first quarter

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~Washington,~~WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2020~~2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File ~~No.~~ Number: 001-39314

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

TALKSPACE, INC.

(Exact ~~name~~Name of ~~registrant~~Registrant as ~~specified~~Specified in its ~~charter)~~Charter)


Delaware		84-4636604
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
622 Third Avenue, New York, New York	10017
(Address of principal executive offices)	(Zip Code)

~~570 Lexington Avenue, 35~~^th ~~Floor~~(212) 284-7206

~~New York, New York 10022~~

~~(Address of Principal Executive Offices, including zip code)~~

~~(212)~~ ~~521-8495~~

(Registrant’s telephone number, including area code)

N/A

~~N/A~~

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

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
~~Units, each consisting of one share of Class A common stock and~~ ~~one-half~~ ~~of one redeemable warrant~~	~~HECCU~~	~~The Nasdaq Stock Market LLC~~
~~Class A common~~ Common stock, par value $0.0001 per share	~~HEC~~ TALK	~~The~~ Nasdaq Stock Market
Warrants to purchase common stock	TALKW	Nasdaq Stock Market ~~LLC~~
~~Warrants, each whole warrant exercisable for one share of Class A common stock, each at an exercise price of $11.50 per share~~	~~HECCW~~	~~The Nasdaq Stock Market LLC~~

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ ☒ No ☒☐

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


Large accelerated filer	☐	Accelerated filer	☐ ☒

Non-accelerated filer	☒ ☐	Smaller reporting company	☒

		Emerging growth company	☒ ☐

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

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

As of ~~August 14, 2020, 41,400,000 Class A ordinary~~July 28, 2023, the registrant had 166,510,245 shares of common stock, $0.0001 par value ~~and 10,350,000 Class B ordinary shares, $0.0001 par value, were issued and~~per share, outstanding.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~Quarterly Report on Form~~ ~~10-Q~~

Table of Contents

~~TABLE OF CONTENTS~~Table of Contents


				~~Page~~
~~PART 1 – FINANCIAL INFORMATION~~

		Page
PART I.	FINANCIAL INFORMATION
Item 1.		~~Unaudited Condensed~~ Financial Statements (Unaudited)			1	3

		~~Unaudited~~ Condensed Consolidated Balance ~~Sheet~~Sheets as of June 30, ~~2020~~2023 (unaudited) and December 31, 2022			1	3
	Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2023 and 2022	4
		~~Unaudited~~ Condensed ~~Statement~~Consolidated Statements of ~~Operations~~Stockholder’s Equity (unaudited) for the ~~Three Months Ended~~three and six months ended June 30, ~~2020~~2023 and ~~for the Period from February 6, 2020 (Inception) Through June 30, 2020~~2022			2	5

		~~Unaudited~~ Condensed ~~Statement of Changes in Stockholders’ Equity for the Three Months Ended June 30, 2020 and for the Period from February 6, 2020 (Inception) Through June 30, 2020~~			3

		~~Unaudited Condensed Statement~~Consolidated Statements of Cash Flows (unaudited) for the ~~Period from February 6, 2020 (Inception) Through~~six months ended June 30, ~~2020~~2023 and 2022			4

		~~Notes to Condensed Financial Statements~~6			5

~~Item 2.~~		Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
			14
Item 3.		Quantitative and Qualitative Disclosures ~~about~~About Market Risk			18
			22
Item 4.		~~Control~~Controls and Procedures			18
			23
PART ~~II –~~ II.	OTHER INFORMATION

Item 1.		Legal Proceedings			19
			24
Item 1A.		Risk Factors			19
			24
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			19
			24
Item 3.		Defaults Upon Senior Securities			20
			24
Item 4.		Mine Safety Disclosures			20
			24
Item 5.		Other Information			20
			24
Item 6.		Exhibits			20
			25
~~SIGNATURES~~Signatures				21

~~PART 1 – FINANCIAL INFORMATION~~

~~ITEM 1.~~

~~CONDENSED FINANCIAL STATEMENTS~~26

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
TALKSPACE, INC.

CONDENSED CONSOLIDATED BALANCE ~~SHEET~~SHEETS

~~JUNE 30, 2020~~


	June 30, 2023			December 31, 2022
(U.S. dollars in thousands, except share and per share data)	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	126,104		$	138,545
Accounts receivable, net		8,420			9,640
Other current assets		2,920			4,372
Total current assets		137,444			152,557
Property and equipment, net		456			677
Intangible assets, net		2,157			2,529
Other long-term assets		464			491
Total assets	$	140,521		$	156,254
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	5,484		$	6,461
Deferred revenues		3,683			4,355
Accrued expenses and other current liabilities		10,444			16,502
Total current liabilities		19,611			27,318
Warrant liabilities		820			939
Other long-term liabilities		295			461
Total liabilities		20,726			28,718
Commitments and contingencies (Note 5)
STOCKHOLDERS’ EQUITY:
Common stock of $0.0001 par value — Authorized: 1,000,000,000 shares at June 30, 2023 and December 31, 2022; Issued and outstanding: 166,204,295 and 161,155,030 shares at June 30, 2023 and December 31, 2022, respectively		16			16
Additional paid-in capital		384,443			378,722
Accumulated deficit		(264,664	)		(251,202	)
Total stockholders’ equity		119,795			127,536
Total liabilities and stockholders’ equity	$	140,521		$	156,254

~~(Unaudited)~~

ASSETS

Current assets

Cash
   $ 1,505,028
Prepaid expenses
   174,508


Total Current Assets
   1,679,536
Cash and marketable securities held in trust account
   414,027,563


Total Assets
   $ 415,707,099


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accrued expenses
   $ 76,666
Accrued offering costs
   225,000


Total Current Liabilities
   301,666
Deferred underwriting fee payable
   14,490,000


Total Liabilities
   14,791,666


Commitments and contingencies

Class A common stock subject to possible redemption, 39,591,543 shares at $10.00 per share redemption value
   395,915,430
Stockholders’ Equity

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding
   —
Class A common stock, $0.0001 par value; 380,000,000 shares authorized; 1,808,457 shares issued and outstanding (excluding 39,591,543 shares subject to possible redemption)
   181
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 10,350,000 shares issued and outstanding
   1,035
Additional paid-in capital
   5,035,172
Accumulated deficit
   (36,385 )


Total Stockholders’ Equity
   5,000,003


Total Liabilities and Stockholders’ Equity
   $ 415,707,099

The accompanying notes are an integral part of the ~~unaudited~~ condensed consolidated financial statements.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

Table of Contents
TALKSPACE, INC.

CONDENSED ~~STATEMENT~~CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months
Ended
June 30,

For the
Period from
February 6,
2020
(Inception)
Through
June 30,

   2020 2020
General and administrative expenses
   $ 62,948 $ 63,948


Loss from operations
   (62,948 ) (63,948 )
Other income:

Interest earned on marketable securities held in trust account
   27,563 27,563


Loss before provision for income taxes
   (35,385 ) (36,385 )
Provision for income taxes
   —   —


Net loss
   $ (35,385 ) $ (36,385 )


Weighted average shares outstanding of Class A redeemable common stock
   41,400,000 41,400,000


Basic and diluted income per share, Class A
   $ —   $ —


Weighted average shares outstanding of Class B non-redeemable common stock
   10,350,000 10,350,000


Basic and diluted net loss per share, Class B
   $ (0.00 ) (0.00 )


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(U.S. dollars in thousands, except share and per share data)	2023			2022			2023			2022
Revenues	$	35,645		$	29,844		$	68,981		$	59,994
Cost of revenues		17,833			15,297			34,421			30,426
Gross profit		17,812			14,547			34,560			29,568
Operating expenses:
Research and development, net		4,171			5,576			9,524			10,611
Clinical operations, net		1,675			2,316			3,276			4,092
Sales and marketing		13,045			18,931			26,514			40,339
General and administrative		5,329			8,792			10,693			16,802
Total operating expenses		24,220			35,615			50,007			71,844
Operating loss		(6,408	)		(21,068	)		(15,447	)		(42,276	)
Financial (income) expense, net		(1,712	)		1,865			(2,136	)		996
Loss before taxes on income		(4,696	)		(22,933	)		(13,311	)		(43,272	)
Taxes on income		8			89			151			110
Net loss	$	(4,704	)	$	(23,022	)	$	(13,462	)	$	(43,382	)
Net loss per share:
Basic and Diluted	$	(0.03	)	$	(0.15	)	$	(0.08	)	$	(0.28	)
Weighted average number of common shares used in computing basic and diluted net loss per share:
Basic and Diluted		164,195,697			155,709,901			163,003,363			154,901,165

The accompanying notes are an integral part of the ~~unaudited~~ condensed consolidated financial statements.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

Table of Contents
TALKSPACE, INC.

CONDENSED ~~STATEMENT~~CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

~~FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND~~(Unaudited)

~~FOR THE PERIOD FEBRUARY 6, 2020 (INCEPTION) THROUGH JUNE 30, 2020~~



(U.S. dollars in thousands, except share data)	Common Stock
Three and Six Months Ended June 30, 2023	Number of Shares Outstanding		Amount		Additional paid-in capital			Accumulated deficit			Total
Balance as of December 31, 2022		161,155,030	$	16	$	378,722		$	(251,202	)	$	127,536
Exercise of stock options		1,739,265	*)			621			—			621
Restricted stock units vested, net of tax		225,050	*)			(65	)		—			(65	)
Stock-based compensation		—		—		2,303			—			2,303
Net loss		—		—		—			(8,758	)		(8,758	)
Balance as of March 31, 2023 (unaudited)		163,119,345	$	16	$	381,581		$	(259,960	)	$	121,637
Exercise of stock options		1,837,734	*)			869			—			869
Restricted stock units vested, net of tax		1,247,216	*)			(136	)		—			(136	)
Stock-based compensation		—		—		2,129			—			2,129
Net loss		—		—		—			(4,704	)		(4,704	)
Balance as of June 30, 2023 (unaudited)		166,204,295	$	16	$	384,443		$	(264,664	)	$	119,795

	Common Stock
Three and Six Months Ended June 30, 2022	Number of Shares Outstanding		Amount		Additional paid-in capital			Accumulated deficit			Total
Balance as of December 31, 2021		152,862,447	$	15	$	363,788		$	(171,530	)	$	192,273
Exercise of stock options		2,164,870	*)			2,063			—			2,063
Restricted stock units vested, net of tax		77,338	*)			(67	)		—			(67	)
Stock-based compensation		—		—		2,368			—			2,368
Net loss		—		—		—			(20,360	)		(20,360	)
Balance as of March 31, 2022 (unaudited)		155,104,655	$	15	$	368,152		$	(191,890	)	$	176,277
Exercise of stock options		1,092,515	*)			286			—			286
Restricted stock units vested, net of tax		1,175,446	*)			(126	)		—			(126	)
Stock-based compensation		—		—		3,839			—			3,839
Net loss		—		—		—			(23,022	)		(23,022	)
Balance as of June 30, 2022 (unaudited)		157,372,616	$	15	$	372,151		$	(214,912	)	$	157,254

*) Represents an amount lower than $1

~~(Unaudited)~~

   Class A
Common Stock Class B
Common Stock
Additional
Paid-in
Accumulated
Total
Stockholders’

   Shares Amount Shares    Amount    Capital Deficit Equity
Balance – February 6, 2020 (Inception)
   —   $ —   —      $ —      $ —   $ —   $ —
Issuance of Class B common stock to Sponsor
   —   —   10,350,000    1,035    23,965 —   25,000
Net loss
   —   —   —      —      —   (1,000 ) (1,000 )






Balance – March 31, 2020
   —   —   10,350,000    1,035    23,965 (1,000 ) 24,000
Sale of 41,400,000 Units, net of underwriting discounts
   41,400,000 4,140 —      —      390,642,678 —   390,646,818
Sale of 10,280,000 Private Placement Warrants
   —   —   —      —      10,280,000 —   10,280,000
Common stock subject to possible redemption
   (39,591,543 ) (3,959 ) —      —      (395,911,471 ) —   (395,915,430 )
Net loss
   —   —   —      —      —   (35,385 ) (35,385 )






Balance – June 30, 2020
   1,808,457 $ 181 10,350,000    $ 1,035    $ 5,035,172 $ (36,385 ) $ 5,000,003

The accompanying notes are an integral part of the ~~unaudited~~ condensed consolidated financial statements.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~Table of Contents

TALKSPACE, INC.

CONDENSED ~~STATEMENT~~CONSOLIDATED STATEMENTS OF CASH FLOWS

~~FOR THE PERIOD FEBRUARY 6, 2020 (INCEPTION) THROUGH JUNE 30, 2020~~(Unaudited)

~~(Unaudited)~~


	Six Months Ended June 30,
(U.S. dollars in thousands)	2023			2022
Cash flows from operating activities:
Net loss	$	(13,462	)	$	(43,382	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		608			697
Stock-based compensation		4,432			6,207
Remeasurement of warrant liabilities		(119	)		1,217
Decrease (increase) in accounts receivable		1,220			(1,650	)
Decrease in other current assets		1,452			5,622
(Decrease) increase in accounts payable		(977	)		381
Decrease in deferred revenues		(672	)		(1,236	)
Decrease in accrued expenses and other current liabilities		(6,058	)		(1,145	)
Other		(172	)		178
Net cash used in operating activities		(13,748	)		(33,111	)
Cash flows from investing activities:
Purchase of property and equipment		(10	)		(160	)
Proceeds from sale of property and equipment		28			—
Net cash provided by (used in) investing activities		18			(160	)
Cash flows from financing activities:
Proceeds from exercise of stock options		1,490			2,349
Payments for employee taxes withheld related to vested stock-based awards		(201	)		(67	)
(Payments) proceeds from reverse capitalization, net of transaction costs		—			(645	)
Net cash provided by financing activities		1,289			1,637
Net decrease in cash and cash equivalents		(12,441	)		(31,634	)
Cash and cash equivalents at the beginning of the period		138,545			198,256
Cash and cash equivalents at the end of the period	$	126,104		$	166,622
Supplemental cash flow data:
Cash paid during the period for income taxes	$	176		$	97

Cash Flows from Operating Activities:

Net loss
   $ (36,385 )
Adjustments to reconcile net loss to net cash used in operating activities:

Interest earned on marketable securities held in trust account
   (27,563 )
Formation costs paid by Sponsor
   2,125
Changes in operating assets and liabilities:

Prepaid expenses
   (174,508 )
Accrued expenses
   76,666


Net cash used in operating activities
   (159,665 )


Cash Flows from Investing Activities:

Investment of cash into Trust Account
   (414,000,000 )


Net cash used in investing activities
   (414,000,000 )


Cash Flows from Financing Activities:

Proceeds from sale of Units, net of underwriting discounts paid
   405,720,000
Proceeds from sale of Private Placement Warrants
   10,280,000
Repayment of promissory note – related party
   (129,606 )
Payment of offering costs
   (205,701 )


Net cash provided by financing activities
   415,664,693


Net Change in Cash
   1,505,028
Cash – Beginning of period
   —


Cash – End of period
   $ 1,505,028


Non-Cash financing activities:

Initial classification of common stock subject to possible redemption
   $ 395,946,830


Change in value of common stock subject to possible redemption
   $ (31,400 )


Deferred underwriting fee payable
   $ 14,490,000


Deferred offering costs paid directly by Sponsor in consideration for the issuance of Class B common stock
   $ 25,000


Deferred offering costs included in accrued offering costs
   $ 225,000


Payment of offering costs through promissory note — related party
   $ 127,481

The accompanying notes are an integral part of the ~~unaudited~~ condensed consolidated financial statements.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~Table of Contents

TALKSPACE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~JUNE 30, 2020~~(Unaudited)

~~(Unaudited)~~

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

~~Hudson Executive Investment Corp. (the~~

Talkspace, Inc. (together with its consolidated subsidiaries, the “Company” or “Talkspace”) ~~was incorporated in Delaware on February 6, 2020.~~is a leading behavioral healthcare company enabled by a purpose-built technology platform. Talkspace provides individuals and licensed therapists, psychologists and psychiatrists with an online platform for one-on-one therapy delivered via messaging, audio and video. The Company ~~was formed~~offers convenient and affordable access to a fully credentialed network of highly qualified providers. Since its inception, the Company has connected millions of patients with licensed behavioral health providers across a wide and growing spectrum of care through virtual counseling, psychotherapy, and psychiatry.

The Company's principal executive office is located in New York, NY. The Company has three wholly owned subsidiaries, Talkspace LLC, Talkspace Network LLC and Groop Internet Platform LTD. In addition, the Company holds a variable interest in one professional association and six professional corporations, which have been established pursuant to the requirements of their respective domestic jurisdiction governing the corporate practice of medicine. See Note 10, “Variable Interest Entities,” in these notes to the condensed consolidated financial statements for further details.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the ~~purpose~~interim periods presented. The Company’s interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These condensed consolidated financial statements should be read in conjuction with the consolidated financial statements as of ~~entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination~~and for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2022, have been applied consistently in these unaudited condensed consolidated financial statements, unless otherwise stated.

Intercompany transactions and balances have been eliminated in the preparation of the condensed consolidated financial statements.

Use of estimates

The preparation of financial statements in conformity with ~~one or more businesses (the “Business Combination”).~~

U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the condensed consolidated financial statements. The ~~Company is~~Company’s significant estimates and assumptions used in these condensed consolidated financial statements include, but are not limited to, ~~a particular industry or sector for purposes~~the recognition and disclosure of ~~consummating a Business Combination.~~contingent liabilities, revenue recognition, stock-based compensation awards and the fair value of warrant liabilities. The Company bases its estimates on historical factors, current circumstances and the experience and judgment of management. The Company evaluates its assumptions on an ongoing basis. The Company’s management believes that the estimates, judgments, and assumptions used are reasonable based on information available at the time they are made. Estimates, by their nature, are based on judgment and available information, therefore, actual results could be materially different from these estimates.

Reclassification

Certain prior year amounts have been reclassified to conform to current year presentation.

Recently Issued and Adopted Accounting Pronouncements

The Company has reviewed recent accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is ~~an early stage and emerging growth company and,~~expected on the condensed consolidated financial statements as ~~such,~~a result of their future adoption.

Table of Contents

NOTE 3. REVENUE RECOGNITION

The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers”, when the Company satisfies its performance obligation to perform its defined contractual obligations to provide virtual behavioral healthcare services. Revenue is ~~subject~~recognized in an amount that reflects the consideration that the Company will be entitled in exchange for the service rendered. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that is included in the transaction price. Variable consideration is included in the transaction price to ~~all~~the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the ~~risks~~uncertainty associated with ~~early stage~~the variable consideration is subsequently resolved.

Through its platform, Talkspace serves its business-to-business (“B2B”) channel, comprised of large health insurance plans and ~~emerging growth companies.~~

~~All activity for the period from February 6, 2020 (inception) through June 30, 2020 relates~~employee assistance programs (“Payors”), and large enterprise clients (“DTE”) who offer their insured members and employees access to the ~~Company’s formation,~~Company's platform at in-network reimbursement rates, or while their employer is under an active contract with Talkspace, where applicable, and its ~~initial public offering~~business-to-consumer (“~~Initial Public Offering”~~Consumer”)~~, which is described below, and identifying a target company for a Business Combination.~~ channel, comprised of individual consumers who subscribe directly to the Company's platform.

The Company ~~will not generate any operating revenues until after the completion of~~contracts with Payors to provide its therapy and psychiatry services to their eligible covered members. Revenue is recognized at a ~~Business Combination, at the earliest.~~point in time, as virtual therapy or psychiatry session is rendered. The ~~Company generates~~ ~~non-operating~~ ~~income~~transaction price is determined based on contracted rates and includes variable consideration in the form of ~~interest income from~~implicit price concessions. The Company determines the ~~proceeds derived from~~total transaction price, including an estimate of variable consideration, at contract inception and reassesses this estimate at each reporting date. The Company estimates the ~~Initial Public Offering.~~

~~The registration statement for the Company’s Initial Public Offering was declared effective on June 8, 2020. On June 11, 2020, the Company consummated the Initial Public Offering~~amount of ~~41,400,000 units (the “Units” and, with respect to the shares of Class A common stock~~variable consideration that is included in the ~~Units sold,~~transaction price primarily based on historical collection experience for each insurance payor. Revenue from Payors is presented net of implicit price concessions. Contracts with Payors include annual evergreen clauses and generally may be terminated by either party typically upon a minimum 60-day advance notice.

The Company contracts with enterprises to provide access to its therapist platform for their employees, primarily based on a per-member-per-month access fee model. Revenues from access fees are recognized ratably over the ~~“Public Shares”), which includes~~contractual term. The majority of contracts with enterprise clients typically range in length from one to three years and are generally non-cancelable during the ~~full exercise by the underwriter of the over-allotment option to purchase an additional 5,400,000 Units, at $10.00 per Unit, generating gross proceeds of $414,000,000, which is described in Note 3.~~initial contractual term.

~~Simultaneously with the closing of the Initial Public Offering, the~~

The Company ~~consummated~~also generates revenues from the sale of ~~10,280,000 warrants (the “Private Placement Warrants”),~~monthly, quarterly, bi-annual and annual membership subscriptions to the Company's therapy platform as well as supplementary a la carte offerings directly to individual consumers through a subscription plan. The Company recognizes consumer revenues ratably over the subscription period, beginning when therapy services commence. The Company recognizes revenues from supplementary a la carte offerings at a point in time, as virtual therapy session is rendered. Members may cancel their subscription at any time and will receive a pro-rata refund for the subscription price. The transaction price from member subscription revenue and supplementary a la carte offerings includes variable consideration in the form of ~~$1.00 per~~refunds. The Company estimates the refund liability for the variable consideration portion of the transaction price primarily based on historical experience. The refund liability is recorded within the “Accrued expenses and other current liabilities” line item in the condensed consolidated balance sheets. Revenue from individual consumers is presented net of refunds.

The following table presents the Company’s revenues from sales to unaffiliated customers disaggregated by revenue source:


Unaudited	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Revenues from sales to unaffiliated customers:
Payor revenue	$	18,539	$	7,880	$	33,350	$	15,990
DTE revenue		8,039		6,685		16,715		12,346
Total B2B revenue		26,578		14,565		50,065		28,336
Consumer revenue		9,067		15,279		18,916		31,658
Total revenue	$	35,645	$	29,844	$	68,981	$	59,994

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Accounts Receivable and Allowance for Credit Losses

Accounts receivables are stated net of credit losses allowance. The Company is exposed to credit losses primarily through its contracts with health insurance plans, employee assistance programs and enterprise clients. The Company’s methodology for estimating credit loss is based on historical collection experience, customer creditworthiness, current and future economic condition and market condition. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Accounts receivables are written off after all reasonable means to collect the full amount have been exhausted. The allowance for credit losses was immaterial as of June 30, 2023 and December 31, 2022.

Deferred Revenue

The Company records deferred revenues when cash payments from customers are received in advance of the Company's performance obligation to provide services. As of June 30, 2023, deferred revenue related mainly to the Company’s consumer channel. The Company expects to satisfy the majority of its performance obligations associated with deferred revenue within one year or less.

NOTE 4. FAIR VALUE MEASUREMENT

The carrying value of the Company’s cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the relatively short-term nature of the underlying assets. The Company’s Private Placement ~~Warrant,~~Warrants are carried at fair value with changes in fair value recognized in earnings each period.

The Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying condensed consolidated balance sheets. The warrant liabilities were measured at fair value at inception and thereafter on a ~~private placement to HEC Sponsor LLC (the “Sponsor”), generating gross proceeds~~recurring, quarterly basis, with changes in fair value presented within financial (income) expense, net, in the condensed consolidated statement of ~~$10,280,000,~~operations.

The Private Placement Warrants were valued using the Black-Scholes-Merton Model, which is ~~described~~considered to be a Level 3 fair value measurement. The primary unobservable input utilized in ~~Note 4.~~

Transaction costs amounted to $23,353,182, consisting of $8,280,000 of underwriting fees, $14,490,000 of deferred underwriting fees and $583,182 of other offering costs. At June 30, 2020, cash of $1,505,028 was held outside ofdetermining the ~~Trust Account (as defined below) and is available for working capital purposes.~~

Following the closing of the Initial Public Offering on June 11, 2020, an amount of $414,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the salefair value of the Private Placement Warrants ~~was placed in a trust account (“Trust Account”) which will be invested only in U.S. government securities, within~~is the ~~meaning set forth in Section 2(a)(16)~~implied volatility from the trading prices of the ~~Investment Company Act~~Public Warrants.

The following table presents the changes in the fair value of ~~1940, as amended (the “Investment Company Act”), with a maturity~~warrant liabilities during the three and six months ended June 30, 2023 and 2022:


	Level 3 Liabilities (unaudited)
	For the Three Months Ended June 30, 2023
(in thousands)	Beginning Balance		Change in Fair Value			Ending Balance
Private Placement Warrants	$	1,128	$	(308	)	$	820

	For the Six Months Ended June 30, 2023
(in thousands)	Beginning Balance		Change in Fair Value			Ending Balance
Private Placement Warrants	$	939	$	(119	)	$	820

	Level 3 Liabilities (unaudited)
	For the Three Months Ended June 30, 2022
(in thousands)	Beginning Balance		Change in Fair Value			Ending Balance
Private Placement Warrants	$	3,195	$	2,092		$	5,287

	For the Six Months Ended June 30, 2022
(in thousands)	Beginning Balance		Change in Fair Value			Ending Balance
Private Placement Warrants	$	4,070	$	1,217		$	5,287

Table of ~~185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by~~Contents

NOTE 5. COMMITMENTS AND CONTINGENT LIABILITIES

Litigation

In January 2022, the Company ~~meeting the conditions~~and certain 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~~its current and ~~(ii) the distribution of the funds held in the Trust Account, as described below.~~

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 the 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 must complete a Business Combination with one or more target businesses that together have an aggregate fair market value of at least 80% of the value of the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. 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.

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) 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, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon consummation of the Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law 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 (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor and the Company’sformer officers and directors were named as defendants in securities class action complaints filed in the United States District Court for the Southern District of New York under the case headings: (1) Baron v. Talkspace et al., No. 22-cv-00163 (S.D.N.Y.) and (2) Valdez v. Talkspace et al., No. 22-cv-00840 (S.D.N.Y.), which were subsequently consolidated under the caption In re Talkspace, Inc. Securities Litigation, No. 22-cv-00163 (S.D.N.Y) (the ~~“initial stockholders”~~“Securities Action”) ~~have agreed to vote their Founder Shares (as defined in Note 5)~~. The Securities Action asserts violations of sections 10(b), 14(a) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or don’t vote at all.

Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the 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 1320(a) of the Securities Exchange Act of 1934 ~~as amended (the “Exchange Act”)), will be restricted from redeeming~~and SEC Rules 10b-5 and 14a-9 promulgated thereunder. These actions generally relate to public disclosures and statements by the Company in connection with its ~~shares~~merger with ~~respect to more than an aggregate of 20% or more~~Hudson Executive Investment Corp. (“HEIC”).

In December 2022, the Company’s subsidiary Tailwind Merger Sub II, LLC, certain of the ~~Public Shares, without~~Company’s current and former directors and officers, and others were named as defendants in a putative class action complaint filed in the ~~prior consent~~Delaware Court of Chancery under the case caption Valdez v. Braunstein, et al., C.A. No. 2022-1148 (Del. Ch.) (the “Delaware Action”). The Delaware Action asserts claims for breach of fiduciary duty and aiding and abetting breach of fiduciary duty relating to the merger with HEIC, among other things, based on many of the ~~Company.~~

same facts at issue in the Securities Action. The ~~initial stockholders have agreed (a) to waive~~complaint seeks, among other things damages on behalf of putative class members who did not redeem their ~~redemption rights with respect to their Founder Shares and Public Shares held by them~~shares in connection with the ~~completion~~Company’s merger with HEIC.

In February 2023, the Company resolved the Securities Action and the Delaware Action through mediation. The settlement resolves these litigations with respect to all named defendants. The settlement will have to be approved by the court, which the Company expects will occur in the third quarter of ~~a Business Combination~~2023.

In June and ~~(b) not to propose an amendment to~~July 2022, two individuals filed stockholder derivative lawsuits on behalf of Talkspace in the ~~Amended~~United States District Court for the Southern District of New York under the case captions: (1) Odsvall v. Oren Frank et al., No. 22-cv-05016 (S.D.N.Y.) and ~~Restated Certificate of Incorporation (i) to modify~~(2) Nayman v. Berg, et al., No. 22-cv-06258 (S.D.N.Y.), which were subsequently consolidated under the ~~substance or timing~~caption In re Talkspace Stockholder Derivative Litigation, No. 22-cv-05016 (S.D.N.Y.) in September 2022 (the “Derivative Action”). The Derivative Action named certain of the Company’s ~~obligation to redeem 100% of its Public Shares if~~current and former officers and directors as defendants and the Company ~~does not complete~~as a ~~Business Combination within 24 months from~~nominal defendant. The Derivative Action asserted claims for violations of federal securities laws, breach of fiduciary duty, and aiding and abetting breaches of fiduciary duty relating to the ~~closing~~merger with HEIC, among other things, based on many of the ~~Initial Public Offering or (ii)~~same facts at issue in the Securities Action.

In February 2023 the parties reached an agreement in principle to resolve the Derivative Action with respect to ~~any other provision relating to stockholders’ rights or~~ ~~pre-initial~~ ~~business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares~~all named defendants in ~~conjunction with any such amendment.~~

The Company will have until June 11, 2022 to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations exceptexchange for ~~the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a~~ ~~per-share~~ ~~price, payable in cash, equal~~certain changes to the ~~aggregate amount then on deposit in~~Company’s Corporate Governance environment, including the ~~Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000~~declassification 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 the Company’s remaining stockholders and the Company’s board of directors, ~~liquidate and dissolve, subject in each case~~creation of a management-level disclosure committee, enhancements to the responsibilities and duties of the Company’s ~~obligations under Delaware law~~Audit Committee, the addition of independent directors, enhancements to ~~provide~~employee compliance training and retention of an internal controls consultant. In addition, the Company agreed to pay or cause to be paid $550,000 in attorney’s fees and expenses. On May 18, 2023, the parties entered into a Stipulation of Settlement and Release Agreement (the “Stipulation”) that sets forth the terms and conditions for the proposed settlement and dismissal with prejudice of the Derivative Action (the “Settlement”). On June 30, 2023, the court entered an order preliminarily approving the Stipulation and proposed Settlement of the Derivative Action and scheduling a hearing for August 16, 2023 to determine whether to give final approval to the Settlement. The defendants have not admitted any liability or wrongdoing in connection with the Settlement and have entered into the Settlement solely to avoid the costs, risks, distraction, and uncertainties of continued litigation of the Derivative Action.

In addition to the foregoing, the Company may in the future be involved in various legal proceedings, claims and litigation that arise in the normal course of ~~creditors~~business. The Company accrues for estimated loss contingencies related to legal matters when available information indicates that it is probable a liability had been incurred and the ~~requirements~~Company can reasonably estimate the amount of that loss. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is often not possible to reasonably estimate the size of the possible loss or range of loss or possible additional losses or range of additional losses.

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Warranties and Indemnification

The Company’s arrangements generally include certain provisions for indemnifying clients against liabilities if there is a breach of a client’s data or if the Company’s service infringes a third party’s intellectual property rights. To date, the Company has not incurred any material costs as a result of such indemnifications.

The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as a director or officer or that person’s services provided to any other ~~applicable law. There will~~company or enterprise at the Company’s request. The Company maintains director and officer liability insurance coverage that would generally enable it to recover a portion of any future amounts paid. The Company may also be ~~no redemption rights or liquidating distributions~~subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.

NOTE 6. CAPITAL STOCK

As of June 30, 2023 and December 31, 2022 there were outstanding 12,780,000 Private Placement Warrants and 21,350,000 Public Warrants to purchase the Company’s ~~warrants, which will expire worthless if~~common stock at an exercise price of $11.50 per share. As of June 30, 2023 and December 31, 2022, no shares of preferred stock were issued or outstanding.

NOTE 7. SHARE-BASED COMPENSATION

In June 2021, the Company ~~fails~~adopted the 2021 Incentive Award Plan (the “2021 Plan”) under which the Company may grant cash and equity incentive awards to ~~complete~~officers, employees, directors, consultants and service providers in order to attract, motivate and retain the talent.

In June 2021, the Company also adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”) under which employees of the Company and its participating subsidiaries are provided with the opportunity to purchase Talkspace common stock at a discount through accumulated payroll deductions during successive offering periods. As of June 30, 2023, no employee stock purchases have been made under the 2021 ESPP.

All stock-based awards are measured based on the grant date fair value and are generally recognized on a straight-line basis in the Company’s condensed consolidated statement of operations over the period during which the employee is required to perform services in exchange for the award (generally requiring a four-year vesting period).

The following table sets forth the total stock-based compensation expense related to stock options and restricted stock units included in the respective components of operating expenses in the condensed consolidated statements of operations:


	Three Months Ended June 30,				Six Months Ended June 30,
Unaudited	2023		2022		2023		2022
(in thousands)
Research and development, net	$	546	$	662	$	1,220	$	1,208
Clinical operations, net		126		79		246		201
Sales and marketing		445		816		836		1,593
General and administrative		1,012		2,282		2,130		3,205
Total stock-based compensation expense	$	2,129	$	3,839	$	4,432	$	6,207

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NOTE 8. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the periods presented:


	Three Months Ended June 30,						Six Months Ended June 30,
Unaudited	2023			2022			2023			2022
(in thousands, except share and per share data)
Net loss	$	(4,704	)	$	(23,022	)	$	(13,462	)	$	(43,382	)
Weighted-average shares used to compute net loss per share:
Basic and Diluted		164,195,697			155,709,901			163,003,363			154,901,165
Net loss per share:
Basic and Diluted	$	(0.03	)	$	(0.15	)	$	(0.08	)	$	(0.28	)

For the three and six months ended June 30, 2023, the following were excluded from the calculation of diluted net loss per share since each would have had an anti-dilutive effect given the Company's net loss: 12,365,441 non-vested stock options, 10,179,411 non-vested restricted stock units, 12,780,000 Private Placement Warrants and 21,350,000 Public Warrants to purchase the Company’s common stock.

For the three and six months ended June 30, 2022, the following were excluded from the calculation of diluted income per share since each would have had an anti-dilutive effect given the Company's net loss: 18,042,701 non-vested stock options, 6,360,148 non-vested restricted stock units, 12,780,000 Private Placement Warrants and 21,350,000 Public Warrants to purchase the Company’s common stock.

NOTE 9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The following table presents the amounts included within accrued expenses and other current liabilities as of June 30, 2023 and December 31, 2022:


	June 30, 2023		December 31, 2022
(in thousands)	Unaudited
Employee compensation	$	3,821	$	5,290
User acquisition		1,913		2,256
Litigation costs		750		5,500
Professional fees		576		543
Other		3,384		2,913
Accrued expenses and other current liabilities	$	10,444	$	16,502

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NOTE 10. VARIABLE INTEREST ENTITIES ("VIEs")

The Company holds a variable interest in Talkspace Provider Network, PA (“TPN”) and certain affiliated professional entities (“PC entities”). TPN and the PC entities are VIEs. Under the provisions of ASC 810, “Consolidation”, an entity consolidates a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company has determined that it is able to direct the activities of TPN and the PC entities that most significantly impact their economic performance and it funds and absorbs all losses of these VIEs resulting in the Company being the primary beneficiary of these entities. Accordingly, the Company consolidates these VIEs.

The following table details the assets and liabilities of the Company's consolidated VIEs as of June 30, 2023 and December 31, 2022. The assets and liabilities in the table below are presented prior to consolidation and thus a portion of these assets and liabilities are eliminated in consolidation.


(in thousands)	June 30, 2023		December 31, 2022
ASSETS	Unaudited
Cash and cash equivalents	$	497	$	883
Accounts receivable		6,159		1,716
Other assets		—		4,813
Total Assets	$	6,656	$	7,412
LIABILITIES
Accrued expenses and other current liabilities		3,802		3,758
Total Liabilities	$	3,802	$	3,758

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless the context otherwise requires, all references in this section as to “Talkspace,” the “Company,” “we,” “us” or “our” refer to the business of Talkspace, Inc. and its consolidated subsidiaries.

The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and the related notes contained in this Quarterly Report and the financial statements and related notes contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022. This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties. As a result of many factors, such as those discussed in Part I, Item 1A, “Risk Factors” of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and “Forward-Looking Statements” sections and elsewhere in this Quarterly Report, our actual results may differ materially from those anticipated in these forward-looking statements.

The purpose of this section is to discuss and analyze our consolidated financial condition, liquidity and capital resources and results of operations for the three and six months ended June 30, 2023 and 2022.

Overview

Talkspace is a healthcare company offering its members convenient and affordable access to a fully-credentialed network of highly qualified providers. We are a leading virtual behavioral health company and, since Talkspace’s founding in 2012, we have connected millions of patients with licensed mental health providers across a wide and growing spectrum of care through virtual counseling, psychotherapy and psychiatry. We created a purpose-built platform to address the vast, unmet and growing demand for mental health services of our members, serving our business-to-business (“B2B”) channel, comprised of large health plans and employee assistance programs (“Payors”) such as Aetna, Cigna, Premera and Optum and large enterprise clients (“DTE”) such as Google and Expedia (collectively, our “clients”), who offer their insured members and employees access to our platform at in-network reimbursement rates, or while their employer is under an active contract with Talkspace, where applicable, and our business-to-consumer (“Consumer”) channel, comprised of individual consumers who subscribe directly to our platform.

As of June 30, 2023, we had approximately 110 million B2B eligible lives and approximately 13,700 consumer active members compared to 77 million B2B eligible lives and 20,100 consumer active members as of June 30, 2022. For the three and six months ended June 30, 2023, our clinicians completed 200,500 and 372,200 B2B sessions, respectively, related to members covered under our health plan clients, as compared to 96,000 and 186,600 completed B2B sessions for the three and six months ended June 30, 2022. Please refer to the “Key Business ~~Combination~~Metrics” section below for a description of active members and B2B eligible lives.

Operating Segments

The Company operates as a single segment and as one reporting unit, which is how the chief operating decision maker (who is the chief executive officer) reviews financial performance and allocates resources.

Key Business Metrics

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. We believe the following metrics are useful in evaluating our business:


Unaudited	Six Months Ended June 30,
(in thousands except number of health plan and enterprise clients or otherwise indicated)	2023		2022
Number of B2B eligible lives at period end (in millions)		110		77
Number of completed B2B sessions during the period		372.2		186.6
Number of health plan clients at period end		20		16
Number of enterprise clients at period end		217		205
Number of Consumer active members at period end		13.7		20.1

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B2B Eligible Lives: We consider B2B lives “eligible” if such persons are eligible to receive treatment on the Talkspace platform, in the case of our health plan clients, at an agreed upon reimbursement rate through insurance under an employee assistance program or other network behavioral health paid benefit program. There may be instances where a person may be covered through multiple solutions, typically through behavioral health plans and employee assistance programs. In these instances, the person is counted each time they are covered in the B2B eligible lives calculation, which may cause this amount to reflect a higher number of B2B eligible lives than we actually serve.

Active Members: We consider members “active”, in the case of our Consumer members, commencing on the date such member initiates contact with a provider on our platform until the term of their monthly, quarterly or bi-annual subscription plan expires, unless terminated early.

Components of Results of Operations

Revenues

We contract with health insurance plans, employee assistance organizations and enterprises to provide services to individuals who are qualified to receive access to the Company’s services through the Company’s commercial arrangements. We generate revenues from payments from insured members and claims paid by their respective insurance companies and from contracted platform access fees paid to us by our enterprise clients for the delivery of therapy services to their members or employees. We recognize revenues from services provided to insured members at a point in time, as virtual therapy or psychiatry session is rendered. We recognize revenue from our enterprise clients ratably over the contractual term based primarily on a per-member-per month access fee model.

We also generate revenues from the sale of monthly, quarterly, bi-annual and annual membership subscriptions to the Company's therapy platform as well as supplementary a la carte offerings directly to individual consumers through a subscription plan. We recognize member subscription revenues ratably over the subscription period, beginning when therapy services commence. We recognize revenues from supplementary a la carte offerings at a point in time, as virtual therapy session is rendered. Members may cancel their subscription at any time and will receive a pro-rata refund for the subscription price.

Revenue growth is generated from increasing our eligible covered lives through contracting with health plans, increasing utilization within eligible covered lives, expanding enterprise clients, and increasing membership subscriptions.

Cost of Revenues

Cost of revenues is comprised primarily of therapist payments. Cost of revenues is largely driven by number of sessions and the ~~Combination Period.~~size of our provider network that is required to service the growth of our health plan and enterprise clients, in addition to the growth of our customer base.

We designed our business model and our provider network to be scalable and to leverage a hybrid model of both employee providers and independently contracted providers to support multiple growth scenarios. The ~~initial~~compensation paid to our independently contracted providers is variable, and the amount paid to a provider is generally based on the amount of time committed by such provider to our members. In addition, our network supervisors have authority to approve the payment of incentive bonuses to providers with certain licenses during periods of higher demand for providers with such licenses. For our employee providers, they receive a fixed-salary and discretionary bonuses, where applicable, all of which is included in cost of revenues.

While we expect to make increased investments to support accelerated growth and the required investment to scale our provider network, we also expect increased efficiencies and economies of scale. Our cost of revenues as a percentage of revenues is expected to fluctuate from period to period depending on the interplay of these factors as well as pricing fluctuations.

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Operating Expenses

Operating expenses consist of research and development, clinical operations, sales and marketing, and general and administrative expenses.

Research and Development Expenses

Research and development expenses include personnel and related expenses for software development and engineering, information technology infrastructure, security, privacy compliance and product development (inclusive of stock-based compensation for our research and development employees), third-party services and contractors related to research and development, information technology and software-related costs.

Clinical Operations Expenses

Clinical operations expenses are associated with the management of our network of therapists. This item is comprised of costs related to recruiting, onboarding, credentialing, training and ongoing quality assurance activities (inclusive of stock-based compensation for our clinical operations employees), costs of third-party services and contractors related to recruiting and training and software-related costs.

Sales and Marketing Expenses

Sales expenses consist primarily of employee-related expenses, including salaries, benefits, commissions, travel and stock-based compensation costs for our employees engaged in sales and account management.

Marketing expenses consist primarily of advertising and marketing expenses for member acquisition and engagement, as well as personnel costs, including salaries, benefits, bonuses, stock-based compensation expense for marketing employees, third-party services and contractors. Marketing expenses also include third-party software subscription services, third-party independent research, participation in trade shows, brand messaging and costs of communications materials that are produced for our clients to generate greater awareness and utilization of our platform among our health plan and enterprise clients.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, including salaries, benefits, bonuses and stock-based compensation expense for certain executives, finance, accounting, legal and human resources functions, as well as professional fees, occupancy costs, and other general overhead costs.

Financial income, net

Financial income, net includes the impact from (i) non-cash changes in the fair value of our warrant liabilities, (ii) interest earned on cash equivalents deposited in our money market accounts and (iii) other financial expenses in connection with bank charges.

Taxes on income

Our taxes on income consists primarily of foreign income taxes related to income generated by our subsidiary organized under the laws of Israel.

We have a full valuation allowance for our U.S. deferred tax assets, including federal and state NOLs. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized through expected future taxable income in the United States.

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Results of Operations

The following table presents our results of operations for the three and six months ended June 30, 2023 and 2022 and the dollar and percentage change between the respective periods:


(in thousands, except percentages)	Three Months Ended June 30,		Variance		Six Months Ended June 30,		Variance
Unaudited	2023	2022	$	%	2023	2022	$	%
Revenue:
Payor revenue	$18,539	$7,880	10,659	135.3	$33,350	$15,990	17,360	108.6
DTE revenue	8,039	6,685	1,354	20.3	16,715	12,346	4,369	35.4
Total B2B revenue	26,578	14,565	12,013	82.5	50,065	28,336	21,729	76.7
Consumer revenue	9,067	15,279	(6,212)	(40.7)	18,916	31,658	(12,742)	(40.2)
Total revenue	35,645	29,844	5,801	19.4	68,981	59,994	8,987	15.0
Cost of revenue	17,833	15,297	2,536	16.6	34,421	30,426	3,995	13.1
Gross profit	17,812	14,547	3,265	22.4	34,560	29,568	4,992	16.9
Operating expenses:
Research and development, net	4,171	5,576	(1,405)	(25.2)	9,524	10,611	(1,087)	(10.2)
Clinical operations, net	1,675	2,316	(641)	(27.7)	3,276	4,092	(816)	(19.9)
Sales and marketing	13,045	18,931	(5,886)	(31.1)	26,514	40,339	(13,825)	(34.3)
General and administrative	5,329	8,792	(3,463)	(39.4)	10,693	16,802	(6,109)	(36.4)
Total operating expenses	24,220	35,615	(11,395)	(32.0)	50,007	71,844	(21,837)	(30.4)
Operating loss	(6,408)	(21,068)	14,660	69.6	(15,447)	(42,276)	26,829	63.5
Financial (income) expense, net	(1,712)	1,865	(3,577)	*	(2,136)	996	(3,132)	*
Loss before taxes on income	(4,696)	(22,933)	18,237	79.5	(13,311)	(43,272)	29,961	69.2
Taxes on income	8	89	(81)	(91.0)	151	110	41	37.3
Net loss	$(4,704)	$(23,022)	$18,318	79.6	$(13,462)	$(43,382)	$29,920	69.0

* Percentage not meaningful

Revenues. Revenues increased by $5.8 million, or 19.4% to $35.6 million for the three months ended June 30, 2023 from $29.8 million for the three months ended June 30, 2022. The increase was principally due to a 82.5% growth in B2B revenue driven by a higher number of completed B2B sessions and an increase in covered lives from health plan clients ("Payors") and new enterprise clients ("DTE"), partially offset by a 40.7% decline in consumer subscription revenue. Revenue from our health plan clients increased by $10.7 million, or 135.3%, to $18.5 million for the three months ended June 30, 2023 from $7.9 million for the three months ended June 30, 2022. Enterprise client contracts increased by 12 clients, or 5.9%, to 217 clients as of June 30, 2023 from 205 clients as of June 30, 2022. This increase in the number of enterprise clients drove DTE revenue to increase by $1.4 million, or 20.3% to $8.0 million for the three months ended June 30, 2023 from $6.7 million for the three months ended June 30, 2022. Consumer subscriptions revenue decreased by $6.2 million, or 40.7%, to $9.1 million for the three months ended June 30, 2023 from $15.3 million for the three months ended June 30, 2022, due to the Company's intentional and strategic decision to reduce marketing spend related to this service.

Revenues increased by $9.0 million, or 15.0% to $69.0 million for the six months ended June 30, 2023 from $60.0 million for the six months ended June 30, 2022. The increase was principally due to a 76.7% growth in B2B revenue driven by a higher number of completed B2B sessions and an increase in covered lives from Payors and new DTE clients, partially offset by a 40.2% decline in consumer subscription revenue. Revenue from our health plan clients increased by $17.4 million, or 108.6%, to $33.4 million for the six months ended June 30, 2023 from $16.0 million for the six months ended June 30, 2022. Enterprise client contracts increased by 12 clients, or 5.9%, to 217 clients as of June 30, 2023 from 205 clients as of June 30, 2022. This increase in the number of enterprise clients drove DTE revenue to increase by $4.4 million, or 35.4% to $16.7 million for the six months ended June 30, 2023 from $12.3 million for the six months ended June 30, 2022. Consumer subscriptions revenue decreased by $12.7 million, or 40.2%, to $18.9 million for the six months ended June 30, 2023 from $31.7 million for the six months ended June 30, 2022, due to the Company's intentional and strategic decision to reduce marketing spend related to this service.

Costs of revenues. Cost of revenues increased by $2.5 million, or 16.6%, to $17.8 million for the three months ended June 30, 2023 from $15.3 million for the three months ended June 30, 2022, and increased by $4.0 million, or 13.1%, to $34.4 million for the six months ended June 30, 2023 from $30.4 million for the six months ended June 30, 2022. The increase in cost of revenues for the three and six months ended June 30, 2023, was primarily due to increased hours worked by therapists to meet strong customer engagement.

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Gross profit.Gross profit increased by $3.3 million, or 22.4%, to $17.8 million for the three months ended June 30, 2023 from $14.5 million for the three months ended June 30, 2022. Gross profit increased by $5.0 million, or 16.9%, to $34.6 million for the six months ended June 30, 2023 from $29.6 million for the six months ended June 30, 2022. The increase in gross profit for the three and six months ended June 30, 2023 was primarily driven by higher revenue and provider network productivity.

Gross margin was 50.0% for the three months ended June 30, 2023, compared to 48.7% during the three months ended June 30, 2022. Gross margin was 50.1% for the six months ended June 30, 2023, compared to 49.3% during the six months ended June 30, 2022. The increase in gross margin for the three and six months ended June 30, 2023 was primarily due to higher revenue and provider network productivity, partially offset by the revenue shift mix towards B2B revenue.

Operating expenses

Overall, our operating expenses for the three and six months ended June 30, 2023 have decreased due to our efficiency initiatives in order to optimize for profitability.

Research and development expenses.Research and development expenses decreased by $1.4 million, or 25.2% to $4.2 million for the three months ended June 30, 2023 from $5.6 million for the three months ended June 30, 2022, and decreased by $1.1 million, or 10.2% to $9.5 million for the six months ended June 30, 2023 from $10.6 million for the six months ended June 30, 2022. The decrease in research and development expenses for the three and six months ended June 30, 2023 was primarily due to a decrease in employee-related costs, inclusive of non-cash stock compensation expense.

Clinical operations expenses.Clinical operations expenses decreased by $0.6 million, or 27.7% to $1.7 million for the three months ended June 30, 2023 from $2.3 million for the three months ended June 30, 2022, and decreased by $0.8 million, or 19.9% to $3.3 million for the six months ended June 30, 2023 from $4.1 million for the six months ended June 30, 2022. The decrease in clinical operations expenses for the three and six months ended June 30, 2023 was primarily due to lower provider recruitment costs.

Sales and marketing expenses.Sales and marketing expenses decreased by $5.9 million, or 31.1%, to $13.0 million for the three months ended June 30, 2023 from $18.9 million for the three months ended June 30, 2022, and decreased by $13.8 million, or 34.3%, to $26.5 million for the six months ended June 30, 2023 from $40.3 million for the six months ended June 30, 2022. The decrease in sales and marketing expenses for the three and six months ended June 30, 2023 was primarily driven by a decrease in direct marketing and promotional costs.

General and administrative expenses. General and administrative expenses decreased by $3.5 million, or 39.4%, to $5.3 million for the three months ended June 30, 2023 from $8.8 million for the three months ended June 30, 2022, and decreased by $6.1 million, or 36.4%, to $10.7 million for the six months ended June 30, 2023 from $16.8 million for the six months ended June 30, 2022. The decrease in general and administrative expenses for the three and six months ended June 30, 2023 was primarily due to a decrease in professional fees, subcontractor costs and employee-related costs, inclusive of non-cash stock compensation expense.

Financial income, net.Financial income, net was $1.7 million for the three months ended June 30, 2023, compared to financial expense, net of $1.9 million for the three months ended June 30, 2022. For the three months ended June 30, 2023 financial income, net was primarily driven by interest income earned on our money market accounts of $1.5 million and $0.3 million in non-cash gains resulting from the remeasurement of warrant liabilities. For the three months ended June 30, 2022 financial expense, net primarily consisted of $2.1 million in non-cash losses resulting from the remeasurement of warrant liabilities.

Financial income, net was $2.1 million for the six months ended June 30, 2023, compared to financial expense, net of $1.0 million for the six months ended June 30, 2022. For the six months ended June 30, 2023 financial income, net was primarily driven by interest income earned on our money market accounts of $2.1 million. For the six months ended June 30, 2022 financial expense, net was primarily driven by $1.2 million of non-cash losses resulting from the remeasurement of warrant liabilities.

Taxes on income. Taxes on income consists primarily of foreign income taxes related to income generated by our subsidiary organized under the laws of Israel.

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Non-GAAP Financial Measures

In addition to our financial results determined in accordance with GAAP, we believe adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance and is a key performance measure that our management uses to assess our operating performance. Because adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes and in evaluating acquisition opportunities. We also use adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. We believe that the use of adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

Some of the limitations of adjusted EBITDA include (i) adjusted EBITDA does not necessarily reflect capital commitments to be paid in the future and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and adjusted EBITDA does not reflect these requirements. In evaluating adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments described herein. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. Our adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure. Adjusted EBITDA should not be considered as an alternative to loss before income taxes, net loss, loss per share, or any other performance measures derived in accordance with U.S. GAAP. When evaluating our performance, you should consider adjusted EBITDA alongside other financial performance measures, including our net loss and other GAAP results.

A reconciliation is provided below for adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review our financial statements prepared in accordance with GAAP and the reconciliation of our non-GAAP financial measure to its most directly comparable GAAP financial measure, and not to rely on any single financial measure to evaluate our business.

We calculate adjusted EBITDA as net loss income adjusted to exclude (i) depreciation and amortization, (ii) interest and other expenses (income), net, (iii) tax benefit and expense, and (iv) stock-based compensation expense.

The following table presents a reconciliation of adjusted EBITDA from the most comparable GAAP measure, net loss for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,						Six Months Ended June 30,
Unaudited	2023			2022			2023			2022
(in thousands)
Net loss	$	(4,704	)	$	(23,022	)	$	(13,462	)	$	(43,382	)
Add:
Depreciation and amortization		302			268			608			697
Financial (income) expense, net (1)		(1,712	)		1,865			(2,136	)		996
Taxes on income		8			89			151			110
Stock-based compensation		2,129			3,839			4,432			6,207
Adjusted EBITDA	$	(3,977	)	$	(16,961	)	$	(10,407	)	$	(35,372	)

(1) For the three months ended June 30, 2023, financial (income), net, primarily consisted of $1.5 million of interest income from our money market accounts and $0.3 million in gains resulting from the remeasurement of warrant liabilities. For the six months ended June 30, 2023, financial (income), net, primarily consisted of $2.1 million of interest income from our money market accounts. For the three and six months ended June 30, 2022, financial expense, net primarily consisted of $2.1 million and $1.2 million, respectively, in losses resulting from the remeasurement of warrant liabilities.

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Liquidity and Capital Resources

As of June 30, 2023, we had $126.1 million of cash and cash equivalents ($138.5 million as of December 31, 2022), which we use to finance our operations and support a variety of growth initiatives and investments. We had no debt as of June 30, 2023.

Our primary cash needs are to fund operating activities. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, the timing and extent of investments to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced service offerings, and the continuing market acceptance of virtual behavioral services. Additionally, we may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies.

We currently anticipate to be able to fund our cash needs for at least the next 12 months and thereafter for the foreseeable future using available cash and cash equivalent balances as of June 30, 2023. However, in the future we may require additional capital to respond to technological advancements, competitive dynamics, customer demands, business and investment opportunities, acquisitions or unforeseen circumstances and we may determine to engage in equity or debt financings for other reasons. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities, our existing stockholders could experience significant dilution. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we cannot raise capital when needed, we may be forced to undertake asset sales or similar measures to ensure adequate liquidity.

Cash Flows from Operating, Investing and Financing Activities

The following table presents the summary condensed consolidated cash flow information for the periods presented:

Cash Flows


Unaudited	Six Months Ended June 30,
(in thousands)	2023			2022
Net cash used in operating activities	$	(13,748	)	$	(33,111	)
Net cash provided by (used in) investing activities		18			(160	)
Net cash provided by financing activities		1,289			1,637
Net decrease in cash and cash equivalents	$	(12,441	)	$	(31,634	)

Operating Activities

The decrease in net cash used in operating activities was driven primarily by the positive impact of lower operating expenses, favorable timing of collections on receivables and an increase in interest income from our money market accounts offset by unfavorable timing of payments of account payables and accrued expenses.

Investing Activities

The increase in net cash provided by investing activities was driven primarily by an increase in the proceeds from the sale of computer equipment and a decrease in the purchases of computer equipment and software.

Financing Activities

The decrease in net cash provided by financing activities was primarily driven by a decrease in the proceeds from the exercise of stock options.

Contractual Obligations, Commitments and Contingencies

As of June 30, 2023, we did not have any short-term or long-term debt, or significant long-term liabilities.

As of June 30, 2023, we have a non-material long-term operating lease for our office space in New York, NY.

A settlement was reached in February 2023 for certain class action lawsuits ending an ongoing litigation, see Note 5, “Commitments and Contingent Liabilities” in the notes to the condensed consolidated financial statements for further details.

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In addition, we may in the future be involved in various legal proceedings, claims and litigation that arise in the normal course of business. We accrue for estimated loss contingencies related to legal matters when available information indicates that it is probable a liability had been incurred and we can reasonably estimate the amount of that loss. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is often not possible to reasonably estimate the size of the possible loss or range of loss or possible additional losses or range of additional losses. Should any of our estimates and assumptions change or prove to be incorrect, it could have a material impact on our results of operations, financial position, and cash flows. See Note 5, “Commitments and Contingent Liabilities” in the notes to the condensed consolidated financial statements for further details.

Our commercial contract arrangements generally include certain provisions requiring us to indemnify clients against liabilities if there is a breach of a client’s data or if our service infringes a third party’s intellectual property rights. To date, we have not incurred any material costs as a result of such indemnifications.

We have also agreed to ~~waive their liquidation rights~~indemnify our officers and directors for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as our director or officer or that person’s services provided to any other company or enterprise at our request. We maintain director and officer liability insurance coverage that would generally enable us to recover a portion of any future amounts paid. We may also be subject to indemnification obligations by law with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account 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 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Periodactions of our employees under certain circumstances and in ~~such event, such amounts will be included with the other funds held~~certain jurisdictions.

Off-Balance Sheet Arrangements

We do not invest in ~~the Trust Account~~any off-balance sheet vehicles that ~~will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible~~provide liquidity, capital resources, market or credit risk support, or engage in any activities that ~~the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).~~

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 which the Company has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.00 per Public Share and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of the trust assets, less taxes payable,

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~provided that such liability will not apply~~expose us to any ~~claims by~~liability that is not reflected in our condensed consolidated financial statements.

Inflation Risk

We do not believe that inflation has had a ~~third party~~material effect on our business, financial condition or ~~prospective target~~results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, ~~who executed a waiver~~financial condition or results of ~~any~~operations.

Critical Accounting Policies and ~~all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any under the~~Estimates

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”). 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 vendors, service providers (except 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.

~~NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Basis of Presentation~~

~~The accompanying unaudited~~ condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of ~~America (“GAAP”)~~America. Reference is also made to the Company’s consolidated financial statements and notes thereto found in its Annual Report on Form 10-K for ~~interim~~the year ended December 31, 2022.

The Company’s accounting policies are essential to understanding and interpreting the financial ~~information and~~results reported on the condensed consolidated financial statements. The significant accounting policies used in ~~accordance with~~ the ~~instructions to Form~~ ~~10-Q~~ ~~and Article 8 of Regulation~~ ~~S-X~~preparation of the ~~SEC. Certain information or footnote disclosures normally included in~~Company’s consolidated financial statements ~~prepared~~are summarized in ~~accordance with GAAP have been condensed or omitted, pursuant~~Note 2 to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensedthose financial statements ~~include all adjustments, consisting~~in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Certain of ~~a normal recurring nature, which~~those policies are ~~necessary for a fair~~considered to be particularly important to the presentation of the Company's financial ~~position, operating~~ results ~~and cash flows for~~because they require management to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain.

During the ~~periods presented.~~

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s final prospectus for its Initial Public Offering as filed with the SEC on June 10, 2020, (the “Final Prospectus”), as well as the Company’s Current Reports on Form ~~8-K,~~ ~~as filed with the SEC on June 11, 2020 and June 17, 2020. The interim results for the three~~six months ended June 30, ~~2020~~2023, there were no material changes to matters discussed under the heading “Critical Accounting Policies and ~~for the period from February 6, 2020 (inception) through June 30, 2020 are not necessarily indicative~~Estimates” in Part II, Item 7 of the ~~results to be expected~~Company’s Annual Report on Form 10-K for the year ~~ending~~ended December 31, ~~2020 or for any future interim periods.~~2022.

~~Emerging Growth Company~~Recent Accounting Pronouncements

~~The Company is an “emerging growth company,” as defined~~Information regarding recent accounting developments and their impact on our results can be found in ~~Section 2(a)~~Note 2, “Summary of Significant Accounting Policies and Estimates” in 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 independent registered public accounting firm 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 nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

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’saudited consolidated 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 condensed financial statements in conformity with 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 financial statements and the reported amounts of revenues and expenses during the reporting period.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from those estimates.

~~Cash and Cash Equivalents~~

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2020.

~~Common Stock Subject to Possible Redemption~~

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June 30, 2020, there are 39,591,543 shares of Class A common stock subject to possible redemption presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.

~~Offering Costs~~

Offering costs consist of legal, accounting and other costs incurred through the Initial Public Offering that are directly related to the Initial Public Offering. Offering costs amounting to $23,353,182 were charged to stockholders’ equity upon the completion of the Initial Public Offering.

~~Income Taxes~~

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their 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 rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of June 30, 2020, the Company had a deferred tax asset of approximately $7,600, which had a full valuation allowance recorded against it of approximately $7,600.

~~The Company’s currently taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally considered~~ ~~start-up~~ costs and are not currently deductible. During the three months ended June 30, 2020 and for the period from February 6, 2020 (inception) through June 30, 2020, the Company recorded no income tax expense. The Company’s effective tax rate for three months ended June 30, 2020 and for the period from February 6, 2020 (inception) through June 30, 2020 was approximately 0%, which differs from the expected income tax rate due to the ~~start-up~~ ~~costs (discussed above) which are not currently deductible.~~

ASC 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 recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 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. The Company is subject to income tax examinations by major taxing authorities since inception.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~Net Income (Loss) per Common Share~~

Net income (loss) per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 30,980,000 shares of Class A common stock in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

~~The Company’s condensed statement of operations includes a presentation of income per share for common shares subject to possible redemption in a manner similar to the~~ ~~two-class~~ method of income per share. Net income per common share, basic and diluted, for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account of $27,563 for the three months ended June 30, 2020 and for the period from February 6, 2020 (inception) through June 30, 2020 (net of applicable franchise and income taxes of approximately $27,000 for the three months ended June 30, 2020 and for the period from February 6, 2020 (inception) through June 30, 2020), by the weighted average number of Class A redeemable common stock for the period. Net loss per common share, basic and diluted, for Class B ~~non-redeemable~~ ~~common stock is calculated by dividing the net income, less income attributable to Class A redeemable common stock, by the weighted average number of Class B~~ ~~non-redeemable~~ ~~common stock outstanding for the period. Class B~~ ~~non-redeemable~~ ~~common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.~~

~~Concentration of Credit Risk~~

Financial instruments that potentially subject the Company to concentrations 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. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

~~Financial Instruments~~

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheet, primarily due to their short-term nature.

~~Recent Accounting Standards~~

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

~~NOTE 3. PUBLIC OFFERING~~

Pursuant to the Initial Public Offering, the Company sold 41,400,000 Units, which includes the full exercise by the underwriters of their option to purchase an additional 5,400,000 Units at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and ~~one-half~~ of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).

~~NOTE 4. PRIVATE PLACEMENT~~

Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 10,280,000 Private Placement Warrants for an aggregate purchase price of $10,280,000. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment (see Note 7). A portion of the proceeds from 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 proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~NOTE 5. RELATED PARTY TRANSACTIONS~~

~~Founder Shares~~

In February 2020, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration of 8,625,000 shares of the Company’s Class B common stock (the “Founder Shares”) for an aggregate price of $25,000. On May 20, 2020, the Sponsor transferred 25,000 Founder Shares to Amy Schulman, a director, and on June 3, 2020 the Sponsor transferred 25,000 shares to Thelma Duggin, a director, resulting in the Sponsor holding an aggregate of 8,575,000 Founder Shares. On June 8, 2020, the Company effected a 1:1.2 stock split of its Class B common stock, resulting an aggregate of 10,350,000 Founder Shares issued and outstanding, of which 10,300,000 Founder Shares are held by the Sponsor and 50,000 Founder Shares are held by the directors. All share and ~~per-share~~ amounts have been retroactively restated to reflect the stock split. The Founder Shares included an aggregate of up to 1,350,000 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the number of Founder Shares would collectively represent approximately 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor did not purchase any Public Shares in the Initial Public Offering). As a result of the underwriter’s election to fully exercise their over-allotment option, 1,350,000 Founder Shares are no longer subject to forfeiture.

The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) 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 a Business Combination, or (y) the date following the completion of a Business Combination on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property.

~~Promissory Note – Related Party~~

~~On February 6, 2020, the Company issued the Promissory Note to the Sponsor, pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. The Promissory Note was~~ ~~non-interest~~ bearing and payable on the earlier of December 31, 2020 or the consummation of the Initial Public Offering. As of June 11, 2020, there was $129,706 outstanding under the Promissory Note. The outstanding balance of $129,706 under the Promissory Note was repaid on June 12, 2020.

~~Related Party Loans~~

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s officers and directors or their affiliates 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 would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would 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 $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity. The warrants would be identical to the Private Placement Warrants. As of June 30, 2020, no Working Capital Loans were outstanding.

~~Administrative Support Agreement~~

The Company entered into an agreement whereby, commencing on June 8, 2020 through the earlier of the Company’s consummation of a Business Combination and its liquidation, the Company will pay an affiliate of the Sponsor a total of $10,000 per month for office space, secretarial and administrative services. For the three months ended June 30, 2020 and for the period from February 6, 2020 (inception) through June 30, 2020, the Company incurred $10,000 in fees for these services. As of June 30, 2020, $10,000 is included in accrued expenses in the accompanying condensed balance sheet.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~Forward Purchase Agreement~~

The Company entered into a forward purchase agreement with HEC Master Fund LP (“HEC Master”) pursuant to which HEC Master has committed to purchase from the Company up to 5,000,000 forward purchase units (the “Forward Purchase Units”), consisting of one share of Class A common stock (the “Forward Purchase Shares”) and ~~one-half~~ of one warrant to purchase one share of Class A common stock (the “Forward Purchase Warrants” and together with the Forward Purchase Units and the Forward Purchase Shares, the “Forward Purchase Securities”), for $10.00 per unit, or an aggregate amount of up to $50,000,000, in a private placement that will close concurrently with the closing of a Business Combination. The proceeds from the sale of these Forward Purchase Units, together with the amounts available to the Company from the Trust Account (after giving effect to any redemptions of Public Shares) and any other equity or debt financing obtained by the Company in connection with the Business Combination, will be used to satisfy the cash requirements of the Business Combination, including funding the purchase price and paying expenses and retaining specified amounts to be used by the post-Business Combination company for working capital or other purposes. To the extent that the amounts available from the Trust Account and other financing are sufficient for such cash requirements, HEC Master may purchase less than 5,000,000 Forward Purchase Units. In addition, HEC Master’s commitment under the forward purchase agreement will be subject to approval, prior to the Company entering into a definitive agreement for the initial Business Combination, of its investment committee. Pursuant to the terms of the Forward Purchase Agreement, HEC Master will have the option to assign its commitment to one of its affiliates and up to $2,500,000 to members of the Company’s management team. The Forward Purchase Shares will be identical to the shares of Class A common stock included in the ~~units sold~~Company's Annual Report on Form 10-K for the year ended December 31, 2022 and in Note 2, “Significant Accounting Policies” in the ~~Initial Public Offering, except that they will be subject~~notes to ~~transfer restrictions and registration rights. The Forward Purchase Warrants will have~~ the ~~same terms as the Private Placement Warrants so long as they are held by HEC Master or its permitted assignees and transferees.~~

~~NOTE 6. COMMITMENTS AND CONTINGENCIES~~

~~Risks and Uncertainties~~

~~Management continues to evaluate the impact of the~~ ~~COVID-19~~ pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. Thecondensed consolidated financial statements ~~do not include any adjustments that might result from the outcome~~ of this ~~uncertainty.~~Quarterly Report on Form 10-Q.

~~Registration Rights~~

~~Pursuant to a registration rights agreement entered into~~21

Table of Contents

FORWARD-LOOKING STATEMENTS

This Quarterly Report on June 8, 2020, the holders of the Founder Shares, Private Placement Warrants, Forward Purchase Securities 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, Forward Purchase Warrants and warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

~~Underwriting Agreement~~

The underwriters were paid a cash underwriting discount of $0.20 per Unit, or $8,280,000 in the aggregate. In addition, the underwriters are entitled to a deferred fee of $0.35 per Unit, or $14,490,000 in the aggregate. The deferred fee will be forfeited by the underwriters in the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting agreement.

~~NOTE 7. STOCKHOLDERS’ EQUITY~~

~~Preferred Stock —~~ The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. At June 30, 2020, there were no shares of preferred stock issued or outstanding.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~Class~~ ~~A Common Stock~~— The Company is authorized to issue 380,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At June 30, 2020, there were 1,808,457 shares of Class A common stock issued or outstanding, excluding 39,591,543 shares of Class A common stock subject to possible redemption.

~~Class~~ ~~B Common Stock~~— The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. At June 30, 2020, there were 10,350,000 shares of Class B common stock issued and outstanding.

~~Holders of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders except as required by law.~~

~~The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a~~ ~~one-for-one~~ basis, subject to adjustment. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an ~~as-converted~~ basis, 20% of the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by public stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination (including the Forward Purchase Shares but not the Forward Purchase Warrants), excluding any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder Shares will never occur on a less than ~~one-for-one~~ ~~basis.~~

~~Warrants~~ — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 12 months from the closing of the Proposed Public Offering and (b) 30 days after the completion of a Business Combination.

The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available.

The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of an initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

~~Once the warrants become exercisable, the Company may call the warrants for redemption:~~

~~in whole and not in part;~~

~~at a price of $0.01 per warrant;~~

~~upon not less than 30 days’ prior written notice of redemption to each warrant holder; and~~

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

if, and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities as described below) for any 20 trading days within a ~~30-trading~~ ~~day period ending on the third trading day prior to the date the Company sends the notice of redemption to the warrant holders.~~

If and when the warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

If the Company calls the Public Warrants for redemption for cash, 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 shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, 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 in the Trust Account, holders 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 of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

In addition, if (x) the Company issues additional Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination (excluding any issuance of Forward Purchase Securities) at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Proposed Public Offering, except that the Private Placement Warrants and the shares of Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and be ~~non-redeemable~~ so long as they are held by the initial purchasers or their permitted. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

~~NOTE 8. FAIR VALUE MEASUREMENTS~~

~~The Company classifies its U.S. Treasury and equivalent securities as~~ ~~held-to-maturity~~ ~~in accordance with ASC 320 “Investments—Debt and Equity Securities.”~~ ~~Held-to-maturity~~ ~~securities are those securities which the Company has the ability and intent to hold until maturity.~~ ~~Held-to-maturity~~ ~~treasury securities are recorded at amortized cost on the accompanying condensed balance sheet and adjusted for the amortization or accretion of premiums or discounts.~~

At June 30, 2020, assets held in the Trust Account were comprised of $814 in money market funds, which are invested in U.S. Treasury Securities, and $414,026,749 in U.S. Treasury Bills. During the period from February 6, 2020 (inception) through June 30, 2020, the Company did not withdraw any interest income from the trust account to pay its franchise taxes.

~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~The gross holding losses and fair value of~~ ~~held-to-maturity~~ ~~securities at June 30, 2020 are as follows:~~

Held-To-Maturity
   Amortized
Cost    Gross
Holding
Losses    Fair Value
June 30, 2020
   U.S. Treasury Securities (Mature on 9/10/2020)    $ 414,026,749    $ (13 )    $ 414,026,736

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:


~~Level 1:~~		Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

~~Level 2:~~		Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

~~Level 3:~~		~~Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.~~

~~NOTE 9. SUBSEQUENT EVENTS~~

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.

~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~References in this report~~Form 10-Q (the “Quarterly Report”) contains forward-looking statements. We intend such forward-looking statements to ~~“we,” “us” or~~be covered by the “Company” refer to Hudson Executive Investment Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to HEC Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financialsafe harbor provisions for forward-looking statements and the notes thereto contained elsewhere in this Quarterly Report (the “Financial Statements”). Capitalized terms used but not otherwise defined herein have the meaning set forth in the Financial Statements. Certain information contained in ~~the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.~~

~~Special Note Regarding Forward-Looking Statements~~

~~This Quarterly Report includes “forward-looking statements” within the meaning of~~ Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act ~~that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected.~~of 1934, as amended (the “Exchange Act”). All statements other than statements of historical ~~fact included~~facts contained in this Quarterly Report ~~including, without limitation,~~may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements regarding our future results of operations and financial position, industry and business trends, stock-based compensation, revenue recognition, business strategy, plans and market growth.

The forward-looking statements in this ~~“Management’s Discussion~~Quarterly Report and ~~Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations,~~other such statements we publicly make from time-to-time are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Suchonly predictions. We base these forward-looking statements ~~relate to~~largely on our current expectations and projections about future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performanceand financial trends that we believe may affect our business, financial condition, and results ~~discussed in the forward-looking statements. For information identifying~~of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that ~~could~~may cause our actual results, performance or achievements to ~~differ~~be materially different from ~~those anticipated in~~any future results, performance or achievements expressed or implied by the forward-looking statements, ~~please refer~~including, but not limited to, the ~~Risk Factors section~~important factors discussed in Part I, Item 1A, “Risk Factors” of the ~~Final Prospectus.~~Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The ~~Company’s securities filings can be accessed on the EDGAR section~~forward-looking statements in this Quarterly Report are based upon information available to us as of the ~~SEC’s website at www.sec.gov.~~date of this Quarterly, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report and the risk factors discussed in Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report. Except as ~~expressly~~ required by applicable ~~securities~~ law, ~~the Company disclaims any intention or obligation~~we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q or any forward-looking statements we may publicly make from time-to-time, whether as a result of any new information, future events or otherwise.

~~Overview~~Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~We are a blank check company incorporated on February 6, 2020 as a Delaware corporation and formed for~~During the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more target businesses. We intend to effectuate our Business Combination using cash from the proceeds of our Initial Public Offering , the sale of the Private Placement Warrants that occurred simultaneously with the completion of our Initial Public Offering and the sale of the Forward Purchase Units, shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.

~~The issuance of additional shares in connection with an initial Business Combination to the owners of the target or other investors, including the Forward Purchase Units:~~

may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A common stock on a greater than ~~one-to-one~~ ~~basis upon conversion of the Class B common stock;~~

~~may subordinate the rights of holders of Class A common stock if shares of preferred stock are issued with rights senior to those afforded our Class A common stock;~~

could cause a change in control if a substantial number of shares of our Class A common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

~~may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and~~

~~may adversely affect prevailing market prices for our Class A common stock and/or warrants.~~

~~Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:~~

~~default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations;~~

acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;

~~our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;~~

~~our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;~~

~~our inability to pay dividends on our Class A common stock;~~

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;

~~limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;~~

~~increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and~~

limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

~~We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.~~

~~Results of Operations~~

We have neither engaged in any operations nor generated any revenues to date. Our only activities through June 30, 2020 were organizational activities, including those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for our initial Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We generate ~~non-operating~~ income in the form of interest income on marketable securities held in the Trust Account. We incur 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 our initial Business Combination.

~~For the three~~six months ended June 30, ~~2020, we had a net loss of $35,385, which consists of operating costs of $62,948, offset by interest income on marketable securities held~~2023, there were no material changes to the information contained in ~~the Trust Account of $27,563.~~

For the period from February 6, 2020 (inception) through June 30, 2020, we had a net loss of $36,385, which consists of operating costs of $63,948, offset by interest income on marketable securities held in the Trust Account of $27,563.

~~Liquidity and Capital Resources~~

~~On June 11, 2020, we consummated the Initial Public Offering of 41,400,000 Units, which included the full exercise by the underwriters~~Part II, Item 7A of the over-allotment option to purchase an additional 5,400,000 Units, at $10.00 per Unit, generating gross proceeds of $414,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 10,280,000 Private Placement Warrants to our Sponsor at a price of $1.00 per warrant, generating gross proceeds of $10,280,000.

Following the Initial Public Offering, the exercise of the over-allotment option and the sale of the Private Placement Warrants, a total of $414,000,000 was placed in the Trust Account. We incurred $23,353,182 in transaction costs, including $8,280,000 of underwriting fees, $14,490,000 of deferred underwriting fees and $583,182 of other offering costs.

~~For the period from February 6, 2020 (inception) through June 30, 2020, cash used in operating activities was $159,665. Net loss of $36,385 was affected by interest earned~~Company’s Annual Report on marketable securities held in the Trust Account of $27,563, formation costs paid by the Sponsor of $2,125 and changes in operating assets and liabilities, which used $97,842 of cash from operating activities.

As of June 30, 2020, we had cash and marketable securities held in the Trust Account of $414,027,563. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable and deferred underwriting commissions) to complete our initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies. During the period ended June 30, 2020, we did not withdraw any interest income from the Trust Account.

As of June 30, 2020, we had $1,505,028 of cash held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.

In order to fund working capital deficiencies or finance transaction costs in connection with our initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside 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 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of $1.00 per warrant at the option of the lender.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking ~~in-depth~~ due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete 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 complete such financing simultaneously with the completion of our initial Business Combination. If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

~~Off-balance~~ ~~Sheet Financing Arrangements~~

~~We have no obligations, assets or liabilities, which would be considered~~ ~~off-balance~~ sheet arrangements as of June 30, 2020. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been establishedForm 10-K for the ~~purpose~~year ended December 31, 2022.

Table of ~~facilitating~~ ~~off-balance~~ ~~sheet arrangements. We have not entered into any~~ ~~off-balance~~ ~~sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any~~ ~~non-financial~~ ~~assets.~~Contents

~~Contractual Obligations~~

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of our Sponsor a monthly fee of $10,000 for office space, utilitiesItem 4. Controls and secretarial and administrative services to the Company. We began incurring these fees on June 8, 2020 and will continue to incur these fees monthly until the earlier of the completion of our Business Combination and the Company’s liquidation.Procedures.

The underwriters are entitled to a deferred fee of $0.35 per Unit, or $14,490,000 in the aggregate. The deferred fee will be forfeited by the underwriters in the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting agreement.

In addition, we into a forward purchase agreement with HEC Master pursuant to which HEC Master has committed to purchase from us up to 5,000,000 Forward Purchase Units, for $10.00 per unit, or an aggregate amount of up to $50,000,000, in a private placement that will close concurrently with the closing of a Business Combination. The proceeds from the sale of these Forward Purchase Units, together with the amounts available to us from the Trust Account (after giving effect to any redemptions of Public Shares) and any other equity or debt financing obtained by us in connection with the ~~Business Combination, will be used to satisfy the cash requirements~~preparation of the Business Combination, including funding the purchase price and paying expenses and retaining specified amounts to be used by the post-Business Combination company for working capital or other purposes. To the extent that the amounts available from the Trust Account and other financing are sufficient for such cash requirements, HEC Master may purchase less than 5,000,000 Forward Purchase Units. In addition, HEC Master’s commitmentthis report, an evaluation was carried out under the forward purchase agreement will be subject to approval, prior to us entering into a definitive agreement for the initial Business Combination, of its investment committee. Pursuant to the terms of the forward purchase agreement, HEC Master will have the option to assign its commitment to one of its affiliatessupervision, and up to $2,500,000 to members of our management team. The Forward Purchase Shares will be identical to the shares of Class A common stock included in the units sold in the Initial Public Offering, except that they will be subject to transfer restrictions and registration rights. The Forward Purchase Warrants will have the same terms as the Private Placement Warrants so long as they are held by HEC Master or its permitted assignees and transferees.

~~Critical Accounting Policies~~

The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

~~Common Stock Subject to Possible Redemption~~

~~We account for our common stock subject to possible redemption in accordance~~ with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the controlparticipation of, the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed balance sheet.

~~Net Income (Loss) Per Common Share~~

~~We apply the~~ ~~two-class~~ method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A redeemable common stock outstanding for the period. Net loss per common share, basic and diluted for Class B ~~non-redeemable~~ ~~common stock is calculated by dividing the net income, less income attributable to Class A redeemable common stock, by the weighted average number of Class B~~ ~~non-redeemable~~ ~~common stock outstanding for the period presented.~~

~~Recent Accounting Standards~~

~~Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.~~

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

As of June 30, 2020, we were not subject to any market or interest rate risk. The net proceeds received into the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

~~ITEM 4.~~

~~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 Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management including our Chief Executive Officer (“CEO”) and Chief Financial Officer ~~to allow timely decisions regarding required disclosure.~~

~~Evaluation of Disclosure Controls and Procedures~~

~~As required by Rules~~ ~~13a-15~~ ~~and~~ ~~15d-15~~ ~~under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation~~(“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Act”)) as of June 30, ~~2020.~~2023. Based upon ~~their~~the evaluation and although management has made significant progress in the design and implementation of IT and business process controls, our ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer~~CFO concluded ~~that~~ our disclosure controls and procedures ~~(as defined~~are not effective as of such date solely due to material weaknesses in ~~Rules~~ ~~13a-15~~ ~~(e)~~internal controls over financial reporting that were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and ~~15d-15~~ ~~(e) under~~are discussed below.

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the ~~Exchange Act)~~fiscal year ended December 31, 2022, we concluded that our internal control over financial reporting was not effective solely due to the existence of the following material weaknesses described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022:

Management was able to complete the design and establish effective information technology general controls (ITGCs) for the majority of tested ITGCs; however, some ineffective ITGC controls existed at December 31, 2022. As a result, business process controls (automated and IT-dependent manual controls) that are dependent on the ineffective ITGCs, or that use data produced from systems impacted by the ineffective ITGCs were ~~effective.~~deemed ineffective; and

Management did not have an adequate process in place to monitor and provide oversight over the completion of its testing and assessment of the design and operating effectiveness of internal control over financial reporting in a timely manner.

The material weaknesses did not result in any identified misstatements to the financial statements, and there were no changes to previously released financial results.

Remediation Plan for the Material Weakness

Management is committed to the remediation of the material weakness described above, as well as the continued improvement of the Company’s internal control over financial reporting. Management has implemented and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented and operating effectively.

Remediation efforts include but are not limited to, (a) hiring additional personnel with appropriate technical skill sets, (b) developing an execution plan and resources to test controls and providing timely feedback of any deficiencies noted to complete remediation (c) establishing a training program for the entire organization to support ongoing execution of internal controls and adherence to control activities and (d) actively monitoring corrective actions and providing status reporting to leadership on the progress.

Management will test and evaluate the implementation of internal controls and revised processes to ascertain whether they are designed and operating effectively to provide reasonable assurance that they will prevent or detect a material error in our financial statements.

We believe that once these actions have been completed, it will remediate the material weakness. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that controls are operating effectively.

Changes in Internal Control Over Financial Reporting

~~During the most recently completed fiscal quarter, there has~~There have been no ~~change~~changes in ~~our~~the Company’s internal control over financial reporting ~~that has~~during the six months ended June 30, 2023 which have materially affected, or isare reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting.

In order to enhance the Company's internal control over financial reporting, management has (a) hired additional personnel with appropriate technical skill sets, (b) developed an execution plan and engaged resources to test controls and provide timely feedback of any deficiencies noted, (c) provided training to the organization to support ongoing execution of internal controls and adherence to control activities, and (d) implemented status reporting to leadership on the progress of the assessment of the design and operating effectiveness of internal control over financial reporting.

Table of Contents

PART ~~II -~~ II—OTHER INFORMATION

~~ITEM 1.~~

~~LEGAL PROCEEDINGS.~~

~~None.~~Item 1. Legal Proceedings.

The Company reached settlements for certain class action lawsuits in February 2023 ending on going securities and derivatives suits. The settlements for these lawsuits have received preliminary court approval and are expected to receive final court approval in the third quarter of 2023. See Note 5, “Commitments and Contingent Liabilities” in the notes to the condensed consolidated financial statements for further details.

~~ITEM 1A.~~

~~RISK FACTORS.~~

~~Factors~~In addition to the foregoing, the Company may in the future be involved in various legal proceedings, claims and litigation that arise in the normal course of business. The Company accrues for estimated loss contingencies related to legal matters when available information indicates that it is probable a liability had been incurred and the Company can reasonably estimate the amount of that loss. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is often not possible to reasonably estimate the size of the possible loss or range of loss or possible additional losses or range of additional losses.

Item 1a. Risk Factors.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed under Part I, Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from ~~those~~our historical results or the results contemplated by any forward-looking statements contained in this Quarterly ~~Report are any of~~Report. During the risks described in the Final Prospectus. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report,six months ended June 30, 2023, there ~~have been~~were no material changes to the ~~risk factors disclosed in our Final Prospectus, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.~~

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~

On June 11, 2020, we consummated our Initial Public Offering of 41,400,000 Units, inclusive of underwriters’ election to fully exercise their over-allotment option, we sold an additional 5,400,000 Units. The Units were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $414,000,000. Citigroup Global Markets Inc and J.P. Morgan Securities LLC acted as the joint book running managers and SVB Leerink LLC acted as the ~~co-manager~~ ~~of the offering. The securities sold in the offering were registered under the Securities Act on a registration statement on Form~~ ~~S-1 (No. 333-238583).~~ ~~The SEC declared the registration statement effective on June 8, 2020.~~

Simultaneously with the consummation of the Initial Public Offering and the full exercise of the over-allotment option, we consummated a private placement of 10,280,000 Private Placement Warrants to our Sponsor at a price of $1.00 per Private Placement Warrant, generating total proceeds of $10,280,000. Such securities were issued pursuant to the exemption from registrationinformation contained in ~~Section 4(a)(2) of the Securities Act.~~

The Private Placement Warrants are the same as the warrants underlying the Units sold in the Initial Public Offering, except that Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and are ~~non-redeemable~~ ~~so long as they are held by the initial purchasers or their permitted transferees.~~

~~Of the gross proceeds received from the Initial Public Offering and the sale of the Private Placement Warrants, $414,000,000 was placed in the Trust Account.~~

We paid a total of $8,280,000 underwriting discounts and commissions and $583,182 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $14,490,000 in underwriting discounts and commissions.

~~For a description of the use of the proceeds generated in our Initial Public Offering, see~~ Part I, Item 21A of ~~this Quarterly Report.~~the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

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

Not applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES.~~

~~None.~~

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES.~~

~~Not applicable.~~

~~ITEM 5.~~

~~OTHER INFORMATION.~~

~~None.~~

~~ITEM 6.~~

~~EXHIBITS.~~

~~The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.~~


~~No.~~	~~Description of Exhibit~~	Filed/
Exhibit Number	Exhibit Description	Furnished Herewith
~~1.1~~	~~Underwriting Agreement, dated June 8, 2020, by and among the Company and Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as representatives of the several underwriters. (1)~~
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).	*
~~3.1~~ 31.2	~~Amended and Restated Certificate~~Certification of ~~Incorporation. (1)~~Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).	*
32.1
~~4.1~~	~~Warrant Agreement, dated June 8, 2020, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent. (1)~~

~~10.1~~	~~Letter Agreement, dated June 8, 2020, by and among the Company, its executive officers, its directors and HEC Sponsor LLC. (1)~~

~~10.2~~	~~Investment Management Trust Agreement, dated June 8, 2020, by and between the Company and Continental Stock Transfer & Trust Company, as trustee. (1)~~

~~10.3~~	~~Registration Rights Agreement, dated June 8, 2020, by and among the Company, HEC Sponsor LLC and the other holders party thereto. (1)~~

~~10.4~~	~~Private Placement Warrants Purchase Agreement, dated June 8, 2020, by and among the Company and HEC Sponsor LLC. (1)~~

~~10.5~~	~~Administrative Services Agreement, dated June 8, 2020, by and between the Company and HEC Sponsor LLC. (1)~~

~~10.6~~	~~Forward Purchase Agreement, dated June 8, 2020, by and between the Company and HEC Master Fund LP. (1)~~

31.1*	Certification of ~~Principal~~Chief Executive Officer ~~Pursuant to Securities Exchange Act Rules~~ ~~13a-14(a)~~ ~~and~~ ~~15(d)-14(a),~~ ~~as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

31.2*	~~Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules~~ ~~13a-14(a)~~ ~~and~~ ~~15(d)-14(a),~~ ~~as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

32.1**	~~Certification of Principal Executive Officer Pursuant~~pursuant to 18 U.S.C. Section ~~1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~1350.	**
32.2
32.2**	Certification of ~~Principal~~Chief Financial Officer ~~Pursuant~~pursuant to 18 U.S.C. Section ~~1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~1350.	**
101.INS
101.INS*	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.	*
101.SCH	Inline XBRL Taxonomy Extension Schema Document.	*
101.CAL* 101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.	*
101.DEF
101.SCH*	~~XBRL Taxonomy Extension Schema Document~~

101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.	*
101.LAB
101.LAB*	Inline XBRL Taxonomy Extension ~~Labels~~Label Linkbase ~~Document~~Document.	*
101.PRE
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.	*
104	Cover Page Interactive Data File (as formatted as Inline XBRL and contained in Exhibit 101).	*

*	~~Filed herewith.~~

**	~~Furnished.~~

~~(1)~~

~~Previously filed as an exhibit to our Current Report on Form~~ ~~8-K~~ ~~filed on June 11, 2020 and incorporated by reference herein.~~

* Filed herewith.

~~SIGNATURES~~** Furnished herewith.

SIGNATURES

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


			~~HUDSON EXECUTIVE INVESTMENT CORP.~~

~~Date: August 14, 2020~~					~~/s/ Douglas G. Bergeron~~	Talkspace, Inc.
			~~Name:~~		~~Douglas G. Bergeron~~
			~~Title:~~	Date: August 2, 2023		By:	/s/ Jon Cohen
		Jon Cohen
		Chief Executive Officer ~~and Director~~ ~~(Principal Executive Officer)~~

~~Date: August 14, 2020~~					~~/s/ Jonathan Dobres~~
Date: August 2, 2023	By:		~~Name:~~		~~Jonathan Dobres~~ /s/ Jennifer Fulk
			~~Title:~~				Jennifer Fulk
		Chief Financial Officer ~~(Principal Financial and Accounting Officer)~~

2126


ASSETS
Current assets
Cash	$	1,505,028
Prepaid expenses		174,508

Total Current Assets		1,679,536
Cash and marketable securities held in trust account		414,027,563

Total Assets	$	415,707,099

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accrued expenses	$	76,666
Accrued offering costs		225,000

Total Current Liabilities		301,666
Deferred underwriting fee payable		14,490,000

Total Liabilities		14,791,666

Commitments and contingencies
Class A common stock subject to possible redemption, 39,591,543 shares at $10.00 per share redemption value		395,915,430
Stockholders’ Equity
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding		—
Class A common stock, $0.0001 par value; 380,000,000 shares authorized; 1,808,457 shares issued and outstanding (excluding 39,591,543 shares subject to possible redemption)		181
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 10,350,000 shares issued and outstanding		1,035
Additional paid-in capital		5,035,172
Accumulated deficit		(36,385	)

Total Stockholders’ Equity		5,000,003

Total Liabilities and Stockholders’ Equity	$	415,707,099


	Three Months Ended June 30,			For the Period from February 6, 2020 (Inception) Through June 30,
	2020			2020
General and administrative expenses	$	62,948		$	63,948

Loss from operations		(62,948	)		(63,948	)
Other income:
Interest earned on marketable securities held in trust account		27,563			27,563

Loss before provision for income taxes		(35,385	)		(36,385	)
Provision for income taxes		—			—

Net loss	$	(35,385	)	$	(36,385	)

Weighted average shares outstanding of Class A redeemable common stock		41,400,000			41,400,000

Basic and diluted income per share, Class A	$	—		$	—

Weighted average shares outstanding of Class B non-redeemable common stock		10,350,000			10,350,000

Basic and diluted net loss per share, Class B	$	(0.00	)		(0.00	)


	Class A Common Stock						Class B Common Stock				Additional Paid-in			Accumulated			Total Stockholders’
	Shares			Amount			Shares		Amount		Capital			Deficit			Equity
Balance – February 6, 2020 (Inception)		—		$	—			—	$	—	$	—		$	—		$	—
Issuance of Class B common stock to Sponsor		—			—			10,350,000		1,035		23,965			—			25,000
Net loss		—			—			—		—		—			(1,000	)		(1,000	)

Balance – March 31, 2020		—			—			10,350,000		1,035		23,965			(1,000	)		24,000
Sale of 41,400,000 Units, net of underwriting discounts		41,400,000			4,140			—		—		390,642,678			—			390,646,818
Sale of 10,280,000 Private Placement Warrants		—			—			—		—		10,280,000			—			10,280,000
Common stock subject to possible redemption		(39,591,543	)		(3,959	)		—		—		(395,911,471	)		—			(395,915,430	)
Net loss		—			—			—		—		—			(35,385	)		(35,385	)

Balance – June 30, 2020		1,808,457		$	181			10,350,000	$	1,035	$	5,035,172		$	(36,385	)	$	5,000,003


	Held-To-Maturity	Amortized Cost		Gross Holding Losses			Fair Value
June 30, 2020	U.S. Treasury Securities (Mature on 9/10/2020)	$	414,026,749	$	(13	)	$	414,026,736