriate to assist an NEO in the performance of his or her duties, to make our NEOs more efficient and effective, for security purposes, and for recruitment, motivation and retention purposes.

Non-qualified deferred compensation

The Company maintains a non-qualified deferred compensation plan (the “Supplemental Retirement Benefit Plan”) under which a select group of highly compensated employees are permitted to supplement contributions made under the 401(k) Plan by deferring up to 50% of their base salary. There is no corresponding Company match provided in the non-qualified plan. Any refunds for prior year contributions returned due to discrimination testing can be rolled into the non-qualified plan at 100%.

Severance benefits

Many of our NEOs are parties to employment agreements with the Company that provide for certain severance benefits in certain circumstances as described below.

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Other Compensation Practices and Policies

Hedging and Pledging Activities

Under our Insider Trading Policy, our employees, including our NEOs and members of our Board, are prohibited from hedging or pledging our stock, engaging in short selling of our securities, trading in derivative securities of our Company, holding our securities in a margin account, or otherwise pledging them as collateral for a loan.

Tax Implications of Executive Compensation

Section 162(m) of the ~~company.~~Internal Revenue Code places a limit of $1 million in compensation per year on the amount public companies may deduct with respect to certain executive officers. When determining compensation for our NEOs, our Compensation Committee balances many factors, including the limitation on the Company’s ability to deduct compensation imposed by Section 162(m) in addition to market trends for similar roles and positions and determines compensation it believes is in the best interests of the Company’s stockholders’ long-term interests.

Accounting for Stock-Based Compensation

The Company follows ASC 718 for our stock-based compensation awards. ASC 718 requires us to measure, and recognize, the compensation expense for all share-based payment awards made to our employees and independent members of our Board, based on grant date fair value. This calculation is performed for accounting purposes and reported in the executive compensation tables included below in this Annual Report, even though the recipient of an equity award may never realize any value from the awards he or she was granted.

Compensation-Related Risks

Our Compensation Committee has reviewed our compensation policies and practices to assess whether they encourage our NEOs to take inappropriate risk. Our Compensation Committee believes that the mix and design of our executive compensation programs, individually and in their entirety, do not encourage NEOs to take inappropriate risks. The mix of fixed and variable compensation prevents undue focus on short-term results and is intended to align the long-term interests of our NEOs with those of our stockholders.

Compensation Tables

The section below contains information, both narrative and tabular, regarding the compensation paid to our NEOs for the fiscal year 2021.

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Summary compensation table


Name and Principal Position	Year	Salary ($)	Bonus (2) ($)	Stock Awards (3,4) ($)	Option Awards (3,4) ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings(5) ($)	All Other Compensation (5) ($)	Total ($)
John Larsen Executive Chairman (1)	2021	555,517	—	302,499	287,586	—	—	1,145,602
Joseph Jordan Chief Financial Officer	2021	415,895	168,750	249,999	237,674	3,335	18,443	1,094,096
	2020	369,538	169,281	—	—	—	10,678	549,497
	2019	349,808	187,500	436,818	—	—	7,897	982,023
Ray Wahl Chief Operating Officer	2021	428,622	168,750	249,999	237,674	2,877	22,615	1,110,537
	2020	394,840	153,900	—	—	—	47,344	596,084
	2019	321,442	225,000	140,019	—	—	69,442	755,903
Diana Chafey Chief Legal Officer	2021	359,100	134,663	266,538	118,837	—	17,733	896,871
	2020	344,200	134,663	—	—	—	4,053	482,916
	2019	350,000	262,500	120,698	—	—	8,655	741,853
Joseph Zavalishin Chief Development Officer	2021	357,719	134,663	125,001	118,837	7,173	10,850	754,243
	2020	330,424	234,663	—	—	—	13,453	578,540
	2019	82,115	166,884	272,766	—	—	15,451	537,216
Augustus Oakes Chief Information Officer	2021	311,346	81,250	125,001	118,837	—	16,871	653,305
	2020	260,892	61,072	220,073	—	—	4,285	546,322
	2019	246,250	84,000	—	—	—	931	331,181
Labeed Diab Former Chief Executive Officer	2021	446,250	281,000	—	—	1,505,165	710,642	2,943,057
	2020	693,750	359,100	—	—	—	21,376	1,074,226
	2019	619,231	700,000	1,463,686	—	—	32,525	2,815,442

(1) John Larsen became ATI's Executive Chairman on August 9, 2021, all fees earned serving on the Board of Directors are included in the above table as follows: $112,440 cash fees, 34,952 stock options valued at $59,418, and 18,275 restricted stock units valued at $62,500.

(2) Cash bonuses earned in 2021 were discretionary awards paid to retain bonus-eligible employees, including the above NEOs.

(3) The award values for periods prior to the Closing Date of the Business Combination reflect the value of the shares distributed by Wilco Acquisition, LP on December 16, 2021 (the "Distribution Date") discussed herein relating to ICUs granted to the NEOs during such prior periods and held by the NEOs on the Distribution Date. The value of the shares reflected in the table is $3.14, which was the share price as of the close of trading on the Distribution Date.

(4) The assumptions used in determining the values disclosed in the Stock Awards and Option Awards columns are set out in the 2021 Consolidated Financial Statements included in Part II, Item 8, of this Annual Report on Form 10-K.

(5) Former Chief Executive Officer, Labeed Diab, stepped down effective August 7, 2021. John Larsen was appointed and named Executive Chairman and took an active role in leading the Company along with Ray Wahl, Chief Operating Officer, and Joseph Jordan, Chief Financial Officer. Mr. ~~Hood~~Diab received $1,505,165 in deferred compensation related to his previous employers' contingent signing bonus repayment, negotiated to the amount owed plus interest.

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(6) Amounts shown in the All Other Compensation column for 2021 are comprised of the following:


	401(k) Match		Executive Physical		Other*		Tax Gross-Ups		Termination or CIC Payment/Accrual		Total
John Larsen	$	—	$	—	$	—	$	—	$	—	$	—
Joseph Jordan	$	9,750	$	5,694	$	1,428	$	1,571	$	—	$	18,443
Ray Wahl	$	9,750	$	—	$	928	$	11,937	$	—	$	22,615
Diana Chafey	$	7,402	$	7,445	$	327	$	2,559	$	—	$	17,733
Joseph Zavalishin	$	8,507	$	—	$	928	$	1,415	$	—	$	10,850
Augustus Oakes	$	9,120	$	5,418	$	928	$	1,405	$	—	$	16,871
Labeed Diab	$	9,750	$	5,279	$	215	$	10,879	$	684,519	$	710,642

*Other perquisites include: life insurance, long term disability insurance benefits, cell phone reimbursements, and non-compete considerations.

Grants of plan-based awards

The following table provides information regarding equity and non-equity incentive plan-based awards granted to our NEOs for the year ended December 31, 2021. Except as set forth below, there were no other grants of equity to our NEOs during 2021.


		Compensation Committee and Board Meeting Date	All Other Stock Awards: Number of Shares or Stock Units (#)	All Other Option Awards: Number of Securities (#)	Exercise or Base Price of Option Awards ($/Sh)		Grant Date Fair Value of Stock and Option Awards
Name	Grant Date
John Larsen	11/23/21	11/22/21	88,450	—			$	302,499
	11/23/21	11/22/21	—	169,168	$	3.42	$	287,586
Joseph Jordan	11/23/21	11/22/21	73,099	—			$	249,999
	11/23/21	11/22/21	—	139,808	$	3.42	$	237,674
Ray Wahl	11/23/21	11/22/21	73,099	—			$	249,999
	11/23/21	11/22/21	—	139,808	$	3.42	$	237,674
Diana Chafey(1)	11/23/21	11/22/21	77,935	—			$	266,538
	11/23/21	11/22/21	—	69,904	$	3.42	$	118,837
Joseph Zavalishin	11/23/21	11/22/21	36,550	—			$	125,001
	11/23/21	11/22/21	—	69,904	$	3.42	$	118,837
Augustus Oakes	11/23/21	11/22/21	36,550	—			$	125,001
	11/23/21	11/22/21	—	69,904	$	3.42	$	118,837

(1) Ms. Chafey's award includes shares of common stock awarded in lieu of a distribution of shares of common stock from Wilco Acquisition, LP related to the unallocated pool of ICUs discussed herein. See discussion under "Wilco Acquisition, LP 2016 Equity Incentive Plan." The award was valued at $141,537 and the shares vest in quarterly installments over three years with a vest start date of the Closing Date of the Business Combination.

(2) The amounts reported represent the grant date fair value associated with the grant of these restricted stock, as computed in accordance with ASC 718. See Note 13 to the consolidated financial statements in Part II, Item 8 of this Annual Report for a discussion of the relevant assumptions used in calculating these amounts.

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Outstanding equity awards at fiscal year-end

The following table provides information regarding all outstanding stock options held by each NEO as of December 31, 2021:


	Option Awards				Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price(1) ($)		Option Expiration Date	Number of Shares or Units of Stock that Have Not Vested(2) (#)	Market Value of Shares or Units that Have Not Vested(3) ($)
John Larsen	169,168	$	3.42	11/23/2031	97,995	$	332,203
Joseph Jordan	139,808	$	3.42	11/23/2031	192,944	$	654,080
Ray Wahl	139,808	$	3.42	11/23/2031	159,414	$	540,413
Diana Chafey	69,904	$	3.42	11/23/2031	127,716	$	432,957
Joseph Zavalishin	69,904	$	3.42	11/23/2031	99,893	$	338,637
Augustus Oakes	69,904	$	3.42	11/23/2031	97,769	$	331,437

(1) Stock options vest one-third on each of the first three anniversaries of the Closing Date of the Business Combination.

(2) Restricted shares of common stock held by each NEO as of December 31, 2021, including restricted shares of common stock received in distribution from Wilco Acquisition, LP related to ICUs held by each NEO. Restricted shares of common stock vest in installments on each quarterly anniversary of the Closing Date of the Business Combination over the shorter of: (a) the eight-year period from the original grant date of the underlying ICUs, or (b) three years post-Closing Date, subject to the NEO’s continued service through each vesting date

(3) The market value of shares of outstanding restricted stock is based on the stock price of $3.39, the closing stock price on December 31, 2021.

Stock Vested in 2021

The following table summarizes the number and market value of stock awards held by each Named Executive Officer that vested during 2021:


	Stock Awards
Name	Number of Shares Acquired on Vesting (#)	Value Realized on Vesting (1) ($)
John Larsen	2,962	$	10,468
Joseph Jordan	30,288	$	108,979
Ray Wahl	24,839	$	83,174
Diana Chafey	22,344	$	81,372
Joseph Zavalishin	14,841	$	50,402
Augustus Oakes	16,376	$	56,182
Labeed Diab	466,142	$	1,463,686

(1) For the period from January 1, 2021 through June 16, 2021, pricing of the market value reported in this table is based on the closing price on the date the ICUs were distributed on December 16, 2021 of $3.14. For the period from June 16, 2021 through December 31, 2021, the market value reported in this table is based upon the closing price of our common stock.

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Non-qualified deferred compensation

The following table summarizes NEO non-qualified deferred compensation:


Name	Executive Contributions in Last FY(1) ($)		Aggregate Earnings in Last FY(2) ($)		Aggregate Balance at Last FYE ($)
Joseph Jordan	$	1,734	$	2,065	$	16,940
Ray Wahl	$	1,666	$	490	$	8,173
Joseph Zavalishin	$	20,800	$	7,261	$	52,132

(1) The full amount shown for executive contributions is included in the base salary figures for each NEO shown above in the Summary Compensation Table.

(2) The amount shown under aggregate earnings reflects the NEO's gain or loss based upon the individual allocation their account balance. These gains or losses do not represent current income to the NEO and have not been included in any of the compensation tables shown above.

Potential Payments Upon Certain Events

Agreements with Executive Officers

The Company has entered into employment agreements with Messrs. Jordan, Wahl, Zavalishin, Oakes and Diab, as well as with Ms. Chafey. The material terms of these employment agreements is detailed below, including the potential payment upon termination, except for Mr. Diab who was no longer employed by the Company at the end of 2021 and thus his summary details what he was paid as a result of his departure.

The Company and Mr. Larsen have not entered into an employment agreement covering his services as Executive Chairman. Nor have the parties agreed on payments with respect to Mr. Larsen’s termination.

The Company's employment agreements with Messrs. Jordan, Wahl, Zavalishin, and Oakes and Ms. Chafey (the “Executive Employment Agreements”), provide for an initial term of three years that automatically renews for one-year terms thereafter, unless notice of non-renewal is provided 30 days before the renewal date, and a minimum base salary of $450,000 per year for Messrs. Jordan and Wahl, $359,100 for Ms. Chafey and Mr. Zavalishin, and $325,000 for Mr. Oakes. In addition, the Executive Employment Agreements provide for annual target bonuses equal to 75% of base salary for Messrs. Jordan, Wahl, and Zavalishin and Ms. Chafey, and Mr. Oakes' Executive Employment Agreement provides for annual target bonuses equal to 50% of base salary. The Executive Employment Agreements also provide for other standard benefits and perquisites, such as reimbursement reasonable business expenses and entitlement to health and welfare benefits generally available to other executive employees, including vacation and sick leave, medical, dental, life and disability insurance benefits.

The Executive Employment Agreements provide that Messrs. Jordan and Wahl will be granted long-term incentive equity awards from ATI in each of 2021, 2022 and 2023 and that Ms. Chafey, Mr. Zavalishin and Mr. Oakes be granted incentive equity awards from ATI in 2021. The aggregate grant-date value of such annual equity awards will be $500,000 for Messrs. Jordan and Wahl in respect of 2021 and 2022, and $750,000 in respect of 2023, and is $250,000 for Ms. Chafey, Mr. Zavalishin and Mr. Oakes in respect of 2021. Fifty percent (50%) of the aggregate value of the equity awards in respect of 2021 and 2022 is to be granted in the form of restricted stock units and the remaining fifty percent is to be granted in the form of stock options; the forms of equity awards in respect of subsequent years will be determined by ATI’s compensation committee after consultation with an external compensation consultant.

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The equity awards are governed by the terms of the Executive Employment Agreements, the 2021 Plan, the Restricted Stock Agreements, and certain Restricted Stock Unit Award Agreements and Stock Option Award Agreements (the "Award Agreements"), as applicable. The equity awards in respect of fiscal year 2021 will vest in three equal annual installments over three years from the Closing Date of the Business Combination or date of grant, depending on the award, and vesting of equity awards in respect of subsequent years will be determined by ATI’s compensation committee after consultation with an external compensation consultant. With respect to years following 2023, Messrs. Jordan and Wahl will be eligible to receive equity awards on terms and conditions determined by ATI’s compensation committee after consultation with an external compensation consultant. For Ms. Chafey, Mr. Zavalishin and Mr. Oakes, with respect to years following 2021, they will be eligible to receive equity awards on terms and conditions determined by ATI’s compensation committee after consultation with an external compensation consultant.

Under the terms of the agreements, in the event of a termination without cause by the Company or a termination for good reason by Messrs. Jordan, Wahl, Zavalishin, or Oakes, or Ms. Chafey, during the term of their respective Executive Employment Agreements and at any time other than within 18 months following a change in control, each will receive (i) an amount equal to 1.25 times the sum of annual base salary and target bonus amount, payable in 15 monthly installments; (ii) a pro-rated annual bonus based on actual performance for the year in which termination occurs; (iii) reimbursement of COBRA costs for a coverage period of 12 months, and (iv) immediate vesting of any restricted shares received in connection with ICUs granted under the 2016 Plan. In the event of a termination of without cause by the Company or termination for good reason by Messrs. Jordan, Wahl, Zavalishin, or Oakes, or Ms. Chafey, within 18 months following a change in control, each are to receive (i) an amount equal to 1.5 times the sum of his annual base salary and target bonus amount, payable in a lump sum; (ii) a pro-rated annual bonus based on actual performance for the year in which termination occurs; (iii) reimbursement of COBRA costs for a coverage period of 12 months, and (iv) immediate vesting of any restricted shares received in connection with the ICUs granted under the 2016 Plan. Any such severance payments will be subject to applicable taxes and the executive’s execution and non-revocation of a general release of claims and continued compliance with restrictive covenant provisions. Any unvested RSUs and stock options are forfeited immediately upon termination of employment (for any reason), and any vested stock options are forfeited immediately upon termination for cause. Any vested options must be exercised prior to the earliest to occur of (i) the expiration date (which is 10 years after the grant date), (ii) 12 months after termination of employment due to death or disability, (iii) 90 days following termination of employment other than for death, disability, or termination for cause, or (iv) the date of termination for cause. Upon a change in control, (i) any awards under the Award Agreements are to be continued and or assumed by the Company or surviving company, or substituted by the surviving company with substantially similar terms for the outstanding awards, and (ii) and Restricted Shares and the Chafey Restricted Shares are to vest immediately prior to the change in control.

The Executive Employment Agreements, except for Ms. Chafey’s agreement due to her status as a licensed attorney, also contain restrictive covenants generally prohibiting each executive from providing services to a competitor or soliciting employees or business contacts for 15 months following termination of employment, or for 18 months if the executive receives enhanced severance upon a qualifying termination within 18 months following a change in control. In addition, the Executive Employment Agreements mandate that the confidentiality obligations continue after termination of employment.

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Any compensation payable under an Executive Employment Agreement, and any awards under the Award Agreements and Restricted Stock Agreements, are subject to recoupment under the 2021 Plan and applicable law, including the provisions of Section 945 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules, regulations and requirements adopted thereunder by the SEC and/or national securities exchange on which the Company’s shares are listed. Under the terms of the 2021 Plan, if after termination of employment the Committee determines in its discretion that the executive engaged in an act or omissions that would have warranted termination for cause, or after termination the executive violated any continuing obligation or duty in respect of the Company, such executive’s rights, payments and benefits with respect to an award are subject to cancellation, forfeiture and/or recoupment.

As defined under the relevant agreements:

“Termination for cause” means termination of employment for (i) willful misfeasance or nonfeasance (including not following the reasonable written direction of the Board, any committee or the Company’s CEO (other than due to disability), or repeated intentional refusal to perform assigned duties (other than due to disability), which in each case continues uncured for 30 days after written notice; (ii) personally engaging in illegal conduct or any act of moral turpitude which reasonably could be expected to harm the Company; (iii) breaching in any material respect the Executive Employment Agreement (other than due to disability) which continues uncured for 30 days after written notice, other than a breach of confidentiality or restrictive covenants (which do not require written notice or opportunity to cure); or (iv) commencement of employment with another company without prior consent.

“Termination without cause” means the Company’s termination of the executive other than for cause or due to executive’s death or disability.

“Termination for good reason” means voluntary termination by executive if (i) there is a ~~Finance Senior Fellow~~reduction in executive’s annual salary or percentage target bonus opportunity then in effect; (ii) the Company acts in any way that adversely affects employee’s participation in or materially reduce executive’s benefits under any benefit plan of the Company, except those changes generally affecting similarly situated employees; (iii) the Company materially breaches the terms of the Executive Employment Agreement; or (iv) there is a material diminution of executive’s job title, reporting relationship or job duties or responsibilities that are materially inconsistent with the position under the agreement; in each case provided that (y) executive notifies the Board in writing of any event constituting the basis for a termination for good reason within 30 days after their knowledge of the initial existence of the circumstance, and (z) the Company fails to cure such circumstance within 30 after such notice.

“Disability” means an executive’s inability to perform the essential duties, responsibilities, and functions of their position as a result of any mental or physical disability or incapacity for a length of time that the Company determines is sufficient to satisfy such obligations as it may have to provide leave under applicable family and medical leave laws and/or “reasonable accommodation” under applicable federal, state or local disability laws.

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“Change in control” means (i) any person (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of Common Stock), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities, (ii) during any period of two consecutive years (the “Board Measurement Period”) individuals who at the ~~United States Military Academy. Mr. Hood~~beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (i), (iii) or (iv) of this definition, or a director initially elected or nominated as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the Board Measurement Period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a ~~Partner~~majority of the Board, (iii) merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation (provided that a merger or consolidation effected to implement a recapitalization of the Company or similar transaction in which no Person other than those covered by the exceptions in (i) above acquires more than 50% of the combined voting power of the Company’s then outstanding securities (which is not a change in control), or (iv) the stockholders of the Company approve the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets other than (y) the sale or disposition of all or substantially all of the assets of the Company to a person(s) who beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding voting securities of the Company at ~~Perella Weinberg Partners (“PWP”) for over thirteen years since helping~~the time of the sale or (z) pursuant to ~~found~~a spinoff type transaction, directly or indirectly, of such assets to the ~~firm in 2006 until November 2019. While at PWP~~ stockholders of the Company.

Mr. ~~Hood held a number of senior executive~~Diab

Effective August 7, 2021, Labeed Diab stepped down from his positions ~~including Head and Co-Head of Perella Weinberg Partners’ Asset Management division and~~as Chief ~~Financial~~Executive Officer of the ~~firm. He was also a member of the Firm’s Executive, Management, Private Investment, Risk,~~Company and Valuation Committees. Prior to PWP, Mr. Hood was a Vice President and Associate in Morgan Stanley’s Leveraged Finance department where he helped arrange financings for the firm’s energy, power and transportation clients. Mr. Hood serves a number of charitable organizations including as a member of the ~~Board~~Board. The Company and Mr. Diab have entered into a mutual release pursuant to which Mr. Diab is eligible for the following payments and benefits: (i) 1.5x the sum of ~~Trustees~~his base salary and the Endowment Board of Toledo St. Frances de Sales High School and the board of West Point Fellowship of Christian Athletes. Mr. Hood has also served as a director of FVAC I since its inception in January 2020 until the consummation of its business combination in November 2020.. Mr. Hood received a Bachelor of Science in Theoretical Economics and Political Sciencetarget bonus, paid over 18 months from the ~~United States Military Academy at West Point where he graduated as~~date of termination; (ii) a Distinguished Cadet. He also earned a Master in Business Administration with High Distinction, Baker Scholar, from Harvard Business School. Mr. Hood’s significant financial expertise make him well qualified to serve as a member of our board of directors.

~~Carmen A. Policy~~ ~~serves as a director of the company. Mr. Policy has served as a consultant and arbitrator~~prorated bonus for the ~~National Football League (“NFL”)~~current year, based on actual performance, paid at the time bonuses are paid to other employees; (iii) continued coverage of health benefits for up to 18 months, if elected; and ~~certain NFL teams since 2014. In addition, since 2003, Mr. Policy has been~~(iv) the ~~President~~vesting of all restricted shares received in connection with the ICUs granted on March 31, 2019 and ~~Chief Executive Officer of Five Vines, LLC and oversees the operations and sales of the company’s vineyard and winery~~December 31, 2019 under the label of Casa Piena. From 2011 to 2015, Mr. Policy served as a lead consultant to Lennar Corporation and the city of San Francisco on the planning and development of the Hunters Point Shipyard and Candlestick Point redevelopment projects. Prior to that, Mr. Policy was President, Chief Executive Officer and minority owner of the Cleveland Browns from 1998 to 2004 and President and Chief Executive of the San Francisco 49ers from 1991-1998. Mr. Policy has also served as a director of FVAC I since June 2020 until the consummation of its business combination in November 2020. Mr. Policy’s extensive management experience make him well qualified to serve as a member of our board of directors.

~~Rakefet Russak-Aminoach~~ serves as a director of the company. Ms. Russak-Aminoach is the founder of Team 8 Fintech, a venture capital firm soon to be launched, which focuses on company building in the Fintech industry. Previously, Ms. Russak-Aminoach was President and Chief Executive Officer of Bank Leumi from 2012 to 2019 where she led a major digital turnaround implementing advanced technologies across all of the bank’s business lines. Prior to 2012, Ms. Russak-Aminoach was the Chief Credit Officer of Leumi group and head of the corporate division. Ms. Russak-Aminoach received a B.A. in accounting and economics and earned her M.B.A in Finance and Insurance and L.L.B., in each case, from Tel Aviv University. Ms. Russak-Aminoach’s significant financial and technological expertise makes her well qualified to serve as a member of our board of directors.

2016 Plan.

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~~Sunil Gulati~~ ~~serves~~Potential Payments upon Termination


	Termination (Without Cause or For Good Reason) within 18 months of a CIC		Termination (Without Cause or For Good Reason) not within 18 months of a CIC		Disability
John Larsen:
Cash severance payments	$	—	$	—	$	—
Accelerated equity vesting	$	—	$	—	$	—
Total	$	—	$	—	$	—
Joseph Jordan:
Cash severance payments	$	1,181,250	$	900,000	$	450,000
Accelerated equity vesting	$	654,080	$	654,080	$	—
Total	$	1,835,330	$	1,554,080	$	450,000
Ray Wahl:
Cash severance payments	$	1,181,250	$	900,000	$	450,000
Accelerated equity vesting	$	540,413	$	540,413	$	—
Total	$	1,721,663	$	1,440,413	$	450,000
Diana Chafey:
Cash severance payments	$	942,638	$	718,200	$	359,100
Accelerated equity vesting	$	432,957	$	432,957	$	—
Total	$	1,375,595	$	1,151,157	$	359,100
Joseph Zavalishin:
Cash severance payments	$	942,638	$	718,200	$	359,100
Accelerated equity vesting	$	338,637	$	338,637	$	—
Total	$	1,281,275	$	1,056,837	$	359,100
Augustus Oakes:
Cash severance payments	$	731,250	$	609,375	$	325,000
Accelerated equity vesting	$	331,437	$	331,437	$	—
Total	$	1,062,687	$	940,812	$	325,000

Non-Employee Director Compensation

In 2021, each non-employee director received annual compensation in the form of a $75,000 annual cash retainer and restricted stock unit and stock option awards valued at $100,000, as ~~a director~~well as additional retainers for committee chairs. Jack Larsen, our Executive Chairman, received an additional $50,000 annual cash retainer and $25,000 restricted stock award for serving as Chairman of the ~~company. Mr. Gulati is the Michael K. Dakolias Senior Lecturer~~Board while in his executive role disclosed in the ~~economics department at Columbia University. Mr. Gulati regularly teaches undergraduate courses in Principles of Economics,~~ Executive Compensation disclosures.

The ~~Global Economy, Sports Economics and Sports Economics & Policy at Columbia Business School, where he is a senior scholar in~~director RSU grant for 2021 vests on the ~~Chazen Institute for Global Business. Mr. Gulati served as the President~~first anniversary of the ~~United States Soccer Federation for twelve years (2006-2018)~~grant date and onentitles the organization’s board for 25 years. In that period he served, at various times, on the investment committee and the audit, risk and compliance committee. Currently he is a member of the FIFA Council (Board of Directors), and serves as a trustee of the Randall’s Island Park Alliance and Bucknell University. Mr. Gulati’s extensive management experience makes him well qualifieddirector to ~~serve as a member of our board of directors.~~

~~Number, Terms of Office, Actions and Election of Officers and Directors~~

Our board of directors consist of eight members. Holders of our Founder Shares have the right to elect all of our directors prior to consummation of our initial business combination and holders of our publicreceive shares will not have the right to vote on the election of directors during such time. These provisions of our amended and restated certificate of incorporation may only be amended if approved by holders of at least 90% of our outstanding common stock entitled to vote thereon. Each of our directors will hold office for a two-year term. Subject to any other special rights applicable to the stockholders, any vacancies on our board of directors may be filled by the affirmative vote of a majority of the remaining directors of our board or by a majority of the holders of our common stock ~~(or, prior to our initial business combination, a majority~~upon vesting, and the director stock option grant for 2021 vests one-third on each of the ~~holders~~first three anniversaries of the date of the grant, all as further described below. The terms of the Award Agreements with the directors are otherwise the same as the executives.

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Annual cash retainers are paid on a quarterly basis at the end of each quarter and include committee fees detailed below:


Committee Cash Retainer	Audit		Compensation		Governance		Healthcare Compliance
Chair	$	25,000	$	20,000	$	10,000	$	15,000
Member	$	15,000	$	10,000	$	5,000	$	5,000

Director Compensation


Name	Fees Earned or Paid in Cash(2) ($)		Stock Awards(5) ($)		Option Awards(5) ($)		Total ($)
John Larsen(1)	$	—	$	—	$	—	$	—
Joanne Burns	$	112,500	$	50,000	$	47,535	$	210,035
Christopher Krubert	$	85,000	$	50,000	$	47,535	$	182,535
James Parisi	$	105,417	$	50,000	$	47,535	$	187,952
Teresa Sparks(3)	$	—	$	49,999	$	49,918	$	99,917
Todd Zimmerman(4)	$	6,250	$	—	$	—	$	6,250

(1) John Larsen's Director cash and equity fees in 2021 are reported in the Summary Compensation Table.

(2) Joanne Burns and James Parisi received one-time cash payments in April 2021 of $25,000 and $16,667, respectively, in lieu of a grant under the 2016 Plan.

(3) Teresa Sparks joined the Board of Directors effective December 21, 2021. Her 2021 equity awards were approved by the Compensation Committee and granted on December 28, 2021.

(4) Todd Zimmerman resigned January 27, 2021 and his fees reflect a prorated award for his service in 2021.

(5) The amounts reported represent the grant date fair value of restricted stock units and stock options granted in 2021, calculated based on the closing stock price on the date of the grant in accordance with FASB ASC Topic 718, Compensation - Stock Compensation, ("ASC 718"). The aggregate number of options and stock awards outstanding as of fiscal year end for each director were as follows:


Name	Aggregate Outstanding Option Awards (#)	Aggregate Outstanding Stock Awards (#)
Joanne Burns	27,962	14,620
Christopher Krubert	27,962	21,337
James Parisi	27,962	14,620
Teresa Sparks	32,414	16,077

Compensation Committee Interlocks and Insider Participation

None of our ~~Founder Shares).~~

~~Our~~executive officers ~~are elected by the board of directors and serve at the discretion~~serves as a member of the board of directors ~~rather than for specific terms~~or Compensation Committee (or other committee performing equivalent functions) of ~~office. Our board of directors is authorized to appoint persons~~any entity that has one or more executive officers serving on the Board or the Compensation Committee.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this Annual Report on Form 10-K with the Company's management. Based upon such review and the related discussions, the Committee has recommended to the ~~offices~~Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

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COMPENSATION COMMITTEE

Carmine Petrone, Chair

Joanne Burns

John Larsen

Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters

The following table sets forth, as of February 17, 2022, certain information with respect to the beneficial ownership of our common stock for each of our executive officers, each of our directors, all of our directors and executive officers as a group and each person we know to be the beneficial owner of more than 5% of our common stock.

In accordance with the rules of the SEC, beneficial ownership includes voting or investment power with respect to securities and includes the shares of common stock issuable pursuant to options and warrants that are exercisable or settled within 60 days of the date of this table. Shares of common stock issuable pursuant to options and warrants are deemed outstanding for computing the percentage of the class beneficially owned by the person holding such securities but are not deemed outstanding for computing the percentage of the class beneficially owned by any other person. Except as otherwise indicated, all share ownership is as of February 17, 2022 and the percentage of beneficial ownership is based on 207,358,218 shares of common stock legally outstanding.

The business address of each beneficial owner is c/o ATI Physical Therapy, Inc., 790 Remington Blvd. Bolingbrook, IL 60440, unless otherwise indicated below.

Name and Address of Beneficial Owner

Shares Beneficially Owned (#)

Percentage of Beneficial Ownership

5% or Greater Stockholders

Advent International Corporation (1)

116,391,635

56.1%

Fortress Acquisition Sponsor II LLC (2)

18,991,666

9.0%

Named Executive Officers and Directors

John L. Larsen (3)

26,143

Joseph Jordan (4)

173,736

Ray Wahl (5)

173,736

Diana Chafey (6)

126,232

Augustus Oakes (7)

79,773

Joe Zavalishin (8)

86,868

Labeed Diab

466,142

Joanne Burns

—

Daniel Dourney

—

John Maldonado

—

Andrew A. McKnight

—

James E. Parisi

—

Carmine Petrone

—

Teresa Sparks

—

All Directors and Executive Officers of ATI as a group (14 persons)

1,132,630

*Represents beneficial ownership of less than 1% of total shares of common stock legally outstanding.

(1) Based solely on Amendment Number 2 to the Schedule 13D filed on December 15, 2021, amounts beneficially owned include: (i) 560,979 shares of Common Stock held by Wilco Acquisition, LP (“Wilco Acquisition”); (ii) for each

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of the following entities which are collectively referred to as the “Advent Luxembourg Funds”: (a) 11,324,692 shares of Common Stock held by Advent International GPE VII Limited Partnership, (b) 30,970,374 shares of Common Stock held by Advent International GPE VII-B Limited Partnership, (c) 9,845,475 shares of Common Stock held by Advent International GPE VII-C Limited Partnership, (d) 6,777,137 shares of Common Stock held by Advent International GPE VII-D Limited Partnership, (e) 2,873,509 shares of Common Stock held by Advent International GPE VII-F Limited Partnership, (f) 2,873,509 shares of Common Stock held by Advent International GPE VII-G Limited Partnership; (iii) for each of the following entities which are collectively referred to as the “Advent Cayman Funds”: (a) 10,481,755 shares of Common Stock held by Advent International GPE VII-A Limited Partnership, (b) 22,316,206 shares of Common Stock held by Advent International GPE VII-E Limited Partnership, (c) 1,743,884 Advent International GPE VII-H Limited Partnership; (iv) for each of the following entities which are collectively referred to as the “Advent AP Funds”: (a) 65,045 shares of Common Stock held by Advent Partners GPE VII 2014 Limited Partnership, (b) 155,782 shares of Common Stock held by Advent Partners GPE VII 2014 Cayman Limited Partnership, (c) 179,333 shares of Common Stock held by Advent Partners GPE VII - A 2014 Limited Partnership, (d) 109,904 shares of Common Stock held by Advent Partners GPE VII - A 2014 Cayman Limited Partnership, (e) 806,132 Advent Partners GPE VII Cayman Limited Partnership, (f) 1,063,662 shares of Common Stock held by Advent Partners GPE VII-B Cayman Limited Partnership, (g) 45,267 shares of Common Stock held by Advent Partners GPE VII Limited Partnership, (h) 212,875 shares of Common Stock held by Advent Partners GPE VII – A Cayman Limited Partnership, (i) 107,151 shares of Common Stock held by Advent Partners GPE VII – A Limited Partnership; and (v) 13,878,964 shares of Common Stock held by GPE VII ATI Co-Investment (Delaware) Limited Partnership ( “Advent Co-Invest Fund”). Collectively, the Advent Luxembourg Funds, Advent Cayman Funds, Advent AP Funds and Advent Co-Invest Fund are referred to as the “Advent Funds”. The foregoing excludes Advent’s contingent right to receive 15,000,000 Earnout Shares.

Advent International GPE VII, LLC (“Advent Top GP”), as the manager of GPE VII GP S.a.r.l. (“Advent GP Luxembourg”) and the general partner of each of GPE VII GP Limited Partnership (“Advent GP Cayman”), the Advent AP Funds and Advent Co-Invest Fund, and Advent, as the manager of Advent Top GP, may each be deemed to beneficially own the 115,830,656 shares of Common Stock held directly by the Advent Funds. Wilco GP, Inc. (“Wilco GP”), as the general partner of Wilco Acquisition, and Advent, an affiliate of Wilco GP, may each be deemed to beneficially own the 560,979 shares of Common Stock held directly by Wilco Acquisition. Advent GP Luxembourg, as the general partner of each of the Advent Luxembourg Funds, may be deemed to beneficially own the 64,664,696 shares of Common Stock held directly by the Advent Luxembourg Funds. Advent GP Cayman, as the general partner of each of the Advent Cayman Funds, may be deemed to beneficially own the 34,541,845 shares of Common Stock held directly by the Advent Cayman Funds.

Investment decisions by Advent are made by a number of individuals currently comprised of John L. Maldonado, David M. McKenna and David M. Mussafer. The address of each of the entities and individuals named in this footnote is c/o Advent International Corporation, Prudential Tower, 800 Boylston Street, Suite 3300, Boston, MA 02199.

(2) Based solely on Amendment Number 1 to the Schedule 13D filed on August 6, 2021 by Fortress Acquisition Sponsor II LLC (“Sponsor”), Hybrid GP Holdings (Cayman) LLC (“Cayman GP”), Hybrid GP Holdings LLC (“Hybrid GP”), FIG LLC (“FIG LLC”), Fortress Operating Entity I LP (“FOE I”), FIG Corp. (“FIG Corp.”), and Fortress Investment Group LLC (“Fortress”). Sponsor directly beneficially owns an aggregate of 16,025,000 shares of Common Stock and 2,966,666 shares of Common Stock issuable upon the exercise of the same number of private placement warrants. Cayman GP controls the general partners of certain investment funds that together, pursuant to a transfer agreement, acquired a majority equity interest in Sponsor. Hybrid GP is the sole owner of Cayman GP. FIG LLC indirectly controls certain investment funds (the “Funds”) managed or advised by controlled affiliates of FIG LLC, which Funds hold all of the outstanding equity interest in Sponsor. FOE I is the sole owner of FIG LLC and the managing member of, and holds the majority of equity interest in, Hybrid GP. FIG Corp. is the general partner of FOE I. Fortress is the sole owner of FIG Corp. Each of Cayman GP, Hybrid GP, FIG LLC, FOE I, FIG Corp. and Fortress may be deemed to indirectly beneficially own the securities held by Sponsor. As the Co-Chief Investment Officers of the fund that owns Sponsor (through advisory and general partner entities) each of Peter L. Briger, Jr., Dean Dakolias, Andrew A. McKnight and Joshua Pack participates in the voting and investment decisions with respect to the shares of Common Stock held by Sponsor, but each of them disclaims beneficial ownership thereof. The address of each of the entities and individuals named in this footnote is 1345 Avenue of the Americas, 46th Floor, New York, New York 10105.

(3) Includes 673 for John Larsen’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(4) Includes 12,367 for Joseph Jordan’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(5) Includes 8,633 for Ray Wahl’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

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(6) Includes 9,480 for Diana Chafey’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(7) Includes 5,952 for Augustus Oakes’ restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(8) Includes 6,335 for Joseph Zavalishin’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

Securities Authorized for Issuance under Equity Compensation Plans

We currently maintain the ATI Physical Therapy 2021 Equity Incentive Plan (the "2021 Plan") under which we may grant equity interests of the Company in the form of share-based awards, to members of management, key employees and independent directors of the Company and its subsidiaries.

The following table sets forth certain equity compensation plan information for the Company as of December 31, 2021:


	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights(2)		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by stockholders(1)	1,626,762	$	3.41	18,996,019
Equity compensation plans not approved by stockholders	—			—
Total	1,626,762			18,996,019

(1) Awards granted by ATI in 2021

(2) Based on the price of the Company's common stock on the grant dates of November 23, 2021 and December 28, 2021 of $3.42 and $3.11, respectively.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The following is a summary of transactions (or series of transactions) and any currently proposed transactions, to which we have been or will be a participant and in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, director nominees, executive officers or holders of more than 5% of any class of our equity interests at the time of such transaction, or any members of their immediate family, had or will have a direct or indirect material interest.

Founder Shares

On June 15, 2020, FAII issued the Founder Shares in exchange for an aggregate capital contribution of $25,000. Sponsor had agreed to forfeit an aggregate of up to 1,125,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On August 14, 2020, the underwriters exercised their over-allotment option in full. As a result, the 1,125,000 Founder Shares were no longer subject to forfeiture. In August 2020, Sponsor transferred a total of 100,000 Founder Shares to four independent directors of FAII for the same per-share price initially paid for by Sponsor. Subsequent to those transfers, Sponsor held 8,525,000 Founder Shares. The Founder Shares automatically converted into Common Stock upon the consummation of the Business Combination ("Vesting Shares").

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Pursuant to the Parent Sponsor Letter Agreement, the Insiders have further agreed that, all of the Vesting Shares shall be unvested and shall be subject to certain vesting and forfeiture provisions, as follows: (A) 33.33% of the Vesting Shares beneficially owned by the Insiders shall vest at such time as a $12.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination, (B) 33.33% of the Vesting Shares beneficially owned by the Insiders shall vest at such time as a $14.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination and (C) 33.34% of the Vesting Shares beneficially owned by the Insiders shall vest at such time as a $16.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination.

Private Placement Warrants

Substantially concurrently with the closing of FAII’s IPO, the Sponsor purchased an aggregate 5,933,333 Private Placement Warrants for a price of $1.50 per warrant. Each Private Placement Warrant was exercisable to purchase one share of FAII Class A common stock at $11.50 per share.

Each Private Warrant entitles the holder to purchase one share of our Common Stock at $11.50 per share. At the closing of the Business Combination, the Sponsor transferred and surrendered for no consideration 2,966,667 of its Private Placement Warrants. 2,966,666 Private Placement Warrants are outstanding at this time.

Related Party Notes

Prior to FAII’s IPO, the Sponsor loaned FAII an aggregate of $97,250 to cover expenses related to FAII’s IPO pursuant to a promissory note. The promissory note was non-interest bearing, unsecured and due on the earlier of April 30, 2021 and the closing of the FAII’s IPO. FAII repaid the promissory note in full on August 14, 2020.

Office Space and Related Support Services

On August 14, 2020, FAII entered into an agreement with an affiliate of Sponsor to pay a monthly fee of $20,000 for office space and related support services. Upon completion of the Business Combination, we ceased paying these monthly fees

PIPE Investment

In connection with the PIPE Investment and consummation of the Business Combination, the Sponsor purchased 7,500,000 shares of FAII Class A common stock at $10.00 per share for an aggregate purchase price of $75 million.

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Earnout Shares

After the consummation of the Business Combination, Wilco Acquisition, LP (the sole holder of the Company common stock as of the date of the Merger Agreement) or its designees will have the contingent right to receive Earnout Shares upon the terms and subject to the conditions set forth in ~~our bylaws~~the Merger Agreement and the agreements contemplated thereunder in the amounts set forth below if the price targets set forth below are achieved any time between the closing and the date that is ten years after the consummation of the Business Combination:

•in the event the dollar volume-weighted average price (“VWAP”) of one share of ATI Class A common stock as ~~it deems appropriate. Our bylaws will provide that our officers may consist~~reported on the NYSE is greater than $12.00 for at least five days out of a ~~Chairman, Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Assistant Secretaries, Treasurer~~period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock;

•in the event the VWAP of one share of ATI Class A common stock as reported on the NYSE is greater than $14.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock; and

•in the event the VWAP of one share of ATI Class A common stock as reported on the NYSE is greater than $16.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock.

In the event that there is an agreement with respect to the sale or other change of control of ATI entered into after the closing and prior to the date that is ten years after the consummation of the Business Combination, that will result in the holders of ATI Class A common stock receiving a per share price in excess of the applicable VWAP set forth above, then the applicable Earnout Shares that have not been issued prior to the closing of such sale or change of control will be issued by ATI on the day prior to such sale or change of control. Following such sale or change of control, ATI and the surviving company will take proper provision to ensure that any Earnout Shares that have not previously been issued will remain eligible to be paid through the date that is ten years after the consummation of the Business Combination.

If, after the closing and on or before the date that is ten years after the consummation of the Business Combination, the outstanding shares of ATI Class A common stock are changed into a different number or class of shares by reason of any merger, stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reorganization, reclassification, recapitalization or other ~~offices~~similar transaction, then the number of Earnout Shares to be issued pursuant to the Merger Agreement will be adjusted to the extent appropriate to provide the same economic effect as ~~may be determined~~contemplated by the Merger Agreement prior to such action.

Advent International Expense Reimbursements

We have reimbursed Wilco GP, Inc., which is affiliated with Advent, for expenses totaling approximately $174,547 for the period covering January 1, 2021 to December 31, 2021. The reimbursed expenses were incurred in the normal course of business and related to third-party expenses for board member search fees, the performance of ~~directors.~~proactive internal audit related to our cybersecurity capabilities, travel expenses and external legal and consulting fees.

Procedures with Respect to Review and Approval of Related Party Transactions

We maintain a Related Person Transaction policy that sets forth the following policies and procedures for the review and approval or ratification of related person transactions.

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A "related person transaction" is a transaction, arrangement or relationship in which ATI or any of its subsidiaries was, is or will be a participant, involving an amount exceeding $120,000 and in which any related person had, has or will have a direct or indirect material interest. A "related person" means:

•any person who is, or at any time during the applicable period was, one of ATI's executive officers or a member of the Board;

•any person who is known by ATI to be the beneficial owner of more than 5% of any class of our voting stock;

•any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, officer or a beneficial owner of more than 5% of our voting stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5% of our voting stock; and

•any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

We have also adopted policies and procedures designed to minimize potential conflicts of interest arising from any dealings we may have with our affiliates and have appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time. Specifically, pursuant to our Second Amended and Restated Certificate of Incorporation, the Audit Committee has the responsibility to review related person transactions and will approve only those transactions that it determines are fair to us and in ATI's best interests.

~~Director Independence~~

The NYSE listing standards require that a majority of our board of directors be independent within one year of our initial public offering. An “independent director” is defined generally as a person that, in the opinion of the company’s board of directors, has no material relationship with the listed company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company). We have four “independent directors” as defined in the NYSE listing standardsCompensation Committee Interlocks and ~~applicable SEC rules. Our board of directors has determined that each of Mr. Hood, Mr. Policy, Ms. Russak-Aminoach and Mr. Gulati is independent under applicable SEC and NYSE rules.~~

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~~Executive Officer and Director Compensation~~

Insider Participation

None of our executive officers ~~or directors have received any cash compensation for services rendered to us. Our Sponsor, officers and~~serves as a member of the board of directors or Compensation Committee (or other committee performing equivalent functions) of any ~~of their respective affiliates, will be reimbursed for any reasonable out-of-pocket expenses incurred in connection with activities~~entity that has one or more executive officers serving on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to our Sponsor, officers, directorsthe Board or ~~our or their affiliates.~~the Compensation Committee.

After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting, management or other fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. It is unlikely the amount of such compensation will be known at the time such materials are distributed, because the directors of the post-combination business will be responsible for determining executive officer and director compensation. Any compensation to be paid to our officers will be determined by a compensation committee constituted solely by independent directors.

Compensation Committee Report

The ~~existence or terms of any employment or consulting arrangements may influence our management’s motivation~~Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in ~~identifying or selecting a target business but we do not believe that~~this Annual Report on Form 10-K with the ~~ability of our management~~Company's management. Based upon such review and the related discussions, the Committee has recommended to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.

~~Committees of~~ the Board of Directors

Our board of directors has three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance committee. Subject to phase-in rules and a limited exception, the rules of the NYSE and Rule 10A of the Exchange Act require that the ~~audit committee of a listed company~~Compensation Discussion and Analysis be comprised solely of independent directors. Subject to phase-in rules and a limited exception, the rules of the NYSE require that the compensation committee and the nominating and corporate governance committee of a listed company be comprised solely of independent directors. Each committee will operate under a charter that has been approved by our board and will have the composition and responsibilities described below. The charter of each committee is availableincluded in this Annual Report on ~~our website.~~

~~Audit Committee~~

Our board of directors has established an audit committee of the board of directors. The members of our audit committee are Mr. McKnight, Mr. Hood and Mr. Policy. Mr. Hood serves as the chair of the audit committee.

Form 10-K.

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~~Each member~~COMPENSATION COMMITTEE

Carmine Petrone, Chair

Joanne Burns

John Larsen

Item 12. Security Ownership of ~~the audit committee meets the financial literacy requirements of the NYSE~~Certain Beneficial Owner and ~~our board of directors has determined that Mr. Hood qualifies as an “audit committee financial expert” as defined in applicable SEC rules~~Management and ~~has accounting or related financial management expertise.~~

Related Stockholder Matters

The ~~primary purposes~~following table sets forth, as of February 17, 2022, certain information with respect to the beneficial ownership of our ~~audit committee are to assist the board’s oversight of:~~

•~~audits~~common stock for each of our ~~financial statements;~~

•~~the integrity~~executive officers, each of our ~~financial statements;~~

•~~our process relating to risk management and the conduct and systems of internal control over financial reporting and disclosure controls and procedures;~~

•~~the qualifications, engagement, compensation, independence and performance~~directors, all of our ~~independent registered public accounting firm;~~directors and

• executive officers as a group and each person we know to be the ~~performance~~beneficial owner of more than 5% of our ~~internal audit function.~~common stock.

~~The audit committee will be governed by a charter that complies~~In accordance with the rules of the ~~NYSE.~~

~~Compensation Committee~~

~~Our board~~SEC, beneficial ownership includes voting or investment power with respect to securities and includes the shares of ~~directors has established a compensation committee~~common stock issuable pursuant to options and warrants that are exercisable or settled within 60 days of the ~~board~~date of ~~directors.~~ this table. Shares of common stock issuable pursuant to options and warrants are deemed outstanding for computing the percentage of the class beneficially owned by the person holding such securities but are not deemed outstanding for computing the percentage of the class beneficially owned by any other person. Except as otherwise indicated, all share ownership is as of February 17, 2022 and the percentage of beneficial ownership is based on 207,358,218 shares of common stock legally outstanding.

The business address of each beneficial owner is c/o ATI Physical Therapy, Inc., 790 Remington Blvd. Bolingbrook, IL 60440, unless otherwise indicated below.

Name and Address of Beneficial Owner

Shares Beneficially Owned (#)

Percentage of Beneficial Ownership

5% or Greater Stockholders

Advent International Corporation (1)

116,391,635

56.1%

Fortress Acquisition Sponsor II LLC (2)

18,991,666

9.0%

Named Executive Officers and Directors

John L. Larsen (3)

26,143

Joseph Jordan (4)

173,736

Ray Wahl (5)

173,736

Diana Chafey (6)

126,232

Augustus Oakes (7)

79,773

Joe Zavalishin (8)

86,868

Labeed Diab

466,142

Joanne Burns

—

Daniel Dourney

—

John Maldonado

—

Andrew A. McKnight

—

James E. Parisi

—

Carmine Petrone

—

Teresa Sparks

—

All Directors and Executive Officers of ATI as a group (14 persons)

1,132,630

*Represents beneficial ownership of less than 1% of total shares of common stock legally outstanding.

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(3) Includes 673 for John Larsen’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(4) Includes 12,367 for Joseph Jordan’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(5) Includes 8,633 for Ray Wahl’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

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(6) Includes 9,480 for Diana Chafey’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(7) Includes 5,952 for Augustus Oakes’ restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(8) Includes 6,335 for Joseph Zavalishin’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

Securities Authorized for Issuance under Equity Compensation Plans

We currently maintain the ATI Physical Therapy 2021 Equity Incentive Plan (the "2021 Plan") under which we may grant equity interests of the Company in the form of share-based awards, to members of ~~our compensation committee are Mr. McKnight, Mr. Hood~~management, key employees and ~~Ms. Russak-Aminoach. Mr. Hood serves as the chair~~independent directors of the ~~compensation committee.~~

Company and its subsidiaries.

The ~~primary purposes~~following table sets forth certain equity compensation plan information for the Company as of December 31, 2021:


	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights(2)		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by stockholders(1)	1,626,762	$	3.41	18,996,019
Equity compensation plans not approved by stockholders	—			—
Total	1,626,762			18,996,019

(1) Awards granted by ATI in 2021

(2) Based on the price of the Company's common stock on the grant dates of November 23, 2021 and December 28, 2021 of $3.42 and $3.11, respectively.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The following is a summary of transactions (or series of transactions) and any currently proposed transactions, to which we have been or will be a participant and in which the amount involved exceeded or will exceed $120,000, and in which any of our ~~compensation committee~~directors, director nominees, executive officers or holders of more than 5% of any class of our equity interests at the time of such transaction, or any members of their immediate family, had or will have a direct or indirect material interest.

Founder Shares

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Private Placement Warrants

Related Party Notes

Prior to ~~assist~~FAII’s IPO, the ~~board~~Sponsor loaned FAII an aggregate of $97,250 to cover expenses related to FAII’s IPO pursuant to a promissory note. The promissory note was non-interest bearing, unsecured and due on the earlier of April 30, 2021 and the closing of the FAII’s IPO. FAII repaid the promissory note in ~~overseeing our management compensation policies~~full on August 14, 2020.

Office Space and ~~practices, including:~~Related Support Services

PIPE Investment

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Earnout Shares

After the consummation of the Business Combination, Wilco Acquisition, LP (the sole holder of the Company common stock as of the date of the Merger Agreement) or its designees will have the contingent right to receive Earnout Shares upon the terms and subject to the conditions set forth in the Merger Agreement and the agreements contemplated thereunder in the amounts set forth below if the price targets set forth below are achieved any time between the closing and the date that is ten years after the consummation of the Business Combination:

•in the event the dollar volume-weighted average price (“VWAP”) of one share of ATI Class A common stock as reported on the NYSE is greater than $12.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock;

•~~determining~~in the event the VWAP of one share of ATI Class A common stock as reported on the NYSE is greater than $14.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock; and ~~approving the compensation of our executive officers; and~~

•~~reviewing~~in the event the VWAP of one share of ATI Class A common stock as reported on the NYSE is greater than $16.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock.

In the event that there is an agreement with respect to the sale or other change of control of ATI entered into after the closing and ~~approving incentive compensation~~prior to the date that is ten years after the consummation of the Business Combination, that will result in the holders of ATI Class A common stock receiving a per share price in excess of the applicable VWAP set forth above, then the applicable Earnout Shares that have not been issued prior to the closing of such sale or change of control will be issued by ATI on the day prior to such sale or change of control. Following such sale or change of control, ATI and ~~equity compensation~~the surviving company will take proper provision to ensure that any Earnout Shares that have not previously been issued will remain eligible to be paid through the date that is ten years after the consummation of the Business Combination.

If, after the closing and on or before the date that is ten years after the consummation of the Business Combination, the outstanding shares of ATI Class A common stock are changed into a different number or class of shares by reason of any merger, stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reorganization, reclassification, recapitalization or other similar transaction, then the number of Earnout Shares to be issued pursuant to the Merger Agreement will be adjusted to the extent appropriate to provide the same economic effect as contemplated by the Merger Agreement prior to such action.

Advent International Expense Reimbursements

We have reimbursed Wilco GP, Inc., which is affiliated with Advent, for expenses totaling approximately $174,547 for the period covering January 1, 2021 to December 31, 2021. The reimbursed expenses were incurred in the normal course of business and related to third-party expenses for board member search fees, the performance of proactive internal audit related to our cybersecurity capabilities, travel expenses and external legal and consulting fees.

Procedures with Respect to Review and Approval of Related Party Transactions

We maintain a Related Person Transaction policy that sets forth the following policies and ~~programs.~~

~~The compensation committee are governed by a charter that complies with~~procedures for the ~~rules~~review and approval or ratification of ~~the NYSE.~~

related person transactions.

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~~Nominating~~A "related person transaction" is a transaction, arrangement or relationship in which ATI or any of its subsidiaries was, is or will be a participant, involving an amount exceeding $120,000 and ~~Corporate Governance Committee~~in which any related person had, has or will have a direct or indirect material interest. A "related person" means:

•

~~Our board~~any person who is, or at any time during the applicable period was, one of ~~directors has established~~ATI's executive officers or a ~~nominating and corporate governance committee. The members of our nominating and corporate governance are Mr. McKnight, Mr. Hood and Ms. Russak-Aminoach. Mr. Hood serves as chair~~member of the ~~nominating and corporate governance committee.~~

~~The primary purposes of our nominating and corporate governance committee are to assist the board in:~~

Board;

•~~identifying, screening and reviewing individuals qualified~~any person who is known by ATI to ~~serve as directors and recommending to~~be the ~~board~~beneficial owner of ~~directors candidates for nomination for election at the annual meeting~~more than 5% of ~~stockholders or to fill vacancies on the board~~any class of ~~directors;~~

our voting stock;

•~~developing, recommending to~~any immediate family member of any of the ~~board~~foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, daughter-in-law, brother-in-law or sister-in-law of ~~directors and overseeing implementation~~a director, officer or a beneficial owner of more than 5% of our ~~corporate governance guidelines;~~

voting stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5% of our voting stock; and

•~~coordinating and overseeing the annual self-evaluation~~any firm, corporation or other entity in which any of the ~~board of directors, its committees, individual directors and management~~foregoing persons is a partner or principal or in ~~the governance of the company; and~~

•~~reviewing on~~ a ~~regular basis our overall corporate governance and recommending improvements as and when necessary.~~

~~The nominating and corporate governance committee are governed by~~similar position or in which such person has a ~~charter that complies with the rules of the NYSE.~~

~~Director Nominations~~

Our nominating and corporate governance committee will recommend to the board of directors candidates for nomination for election at the annual meeting of the stockholders. Prior to our initial business combination, the board of directors will also consider director candidates recommended for nomination by holders of our Founder Shares during such times as they are seeking proposed nominees to stand for election at an annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Prior to our initial business combination, holders of our public shares will not have the right to recommend director candidates for nomination to our board of directors.

10% or greater beneficial ownership interest.

We have ~~not formally established~~also adopted policies and procedures designed to minimize potential conflicts of interest arising from any ~~specific, minimum qualifications~~dealings we may have with our affiliates and have appropriate procedures for the disclosure of any real or potential conflicts of interest that ~~must be met or skills~~may exist from time to time. Specifically, pursuant to our Second Amended and Restated Certificate of Incorporation, the Audit Committee has the responsibility to review related person transactions and will approve only those transactions that it determines are ~~necessary for directors~~fair to ~~possess. In general,~~us and in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent theATI's best ~~interests of our stockholders.~~interests.

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Compensation Committee Interlocks and Insider Participation

~~Aside from Mr. McKnight, who serves as Chief Executive Officer and is on the compensation committee of FVAC III, none~~None of our executive officers ~~currently~~ serves ~~and in the past year has not served, (i)~~ as a member of the ~~compensation committee or~~ board of directors or Compensation Committee (or other committee performing equivalent functions) of ~~another~~any entity that has one ~~of whose~~or more executive officers ~~served~~serving on ~~our compensation committee,~~the Board or ~~(ii) as a member of~~ the ~~compensation committee of another entity, one of whose executive officers served~~Compensation Committee.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this Annual Report on ~~our board of directors.~~

~~Section 16(a) Beneficial Ownership Reporting Compliance~~

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownershipForm 10-K with the ~~SEC. These reporting persons are also required~~Company's management. Based upon such review and the related discussions, the Committee has recommended to ~~furnish us with copies~~the Board of ~~all Section 16(a) forms they file. Based solely upon a review of such Forms, we believe~~Directors that ~~during~~ the ~~year ended December 31, 2020 there were no delinquent filers.~~

~~Code of Business Conduct~~Compensation Discussion and ~~Ethics~~

~~We have adopted a Code of Business Conduct and Ethics applicable to our directors, officers and employees. A copy of the Code of Business Conduct and Ethics is available~~Analysis be included in this Annual Report on ~~our website. Any amendments to or waivers of certain provisions of our Code of Business Conduct and Ethics will be disclosed on such website promptly following the date of such amendment or waiver.~~

~~Corporate Governance Guidelines~~

Our board of directors has adopted corporate governance guidelines in accordance with the corporate governance rules of the NYSE that serve as a flexible framework within which our board of directors and its committees operate. These guidelines cover a number of areas including board membership criteria and director qualifications, director responsibilities, board agenda, roles of the chairman of the board, chief executive officer and presiding director, meetings of independent directors, committee responsibilities and assignments, board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning. A copy of our corporate governance guidelines is posted on our website.

~~Conflicts of Interest~~

~~In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:~~

•~~the corporation could financially undertake the opportunity;~~

Form 10-K.

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•~~the opportunity is within the corporation’s line of business; and~~COMPENSATION COMMITTEE

Carmine Petrone, Chair

•~~it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation.~~Joanne Burns

John Larsen

Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities, including FVAC III, pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity that is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our initial business combination.

~~Potential investors should also be aware of the following other potential conflicts of interest:~~

•None of our officers or directors is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest in allocating his or her time among various business activities.

•In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.

~~124~~

•Our Sponsor, officers and directors have agreed to waive their redemption rights with respect to any Founder Shares and any public shares held by them in connection with the consummation of our initial business combination. Additionally, our Sponsor, officers and directors have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if we fail to complete our initial business combination within 24 months from the closing of the Initial Public Offering. However, if our Sponsor, officers and directors acquire public shares, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if we fail to complete our initial business combination within the prescribed time period. If we do not complete our initial business combination within such applicable time period, the proceeds of the sale of the private placement warrants held in the Trust Account will be used to fund the redemption of our public shares, and the private placement warrants will expire worthless. With certain limited exceptions, the Founder Shares will not be transferable, assignable or salable by our initial stockholders until the earliest to occur of: (A) one year after the completion of our initial business combination; (B) subsequent to our initial business combination, if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination; and (C) the date following the completion of our initial business combination on which we complete a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of our public stockholders having the right to exchange their shares of common stock for cash, securities or other property. With certain limited exceptions, the private placement warrants and the Class A common stock underlying such warrants, will not be transferable, assignable or salable by our Sponsor or its permitted transferees until 30 days after the completion of our initial business combination. Since our Sponsor and officers and directors may directly or indirectly own common stock and warrants, our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination.

•Our officers and directors may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether to proceed with a particular business combination.

•Our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.

~~The conflicts described above may not be resolved in our favor.~~

~~125~~

Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities.

We are not prohibited from pursuing an initial business combination with a business that is affiliated with our Sponsor, officers or directors. In the event we seek to complete our initial business combination with such a business, we, or a committee of independent and disinterested directors, would obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, that such an initial business combination is fair to our company from a financial point of view.

In addition, our Sponsor or any of its affiliates may make additional investments in the company in connection with the initial business combination, although our Sponsor and its affiliates have no obligation or current intention to do so. If our Sponsor or any of its affiliates elect to make additional investments, such proposed investments could influence our Sponsor’s motivation to complete an initial business combination.

In the event that we submit our initial business combination to our public stockholders for a vote, our Sponsor, officers and directors have agreed, pursuant to the terms of a letter agreement entered into with us, to vote any Founder Shares held by them (and their permitted transferees will agree) and any public shares held by them in favor of our initial business combination.

~~Limitation on Liability and Indemnification of Officers and Directors~~

Our amended and restated certificate of incorporation provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, except to the extent such limitation on or exemption from liability is not permitted under the DGCL or unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.

We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We may purchase a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgement in some circumstances and insures us against our obligations to indemnify our officers and directors. We believe that these provisions, the insurance and indemnity agreements are necessary to attract and retain talented and experienced officers and directors.

~~126~~

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

~~Item 11. Executive Compensation.~~

The Company currently has four officers, Andrew A. McKnight (Chief Executive Officer), Daniel N. Bass (Chief Financial Officer), Micah B. Kaplan (Chief Operating Officer) and Alexander P. Gillette (General Counsel). The Company has no other officers or employees. None of our officers or directors have received any cash compensation for services rendered to us. Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any reasonable out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to our Sponsor, officers, directors or our or their affiliates.

We entered into an agreement with an affiliate of Fortress Acquisition Sponsor II LLC, pursuant to which we pay such affiliate a total of $20,000 per month for office space and related support services. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.

The existence or terms of any employment or consulting arrangements may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.

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Item 12. Security Ownership of Certain Beneficial ~~Owners~~Owner and Management and Related Stockholder ~~Matters.~~

~~We have no compensation plans under which equity securities are authorized for issuance.~~

Matters

The following table sets forth, as of February 17, 2022, certain information ~~available to us at March 1, 2021~~ with respect to the beneficial ownership of our common stock ~~held by:~~

•~~Each~~for each of our executive officers, each of our directors, all of our directors and executive officers as a group and each person ~~known by us~~we know to be the beneficial owner of more than 5% of our ~~outstanding~~ common ~~stock;~~stock.

•~~Each~~In accordance with the rules of ~~our executive officers and directors that beneficially own common stock; and~~

•~~All of our executive officers and directors as a group.~~

~~Unless otherwise indicated, we believe that all persons named in~~ the ~~table have sole~~SEC, beneficial ownership includes voting ~~and~~or investment power with respect to ~~all~~securities and includes the shares of common stock ~~beneficially owned by them. The following table does not reflect record~~issuable pursuant to options and warrants that are exercisable or ~~beneficial ownership of the private placement warrants as they are not exercisable~~settled within 60 days of ~~March 1, 2021.~~the date of this table. Shares of common stock issuable pursuant to options and warrants are deemed outstanding for computing the percentage of the class beneficially owned by the person holding such securities but are not deemed outstanding for computing the percentage of the class beneficially owned by any other person. Except as otherwise indicated, all share ownership is as of February 17, 2022 and the percentage of beneficial ownership is based on 207,358,218 shares of common stock legally outstanding.

Name and Address of Beneficial Owner (1)
Numbers of
Shares
Beneficially
Owned (2)
Percentage of Outstanding
Common Stock
Fortress Acquisition Sponsor II LLC (3)
8,525,000 19.8 %
Grandview LLC (4)
2,151,500 6.2 %
Marc Furstein 30,000 *
Andrew A. McKnight 30,000 *
Aaron F. Hood 25,000 *
Carmen A. Policy 25,000 *
Rakefet Russak-Aminoach 25,000 *
Sunil Gulati 25,000 *
Joshua A. Pack 10,000 *
Daniel Bass 5,000 *
Alexander P. Gillette 5,000 *
All officers and directors as a group (9 individuals) 180,000 *
The business address of each beneficial owner is c/o ATI Physical Therapy, Inc., 790 Remington Blvd. Bolingbrook, IL 60440, unless otherwise indicated below.

Name and Address of Beneficial Owner

Shares Beneficially Owned (#)

Percentage of Beneficial Ownership

5% or Greater Stockholders

Advent International Corporation (1)

116,391,635

56.1%

Fortress Acquisition Sponsor II LLC (2)

18,991,666

9.0%

Named Executive Officers and Directors

John L. Larsen (3)

26,143

Joseph Jordan (4)

173,736

Ray Wahl (5)

173,736

Diana Chafey (6)

126,232

Augustus Oakes (7)

79,773

Joe Zavalishin (8)

86,868

Labeed Diab

466,142

Joanne Burns

—

Daniel Dourney

—

John Maldonado

—

Andrew A. McKnight

—

James E. Parisi

—

Carmine Petrone

—

Teresa Sparks

—

All Directors and Executive Officers of ATI as a group (14 persons)

1,132,630

*~~Less~~Represents beneficial ownership of less than ~~one percent.~~

1% of total shares of common stock legally outstanding.

(1)~~Unless otherwise noted,~~ Based solely on Amendment Number 2 to the ~~business~~Schedule 13D filed on December 15, 2021, amounts beneficially owned include: (i) 560,979 shares of Common Stock held by Wilco Acquisition, LP (“Wilco Acquisition”); (ii) for each

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Investment decisions by Advent are made by a number of individuals currently comprised of John L. Maldonado, David M. McKenna and David M. Mussafer. The address of each of the ~~following~~ entities orand individuals named in this footnote is c/o Advent International Corporation, Prudential Tower, 800 Boylston Street, Suite 3300, Boston, MA 02199.

(2) Based solely on Amendment Number 1 to the Schedule 13D filed on August 6, 2021 by Fortress ~~Value~~ Acquisition Sponsor II LLC (“Sponsor”), Hybrid GP Holdings (Cayman) LLC (“Cayman GP”), Hybrid GP Holdings LLC (“Hybrid GP”), FIG LLC (“FIG LLC”), Fortress Operating Entity I LP (“FOE I”), FIG Corp. ~~II,~~(“FIG Corp.”), and Fortress Investment Group LLC (“Fortress”). Sponsor directly beneficially owns an aggregate of 16,025,000 shares of Common Stock and 2,966,666 shares of Common Stock issuable upon the exercise of the same number of private placement warrants. Cayman GP controls the general partners of certain investment funds that together, pursuant to a transfer agreement, acquired a majority equity interest in Sponsor. Hybrid GP is the sole owner of Cayman GP. FIG LLC indirectly controls certain investment funds (the “Funds”) managed or advised by controlled affiliates of FIG LLC, which Funds hold all of the outstanding equity interest in Sponsor. FOE I is the sole owner of FIG LLC and the managing member of, and holds the majority of equity interest in, Hybrid GP. FIG Corp. is the general partner of FOE I. Fortress is the sole owner of FIG Corp. Each of Cayman GP, Hybrid GP, FIG LLC, FOE I, FIG Corp. and Fortress may be deemed to indirectly beneficially own the securities held by Sponsor. As the Co-Chief Investment Officers of the fund that owns Sponsor (through advisory and general partner entities) each of Peter L. Briger, Jr., Dean Dakolias, Andrew A. McKnight and Joshua Pack participates in the voting and investment decisions with respect to the shares of Common Stock held by Sponsor, but each of them disclaims beneficial ownership thereof. The address of each of the entities and individuals named in this footnote is 1345 Avenue of the Americas, 46th Floor, New York, New York 10105.

~~(2)~~(3)~~Some~~ Includes 673 for John Larsen’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(4) Includes 12,367 for Joseph Jordan’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(5) Includes 8,633 for Ray Wahl’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

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(6) Includes 9,480 for Diana Chafey’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(7) Includes 5,952 for Augustus Oakes’ restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

(8) Includes 6,335 for Joseph Zavalishin’s restricted stock awards that will be settled into shares within 60 days of February 17, 2022.

Securities Authorized for Issuance under Equity Compensation Plans

We currently maintain the ATI Physical Therapy 2021 Equity Incentive Plan (the "2021 Plan") under which we may grant equity interests of the ~~interests shown consist~~Company in the form of ~~founder shares, classified~~share-based awards, to members of management, key employees and independent directors of the Company and its subsidiaries.

The following table sets forth certain equity compensation plan information for the Company as ~~Class F~~of December 31, 2021:


	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights(2)		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by stockholders(1)	1,626,762	$	3.41	18,996,019
Equity compensation plans not approved by stockholders	—			—
Total	1,626,762			18,996,019

(1) Awards granted by ATI in 2021

(2) Based on the price of the Company's common ~~stock.~~ stock on the grant dates of November 23, 2021 and December 28, 2021 of $3.42 and $3.11, respectively.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The ~~founder shares~~following is a summary of transactions (or series of transactions) and any currently proposed transactions, to which we have been or will ~~convert into Class A common stock~~be a participant and in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, director nominees, executive officers or holders of more than 5% of any class of our equity interests at the time of ~~our initial business combination,~~such transaction, or ~~earlier at the option~~any members of ~~the holder, on~~their immediate family, had or will have a ~~one-for-one basis, subject to adjustment.~~direct or indirect material interest.

~~(3)Represents the interest directly held by Fortress Acquisition Sponsor II LLC.~~Founder Shares

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~~(4)~~According to Schedule 13G, filed on January 20, 2021 by Grandview LLC, Millennium Management LLC, Millennium Group Management LLC and Israel A. Englander. The business address of such parties is 666 Fifth Avenue, New York, New York 10103. According to such Schedule 13G, Israel A. Englander is the sole voting trustee of a trust that is the managing member of Millennium Group Management LLC, Millennium Group Management LLC is the managing member of Millennium Management LLC and Millennium Management LLC is the managing member of Grandview LLC.

~~Our initial stockholders beneficially own, on an as-converted basis, 20% of our~~On June 15, 2020, FAII issued ~~and outstanding common stock and have the right to elect all of our directors prior to our business combination as a result of holding all of~~ the Founder Shares. Holders of our public shares will not have the right to elect any directors to our board of directors prior to our business combination. In addition, because of their ownership block, our initial stockholders may be able to effectively influence the outcome of all other matters requiring approval by our stockholders, including amendments to our certificate of incorporation and approval of significant corporate transactions.

~~In June 2020, we issued an aggregate of 8,625,000 shares of Class F common stock to our Sponsor~~Shares in exchange for an aggregate capital contribution of $25,000. Sponsor had agreed to forfeit an aggregate of up to 1,125,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On August 14, 2020, the underwriters exercised their over-allotment option in full. As a result, the 1,125,000 Founder Shares were no longer subject to forfeiture. In August 2020, ~~the~~ Sponsor transferred a total of 100,000 Founder Shares to four independent directors of ~~the Company~~FAII for the same per-share price initially paid for by ~~the~~ Sponsor. Subsequent to ~~these~~those transfers, ~~the~~ Sponsor held 8,525,000 Founder Shares.

~~Our Sponsor, together with our four independent directors, currently own 8,625,000 Class F common stock.~~

~~In connection with~~ The Founder Shares automatically converted into Common Stock upon the consummation of ~~our Initial Public Offering, our~~the Business Combination ("Vesting Shares").

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Private Placement Warrants

Substantially concurrently with the closing of FAII’s IPO, the Sponsor purchased an aggregate of 5,933,333 ~~private placement warrants at~~Private Placement Warrants for a price of $1.50 per ~~private placement warrant (or $8,900,000 in the aggregate) in a private placement.~~warrant. Each ~~private placement warrant entitles the holder~~Private Placement Warrant was exercisable to purchase one share of FAII Class A common stock at $11.50 per share.

Our Sponsor and our executive officers and directors are deemed to be our “promoters” as such term is defined under the federal securities laws. See “Item 13. Certain Relationships and Related Transactions, and Director Independence” below for additional information regarding our relationships with our promoters.

~~Item 13. Certain Relationships and Related Transactions, and Director Independence.~~

In June 2020, our Sponsor purchased an aggregate of 8,625,000 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. In August 2020, the Sponsor transferred a total of 100,000 Founder Shares to four independent directors of the Company for the same per-share price initially paid for by the Sponsor. Subsequent to these transfers, the Sponsor held 8,525,000 Founder Shares.

~~129~~

In addition, our Sponsor purchased an aggregate of 5,933,333 private placement warrants for a purchase price of $1.50 per warrant in a private placement that closed simultaneously with the closing of this Initial Public Offering. As such, our Sponsor’ interest in this transaction is valued at approximately $8,900,000. Each ~~private placement warrant~~Private Warrant entitles the holder to purchase one ~~Class A common stock~~share of our Common Stock at ~~a price of~~ $11.50 per ~~share, subject to adjustment. The private placement warrants (including~~share. At the ~~Class A common stock issuable upon exercise~~closing of the ~~private placement warrants) may not, subject~~Business Combination, the Sponsor transferred and surrendered for no consideration 2,966,667 of its Private Placement Warrants. 2,966,666 Private Placement Warrants are outstanding at this time.

Related Party Notes

Prior to ~~certain limited exceptions, be transferred, assigned or sold by it until 30 days after~~FAII’s IPO, the ~~completion of our initial business combination.~~

~~The~~ Sponsor ~~had~~ loaned usFAII an aggregate of $97,250 to cover expenses related to ~~the Initial Public Offering~~FAII’s IPO pursuant to a promissory note. The ~~loan~~promissory note was non-interest bearing, unsecured and due on the earlier of April 30, 2021 orand the closing of the ~~Initial Public Offering. We~~FAII’s IPO. FAII repaid the promissory note in full on August 14, 2020.

Office Space and Related Support Services

WeOn August 14, 2020, FAII entered into an ~~Agreement~~agreement with an affiliate of ~~Fortress Acquisition~~ Sponsor ~~II, LLC, pursuant~~ to ~~which we~~ pay a ~~total~~monthly fee of $20,000 ~~per month~~ for office space and related support ~~services to such affiliate.~~services. Upon completion of ~~our initial business combination or our liquidation,~~the Business Combination, we ~~will cease~~ceased paying these monthly ~~fees.~~fees

PIPE Investment

~~Our Sponsor, officers and directors, or any of their respective affiliates, are reimbursed for any reasonable out-of-pocket expenses incurred in~~In connection with ~~activities on our behalf such~~the PIPE Investment and consummation of the Business Combination, the Sponsor purchased 7,500,000 shares of FAII Class A common stock at $10.00 per share for an aggregate purchase price of $75 million.

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Earnout Shares

After the consummation of the Business Combination, Wilco Acquisition, LP (the sole holder of the Company common stock as ~~identifying potential target businesses~~of the date of the Merger Agreement) or its designees will have the contingent right to receive Earnout Shares upon the terms and ~~performing due diligence on suitable business combinations. There~~subject to the conditions set forth in the Merger Agreement and the agreements contemplated thereunder in the amounts set forth below if the price targets set forth below are achieved any time between the closing and the date that is ~~no cap or ceiling~~ten years after the consummation of the Business Combination:

•in the event the dollar volume-weighted average price (“VWAP”) of one share of ATI Class A common stock as reported on the ~~reimbursement~~NYSE is greater than $12.00 for at least five days out of ~~reasonable out-of-pocket expenses incurred by such persons in connection with activities~~a period of ten consecutive trading days ending on ~~our behalf.~~the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock;

~~In order~~•in the event the VWAP of one share of ATI Class A common stock as reported on the NYSE is greater than $16.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to ~~finance transaction costs in connection with an intended initial business combination, our Sponsor or affiliates~~the date of ~~our Sponsor or certain~~determination, there will be a one-time issuance of ~~our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we would repay such loaned amounts.~~ 5,000,000 shares of ATI Class A common stock.

In the event that there is an agreement with respect to the ~~initial business combination does not close, we may use a portion~~sale or other change of control of ATI entered into after the closing and prior to the date that is ten years after the consummation of the ~~working capital held outside~~Business Combination, that will result in the ~~Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000~~holders of ~~such loans may be converted into warrants~~ATI Class A common stock receiving a per share price in excess of the ~~post business combination entity at a price of $1.50 per warrant at~~applicable VWAP set forth above, then the ~~option of the lender. The warrants would be identical to the private placement warrants issued to our Sponsor. The terms of such loans, if any,~~applicable Earnout Shares that have not been ~~determined and no written agreements exist with respect~~issued prior to the closing of such sale or change of control will be issued by ATI on the day prior to such ~~loans. We do~~sale or change of control. Following such sale or change of control, ATI and the surviving company will take proper provision to ensure that any Earnout Shares that have not ~~expect~~previously been issued will remain eligible to ~~seek loans from parties~~be paid through the date that is ten years after the consummation of the Business Combination.

If, after the closing and on or before the date that is ten years after the consummation of the Business Combination, the outstanding shares of ATI Class A common stock are changed into a different number or class of shares by reason of any merger, stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reorganization, reclassification, recapitalization or other ~~than our Sponsor or affiliates~~similar transaction, then the number of ~~our Sponsor as we do not believe third parties~~Earnout Shares to be issued pursuant to the Merger Agreement will be ~~willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.~~

~~130~~

After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders,adjusted to the extent ~~then known,~~appropriate to provide the same economic effect as contemplated by the Merger Agreement prior to such action.

Advent International Expense Reimbursements

We have reimbursed Wilco GP, Inc., which is affiliated with Advent, for expenses totaling approximately $174,547 for the period covering January 1, 2021 to December 31, 2021. The reimbursed expenses were incurred in the ~~tender offer or proxy solicitation materials, as applicable, furnished~~normal course of business and related to third-party expenses for board member search fees, the performance of proactive internal audit related to our ~~stockholders. It is unlikely the amount~~cybersecurity capabilities, travel expenses and external legal and consulting fees.

Procedures with Respect to Review and Approval of ~~such compensation will be known at the time of distribution of such tender offer materials or at the time of~~Related Party Transactions

We maintain a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.

Related Person ~~Transactions Policy~~

~~Prior to~~Transaction policy that sets forth the ~~Initial Public Offering, we had not yet adopted a formal policy~~following policies and procedures for the review and approval or ratification of related ~~party~~person transactions. ~~Accordingly, the transactions discussed above were not reviewed, approved or ratified in accordance with any such policy.~~

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~~We have adopted a Related Person Transactions Policy.~~ A ~~“related~~"related person ~~transaction”~~transaction" is a transaction, or arrangement or ~~series of transactions or arrangements~~relationship in which ~~we participate (whether~~ATI or ~~not we are~~any of its subsidiaries was, is or will be a ~~party)~~participant, involving an amount exceeding $120,000 and ain which any related person had, has or will have a direct or indirect material ~~interest in such transaction. Our audit committee will review and approve~~interest. A "related person" means:

•any person who is, or ~~ratify all relationships and related person transactions between us and (i) our directors, director nominees or~~at any time during the applicable period was, one of ATI's executive officers ~~(ii)~~ or a member of the Board;

•any ~~5% record or~~person who is known by ATI to be the beneficial owner of more than 5% of any class of our ~~common stock or (iii)~~ voting stock;

•any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, officer or a beneficial owner of more than 5% of our voting stock, and any person ~~specified~~(other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5% of our voting stock; and

•any firm, corporation or other entity in ~~(i)~~which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

We have also adopted policies and ~~(ii) above. The audit committee will~~procedures designed to minimize potential conflicts of interest arising from any dealings we may have with our affiliates and have appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time. Specifically, pursuant to our Second Amended and Restated Certificate of Incorporation, the Audit Committee has the responsibility to review ~~all~~ related person transactions and ~~where the audit committee determines that such transactions are in our best interests,~~will approve ~~such transactions in advance of such transaction being given effect.~~

As set forth in the Related Person Transactions Policy, in the course of its review and approval or ratification of a related party transaction, the audit committee will, in its judgment, consider in light of the relevant facts and circumstances whether the transaction is, or is not inconsistent with, our best interests, including consideration of various factors enumerated in the policy.

Any member of the audit committee who is a related person with respect to a transaction under review will not be permitted to participate in the discussions or approval or ratification of the transaction. Our policy also includes certain exceptions foronly those transactions that ~~need not be reported~~it determines are fair to us and ~~provides the audit committee with the discretion to pre-approve certain transactions.~~in ATI's best interests.

~~131~~

Director Independence

For information on director independence, see Item 10. Directors, Executive Officers and Corporate Governance.

The NYSE listing standards require that a majority of our board of directors be independent within one year of our initial public offering. An “independent director” is defined generally as a person that, in the opinion of the company’s board of directors, has no material relationship with the listed company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company). Upon the effectiveness of the registration statement of which this prospectus forms a part, we expect to have four “independent directors” as defined in the NYSE listing standards and applicable SEC rules. Our board of directors has determined that each of Mr. Hood, Mr. Policy, Ms. Russak-Aminoach and Mr. Gulati is independent under applicable SEC and NYSE rules.

Item 14. Principal ~~Accountant~~Accounting Fees and ~~Services.~~Services

~~Fees~~The following table shows the fees for professional services ~~provided~~rendered to us by PricewaterhouseCoopers LLP (“PwC”), our independent registered public accounting firm, ~~WithumSmith+Brown, PC "Withum" since inception include:~~for services in respect of the years ended December 31, 2021 and 2020:


	~~For the period from June 10, 2020 (inception) through December 31, 2020~~
~~Audit Fees (1)~~	$	~~96,305~~
~~Audit-Related Fees (2)~~	—
~~Tax Fees (3)~~	—
~~All Other Fees (4)~~	—
~~Total~~	$	~~96,305~~


	2021		2020
Audit Fees(1)	$	1,380,593	$	1,672,880
Audit Related Fees(2)	—		—
Tax Fees(3)	—		—
All Other Fees(4)	5,400		5,400
Total Fees	$	1,385,993	$	1,678,280

1.(1)~~Audit~~ Includes the aggregate fees ~~consist~~recognized in each of ~~fees billed~~the last two fiscal years for professional services rendered for the audit of ~~our~~the Company’s annual financial statements, reviews of financial statements, consents and other services related to SEC matters. The fees are for services that are normally provided ~~by Withum~~ in connection with statutory or regulatory filings. The aggregate fees billed by Withum for professional services rendered for the audit of our annual financial statements, the audits included in our registration statements on Form S-1 related to our Initial Public Offering, review of the quarterly financial information in our Form 10-Qs and other required filings ~~with the SEC.~~or engagements.

2.(2)~~Audit-related~~ Audit-Related Fees include fees ~~consist of fees billed~~ for assurance and related services that are reasonably related to the performance of the audit or review of ~~our year-end~~the Company's financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards. We did not pay Withum for consultations concerning financial accounting and reporting standards for the period from June 10, 2020 (inception) through December 31, 2020.statements.

3.(3)~~Tax~~ Includes the aggregate fees ~~consist~~recognized in each of ~~fees billed~~the last two fiscal years for professional services ~~relating to~~rendered for tax compliance, tax ~~planning~~advice and tax ~~advice. We did not pay Withum for~~planning.

(4) All Other Fees include fees for ~~professional services related to tax compliance, tax planning or tax advice for~~other permissible work that do not meet the ~~period from June 10, 2020 (inception) through December 31, 2020.~~

4.~~All other fees consist of fees billed for all other services. We did not pay Withum for other services for the period from June 10, 2020 (inception) through December 31, 2020.~~above category descriptions.

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In accordance with its charter, the Audit Committee approved in advance all audit services provided by the Company's independent registered public accounting firm for fiscal year 2021.

Pre-Approval Policy and Procedures

~~Policy on Board Pre-Approval of~~Consistent with SEC policies regarding auditor independence and the Audit ~~and Permissible Non-Audit Services of~~Committee’s charter, the ~~Independent Registered Public Accounting Firm~~

~~The audit committee is responsible~~Audit Committee has responsibility for ~~appointing,~~engaging, setting compensation for and ~~overseeing~~reviewing the ~~work~~performance of the independent registered public accounting firm. In ~~recognition of~~exercising this responsibility, the ~~audit committee shall review and, in its sole discretion, pre-approve~~Audit Committee pre-approves all audit and permitted non-audit services ~~to be~~ provided by ~~the~~any independent registered public accounting firm ~~as provided under the audit committee charter.~~prior to each engagement.

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PART IV

Item 15. Exhibits, Financial Statement ~~Schedules.~~Schedules

a.The ~~following documents are~~consolidated financial statements filed as part of this Annual Report on Form 10-K

1.~~Financial Statements: See “Index~~ are listed in the accompanying Index to ~~Financial Statements” at “Item 8.~~Consolidated Financial Statements on page 70. See page 160 for Schedule II - Valuation and ~~Supplementary Data” herein.~~

b.~~Financial Statement Schedules.~~Qualifying Accounts. All other schedules are omitted ~~for~~because of the ~~reason that~~absence of conditions under which they are required or because the required information is ~~included~~shown in the financial statements or ~~the~~ notes ~~thereto or that they are not required or are not applicable.~~

c.~~Exhibits:~~thereto. The exhibits ~~listed in the accompanying index to exhibits are~~ filed ~~or incorporated by reference~~ as a part of this Annual Report ~~on Form 10-K.~~are listed in the Exhibit Index below.

Exhibit
Number

Description

2.1

Agreement and Plan of Merger, dated as of February 21, 2021, by and among ~~the Company,~~Fortress Value Acquisition Corp. II, FVAC Merger Corp. II and Wilco Holdco, Inc. ~~(incorporated by reference to~~(filed as Exhibit 2.1 ofto the ~~Company’s~~ Current Report on Form 8-K ~~filed with~~of the ~~SEC~~Company on February 22, ~~2021).~~2021 and incorporated herein by reference)

3.1

Second Amended and Restated Certificate of Incorporation ~~(incorporated by reference to~~of ATI Physical Therapy, Inc. (filed as Exhibit 3.1 ofto the ~~Company’s~~ Current Report on Form 8-K ~~filed with~~of the ~~SEC~~Company on ~~August 17, 2020).~~June 23, 2021 and incorporated herein by reference)

~~3.3~~3.2

Amended and Restated Bylaws ~~(incorporated~~of ATI Physical Therapy, Inc. (filed as Exhibit 3.2 to the Current Report on Form 8-K of the Company on June 23, 2021 and incorporated herein by ~~reference to Exhibit 3.3 filed with the Form S-1 filed by the Registrant on July 24, 2020).~~reference)

~~4.1~~3.3

~~Specimen Unit~~ Certificate ~~(incorporated~~of Designation of Series A Senior Preferred Stock of ATI Physical Therapy, Inc., filed on February 24, 2022 (filed as Exhibit 3.1 to the Current Report on Form 8-K of the Company on February 25, 2022 and incorporated herein by ~~reference to Exhibit 4.1 filed with the Form S-1 filed by the Registrant on July 24, 2020).~~reference)

~~4.2~~4.1

Specimen Class A Common Stock Certificate ~~(incorporated by reference to~~(filed as Exhibit 4.2 ~~filed with~~to the Registration Statement on Form S-1 ~~filed by~~of the ~~Registrant~~Company on July 24, ~~2020).~~2020 and incorporated herein by reference)

~~4.3~~4.2

Specimen ~~Warrant~~Unit Certificate ~~(incorporated by reference~~(filed as Exhibit 4.1 to ~~Exhibit 4.~~4 ~~filed with~~ the Registration Statement on Form S-1 ~~filed by~~of the ~~Registrant~~Company on July 24, ~~2020).~~2020 and incorporated herein by reference)

~~4.4~~4.3

Warrant Agreement ~~dated August 11, 2020,~~ b ~~etweenthe~~ ~~Company~~ ~~and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.1 of the~~ ~~Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).~~

~~10.1~~

~~Promissory Note, dated June 15, 2020, issued Fortress Acquisition Sponsor II LLC (incorporated by reference to Exhibit 10.1 filed with the Form S-1 filed by the Registrant on July 24, 2020).~~

~~10.2~~

~~Investment Management Agreement, dated August 11, 2020,~~ between the Company and Continental Stock Transfer & Trust Company ~~(incorporated~~(filed as Exhibit 4.4 to the Registration Statement on Form S-1 on July 24, 2020 and incorporated herein by ~~reference~~reference)

4.4

Warrant Agreement, dated as of February 24, 2022, by and between ATI Physical Therapy, Inc. and Continental Stock Transfer & Trust Company, as Warrant Agent (filed as Exhibit 4.1 to ~~Exhibit 10.1 of~~ the ~~Company’s~~ Current Report on Form 8-K ~~filed with~~of the ~~SEC~~Company on ~~August 17, 2020).~~February 24, 2022 and incorporated herein by reference)

~~10.3~~4.5*

Description of Securities

10.1

Form of Subscription Agreement (filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company on February 22, 2021 and incorporated herein by reference)

10.2

Parent Sponsor Letter Agreement, dated as of February 21, 2021, by and among Fortress Value Acquisition Corp. II, Fortress Acquisition Sponsor II LLC, Wilco Holdco, Inc. and the other parties thereto (filed as Exhibit 10.2 to the Current Report on Form 8-K of the Company of February 22, 2021 and incorporated herein by reference)

10.3

Stockholders Agreement dated February 21, 2021, by and among the Fortress Value Acquisition Corp. II and the other parties thereto (filed as Exhibit 10.3 to the Current Report on Form 8-K of the Company on February 22, 2021 and incorporated herein by reference)

10.4

Amended and Restated Registration Rights Agreement, dated ~~August 11, 2020,~~as of February 21, 2021, by and among ~~the Company,~~Fortress Value Acquisition Corp. II, Fortress Acquisition Sponsor II LLC and ~~certain~~the other ~~security holders named therein (incorporated~~ ~~by reference~~parties thereto (filed as Exhibit 10.4 to ~~Exhibit 10.2 of~~ the ~~Company’s~~ Current Report on Form 8-K ~~filed with~~of the ~~SEC~~Company on ~~August 17, 2020).~~June 23, 2021 and incorporated herein by reference)

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~~10.4~~10.5						~~Private Placement Warrants Purchase~~First Amendment to Amended and Restated Registration Rights Agreement, dated ~~August 11, 2020, between the Company~~as of June 16, 2021, by and among Fortress Value Acquisition Corp. II, Fortress Acquisition Sponsor II LLC ~~(incorporated by reference~~and the other parties thereto (filed as Exhibit 10.5 to ~~Exhibit 10.3 of~~ the ~~Company’s~~ Current Report on Form 8-K ~~filed with~~of the ~~SEC~~Company on ~~August 17, 2020).~~June 23, 2021 and incorporated herein by reference)

~~10.5~~10.6†						ATI Physical Therapy 2021 Equity Incentive Plan (filed as Annex L to the Definitive Proxy Statement of the Company filed on May 14, 2021 and incorporated herein by reference)
~~Administrative Services~~10.7						Form of Indemnity Agreement ~~dated August 11, 2020, between~~(filed as Exhibit 10.17 to the ~~Company and FIG LLC (incorporated by reference to Exhibit 10.4 of the Company’s~~ Current Report on Form 8-K ~~filed with~~of the ~~SEC~~Company on ~~August 17, 2020).~~June 23, 2021 and incorporated herein by reference)

~~10.6~~10.8†						~~Letter~~Employment Agreement, dated ~~August 11, 2020, by~~as of February 21, 2021, between Fortress Value Acquisition Corp. II and ~~between the Company and each of its officers and directors, and Fortress Acquisition Sponsor II LLC (incorporated by reference to~~Labeed S. Diab (filed as Exhibit 10.5 ofto the ~~Company’s~~ Current Report on Form 8-K of the Company on February 22, 2021 and incorporated herein by reference)
10.9†						Mutual Release, dated as of August 7, 2021, by and between ATI Physical Therapy, Inc. and Labeed Diab (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q of the Company on November 17, 2021 and incorporated herein by reference)
10.1 0†						Employment Agreement, dated as of February 21, 2021, between Fortress Value Acquisition Corp. II and Joseph Jordan (filed as Exhibit 10.6 to the Current Report on Form 8-K of the Company on February 22, 2021 and incorporated herein by reference)
10.11†						Employment Agreement, dated as of May 14 2021, between Fortress Value Acquisition Corp. II and Ray Wahl (filed as Annex J to the Definitive Proxy Statement of the Company filed ~~with~~on May 14, 2021 and incorporated herein by reference)
10.12†						Employment Agreement, dated as of May 14, 2021 between Fortress Value Acquisition Corp. II and Cedric Coco (filed as Annex K to the ~~SEC~~Definitive Proxy Statement of the Company filed on ~~August~~May 14, 2021 and incorporated herein by reference)
10.13†						Mutual Release, dated as of July 25, 2021 by and between ATI Physical Therapy, Inc. and Cedric Coco (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company on November 17, ~~2020).~~2021 and incorporated herein by reference)
10.1 4†*						Employment Agreement, dated as of May 14 2021, between Fortress Value Acquisition Corp. II and Diana Chafey
10.1 5†*						Employment Agreement, dated as of May 14 2021, between Fortress Value Acquisition Corp. II and Joseph Zavalishin
10.16†*						Employment Agreement, dated as of May 14 2021, between Fortress Value Acquisition Corp. II and Augustus Oakes
10.1 7						First Lien Credit Agreement, dated as of May 10, 2016, by and among, inter alios, ATI Holdings Acquisition, Inc., as borrower, the lenders from time to time party thereto and Barclays Bank PLC as administrative agent (filed as Exhibit 10.6 to the Current Report on Form 8-K of the Company on June 23, 2021 and incorporated herein by reference)
10.1 8						First Amendment to First Lien Credit Agreement, dated as of December 13, 2016, by and among, inter alios, ATI Holdings Acquisition, Inc., as borrower, the lenders from time to time party thereto and Barclays Bank PLC as administrative agent (filed as Exhibit 10.7 to the Current Report on Form 8-K of the Company on June 23, 2021 and incorporated herein by reference)

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10.1 9						Second Amendment to First Lien Credit Agreement, dated as of June 29, 2017, by and among, inter alios, ATI Holdings Acquisition, Inc., as borrower, the lenders from time to time party thereto and Barclays Bank PLC as administrative agent (filed as Exhibit 10.8 to the Current Report on Form 8-K of the Company on June 23, 2021 and incorporated herein by reference)
10.20						Third Amendment to First Lien Credit Agreement, dated as of August 16, 2017, by and among, inter alios, ATI Holdings Acquistion, Inc., as borrower, the lenders from time to time party thereto and Barclays Bank PLC as administrative agent (filed as Exhibit 10.9 to the Current Report on Form 8-K of the Company on June 23, 2021 and incorporated herein by reference)
10.2 1						Fourth Amendment to First Lien Credit Agreement, dated as of August 16, 2017, by and among, inter alios, ATI Holdings Acquisition, Inc., as borrower, the lenders from time to time party thereto and Barclays Bank PLC as administrative agent (filed as Exhibit 10.10 to the Current Report on Form 8-K of the Company on June 23, 2021 and incorporated herein by reference)
10.2 2						Fifth Amendment to First Lien Credit Agreement, dated as of October 2, 2018, by and among, inter alios, ATI Holdings Acquisition, Inc., as borrower, the lenders from time to time party thereto and Barclays Bank PLC as administrative agent (filed as Exhibit 10.11 to the Current Report on Form 8-K of the Company on June 23, 2021 and incorporated herein by reference)
10.2 3						Credit Agreement, dated as of February 24, 2022, by and among ATI Holdings Acquisition, Inc., Wilco Intermediate Holdings, Inc., Barclays Bank PLC, as Administrative Agent and Issuing Bank and the other lenders party thereto (filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company on February 25, 2022 and incorporated herein by reference)
10.2 4						Series A Senior Preferred Stock Purchase Agreement, dated as of February 24, 2022, by and between ATI Physical Therapy, Inc. and the Purchasers signatory thereto (filed as Exhibit 10.2 to the Current Report on Form 8-K of the Company on February 25, 2022 and incorporated herein by reference)
10.2 5						Investors’ Rights Agreement, dated as of February 24, 2022, by and among ATI Physical Therapy, Inc. and the Holders party thereto from time to time (filed as Exhibit 10.3 to the Current Report on Form 8-K of the Company on February 25, 2022 and incorporated herein by reference)
16.1						Letter from WithumSmith+Brown, PC to the SEC (filed as Exhibit 16.1 to the Current Report on Form 8-K of the Company on June 23, 2021 and incorporated herein by reference).
21.1*						Subsidiaries of the Registrant
23.1*						Consent of PricewaterhouseCoopers LLP
31.1*						Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15(d)-14(a) under the Securities Exchange Act of 1934, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*						Certification of Principal Operations Officer pursuant to Rules 13a-14(a) and 15(d)-14(a) under the Securities Exchange Act of 1934, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*						Certification of Principal Executive Officer, Principal Financial Officer, and Principal Operations Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						XBRL Instance Document

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~~10.7~~101.SCH*						Indemnity Agreement, dated August 11, 2020, between the Company and Joshua A. Pack (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).XBRL Taxonomy Extension Schema Document

~~10.8~~101.CAL*						Indemnity Agreement, dated August 11, 2020, between the Company and Andrew A. McKnight (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).XBRL Taxonomy Extension Calculation Linkbase Document

~~10.9~~101.DEF*						Indemnity Agreement, dated August 11, 2020, between the Company and Daniel N. Bass (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).XBRL Taxonomy Extension Definition Linkbase Document

~~10.10~~101.LAB*						Indemnity Agreement, dated August 11, 2020, between the Company and Micah B. Kaplan (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).XBRL Taxonomy Extension Label Linkbase Document

~~10.11~~101.PRE*						Indemnity Agreement, dated August 11, 2020, between the Company and Alexander P. Gillette (incorporated by reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).XBRL Taxonomy Extension Presentation Linkbase Document

~~10.12~~						~~Indemnity Agreement, dated August 11, 2020, between the Company and Marc~~ F ~~urstein(incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).~~

~~10.13~~						Indemnity Agreement, dated August 11, 2020, between the Company and Leslee Cowen (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).

~~10.14~~						Indemnity Agreement, dated August 11, 2020, between the Company and Aaron F. Hood (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).

~~10.15~~						Indemnity Agreement, dated August 11, 2020, between the Company and Carmen A. Policy (incorporated by reference to Exhibit 10.14 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).

~~10.16~~						Indemnity Agreement, dated August 11, 2020, between the Company and Rakefet Russak-Aminoach (incorporated by reference to Exhibit 10.15 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).

~~10.17~~						Indemnity Agreement, dated August 11, 2020, between the Company and Sunil Gulati (incorporated by reference to Exhibit 10.16 of the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2020).

~~10.18~~						Securities Subscription Agreement, dated June 15, 2020, between the Company and Fortress Acquisition Sponsor II LLC (incorporated by reference to Exhibit 10.5 filed with the Form S-1 filed by the Registrant on July 24, 2020).

~~10.19~~						~~Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 22, 2021).~~

~~10.20~~						Parent Sponsor Letter Agreement, dated as of February 21, 2021, by and among the Company, Fortress Acquisition Sponsor II LLC, Wilco Holdco, Inc. and the other parties thereto (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on February 22, 2021).

~~10.21~~						Stockholders Agreement, dated as of February 21, 2021, by and among the Company and the other parties thereto (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on February 22, 2021).

~~10.22~~						Amended and Restated Registration Rights Agreement, dated as of February 21, 2021, by and among the Company, Fortress Acquisition Sponsor II LLC and the other parties thereto (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on February 22, 2021).

~~10.23~~						Employment Agreement between the Company and Labeed S. Diab, dated as of February 21, 2021 (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on February 22, 2021).

~~10.24~~						Employment Agreement between the Company and Joseph Jordan, dated as of February 21, 2021 (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on February 22, 2021).

* Filed or furnished herewith

† Management contract or compensatory plan or arrangement

~~135~~

Schedule II - Valuation and Qualifying Accounts


$ in thousands	Balance at Beginning of Year	Additions	Deductions/ Adjustments	Balance at End of Year
Year ended December 31, 2021
Allowance for doubtful accounts (1)	69,693	16,369	(32,529)	53,533
Valuation allowance for deferred tax assets (2)	22,581	35,731	—	58,312
Year ended December 31, 2020
Allowance for doubtful accounts (1)	80,350	16,231	(26,888)	69,693
Valuation allowance for deferred tax assets (3)	23,562	—	(981)	22,581
Year ended December 31, 2019
Allowance for doubtful accounts (1)	77,115	22,191	(18,956)	80,350
Valuation allowance for deferred tax assets (4)	58,505	—	(34,943)	23,562

(1) The additions to the allowance for doubtful accounts represent the provision for doubtful accounts that is recorded based upon the Company's evaluation of the collectability of accounts receivable. Deductions/Adjustments are primarily related to actual write-offs of receivables and other adjustments.


~~24.1~~(2) The increase in the valuation allowance for deferred tax assets is primarily related to an increase in net operating loss carryforwards not expected to be realized prior to expiration. Refer to Note 16 - Income Taxes in the consolidated financial statements included in Part II, Item 8, of this Form 10-K for further details.						~~Power of Attorney (included on signature page of this Annual Report).~~

~~31.1~~						~~Certification of~~ ~~Principal~~ ~~Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~						~~Certification of~~ Pr ~~incipal~~ ~~Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~						~~Certification of~~ ~~Principal~~ ~~Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~						~~Certification of~~ ~~Principal~~ ~~Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101~~						The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Balance Sheet; (ii) Statement of Operations; (iii) Statement of Changes in Stockholders’ Equity; (iv) Statement of Cash Flows; and (v) Notes to Financial Statements

~~104~~						~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)~~

(3) The decrease in the valuation allowance for deferred tax assets is primarily related to removal of valuation allowance on net loss carryforwards due to current period taxable income.

(4) The decrease in the valuation allowance for deferred tax assets is primarily related to the removal of both U.S. federal and state valuation allowance on net operating loss carryforwards based on operating performance and the expectation of future taxable income.

Item 16. Form 10-K Summary

None.

~~136~~160

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SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, in New York City, New York, on the 8th day of March, 2021.

~~Fortress Value Acquisition Corp. II~~


~~By:~~			~~/s/ Andrew A. McKnight~~
			~~Name: Andrew A. McKnight~~
			~~Title: Chief Executive Officer~~

~~POWER OF ATTORNEY~~

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Andrew A. McKnight and Daniel N. Bass and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of ~~1933, as amended,~~1934, the registrant has duly caused this ~~Annual Report~~report to be signed on our behalf by the undersigned thereunto duly authorized.

ATI PHYSICAL THERAPY, INC.

Date:March 1, 2022


/s/ JOSEPH JORDAN
Joseph Jordan
Chief Financial Officer

161

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities ~~and on the dates indicated.~~as of March 1, 2022.

/s/ JOHN (JACK) LARSEN

Executive Chairman
(member of leadership team fulfilling the role of Principal Executive Officer)

John (Jack) Larsen

~~Name~~/s/ JOSEPH JORDAN

Chief Financial Officer

(Principal Financial Officer and member of leadership team fulfilling the role of Principal Executive Officer)

~~Position~~Joseph Jordan

~~Date~~

/s/ RAY WAHL

Chief Operating Officer
(member of leadership team fulfilling the role of Principal Executive Officer)

Ray Wahl

/s/ BRENT RHODES

Chief Accounting Officer
(Principal Accounting Officer)

Brent Rhodes

/s/ JOHN MALDONADO

Director

John Maldonado

/s/ ~~Andrew A. McKnight~~CARMINE PETRONE

~~Chief Executive Officer,~~ Director

Carmine Petrone

/s/ JOANNE M. BURNS

~~March 8, 2021~~Director

Joanne M. Burns

/s/ JAMES E. PARISI

Director

James E. Parisi

/s/ ANDREW A. MCKNIGHT

Director

Andrew A. McKnight

/s/ ~~Daniel N. Bass~~

~~Chief Financial Officer~~

~~March 8, 2021~~

~~Daniel N. Bass~~

~~/s/ Joshua A. Pack~~

~~Chairman~~

~~March 8, 2021~~

~~Joshua A. Pack~~

~~/s/ Marc Furstein~~TERESA SPARKS

Director

~~March 8, 2021~~

~~Marc Furstein~~Teresa Sparks

~~/s/ Leslee Cowen~~

~~Director~~

~~March 8, 2021~~

~~Leslee Cowen~~

~~/s/ Aaron F. Hood~~

~~Director~~

~~March 8, 2021~~

~~Aaron F. Hood~~

Director

~~Carmen A. Policy~~

~~Director~~

~~Rakefet Russak-Aminoach~~

~~Director~~

~~Sunil Gulati~~Daniel Dourney

162


Delaware						85-1408039
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification ~~No.)~~
~~or organization)~~						Number)


☒~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934~~			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Total Number of Shares Purchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans of Programs
October 1 - October 31, 2021	—	$	—	—	—
November 1 - November 30, 2021	3,931	$	3.60	—	—
December 1 - December 31, 2021	25,860	$	3.14	—	—
Total	29,791	$	3.20	—	—