UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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 September 30, ~~2020~~2021

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

For the transition period from to

Commission File Number: 001-39515

American Well Corporation

(Exact name of registrant as specified in its charter)

Delaware		20-5009396
~~Delaware~~		~~20-5009396~~
(State of incorporation)		(I.R.S. Employer Identification Number)

75 State Street, 26th Floor

Boston, MA 02109

(Address of registrant’s principal executive offices)

(617) 204-3500

(Registrant’s telephone number, including area code)

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, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 ☒

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock,

par value of $0.01 per share

AMWL

The New York Stock Exchange

As of October ~~30, 2020,~~31, 2021, the number of shares of the registrant’s Class A common stock outstanding was ~~199,891,685,~~227,489,928, the number of shares of the registrant’s Class B common stock outstanding was ~~29,508,844~~26,913,579 and the number of shares of the registrant’s Class C common stock outstanding was 5,555,555.

American Well Corporation

QUARTERLY REPORT ON FORM 10-Q

For the period ended September 30, ~~2020~~2021

TABLE OF CONTENTS


		Page
PART I	Financial Information		3
Item 1.	Financial Statements		3
	Condensed Consolidated Balance Sheet as of September 30, ~~2020~~2021 (unaudited) and December 31, ~~2019~~2020		3
	Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited) for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020		4
	Condensed Consolidated Statement of Stockholders’ Equity (Deficit) (unaudited) for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020		5
	Condensed Consolidated Statement of Cash Flows (unaudited) for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020		7
	Notes to the Unaudited Condensed Consolidated Financial Statements		8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		36	38
Item 4.	Controls and Procedures		36	39
PART II	Other Information		38	42
Item 1.	Legal Proceedings		38	42
Item 1A.	Risk Factors		38	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		38	43
Item 3.	Defaults Upon Senior Securities		39	44
Item 4.	Mine Safety Disclosures		39	44
Item 5.	Other Information		39	44
Item 6.	Exhibits		40	45

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	790,402		$	941,616
Investments		—			99,963
Restricted cash		—			1,095
Accounts receivable ($497 and $12,053, from related parties and net of allowances of $1,497 and $1,556, respectively)		39,851			45,296
Inventories		9,100			9,128
Deferred contract acquisition costs		1,339			2,134
Prepaid expenses and other current assets		13,902			14,055
Total current assets		854,594			1,113,287
Restricted cash		795			—
Property and equipment, net		2,714			3,836
Goodwill		443,903			193,877
Intangible assets, net		159,926			55,528
Operating lease right-of-use asset		17,780			6,609
Deferred contract acquisition costs, net of current portion		1,921			1,327
Other assets		1,520			1,430
Investment in minority owned joint venture		1,205			752
Total assets	$	1,484,358		$	1,376,646
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	5,278		$	5,797
Accrued expenses and other current liabilities		45,910			42,135
Contingent consideration liabilities		11,850			—
Operating lease liability, current		3,121			6,357
Deferred revenue ($683 and $14,421 from related parties, respectively)		60,949			66,693
Total current liabilities		127,108			120,982
Other long-term liabilities		4,210			64
Contingent consideration liabilities, net of current portion		33,340
Operating lease liability, net of current portion		14,988			1,296
Deferred revenue, net of current portion ($26 and $486 from related parties, respectively)		7,050			8,107
Total liabilities		186,696			130,449
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.01 par value; 100,000,000 shares authorized, 0 shares issued or outstanding as of September 30, 2021 and as of December 31, 2020		—			—
Common stock, $0.01 par value; 1,000,000,000 Class A shares authorized, 227,158,943 and 201,488,097 shares issued, and 227,158,943 and 200,751,168 shares outstanding, respectively; 100,000,000 Class B shares authorized, 26,650,761 and 30,427,128 shares issued, and 26,650,761 and 29,297,382 shares outstanding, respectively; 200,000,000 Class C shares authorized 5,555,555 issued and outstanding as of September 30, 2021 and December 31, 2020		2,595			2,357
Treasury stock, 0 shares and 1,866,675 shares as of September 30, 2021 and December 31, 2020, respectively		—			(37,568	)
Additional paid-in capital		2,038,012			1,841,405
Accumulated other comprehensive income		(2,237	)		297
Accumulated deficit		(762,441	)		(582,359	)
Total American Well Corporation stockholders’ equity		1,275,929			1,224,132
Non-controlling interest		21,733			22,065
Total stockholders’ equity		1,297,662			1,246,197
Total liabilities and stockholders’ equity	$	1,484,358		$	1,376,646

   September 30,
2020 December 31,
2019
Current assets:

Cash and cash equivalents
   $ 956,417 $ 137,673
Investments
   129,914 39,953
Restricted cash
   300 —
Accounts receivable ($1,408 and $2,601 from related parties and net of allowances of $1,333 and $686, respectively)
   39,962 32,730
Inventories
   7,775 3,104
Deferred contract acquisition costs
   865 1,130
Prepaid expenses and other current assets
   8,408 8,937


Total current assets
   1,143,641 223,527
Restricted cash
   795 1,143
Property and equipment, net
   4,352 2,664
Goodwill
   193,877 193,877
Intangible assets, net
   57,718 63,535
Operating lease right-of-use asset
   8,201 11,944
Deferred contract acquisition costs, net of current portion
   2,627 1,639
Other assets
   1,126 1,552
Investment in minority owned joint venture
   1,690 —


Total assets
   $ 1,414,027 $ 499,881


Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Current liabilities:

Accounts payable
   $ 7,670 $ 6,504
Accrued expenses and other current liabilities
   38,301 27,351
Operating lease liability, current
   6,321 6,232
Deferred revenue ($6,325 and $12,912 from related parties, respectively)
   54,324 66,490


Total current liabilities
   106,616 106,577
Other long-term liabilities
   115 309
Operating lease liability, net of current portion
   3,056 7,164
Deferred revenue, net of current portion ($275 and $1,385 from related parties, respectively)
   7,480 10,896


Total liabilities
   117,267 124,946


Commitments and contingencies (Note 12)

Convertible preferred stock, $0.01 par value; no shares authorized, issued or outstanding as of September 30, 2020, and 17,744,445 shares authorized 14,061,508 shares issued and 14,012,935 shares outstanding as of December 31, 2019; aggregate liquidation preference of $0 and $608,449, respectively
   —   655,799
Stockholders’ equity (deficit):

Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued or outstanding as of September 30, 2020, and no shares authorized, issued or outstanding as of December 31, 2019
   —   —
Common stock, $0.01 par value; 1,000,000,000 Class A shares authorized, 200,131,318 shares issued and 199,647,646 shares outstanding, 100,000,000 Class B shares authorized, 29,950,326 shares issued and 29,032,042 shares outstanding, 200,000,000 Class C shares authorized 5,555,555 issued and outstanding as of September 30, 2020; and 220,000,000 common stock shares authorized, 42,338,679 shares issued and 42,302,845 shares outstanding as of December 31, 2019
   2,343 423
Treasury stock, 1,401,956 shares and 35,834 shares as of September 30, 2020 and as of December 31, 2019, respectively
   (24,320 ) (158 )
Additional paid-in capital
   1,828,395 50,289
Accumulated other comprehensive income
   50 250
Accumulated deficit
   (532,047 ) (357,927 )


Total American Well Corporation stockholders’ equity (deficit)
   1,274,421 (307,123 )
Non-controlling interest
   22,339 26,259


Total stockholders’ equity (deficit)
   1,296,760 (280,864 )


Total liabilities, convertible preferred stock and stockholders’ equity (deficit)
   $ 1,414,027 $ 499,881

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

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Revenue
($14,868, $8,253, $44,028 and $24,404 from related parties, respectively)	$	62,551		$	34,744		$	184,833		$	103,825
($698, $15,912, $11,005 and $29,160 from related parties, respectively)													$	62,223		$	62,551		$	180,039		$	184,833
Costs and operating expenses:
Costs of revenue, excluding depreciation and amortization of intangible assets		42,116			19,060			118,969			55,060			35,184			42,116			104,778			118,969
Research and development		25,275			13,602			57,848			39,169			27,399			25,275			72,817			57,848
Sales and marketing		13,758			11,309			39,978			33,951			16,370			13,758			44,891			39,978
General and administrative		43,113			14,654			138,537			40,189			34,380			43,113			79,946			138,537
Depreciation and amortization expense		2,576			1,868			7,371			5,668			4,340			2,576			9,330			7,371

Total costs and operating expenses		126,838			60,493			362,703			174,037			117,673			126,838			311,762			362,703

Loss from operations		(64,287	)		(25,749	)		(177,870	)		(70,212	)		(55,450	)		(64,287	)		(131,723	)		(177,870	)
Interest income and other income (expense), net		255			1,286			1,410			4,547

Loss before benefit (expense) from income taxes and loss from equity method investment		(64,032	)		(24,463	)		(176,460	)		(65,665	)
Benefit (expense) from income taxes		(78	)		392			(330	)		22
Interest income and other (expense) income, net														(382	)		255			(97	)		1,410
Loss before expense from income taxes and loss from equity method investment														(55,832	)		(64,032	)		(131,820	)		(176,460	)
Benefit (Expense) from income taxes														5,454			(78	)		5,042			(330	)
Loss from equity method investment		(486	)		—			(1,250	)		—			(554	)		(486	)		(2,095	)		(1,250	)

Net loss		(64,596	)		(24,071	)		(178,040	)		(65,643	)		(50,932	)		(64,596	)		(128,873	)		(178,040	)
Net loss attributable to non-controlling interest		(1,515	)		(56	)		(3,920	)		(884	)

Net income (loss) attributable to non-controlling interest														562			(1,515	)		(332	)		(3,920	)
Net loss attributable to American Well Corporation	$	(63,081	)	$	(24,015	)	$	(174,120	)	$	(64,759	)	$	(51,494	)	$	(63,081	)	$	(128,541	)	$	(174,120	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.92	)	$	(0.57	)	$	(3.38	)	$	(1.55	)	$	(0.20	)	$	(0.92	)	$	(0.51	)	$	(3.38	)
Weighted-average common shares outstanding, basic and diluted		68,499,106			41,933,597			51,492,988			41,805,929			257,283,961			68,499,106			250,115,414			51,492,988

Net loss	$	(64,596	)	$	(24,071	)	$	(178,040	)	$	(65,643	)	$	(50,932	)	$	(64,596	)	$	(128,873	)	$	(178,040	)
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale investments		(135	)		(226	)		(415	)		(938	)
Other comprehensive income (loss), net of tax:
Unrealized gain on available-for-sale investments														0			(135	)		(85	)		(415	)
Foreign currency translation		37			(59	)		215			(188	)		(2,377	)		37			(2,449	)		215

Comprehensive loss		(64,694	)		(24,356	)		(178,240	)		(66,769	)		(53,309	)		(64,694	)		(131,407	)		(178,240	)
Less: Comprehensive loss attributable to non-controlling interest		(1,515	)		(56	)		(3,920	)		(884	)		562			(1,515	)		(332	)		(3,920	)

Comprehensive loss attributable to American Well Corporation	$	(63,179	)	$	(24,300	)	$	(174,320	)	$	(65,885	)	$	(53,871	)	$	(63,179	)	$	(131,075	)	$	(174,320	)

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

AMERICAN WELL CORPORATION

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

(in thousands, except share amounts)

(unaudited)

																																		Common Stock						Treasury			Additional Paid-In			Accumulated Other Comprehensive			Accumulated			American Well Corporation Stockholders’			Noncontrolling			Total Stockholders’
	Convertible Preferred Stock						Common Stock, Class A, Class B and Class C shares						Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			American Well Corporation Stockholders’ Equity (Deficit)			Noncontrolling Interest			Total Stockholders’ Equity (Deficit)			Shares			Amount			Stock			Capital			Income (Loss)			Deficit			Equity			Interest			Equity
	Shares			Amount			Shares			Amount
Balances as of December 31, 2019		14,012,935		$	655,799			42,302,845		$	423		$	(158	)	$	50,289		$	250		$	(357,927	)	$	(307,123	)	$	26,259		$	(280,864	)
Issuance of Series C convertible preferred stock, net of issuance costs of $261		170,000			12,489			—			—			—			—			—			—			—			—			—
Balances as of January 1, 2021																																			235,604,105		$	2,357		$	(37,568	)	$	1,841,405		$	297		$	(582,359	)	$	1,224,132		$	22,065		$	1,246,197
Exercise of common stock options		—			—			7,392			—			—			2			—			—			2			—			2			3,474,375			34			—			10,096			—			—			10,130			—			10,130
Vesting of restricted stock units		—			—			146,969			1			—			—			—			—			1			—			1			853,842			9			—			(9	)		—			—			—			—			—
Retirement of treasury stock purchased in 2020																																			—			—			37,568			(15	)		—			(37,553	)		—			—			—
Shares withheld related to net share settlement and retired treasury stock in 2021																																			(402,060	)		(4	)		—			4			—			(9,771	)		(9,771	)		—			(9,771	)
Stock-based compensation expense		—			—			—			—			—			4,458			—			—			4,458			—			4,458			—			—			—			8,642			—			—			8,642			—			8,642
Retirement of treasury stock		—			—			—			—			158			(158	)		—			—			—			—			—
Currency translation adjustment		—			—			—			—			—			—			(171	)		—			(171	)		—			(171	)		—			—			—			—			(52	)		—			(52	)		—			(52	)
Unrealized gains on available-for-sale securities, net of tax		—			—			—			—			—			—			43			—			43			—			43			—			—			—			—			34			—			34			—			34
Net loss		—			—			—			—			—			—			—			(24,382	)		(24,382	)		(843	)		(25,225	)		—			—			—			—			—			(39,188	)		(39,188	)		(617	)		(39,805	)

Balances as of March 31, 2020		14,182,935		$	668,288			42,457,206		$	424		$	—		$	54,591		$	122		$	(382,309	)	$	(327,172	)	$	25,416		$	(301,756	)

Issuance of Series C convertible preferred stock, net of issuance costs of $750		1,342,750			133,525			—			—			—			—			—			—			—			—			—
Balances as of March 31, 2021																																			239,530,262			2,396			—			1,860,123			279			(668,871	)		1,193,927			21,448			1,215,375
Exercise of common stock options		—			—			768,106			8			—			2,319			—			—			2,327			—			2,327			1,812,491			18			—			6,656			—			—			6,674			—			6,674
Vesting of restricted stock units		—			—			204,829			2			—			—			—			—			2			—			2			844,900			9			—			(9	)		—			—			—			—			—
Treasury stock		—			—			(61,600	)		—			(163	)		—			—			—			(163	)		—			(163	)
Shares withheld related to net share settlement and retired treasury stock in 2021																																			(68,750	)		(1	)		—			1			—			(1,857	)		(1,857	)		—			(1,857	)
Stock-based compensation expense		—			—			—			—			—			67,638			—			—			67,638			—			67,638			—			—			—			10,726			—			—			10,726			—			10,726
Currency translation adjustment		—			—			—			—			—			—			349			—			349			—			349			—			—			—			—			(20	)		—			(20	)		—			(20	)
Unrealized loss on available-for-sale securities, net of tax		—			—			—			—			—			—			(323	)		—			(323	)		—			(323	)
Unrealized gains on available-for-sale securities, net of tax																																			—			—			—			—			(119	)		—			(119	)		—			(119	)
Net loss		—			—			—			—			—			—			—			(86,657	)		(86,657	)		(1,562	)		(88,219	)		—			—			—			—			—			(37,859	)		(37,859	)		(277	)		(38,136	)

Balances as of June 30, 2020		15,525,685		$	801,813			43,368,541		$	434		$	(163	)	$	124,548		$	148		$	(468,966	)	$	(343,999	)	$	23,854		$	(320,145	)

Balances as of June 30, 2021																																			242,118,903			2,422			—			1,877,497			140			(708,587	)		1,171,472			21,171			1,192,643
Exercise of common stock options		—			—			885,253			9			—			1,877			—			—			1,886			—			1,886			491,598			5			—			1,872			—			—			1,877			—			1,877
Vesting of restricted stock units		—			—			3,458,849			34			—			(34	)		—			—			—			—			—			3,989,239			40			—			(40	)		—			—			—			—			—
Class A and Class B shares withheld related to net share settlement of loans		—			—			(1,340,354	)		(13	)		(24,157	)		13			—			—			(24,157	)		—			(24,157	)
Conversion of Series A, Series B, and Series C convertible preferred stock into Class A shares		(15,525,685	)		(801,813	)		136,625,900			1,366			—			800,447			—			—			801,813			—			801,813
Issuance of Class A shares in connection with initial public offering, net of offering costs and underwriting discounts of $53,730		—			—			45,681,499			457			—			768,080			—			—			768,537			—			768,537
Issuance of Class C shares in connection with Google Private Placement, net of offering costs of $900		—			—			5,555,555			56			—			99,044			—			—			99,100			—			99,100
Shares withheld related to net share settlement and retired treasury stock in 2021																																			(211,494	)		(2	)		—			2			—			(2,360	)		(2,360	)		—			(2,360	)
Issuance of stock under employee stock purchase plan																																			178,021			2			—			1,597			—			—			1,599			—			1,599
Issuance of common stock in acquisitions																																			12,798,992			128			—			143,979			—			—			144,107			—			144,107
Stock-based compensation expense		—			—			—			—			—			34,420			—			—			34,420			—			34,420			—			—			—			12,388			—			—			12,388			—			12,388
Capital contributed by selling shareholders of acquired businesses																																			—			—			—			717			—			—			717			—			717
Currency translation adjustment		—			—			—			—			—			—			37			—			37			—			37			—			—			—			—			(2,377	)		—			(2,377	)		—			(2,377	)
Unrealized loss on available-for-sale securities, net of tax		—			—			—			—			—			—			(135	)		—			(135	)		—			(135	)
Net loss		—			—			—			—			—			—			—			(63,081	)		(63,081	)		(1,515	)		(64,596	)		—			—			—			—			—			(51,494	)		(51,494	)		562			(50,932	)

Balances as of September 30, 2020		—		$	—			234,235,243		$	2,343		$	(24,320	)	$	1,828,395		$	50		$	(532,047	)	$	1,274,421		$	22,339		$	1,296,760

Balances as of September 30, 2021																																			259,365,259		$	2,595		$	—		$	2,038,012		$	(2,237	)	$	(762,441	)	$	1,275,929		$	21,733		$	1,297,662

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

AMERICAN WELL CORPORATION

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

(in thousands, except share amounts)

(unaudited)

																																		Convertible Preferred Stock							Common Stock						Treasury			Additional Paid-In			Accumulated Other Comprehensive			Accumulated			American Well Corporation Stockholders’			Noncontrolling			Total Stockholders’
	Convertible Preferred Stock				Common Stock								Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)								American Well Corporation Stockholders’ Deficit							Total Stockholders’ Deficit			Shares				Amount			Shares			Amount			Stock			Capital			Income (Loss)			Deficit			Deficit			Interest			(Deficit)
	Shares		Amount		Shares			Amount		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit					American Well Corporation Stockholders’ Deficit			Noncontrolling Interest
Balances as of December 31, 2018		12,927,549	$	575,713		41,393,622		$	414		—			$	37,127		$	1,351			$	(270,737	)		$	(231,845	)		$	27,435	Total Stockholders’ Deficit				$	(204,410	)
Exercise of common stock options		—		—		443,846			4		—			357			—				—				361				—			361
Stock-based compensation expense		—		—		—			—		—			2,600			—				—				2,600				—			2,600
Currency translation adjustment		—		—		—			—		—			—			(49	)			—				(49	)			—			(49	)
Unrealized loss on available-for-sale securities, net of tax		—		—		—			—		—			—			(333	)			—				(333	)			—			(333	)
Net loss		—		—		—			—		—			—			—				(21,131	)			(21,131	)			(384	)		(21,515	)

Balances as of March 31, 2019		12,927,549	$	575,713		41,837,468		$	418	$	—		$	40,084		$	969			$	(291,868	)		$	(250,397	)		$	27,051		$	(223,346	)

Exercise of common stock options		—		—		11,546			—		—			18			—				—				18				—			18
Stock-based compensation expense		—		—		—			—		—			2,471			—				—				2,471				—			2,471
Currency translation adjustment		—		—		—			—		—			—			(80	)			—				(80	)			—			(80	)
Unrealized loss on available-for-sale securities, net of tax		—		—		—			—		—			—			(379	)			—				(379	)			—			(379	)
Net loss		—		—		—			—		—			—			—				(19,613	)			(19,613	)			(444	)		(20,057	)

Balances as of June 30, 2019		12,927,549	$	575,713		41,849,014		$	418	$	—		$	42,573		$	510			$	(311,481	)		$	(267,980	)		$	26,607		$	(241,373	)

Balances as of January 1, 2020																																			14,012,935			$	655,799			42,302,845			423		$	(158	)		50,289		$	250		$	(357,927	)	$	(307,123	)	$	26,259		$	(280,864	)
Issuance of Series C convertible preferred stock, net of issuance costs of $261																																			170,000				12,489			—			—			—			—			—			—			—			—			—
Exercise of common stock options		—		—		75,647			1		—			229			—				—				230				—			230			—				—			7,392			—			—			2			—			—			2			—			2
Vesting of restricted stock units		—		—		146,968			1		—			—			—				—				1				—			1			—				—			146,969			1			—			(1	)		—			—			—			—			—
Stock-based compensation expense		—		—		—			—		—			3,604			—				—				3,604				—			3,604			—				—			—			—			—			4,458			—			—			4,458			—			4,458
Treasury Stock		—		—		(35,834	)		—		(158	)		—			—				—				(158	)			—			(158	)
Retirement of treasury stock																																			—				—			—			—			158			(158	)		—			—			—			—			—
Currency translation adjustment		—		—		—			—		—			—			(59	)			—				(59	)			—			(59	)		—				—			—			—			—			—			(171	)		—			(171	)		—			(171	)
Unrealized loss on available-for-sale securities, net of tax		—		—		—			—		—			—			(226	)			—				(226	)			—			(226	)
Unrealized gains on available-for-sale securities, net of tax																																			—				—			—			—			—			—			43			—			43			—			43
Net loss		—		—		—			—		—			—			—				(24,015	)			(24,015	)			(56	)		(24,071	)		—				—			—			—			—			—			—			(24,381	)		(24,381	)		(843	)		(25,224	)

Balances as of September 30, 2019		12,927,549	$	575,713		42,035,795			420		(158	)	$	46,406		$	225			$	(335,496	)		$	(288,603	)		$	26,551		$	(262,052	)

Balances as of March 31, 2020																																			14,182,935				668,288			42,457,206			424			—			54,590			122			(382,308	)		(327,172	)		25,416			(301,756	)
Issuance of Series C convertible preferred stock, net of issuance costs of $750																																			1,342,750				133,525			—			—			—			—			—			—			—			—			—
Treasury stock																																			—				—			(61,600	)					(163	)		—			—			—			(163	)		—			(163	)
Exercise of common stock options																																			—				—			768,106			8			—			2,322			—			—			2,330			—			2,330
Vesting of restricted stock units																																			—				—			204,829			2			—			(2	)		—			—			—			—			—
Stock-based compensation expense																																			—				—			—			—			—			67,638			—			—			67,638			—			67,638
Currency translation adjustment																																			—				—			—			—			—			—			349			—			349			—			349
Unrealized gains on available-for-sale securities, net of tax																																			—				—			—			—			—			—			(323	)		—			(323	)		—			(323	)
Net loss																																			—				—			—			—			—			—			—			(86,658	)		(86,658	)		(1,562	)		(88,220	)
Balances as of June 30, 2020																																			15,525,685				801,813			43,368,541			434			(163	)		124,548			148			(468,966	)		(343,999	)		23,854			(320,145	)
Exercise of common stock options																																			—				—			885,253			9			—			1,877			—			—			1,886			—			1,886
Vesting of restricted stock units																																			—				—			3,458,849			34			—			(34	)		—			—			—			—			—
Class A and Class B shares withheld to net share settlement of loans																																			—				—			(1,340,354	)		(13	)		(24,157	)		13			—			—			(24,157	)		—			(24,157	)
Conversion of Series A, Series B, and Series C convertible preferred stock into Class A shares																																			(15,525,685	)			(801,813	)		136,625,900			1,366			—			800,447			—			—			801,813			—			801,813
Issuance of Class A shares in connection with initial public offering, net of offering costs and underwriting discounts of $53,730																																			—				—			45,681,499			457			—			768,080			—			—			768,537			—			768,537
Issuance of Class A shares in connection with Google Private Placement, net of offering costs of $900																																			—				—			5,555,555			56			—			99,044			—			—			99,100			—			99,100
Stock-based compensation expense																																			—				—			—			—			—			34,420			—			—			34,420			—			34,420
Currency translation adjustment																																			—				—			—			—			—			—			37			—			37			—			37
Unrealized gains on available-for-sale securities, net of tax																																			—				—			—			—			—			—			(135	)		—			(135	)		—			(135	)
Net loss																																			—				—			—			—			—			—			—			(63,081	)		(63,081	)		(1,515	)		(64,596	)
Balances as of September 30, 2020																																			—			$	-			234,235,243		$	2,343		$	(24,320	)	$	1,828,395		$	50		$	(532,047	)	$	1,274,421		$	22,339		$	1,296,760

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

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share and per share amounts)

(unaudited)

							Nine Months Ended September 30,
	Nine Months Ended September 30,						2021			2020
	2020			2019
Cash flows from operating activities:
Net loss	$	(178,040	)	$	(65,643	)	$	(128,873	)	$	(178,040	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		7,371			5,668			9,330			7,371
Provisions for doubtful accounts		1,236			621			401			1,236
Amortization of deferred contract acquisition costs		852			797			1,254			852
Amortization of deferred contract fulfillment costs		510			531			535			510
Accretion of contingent consideration								600			—
Noncash compensation costs incurred by selling shareholders								717			—
Stock-based compensation expense		106,516			8,675			31,756			106,516
Loss on equity method investment		1,250			—			2,095			1,250
Deferred income taxes								(4,184	)		—
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		(8,468	)		11,878			11,325			(8,468	)
Inventories		(4,671	)		(500	)		28			(4,671	)
Deferred contract acquisition costs		(1,575	)		(1,115	)		(1,053	)		(1,575	)
Prepaid expenses and other current assets		(1	)		(797	)		946		��	(1	)
Other assets		426			(846	)		319			426
Accounts payable		(135	)		13			(1,332	)		(135	)
Accrued expenses and other current liabilities		2,353			553			(1,564	)		2,353
Other long-term liabilities		(194	)		(902	)		(1,784	)		(194	)
Deferred revenue		(15,364	)		(25,548	)		(17,130	)		(15,364	)

Net cash used in operating activities		(87,934	)		(66,615	)		(96,614	)		(87,934	)

Cash flows from investing activities:
Purchases of property and equipment		(3,261	)		(1,098	)		(221	)		(3,261	)
Investment in minority owned joint venture		(2,940	)		—
Investment in less than majority owned joint venture								(2,548	)		(2,940	)
Purchases of investments		(159,608	)		(78,946	)		—			(159,608	)
Proceeds from sales and maturities of investments		69,132			226,509			100,000			69,132

Net cash (used in) provided by investing activities		(96,677	)		146,465

Acquisitions of business, net of cash acquired								(156,526	)
Net cash used in investing activities								(59,295	)		(96,677	)
Cash flows from financing activities:
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs		146,014			—			—			146,014
Proceeds from exercise of common stock options		4,235			610			18,539			4,235
Proceeds from employee stock purchase plan								1,599			—
Payments for the purchase of treasury stock		(18,417	)		(158	)		(13,988	)		(18,417	)
Proceeds from issuance of common stock in initial public offering, net of underwriting costs and commissions		772,931			—			—			772,931
Proceeds from issuance of common stock to Google		100,000			—			—			100,000
Payment of deferred offering costs		(1,456	)		—			(1,613	)		(1,456	)

Net cash provided by financing activities		1,003,307			452			4,537			1,003,307

Net increase in cash, cash equivalents, and restricted cash		818,696			80,302
Effect of exchange rates changes on cash, cash equivalents, and restricted cash								(142	)		—
Net decrease in cash, cash equivalents, and restricted cash								(151,514	)		818,696
Cash, cash equivalents, and restricted cash at beginning of period		138,816			54,070			942,711			138,816

Cash, cash equivalents, and restricted cash at end of period	$	957,512		$	134,372		$	791,197		$	957,512

Cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents		956,417			133,277			790,402			956,417
Restricted cash		1,095			1,095			795			1,095

Total cash, cash equivalents, and restricted cash at end of period	$	957,512		$	134,372		$	791,197		$	957,512

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	138		$	—		$	1,414		$	138
Supplemental disclosure of non-cash investing and financing activities:
Additions to property and equipment included in accrued expenses and accounts payable	$	19		$	—		$	312		$	19
Initial public offering and Google common stock offering costs in accrued expenses	$	3,838		$	—		$	—		$	3,838
Treasury stock costs in accrued expenses	$	5,903		$	—		$	—		$	5,903
Receivable related to exercise of common stock options							$	142		$	—

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

AMERICAN WELL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

(unaudited)

1. Organization and Description of Business

Description of Business

American Well Corporation (the “Company”) was incorporated under the laws of the State of Delaware in June 2006. The Company is headquartered in Boston, Massachusetts. The Company is a leading telehealth company that enables the digital distribution and delivery of care for healthcare’s key stakeholders. The Company’s scalable technology is deployed at the enterprise level of clients, embeds into existing offerings and workflows, spans the continuum of care and enables the delivery of this care across a wide variety of clinical, retail, school and home settings.

The Company is subject to a number of risks similar to other companies of a similar size in the high technology industry, including, but not limited to, uncertainty of progress in developing technologies, new technological innovations, dependence on key personnel, protection of proprietary technology, uncertainty of market acceptance of telehealthAcquisitions

On August 9, 2021 and ~~the need for additional financing.~~

~~Initial Public Offering~~

~~On September 21, 2020,~~August 27, 2021, the Company ~~closed on its initial public offering (the “IPO”~~completed the acquisitions of Conversa Health Inc. (“Conversa”) and SilverCloud Health Holdings, Inc. (“SilverCloud”), respectively (together, the “Acquisitions”). Conversa is a leader in which the Company issued and sold 45,681,499 shares of Class A common stock, including the exercise of an underwriter option to purchase additional shares, at an issuance price of $18.00 per share. The Company received net proceeds of $768,537 after deducting underwriting discounts and commissions of $49,336 as well as other offering costs of $4,394. Upon the closing of the IPO, the Company’s then-outstanding convertible preferred stock converted into an aggregate of 136,625,900 shares of Class A common stock.automated virtual healthcare. SilverCloud is a leading digital mental health platform. See Note 7 “Business Combinations”.

~~Google Private Placement~~

On August 22, 2020, the Company entered into a strategic partnership and stock purchase agreement with Google LLC, where the Company agreed to issue Google $100,000 of Class C common stock, with the price per share to be equal to the purchase price in the IPO. Concurrently with the IPO, the Company consummated the private placement offering to Google and issued Google 5,555,555 shares of Class C common stock for $99,100 after deducting offering costs of $900.

Stock Split

On August 28, 2020, the Company effected an 8.8-for-1.0 stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s then outstanding convertible preferred stock (see Note ~~11)~~10). The corresponding number of shares and exercise prices related to stock options and RSUs were also adjusted. The impact of the stock split has been applied retrospectively to all periods presented.

Liquidity and Capital Resources

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. Through September 30, 2020, the Company has primarily funded its operations with proceeds from the initial public offering, the sales of convertible preferred stock and revenue from customers who purchase access to the Company’s telehealth platform. On September 21, 2020, the Company closed on the IPO raising $822,267 in gross proceeds. On September 21, 2020, the Company closed on a private placement with Google raising $100,000 in gross proceeds. Since inception, the Company has incurred recurring losses. As of September 30, ~~2020,~~2021, the Company had an accumulated deficit of ~~$532,047.~~$762,441. The Company expects to continue to generate operating losses for the foreseeable future.

The Company expects that its cash, cash equivalents and investments balance as of September 30, 2021 of $790,402 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months.

2. Summary of Significant Accounting Policies

There have been no material changes to the significant accounting policies described in the Company’s ~~final prospectus, as amended, filed~~Form 10-K for the fiscal year ended December 31, 2020, that have had a material impact on ~~September 18, 2020 with~~ the ~~SEC pursuant to Rule 424(b) under the Securities Act of 1933 (the “Prospectus”) during the nine months ended September 30, 2020.~~consolidated financial statements and related notes.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary for the fair statement of the Company’s the financial position, results of operations and cash flows at the dates and for the periods indicated. The interim results for the three and nine months ended September 30, ~~2020~~2021 are not necessarily indicative of results for the full ~~2020~~2021 calendar year or any other future interim periods. The information included in the interim financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in the ~~Prospectus.~~Form 10-K.

The unaudited condensed consolidated financial statements include the accounts of American Well Corporation, its wholly-owned subsidiaries, those of professional corporations, which represent variable interest entities in which American Well has an interest and is the primary beneficiary (“PC”), and National Telehealth Network (“NTN”), an entity in which American Well controls fifty percent or more of the voting shares (see Note 4). Intercompany accounts and transactions have been eliminated in consolidation.

For substantially all of the Company’s subsidiaries, the functional currency is the U.S. dollar. Foreign currency denominated monetary assets and liabilities are remeasured into U.S. dollars at current exchange rates and foreign currency denominated nonmonetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. Gains or losses from foreign currency remeasurement and settlements are included in interest income and other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

For consolidated entities where American Well owns or is exposed to less than 100% of the economics, the net ~~income (loss)~~loss attributable to noncontrolling interests is recorded in the condensed consolidated statements of operations and comprehensive loss equal to the percentage of the economic or ownership interest retained in each entity by the respective non-controlling party. The noncontrolling interests are presented as a separate component of stockholders’ deficit in the condensed consolidated balance sheets.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the estimated customer relationship period that is used in the amortization of deferred contract acquisition costs, the valuation of assets and liabilities acquired in business combinations, the useful lives of intangible assets and property and equipment and the valuation of common stock. The Company bases its estimates on historical experience, known trends, and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

Due to the COVID-19 global pandemic, the global economy and financial markets have been disrupted and there is a significant amount of uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and has not experienced any significant impact to its estimates and assumptions as a result of the COVID-19 pandemic. On an ongoing basis, the Company will continue to closely monitor the COVID-19 impact on its estimates and assumptions.

Segment Information

The Company’s chief operating decision makers (CODMs), its two Chief Executive Officers, review financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company operates and manages its business as ~~one~~1 reportable and operating segment. In addition, substantially all of the Company’s revenue and long-lived assets are attributable to operations in the United States for all periods presented.

Variable Interest Entities

The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex and involve judgment. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its condensed consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.

The aggregate carrying value of total assets and total liabilities included on the condensed consolidated balance sheets for the PCs after elimination of intercompany transactions were ~~$31,987~~$22,771 and ~~$2,216,~~$1,893, respectively, as of September 30, ~~2020~~2021 and ~~$35,714~~$22,682 and ~~$5,777,~~$1,998, respectively as of December 31, ~~2019.~~2020.

Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was ~~$18,206~~$18,356 and ~~$3,698~~$18,206 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Net ~~income~~loss included on the condensed consolidated statements of operations and comprehensive loss ~~for the PCs after elimination of intercompany transactions $12,258 and $3,562~~was not material for the three months ended September 30, ~~2020~~2021 and ~~2019, respectively.~~2020. Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was ~~$61,596~~$53,511 and ~~$13,905~~$61,596 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Net ~~income~~loss included on the condensed consolidated statements of operations and comprehensive loss was not material for the ~~PCs after elimination of intercompany transactions was $42,644~~three and ~~$13,267 for the~~ nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

Investment in Minority Owned Joint Venture

The Company and Cleveland Clinic partnered to form a joint venture, under the name CCAW, JV LLC, to provide broad access to comprehensive and high acuity care services via telehealth. The Company does not have a controlling financial interest in CCAW, JV LLC, but it does have the ability to exercise significant influence over the operating and financial policies of CCAW, JV LLC. Therefore, the Company accounts for its investment in CCAW, JV LLC using the equity method of accounting. The joint venture is considered a variable interest entity under ASC 810-10, but the Company is not the primary beneficiary as it does not have the power to direct the activities of the joint venture that most significantly impact its performance. The Company’s evaluation of ability to impact performance is based on Cleveland Clinic’s managing directors and Cleveland Clinic’s ability to appoint and remove the chairperson who has the ability to cast the tie breaking vote on the most significant activities.

~~During the nine months ended September 30,~~In 2020 the Company contributed $2,940 as its initial investment for a 49% interest in CCAW, JV LLC. The agreement also requires aggregate total capital contributions by the Company up to an additional $11,800 in two phases, which is yet to be defined. ~~For~~During the ~~three months and~~ nine months ended September 30, 2021, the Company made a capital contribution of $2,548, related to a portion of the phase one capital commitment. For the three months ended September 30, 2021 and 2020, the Company recognized a loss of $554 and $486 as its proportionate share of the joint venture’s results of operations, respectively. For the nine months ended September 30, 2021 and 2020, the Company recognized a loss of $2,095 and $1,250 as its proportionate share of the joint venture’s results of operations, respectively. Accordingly, the carrying value of the equity method investment as of September 30, 2021 and December 31, 2020 was ~~$1,690.~~$1,205 and $752, respectively.

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, investments and accounts receivable. The Company invests its excess cash with large financial institutions that the Company believes are of high credit quality. Cash and cash equivalents are invested in highly rated money market funds. At times, the Company’s cash balances with individual banking institutions are in excess of federally insured limits. The Company’s investments are invested in U.S. government agency bonds. The Company has not experienced any losses on its deposits of cash, cash equivalents or investments. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company performs ongoing assessments and credit evaluations of its customers to assess the collectability of the accounts based on a number of factors, including past transaction experience, age of the accounts receivable, review of the invoicing terms of the contracts, and recent communication with customers. The Company has not experienced significant credit losses from its accounts receivable. As of September 30, ~~2020~~2021 and December 31, ~~2019, no~~2020, one customer accounted for ~~10% or greater~~21% and 19% of outstanding accounts ~~receivable.~~receivable, respectively.

During the three ~~and nine~~ months ended September 30, 2021 and 2020, sales to one customer (who was a related party ~~customer~~during the 2020 period noted) represented ~~22% of the Company’s total revenue, for both periods. During the three and nine months ended September 30, 2019, sales to one related party customer represented 23%~~26% and 22% of the Company’s total revenue, respectively.

During the nine months ended September 30, 2021 and 2020, sales to one customer (who was a related party during the periods noted) represented 25% and 22% of the Company’s total revenue, respectively.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13,Fair Value Measurement (Topic 820): Disclosure Requirements for Fair Value Measurement (‘‘ASU 2018-13’’), which modifies the existing disclosure requirements for fair value measurements in Topic 820. The new disclosure requirements include disclosure related to changes in unrealized gains or losses included in other comprehensive ~~income (loss)~~loss for recurring Level 3 fair value measurements held at the end of each reporting period and the explicit requirement to disclose the range and weighted-average of significant unobservable inputs used for Level 3 fair value measurements. The other provisions of ASU 2018-13 include eliminated and modified disclosure requirements. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. For all entities, this guidance is required to be adopted for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The guidance was adopted effective January 1, 2020 and did not have a material impact on the condensed consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud ComputingArrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use-software. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The guidance was adopted effective January 1, 2020 and did not have a material impact on the condensed consolidated financial statements and disclosures.

~~Recently Issued Accounting Pronouncements~~

In ~~June 2016,~~December 2019, the FASB issued ASU ~~No. 2016-13,~~~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ~~(‘‘~~2019-12, Simplifying the Accounting for Income Taxes (“ASU ~~2016-13’’~~2019-12”), which ~~requires~~simplifies the ~~measurement~~accounting for income taxes by removing certain exceptions and ~~recognition of expected credit losses~~clarifying and amending existing guidance. ASU 2019-12 removes certain exceptions for ~~financial assets held at amortized cost. ASU~~ ~~2016-13~~ ~~replaces~~performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the ~~existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to~~ ~~available-for-sale~~ ~~debt securities to be recorded through an allowance~~accounting for ~~credit losses rather than as~~franchise taxes, transactions that result in a ~~reduction~~step-up in the ~~amortized cost~~tax basis of goodwill, and the ~~securities. These~~effect of enacted changes ~~may result~~ in ~~earlier recognition of credit losses. In November 2018, the FASB issued ASU~~ ~~No. 2018-19,~~~~Codification Improvements to~~~~Topic 326, Financial Instruments—Credit Losses~~~~, which narrowed the scope and changed the effective date for~~ ~~non-public~~ ~~entities for ASU~~ ~~2016-13.~~ ~~The FASB subsequently issued supplemental guidance within ASU~~ ~~No. 2019-05,~~~~Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief~~ ~~(‘‘ASU~~ ~~2019-05’’).~~ ~~ASU~~ ~~2019-05~~ ~~provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis.~~tax laws or rates in interim periods. For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU ~~2016-13~~ ~~is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU~~ ~~2016-13~~ is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. This standard will be effective for the Company on January 1, 2023. The Company is currently evaluating the impact that the adoption of ASU ~~2016-13~~ ~~will have on its condensed consolidated financial statements.~~

~~In December 2019, the FASB issued ASU~~ 2019-12 ~~Simplifying the Accounting for Income Taxes (“ASU~~ ~~2019-12”),~~ which simplifies the accounting for income taxes by removing certain exceptions and clarifying and amending existing guidance. For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU ~~2019-12~~ is effective for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption ~~of the amendments~~ is permitted. The ~~Company is planning on early adopting this standard on~~guidance was adopted effective January 1, 2021 and did not have a material impact on the condensed consolidated financial statements and disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU 2021-08 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The guidance was adopted effective July 1, 2021 and impacted the accounting of acquired deferred revenue for the Conversa and SilverCloud acquisitions that occurred in August 2021.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (‘‘ASU 2016-13’’), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (‘‘ASU 2019-05’’). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The guidance will be adopted in the 2021 annual condensed consolidated financial statements. The Company is currently evaluating the impact that the adoption of ASU ~~2019-12~~2016-13 will have on its condensed consolidated financial statements.

3. Revenue

The following table presents the Company’s revenues disaggregated by revenue source:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Platform subscription	$	25,834	$	21,959	$	72,048	$	60,849	$	26,736	$	25,834	$	78,112	$	72,048
Visits		28,455		7,177		90,936		25,681		30,042		28,455		85,395		90,936
Other		8,262		5,608		21,849		17,295		5,445		8,262		16,532		21,849

Total Revenue	$	62,551	$	34,744	$	184,833	$	103,825	$	62,223	$	62,551	$	180,039	$	184,833

Accounts Receivable, Net

Accounts receivable primarily consist of amounts billed currently due from customers. Accounts receivable are presented net of an allowance for doubtful accounts, which is an estimate of amounts that may not be collectible. In determining the amount of the allowance at each reporting date, the Company makes judgments about general economic conditions, historical write-off experience and any specific risks identified in customer collection matters, including the aging of unpaid accounts receivable and changes in customer financial conditions. Account balances are written off after all means of collection are exhausted and the potential for non-recovery is determined to be probable. Adjustments to the allowance for doubtful accounts are recorded as general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.

Changes in the allowance for doubtful accounts were as follows:


	Nine Months Ended September 30, 2020			Year Ended December 31, 2019			Nine Months Ended September 30,			Year Ended December 31, 2020
Allowance for doubtful accounts, beginning of the period	$	686		$	396		$	1,556		$	686
Provisions		1,236			717			401			1,646
Write-offs		(589	)		(427	)		(460	)		(776	)

Allowance for doubtful accounts, end of the period	$	1,333		$	686		$	1,497		$	1,556

The Company has rights to consideration for services completed but not billed at the reporting date. Unbilled receivables are classified as receivables when the Company has the right to invoice the customer. The amount of unbilled accounts receivable was ~~$3,294~~$6,826 and ~~$1,622~~$3,376 as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, and has been included within accounts receivable on the condensed consolidated balance sheet.

Deferred Revenue

Contract liabilities consist of deferred revenue and include billings in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. For the three ~~and nine-months~~months ended September 30, 2021 and 2020, the Company recognized revenue of ~~$43,656~~$16,912 and ~~$61,775,~~$43,656, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. For the ~~three and nine-months~~nine months ended September 30, ~~2019,~~2021 and 2020, the Company recognized revenue of ~~$25,229~~$56,058 and ~~$57,128~~$61,775, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented.

Significant changes in the Company’s deferred revenue balance for the nine months ended September 30, ~~2020~~2021 and the year ended December 31, ~~2019~~2020 were as follows:


	Nine Months Ended September 30, 2020			Year Ended December 31, 2019			Nine Months Ended September 30,			Year Ended December 31, 2020
Total deferred revenue, beginning of the period	$	77,386		$	93,299		$	74,800		$	77,386
Additions		56,825			85,167			77,857			109,542
Recognized		(72,407	)		(101,080	)		(84,658	)		(112,128	)

Total deferred revenue, end of the period	$	61,804		$	77,386		$	67,999		$	74,800

Current deferred revenue								60,949			66,693
Non-current deferred revenue								7,050			8,107
Total							$	67,999		$	74,800

   September 30, 2020    December 31, 2019
Current deferred revenue
   54,324    66,490
Non-current deferred revenue
   7,480    10,896




Total deferred revenue, end of the period
   $ 61,804    $ 77,386

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$170,168~~$184,001 and ~~$162,230,~~$192,238, respectively. The substantial majority of the unsatisfied performance obligations will be satisfied over the next three years.

As it pertains to the ~~December 31, 2019~~September 30, 2021 amount, the Company expects to recognize 45% of the transaction price in the year ending December 31, 2020 in its condensed consolidated statement of operations and comprehensive loss with the remainder recognized thereafter. As it pertains to the September 30, 2020 amount, the Company expects to recognize 45%48% of the transaction price in the 12 month period ended September 30, ~~2021,~~2022, in its condensed consolidated statement of operations and comprehensive loss with the remainder recognized thereafter.

4. National Telehealth Network

In 2012, the Company and an affiliate of Anthem, Inc. formed NTN to expand the availability and adoption of telemedicine. The Company did not have a controlling financial interest in NTN, but it had the ability to exercise ~~significance~~significant influence over the operating and financial policies of NTN. Therefore, the Company accounted for its investment in NTN using the equity method of accounting through December 31, 2015.

On January 1, 2016, the Company made an additional investment in NTN, which increased its ownership percentage above 50%. The Company also obtained the right to elect the Chairman of NTN, who has the ability to cast the tie-breaking vote in all decisions. Therefore, on January 1, 2016, the Company obtained control over NTN and has the power to direct the activities that most significantly impact NTN’s economic performance. This step-acquisition was accounted for as a business combination and the results of the operations of NTN from January 1, 2016, have been included in the Company’s condensed consolidated financial statements. However, because the Company owns less than 100% of NTN, the Company recognizes net ~~income (loss)~~loss attributable to non-controlling interest in the condensed consolidated statements of operations and comprehensive loss equal to the percentage of the ownership interest retained in NTN by the respective non-controlling party.

The proportionate share of the ~~income (loss)~~(income)/loss attributed to the non-controlling interest amounted to ~~$(1,515)~~$(562) and ~~($56)~~$1,515 for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The proportionate share of the loss attributed to the non-controlling interest amounted to ~~($3,920)~~$332 and ~~($884)~~$3,920 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The carrying value of the non-controlling interest was ~~$22,339~~$21,733 and ~~$26,259~~$22,065 as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

5. Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure

fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

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

•

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The following tables presents the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:


	September 30, 2020								September 30, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market funds	$	52,955	$	—	$	—	$	52,955	$	714,097	$	—	$	—	$	714,097
Investments		—		129,914		—		129,914		—		—		—		—

		52,955		129,914		—	$	182,869


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Money market funds	$	62,113	$	—	$	—	$	62,113
Investments		—		39,953		—	$	39,953

		62,113		39,953		—		102,066

Total financial assets:									$	714,097	$	—	$	—	$	714,097
Contingent consideration										—		—		45,190		45,190
Total financial liabilities:									$	—	$	—	$	45,190	$	45,190

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Money market funds	$	892,934	$	—	$	—	$	892,934
Investments		—		99,963		—		99,963
Total financial assets:	$	892,934	$	99,963	$	—	$	992,897

The Company’s cash equivalents were invested in money market funds and were valued based on Level 1 inputs. The Company’s investments consisted of U.S. government agency bonds and were valued based on Level 2 inputs. In determining the fair value of its U.S. government agency bonds, the Company relied on quoted prices for similar securities in active markets or other inputs that are observable or can be corroborated by observable market data.

The Company has classified its net liability for contingent earnout considerations relating to the Acquisitions within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which included the Monte Carlo method that uses key assumptions to model future revenue and costs of goods sold projections. The income approach method involves calculating the earnout payment based on the forecasted revenue and the revenue discount rate of 1.3% and 3.2% for SilverCloud and Conversa, respectively. A description of the Acquisitions is included within Note 7. The contingent earnout payments for each acquisition are based on the achievement of certain revenue and integration thresholds.

	Nine Months Ended September 30,
Beginning Balance as of January 1	$	—
Initial estimate of fair value related to SilverCloud contingent consideration		29,360
Initial estimate of fair value related to Conversa contingent consideration		15,230
Accretion of contingent consideration		600
Ending Balance	$	45,190

During the nine months ended September 30, ~~2020,~~2021, there were no0 transfers between fair value measurement levels.

6. Investments

As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair value of the Company’s investments by type of security was as follows:

   September 30, 2020
   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
Losses    Fair Value
Assets:

U.S government securities
   $ 129,831    $ 83    $ —      $ 129,914








   129,831    83    —      129,914








   December 31, 2019
   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
Losses    Fair Value
Assets:

U.S government securities
   $ 39,355    $ 598    $ —      $ 39,953








   39,355    598    —      39,953

September 30, 2021

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Fair Value

Assets:

U.S government securities

—

	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Assets:
U.S government securities	$	99,854	$	109	$	—	$	99,963
	$	99,854	$	109	$	—	$	99,963

7. Business Combinations

~~In November 2019,~~On August 27, 2021, the Company ~~acquired all~~completed the ~~issued and outstanding shares~~acquisition of ~~Aligned Telehealth, Inc. (“Aligned”). This acquisition will combine Aligned’s customer base with~~SilverCloud through a merger in which SilverCloud became a wholly-owned subsidiary of the ~~Company’s telehealth platform to increase the number of hospitals and health plans utilizing telehealth.~~Company. The ~~aggregate~~cash consideration paid was ~~$82,948, which consists~~$105,195 net of ~~(i) 456,667~~cash acquired of $12,239. The stock consideration was comprised of 8.1 million shares of the Company’s ~~Series C convertible preferred~~Class A common stock valued at ~~$34,250; (ii) $48,688 of cash~~$85,571, and ~~(iii) contingent~~escrow share consideration of ~~$10.~~$6,376. SilverCloud is a leading digital mental health platform. The Company is obligated to pay an earn-out of up to ~~$70,000~~$40,000 contingent upon ~~Aligned~~SilverCloud achieving certain revenue ~~and margin~~ thresholds for the year ending December 31, ~~2020.~~2022. The Company estimated the fair value of the contingent consideration as of the acquisition ~~date.~~date to be $29,360. The contingent consideration is subject to remeasurement at each reporting date until December 31, ~~2020,~~2022, with the remeasurement adjustment reported in the ~~condensed~~ consolidated ~~statements~~statement of operations and comprehensive loss.

The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were ~~$1,494~~$5,571 which included transaction costs from financial and legal advisors and other transaction related fees, as well as $717 of noncash compensation costs, and were recognized as ~~general and administrative expense~~incurred in the ~~condensed~~

Company’s consolidated ~~statements~~statement of operations and comprehensive loss ~~during~~in general and administrative expenses. The noncash compensation costs related to the SilverCloud acquisition are for additional noncash compensation costs incurred by the selling SilverCloud shareholders for certain employees that have continued employment after the transaction date and through the earn-out period, and will be a reoccurring cost until the payout of earn-out in 2023.

On August 9, 2021, the Company completed the acquisition of Conversa through a merger in which Conversa became a wholly-owned subsidiary of the Company. The cash consideration paid was $51,331 net of cash acquired of $9,735. This consideration was comprised of 4.7 million shares of the Company’s Class A common stock valued at $52,160. Conversa is a leader in automated virtual healthcare. The Company is obligated to pay an earn-out of up to $30,000 contingent upon Conversa achieving certain integration thresholds in the first quarter of 2022, and certain revenue thresholds for the year ~~ended~~ending December 31, ~~2019.~~2022. The Company estimated the fair value of the contingent consideration as of the acquisition date to be $15,230. The contingent consideration is subject to remeasurement at each reporting date until December 31, 2022, with the remeasurement adjustment reported in the consolidated statement of operations and comprehensive loss. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $2,435 which included transaction costs from financial and legal advisors and other transaction related fees and were recognized as incurred in the Company’s consolidated statement of operations and comprehensive loss in general and administrative expenses.

The Acquisitions were accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. The results of ~~operations of Aligned have been included in~~ the ~~Company’s condensed~~Acquisitions were integrated within the consolidated financial statements ~~of operations from~~commencing on the aforementioned acquisition ~~date.~~dates. Actual revenue and losses of ~~Aligned~~the Acquisitions since the acquisition date as well as pro forma combined results of operations for the ~~Aligned acquisition~~Acquisition have not been presented because the effect of the ~~acquisition~~Acquisition was not material to the Company’s ~~condensed~~ consolidated financial results for the periods presented. ~~There was no change in~~

The following table summarizes the preliminary fair value estimates of the assets acquired and liabilities assumed for the SilverCloud and Conversa acquisitions at the respective acquisition dates. The Company, with the assistance of a third-party valuation expert, estimated the preliminary fair value of the ~~contingent consideration during the three~~acquired tangible and ~~nine months ended September 30, 2020.~~

intangible assets with significant estimates such as revenue projections. The ~~final~~ allocation of the ~~purchase~~ consideration transferred to the assets acquired and the liabilities assumed is preliminary. This can

be revised as a result of ~~$82,948 is~~additional information obtained due to the finalization of the valuation inputs and assumptions as ~~follows:~~well as completing the assessment of the tax attributes of the business combination. Additional adjustments that could have a material impact on the Company’s results of operations and financial position may be recorded within the measurement period, which will not exceed one year from the respective acquisition dates.

Identifiable assets acquired and liabilities assumed (in thousands):

				SilverCloud			Conversa Health
Purchase consideration:
Cash consideration, net of cash acquired				$	105,195		$	51,331
Stock consideration					85,571			52,160
Contingent consideration					29,360			15,230
Escrow share consideration					6,376
Working capital adjustment					(309	)		(193	)
Total consideration transferred				$	226,193		$	118,528
	Amount
Cash	$	2,938
Allocation of Consideration transferred:
Accounts receivable		3,612		$	2,630		$	3,651
Identifiable intangible assets		14,100			78,146			34,700
Other assets		179			491			4,604

Total assets acquired		20,829			81,267			42,955
Current liabilities		(3,102	)		2,155			8,463
Deferred tax liability		(1,388	)

Deferred revenue					5,813			4,655
Other long-term liabilities					8,731			1,383
Total liabilities assumed		(4,490	)		16,699			14,501

Goodwill		66,609		$	161,625		$	90,074
				$	226,193		$	118,528
Total purchase consideration	$	82,948

The amount allocated to goodwill reflects the benefits the Company expects to realize from post-acquisition cross selling opportunities from integrating customer relationships and from the growth of the respective acquisitions’ operations.

The following are the identifiable intangible assets acquired in the Acquisitions and their respective weighted average useful lives, as determined based on ~~final~~initial valuations:

	SilverCloud		Weighted Average Life (Years)		Conversa Health		Weighted Average Life (Years)
Technology	$	34,996		5.0	$	20,400		5.0
Tradename		10,800		7.0		4,200		5.0
Customer relationships		32,350		10.0		10,100		10.0
Total	$	78,146			$	34,700

   Amount    Weighted
Average
Life (Years)
Customer relationships
   $ 13,800    7.0
Trade name
   300    7.0



Total
   $ 14,100

~~Customer-relationship intangible assets were valued using the multi-period, excess-earnings method, a method that values the intangible asset using the present value of the~~ ~~after-tax~~ cash flows attributable to the intangible asset only. Key assumptions used in developing the valuation included the estimated annual net cash flows (including forecasted revenue, gross margin, and expenses) and the discount rate that appropriately reflects the risk inherent in each future cash flow stream, all of which were estimated by management. Goodwill represents the excess of the purchase consideration over the estimated acquisition date fair value of the net tangible and intangible assets acquired and liabilities assumed. Goodwill is primarily attributable to expected post-acquisition cross-selling opportunities from integrating Aligned’s customer relationships with the Company’s telehealth platform.

8. Goodwill and Intangible Assets

Goodwill consisted of the following:


	Nine Months Ended September 30, 2020		Year Ended December 31, 2019
	Nine Months Ended September 30, 2020		Year Ended December 31, 2019
Beginning Balance as of January 1	$	193,877	$	127,268	$	193,877		$	193,877
Goodwill acquired (Note 7)		—		66,609
Goodwill acquired						251,699			—
Currency translation adjustments						(1,673	)		—

Ending Balance	$	193,877	$	193,877	$	443,903		$	193,877

Identified intangible assets consisted of the following:

										Gross Amount		Accumulated Amortization			Carrying Value		Weighted Average Remaining Life
September 30, 2021
Customer relationships										$	81,059	$	(14,785	)	$	66,274		8.6
Contractor relationships											535		(237	)		298		7.3
Tradename											14,855		(255	)		14,600		6.3
Technology											91,994		(13,240	)	$	78,754		5.5
										$	188,443	$	(28,517	)	$	159,926
	Gross Amount		Accumulated Amortization			Carrying Value		Weighted Average Remaining Life
December 31, 2019
										Gross Amount		Accumulated Amortization			Carrying Value		Weighted Average Remaining Life
December 31, 2020
Customer relationships	$	38,782	$	(7,416	)	$	31,366		8.0	$	38,782	$	(11,380	)	$	27,402		7.0
Contractor relationships		535		(165	)		370		9.0		535		(206	)		329		8.0
Trade name		300		(4	)		296		6.9		300		(300	)		—		—
Technology		37,063		(5,560	)		31,503		8.5		37,063		(9,266	)		27,797		7.5
										$	76,680	$	(21,152	)	$	55,528
	$	76,680	$	(13,145	)	$	63,535

   Gross
Amount    Accumulated
Amortization    Carrying
Value    Weighted
Average
Remaining Life
September 30, 2020

Customer relationships
   $ 38,782    $ (10,390 )    $ 28,392    7.3
Contractor relationships
   535    (195 )    340    8.3
Trade name
   300    (38 )    262    6.1
Technology
   37,063    (8,339 )    28,724    7.8







   $ 76,680    $ (18,962 )    $ 57,718

Amortization expense related to intangible assets for the three ~~and nine~~ months ended September 30, 2021 and 2020 was ~~$1,940~~$3,819 and ~~$5,817,~~$1,940, respectively. Amortization expense related to intangible assets for the ~~three and~~ nine months ended September 30, ~~2019~~2021 and 2020 was ~~$1,435~~$7,675 and ~~$4,305,~~$5,817, respectively. Estimated future amortization expense of the identified intangible assets as of September 30, ~~2020,~~2021, is as follows:


2020	$	1,938
2021		7,755	$	6,291
2022		7,755		25,114
2023		7,755		25,114
2024		7,755		25,130
2025				25,114
Thereafter		24,760		53,163
			$	159,926

9. Accrued Expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:

					Nine Months Ended September 30,		Year Ended December 31, 2020
	September 30, 2020		December 31, 2019
	September 30, 2020		December 31, 2019
Employee compensation, benefits, and payroll taxes	$	18,133	$	11,698
Employee compensation and benefits					$	22,761	$	20,521
Professional services		3,805		3,351		10,046		6,832
Provider services		4,043		2,709		4,428		4,632
Transaction costs		2,518		—
Other		9,802		9,593		8,675		10,150

Total	$	38,301	$	27,351	$	45,910	$	42,135

10. Line of Credit

In January 2011, the Company entered into a credit agreement (the “Line of Credit”) with a financial institution that provides for maximum borrowings in one or more advances of an amount up to $5,000. Borrowings under the Line of Credit accrue interest at the London Interbank Offered Rate plus 1.25%. Borrowings are repayable immediately upon demand by the financial institution. In November 2017, the Line of Credit was amended to increase the maximum borrowings to $7,000. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had no0 outstanding borrowings under the Line of Credit.

During any period that the Line of Credit is in effect, the Company can request the financial institution issue a letter of credit with a maximum maturity not to exceed twelve months. Any letters of credit issued by the financial institution reduce the maximum borrowings available under the Line of Credit. As of September 30, 2021, the maximum borrowing available to the Company is $7,000 based on the outstanding letters of credit of $795 that have been issued by the financial institution. As of December 31, 2020, the maximum borrowing available to the Company iswas $5,905 based on the outstanding letters of credit of $1,095 that have been issued by the financial institution. ~~As of December 31, 2019, the maximum borrowing available to the Company was $5,857 based on the outstanding letters of credit of $1,143 that have been issued by the financial institution.~~

11. Stockholders’ Equity

Convertible Preferred Stock

The authorized, issued and outstanding shares, liquidation preference, and carrying value of the Company’s convertible preferred stock as of December 31, 2019 were as follows:


	Shares Authorized		Shares Issued		Shares Outstanding		Liquidation Preference		Carrying Value		Shares Authorized		Shares Issued		Shares Outstanding		Liquidation Preference		Carrying Value
Series A		3,200,000		3,178,650		3,130,077		51,741		28,889		3,200,000		3,178,650		3,130,077		51,741		28,889
Series B		833,334		787,725		787,725		37,060		23,632		833,334		787,725		787,725		37,060		23,632
Series C		13,711,111		10,095,133		10,095,133		519,648		603,278		13,711,111		10,095,133		10,095,133		519,648		603,278
												17,744,445		14,061,508		14,012,935		608,449		655,799
		17,744,445		14,061,508		14,012,935		608,449		655,799

In the year ended December 31, 2019, the Company issued and sold 628,719 shares of Series C preferred stock at a price of $75 per share for gross proceeds of $47,154. The Company incurred $1,318 of issuance costs in connection with the issuance of the Series C preferred stock. Additionally, the Company issued 456,667 shares of Series C preferred stock at a price of $75 per share in connection with the acquisition of Aligned (see Note 7).

In February 2020, the Company issued and sold 170,000 shares of Series C preferred stock at a price of $75 per share for gross proceeds of $12,750. The Company incurred $261 of issuance costs in connection with the issuance of the Series C preferred stock

In May 2020, the Company issued and sold 1,342,750 shares of Series C preferred stock at a price of $100 per share for gross proceeds of $134,275. The Company incurred $750 of issuance costs in connection with the issuance of the Series C preferred stock.

In conjunction with the Company’s IPO in September 2020, all shares of convertible preferred stock then outstanding, totaling 15,525,685 shares (pre-split), were automatically converted into an equivalent number of shares of Class A common stock on an 8.8-to-1.0 basis pursuant to a stock split and their carrying value, totaling $801,813 was reclassified into stockholders’ equity on the condensed consolidated balance sheet.

In connection with the IPO, the Company filed an Amended and Restated Certificate of Incorporation which authorizes the issuance of 100,000,000 shares of undesignated preferred stock, par value of $0.01 per share, with rights and preferences, including voting rights, designated from time to time by the board of directors.

Common Stock

In September 2020, upon completion of the IPO, the Company sold 45,681,499 shares of Class A common stock at an offering price of $18.00 per share, including 4,459,277 shares of Class A common stock pursuant to the exercise in full of the underwriters’ option to purchase additional shares. The Company received net proceeds of ~~$768,537,~~$767,568, after deducting underwriting discounts and commissions of $49,336 and offering costs of approximately ~~$4,394.~~$4,906. In September 2020, the Company sold 5,555,555 shares of Class C common stock in connection with the stock purchase agreement with Google, LLC for net proceeds of $99,100, after deducting offering costs of $900.

Concurrently with the IPO, the Company used $24,157 of the proceeds from the IPO to repurchase 1,340,354 shares of Class A and Class B common stock from certain executive officers and other employees, to permit such executive officers and other employees to pay taxes owed in connection with the vesting of equity awards, including the repayment of ~~third party~~third-party loans incurred to finance the payment of such taxes.

In connection with the IPO, the Company filed an Amended and Restated Certificate of Incorporation which authorizes capital stock of 1,000,000,000 shares of Class A common stock, par value $0.01 per share, 100,000,000 shares of Class B common stock, par value $0.01 per share, and 200,000,000 shares of Class C common stock, par value $0.01 per share. Except for the rights noted below, each share of Class A, Class B and Class C common stock have the same rights, are equal in all respects and are treated by us as one

class of shares. Each share of Class A and Class C common stock is entitled to one vote per share on all matters presented for a vote, except that Class C common stock does not have the right to vote for elections of directors. Subject to certain conditions, Class B common stock is collectively entitled to a number of votes equal to the product of (x) 1.0408163 and (y) the total number of votes that would be cast at such time by the holders of the Class A and Class C common stock and any other preferred stock entitled to vote under the certificate of incorporation at such time (resulting in the Class B common stock collectively holding 51% of the total outstanding voting power), and each share of Class B common stock will be entitled to a number of votes equal to the total number of votes held by all Class B common stock divided by the total number of then outstanding shares of Class B common stock. Shares of Class B and Class C common stock will be converted into shares of Class A common stock on a one-for-one basis upon the occurrence of certain events. Shares of Class B common stock will automatically convert on the first business day (i) after the date on which the outstanding shares of Class B common stock constitutes less than 5% of the aggregate number of shares of common stock then outstanding, (ii) after the date on which neither founder is serving as an executive officer or (iii) following seven years after the date the amended and ~~restate~~restated certificate of incorporation becomes effective, provided that, such period may, to the extent permitted by law and applicable stock exchange rules, be extended for three years upon the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of Class A common stock entitled to vote thereon, voting separately as a class. Shares of Class C common stock will be convertible at the option of the holder upon determination that a Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) filing is not necessary prior to the holder’s conversion of such shares or, if required, upon expiration or termination of the HSR waiting period.

In the nine months ended September 30, 2021, 3,865,035 shares of Class B common stock were converted to Class A common stock. As of September 30, ~~2020~~2021, the par value of the Class A, Class B and Class C shares was ~~$1,997, $290,~~$2,272, $267, and $56, respectively.


	Shares Authorized		Shares Issued		Shares Outstanding		Shares Authorized		Shares Issued		Shares Outstanding
Class A		1,000,000,000		200,131,318		199,647,646		1,000,000,000		227,158,943		227,158,943
Class B		100,000,000		29,950,326		29,032,042		100,000,000		26,650,761		26,650,761
Class C		200,000,000		5,555,555		5,555,555		200,000,000		5,555,555		5,555,555
								1,300,000,000		259,365,259		259,365,259
		1,300,000,000		235,637,199		234,235,243

As of September 30, 2021 and December 31, 2020, the Company had reserved ~~63,226,337~~61,572,141 and 61,392,747 shares of common stock for the exercise of outstanding stock options, the vesting of restricted stock units and the number of shares remaining available for future grant. As of December 31, 2019, the Company had reserved 157,998,948 shares of common stock for the conversion of the outstanding shares of Preferred Stock, the exercise of outstanding stock options, the vesting of restricted stock units and the number of shares remaining available for future grant.grant, respectively.

Stock Plans and Stock Options

The Company maintains the 2006 Employee, Director and Consultant Stock Plan as amended and restated (the “2006 Plan”) and 2020 Equity Incentive Plan (the “2020 Plan” together, the “Plans”) under which it has granted incentive stock options, non-qualified stock options, and restricted stock units to employees, officers, and directors of the Company. In connection with the adoption of the 2020 Plan, the then-remaining shares of common stock reserved for grant or issuance under the 2006 Plan became available for issuance under the 2020 Plan, and no further grants will be made under the 2006 Plan. The 2020 Plan is administered by the board of directors with respect to awards to non-employee directors and by the compensation committee, with respect to other participants, are

collectively, referred to as the plan administrator. The exercise prices, vesting and other restrictions are determined at the discretion of the plan administrator.

The 2020 Plan became effective on August 17, 2020. A total of 22,083,184 shares of Class A and Class B common stock were initially reserved for issuance pursuant to the 2020 Plan, which number was increased to 31,275,204 shares immediately following the IPO. In addition, the shares reserved for issuance under the 2020 Plan include 3,710,240 shares that were reserved but unissued under the 2006 Plan as of immediately prior to its termination. The number of shares of common stock available for issuance under the 2020 Plan includes an annual increase on the first day of each year beginning in 2021 and ending in and including 2029, equal to the lesser of (A) 5% of the number of outstanding shares of all classes of common stock on the last day of the immediately preceding fiscal year and (B) such smaller amount as determined by the board of directors. The Company had 27,614,753 shares available for grant as of September 30, 2020.

Options issued under the Plans are exercisable for periods not to exceed ten years, and vest and contain such other terms and conditions as specified in the applicable award document. Options to buy common stock are issued under the Plans, with exercise prices equal to the closing price of shares of the Company’s common stock on the New York Stock Exchange on the date of award.

Activity under the Plans is as follows:

   Number of
Shares    Weighted Average
Exercise Price    Weighted Average
Remaining Contractual
Term (Years)    Aggregate
Intrinsic Value
Outstanding as of December 31, 2019
   24,917,003    $ 3.90    6.9    $ 79,798
Granted
   2,637,220    $ 7.80
Forfeited
   (1,697,171 )    $ 4.80
Expired
   (132,001 )    $ 2.16
Exercised
   (1,660,751 )    $ 2.59





Outstanding as of September 30, 2020
   24,064,300    $ 4.35    6.4    $ 610,782








Vested and expected to vest as of December 31, 2019
   22,650,355    $ 3.73    6.7    $ 76,321
Vested and expected to vest as of September 30, 2020
   22,212,804    $ 4.09    6.2    $ 567,533








Options exercisable as of December 31, 2019
   14,685,654    $ 2.83    5.5    $ 62,869
Options exercisable as of September 30, 2020
   16,254,829    $ 3.43    5.3    $ 426,049

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of January 1, 2021		23,167,514		$	4.37		6.2	$	487,758
Granted		—		$	—
Forfeited		(386,694	)	$	5.76
Expired		—		$	—
Exercised		(5,778,464	)	$	3.30
Outstanding as of September 30, 2021		17,002,356			4.70		6.0	$	77,588
Vested and expected to vest as of December 31, 2020		21,744,937		$	4.14		6.0	$	460,712
Vested and expected to vest as of September 30, 2021		16,317,595		$	4.49		5.9	$	75,687
Options exercisable as of December 31, 2020		17,640,827		$	3.71		5.5	$	381,511
Options exercisable as of September 30, 2021		13,833,503		$	4.20		5.6	$	68,029

~~The weighted-average grant date fair value of common stock options granted during the three months ended September 30, 2020 was $5.06. No~~

NaN options were granted in the ~~three~~nine months ended September 30, ~~2019.~~2021. The weighted-average grant date fair value of common stock options granted during the nine months ended September 30, 2020 ~~and September 30, 2019,~~ was ~~$4.17 and $2.78, respectively. As~~$5.06.

The weighted-average of ~~September 30, 2020,~~assumptions that the ~~unrecognized stock-based compensation expense related~~Company used to ~~outstanding~~determine the fair value of the common stock options ~~was $12,688, which is expected~~granted to ~~be recognized over a weighted-average period of 2.62 years.~~employees and directors were as follows:

Nine Months Ended September 30,

2021

2020

Risk-free interest rate

N/A

1.09
%
Expected term (in years)

N/A

6.1

Expected volatility

N/A

52
%
Expected dividend yield

N/A

0
%

Executive Equity Awards

~~In the second quarter of 2020, the Company entered into employment agreements with the Company’s two Chief Executive Officers.~~ Each ~~agreement provided for the acceleration of certain stock option vesting schedules and a grant of 2,860,880~~CEO has received restricted stock units, totaling 5,721,760 restricted stock units. The restricted stock unit grants of 2,860,880 units to each CEO, have no future service period in order to vest and therefore the Company recognized $56,971, the full amount of stock-based compensation expense, in the second quarter of 2020. The employment agreements modified the stock options that had been previously issued, 1,764,884 options each, to accelerate the vesting and to eliminate the future service period. The Company recognized an incremental $5,659, in the aggregate, of stock-based compensation expense associated with the modification in the second quarter of 2020.

~~In addition, each CEO has received, and will receive additional restricted stock units,~~ equaling ~~up to~~ 1.5% of the Company’s fully-diluted outstanding capital stock as a result of the IPO (“IPO RSUs”), 50% of the IPO RSUs (representing 0.75% of the Company’s fully diluted outstanding capital stock immediately prior to the IPO or 3,230,750 shares of Class A common stock) were granted on the closing date of the IPO based on the closing price per share on the IPO closing date, and 50% (representing ~~up to~~ 0.75% of the Company’s fully diluted outstanding capital stock immediately prior to the ~~IPO) will be~~IPO or 3,230,750 shares of Class A common stock) was granted on the 180-day anniversary of the IPO, based on a specific range of the price per share of the Company’s publicly traded common stock prior to March 16, 2021, and will vest over a three-year period, with one-third vesting on the first anniversary of the IPO’s closing date and the remaining vesting in equal quarterly installments thereafter. As the issuance of the second 50% tranche iswas based upon events that are probable the expense related to both tranches of the IPO RSUs was recognized in the three months ended September 30, 2020.

The grant-date fair value of each of the awards issued on the IPO closing date and ~~to be~~ issued on the 180-day anniversary of the IPO was estimated using a binomial lattice approach. The main inputs to valuing the IPO RSUs include the fair value of Class A common stock ($9.96 post-split), expected volatility (60%) and the expected date of the IPO (September 30, 2020). The Company recognized a total of $23,644 in stock-based compensation expense, which included both tranches of the IPO ~~RSU~~RSUs for each CEO, on the date of the IPO as the requisite future service of the awards is not substantive for accounting purposes.

Restricted Stock Units

During the year ended December 31, ~~2019,~~2020, the Company granted ~~2,616,345~~13,816,885 restricted stock units which vest over the service period of ~~two~~one to four years. During the nine months ended September 30, 2021, the Company granted 7,284,665 restricted stock units which vest over the service period of one to four years.

Activity for the restricted stock units is as follows:

	Shares			Weighted Average Grant Date Fair Value
Unvested as of January 1, 2021		11,014,450		$	14.43
Granted		7,284,665			18.89
Vested		(5,687,981	)		10.65
Forfeited		(187,398	)		15.67
Unvested as of September 30, 2021		12,423,736		$	18.76

The total grant date fair value of RSU’s granted for the nine months ended September 30, 2021 was $137,604. During the nine months ended September 30, 2020 the Company granted 13,039,392 restricted stock ~~units which were either fully vested upon issuance or vest over the service period~~units. The aggregate intrinsic value of ~~three to four years.~~

~~Activity for the~~ restricted stock units ~~is as follows:~~

   Shares    Weighted Average Grant
Date Fair
Value
Unvested as of December 31, 2019
   2,322,408    $ 5.79
Granted
   13,039,392    13.41
Vested
   (3,810,645 )    9.50

   Shares    Weighted Average Grant
Date Fair
Value
Forfeited
   (3,871 )    10.79




Unvested as of September 30, 2020
   11,547,284    $ 13.17

The amount of compensation costs recognized for the three months ended September 30, 2020 and 2019 on the restricted stock units expected to vest was $31,253 and $1,297, respectively. The amount of compensation costs recognizedvested for the nine months ended September 30, 2021 and 2020 was $77,949 and ~~2019 on the restricted stock units expected to vest was $91,168 and $1,297,~~$32,137, respectively. As of September 30, 2020, the unrecognized stock-based compensation expense related to these restricted awards was $39,449, which is expected to be recognized over a weighted-average period of 3.0 years.

~~Stock-Based Compensation~~

~~The weighted average of assumptions that the Company used to determine the fair value of the common stock options granted to employees and directors were as follows:~~

   Nine Month Ended
September 30,
   2020 2019
Risk-free interest rate
   1.09 % 2.44 %
Expected term (in years)
   6.1 6.1
Expected volatility
   52 % 50 %
Expected dividend yield
   0 % 0 %

~~Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows:~~

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2020    2019    2020    2019
Cost of revenues
   $ 309    $ 124    $ 668    $ 360
Research and development
   2,083    360    3,519    1,169
Selling and marketing
   1,138    540    2,684    1,848
General and administrative
   30,890    2,580    99,645    5,298








Total
   $ 34,420    $ 3,604    $ 106,516    $ 8,675

2020 Employee Stock Purchase Plan

In July and August 2020, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2020 Employee Stock Purchase Plan (“ESPP”). A total of 3,084,218 shares of Class A common stock were reserved for issuance under the ESPP. The ESPP ~~is expected to become~~became effective ~~January~~March 1, 2021. Rights granted under the ESPP will be issued only with respect to shares of Class A common stock. ~~Subject to any limitations contained therein, under the ESPP an employee will be permitted to accrue the right to purchase stock under the ESPP up to $25,000 worth of shares during any calendar year.~~ The purchase price of the shares will not be less than 85% of the fair market value of Class A common stock on the lower of the purchase date, which will be the final trading day of the purchase period, or the enrollment date, which will be the first trading day of the offering period.

During the three and nine months ended September 30, 2021, the Company issued 178,021 shares under the ESPP. As of September 30, 2021 2,906,197 shares remained available for issuance.

For the three and nine months ended September 30, 2021, the Company recorded stock-based compensation expense related to the ESPP of $372 and $756, respectively, based on elections made under the plan to-date. There was 0 expense for the three and nine months ended September 30, 2020.

Stock-Based Compensation

Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of revenues	$	436	$	309	$	1,346	$	668
Research and development		2,173		2,083		5,851		3,519
Selling and marketing		2,033		1,138		6,022		2,684
General and administrative		7,746		30,890		18,537		99,645
Total	$	12,388	$	34,420	$	31,756	$	106,516

As of September 30, 2021, the unrecognized stock-based compensation expense related to unvested common stock-based awards was $86,486, which is expected to be recognized over a weighted-average period of 1.2 years.

12. Commitments and Contingencies

Indemnification

The Company’s arrangements generally include certain provisions for indemnifying customers against third-party claims asserting infringement of certain intellectual property rights in the ordinary course of business. The Company also regularly indemnifies customers against third-party claims that the company’s products or services breach applicable law or regulation or from claims resulting from a breach of the business associate agreement in place with the customer. In addition, the Company indemnifies its officers, directors and certain key employees while they are serving in good faith in their capacities. Through September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there have been no0 claims under any indemnification provisions.

Litigation

From time to time, and in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. On September 14, 2020, the Company received a letter from Teladoc Health, Inc. alleging that certain of the Company’s cart products and associated peripherals infringe upon their patents. On October 12, 2020, Teladoc Health, Inc filed a claim against the Company related to these allegations. The Company believes that these claims lack merit and intends to defend against them vigorously. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company did ~~not~~0t have any pending claims, charges or litigation that it expects would have a material adverse effect on its consolidated financial position, results of operations or cash flows.

13. Leases

The Company’s primary lease represents the lease for its corporate headquarters in Boston, Massachusetts. The Company modified the corporate headquarter lease during the third quarter of 2021, the future payments on the new lease are $17,169. The carrying value of the Company’s right-of-use assets are substantially concentrated in real estate as the Company primarily leases office space. The Company’s policy is not to record leases with an original lease term of one year or less on the consolidated balance sheets. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. The Company does not have any lease contracts with the option to purchase as of September 30, 2021.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
The components of lease cost under ASC 842 were as follows:
Operating lease cost	$	1,267	$	1,784	$	4,414	$	5,065
Short-term lease cost		—		—		—		—
Variable lease cost		—		—		—		—
Total lease cost	$	1,267	$	1,784	$	4,414	$	5,065

	Nine Months Ended September 30,
	2021		2020
Supplemental cash flow information:
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	5,207	$	5,213
Non-cash lease activity:
Right-of-use lease assets obtained in exchange for new operating lease liability:
Operating leases	$	15,506	$	417

	Nine Months Ended September 30,			Year Ended December 31, 2020
Supplemental balance sheet information related to leases is as follows:
Operating leases
Operating lease right-of-use assets	$	17,780		$	6,609
Total operating right-of-use lease assets	$	17,780		$	6,609
Operating lease liabilities, current		3,121			6,357
Operating lease liabilities, net of current portion		14,988			1,296
Total operating lease liabilities	$	18,109		$	7,653
Weighted-average remaining lease term (in years)	5.1 years			1.3 years
Weighted-average discount rate		3.2	%		2.9	%

As of September 30, 2021, minimum future lease payments for these operating leases were as follows:

Years ending December 31,
2021	$	1,283
2022		3,409
2023		3,679
2024		3,416
2025		3,484
Thereafter		4,447
Total lease payments	$	19,718
Less imputed interest		(1,609	)
Total present value of lease liabilities	$	18,109

14. Income Taxes

As a result of the Company’s history of net operating losses (“NOL”), the Company ~~has provided for~~continues to maintain a full valuation allowance against its domestic net deferred tax assets. For the three and nine months ended September 30, 2020, the Company recognized an income tax expense of $78 and $330, respectively, primarily due to the amortization of acquired intangibles and stock compensation deductions. For the three months and nine months ended September 30, 2019,2021, the Company recognized an income tax benefit of ~~$392~~$5,454 and ~~$22, respectively, related~~$5,042, primarily due to ~~certain United States and foreign income, as well as amortization~~a partial release of ~~tax-deductible~~ ~~goodwill, which partially benefits the realization of its indefinite lived NOL~~valuation allowance in the ~~United States.~~U.S resulting from the deferred tax liabilities established as part of the Acquisitions consummated during the quarter. During the three and nine months ended September 30, 2020, the Company recorded income tax expense of $78 and $330, respectively.

~~14.~~15. Related-Party Transactions

Teva Pharmaceuticals, Industries Ltd

Teva Pharmaceuticals, Industries Ltd (“Teva”) iswas determined to be a related party because a member of the Company’s board of directors iswas the ~~Executive Vice~~ President and ~~Head~~CFO of Teva Pharmaceuticals’ North America ~~Commercial.~~Commercial through June 2021. In addition, Teva is a non-significant shareholder of the Company. As of September 30, ~~2020 and~~2021 it was determined that Teva was no longer a related party. As of December 31, ~~2019,~~2020, short-term and long-term deferred revenue from this customer was ~~not~~0t material. As of ~~September 30, 2020 and~~ December 31, ~~2019, there were no~~2020, amounts due from ~~Teva.~~Teva were 0t material.

Prior to the board member’s departure from the board of directors in June 2021, the Company recognized an immaterial amount of revenue from contracts with this customer. During the three ~~months ended September 30, 2020~~ and ~~2019, and the~~ nine months ended September 30, 2020, ~~and 2019,~~ revenues recognized from this customer were ~~not~~0t material.

Philips Holding USA, Inc.

Philips Holding USA, Inc. (“Philips”) iswas determined to be a related party because a member of the Company’s board of directors is the Business Leader of Philips Population Health ~~Management.~~Management through June 2021. In addition, Philips is a non-significant shareholder of the Company. As of September 30, ~~2020 and~~2021 it was determined Philips was no longer a related party. As of December 31, ~~2019,~~

2020, the Company held short-term and long-term deferred revenue of ~~$1,195 and~~ $2,549, ~~respectively~~ from contracts with this customer. As of ~~September 30, 2020 and~~ December 31, ~~2019,~~2020, amounts due from Philips were ~~not material.~~$763.

Prior to the board member’s departure from Philips in June 2021, the Company recognized revenue of $708, from contracts with this customer. During the three and nine months ended September 30, 2020, ~~and 2019,~~ the Company recognized revenue of $418 and ~~$146, respectively from contracts with this customer. During the nine months ended September 30, 2020 and 2019, the Company recognized revenue of~~ $1,126, ~~and $372,~~ respectively from contracts with this customer.

Anthem Inc.

Anthem Inc. (“Anthem”) iswas determined to be a related party because a member of the Company’s board of directors ~~is a~~served as the Vice President of ~~Anthem.~~Anthem through February 2021. In addition, Anthem is a non-significant shareholder of the Company. As of September 30, ~~2020 and~~2021 it was determined Anthem was no longer a related party. As of December 31, ~~2019,~~2020, the Company held short-term and long-term deferred revenue of ~~$4,671 and $11,561, respectively~~$11,347, from contracts with this customer. As of ~~September 30, 2020 and~~ December 31, ~~2019,~~2020, amounts due from Anthem were ~~$1,178 and $2,499, respectively.~~$8,391.

Prior to the board member’s departure from Anthem in February 2021, the Company recognized revenue of $- from contracts with this customer. During the three and nine months ended September 30, 2020 ~~and 2019,~~ the Company recognized revenue of $13,522 and ~~$7,837, respectively from contracts with this customer. During the nine months ended September 30, 2020 and 2019, the Company recognized revenue of~~ $40,677, ~~and $23,120,~~ respectively from contracts with this customer.

Cleveland Clinic

Cleveland Clinic is a related party because a member of the Company’s board of directors is an executive advisor to Cleveland Clinic. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company held short-term and long-term deferred revenue of ~~$457~~$281 and ~~$180,~~$606, respectively from contracts with this customer. As of September 30, 2021 and December 31, 2020, amounts due from Cleveland Clinic were ~~$205. As of December 31, 2019, amounts due from Cleveland Clinic were not material.~~$497 and $1,020, respectively.

During the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized revenue of ~~$514~~$286 and ~~$262,~~$514, respectively, from contracts with this customer. During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized revenue of ~~$1,004~~$816 and ~~$889,~~$1,004, respectively, from contracts with this customer.

CCAW, JV LLC

CCAW, JV LLC is a related party because it is a joint venture formed between the Company and Cleveland Clinic for which the Company has a minority owned interest in. During the ~~nine months~~year ended ~~September 30,~~December 31, 2020, the Company made an initial investment in CCAW, JV LLC of $2,940 for its less than 50% interest in the joint venture. During the ~~three and~~ nine months ended September 30, 2021, the Company made a capital contributed of $2,548, related to a portion of the phase one capital commitment. During the three months ended September 30, 2021 and 2020 the Company recognized revenue of $412 and $404 from contracts with this customer, respectively. During the nine months ended September 30, 2021 and 2020 the Company recognized revenue of $1,286 and $1,190 from contracts with this customer, ~~respectively.~~respectively, As of September 30, 2021 and December 31, 2020, the Company held short and long term deferred revenue of ~~$277~~$428 and $1,496, respectively, from contracts with this customer. As of September 30, 2021 and December 31, 2020, amounts due from CCAW, JV LLC were ~~not~~0t material.

Loans to Officers

During ~~the year ended December 31, 2019,~~2020, the Company entered into secured promissory notes with ~~the Company’s Chief Financial Officer in the amount of $1,781. During 2020, the Company entered into additional secured promissory notes with the Chief Financial Officer and other~~ executive officers in the amount of $16,441. These loans were to fund the taxes associated with the restricted stock units and were collateralized by all of the capital stock of the Company that the employee owned or would own in the future and the employees’ personal assets. These loans are recorded within prepaids and other current assets in the Company’s condensed consolidated balance sheet. All outstanding loans with officers were repaid in August 2020 prior to the Company’s IPO.

~~15.~~16. Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Numerator:
Net loss	$	(64,596	)	$	(24,071	)	$	(178,040	)	$	(65,643	)	$	(50,932	)	$	(64,596	)	$	(128,873	)	$	(178,040	)
Net income (loss) attributable to non-controlling interest		(1,515	)		(56	)		(3,920	)		(884	)

Net loss attributable to non-controlling interest														562			(1,515	)		(332	)		(3,920	)
Net loss attributable to American Well Corporation	$	(63,081	)	$	(24,015	)	$	(174,120	)	$	(64,759	)	$	(51,494	)	$	(63,081	)	$	(128,541	)	$	(174,120	)

Denominator:
Weighted-average common shares outstanding—basic and diluted		68,499,106			41,933,597			51,492,988			41,805,929

Weighted-average common shares outstanding —basic and diluted														257,283,961			68,499,106			250,115,414			51,492,988
Net loss per share attributable to common stockholders—basic and diluted	$	(0.92	)	$	(0.57	)	$	(3.38	)	$	(1.55	)	$	(0.20	)	$	(0.92	)	$	(0.51	)	$	(3.38	)

The Company’s potential dilutive securities, which include stock options, convertible preferred stock and unvested restricted stock units, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares equivalents presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

									Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended September 30,				Nine Months Ended September 30,				2021		2020		2021		2020
	2020		2019		2020		2019
Convertible preferred stock (as converted to common stock)		—		113,762,320		—		113,762,320
Unvested restricted stock units		5,455,654		—		5,455,654		—		7,162,432		5,455,654		7,162,432		5,455,654
Options to purchase shares of common stock		24,064,300		23,712,967		24,064,300		23,712,967		17,002,356		24,064,300		17,002,356		24,064,300
										24,164,788		29,519,954		24,164,788		29,519,954
		29,519,954		137,475,287		29,519,954		137,475,287

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

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations, including descriptions of our business plan and strategies, are forward-looking statements. These statements often include words such as “anticipate,”

~~“expect,~~ “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” or the negative of these terms, and other similar expressions, although not all forward-looking statements contain these words.

The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections.

Important factors that may materially affect such forward-looking statements and projections include the following:

•

weak growth and increased volatility in the telehealth market;

•

our history of losses and the risk we may not achieve profitability;

•

inability to adapt to rapid technological changes;

~~our limited number of significant clients and the risk that we may lose their business;~~
•
our ability to successfully launch our new Converge telehealth platform without significant cost overruns or disruptions to our business and our customers’ acceptance of this new platform;

~~increased competition from existing and potential new participants in the healthcare industry;~~
•
our limited number of significant clients and the risk that we may lose their business;

~~changes in healthcare laws, regulations or trends and our ability to operate~~
•
increased competition from existing and potential new participants in the ~~heavily regulated~~ healthcare industry;

~~compliance with regulations concerning personally identifiable information and personal health~~
•
changes in healthcare laws, regulations or trends and our ability to operate in the heavily regulated healthcare industry;

~~slower than expected growth in patient adoption of telehealth and in platform usage by either clients or patients;~~
•
compliance with regulations concerning personally identifiable information and personal health industry;

~~inability to grow our base of affiliated and~~ ~~non-affiliated~~ ~~providers sufficient to serve patient demand;~~
•
slower than expected growth in patient adoption of telehealth and in platform usage by either clients or patients;

~~our ability to comply with federal and state privacy regulations and the significant liability that could result from a cybersecurity breach or our failure to comply with such regulations;~~
•
inability to grow our base of affiliated and non-affiliated providers sufficient to serve patient demand;

~~our ability to establish and maintain strategic relationships with third parties;~~
•
our ability to comply with federal and state privacy regulations and the significant liability that could result from a cybersecurity breach or our failure to comply with such regulations;

~~the impact of the~~ ~~COVID-19~~ ~~pandemic on our business or on our ability to forecast our business’s financial outlook;~~
•
our ability to establish and maintain strategic relationships with third parties;

~~the risk that the insurance we maintain may not fully cover all potential exposures; and~~
•
our ability to complete, integrate and realize the anticipated benefits of strategic acquisitions;

•

the impact of the COVID-19 pandemic on our business or on our ability to forecast our business’s financial outlook;

•

the risk that the insurance we maintain may not fully cover all potential exposures; and

•

inability to remediate material weaknesses or maintain effective internal control over financial reporting.

The foregoing list of factors is not exhaustive and does not necessarily include all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. The information in this Quarterly Report should be read carefully in conjunction with other uncertainties and potential events described in our ~~final prospectus~~Form 10-K filed with the SEC ~~pursuant to Rule 424(b) under the Securities Act of 1933, as amended,~~ on ~~September 18, 2020~~March 26, 2021 (the ~~“Prospectus”~~“Form 10-K”).

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this Quarterly Report. Except as required by law or regulation, we do not undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances

Overview

We are a leading telehealth company enabling digital delivery of care for healthcare’s key stakeholders. We empower our clients at the enterprise level with the core technology and services necessary to successfully develop and distribute telehealth programs that meet their strategic, operational, and social objectives under their own brands. The Amwell Platform is a complete

digital care delivery solution that equips our health system, health plan and innovator, including government, clients with the tools to enable new models of care for their patients and members. Our scalable technology embeds with our clients’ existing offerings and clinical workflows, spanning the continuum of care and enabling care delivery across a wide variety of clinical, retail, school and home settings. Our client-focused approach drives our success as one of the largest telehealth companies. As of September 30, ~~2020,~~2021, we powered the digital care programs of over 55 health plans, which support over 36,000 employers and collectively represent more than 80 million covered lives, as well as over 150 of the nation’s largest health systems, encompassing more than 2,000 hospitals. Since inception, we have powered over ~~7.0~~12 million telehealth visits for our clients, including ~~more than~~ 4.3 million in the nine months ended September 30, ~~2020.~~2021.

Healthcare today faces many challenges. Choice and access can be limited, care delivery is fragmented and inefficient, and costs continue to rise and shift to consumers while health outcomes have not improved. The healthcare industry is evolving to meet these challenges with innovative care models and new regulatory frameworks to promote more effective outcomes. As healthcare’s key stakeholders demand innovative technology solutions that streamline care delivery, lower costs, expand access and improve outcomes, we believe there is significant opportunity for transformation.

We believe Amwell makes this digital care transformation possible for the healthcare ecosystem. The Amwell Platform enables care delivery across the full healthcare continuum – from primary and urgent care in the home to high acuity specialty consults, such as telestroke and telepsychiatry, in the hospital. We support both on-demand and scheduled consultations and offer 40 pre-packaged care modules and programs that power over 100 unique use cases today. Our platform can be fully embedded into our clients’ patient/member portals and provider workflows. Providers can launch telehealth directly from their native EHRs, with seamless integration to their payer eligibility and claims systems. Providers, patients and members can access this care through a full range of Carepoints^™, including via mobile, web, phone and our proprietary kiosks and carts that support multi-way video, phone or secure messaging interactions. As of September 30, ~~2020, over 62,000~~2021, approximately 80,000 of our active providers use the Amwell Platform to serve their patients and members. When needed, we augment and extend our clients’ clinical capabilities with AMG, a nationwide clinical network of over 5,000 multi-disciplinary providers covering 50 states with 24/7/365 coverage.

Amwell exists to empower healthcare’s leading players, who have earned the deep trust of their patients and members over decades, and does not aim to compete with or replace them. We help our clients white-label and embed telehealth within their existing healthcare offerings for their patients and members. Thus, we enable our provider customers to offer a seamless experience that blends online convenience when needed with in-person care by known, trusted providers as part of a complete care program that offers patients continuity of care. In this way, providers can use our telehealth platform as an effective augmentation and not a replacement of their traditional care delivery.

Our Business Model

The Amwell Platform is a complete digital care delivery solution that equips our health system, health plan and innovator partners with the tools to enable new models of care for their patients and members. We sell the Amwell Platform on a subscription basis, which with our modular platform architecture allows our clients to introduce innovative telehealth use cases over time, expanding our subscription revenue opportunity. To support the Amwell Platform, we offer professional services on a ~~fee-for-service~~fixed fee and time and material basis and a range of patient and provider access Carepoints that support hospital and home use cases and access to AMG, our affiliated medical group that provides clinical services on a fee-for-service basis. The combination of the platform, services and Carepoints allows our clients to deploy telehealth solutions across their full enterprise, deepening their relationships with existing and new patients and members through improved care access and coordination, cost, and quality. Our contracts are typically three years in length but may be longer for our largest strategic customer partners.

Total subscription fees received from Health System, Health Plan and Innovator clients were ~~$25.8~~$26.7 million and ~~$22.0~~$25.8 million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$72.0~~$78.1 million and ~~$60.8~~$72.0 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Health Systems

For our health system customers, the Amwell Platform’s primary function is to facilitate consultations between patients and providers affiliated with the health system. Our typical contracts with health systems are mainly the platform subscription, but also include services delivered by AMG to complement the health system provider resources, services for technology integration, marketing and Carepoints. Subscription fees are recurring and are determined based on the initial forecasted number of overall consultations throughout the entire health system on the Amwell Platform and net patient revenue of the health system. Subscriptions include a maximum number of consultations that can be delivered on the platform and similar to a cellular phone plan, when consultations exceed the contractual maximum, overages result in higher subscription fees in the following annual period. As the

health system expands its use of the Amwell Platform through additional modules, there is a corresponding increase in subscription fees. ~~Examples of modules include:~~

~~• Acute Behavioral Health~~

~~• Urgent Care~~

~~• Specialty Consult~~

~~• School Health~~

~~• Telestroke~~

~~• Behavioral Health Therapy~~

~~• Retail Health~~

~~• Triage in the ED~~

~~• Dialysis~~

To supplement a health system’s own network of healthcare providers, health systems often choose to purchase clinical services from AMG to deliver care for certain specialties such as telepsychiatry, behavioral health therapy and general urgent care, or to simply operate as backup providers on nights and weekends. AMG services are provided on a fee-for-service basis.

Health Plans

For our health plan clients, the Amwell Platform functions to provide better access to care, better coordination of care and the ability to direct care referrals to providers owned or affiliated with the respective health plan. All of these functions lower the overall cost of care for health plan clients: improved population access to needed services reduces unneeded ED usage and better coordination of care can improve outcomes and lower the overall cost of care.

Currently, our typical health plan contract includes a recurring subscription fee based on the number of members who have access to our platform plus additional subscription fees associated with the various programs we offer the health plan. ~~Clinical programs offered on the Amwell Platform include:~~

~~• Urgent Care~~

~~• Nutrition~~

~~• Sleep Therapy~~

~~• Employee Assistance~~
~~Program Therapy~~

~~• Women’s Health~~

~~• Behavioral Health~~
~~Therapy~~

Our health plan clients mainly purchase clinical services for their members through AMG. They may also maintain relationships with other in network provider organizations to deliver care on the Amwell Platform on their behalf. These visit consultations are charged on a fee-for-service basis and range in price based on the type of consultation and the specialty of the provider.

Innovators

Amwell has a number of unique customers that use our platform in various ways to support their products. For example, we support: (i) Philips’ sleep apnea products and programs, (ii) a joint-venture with Cleveland Clinic and Amwell, (iii) Meuhedet’s advanced, hybrid-virtual international health ~~plan, and (iv) more recently, government contracts where we support 911 calls that can be addressed with virtual care.~~plan.

Our contracts with our innovator customers vary from simple subscription fee-only contracts, where an innovator customer embeds our technology within their product, to broad subscription fee and services contracts that resemble a blend of our health system and health plan profile contracts.

Visits

Amwell’s ~~partner~~clinical affiliate AMG has built a network of over 5,000 providers who are registered and credentialed to deliver care on the Amwell Platform. This clinical network is designed and operated in a way that allows us to meet the aggregate visit demand requirements of our health plan and health system clients, spanning ~~the following specialties:~~a broad mix of specialties including, for example, internal medicine, Family Medicine, Psychiatry, Gynecology, Anesthesiology, Nutritionist, Sleep Medicine, Pain Management, Psychology, Pulmonology, Urology, Health Coach, Orthopedic Surgery, Case Manager, Emergency Medicine, Gastroenterology, Nephrology, Pediatrician, Lactation Consultant, Social Worker, Vascular Surgery.


~~• Family Medicine~~ ~~• Psychiatry~~ ~~• Gynecology~~ ~~• Anesthesiology~~ ~~• Nutritionist~~ ~~• Sleep Medicine~~ ~~• Pain Management~~	~~• Internal Medicine~~ ~~• Psychology~~ ~~• Pulmonology~~ ~~• Urology~~ ~~• Health Coach~~ ~~• Orthopedic Surgery~~ ~~• Case Manager~~	~~• Emergency Medicine~~ ~~• Gastroenterology~~ ~~• Nephrology~~ ~~• Pediatrician~~ ~~• Lactation Consultant~~ ~~• Social Worker~~ ~~• Vascular Surgery~~

AMG earns fee-for-service revenue for each episode of care delivered on the Amwell Platform by its providers with fees varying by physician specialty or clinical program. These clinical fees vary significantly from $59 to more than $800 per consultation or case based on the specialty and may require an additional module subscription, as in the case of telepsychiatry.

Fees received from AMG-related visits were ~~$28.5~~$30.0 million and ~~$7.2~~$28.5 million for the three months ended September 30, 2021 and 2020, ~~and 2019, respectively~~respectively. Fees received from AMG-related visits were $85.4 million and $90.9 ~~million and $25.7~~ million for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively.

Services & Carepoints

We offer a full suite of paid, supporting services to our clients to enable their telehealth offerings, including professional services to facilitate telehealth implementation, workflow design, systems integration and service expansion. To help our clients promote adoption and utilization, we offer patient and provider engagement services through our internal digital engagement agency.

Our customers often deploy telemedicine through a variety of our proprietary Carepoints, which are medical carts and kiosks designed for various clinical and community settings. These Carepoints enable providers to deliver digital care into clinical care locations, such as the ED and clinics, as well as into community settings such as retail stores, community centers, employer sites, skilled nursing facilities and schools. Carepoints consist of hardware integrated into our Platform but can also be deployed

independent of our software solution. Our Carepoints are designed by our product development teams and manufactured through partner and contract relationships.

Fees received from the provision of services and Carepoints were ~~$8.3~~$5.4 million and ~~$5.6~~$8.3 million for the three months ended September 30, 2021 and 2020, respectively. Fees received from the provision of services and ~~2019, respectively~~Carepoints were $16.5 million and $21.8 ~~million and $17.3~~ million for the nine months ended September 30, 2021 and 2020, respectively.

Acquisitions

We have expanded and ~~2019, respectively.~~intend to continue to expand our platform through research and development as well as the pursuit of selective acquisitions. We have completed multiple acquisitions since our inception, which we believe have expanded the channels that we serve and our distribution capabilities as well as broadening our service offering. Our acquisitions of SilverCloud and Conversa add proven longitudinal care and behavioral healthcare capabilities to our digital care enablement platform. SilverCloud is a leading digital mental health platform. Conversa is a leader in automated virtual healthcare.

For further information, see Note 7, “Business Combinations” of the Notes to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Key Factors Affecting Our Performance

We believe our future growth, success and performance are dependent on many factors, including those set forth below. While these factors present significant opportunities for us, they also represent the challenges that we must successfully address in order to grow our business and improve our results of operations.

Telehealth Utilization

Telehealth utilization is a key driver of our business. A client’s overall utilization of its telehealth platform provides an important measure of the value they derive. Telehealth utilization drives our business in three important ways. First, to the extent a client succeeds with its telehealth program and sees good usage, they are more likely to renew and potentially expand their contract with us. Second, our health systems agreements typically include a certain number of visits conducted by their own providers annually and provide that as certain volume thresholds are exceeded, its annual license fees will rise to reflect this growing value. Third, to the extent that clients utilize provider services from AMG, Amwell derives revenue from clinical fees. We expect that our future revenues will be driven by the growing adoption of telehealth and our ability to maintain and grow market share within that market.

~~In the nine months ended September 30, 2019, our clients completed~~COVID-19 has dramatically accelerated telehealth adoption seen in both overall volumes and embracement of delivering higher acuity care in a total of 0.8 million visits on the Amwell Platform, while in the nine months ended September 30, 2020, clients significantly expanded their use of the Amwell Platform with 4.3 million completed visits. During the virtual medium. Peak COVID-19 crisis, utilization of the platform achieved levels not seen before, evident by a larger number of clients’ own providers using the Amwell Platform. AMG providers accounted for 29% of total visits performed during the nine months ended September 30, 2020 versus 66% of total visits performed on the Amwell Platform during the nine months ended September 30, 2019.

In the three months ended September 30, 2019, our clients completed a total of 0.3 million visits on the Amwell Platform, while in the three months ended September 30, 2020, clients significantly expanded their use of the Amwell Platform with 1.4 million completed visits. During the ~~COVID-19~~ crisis, utilization of the platform achieved levels not seen before, evident by a larger number of clients’ own providers using the Amwell Platform. AMG providers accounted for 27% of total visits performed during the three months ended September 30, 2020 versus 62% of total visits performed on the Amwell Platform during the three months ended September 30, 2019.

~~COVID-19-related~~ pandemic visit growth ~~reflects~~reflected several factors. Many patients ~~need~~needed assessment for respiratory or other COVID-19-like symptoms and ~~have~~ sought to be assessed for possible referral to hospital or testing facilities. In addition, many patients, especially those with health vulnerabilities, ~~have~~ sought to avoid going into brick and mortar facilities – and indeed our health systems’ clients ~~have~~ preferred wherever possible to treat patients remotely at home for non-COVID-19 related ongoing healthcare needs. Finally, we ~~have seen~~saw significant expansion of reimbursement for telehealth during the COVID-19 crisis, which ~~has~~ made telehealth more affordable for many people.

We continue to experience these levels of telehealth adoption and usage of our platform and products. In both the nine months ended September 30, 2021 and 2020, our clients completed 4.3 million visits on the Amwell Platform. Visits in the nine months ended September 30, 2020 were driven by the height of the COVID-19 pandemic while visits in the nine months ended September 30, 2021 were driven by expanded utilization of the platform evident by a larger number of clients’ own providers using the Amwell Platform. During the nine months ended September 30, 2021 our clients’ own providers performed over 75% of the total visits performed on the Amwell Platform versus 70% of total visits performed on the Amwell Platform during the nine months ended September 30, 2020. Comparatively, throughout 2019 and through February 2020, or pre-COVID-19, clients’ own providers delivering care represented 40% whereas AMG providers typically performed more than 60% of the total overall visits on the Amwell Platform.

Total Overall Quarterly Visits
Quarter Ended	Overall Visits		Performed by Customer Providers
September 30, 2021		1,425,000		75	%
June 30, 2021		1,300,000		75	%
March 31, 2021		1,575,000		80	%
December 31, 2020		1,550,000		75	%
September 30, 2020		1,400,000		75	%
June 30, 2020		2,200,000		75	%

Active Providers

An important indicator of the value of our Amwell Platform to our clients is the number of non-AMG providers that are active on the Amwell Platform. We define “Active Providers” as providers that have delivered a visit on the Amwell Platform at least once in the last 12 months. Active Providers demonstrate the prevalence of telehealth within our clients in both home and hospital environments. We believe Active Providers is a measure of our success in delivering on our mission of enabling access to care. We expect that the overall number of Active Providers will increase over time as a result of several factors:

•

the number of modules and use cases deployed within health systems

•

the adoption of telehealth by providers across the spectrum of care

•

the number of programs offered through health plans

•

the continued improvement in the regulatory environment for telehealth, including reimbursement for telehealth services

•

the ongoing consumerization of healthcare

A significant number of providers were added to the platform in Q2 and Q3 of 2020 by our Health Plan but predominately by our Health System customers to handle the anticipated extraordinary increase in COVID-related consultations. Additional AMG providers were also added to absorb COVID-related spikes in care. As the 12 month measurement period for “Active Providers” advanced beyond the peak COVID period of Q2 2020, these extraordinary COVID-related additional AMG and customer providers cycled out of the Active Provider count thus we experienced a reset to the core base in Q2 2021. We continue to experience growth in core active providers as seen in our most recent quarter, Q3 2021, where approximately 9,000 active providers were added to our platform all coming from our Health System and Health Plan customers.

~~the number of modules and use cases deployed within health systems~~

Total Active Providers
Quarter Ended	Total Active Providers		Customer Providers		AMG
September 30, 2021		80,000		76,000		4,000
June 30, 2021		71,000		67,000		4,000
March 31, 2021		81,000		76,000		5,000
December 31, 2020		72,000		68,000		4,000
September 30, 2020		62,000		58,000		4,000
June 30, 2020		57,000		53,000		4,000

~~the adoption of telehealth by providers across the spectrum of care~~

~~the number of programs offered through health plans~~

~~the continued improvement in the regulatory environment for telehealth, including reimbursement for telehealth services~~

~~the ongoing consumerization of healthcare~~

Regulatory Environment

Our operations are subject to comprehensive United States federal, state and local and international regulation in the jurisdictions in which we do business. Our ability to operate profitably will depend in part upon our ability, and that of our affiliated providers, to maintain all necessary licenses and to operate in compliance with applicable laws and rules. The COVID-19 pandemic has resulted in a reduction of regulatory and reimbursement barriers for telehealth, including removing the originating site restrictions for fee for service Medicare; the expansion of Medicare and commercial reimbursement for telehealth and an easing of state licensure policies for providers. However, it is uncertain how long the relaxed policies will remain in effect, and there can be no guarantee that once the COVID-19 pandemic is over that such restrictions will not be reinstated or changed in a way that adversely affects our business. For additional discussion of this factor, see “Item 1A. Risk Factors—Risks Related to Government Regulation.”

~~Business Combinations~~

In November 2019, we acquired all of the outstanding stock of Aligned Telehealth. This acquisition combines Aligned’s ability to access an affiliated network of psychiatrists and advanced practice psychiatric nurses, with the Company’s health system and health plan client relationships to address the mounting challenges of psychiatric clinician shortages, fragmented care and societal stigmas impeding adequate behavioral health access and treatment. The aggregate consideration for this transaction was $82.9 million, and included $48.7 million paid in cash and $34.3 million in equity comprised of 4,018,669 shares of Series C preferred stock at a price of $8.52 per share. The agreement also included a component of contingent earnout consideration to be earned if certain financial performance is achieved. The total potential contingent earnout consideration is capped at $70.0 million. The acquisition was a stock purchase and the goodwill resulting from this acquisition is not deductible for tax purposes. The results of operations of Aligned have been included within our operations from the date of acquisition.

Seasonality

Visit volumes typically follow the annual flu season, rising during quarter four and quarter one and falling in the summer months. The ~~impact of~~ ~~COVID-19~~ ~~has caused an increase in the volume of visits in the late spring and summer of 2020, the~~ future impact of COVID-19 on seasonality is unknown as there could be additional surges and demand on telehealth visits. While we sell to and implement our solutions to clients year-round, we experience some seasonality in terms of when we enter into agreements with our clients and when we launch our solutions to members. We typically enter into a higher percentage of agreements with new clients, as well as renewal agreements with existing clients, in the first and fourth quarters. Regardless of when the agreement is entered into, we can typically complete client implementation in an average of approximately three months. Any downturn in sales, however, may negatively affect our revenue in future periods. Accordingly, the effect of downturns in sales and potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods.

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. We 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. In particular, 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. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. A reconciliation is provided below for our non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of this non-GAAP financial measure to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Adjusted EBITDA

Adjusted EBITDA 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 calculate adjusted EBITDA as net loss adjusted to exclude (i) interest income and other income, net, (ii) tax benefit and expense, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) ~~initial~~ public offering expenses, (vi) acquisition-related income and expenses, (vii) litigation expenses related to the defense of our patents in the patent infringement claim filed by Teladoc and ~~(vii)~~(viii) other items affecting our results that we do not view as representative of our ongoing operations, including direct and incremental expenses associated with the COVID-19 pandemic. We had no such other items during the three and nine months ended September 30, ~~2019.~~2021 and 2020.

The following table presents a reconciliation of adjusted EBITDA from the most comparable GAAP measure, net loss, for the three and ~~the~~ nine months ended September 30, ~~2019~~2021 and 2020:


	Three months ended September 30,						Nine months ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2020			2019			2020			2019			2021			2020			2021			2020
Net loss	$	(64,596	)	$	(24,071	)	$	(178,040	)	$	(65,643	)	$	(50,932	)	$	(64,596	)	$	(128,873	)	$	(178,040	)
Add:
Depreciation and amortization		2,576			1,868			7,371			5,668			4,340			2,576			9,330			7,371
Interest and other income, net		(255	)		(1,286	)		(1,410	)		(4,547	)
Expense (Benefit) from income taxes		78			(392	)		330			(22	)
Interest income and other (expense) income, net														382			(255	)		97			(1,410	)
Benefit (Expense) from income taxes														(5,454	)		78			(5,042	)		330
Stock-based compensation		34,420			3,604			106,516			8,675			12,388			34,420			31,756			106,516
Initial public offering expenses		1,362			—			2,039			6
Acquisition-related expenses		—			—			(48	)		95
Public offering expenses⁽²⁾														—			1,362			1,223			2,039
Acquisition-related expense (income)														7,419			—			8,006			(48	)
COVID-19-related expenses⁽¹⁾		191			—			5,933			—			—			191			—			5,933

Litigation expense														371			—			1,918			—
Adjusted EBITDA	$	(26,224	)	$	(20,277	)	$	(57,309	)	$	(55,768	)	$	(31,486	)	$	(26,224	)	$	(81,585	)	$	(57,309	)

~~(1)~~

(1)

COVID-19-related expenses include non-recurring provider bonus payments, emergency hosting licensing fees and non-medical provider temporary labor costs related to on-boarding non-AMG providers incurred in response to the initial outbreak of the COVID-19 virus as Amwell attempted to scale quickly to meet unusually high patient and non-AMG provider demand.

(2)

Public offering expenses include non-recurring expenses incurred in relation to our initial public offering for the three and nine months ended September 30, 2020 and our secondary offering for the nine months ended September 30, 2021.

Some of the limitations of adjusted EBITDA include (i) adjusted EBITDA does not properly 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 capital expenditures. Our ~~IPO~~public offering and acquisition-related expenses, including legal, accounting and other professional expenses, reflect cash expenditures and we expect such expenditures for acquisitions to recur from time to time. 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. In evaluating adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. 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. Adjusted EBITDA should not be considered as an alternative to loss before benefit from income taxes, net loss, earnings 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.

Components of Statement of Operations

Revenue

The Company has demonstrated continued revenue growth as a direct result ~~of the~~increasing acceptance of telehealth, ~~and~~ our penetration of the ~~market.~~market, and the successful launch of new or expanded products that enable broadened applications of settings for care delivered virtually. Revenue performance is reflective of the strong foundation that has been built, focused around health plans, health systems, our provider network and a consistently increasing visit base.

We generate revenues from the use of the Amwell Platform in the form of recurring subscription fees for use of our platform, and related services and Carepoint sales. We also generate revenue from the performance of AMG patient visits.

Cost of Revenues, Excluding Amortization of ~~Acquired~~ Intangible Assets

Cost of revenue primarily consists of hosting fees paid to our hosting providers, costs incurred in connection with our professional services, technical and hosting support, and costs for running our affiliated provider network operations team. These costs primarily include employee-related expenses (including salaries, bonuses, benefits, stock-based compensation and travel).

Cost of revenues are primarily driven by the size of our provider network and the hosting and technical support required to service our platform customers. Our business models are designed to be scalable and to leverage fixed costs to generate higher revenues. While we currently expect increased investments to support accelerated growth, we also expect increased efficiencies and economies of scale. Our quarterly cost of revenues as a percentage of revenues is expected to fluctuate from period to period depending on the interplay of these aforementioned factors.

Operating Expenses

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

Research and Development Expenses

Research and development expenses include personnel and related expenses for software and hardware engineering, information technology infrastructure, security and compliance and product development (inclusive of stock-based compensation for our research and development employees). Research and development expenses also include the periodic outsourcing of similar functions to third party specialists. Due to the quarantine and isolation strategies employed by governmental authorities, health systems and health plans to deal with the COVID-19 pandemic, a significant portion of healthcare was forced to be delivered virtually. Our health plan and health system customers believe that overall utilization of telemedicine and care delivered virtually will continue to increase during and after the COVID-19 crisis. By partnering with our customers during the crisis, we understand the increased volume and additional types of care they intend to deliver virtually on our platform. We originally expected this increase in volume, evolution and advancement of telemedicine usage to occur over the next few years but we have now adjusted our research and development strategies to match the views of our customer partners, thus accelerating the expansion of our platform volume capacity and the development of additional functionality through new programs and modules. While an increase in the research and development expense is expected in the near-term future periods, the corresponding future revenue growth is expected to result in lower expenses as a percentage of revenue.

Our research and development expenses may also fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our research and development expenses. We are accelerating our multiyear technology investment in 2021 to accommodate the anticipated significant growth in market demand for increasingly broad and sophisticated telehealth enablement infrastructure following COVID-19.

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. We expect our sales expenses to increase as we continue to invest in the expansion of our business. We expect to hire additional sales personnel and related account management and sales support personnel to properly service our growing client base and to identify and capitalize on new strategic market opportunities.

Marketing expenses consist primarily of personnel and related expenses (inclusive of stock-based compensation) for our marketing staff, including costs of communications materials that are produced to generate greater awareness and utilization of our platform among our clients and their users. Marketing costs also include third-party independent research, participation in trade shows, brand messaging, and public relations costs.

Our sales and marketing expenses will fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our advertising and marketing expenses.

General and Administrative Expenses

General and administrative expenses include personnel and related expenses, and professional fees incurred by finance, legal, human resources, information technology, our executives, and executive administration staff. They also include stock-based compensation for employees in these departments and expenses related to auditing, consulting, legal, and corporate insurance.

We expect our general and administrative expenses to increase for the foreseeable future due to costs that we incur as a new public company, as well as other costs associated with continuing to grow our business. However, we expect our general and administrative expenses to decrease as a percentage of our total revenue over the next several years. Our general and administrative expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our general and administrative expenses.

Depreciation and Amortization Expense

Depreciation and amortization expense includes the amortization of intangible assets and depreciation related to our fixed assets. Amortization of ~~acquired~~ intangible assets consists of the amortization of ~~acquisition related~~acquisition-related intangible assets, which are customer relationships, contractor relationships, technology and trade names.

Interest Income and Other Income (Expense), Net

The balance of interest income and other income (expense), net, consists predominantly of interest income on our money-market and short-term investments. We did not incur material interest expenses in the period as there were no outstanding debts or notes payables.

Provision for ~~(Benefit from)~~ Income Taxes

The income tax provision and benefit were primarily due to state and foreign income tax expense, ~~and benefit related to~~offset by a partial release of the valuation ~~allowance as a result of our acquisitions.~~allowance.

Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates.

Consolidated Results of Operations

The following table sets forth our summarized condensed consolidated statement of operations data for the three and nine months ended September 30, ~~2020,~~2021, and ~~2019~~2020 and the dollar and percentage change between the respective periods:

																									Three Months Ended September 30,												Nine Months Ended September 30,
	Three Months Ended September 30,												Nine Months Ended September 30,
	2020			2019			Variance			% Change			2020			2019			Variance			% Change
(in thousands)																									2021			2020			Change			%			2021			2020			Change			%
Revenue	$	62,551		$	34,744		$	27,807			80	%	$	184,833		$	103,825		$	81,008			78	%	$	62,223		$	62,551		$	(328	)		-1	%	$	180,039		$	184,833		$	(4,794	)		-3	%
Costs and operating expenses:
Costs of revenue, excluding depreciation and amortization of intangible assets		42,116			19,060			23,056			121	%		118,969			55,060			63,909			116	%		35,184			42,116			(6,932	)		(16	)%		104,778			118,969			(14,191	)		(12	)%
Research and development		25,275			13,602			11,673			86	%		57,848			39,169			18,679			48	%		27,399			25,275			2,124			8	%		72,817			57,848			14,969			26	%
Sales and marketing		13,758			11,309			2,449			22	%		39,978			33,951			6,027			18	%		16,370			13,758			2,612			19	%		44,891			39,978			4,913			12	%
General and administrative		43,113			14,654			28,459			194	%		138,537			40,189			98,348			245	%		34,380			43,113			(8,733	)		(20	)%		79,946			138,537			(58,591	)		(42	)%
Depreciation and amortization expense		2,576			1,868			708			38	%		7,371			5,668			1,703			30	%		4,340			2,576			1,764			68	%		9,330			7,371			1,959			27	%

Total costs and operating expenses		126,838			60,493			66,345			110	%		362,703			174,037			188,666			108	%		117,673			126,838			(9,165	)		(7	)%		311,762			362,703			(50,941	)		(14	)%
Loss from operations		(64,287	)		(25,749	)		(38,538	)		150	%		(177,870	)		(70,212	)		(107,658	)		153	%		(55,450	)		(64,287	)		8,837			(14	)%		(131,723	)		(177,870	)		46,147			(26	)%
Interest income and other income (expense), net		255			1,286			(1,031	)		(80	)%		1,410			4,547			(3,137	)		(69	%)		(382	)		255			(637	)		(250	)%		(97	)		1,410			(1,507	)		(107	)%

Loss before benefit from income taxes and loss from equity method investment		(64,032	)		(24,463	)		(39,569	)		162	%		(176,460	)		(65,665	)		(110,795	)		169	%

Benefit (expense) from income taxes		(78	)		392			(470	)		(120	)%		(330	)		22			(352	)		(1,600	%)
Loss before expense from income taxes and loss from equity method investment																										(55,832	)		(64,032	)		8,200			(13	)%		(131,820	)		(176,460	)		44,640			(25	)%
Benefit (Expense) from income taxes																										5,454			(78	)		5,532			(7,092	)%		5,042			(330	)		5,372			(1,628	)%
Loss from equity method investment		(486	)		—			(486	)		N/A			(1,250	)		—			(1,250	)		N/A			(554	)		(486	)		(68	)		14	%		(2,095	)		(1,250	)		(845	)		68	%

Net loss	$	(64,596	)	$	(24,071	)		(40,525	)		168	%	$	(178,040	)	$	(65,643	)		(112,397	)		171	%		(50,932	)		(64,596	)		13,664			(21	)%		(128,873	)		(178,040	)		49,167			(28	)%

Net loss attributable to noncontrolling interest		(1,515	)		(56	)		(1,459	)		2,605	%		(3,920	)		(884	)		(3,036	)		343	%
Net income (loss) attributable to non-controlling interest																										562			(1,515	)		2,077			(137	)%		(332	)		(3,920	)		3,588			(92	)%
Net loss attributable to American Well Corporation	$	(63,081	)	$	(24,015	)	$	(39,066	)		163	%	$	(174,120	)	$	(64,759	)	$	(109,361	)		169	%	$	(51,494	)	$	(63,081	)	$	11,587			(18	)%	$	(128,541	)	$	(174,120	)	$	45,579			(26	)%

~~Revenue~~

~~Total revenue was $62.6 million for~~Revenue

For the three months ended September 30, ~~2020, compared~~2021, overall revenue was relatively similar to ~~$34.7~~the prior period with increased subscription and visit revenue of $0.9 million ~~during~~and $1.6 million, respectively, offset by a $2.9 million decrease in hardware revenue caused by higher levels of care points purchases in the ~~three~~prior period attributed to Health Systems spending time constrained, government grant program funds, and also in the current 2021 period, customers waiting on completion of their transition to the new Converge Platform before expanding their care point footprint.

For the nine months ended September 30, ~~2019, an increase of $27.8 million, or 80%. This increase~~2021, the decrease in revenue from the prior period was substantially driven by ~~an increase~~a decrease in visit revenue. Visit revenue ~~volume ($21.3~~earned from AMG patient visits decreased by $5.5 million, ~~increase). Total revenue was $184.8~~or 6%, from $90.9 million ~~for~~in the nine months ended September 30, 2020 ~~compared~~ to ~~$103.8~~$85.4 million ~~during~~in the nine months ended September 30, ~~2019, an increase~~2021. The decrease was primarily driven by reduced visit volume versus the height of ~~$81.0 million, or 78%. This increase~~the COVID-19 pandemic experienced in the second quarter of 2020, but was slightly offset by the overall increased utilization of telemedicine as a part of now normal delivery of healthcare. For the nine months ended September 30, 2021, the decrease in revenue was also ~~substantially~~ driven by a decrease in hardware revenue of $5.3 million. The decreases in revenue were partially offset by an increase in ~~visit~~subscription revenue ~~volume ($65.3 million increase). Visit revenue has increased due to the impact of the~~ ~~COVID-19~~ crisis as well as the contribution of the Aligned Acquisition (which closed in the fourth quarter of 2019). Revenue increase was also attributable to new clients using our platform and existing clients adding additional modules to their platform subscriptions, such as our ~~COVID-19~~ ~~module. We believe that the strength of our technology platform will continue to serve as the foundation for our revenue growth.~~

Subscription revenue was $25.8 million for the three months ended September 30, 2020, compared to $22.0 million during the three months ended September 30, 2019, an increase of $3.9 million, or 18%. Subscription revenue wasfrom $72.0 million for the nine months ended September 30, 2020 ~~compared~~ to ~~$60.8~~$78.1 million during the nine months ended September 30, ~~2019,~~2021, an increase of ~~$11.2~~$6.1 million, or ~~18%~~7%. ~~Revenue earned from AMG patient visits increased by $21.3 million, or 296%, from $7.2 million in~~Subscription revenue grew as a result of new customers subscribing to the three months ended September 30, 2019 to $28.5 million in the three months ended September 30, 2020. Revenue earned from AMG patient visits increased by $65.3 million, or 254%, from $25.7 million in the nine months ended September 30, 2019 to $90.9 million in the nine months ended September 30, 2020. The increases were primarily driven by increased utilization across our health systemplatform and ~~health plan clients primarily from the~~ ~~COVID-19~~ ~~pandemic as well as overall increased acceptance of telemedicine. AMG paid visits constituted 27%~~existing customers expanding their use of the ~~total visits for~~platform through increasing the ~~three months ended September 30, 2020, compared to 62% for the three months ended September 30, 2019. AMG paid visits constituted 29%~~number of the total visits for the nine months ended September 30, 2020, compared to 66% for the nine months ended September 30, 2019. Revenue earned from services and Carepoints were $8.3 million for the three months ended September 30, 2020, compared to $5.6 million for the three months ended September 30, 2019, an increase of $2.7 million, or 47%. Revenue earned from services and Carepoints were $21.8 million for the nine months ended September 30, 2020, compared to $17.3 million for the nine months ended September 30, 2019, an increase of $4.6 million, or 26%. The increase in services and Carepoints revenue was largely duemembers they provided access to the ~~overall~~platform, increased number of programs, increased modules and increased volume of ~~Carepoints sales and partially the result of timing with respect to the performance of services and the timing of delivery of Carepoints.~~care delivered on our platform by our customers’ own providers.

Costs of Revenue, Excluding Amortization of Acquired Intangible Assets

~~Cost of revenue was $42.1 million for~~For the three months ended September 30, ~~2020, compared~~2021, the decrease in cost of revenue was primarily due to ~~$19.1~~a decrease of $2.8 million ~~for~~in costs related to marketing provided to customers. The Company also experienced a $2.1 million decrease in hardware costs due to low margin hardware unit sales.

For the nine months ended September 30, 2021, the decrease in cost of revenue was primarily due to a decrease of $6.3 million in provider related costs due to lower visit volume but also technology and process efficiencies realized in our AMG visit processes. The Company also experienced a $4.3 million decrease in hardware costs due to lower hardware unit sales volume.

Research and Development Expenses

For the three months ended September 30, ~~2019,~~2021, the increase in research and development expense was primarily driven by an increase of ~~$23.1~~$2.5 million ~~or 121%. Cost~~in employee-related costs (inclusive of ~~revenue was $119.0~~stock compensation expense) offset by a decrease of $0.4 million ~~for~~in consulting services.

For the nine months ended September 30, 2020, compared to $55.1 million for the nine months ended September 30, 2019, an increase of $63.9 million, or 116%. These increases were primarily due to an increase of $15.4 million and $47.9 million, for the three and nine months ended September 30, 2020, respectively, in provider related costs, with some portion of these provider costs due both to increased visit volumes as well as the Aligned Acquisition. Some portion of these provider costs were above typical levels due to the ~~COVID-19~~ emergency rapid expansion of active providers. The increase in visit volume also resulted in the need to utilize a significantly higher level of non-clinical contractor resources to properly service visit demand. The Company experienced a $2.1 million and $5.5 million increase, for the three and nine months ended September 30, 2020, respectively, in employee-related expense (primarily in the form of variable compensation and stock compensation expense). Hardware costs increased $2.5 and $5.2 million, for the three and nine months ended September 30, 2020, respectively, related to2021, the increase ~~in sale of devices. There~~ was also an increase of $2.0 million and $3.9 million, for the three and nine months ended September 30, 2020, respectively, in marketing services performed on behave of customers. As a percentage of revenue, cost of revenues has increased as a result of the shift in revenue mix. The impact of ~~COVID-19~~ ~~has increased our visit revenue, which generates a lower gross margin contribution.~~

~~Research and Development Expenses~~

Research and development expenses were $25.3 million for the three months ended September 30, 2020, compared to $13.6 million for the three months ended September 30, 2019, an increase of $11.7 million, or 86%. Research and development expenses were $57.8 million for the nine months ended September 30, 2020, compared to $39.2 million for the nine months ended September 30, 2019, an increase of $18.7 million, or 48%. These increases were primarily driven by an increase of ~~$4.0~~$10.3 million ~~and $7.4 million, for the three and nine months ended September 30, 2020, respectively,~~ in employee-related costs (inclusive of stock compensation expense). The increase in research and development expense was further driven by a ~~$7.0 million and $8.7~~$5.2 million increase ~~for~~in consulting services primarily driven by increased spend in the ~~three~~first half of the year related to our new Converge telehealth platform.

Sales and ~~nine~~Marketing Expenses

For the three months ended September 30, ~~2020, respectively,~~2021, the increase in sales and marketing expense primarily consisted of $1.3 million in employee-related costs (inclusive of commissions and stock compensation expense). There was also an increase in marketing expenses of $0.5 million and consulting ~~services used by the research and development group. In~~expense of $0.5 million.

For the nine months ended September 30, ~~2020 there was also an~~2021, the increase ~~in product development costs of $0.9 million and $0.5 million in third party software costs.~~

~~Sales and Marketing Expenses~~

Sales and marketing expenses were $13.8 million for the three months ended September 30, 2020, compared to $11.3 million for the three months ended September 30, 2019, an increase of $2.4 million, or 22%. Sales and marketing expenses were $40.0 million for the nine months ended September 30, 2020, compared to $34.0 million for the nine months ended September 30, 2019, an increase of $6.0 million, or 18%. These increases in sales and marketing primarily consisted of ~~a $3.0~~$5.2 million ~~and $6.8 million increase, for the three and nine months ended September 30, 2020, respectively,~~ in employee-related costs (inclusive of commissions and stock compensation expense). The increase ~~also consisted~~was offset by reduced subcontractor expenses of ~~an increase in third party software costs of $0.5 million~~$0.4million.

General and ~~$1.3 million, for the three and nine months ended September 30, 2020, respectively. The increase for~~Administrative Expenses

For the three months ended September 30, ~~2020~~2021, the decrease in general and administrative expense was driven by a decrease in stock-based compensation expense of $23.1million predominantly related to awards granted to the co-CEOs related to our IPO in 2020. The decrease was offset by ~~reduced travel~~an increase related to employee-related costs (excluding stock compensation expense) of approximately $1.8million. The decrease in general and administrative expenses ~~of $1.4~~ was offset by a $2.1million increase in insurance costs for our directors and officers, $2.8 million in increased legal costs largely related to the Teladoc litigation and $4.3 million in consulting costs largely related to the Acquisitions. The decrease in general and administrative expenses was further offset by a $1.5million increase ~~for~~in system costs to enhance administrative processing.

For the nine months ended September 30, ~~2020~~2021, the decrease was ~~offset~~driven by a decrease in ~~marketing and promotional items of $2.0 million~~

~~General and Administrative Expenses~~

General and administrative expenses were $43.1 million for the three months ended September 30, 2020, compared to $14.7 million for the three months ended September 30, 2019, an increase of $28.5 million, or 194%. General and administrative expenses were $138.5 million for the nine months ended September 30, 2020, compared to $40.2 million for the nine months ended September 30, 2019, an increase of $98.3 million, or 245%. These increases were driven by stock-based compensation expense of ~~$28.3~~ $81.1million ~~and $94.3 million, for the three and nine months ended September 30, 2020, respectively, (predominantly~~predominantly related to ~~restricted stock units~~awards granted to the ~~co-CEOs).~~ ~~Additionally, the~~co-CEOs related to our IPO in 2020. The decrease was offset by increases ~~consisted of~~related to employee-related costs (excluding ~~compensation and~~ stock compensation expense) of approximately ~~$1.9 million~~$2.7million. The decrease in general and ~~$6.4 million, for the three and nine months ended September 30, 2020, respectively. Each of these~~administrative expenses ~~were partially~~was further offset by ~~savings~~a $5.9million increase in insurance costs for our directors and officers, $4.6 million in consulting costs largely related to the Acquisitions and $5.0million in increased legal costs largely related to the Teladoc litigation. The decrease in general and administrative expenses ~~of $1.9~~ was further offset by a $3.1million ~~and $2.2 million respectively (as the Company required less reliance on outside third parties).~~increase in system costs to enhance administrative processing. General and administrative expenses ~~excluding the increase in stock-based compensation,~~ are expected to continue to increase (in absolute dollars) in future periods as we continue to grow in size and complexity while at the same time recognizing the full year impact of the regulatory and compliance costs associated with being a publicly traded company.

Depreciation and Amortization Expense

Depreciation and amortization expenses were $2.6 million for the three months ended September 30, 2020, compared to $1.9 million for the three months ended September 30, 2019, an increase of $0.7 million, or 38%. Depreciation and amortization expenses were $7.4 million for the nine months ended September 30, 2020, compared to $5.7 million for the nine months ended September 30, 2019, an increase of $1.7 million, or 30%. Depreciation expense ~~increased by $0.2 million and $0.2 million~~remained consistent for the three and nine months ended September 30, ~~2020, respectively.~~2021. Amortization expense increased by ~~$0.5 million and $1.5~~ $1.9million for the three months ended September 30, 2021 and for the nine months ended September 30, 2021. The increase in amortization was related to the intangible assets acquired in the Acquisitions.

Interest Income and Other (Expense) Income, net

For the three and nine months ended September 30, 2020, ~~respectively.~~

~~Interest Income and Other Income (Expense), net~~

~~Interest~~interest income and other ~~expenses were $0.3~~(expense) income, net consist entirely of interest income and gains from our cash equivalents and short-term investments. For the three and nine months ended September 30,

2021, interest income and other (expense) income, net consist of accretion of $0.6 million on the contingent consideration related to the Acquisitions, as well as interest income and gains from our cash equivalents and short-term investments.

Expense from Income Taxes

Income tax benefit was $5.5 million for the three months ended September 30, ~~2020,~~2021, compared to ~~$1.3 million for the three months ended September 30, 2019, a decrease of $1 million, or 80%. Interest~~ income and other expenses were $1.4 million for the nine months ended September 30, 2020, compared to $4.5 million for the nine months ended September 30, 2019, a decrease of $3.1 million, or 69%. These amounts consist entirely of interest income from our cash equivalents and short-term investments.

~~Benefit (Expense) from Income Taxes~~

~~Income~~ tax expense ~~was~~of $0.1 million for the three months ended September 30, ~~2020,~~2020. Income tax benefit was $5.0 million for the nine months ended September 30, 2021, compared to income tax ~~benefit of $0.4 million for the three months ended September 30, 2019, a decrease of $0.5 million, or 120%. Income tax~~ expense ~~was~~ $0.3 million for the nine months ended September 30, ~~2020, compared~~2020. The increase in the benefit is due to ~~$0.0~~a $5.1 million ~~for~~release of the ~~nine months ended September 30, 2019, a decrease of $0.3 million, or 1,600%.~~valuation allowance in the U.S. due to the Acquisitions.

Loss from Equity Method Investment

The Company and Cleveland Clinic partnered to form a joint venture, under the name CCAW, JV LLC, to provide broad access to comprehensive and high acuity care services via telehealth. The Company does not have a controlling financial interest in CCAW, JV LLC, but it does have the ability to exercise significant influence over the operating and financial policies of CCAW, JV LLC. Therefore, the Company accounts for its investments in CCAW, JV LLC using the equity method of accounting. During the three months ended September 30, 2021 and 2020, the Company recognized a loss of $0.6 million and $0.5 million, respectively, as its proportionate share of the joint venture results of operations. During the nine months ended September 30, 2021 and 2020, the Company recognized a loss of $2.1 and $1.3 million, respectively, as its proportionate share of the joint venture results of operations.

Liquidity and Capital Resources

The following table presents a summary of our cash flow activity for the periods set forth below:

							Nine Months Ended September 30,
	Nine Months Ended September 30,						2021			2020
	2020			2019
Condensed Consolidated Statements of Cash Flows Data:
Consolidated Statements of Cash Flows Data:
Net cash used in operating activities	$	(87,934	)	$	(66,615	)	$	(96,614	)	$	(87,934	)
Net cash provided by investing activities		(96,677	)		146,465
Net cash used in investing activities								(59,295	)		(96,677	)
Net cash provided by financing activities		1,003,307			452			4,537			1,003,307

Total	$	818,696		$	80,302		$	(151,372	)	$	818,696

Sources of Financing

Our principal sources of liquidity were cash, cash equivalents and short-term investments totaling ~~$177.6~~$790.4 million and ~~$1,086.3~~$1,041.6 million as of September 30, 2021 and December 31, ~~2019 and September 30,~~ 2020, respectively, which were held for a variety of growth initiatives and investments as well as working capital purposes. Our cash, cash equivalents and short-term investments are comprised of money market funds and marketable securities including U.S. Treasury bills.

In September 2020, we ~~completed our initial public offering, or IPO, and issued and sold~~received net proceeds of $767.6 million associated with the issuance of 45,681,499 shares of Class A common stock at an offering price of $18.00 per share, including 4,459,277 shares of Class A common stock pursuant to the exercise in full of the underwriters’ option to purchase additional shares. We received net proceeds of $768.5 million,from our IPO, after deducting underwriting

discounts and commissions of ~~$43.3~~$49.3 million and ~~estimated deferred~~ offering costs of approximately ~~$4.4~~$4.9 million. In conjunction with the IPO, we closed on the Google LLC private placement and issued 5,555,555 shares of Class C common stock for proceeds of $99.1 million, net of offering costs of $0.9 million.

Prior to our IPO, the Company funded its operations primarily through private placements of its convertible preferred stock as well as through revenues generated through customer contracts.

As shown in the accompanying condensed consolidated financial statements, the Company incurred a loss from operations of ~~$177.9~~$131.7 million and a net loss of ~~$178.0~~$128.9 million for the nine months ended September 30, ~~2020~~2021 and had an accumulated deficit of ~~$532.0~~$762.4 million as of September 30, ~~2020.~~2021.

The Company has no debt as of September 30, ~~2020~~2021 or December 31, ~~2019~~2020 and expects to generate operating losses in future years.

We believe that our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months from the issuance date of the financial statements. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, number of consultations on our platform, the timing and extent of

spending to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced services offerings, and the continuing market acceptance of telehealth services. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies and intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations would be adversely affected.

Indebtedness & Lines of Credit

In January 2011, the Company entered into a credit agreement (the “Line of Credit”) with a financial institution that provides for maximum borrowings in one or more advances of an amount up to $5.0 million. Borrowings under the Line of Credit accrue interest at the London Interbank Offered Rate plus 1.25%. Borrowings are repayable immediately upon demand by the financial institution. In November 2017, the Line of Credit was amended to increase the maximum borrowings to $7.0 million. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had no outstanding borrowings under the Line of Credit.

Nine months ended September 30, ~~2020,~~2021, vs. nine months ended September 30, ~~2019~~2020

Cash Used in Operating Activities

For the nine months ended September 30, 2021, cash used in operating activities was $96.6 million. The primary driver of this use of cash was our net loss of $128.9 million. The net loss for the year was reflective of the investments made back into the Company (from both a personnel and technology perspective), partially offset by the overall growth of our business including an increase in new clients and expansion of business with existing clients. The net loss was partially offset by non-cash expenses of $42.5 million (primarily stock-based compensation of $31.8 million and depreciation and amortization of $9.3 million).

For the nine months ended September 30, 2020, cash used in operating activities was $87.9 million. The primary driver of this use of cash was our net loss of $178.0 million. The net loss for the year was reflective of the expenses incurred with our response to COVID-19 and our continued investments made back into the Company’s infrastructure, partially offset by the revenue growth discussed above. The net loss was partially offset by non-cash expenses of $117.7 million (primarily stock-based compensation of $106.5 million and depreciation and amortization of $7.4 million).

~~For~~Cash Used in Investing Activities

Cash used in investing activities was $59.3 million for the nine months ended September 30, ~~2019, cash~~2021. Cash used in ~~operating~~investing activities ~~was $66.6 million. The primary driver~~consisted of ~~this use~~$156.5 million in acquisitions of ~~cash was our net loss of $65.6 million. The cash used for operating activities was primarily driven by~~businesses, a $2.5 million investment in ~~corporate infrastructure as~~ the ~~Company integrated~~CCAW, JV LLC joint venture with Cleveland Clinic and $0.2 million in the ~~Avizia acquisition~~purchases of property and ~~prepared for public company requirements. The net loss was partially~~equipment offset by ~~non-cash~~ ~~charges totaling $16.3 million (primarily comprised~~proceeds from maturities of ~~stock-based compensation~~investments of ~~$8.7 million and depreciation and amortization expense of $5.7~~$100.0 million.)

~~Cash Provided by Investing Activities~~

Cash used in investing activities was $96.7 million for the nine months ended September 30, 2020. Cash ~~provided by~~used in investing activities consisted of $69.1 million in proceeds from the maturities of investments, offset by $159.6 million in purchases of investments. Further, cash used in investing activities included a $2.9 million investment in the CCAW, JV LLC joint venture with Cleveland Clinic and $3.3 million in the purchases of property and equipment.

Cash Provided by Financing Activities

Cash provided by ~~investing~~financing activities ~~was $146.5 million~~ for the nine months ended September 30, ~~2019.~~2021, was $4.5 million. Cash provided by ~~investing~~financing activities consisted of ~~$226.5~~$18.5 million inof proceeds from the ~~maturities~~exercise of ~~investments, which~~employee stock options. These proceeds were ~~partially~~ offset by cash payments primarily for the purchase of ~~$78.9 million in investments. Further, the Company used $1.1 million for purchases~~treasury stock of ~~property and equipment.~~

~~Cash Provided by Financing Activities~~$14.0 million.

Cash provided by financing activities for the nine months ended September 30, 2020, was $1,005.1 million. Cash provided by financing activities consisted of $146.0 million of cash proceeds from our issuance of Series C Convertible Preferred Stock, net of issuance costs, $772.9 million of cash proceeds from our IPO, net of underwriting commissions and ~~$100~~$100.0 million cash proceeds from the issuance of Class C common stock to Google, LLC in a private placement offering. These proceeds were offset by cash payments for the purchase of treasury stock of $18.4 million.

Cash provided by financing activities for the nine months ended September 30, 2019, was $0.5 million. Cash provided by financing activities consisted of proceeds received from the exercise of options of common stock.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are therefore not exposed to the financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships.

Contractual Obligations and Commitments

As of September 30, ~~2020,~~2021, there have been no material changes from the contractual obligations and commitments previously disclosed in our ~~Prospectus.~~Form 10-K.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and the related notes thereto are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, and various other assumptions that the Company believes are necessary to consider to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s condensed consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment evolves.

Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements in our ~~Prospectus~~Form 10-K and Note 2, Summary of Significant Accounting Policies to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. There have been no significant changes to these policies during the ~~three~~nine months ended September 30, ~~2020.~~2021.

Recently Issued Accounting Pronouncements Adopted

For more information on recently issued accounting pronouncements, see Note 2 to our condensed consolidated financial statements covered under Part I, Item 1 of this Quarterly Report on Form 10-Q.

New Accounting Pronouncements Not Yet Adopted

For more information on new accounting pronouncements not yet adopted, see Note 2 to our condensed consolidated financial statements covered under Part I, Item 1 in this Quarterly Report on Form 10-Q.

Emerging Growth Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended

transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Item 3. Qualitative and Quantitative Disclosure about Market Risk

Interest Rate Risk

We had cash and cash equivalents totaling ~~$956.4~~$790.4 million, and ~~$137.7~~$941.6 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The Company also held investments totaling ~~$129.9~~$0 million and ~~$40.0~~$100.0 million as of September 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, respectively. These amounts were primarily invested in money markets and U.S. Treasury bills. The cash and cash equivalents are held for a variety of growth and investments as well as working capital purposes. Our investments are made for

capital preservation purposes. We do not enter into investments for trading or speculative purposes. All our investments are denominated in U.S. dollars.

We do not believe that an increase or decrease of 100 basis points in interest rates would have a material effect on our business, financial condition or results of operations. However, our cash equivalents are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of expectation due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.

Fluctuations in the value of our money market funds caused by a change in interest rates (gains or losses on the carrying value) are recorded in other income and are realized only if we sell the underlying securities.

Foreign Currency Exchange Risk

To date, a substantial majority of our revenue from customer arrangements has been denominated in U.S. dollars. We have limited operations outside the United States. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~one~~four foreign ~~subsidiary. The functional currency of our foreign subsidiary is the U.S. dollar.~~subsidiaries. The Company also has a branch with a functional currency of the New Israeli Shekel, however activity in the New Israeli Shekel is not considered significant. Prior to the Acquisitions the Company had one foreign subsidiary in Israel, the functional currency of that subsidiary is the U.S. dollar. In the third quarter of 2021, the Company acquired three foreign subsidiaries from the acquisition of SilverCloud with functional currencies of the Euro, British pound and Australian dollars. The activity for these entities in the nine months ended September 30, 2021 was not considered significant as only one month of operations is included in the consolidated statement of operations. Accordingly, we believe we do not have a material exposure to foreign currency risk. We may choose to focus on international expansion, which may increase our exposure to foreign currency exchange risk in the future.

Inflation Risk

We do not believe that inflation had a material effect on our business, financial condition or results of operations in the last two years. 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, financial condition or results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officers and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedures refer to controls and other procedures designed to ensurethat information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure.

Based on ~~such~~this evaluation, our principal executive officers and principal financial officer ~~have~~ concluded that ~~as of such date,~~ our disclosure controls and procedures were not effective at athe reasonable assurance level ~~as of September 30, 2020~~ due to ~~material weaknesses in internal control over financial reporting, as described below:~~

~~The management of~~ the ~~company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules~~ ~~13a-15(f)~~ ~~and~~ ~~15d-15(f)~~ ~~under the Exchange Act. As of December 31, 2019, we identified~~ material weaknesses in our internal control over financial ~~reporting.~~reporting, as further described below:

We concluded that certain material weaknesses in our internal control over financial reporting are still present as of September 30, 2021. The material weaknesses ~~we identified were~~present are as follows:

We did not maintain an effective control environment as we did not maintain a sufficient complement of accounting and financial reporting resources commensurate with our financial reporting requirements. This material weakness contributed to the following material ~~weaknesses:~~

weakness:

We did not have sufficient resources to appropriately record revenue transactions, nor did we did have controls in place to validate that the terms of the revenue transactions were appropriately entered into the revenue ~~sub-ledger~~ ~~based on the terms of the arrangement with the customer.~~

~~We did not design or maintain the appropriate controls to review the work of the third party used to assist management in the accounting for taxes, including both income taxes and~~ ~~non-income~~ ~~based taxes.~~

We did not design or maintain effective controls over the period end financial reporting process and preparation of financial statements. Specifically, we did not design and implement a sufficient level of formal accounting policies and procedures that define how transactions across the business cycles should be initiated, recorded, processed and reported and appropriately authorized and approved.

•

We did not have sufficient resources to appropriately record revenue transactions, nor did we did have controls in place to validate that the terms of the revenue transactions were appropriately entered into the revenue sub-ledger based on the terms of the arrangement with the customer.

These control deficiencies did not result in errors that were material to our annual or interim financial statements. However, these control deficiencies could result in a misstatement in our accounts or disclosures that would result in a material misstatement to the ~~annual~~ financial statements that would not be prevented or detected. Accordingly, we determined that these control deficiencies constitute material weaknesses.

We are in the process of implementing measures designed to improve our internal control over financial reporting and remediate the control deficiencies that led to the material weaknesses. As of September 30, ~~2020,~~2021, we have completed the following remedial actions:

hired additional full-time accounting resources with appropriate levels of accounting knowledge and experience, including but not limited to a Chief Financial Officer in the second half of 2018, a Vice President of Accounting, Vice President of FP&A and Director of Revenue in the first half of 2019;
•
hired additional full-time accounting resources with appropriate levels of accounting knowledge and experience, including but not limited to a Chief Financial Officer in the second half of 2018, and the following resources who all have significant public company experience: a Vice President of Accounting, Vice President of FP&A, Senior Director of Revenue in the first half of 2019, Director of SEC Reporting with Big Four Accounting experience in the second half of 2020, and a Senior Revenue Manager in the first quarter of 2021;

•

reallocated responsibilities across the accounting organization to ensure that the appropriate level of knowledge and experience is applied based on risk and complexity of transactions and tasks under review;

•

migrated to a new accounting enterprise resource planning (“ERP”) system that better meets the needs of our business;

implemented controls to provide for a robust review of the accounting for taxes including the work prepared by the third party as well as identification of changes to tax regulation to ensure all tax regulation changes that impact the Company are being evaluated timely and properly.
•
designed and implemented controls and continued to refine processes to validate all terms of the revenue transactions were properly considered when determining revenue recognition and that all revenue transactions were subject to thorough review from individuals with the appropriate mix of expertise and oversight to ensure accurate presentation;

•

increased the number of Board Directors on our Audit Committee to three independent Directors late 2020; and

•

engaged a Big Four public accounting firm to assist us in the creation of, and ultimately serve as, an internal audit function, including the establishment of an internal audit charter and assessment, documentation, design and implementation of control activities related to internal controls in the second quarter of 2021.

We have made significant progress towards remediating the material weaknesses by hiring qualified professionals for critical roles within our accounting department and migrating to a new ERP system, and we continue enhancing and implementing new processes and controls to strengthen our internal control over financial reporting. We believe we are taking the steps necessary to remediate these material weaknesses and will continue to review, revise, and improve the effectiveness of our internal controls as ~~appropriate.~~appropriate Although we have made significant enhancements to our control procedures, these material weaknesses will not be considered remediated until our controls are operational for a sufficient period of time, tested, and management concludes that these controls are operating effectively.

Remediation of Previously Identified Material Weakness in Internal Control over Financial Reporting

We previously identified and disclosed in the financial statements as of and for the period ended December 31, 2020 included in our Annual Report on Form 10-K as well as in our Quarterly Report on Form 10-Q for the interim period ended June 30, 2021, a material weakness in our internal control over financial reporting relating to the following:

•

Our management, with the oversight from our audit committee, has completed the following remediation steps to address the previously disclosed material weakness:

•

hired additional full-time accounting resources with appropriate levels of accounting knowledge and experience, including a Chief Financial Officer in the second half of 2018, a Vice President of Accounting, Vice President of FP&A, and Director of SEC Reporting in the second half of 2020;

•

strengthened our internal policies, processes and reviews over period end financial reporting and preparation of financial statements, including formal documentation thereof; and

•

engaged a professional accounting services firm in the second quarter of 2021 to help us assess, document, design and implement control activities related to internal control over financial reporting.

Our management concluded that based on the completion of these actions, and the results of our testing over the design and operating effectiveness of the newly designed and implemented controls, the previously-identified material weakness related to the period end financial reporting process and preparation of financial statements was remediated as of September 30, 2021.

Changes in Internal Control over Financial Reporting

~~During~~There have been no changes in our internal control over financial reporting during the ~~third~~ quarter ~~we have designed and implemented controls related to the accounting for taxes, including both income and non-income based taxes,~~ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~Other than these changes, there have been no other changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules~~ ~~13a-15(d)~~ or ~~15d-15(d)~~ ~~of the Exchange Act during the period covered by this Quarterly Report on Form~~ ~~10-Q~~ ~~that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~

Limitations on Effectiveness of Controls and Procedures

Our management, including our principal executive officers and principal financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by

management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, financial condition, results of operations or cash flows. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.

On September 14, 2020, we received a letter from Teladoc Health, Inc. alleging that certain of our cart products and associated peripherals infringe upon their patents. On October 12, 2020, Teladoc Health, Inc filed a claim against the Company related to these allegations. While we can provide no guarantees about the outcome of ~~any potential~~this dispute, we believe that these claims lack merit and we intend to defend against them vigorously. Moreover, even if we were found to infringe upon any valid claim of these patents, our revenues from the Carepoints products approximated 5%6% of our revenues in ~~2019.~~2020. See ~~“Risk~~“Item 1A. Risk Factors—Risks Related to Intellectual Property—Third parties may challenge the validity of our patents and trademarks, or oppose our patent and trademark applications. We may not be able to obtain and enforce additional patents to protect our proprietary rights from use by potential competitors. Companies with other patents could require us to stop using or pay to use required technology” and ~~“Risk~~“Item 1A. Risk Factors—Risks Related to Intellectual Property—We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights” in our ~~Prospectus.~~Form 10-K.

Item 1A. Risk Factors

~~There~~Other than the risk factor set forth below, there have been no material changes to the risk factors previously disclosed in our ~~Prospectus.~~Form 10-K. For a discussion of potential risks and uncertainties related to our Company see the information in our ~~Prospectus~~Form 10-K in the section entitled “Risk Factors.”

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in the “Special Note Regarding Forward-Looking Statements” section in Part I, Item 2, of this Quarterly Report on Form 10-Q.

We may fail to realize all of the anticipated benefits of the Acquisitions, including expected synergies, and be subject to business uncertainties that could adversely affect our business, including difficulty integrating the Conversa and SilverCloud businesses

We believe that the Acquisitions will result in certain benefits, including certain cost synergies, product innovations, and operational efficiencies. However, our success in realizing these benefits and synergies, and the timing of this realization, depends on the successful integration of our business and operations with Conversa’s and SilverCloud’s businesses, respectively, and may require significant internal and external investment. The efforts to realize these benefits and synergies will be a complex process and may disrupt each of the companies’ existing operations if not implemented in a timely and efficient manner. The full benefits of the Acquisitions, including the anticipated sales or growth opportunities, may not be realized as expected or may not be achieved within the anticipated time frame, or at all. Failure to achieve the anticipated benefits of the Acquisitions could adversely affect our results of operations or cash flows, cause dilution to our earnings per share, decrease or delay any accretive effect of the Acquisitions and negatively impact the price of our common stock. The combined company may fail to realize the anticipated benefits of the Acquisitions for a variety of reasons, including the following:

•

the Acquisitions may result in our assuming unexpected liabilities;

•

we may experience difficulties integrating operations and systems, for example with respect to accounting and IT controls, IT systems as well as company policies and cultures;

•

we may fail to retain and assimilate employees of Conversa’s and/or SilverCloud’s business;

•

we may fail to effectively coordinate sales and marketing efforts to communicate the capabilities of the combined company;

•

we may fail to combine product offerings and product lines quickly and effectively; and

•

problems may arise in entering new markets in which we have little or no experience.

Uncertainty about the effect of the Acquisitions on employees, customers and suppliers may expose us to financial, executional and operational risks. These uncertainties may impair our ability to attract, retain and motivate key personnel and could cause our customers, suppliers and other business partners to delay or defer certain business decisions or to seek to change existing business relationships with us. The occurrence of any of these events could have a material adverse effect on our operating results.

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

Recent Sales of Unregistered ~~Sale of Equity~~ Securities

~~On September 21, 2020 we granted restricted stock units for an aggregate of 3,230,750 shares of Class A common stock under our 2020 Equity Incentive Plan~~

~~None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. We believe the offers, sales, and issuances of the above securities~~There were exempt from registration under the Securities Act (or Regulation D or Regulation S promulgated thereunder) by virtue of Section 4(a)(2) of the Securities Act because the issuance of securities to the recipients did not involve a public offering, or in reliance on Rule 701 because the transactions were pursuant to compensatory benefit plans or contracts relating to compensation as provided under such rule. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us. Theno sales of ~~these securities were made without any general solicitation or advertising.~~

~~Use of Proceeds~~

On September 21, 2020, we closed our initial public offering, or IPO, in which we sold 45,681,499 shares of our Class A common stock at an offering price of $18.00 per share, including 4,459,277 shares of Class A common stock pursuant to the exercise in full of the underwriters’ option to purchase additional shares. We received net proceeds of $768.5 million, after deducting underwriting discounts and commissions of $49.3 million and estimated deferred offering costs of $4.4 million. All of the shares of common stock issued and sold in our IPO were registered under the Securities Act of 1933, as amended pursuant to a registration statement on Form ~~S-1~~ ~~(File~~ ~~No. 333-248309),~~ which was declared effective by the SEC on September 16, 2020. The representatives of the underwriters of our IPO were Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, Piper Sandler & Co, UBS Securities LLC, Credit Suisse Securities (USA) LLC, Cowen and Company, LLC, and Berenberg Capital Markets LLC.

Concurrent with the IPO we closed on the Google LLC private placement and issued 5,555,555 shares of Class C common stock for proceeds of $99.1 million, net of offering costs of $0.9 million. No offering costs were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10% or more of any class of ourunregistered equity securities ~~or to any other affiliates. As of~~during the quarter ended September 30, 2020, approximately $1.5 million of expenses incurred in connection with our IPO had been paid. There has been no material change in the planned use of proceeds from our IPO from those disclosed in the Prospectus. In September 2020, the Company repurchased 1,340,354 shares of Class A and Class B common stock from certain executive officers and other employees, to permit such executive officers and other employees to pay taxes owed in connection with the vesting of equity awards, including the repayment of third party loans incurred to finance the payment of such taxes.2021.

Issuer Purchases of Equity Securities

The following table provides information about the Company’s purchases of its common stock for each month during this quarterly period covered by this report:


Period	(a) Total number of shares (or units) purchased			(b) Average price paid per share (or unit)		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs		(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs		(32)(a) Total number of shares (or units) purchased*		(b) Average price paid per share (or unit)*		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs		(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
July 1 to July 31		—			—		—		—		4,517	$	11.59		—		—
August 1 to August 31					—		—		—		206,977		11.15		—		—
September 1 to September 30		1,340,354	*	$	18.00		—		—		—		—		—		—
Total		1,340,354	*	$	18.00		—		—		211,494	$	11.16		—		—

~~Represents shares repurchased from certain officers using a portion of~~Shares withheld to cover tax withholding obligations under the net ~~proceeds from the IPO, approximately $24.2 million, as discussed in~~ ~~Use~~settlement provision upon vesting of ~~Proceeds~~.restricted stock units and exercising of options.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The documents listed below are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

4.9#†		Agreement and Plan of Merger by and among American Well Corporation, SilverCloud Health Holdings, Inc., Shannon Merger Subsidiary Inc, Shannon Merger Sister Subsidiary, LLC, and Fortis Advisors LLC, as the Securityholder Representative Named Herein, dated as of July 28, 2021

4.10#†		Agreement and Plan of Merger by and among American Well Corporation, Conversa Health, Inc., Copernicus Merger Subsidiary Inc, Copernicus Merger Sister Subsidiary, LLC, and Fortis Advisors LLC, as the Securityholder Representative Named Herein, dated as of July 27, 2021

10.1		Employment Agreement between American Well Corporation and Brendan O’Grady, dated July 19, 2021

10.2		Employment Agreement between American Well Corporation and Robert Shepardson, dated September 15, 2021

10.39		Addendum to Employment Agreement between American Well Corporation and Ido Schoenberg, dated June 29, 2021

10.40		Amendment to Amended & Restated Employment Agreement between American Well Corporation and Keith Anderson, dated September 21, 2021

10.41		Amendment No. 6 to Amended and Restated Vendor Agreement, dated July 30, 2021, by and among American Well Corporation and Health Management Corporation dba LiveHealth Online

31.1		Chief Executive Officers Certifications

31.2		Chief Financial Officer and Chief Financial Officer in Transition Certifications

32.1		CEO Certification of Quarterly Report

32.2		CFO and CFO in Transition Certifications of Quarterly Report

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)


#	Portions of this exhibit have been omitted because they are both (i) not material and (ii) customarily and actually treated by the registrant as private or confidential.


~~10.1~~	†	~~Amendment No. 5~~ Exhibits and ~~Joinder~~schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be provided on a supplemental basis to the ~~Company’s Second Amended~~Securities and ~~Restated Investors’ Rights Agreement (Exhibit 10.1 to the Current Report on Form~~ ~~8-K~~ ~~filed September 22, 2020 and incorporated by reference herein)~~

~~31.1~~		~~Chief Executive Officers Certifications~~

~~31.2~~		~~Chief Financial Officer Certification~~

~~32.1~~		~~CEO Certification of Quarterly Report~~

~~32.2~~		~~CFO Certification of Quarterly Report~~

~~101~~		~~Interactive Data File~~Exchange Commission or its staff upon request.

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.


��							AMERICAN WELL CORPORATION

Date:		November ~~13, 2020~~12, 2021			By:		/s/ Ido Schoenberg, MD
								Co-Chief Executive Officer
								(Principal Executive Officer)

Date:		November ~~13, 2020~~12, 2021			By:		/s/ Roy Schoenberg, MD, MPH
								Co-Chief Executive Officer
								(Principal Executive Officer)

Date:		November ~~13, 2020~~12, 2021			By:		/s/ ~~Keith Anderson~~Robert Shepardson
							Chief Financial Officer
								(Principal Financial Officer)

Date:		November ~~13, 2020~~12, 2021			By:	/s/ Keith Anderson
				Chief Financial Officer in Transition

Date:	November 12, 2021		By:	/s/ Paul McNeice
							Vice President of Accounting
								(Principal Accounting Officer)

4146


	September 30, 2020			December 31, 2019
Current assets:
Cash and cash equivalents	$	956,417		$	137,673
Investments		129,914			39,953
Restricted cash		300			—
Accounts receivable ($1,408 and $2,601 from related parties and net of allowances of $1,333 and $686, respectively)		39,962			32,730
Inventories		7,775			3,104
Deferred contract acquisition costs		865			1,130
Prepaid expenses and other current assets		8,408			8,937

Total current assets		1,143,641			223,527
Restricted cash		795			1,143
Property and equipment, net		4,352			2,664
Goodwill		193,877			193,877
Intangible assets, net		57,718			63,535
Operating lease right-of-use asset		8,201			11,944
Deferred contract acquisition costs, net of current portion		2,627			1,639
Other assets		1,126			1,552
Investment in minority owned joint venture		1,690			—

Total assets	$	1,414,027		$	499,881

Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	7,670		$	6,504
Accrued expenses and other current liabilities		38,301			27,351
Operating lease liability, current		6,321			6,232
Deferred revenue ($6,325 and $12,912 from related parties, respectively)		54,324			66,490

Total current liabilities		106,616			106,577
Other long-term liabilities		115			309
Operating lease liability, net of current portion		3,056			7,164
Deferred revenue, net of current portion ($275 and $1,385 from related parties, respectively)		7,480			10,896

Total liabilities		117,267			124,946

Commitments and contingencies (Note 12)
Convertible preferred stock, $0.01 par value; no shares authorized, issued or outstanding as of September 30, 2020, and 17,744,445 shares authorized 14,061,508 shares issued and 14,012,935 shares outstanding as of December 31, 2019; aggregate liquidation preference of $0 and $608,449, respectively		—			655,799
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued or outstanding as of September 30, 2020, and no shares authorized, issued or outstanding as of December 31, 2019		—			—
Common stock, $0.01 par value; 1,000,000,000 Class A shares authorized, 200,131,318 shares issued and 199,647,646 shares outstanding, 100,000,000 Class B shares authorized, 29,950,326 shares issued and 29,032,042 shares outstanding, 200,000,000 Class C shares authorized 5,555,555 issued and outstanding as of September 30, 2020; and 220,000,000 common stock shares authorized, 42,338,679 shares issued and 42,302,845 shares outstanding as of December 31, 2019		2,343			423
Treasury stock, 1,401,956 shares and 35,834 shares as of September 30, 2020 and as of December 31, 2019, respectively		(24,320	)		(158	)
Additional paid-in capital		1,828,395			50,289
Accumulated other comprehensive income		50			250
Accumulated deficit		(532,047	)		(357,927	)

Total American Well Corporation stockholders’ equity (deficit)		1,274,421			(307,123	)
Non-controlling interest		22,339			26,259

Total stockholders’ equity (deficit)		1,296,760			(280,864	)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	1,414,027		$	499,881


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2019		24,917,003		$	3.90		6.9	$	79,798
Granted		2,637,220		$	7.80
Forfeited		(1,697,171	)	$	4.80
Expired		(132,001	)	$	2.16
Exercised		(1,660,751	)	$	2.59

Outstanding as of September 30, 2020		24,064,300		$	4.35		6.4	$	610,782

Vested and expected to vest as of December 31, 2019		22,650,355		$	3.73		6.7	$	76,321
Vested and expected to vest as of September 30, 2020		22,212,804		$	4.09		6.2	$	567,533

Options exercisable as of December 31, 2019		14,685,654		$	2.83		5.5	$	62,869
Options exercisable as of September 30, 2020		16,254,829		$	3.43		5.3	$	426,049


	Shares			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2019		2,322,408		$	5.79
Granted		13,039,392			13.41
Vested		(3,810,645	)		9.50


	Nine Month Ended September 30,
	2020			2019
Risk-free interest rate		1.09	%		2.44	%
Expected term (in years)		6.1			6.1
Expected volatility		52	%		50	%
Expected dividend yield		0	%		0	%

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company