(Mark One)

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

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

2021


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

Commission File Number: 001-38924

~~GigCapital2,~~

UpHealth, Inc.

(Exact Name of Registrant as Specified in its Charter)

~~Delaware~~	~~83-3838045~~
Delaware			83-3838045
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
~~1731 Embarcadero Rd.,~~ 14000 S. Military Trail,		Suite ~~200~~ ~~Palo Alto, CA~~ 203	~~94303~~ 33484
Delray Beach,		Florida
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: ~~(650) 276-7040~~

(312) 618-1322

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

~~Units, each consisting of one share of Common Stock, one Right and one Warrant~~

~~GIX.U~~

~~New York Stock Exchange~~

Common Stock, par value $0.0001 per share

~~GIX~~UPH

New York Stock Exchange

~~Rights to purchase one-twentieth of~~Redeemable Warrants, exercisable for one share of Common Stock

at an exercise price of $11.50 per share

~~GIX.RT~~UPH.WS

New York Stock Exchange

~~Warrants to purchase one share of Common Stock~~

~~GIX.WS~~

~~New York Stock Exchange~~

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

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

☐

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

☐

As of ~~November 2, 2020,~~August 12, 2021, the registrant had ~~22,245,000~~117,604,610 shares of common stock, $0.0001 par value per share, outstanding.

~~GIGCAPITAL2, INC.~~

~~Quarterly Report on Form 10-Q~~

~~Table of Contents~~

TABLE OF CONTENTS

	~~Page~~
~~PART I.~~		~~FINANCIAL INFORMATION~~Page
~~Item 1.~~		~~Condensed Financial Statements (Unaudited)~~		1
		3
Item 1. Financial Statements		3
Condensed Consolidated Balance Sheets		1 4
		Condensed Consolidated Statements of Operations ~~and~~	5
Condensed Consolidated Statements of Comprehensive Income (Loss)		2 6
		Condensed Consolidated Statements of ~~Stockholders’~~Stockholders' Equity	3 7
		Condensed Consolidated Statements of Cash Flows	4 8
		Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements	5 9
Item 2.		~~Management’s~~ Management's Discussion and Analysis of Financial Condition and Results of Operations	15 41
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	20 56
Item 4.		Controls and Procedures	20 56
~~PART II.~~		~~OTHER INFORMATION~~
~~Item 1.~~ Part II - Other Information		~~Legal Proceedings~~58		21
Item ~~1A.~~ 1. Legal Proceedings		~~Risk Factors~~58		21
Item 1A. Risk Factors		58
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	27 58
Item 3.		Defaults Upon Senior Securities	28 58
Item 4.		Mine Safety Disclosures	28 58
Item 5.		Other Information	28 58
Item 6. Exhibits		~~Exhibits~~58		29
Signatures		30 62

~~PART I—FINANCIAL INFORMATION~~

Part 1 - Financial Information

Item 1. Financial ~~Statements.~~

~~GIGCAPITAL2~~Statements

UPHEALTH, INC.

~~Condensed Balance Sheets~~

~~(Unaudited)~~

September 30, 2020

December 31, 2019

ASSETS

Current Assets

Cash

$
387,430

$
1,576,508

Prepaid expenses

178,047

161,609

Receivable from related parties

10,078

1,952

Total current assets

575,555

1,740,069

Cash and marketable securities held in Trust Account

174,284,387

173,994,583

Other non-current assets

—

33,327

TOTAL ASSETS

$
174,859,942

$
175,767,979

LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$
24,597

$
142,613

Payable to related parties

6,185

16,649

Accrued liabilities

150

—

Other current liabilities

—

180,696

Total liabilities

30,932

339,958

Commitments and contingencies (Note 5)

Common stock subject to possible redemption, 16,982,900 and 17,042,802 shares as of September 30, 2020 and December 31, 2019, respectively, at a redemption value of $10.00 per share

169,829,000

170,428,020

Stockholders’ equity

Preferred stock, par value of $0.0001 per share; 1,000,000 shares authorized; NaN issued or outstanding

—

—

Common stock, par value of $0.0001 per share; 100,000,000 shares authorized; 5,262,100 and 5,202,198 shares issued and outstanding as of September 30, 2020 and December 31, 2019

526

520

Additional paid-in capital

5,238,044

4,639,030

Retained earnings (accumulated deficit)

(238,560
)

360,451

Total stockholders’ equity

5,000,010

5,000,001

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$
174,859,942

$
175,767,979

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)


	June 30, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	98,116	$	1,839
Restricted cash	586		530
Accounts receivable, net	40,636		6,703
Inventories	3,208		117
Due from related parties	13		0
Prepaid expenses and other current assets	7,060		3,501
Total current assets	149,619		12,690
Property and equipment, net	55,154		151
Intangible assets, net	123,463		27,782
Goodwill	567,952		164,194
Equity method investments	0		57,214
Deferred tax assets	0		335
Other assets	1,865		24
Total assets	$	898,053	$	262,390
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	8,232	$	2,680
Accrued expenses	33,764		8,482
Deferred revenue	6,572		397
Due to related party	57		70
Income taxes payable	902		673
Related-party long-term debt, current	670		39
Long-term debt, current	49,487		22,531
Derivative liability, current	38,598		0
Forward share purchase liability	17,123		0
Other current liabilities	1,048		0
Total current liabilities	156,453		34,872
Related-party long-term debt, noncurrent	0		381
Long-term debt, noncurrent	96,131		344
Deferred tax liabilities	24,582		6,072
Warrant liabilities, noncurrent	772		0
Derivative liability, noncurrent	23,225		0
Other long-term liabilities	2,773		0
Total liabilities	303,936		41,669
Commitments and Contingencies (Note 17)	0		0
Stockholders’ Equity:
Preferred stock, $0.0001 par value, 1,000 shares authorized; NaN issued or outstanding	0		0
Common stock, $0.0001 par value, 300,000 shares authorized; 117,605 issued and outstanding at June 30, 2021; 70,021 issued and outstanding at December 31, 2020	12		7
Additional paid-in capital	620,455		222,900
Accumulated deficit	(37,920)		(2,186)
Accumulated other comprehensive loss	(3,478)		0
Total UpHealth, Inc., stockholders’ equity	579,069		220,721
Noncontrolling interests	15,048		0
Total stockholders’ equity	594,117		220,721
Total liabilities and stockholders’ equity	$	898,053	$	262,390

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

~~GIGCAPITAL2,~~

UPHEALTH, INC.

~~Condensed Statements of Operations and Comprehensive Income (Loss)~~

~~(Unaudited)~~

For the Three
Months Ended
September 30,
2020

For the Three
Months Ended
September 30,
2019

For the Nine
Months Ended
September 30,
2020

Period from
March 6, 2019
(Inception)
through
September 30,
2019

Revenues

$
—

$
—

$
—

$
—

General and administrative expenses

361,005

395,583

1,346,525

577,407

Loss from operations

(361,005
)

(395,583
)

(1,346,525
)

(577,407
)
Other income

Interest income on cash and marketable securities held in Trust Account

44,890

933,853

1,016,923

1,151,957

Income (loss) before provision for income taxes

(316,115
)

538,270

(329,602
)

574,550

Provision for income taxes

14,119

278,662

269,409

343,744

Net income (loss) and comprehensive income (loss)

$
(330,234
)

$
259,608

$
(599,011
)

$
230,806

Net loss attributable to common stockholders

$
(353,726
)

$
(241,866
)

$
(1,169,699
)

$
(387,789
)
Weighted-average common shares outstanding, basic and diluted

5,245,947

5,223,704

5,218,968

4,675,325

Net loss per share common share, basic and diluted

$
(0.07
)

$
(0.05
)

$
(0.22
)

$
(0.08
)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue
Services	$	14,773	$	0	$	22,911	$	0
Licenses and subscriptions	9,145		0		12,803		0
Products	7,964		0		8,984		0
Total revenue	31,882		0		44,698		0
Cost of goods and services
Services	9,381		0		14,102		0
License and subscriptions	6,173		0		6,670		0
Products	4,727		0		5,644		0
Total cost of goods and services	20,281		0		26,416		0
Gross margin	11,601		0		18,282		0
Operating expenses
Sales and marketing	1,695		0		2,580		0
Research and development	872		0		2,630		0
General and administrative	8,974		336		12,254		539
Depreciation and amortization	2,966		0		3,870		0
Acquisition-related expenses	32,646		0		35,339		0
Total operating expenses	47,153		336		56,673		539
Loss from operations	(35,552)		(336)		(38,391)		(539)
Other income (expense)
Interest expense	(4,870)		0		(5,581)		0
Gain on consolidation of equity method investment	0		0		640		0
Gain on fair value of warrant liabilities	1,074		0		1,074		0
Gain on extinguishment of debt	151		0		151		0
Other expense, net, including interest income	(258)		0		(221)		0
Total other expense	(3,903)		0		(3,937)		0
Loss before income tax benefit	(39,455)		(336)		(42,328)		(539)
Income tax benefit	6,647		0		7,053		0
Net loss before loss from equity method investment	(32,808)		(336)		(35,275)		(539)
Loss from equity method investment	0		0		(561)		0
Net loss	(32,808)		(336)		(35,836)		(539)
Less: net loss attributable to noncontrolling interests	(24)		0		(102)		0
Net loss attributable to UpHealth, Inc.	$	(32,784)	$	(336)	$	(35,734)	$	(539)
Net loss per share attributable to UpHealth, Inc.:
Basic	$	(0.35)	$	(0.01)	$	(0.43)	$	(0.01)
Diluted	$	(0.35)	$	(0.01)	$	(0.43)	$	(0.01)
Weighted average shares outstanding:
Basic	94,170		50,050		83,585		50,050
Diluted	94,170		50,050		83,585		50,050

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

~~GIGCAPITAL2,~~

UPHEALTH, INC.

~~Condensed Statements of Stockholders’ Equity~~

~~(Unaudited)~~

Common Stock

Additional

Retained
Earnings

Three Months Ended September 30, 2020

Shares

Amount

Paid-In
Capital

(Accumulated
Deficit)

Stockholders’
Equity

Balance as of June 30, 2020

5,229,076

$
523

$
4,907,807

$
91,674

$
5,000,004

Shares subject to redemption

33,024

3

330,237

330,240

Net loss

—

—

—

(330,234
)

(330,234
)
Balance as of September 30, 2020

5,262,100

$
526

$
5,238,044

$
(238,560
)

$
5,000,010

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Common Stock

Additional

Retained
Earnings

Three Months Ended September 30, 2019

Shares

Amount

Paid-In
Capital

(Accumulated
Deficit)

Stockholders’
Equity

Balance as of June 30, 2019

5,237,624

$
524

$
5,028,286

$
(28,802
)

$
5,000,008

IPO offering costs

—

-

(85,000
)

—

(85,000
)
Cancellation of insider shares

(5,000
)

(1
)

1

—

—

Shares subject to redemption

(17,461
)

(1
)

(174,609
)

—

(174,610
)
Net income

—

—

—

259,608

259,608

Balance as of September 30, 2019

5,215,163

$
522

$
4,768,678

$
230,806

$
5,000,006

(In thousands, unaudited)

Common Stock

Additional

Retained
Earnings

Nine Months Ended September 30, 2020

Shares

Amount

Paid-In
Capital

(Accumulated
Deficit)

Stockholders’
Equity

Balance as of December 31, 2019

5,202,198

$
520

$
4,639,030

$
360,451

$
5,000,001

Shares subject to redemption

59,902

6

599,014

—

599,020

Net loss

—

—

—

(599,011
)

(599,011
)
Balance as of September 30, 2020

5,262,100

$
526

$
5,238,044

$
(238,560
)

$
5,000,010

Common Stock

Additional

Period from March 6, 2019 (Inception) through September 30, 2019

Shares

Amount

Paid-In
Capital

Accumulated
Deficit

Stockholders’
Equity

Balance as of March 6, 2019 (Inception)

0

$
0

$
0

$
0

$
0

Sale of common stock to Founders at $0.005804 per share

4,307,500

431

24,569

—

25,000

Sale of common stock to Founders in private placement at $10 per share

567,500

57

5,674,943

—

5,675,000

Sale of common stock to underwriters at $10 per share

120,000

12

1,199,988

—

1,200,000

Issuance of Insider shares for no consideration

5,000

1

(1
)

—

—

Cancellation of insider shares

(5,000
)

(1
)

1

—

—

Sale of common stock in Initial Public Offering, net of offering costs

17,250,000

1,725

168,165,845

—

168,167,570

Shares subject to redemption

(17,029,837
)

(1,703
)

(170,296,667
)

—

(170,298,370
)
Net income

—

—

—

230,806

230,806

Balance as of September 30, 2019

5,215,163

$
522

$
4,768,678

$
230,806

$
5,000,006


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net loss	$	(32,808)	$	(336)	$	(35,836)	$	(539)
Foreign currency translation adjustments, net of tax	(2,319)		0		(3,478)		0
Comprehensive loss	(35,127)		(336)		(39,314)		(539)
Less: comprehensive loss attributable to noncontrolling interests	(24)		0		(102)		0
Comprehensive loss attributable to UpHealth, Inc.	$	(35,103)	$	(336)	$	(39,212)	$	(539)

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

~~GIGCAPITAL2,~~

UPHEALTH, INC.

~~Condensed Statements of Cash Flows~~

~~(Unaudited)~~

For the Nine
Months Ended
September 30, 2020

Period from
March 6, 2019
(Inception)
through
September 30, 2019

OPERATING ACTIVITIES

Net income (loss)

$
(599,011
)

$
230,806

Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:

Interest earned on cash and marketable securities held in Trust Account

(1,016,923
)

(1,151,957
)
Change in operating assets and liabilities:

Prepaid expenses

(16,438
)

(187,100
)
Receivable from related parties

(8,126
)

(30,054
)
Other non-current assets

33,327

(53,368
)
Accounts payable

(118,016
)

96,632

Payable to related parties

(10,464
)

—

Accrued liabilities

150

5,000

Other current liabilities

(180,696
)

293,362

Net cash and cash equivalents used in operating activities

(1,916,197
)

(796,679
)
INVESTING ACTIVITIES

Investment of cash in Trust Account

—

(172,500,000
)
Cash withdrawn from Trust Account

727,119

71,590

Net cash and cash equivalents provided by (used in) investing activities

727,119

(172,428,410
)
FINANCING ACTIVITIES

Proceeds from sale of common stock to Founders

—

25,000

Borrowing from related party

—

99,937

Repayment of borrowing from related party

—

(99,937
)
Proceeds from sale of Private Placement Units

—

5,675,000

Proceeds from sale of common stock to underwriters

—

1,200,000

Proceeds from sale of Units, net of underwriting discounts paid

—

169,050,000

Payment of offering costs

—

(689,210
)
Net cash and cash equivalents provided by financing activities

—

175,260,790

Net change in cash and cash equivalents during period

(1,189,078
)

2,035,701

Cash and cash equivalents, beginning of period

1,576,508

—

Cash and cash equivalents, end of period

$
387,430

$
2,035,701

SUPPLEMENTAL DISCLOSURES

Cash paid for income taxes

$
462,238

$
50,382

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Offering costs included in accounts payable

$
—

$
193,220

Change in value of common stock subject to possible redemption

$
(599,020
)

$
2,130,800

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, unaudited)


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total UpHealth, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
Balance at December 31, 2020(1)	70,021	$	7	$	222,900	$	(2,186)	$	0	$	220,721	$	0	$	220,721
Issuance of common stock to consummate business combinations(1)	8,749	1		87,408		—		—		87,409		17,389		104,798
Net loss	—	—		—		(2,950)		—		(2,950)		(78)		(3,028)
Foreign currency translation adjustments	—	—		—		—		(1,159)		(1,159)		—		(1,159)
Balance at March 31, 2021(1)	78,771	$	8	$	310,308	$	(5,136)	$	(1,159)	$	304,021	$	17,311	$	321,332
Issuance of common stock to consummate business combinations	26,162	3		243,584		—		—		243,587		(2,239)		241,348
Merger recapitalization	9,471	1		54,604		—		—		54,605		—		54,605
PIPE common stock issuance	3,000	—		27,079		—		—		27,079		—		27,079
Forward share repurchase agreement	0	—		(17,000)		—		—		(17,000)		—		(17,000)
Issuance of common stock for debt conversion	200	—		1,879		—		—		1,879		—		1,879
Net loss	—	—		—		(32,784)		—		(32,784)		(24)		(32,808)
Foreign currency translation adjustments	—	—		—		—		(2,319)		(2,319)		—		(2,319)
Balance at June 30, 2021	117,605	$	12	$	620,455	$	(37,920)	$	(3,478)	$	579,069	$	15,048	$	594,117

(1) Amounts as of March 31, 2021 and before that date differ from those published in prior consolidated financial statements as they were retrospectively adjusted as a result of the accounting for the Business Combinations (as defined below in Note 1). Specifically, the number of common shares outstanding during periods before the Business Combinations are computed on the basis of the number of common shares of UpHealth Holdings (accounting acquiror) during those periods multiplied by the exchange ratio established in the stock purchase agreement (1.00 UpHealth Holdings shares converted to 10.28 GigCapital2 shares). Common stock and additional paid-in capital were adjusted accordingly.


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total UpHealth, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
Balance at January 1, 2020(1)	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Issuance of common stock for formation(1)	50,050	5		(5)		—		—		—		—		0
Net loss	—	—		—		(203)		—		(203)		—		(203)
Balance at March 31, 2020(1)	50,050	$	5	$	(5)	$	(203)	$	0	$	(203)	$	0	$	(203)
Net loss	—	—		—		(336)		—		(336)		—		(336)
Balance at June 30, 2020(1)	50,050	$	5	$	(5)	$	(539)	$	0	$	(539)	$	0	$	(539)

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

~~GIGCAPITAL2,~~

UPHEALTH, INC.

~~Notes to Unaudited Condensed Financial Statements~~

~~(Unaudited)~~

~~1. DESCRIPTION~~

CONDENSED CONSOLIDATED STATEMENTS OF ~~ORGANIZATION AND BUSINESS OPERATIONS~~

CASH FLOWS

(In thousands, unaudited)


	Six Months Ended June 30,
	2021		2020
Operating activities:
Net loss	$	(35,836)	$	(539)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4,353		0
Amortization of debt issuance costs and discount on convertible debt	1,913		0
Gain on extinguishment of debt	(151)		0
Loss from equity method investment	561		0
Gain on consolidation of equity method investment	(640)		0
Gain on fair value of warrant liabilities	(1,074)		0
Loss on disposal of property and equipment	78		0
Deferred income taxes	(7,262)		0
Other	(271)		0
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(21,000)		0
Inventories	(80)		0
Prepaid expenses and other current assets	5		0
Accounts payable and accrued expenses	15,592		539
Income taxes payable	200		0
Deferred revenue	5,877		0
Proceeds from Provider Relief Funds	506		0
Due to (from) related parties	28		0
Other current liabilities	(27)		0
Net cash used in operating activities	(37,228)		0
Investing activities:
Purchases of property and equipment	(669)		0
Due to (from) related parties	265		0
Net cash acquired in acquisition of businesses	4,263		0
Net cash provided by investing activities	3,859		0
Financing activities:
Proceeds from merger and recapitalization transaction	83,435		0
Proceeds from convertible debt	164,500		0
Repayments of debt	(17,333)		0
Payments of debt issuance costs	(8,100)		0
Payments of seller notes	(88,056)		0
Payments of capital lease obligations	(275)		0
Distribution to noncontrolling interest	(100)		0
Payments of amount due to member	(4,270)		0
Net cash provided by financing activities	129,801		0
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(99)		0
Net increase in cash, cash equivalents, and restricted cash	96,333		0
Cash, cash equivalents, and restricted cash, beginning of period	2,369		0
Cash, cash equivalents, and restricted cash, end of period	$	98,702	$	0
Supplemental cash flow information:
Cash paid for interest, net of amounts capitalized	$	233	$	0
Cash paid for income taxes	$	0	$	0
Non-cash investing and financing activity:
Issuance of common stock for debt conversion	$	1,879	$	0
Issuance of common stock and promissory note to consummate TTC business combination	$	43,306	$	0
Issuance of common stock and promissory note to consummate Glocal business combination	$	110,421	$	0
Issuance of common stock and promissory note to consummate Innovations business combination	$	160,378	$	0
Issuance of common stock and promissory note to consummate Cloudbreak business combination	$	106,284	$	0
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	98,116	$	0
Restricted cash	586		0
Total cash, cash equivalents, and restricted cash:	$	98,702	$	0

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

UPHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in dollars, unaudited)

1.Organization and ~~General~~

Business

UpHealth, Inc.

UpHealth, Inc. ("UpHealth," “we,” “us,” “our,” or the “Company") is the parent company of both UpHealth Holdings, Inc. ("UpHealth Holdings") and Cloudbreak Health, LLC ("Cloudbreak").

GigCapital2, Inc. ~~(the “Company”~~(“GigCapital2”), the Company’s predecessor, was incorporated in Delaware on March 6, 2019. ~~The Company~~GigCapital2 was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more ~~businesses (the “Business Combination”~~businesses.On November 20, 2020, GigCapital2, UpHealth Merger Sub, Inc. (“UpHealth Merger Sub”)~~. The Company is an “emerging growth company,” as defined in Section 2(a) of~~, and UpHealth Holdings, entered into a business combination agreement (as subsequently amended on January 29, 2021, March 23, 2021, April 23, 2021, and May 30, 2021, the ~~Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).~~

As of September 30, 2020, the Company had not commenced any operations. All activity for the period from March 6, 2019 (date of inception) through September 30, 2020 relates to the Company’s formation and the initial public offering (the “Offering”), as described in Note 3, and identifying a target“UpHealth Business Combination ~~as described below. The Company will not generate any operating revenues until after completion of its initial~~Agreement”). In connection with the UpHealth Business Combination atAgreement, UpHealth Merger Sub was merged with and into UpHealth Holdings, with UpHealth Holdings surviving the ~~earliest. The Company will generate non-operating income in the form of interest income~~merger. Also on ~~cash and cash equivalents from the proceeds derived from the Offering. The Company has selected December 31 as its fiscal year end.~~

~~The Company’s sponsor, GigAcquisitions2,~~November 20, 2020, GigCapital2, Cloudbreak Health Merger Sub, LLC, a Delaware limited liability company ~~(the “Sponsor”~~(“Cloudbreak Merger Sub”), Cloudbreak Health, Dr. Chirinjeev Kathuria and Dr. Mariya Pylypiv, UpHealth Holdings, and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative, agent and attorney-in-fact of the Cloudbreak members, entered into a business combination agreement (as subsequently amended on April 23, 2021 and June 9, 2021, the “Cloudbreak Business Combination Agreement” and, together with ~~one~~the UpHealth Business Combination Agreement, the “Business Combination Agreements”). In connection with the Cloudbreak Business Combination Agreement, Cloudbreak Merger Sub was merged with and into Cloudbreak, with Cloudbreak surviving the merger (the “Cloudbreak Business Combination” and, together with the UpHealth Business Combination, the “Business Combinations”). The Business Combinations were consummated on June 9, 2021. In connection with the Business Combinations, GigCapital2 changed its corporate name to “UpHealth, Inc.”

Our public units began trading on the NYSE under the symbol “GIX.U” on June 5, 2019. On June 26, 2019, we announced that the holders of our units may elect to separately trade the securities underlying such units. On July 1, 2019, the shares, warrants, and rights began trading on the NYSE under the symbols “GIX”, “GIX.WS,” and “GIX.RT,” respectively. On June 9, 2021, upon the completion of the ~~underwriters, EarlyBirdCapital,~~Business Combinations, our units separated into their underlying shares of common stock, warrants, and rights (and the rights were converted into shares of common stock). Our units and rights ceased to trade, and our common stock and warrants now trade under the symbols "UPH" and "UPH.WS", respectively.

UpHealth Holdings

UpHealth Holdings, a Delaware corporation formed on October 26, 2020, was established to raise capital and pursue opportunities for investment and acquisition in various healthcare entities, primarily those that bring technology and services to efficiently and profitably manage chronic and complex care, including behavioral health and substance abuse, while also serving the demands for easy access to personalized primary care. UpHealth Holdings merged with UpHealth Services, Inc. ~~(“EarlyBird”~~("UpHealth Services") on October 26, 2020 with UpHealth Holdings deemed the surviving corporation. UpHealth Services' pre-merger financial statements are now UpHealth Holdings' pre-merger financial statements and ~~certain affiliates~~are reflected in the three and ~~employees~~six months ended June 30, 2020.

UpHealth Services was incorporated in Illinois on November 5, 2019; operations effectively began January 1, 2020 and continued through its October 2020 merger with UpHealth Holdings.

On November 20, 2020, UpHealth Holdings completed the acquisition of ~~EarlyBird (the “EarlyBird Group”~~Thrasys, Inc. (“Thrasys”), a California corporation and ~~Northland Gig 2 Investment~~a provider of an advanced, comprehensive, and extensible technology platform, marketed under the umbrella “SyntraNetTM,” to manage health, quality of care, and costs, especially for individuals with complex medical, behavioral health, and social needs.

On November 20, 2020, UpHealth Holdings completed the acquisition of Behavioral Health Services, LLC (“BHS”), a Missouri limited liability company and a provider of medical, retail pharmacy and billing services.

On November 20, 2020, UpHealth Holdings completed the acquisition of 43.46% of Glocal Healthcare Systems Private Limited and subsidiaries (“Glocal”), an India-based healthcare company, which was presented as an equity method investment. On March 26, 2021, UpHealth Holdings acquired an additional 45.94% of Glocal and recognized a gain of $0.6 million on our equity method investment through the step-acquisition, which is presented as gain on consolidation of equity method investment in the condensed consolidated statement of operations for the three months ended March 31, 2021. Subsequent to March 31, 2021, UpHealth Holdings acquired an additional 2.8% of Glocal in a step-acquisition, bringing our total ownership to 92.2%. Glocal is included in our condensed consolidated financial statements as of March 26, 2021.

On January 25, 2021, UpHealth Holdings completed the acquisition of TTC Healthcare, Inc. (“TTC”), a Delaware corporation and a provider of medical, retail pharmacy, and billing services for individuals with complex medical and behavioral health needs.

On April 27, 2021, UpHealth Holdings completed the acquisition of Innovations Group, Inc. (d/b/a MedQuest) ("Innovations"), a Utah corporation and a Utah-based internet pharmacy company.

Cloudbreak

Cloudbreak, a Delaware limited liability company ~~(“Northland Investment”) collectively make up the founders of the Company (the “Founders”).~~

that was formed on May 26, 2015, is a unified telemedicine and video medical interpretation solutions provider. On June ~~5, 2019, the initial registration statement on Form S-1, as amended, filed in connection~~9, 2021, contemporaneous with the ~~Offering, and~~GigCapital2 merger with UpHealth Holdings, GigCapital2 completed the ~~subsequent registration statement on Form S-1 filed by the Company pursuant to Section 462(b)~~acquisition of the Securities Act to register additional securities, also in connection with the Offering, were declared effective. The Company concurrently entered into an underwriting agreement on June 5, 2019 to conduct the Offering, the initial closingCloudbreak.

See Note 3, Business Combinations, for further information.

2.Summary of which was consummated on June 10, 2019 with the delivery of 15,000,000 units (the “Units”). The Units sold in the Offering consisted of the securities described in Note 3. The Offering generated gross proceeds of $150,000,000.

Simultaneously with the initial closing of the Offering, the Company consummated the initial closing of a private placement sale (the “Private Placement”) of 492,500 units (the “Private Placement Units”), at a price of $10.00 per unit, to its Founders, and 100,000 shares of its common stock (the “Private Underwriter Shares”), at a price of $10.00 per share, to Northland Securities, Inc. (“Northland”), an affiliate of Northland Investment. The Private Placement Units consisted of the securities described in Note 4. The initial closing of the Private Placement generated gross proceeds of $5,925,000.

Following the initial closing of the Offering, net proceeds in the amount of $147,000,000 from the sale of the Units and proceeds in the amount of $3,000,000 from the sale of Private Placement Units, for a total of $150,000,000, were placed in a trust account (“Trust Account”) which is described further below.

On June 13, 2019, in connection with the underwriters’ exercise in full of their option to purchase an additional 2,250,000 Units solely to cover over-allotments, if any (the “over-allotment option”), the Company consummated the sale of an additional 2,250,000 Units at $10.00 per unit. Simultaneously with the closing of the sale of the additional Units, the Company consummated a second closing of the Private Placement, resulting in the sale of an additional 75,000 Private Placement Units at $10.00 per unit to the Founders, and an additional 20,000 Private Underwriter Shares at $10.00 per share to Northland. Following the closings, an additional $22,500,000 of net proceeds were placed in the Trust Account.

Transaction costs amounted to $4,332,430, consisting of $3,450,000 of underwriting fees and $882,430 of offering costs. The Company’s remaining cash after payment of the offering costs will be held outside of the Trust Account for working capital purposes.

~~The Trust Account~~

The funds in the Trust Account have been invested only in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the Business Combination or (ii) the distribution of the Trust Account as described below. The remaining proceeds from the Offering outside the Trust Account may be used to pay for business, legal and accounting due diligence expenses on acquisition targets and continuing general and administrative expenses.

Significant Accounting Policies

The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay taxes, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of the Business Combination; (ii) the redemption of 100% of the shares of common stock included in the units sold in the Offering (the “public shares”) if the Company is unable to complete a Business Combination within 18 months from the closing of the Offering on June 10, 2019; or (iii) the redemption of the public shares in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of its public shares if it does not complete its initial Business Combination within 18 months from the closing of the Offering on June 10, 2019.

~~Business Combination~~

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering are intended to begenerally applied toward consummating a Business Combination with (or acquisition of) a target business (“Target Business”). As used herein, “Target Business” must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (less taxes payable on interest earned at the time the Company signs a definitive agreement in connection with the Business Combination). There is no assurance that the Company will be able to successfully effect a Business Combination.

The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable or (ii) provide stockholders with the opportunity to have their shares redeemed by the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to redeem their shares to the Company in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval unless a vote is required by New York Stock Exchange rules. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of a Business Combination. In such case, the Company would not proceed with the redemption of its public shares and the related Business Combination, and instead may search for an alternate Business Combination.

If the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable. As a result, such shares of common stock have been recorded at their redemption amount and classified as temporary equity. The amount held in the Trust Account as of September 30, 2020 was $174,284,387 which represents cash and marketable securities of $172,500,000 from the sale of 17,250,000 Units at $10.00 per unit and $2,889,624 of interest income earned on these holdings, less $1,105,237 withdrawn from the interest earned on the Trust Account to pay tax obligations.

The Company will have 18 months from June 10, 2019, the closing date of the Offering, to complete its initial Business Combination. If the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining stockholders, as part of its plan of dissolution and liquidation. The Founders, Northland and the Company’s former Chief Financial Officer, Ms. McDonough, who received 5,000 shares of common stock (the “insider shares”), have entered into letter agreements with the Company, pursuant to which they have waived their rights to participate in any redemption with respect to their initial shares; however, if the Founders, Northland or Ms. McDonough or any of the Company’s officers, directors or affiliates acquired shares of common stock after the Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete a Business Combination within the required time period. As a result of Ms. McDonough’s resignation effective as of August 12, 2019, Ms. McDonough forfeited her insider shares.

In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit.

~~2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

Basis of Presentation

and Consolidation

The accompanying unaudited condensed ~~interim~~consolidated financial statements of ~~the Company are presented~~UpHealth have been prepared in ~~conformity~~accordance with U.S. generally accepted accounting principles ~~generally accepted in the United States of America~~ (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission ~~(“SEC”~~(the “SEC”) for interim financial information and ~~reflect~~the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The unaudited condensed consolidated financial statements, including the condensed notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. The condensed consolidated balance sheet as of December 31, 2020 has been derived from our audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments ~~which are, in the opinion of management,~~ necessary for a fair presentation ~~of the financial position as of September 30, 2020, and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included~~ in ~~financial statements prepared in accordance~~conformity with ~~GAAP have been omitted pursuant to such rules and regulations.~~

GAAP. The accompanying unaudited condensed ~~interim~~consolidated financial statements should be read in conjunction with the ~~Company's Annual Report on Form 10-K~~audited consolidated financial statements for the ~~year~~period ended December 31, ~~2019 as filed with SEC on March 30, 2020, which contains~~ ~~the audited~~2020.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of UpHealth and ~~notes thereto.~~its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

We follow FASB Accounting Standards Codification (“ASC”) guidance for identification and reporting of entities over which control is achieved through means other than voting rights. The ~~condensed financial information~~guidance defines such entities as Variable Interest Entities (“VIEs”). We consolidate VIEs when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met.

One of ~~December 31, 2019~~our consolidated subsidiaries is ~~derived from~~ the ~~audited financial statements presented in~~primary beneficiary of a real estate VIE since it absorbs a majority of the ~~Company’s Annual Report on Form 10-K~~VIE’s expected losses and receives a majority of its expected residual returns. The VIE was formed for the ~~year~~purpose of acquiring and holding real estate. The VIE’s sole activity is to lease the real estate to our subsidiary. At June 30, 2021, the VIE had total assets of $4.5 million and total liabilities of $4.1 million. For the three month ended ~~December 31, 2019.~~ ~~The results~~June 30, 2021, revenues of ~~operations~~$0.1 million were eliminated in consolidation. For the three months ended June 30, 2021, expenses were $25 thousand, primarily for ~~the interim periods presented are not necessarily indicative~~interest and depreciation. Creditors and beneficial holders of the ~~results~~VIE have no recourse to ~~be expected for~~ the ~~year ending December 31, 2020~~assets or ~~for any future interim periods.~~

~~The financial statements~~general credit of the Company have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. As of September 30, 2020, the Company had $387,430 in cash and working capital of $544,623. Further, the Company expects to continue to incur significant costs in pursuit of its acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to address this uncertainty by raising additional capital and/or completing its Business Combination. There is no assurance that the Company’s plans to raise capital or to consummate a Business Combination will be successful or successful within the target business acquisition period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

our subsidiary.

Emerging Growth Company

Section 102(b)(1) of the ~~JOBS~~Jumpstart Our Business Startups ("JOBS") Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. ~~The Company has~~We have elected not to opt out of such extended transition period, which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, ~~the Company,~~we, as an emerging growth company, can adopt the new or revised accounting standard at the time private companies adopt the new or revised standard.

~~Net Loss Per Share~~

Fiscal Year

Our fiscal year ends on December 31. References to fiscal year 2021 and fiscal year 2020 refer to our fiscal year ending December 31, 2021 and our fiscal year ended December 31, 2020, respectively.

Use of ~~Common Stock~~

~~Net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding for the period.~~ Estimates and Assumptions

The Company applies the two-class method in calculating the net loss per common share. Shares of common stock subject to possible redemption as of September 30, 2020 have been excluded from the calculationpreparation of the basic net loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. When calculating its diluted net loss per share, the Company has not considered the effect of (i) the incremental number of shares of common stock to settle warrants sold in the Offering and Private Placement, as calculated using the treasury stock method; (ii) the contingently issuable shares associated with the rights sold in the Offering and Private Placement to receive one-twentieth (1/20) of one share of common stock upon the consummation of the Company’s initial Business Combination; and (iii) the insider shares issued to the former Chief Financial Officer representing 5,000 shares of common stock underlying restricted stock awards for the period they were outstanding. Since the Company was in a net loss position during the periods after deducting net income attributable to common stock subject to redemption, diluted net loss per common share is the same as basic net loss per common share for the periods presented as the inclusion of all potential common shares outstanding would have been anti-dilutive.

~~Reconciliation of Net Loss Per Common Share~~

In accordance with the two-class method, the Company’s net income (loss) is adjusted for net income that is attributable to common stock subject to redemption, as these shares only participate in the income of the Trust Account and not the losses of the Company. Accordingly, net loss per common share, basic and diluted, is calculated as follows:

For the Three
Months Ended
September 30,
2020

For the Three
Months Ended
September 30,
2019

For the Nine
Months Ended
September 30,
2020

Period from
March 6, 2019
(Inception)
through
September 30,
2019

Net income (loss)

$
(330,234
)
$
259,608

$
(599,011
)
$
230,806

Less: net income attributable to common stock subject to redemption

(23,492
)

(501,474
)

(570,688
)

(618,595
)
Net loss attributable to common stockholders

$
(353,726
)
$
(241,866
)

$
(1,169,699
)
$
(387,789
)
Weighted-average common shares outstanding, basic and diluted

5,245,947

5,223,704

5,218,968

4,675,325

Net loss per share common share, basic and diluted

$
(0.07
)
$
(0.05
)

$
(0.22
)
$
(0.08
)

~~Cash and Cash Equivalents~~

The Company considers all short-term investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains cash balances that at times may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.

~~Cash and Marketable Securities Held in Trust Account~~

~~As of September 30, 2020, the assets held in the Trust Account consisted of money market funds and cash.~~

~~Concentration of Credit Risk~~

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which at times, may exceed federally insured limits. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

~~Financial Instruments~~

~~The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the~~ condensed ~~balance sheets primarily due to their short-term nature.~~

~~Use of Estimates~~

~~The preparation of~~consolidated financial statements in conformity with GAAP requires ~~the Company’s management~~us to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes thereto.

Significant estimates and assumptions made by management include the determination of:

•the fair value of assets acquired and liabilities assumed for business combinations;

•the fair value of derivatives and warrants;

•the fair value of stock awards issued;

•the standalone selling price (“SSP”) of performance obligations for revenue contracts with multiple performance obligations;

•the recognition, measurement, and valuation of current and deferred income taxes and uncertain tax positions; and

•the identification and estimated economic lives of intangible assets.

Actual results could differ materially from those estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the result of which forms the basis for making judgments about the carrying values of assets and liabilities.

Foreign Currency Translation Adjustments

Balance sheet assets and liabilities of subsidiaries which do not use the U.S. dollar as their functional currency are translated at the exchange rate at the end of the reporting period. Income statement amounts are translated using a weighted-average exchange rate during the period. Equity accounts and noncontrolling interests are translated using historical exchange rates at the date the entry to shareholder equity was recorded, except for the change in retained earnings during the reporting period, which is translated using the same weighted-average exchange rate used to translate the condensed consolidated statements of operations. The net cumulative translation adjustment is reported in accumulated other comprehensive income (loss), net of tax, in the condensed consolidated balance sheets.

Foreign Currency Transactions

Foreign exchange transactions are recorded at the exchange rate prevailing on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at foreign exchange rates in effect at the end of the reporting period. Exchange differences arising on settlements/period-end translations are recognized in the condensed consolidated statements of operations in the period they arise.

Fair Value Measurements

Fair value is measured in accordance with ASC guidance on fair value measurements, which defines fair value, establishes a framework for measuring fair value, and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. We measure fair value for financial instruments on an ongoing basis. We measure fair value for non-financial assets when a valuation is necessary, such as for impairment of long-lived and indefinite-lived assets when indicators of impairment exist.

Cash and Cash Equivalents

We consider all cash on deposit, money market funds, and short-term investments with original maturities of three months or less to be cash and cash equivalents. Cash and cash equivalents consist of amounts we have on deposit with major commercial financial institutions.

Restricted Cash

At June 30, 2021, TTC had restricted cash totaling $0.5 million, representing collateral with a bank for ACHs and corporate credit cards. At December 30, 2020, Thrasys had restricted cash totaling $0.5 million, representing an escrow account containing the balance of its Paycheck Protection Program (“PPP”) loan. The PPP loan was forgiven and the restricted cash returned to Thrasys in the three months ended June 30, 2021.

Receivable

For software-as-a-service (“SaaS”) internet hosting, licenses, and subscriptions provided by our integrated care management operations, accounts receivable are carried at original invoice, net of an allowance for doubtful accounts. Management determines the allowance for doubtful accounts by evaluating individual customer receivables on a monthly basis and considering a customer’s financial condition and current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. At June 30, 2021 and December 31, 2020, we determined that 0 allowance for doubtful accounts was necessary.

For medical services provided through our behavioral health operations, accounts receivable are recorded without collateral from patients, most of whom are local residents and are insured under third-party payor agreements. Accounts receivable are based on gross charges, reduced by explicit price concessions provided to third-party payors and implicit price concessions provided primarily to self-pay patients. Estimates for explicit price concessions are based on provider contracts and historical experience adjusted for economic conditions and other trends affecting our ability to collect outstanding amounts. At June 30, 2021 and December 31, 2020, the allowance for contractual adjustments was $0.7 million and $1.0 million, respectively. For accounts receivable associated with

self-pay patients, we record implicit price concessions in the period of service on the basis of our past experience, which indicates that many patients are unable or unwilling to pay the portion of their bill for which they are financially responsible.

For digital pharmacy services, accounts receivable are recorded at net invoice amount from patients, most of whom are insured under third-party payor agreements. For compounded and customized medications, substantially all accounts receivable are paid by credit card at the time of shipment. At June 30, 2021 and December 31, 2020, we determined that 0 allowance for doubtful accounts was necessary.

For the three months ended June 30, 2021, one customer accounted for approximately 24% of total revenues, and for the six months ended June 30, 2021, one customer accounted for approximately 24% of total revenues. At June 30, 2021, one customer accounted for approximately 31% of total accounts receivable, and at December 31, 2020, two customers accounted for approximately 47% and 27% of total accounts receivable.

Inventories

Inventories primarily consist of stock of digital dispensaries, medicines, and pharmaceutical products, and are stated at the lower of cost or net realizable value. Cost comprises purchase price and all incidental expenses incurred in bringing the inventory to its present location and condition. Cost is computed using the weighted average cost method. Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation, with a normal margin to sell. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.

Equity Method Investment

As of December 31, 2020, and for the period January 1, 2021 through March 26, 2021, we held an interest in the privately-held equity securities of Glocal in which we did not have a controlling interest, but were able to exercise significant influence. Based on the terms of these privately-held securities, we determined that we exercised significant influence on Glocal, applied the equity method of accounting for our investment in Glocal, and presented our investment in Glocal in equity method investments in the condensed consolidated balance sheets. Any and all gains and losses on privately-held equity securities, realized and unrealized, were recorded in other income (expense) in the condensed consolidated statements of operations. Income recognized in our equity method investments was reduced by the expected amortization from intangible assets recognized through the fair value step-up, until we acquired a controlling financial interest and consolidated Glocal.

Valuations of privately-held securities in which we do not have a controlling financial interest are inherently complex due to the lack of readily available market data and requires the use of judgment. The carrying value is not adjusted for our privately-held equity securities if there are no observable price changes in a similar security from the same issuer or if there are no identified events or changes in circumstances that may indicate impairment. Our impairment analysis encompasses an assessment of both qualitative and quantitative factors, including the investee’s financial metrics, market acceptance of the investee’s product or technology, and the rate at which the investee is using its cash. If the investment is considered impaired, we recognize an impairment in the condensed consolidated statements of operations and establish a new carrying value for the investment.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method over the estimated economic lives of the assets, which range as follows:


Land	Indefinite
Buildings	60	years
Medical and surgical equipment	13	years
Electrical and other equipment	5-7	years
Computer equipment, furniture and fixtures	3-7	years
Vehicles	5-7	years

Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated economic life of the asset.

When assets are retired or disposed of, the asset costs and related accumulated depreciation or amortization are removed from the respective accounts and any related gain or loss is recognized in the condensed consolidated statements of operations. Maintenance and repairs are charged to expense as incurred. Significant expenditures, which extend the economic lives of assets, are capitalized.

Software Development Costs

We capitalize our ongoing costs of developing internal use software for hosting, which consists primarily of personnel costs. Internal and external costs incurred to develop internal-use computer software during the application development stage are capitalized.

Costs incurred internally in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, software costs are capitalized until the product is available for general release to customers.

Intangible Assets

Acquired intangible assets subject to amortization are stated at fair value and are amortized using the straight-line method over the estimated useful lives of the assets. Intangible assets that are subject to amortization are reviewed for potential impairment when events or circumstances indicate that carrying amounts may not be recoverable. No impairment charge was recognized during the three and six months ended June 30, 2021.

Goodwill

Our goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired. We assess goodwill for impairment on an annual basis as of the first day of our fourth quarter, or sooner if events indicate such a review is necessary through a triggering event. An impairment exists if the fair value of a reporting unit to which goodwill has been allocated is less than its respective carrying value. The impairment for goodwill is limited to the total amount of goodwill allocated to the reporting unit. Future changes in the estimates used to conduct the impairment review, including revenue projections, market values, and changes in the discount rate used, could cause the analysis to indicate that our goodwill is impaired in subsequent periods and result in a write-down of a portion or all of goodwill. The discount rate used is based on independently calculated risks, our capital mix, and an estimated market premium. NaN impairment charge was recognized during the three and six months ended June 30, 2021.

Debt Issuance Costs and Original Issue Discounts

The third-party cost of issuing debt results in the recognition of debt issuance costs (“DIC”), which are capitalized and presented as a net reduction to the face amount of the debt. DIC is amortized using the effective interest rate method over the expected life of the debt.

The reduction in gross proceeds from a debt facility by a lender or lenders results in an original issue discount (“OID”), which is amortized using the effective interest rate method over the expected life of the debt. The amortization of OID for the reporting period results in the recognition of additional interest expense.

Warrant Liabilities

We account for warrants for shares of our common stock that are not indexed to our own stock as liabilities at fair value on the condensed consolidated balance sheets. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense) in the condensed consolidated statements of operations. We will continue to adjust the liabilities for changes in fair value until the earlier of the exercise or expiration of the common stock warrants. At that time, the portion of the warrant liability related to the common stock warrants will be reclassified to additional paid-in capital.

Forward Share Purchase Agreement

On June 3, 2021, we entered into a third-party put option arrangement assuming the obligation to repurchase our common stock at a future date by transferring cash to the third-party under certain conditions described in more detail in Note 10, Capital Structure. Due to its mandatorily redeemable for cash feature, we have recorded such obligation as a forward share purchase liability in our condensed consolidated balance sheet.

Revenue Recognition

We recognize revenue in accordance with ASC guidance on revenue from contracts with customers. Revenue is reported at the amount that reflects the consideration to which we expect to be entitled in exchange for providing goods and services.

Contract Assets, Contract Liabilities, and Remaining Performance Obligations

We record a contract asset when revenue recognized on a contract exceeds the billings. Thrasys and Cloudbreak generally invoice customers monthly, quarterly, or in installments. BHS, TTC, Glocal, and Innovations generally invoice their customers upon providing services as the performance obligations are deemed complete. Contract assets are included in accounts receivable in the condensed consolidated balance sheets.

We record deferred revenue when billed amounts have been invoiced and received in advance of revenue recognition. It is recognized as revenue when transfer of control to customers has occurred or services have been provided. The deferred revenue

balance does not represent the remaining contract value of multi-year, non-cancelable subscription agreements. The deferred revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing, dollar size, and new business linearity within the period.

The transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which includes unbilled receivables and deferred revenue that will be recognized as revenue in future periods. The transaction price allocated to the remaining performance obligations is influenced by several factors, including seasonality, the timing of renewals, the timing of delivery of software licenses, average contract terms, and foreign currency exchange rates. Unbilled portions of the remaining performance obligations are subject to future economic risks including bankruptcies, regulatory changes, and other market factors.

We exclude amounts related to performance obligations that are billed and recognized as they are delivered. This primarily consists of professional services contracts that are on a time-and-materials basis.

Services Revenues

We derive our service revenues primarily through the provision of HIPAA-compliant medical information technology services through Thrasys; the provision of medical and behavioral health services by accredited medical professionals through BHS, TTC, and Glocal; and the provision of subscription-based medical language interpretation services through Cloudbreak, as follows:

•Services – SaaS internet hosting, licenses, and subscriptions

Software license revenue is recognized based on whether or not the license constitutes a distinct performance obligation. If the license can be separated from the rest of the hosting services, it may be fully recognized on the date license rights are granted to the customer and access is granted; otherwise, it is an indistinct performance obligation, which is recognized ratably over the contract term, along with other hosting services beginning on the commencement date of each contract, which is the date license rights are granted to the customer.

Subscription revenue from SaaS hosting access and support and maintenance are recognized ratably over the contract term beginning on the commencement date of each contract, which is the date our service is made available to the customer. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met and whether payments have been made ahead of the hosting services provided. Our subscription service arrangements are noncancellable and do not contain refund-type provisions.

•Services – Professional services for training, set-up, configuration, implementation, and customization services

The majority of our professional services contracts related to SaaS are on a time and materials basis, which may also be independently offered by our competitors. When these services are not combined with other SaaS revenues as a distinct performance obligation, revenue is recognized as the services are rendered for time and materials contracts, and when the milestones are achieved and accepted by the customer for fixed price contracts. Training revenue, set-up fees, and configuration fees are recognized as the services are completed

•Services – Medical and behavioral services provided through our hospitals and behavioral services operations

Performance obligations for medical and behavioral services provided by accredited medical and clinical professionals are satisfied over time as services are provided, and revenue is recognized accordingly. Revenue is based on gross charges, reduced by explicit price concessions provided to third-party payors and implicit price concessions provided primarily to self-pay patients. Estimates for explicit price concessions are based on provider contracts and historical experience, adjusted for economic conditions and other trends affecting our ability to collect outstanding items. Substantially all of our patients are insured under third-party payor agreements.

Generally, patients who are covered by third-party payors are responsible for related deductibles and coinsurance, which may vary in amount. We also provide services to uninsured patients and may offer those uninsured patients a discount from standard charges. We estimate the transaction price for patients with deductibles and coinsurance, and from those who are uninsured, based on historical experience and market conditions. We determined that the nature, amount, timing, and uncertainty of revenue and cash flows are affected by payors having different reimbursement and payment methodologies, length of the patient’s service, and method of reimbursement.

Estimates of net realizable value are subject to significant judgment and approximation by management. It is possible that actual results could differ from the historical estimates management has used to help determine the net realizable value of revenue. If actual collections either exceed or are less than the net realizable value estimates, we record a revenue adjustment, either positive or negative,

for the difference between the estimate of the receivable and the amount actually collected in the reporting period in which the collection occurred. No significant adjustments were recorded in the three and six months ended June 30, 2021.

•Services – Subscription-based medical language interpretation services

Service fees of subscription-based fixed monthly minute medical language interpretation services are recognized monthly on a straight-line basis over the term of the contract due to the stand-ready nature of the services provided. Variable consideration received for medical language interpretation services, information technology services, and for the lease of My Accessible Real-Time Trusted Interpreter ("MARTTI") devices, our language access solution, is based on a fixed per item charge applied to a variable quantity. Variable consideration for these services is recognized over time in accordance with the “right to invoice” practical expedient and therefore is not subject to revenue constraint evaluation. Revenue related to the sale of MARTTI devices is recognized at a point in time upon delivery of the devices to the customer. We may enter into multiple component services arrangements that bundle the pricing for the lease of MARTTI devices with information technology services. Often, the pricing bundle may also include medical language interpretation services. When an equipment lease is bundled with services, allocation of the transaction price consideration between the lease and nonlease components of the lease is required. We have determined that the consideration allocated to the lease components in its bundled multiple component services arrangements is not material to the financial statements.

Product Revenues

We derive product sales from sales of products through our digital pharmacy operations. Our product sales are primarily a function of the price per unit for pharmaceutical products sold and the number of prescriptions provided to customers.

We recognize revenue at the time the client effectively takes possession and control of the product.

Contracts with Multiple Performance Obligations and Transaction Prices

From time to time, we may enter into contracts that contain multiple performance obligations, particularly with our SaaS internet hosting, licenses, subscriptions, and services. For these arrangements, we allocate the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product or service is transferred to the customer, in satisfaction of the corresponding performance obligations.

A significant portion of our contracts with customers have fixed transaction prices. For some contracts, the amount of consideration to which we will be entitled is variable. We include variable consideration in a contract’s transaction price only to the extent that we have a relatively high level of confidence that the amounts will not be subject to significant reversals. In determining amounts of variable consideration to include in a contract’s transaction price, we rely on our experience and other evidence that supports our qualitative assessment of whether revenue would be subject to significant reversal.

Grants

Since there is no authoritative GAAP governing grant recognition, measurement, and presentation, International Accounting Standards (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”) is incorporated as the governing guidance. It states that economic benefits of government grants shall not be recognized until there is reasonable assurance that the entity will comply with the conditions attaching to them and the grants will be received.

We recognize grants if we are reasonably assured we will be able to comply with the conditions specified in the grant agreement and the government will have the ability to pay the amounts due under the grant.

Government grants and subsidies received towards specific property and equipment (“PE”) acquisitions reduce the historical basis of the concerned PE. Grant subsidies received during the year towards revenue and related expenses have been recorded as other income in the condensed consolidated statements of operations. We have evaluated the classification and presentation for grant agreements and have elected to treat non-reimbursable grants as a grant receivable, earned over the life of the underlying agreement, with the offsetting credit to other income in the condensed consolidated statements of operations. Periodic cash received relieves the grant receivable.

Cost of Goods and Services (“COGS”)

Cost of goods and services is the accumulated total of all costs used to create a product, which has been sold to generate revenue. These costs include direct materials (resale products and raw and externally sourced materials for internally manufactured products), direct labor, and an appropriately allocated portion of indirect overhead. Direct labor is the direct provision of activities to manufacture or provide a good or service. Indirect overhead costs include allocable costs, such as facilities, information technology, and depreciation costs, and ancillary costs, such as freight, delivery, non-sales and non-income taxes, and insurance.

The cost of services sold for discrete information technology services includes the cost of direct labor, payroll taxes, and direct benefits of those individuals who provide direct services and/or generate billable hours, and an allocation of facilities, information technology, and depreciation costs.

The cost of services sold for SaaS includes all the accumulated costs of providing a hybrid cloud-based hosting arrangement.

Taxes Collected from Customers and Remitted to Governmental Authorities

We exclude from our measurement of transaction prices all taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction and collected from customers. Accordingly, such tax amounts are not included as a component of revenue or cost of goods and services in the condensed consolidated statements of operations.

Research and Development Costs

Research and development costs are expensed as incurred and were $0.9 million and $2.6 million for the three and six months ended June 30, 2021, respectively. There were 0 research and development costs incurred for the three and six months ended June 30, 2020.

Advertising, Marketing, and Promotion Expenses

Advertising, marketing, and promotion costs are expensed as incurred. Advertising expense was $1.1 million and $1.7 million for the three and six months ended June 30, 2021, respectively, and are included within sales and marketing expenses in the condensed consolidated statements of operations. There were 0 sales and marketing expenses incurred for the three and six months ended June 30, 2020.

Income Taxes

Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and ~~disclosure of contingent assets~~their financial reporting amounts at each year end, based on enacted tax laws and ~~liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.~~

~~Offering Costs~~

~~Offering costs in the amount of $4,332,430 consist of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related~~statutory tax rates applicable to the ~~Offering. Offering costs were charged to stockholders’ equity and recorded in additional paid-in capital as a reduction to the gross proceeds received upon completion of the Offering.~~

~~Common Stock Subject to Possible Redemption~~

certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of September 30, 2020, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.

~~Stock-based Compensation~~

Stock-based compensation related to restricted stock awards are based on fair value of common stock on the grant date. The shares underlying the Company’s restricted stock awards are subject to forfeiture if these individuals resign or are terminated for cause prior to the completion of the Business Combination. Therefore, the related stock-based compensation will be recognized upon the completion of a Business Combination, unless the related shares are forfeited prior to a Business Combination occurring.

~~Income Taxes~~

The Company follows the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the yearsyear in which ~~those temporary~~the differences are expected to ~~be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.~~affect taxable income. Valuation allowances are established when ~~necessary, to reduce~~it is deemed more likely than not that some portion or all of the deferred tax assets towill not be realized.

We account for income tax uncertainties in accordance with ASC guidance on income taxes, which clarifies the ~~amount expected to be realized.~~

~~The Company~~accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax ~~positions~~position taken or expected to be taken in a tax return. The ASC also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

New Accounting Pronouncements Not Yet Adopted

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses: (1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. This ASU will be effective for us on January 1, 2022. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the effect the adoption of this ASU will have on our condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for convertible instruments by eliminating the conversion option separation model for convertible debt that can be settled in cash and by eliminating the measurement model for beneficial conversion features. Convertible instruments that continue to be subject to separation models are (1) those with conversion options that are required to be accounted for as bifurcated derivatives and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. This ASU also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This ASU will be effective for us on January 1, 2024. Early adoption is permitted, but no earlier than the fiscal year beginning

on January 1, 2021, including interim periods within that fiscal year. We are currently evaluating the effect the adoption of this ASU will have on our condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU removes specific exceptions to the general principles in Topic 740. It eliminates the need for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intraperiod tax allocation, (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments, and (3) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. This ASU also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. This ASU will be effective for us for fiscal year beginning January 1, 2022, and to interim periods within the fiscal year beginning on January 1, 2023, with early adoption permitted. We are currently evaluating the effect the adoption of this ASU will have on our condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), and subsequently issued several supplemental/clarifying ASUs (collectively, “ASC 842”). Among other things, under this ASU, lessees will be required to recognize, at commencement date, a lease liability representing the lessee’s obligation to make lease payments arising from the lease and a right-of-use asset representing the lessee’s right to use or control the use of a specified asset for the lease term for leases greater than 12 months. Under the new guidance, lessor accounting is largely unchanged. This ASU will be effective for us for the fiscal year beginning on January 1, 2022, and to interim periods within the fiscal year beginning on January 1, 2023 using the modified retrospective approach. We are currently evaluating the effect the adoption of this ASU will have on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequently issued several supplemental/clarifying ASUs (collectively, “ASC 326”). This ASU requires entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables, other long-term financings including available for sale and held-to-maturity debt securities, and loans. Subsequently, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which amended the scope of ASC 326 and clarified that receivables arising from operating leases are not within the scope of the standard and should continue to be accounted for in accordance with ASC 842. This ASU will be effective for us on January 1, 2022. We are currently evaluating the effect the adoption of this ASU will have on our condensed consolidated financial statements.

3.Business Combinations

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the underlying net assets acquired.

Trade Names

A trade name is a legally-protected trade or similar mark. Acquired trade names are valued using an income method approach, generally the relief-from-royalty valuation method. The method uses a royalty rate based on comparable marketplace royalty agreements for similar types of trade names and applies it to the after-tax discounted free cash flow attributed to the trade name. The discount rate used is based on an estimated weighted average cost of capital and the anticipated risk for intangible assets.

Technology and Intellectual Property

Technology and intellectual property (“IP”) is a design, work, or invention that is the result of creativity to which one has ownership rights that may be protected through a patent, copyright, trademark, or service mark. IP is valued using the relief-from-royalty valuation method. The method uses a royalty rate based on comparable marketplace royalty agreements for similar types of IP and applies it to the after-tax discounted free cash flow attributed to the IP. The discount rate used is based on an estimated weighted average cost of capital and the anticipated risk for intangible assets.

IP is amortized following the pattern in which the expected benefits will be consumed or otherwise used up over each component’s useful life, based on our plans and expectations for the IP going forward, which is generally the underlying IP’s legal expiration dates.

Customer Relationships

Customer relationships are intangible assets that consist of historical and factual information about customers and contacts collected from repeat transactions with customers, with or without any underlying contracts. The information is generally organized as customer lists or customer databases. We have the expectation of repeat patronage from these customers based on the customers’ historical purchase activity, which creates the intrinsic value over a finite period of time and translates into the expectation of future revenue, income, and cash flow.

Customer relationships are valued using projected operating income, adjusted for estimated future existing customer growth, less estimated future customer attrition, net of charges for net tangible assets, IP charge, trade name charge, and work force. The concluded value is the after-tax discounted free cash flow.

Measurement Period

The estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of each acquisition date to estimate the fair value of assets acquired and liabilities assumed. We believe that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but we are waiting for additional information necessary to finalize those fair values. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant. We expect to finalize the valuations and complete the purchase price allocations as soon as practicable, but no later than one year from each acquisition date. In addition, we have not finalized our evaluation of allocating goodwill to reporting units.

In evaluating whether new information obtained meets the criteria for adjusting provisional amounts, management must consider all relevant factors. Relevant factors include:

•The timing of the receipt of the additional information that management could have used in its evaluation on or after the acquisition date, and

•Whether management can identify a reason that a change to the provisional amounts is warranted and not driven by a discrete independent event occurring subsequent to the acquisition.

We have included a measurement period table for each acquisition, identifying the line item or line items where an adjustment was deemed necessary and have quantified its impact.

Merger with UpHealth Services

On October 26, 2020, UpHealth Holdings entered into a merger agreement with UpHealth Services whereby UpHealth Holdings was deemed the surviving entity. All shares of UpHealth Services were exchanged for outstanding common stock in UpHealth Holdings. This was accounted for as a common control transaction with assets and liabilities carried over at book value.

Acquisition of Thrasys

On November 20, 2020, UpHealth Holdings completed the 100% acquisition of Thrasys, in exchange for a promissory note for future cash consideration, as defined in the merger agreements, and common stock interests in UpHealth Holdings totaling $167.4 million, net of cash and restricted cash acquired of $2.5 million. The acquisition brings additional software and support synergies to our consolidated digital healthcare offerings.

Under the terms of the merger agreement, shares of common stock held by two officers of Thrasys, with a value of $10.0 million, have been restricted for 12 months from the closing date of the merger, as security for a potential indemnification claim related to a Thrasys tax matter (see Note 12, Income Taxes, for further information).

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after our acquisition of Thrasys. The goodwill is 0t deductible for tax purposes.

The following table sets forth the preliminary allocation of the purchase price to Thrasys’ identifiable tangible and intangible assets acquired and liabilities assumed, including measurement period adjustments. The allocation of value in this table is subject to reevaluation during the measurement period.


(In thousands)	As of June 30, 2021		Measurement Period Adjustments		As of November 20, 2020
Accounts receivable	$	3,491	$	—	$	3,491
Prepaid expenses and other	3,001		—		3,001
Identifiable intangible assets	27,875		—		27,875
Property and equipment	101		—		101
Other assets	19		—		19
Goodwill	145,036		(3,052)		148,088
Total assets acquired	179,523		(3,052)		182,575
Accounts payable	1,779		—		1,779
Accrued expenses and other current liabilities	5,322		—		5,322
Debt	430		(531)		961
Deferred tax liabilities	6,378		—		6,378
Deferred revenue	700		—		700
Total liabilities assumed	14,609		(531)		15,140
Net assets acquired	$	164,914	$	(2,521)	$	167,435

In connection with the closing of the Business Combinations on June 9, 2021, the purchase consideration was adjusted in accordance with the merger agreement, resulting in a decrease in net assets acquired and goodwill of $2.5 million.

The acquired intangible assets from Thrasys and their related estimated useful lives consisted of the following:


	Value		Useful Life
(In thousands)			(in years)
Definite-lived intangible assets—Trade names	$	6,925	10
Definite-lived intangible assets—Technology and intellectual property	10,825		10
Definite-lived intangible assets—Customer relationships	10,125		10
Total fair value of identifiable intangible assets	$	27,875

Acquisition of BHS

On November 20, 2020, UpHealth Holdings completed the 100% acquisition of BHS in exchange for a promissory note for future cash consideration, as defined in the merger agreements, and common stock interests in UpHealth Holdings totaling $15.8 million, net of cash acquired of $1.0 million. The acquisition brings additional medical synergies to our consolidated digital healthcare offerings.

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after our acquisition of BHS. The goodwill is 0t deductible for tax purposes.

The following table sets forth the preliminary allocation of the purchase price to BHS’ identifiable tangible and intangible assets acquired and liabilities assumed, including measurement period adjustments. The allocation of value in this table is subject to reevaluation during the measurement period.


(In thousands)	As of June 30, 2021		Measurement Period Adjustments		As of November 20, 2020
Accounts receivable	$	1,257	$	—	$	1,257
Inventories	100		—		100
Prepaid expenses and other	40		—		40
Identifiable intangible assets	225		—		225
Property and equipment	53		—		53
Other assets	4		—		4
Deferred tax assets	19		—		19
Goodwill	16,344		238		16,106
Total assets acquired	18,042		238		17,804
Accounts payable	374		—		374
Accrued expenses and other current liabilities	847		421		426
Debt	1,234		—		1,234
Total liabilities assumed	2,455		421		2,034
Net assets acquired	$	15,587	$	(183)	$	15,770

In connection with the closing of the Business Combinations on June 9, 2021, the purchase consideration was adjusted in accordance with the merger agreements, resulting in a decrease in net assets acquired and goodwill of $0.2 million.

The acquired intangible assets from BHS and their related estimated useful lives consisted of the following:


	Value		Useful Life
(In thousands)			(in years)
Definite-lived intangible assets—Trade names	$	225	3
Total fair value of identifiable intangible assets	$	225

Acquisition of TTC

On January 25, 2021, UpHealth Holdings completed the 100% acquisition of TTC in exchange for a promissory note for future cash consideration, as defined in the merger agreements, and common stock interests in UpHealth Holdings totaling $45.9 million, net of cash acquired of $2.4 million. The acquisition brings additional medical synergies to our consolidated digital healthcare offerings.

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after our acquisition of TTC. The goodwill is 0t deductible for tax purposes.

The following table sets forth the preliminary allocation of the purchase price to TTC’s identifiable tangible and intangible assets acquired and liabilities assumed, including measurement period adjustments. The allocation of value in this table is subject to reevaluation during the measurement period.


(In thousands)	As of June 30, 2021		Measurement Period Adjustments		As of January 25, 2021
Accounts receivable	$	1,773	$	—	$	1,773
Prepaid expenses and other	187		—		187
Identifiable intangible assets	1,125		—		1,125
Property and equipment	531		—		531
Other assets	281		—		281
Goodwill	57,921		347		57,574
Total assets acquired	61,818		347		61,471
Accounts payable	625		—		625
Accrued expenses and other current liabilities	602		—		602
Due to related parties	4,200		2,807		1,393
Debt	11,217		(1,283)		12,500
Deferred tax liabilities	474		—		474
Total liabilities assumed	17,118		1,524		15,594
Net assets acquired	$	44,700	$	(1,177)	$	45,877

The acquired intangible assets from TTC and their related estimated useful lives consisted of the following:


	Approximate Fair Value		Estimated Useful Life
(In thousands)			(in years)
Definite-life intangible assets – Trade names	$	1,125	3
Total fair value of identifiable intangible assets	$	1,125

Acquisition of Glocal

On November 20, 2020, UpHealth Holdings entered into a stock purchase agreement to acquire 43.46% of Glocal. On March 26, 2021, UpHealth Holdings completed a step acquisition of an additional 45.94% of Glocal, bringing our total ownership to 89.4%. The acquisition resulted in our ownership exceeding 50.0%, requiring consolidation of Glocal as of March 26, 2021. On May 14, 2021 and June 21, 2021, UpHealth Holdings completed the acquisition of an additional 1.0% and 1.8% of Glocal, respectively, bringing our total ownership to 92.2% as of June 30, 2021. Total purchase price consideration included a promissory note for future cash consideration, as defined in the merger agreements, and common stock interests in UpHealth Holdings totaling $131.5 million, net of cash acquired of $0.4 million. The acquisition brings additional medical synergies to our global telemedicine offerings.

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after our acquisition of Glocal. The goodwill is 0t deductible for tax purposes.

The following table sets forth the preliminary allocation of the purchase price to Glocal’s identifiable tangible and intangible assets acquired and liabilities assumed, including measurement period adjustments. The allocation of value in this table is subject to reevaluation during the measurement period.


(In thousands)	As of June 30, 2021		Measurement Period Adjustments		As of March 26, 2021
Accounts receivable, net	$	6,461	$	—	$	6,461
Inventories	326		—		326
Identifiable intangible assets	38,039		—		38,039
Property, equipment, and work in progress	40,726		—		40,726
Other current assets, including short term advances	1,980		—		1,980
Other noncurrent assets, including long term advances	509		—		509
Goodwill	95,913		4,042		91,871
Total assets acquired	183,954		4,042		179,912
Accounts payable	579		—		579
Accrued expenses and other current liabilities	8,271		—		8,271
Deferred tax liability	9,890		9,890		0
Debt	22,212		—		22,212
Noncontrolling interest	17,389		—		17,389
Total liabilities assumed and noncontrolling interest	58,341		9,890		48,451
Net assets acquired	$	125,613	$	(5,848)	$	131,461

The acquired intangible assets from Glocal and their related estimated useful lives consisted of the following:


	Approximate Fair Value		Estimated Useful Life
(In thousands)			(in years)
Definite-lived intangible assets—Technology and intellectual property	$	38,039	8.5
Total fair value of identifiable intangible assets	$	38,039

Acquisition of Innovations

On April 27, 2021, UpHealth Holdings completed the 100% acquisition of Innovations in exchange for a promissory note for future cash consideration, as defined in the merger agreement, and common stock interests in UpHealth Holdings totaling $169.8 million, net of cash acquired of $0.6 million. The acquisition adds the digital pharmacy segment to our operations.

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after our acquisition of Innovations. The goodwill is 0t deductible for tax purposes.

The following table sets forth the preliminary allocation of the purchase price to Innovation’s identifiable tangible and intangible assets acquired and liabilities assumed. The allocation of value in this table is subject to reevaluation during the measurement period.


(In thousands)	As of April 27, 2021
Accounts receivable	$	47
Inventories	2,693
Prepaid expenses and other	530
Identifiable intangible assets	28,325
Property and equipment	7,937
Other assets	22
Goodwill	143,730
Total assets acquired	183,284
Accounts payable	472
Accrued expenses and other current liabilities	780
Deferred revenue	302
Deferred tax liability	7,837
Debt	4,069
Total liabilities assumed	13,460
Net assets acquired	$	169,824

The acquired intangible assets from Innovations and their related estimated useful lives consisted of the following:


	Approximate Fair Value		Estimated Useful Life
(In thousands)			(in years)
Definite-lived intangible assets—Trade names	$	10,925	10
Definite-lived intangible assets—Technology and intellectual property	8,075		5 - 7
Definite-lived intangible assets—Customer relationships	9,325		17
Total fair value of identifiable intangible assets	$	28,325

Acquisition of Cloudbreak

On June 9, 2021, UpHealth (fka GigCapital2) completed the Cloudbreak Business Combination in an exchange of cash, notes, and common stock interests in UpHealth totaling $142.0 million, net of cash acquired of $0.9 million. The acquisition brings additional software and support synergies to our global telemedicine offerings.

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after our acquisition of Cloudbreak. The goodwill is 0t deductible for tax purposes.

The following table sets forth the preliminary allocation of the purchase price to Cloudbreak's identifiable tangible and intangible assets acquired and liabilities assumed. The allocation of value in this table is subject to reevaluation during the measurement period.


(In thousands)	As of June 9, 2021
Accounts receivable	$	4,810
Prepaid expenses and other	921
Identifiable intangible assets	32,475
Property and equipment	6,882
Other assets	1,042
Goodwill	110,968
Total assets acquired	157,098
Accounts payable	2,518
Accrued expenses and other current liabilities	905
Deferred revenue	15
Deferred tax liability	7,906
Debt	3,752
Total liabilities assumed	15,096
Net assets acquired	$	142,002

The acquired intangible assets from Cloudbreak and their related estimated useful lives consisted of the following:


	Approximate Fair Value		Estimated Useful Life
(In thousands)			(in years)
Definite-lived intangible assets—Trade names	$	12,975	15
Definite-lived intangible assets—Technology and intellectual property	5,825		5
Definite-lived intangible assets—Customer relationships	$	13,675	10
Total fair value of identifiable intangible assets	$	32,475

Acquisition of UpHealth Holdings

On June 9, 2021, GigCapital2 completed the UpHealth Business Combination as disclosed above, in an exchange of cash, notes, and common stock interests in UpHealth for all the shares of UpHealth Holdings' capital stock issued and outstanding immediately prior to the effective date of the acquisition. The acquisition was accounted for as a reverse recapitalization, which is the equivalent of UpHealth Holdings issuing stock for the net assets of GigCapital2, accompanied by a recapitalization, with UpHealth Holdings treated as the accounting acquiror. The determination of UpHealth Holdings as the accounting acquiror was primarily based on the fact that subsequent to the acquisition, UpHealth Holdings owns a majority of the voting power of the combined company, UpHealth Holdings will comprise 75% of the ongoing operations of the combined entity, UpHealth Holdings will control a majority of the governing body of the combined company, and UpHealth Holdings' senior management will comprise most of the senior management of the combined company. The net assets of GigCapital2 were stated at historical cost with 0 goodwill or other intangible assets recorded. Reported results from operations included herein prior to the acquisition are those of UpHealth Holdings. The shares and corresponding capital amounts and loss per share related to UpHealth Holdings' outstanding common stock prior to the acquisition have been retroactively restated to reflect the exchange ratio (1.0 UpHealth Holdings share to 10.28 GigCapital2 shares) established in the business combination agreement.

Acquisition-Related Costs

For the three and six months ended June 30, 2021, we have incurred $32.6 million and $35.3 million, respectively, of acquisition-related charges for the acquisitions of UpHealth Holdings and its subsidiaries (Thrasys, BHS, TTC, Glocal, and Innovations), and Cloudbreak, which are included in acquisition-related expenses in the condensed consolidated statements of operations.

Combined Pro Forma Results for the Three and Six Months Ended June 30, 2021 and 2020

The results of operations of UpHealth Holdings and its subsidiaries (BHS, Thrasys, TTC, Glocal, and Innovations), and Cloudbreak have been included in the financial statements subsequent to their acquisition dates. The following unaudited pro forma consolidated financial information reflects the results of operations as if the acquisition of UpHealth Holdings (including all subsidiaries) and Cloudbreak had occurred on January 1, 2020, after giving effect to certain purchase accounting adjustments. These purchase accounting adjustments mainly include incremental depreciation expense related to the fair value adjustment of property and

equipment, amortization expense related to identifiable intangible assets, and tax expense related to the combined tax provisions. This information does not purport to be indicative of the actual results that would have occurred if the acquisition had actually been completed on the date indicated, nor is it necessarily indicative of the future operating results or the financial position of the combined company:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2021		2020		2021		2020
Pro Forma
Revenues	$	39,171	$	28,293	$	69,778	$	59,468
Net loss	$	(37,052)	$	(2,549)	$	(43,627)	$	(2,008)
Basic earnings per share	$	(0.39)	$	(0.05)	$	(0.52)	$	(0.04)
Diluted earnings per share	$	(0.39)	$	(0.05)	$	(0.52)	$	(0.04)

Measurement period adjustments in the condensed consolidated financial statements will be disclosed in accordance with ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.

4.Property and Equipment

Property and equipment consisted of the following:


(In thousands)	June 30, 2021		December 31, 2020
Land	$	16,210	$	0
Buildings	21,547		0
Leasehold improvements	3,252		0
Medical and surgical equipment	2,704		0
Electrical and other equipment	494		73
Computer equipment, furniture and fixtures	7,980		33
Vehicles	164		48
Construction in progress	3,816		0
	56,167		154
Accumulated depreciation and amortization	(1,013)		(3)
Total property and equipment, net	$	55,154	$	151

Depreciation expense was $0.9 million and NaN for the three months ended June 30, 2021 and 2020, respectively, and $1.0 million and 0 for the six months ended June 30, 2021 and 2020, respectively.

5.Goodwill and Intangible Assets

The changes in the carrying amount of goodwill consisted of the following:


(In thousands)	Goodwill
Balance at December 31, 2020	$	164,194
Business acquisition of TTC	57,574
Measurement period adjustment—TTC	347
Business acquisition of Glocal	91,871
Measurement period adjustment—Glocal	4,042
Measurement period adjustment—BHS	238
Measurement period adjustment—Thrasys	(3,052)
Business acquisition of Innovations	143,730
Business acquisition of Cloudbreak	110,968
Foreign exchange	(1,960)
Balance at June 30, 2021	$	567,952

The changes in carrying amounts of intangible assets consisted of the following:


(In thousands)	Trade Names		Technology and Intellectual Property		Customer Relationships		Total
December 31, 2020	$	7,065	$	10,705	$	10,012	$	27,782
Additions	25,025		51,939		23,000		99,964
Amortization	(792)		(2,037)		(683)		(3,512)
Foreign exchange	0		(771)		0		(771)
June 30, 2021	$	31,298	$	59,836	$	32,329	$	123,463

The estimated useful lives of trade names are 3-15 years, the estimated useful life of technology and intellectual property is 5-10 years, and the estimated useful life of customer relationships is 10-17 years.

Amortization expense was $2.7 million and NaN for the three months ended June 30, 2021 and 2020, respectively. Amortization expense was $3.5 million and NaN for the six months ended June 30, 2021 and 2020, respectively .

The estimated amortization expense related to definite-lived intangible assets for the five succeeding years is as follows:


(In thousands)	Trade Name Amortization		Technology and Intellectual Property Amortization		Customer Relationships Amortization		Total
Remaining 2021	$	1,550	$	4,032	$	1,472	$	7,054
2022	3,100		8,063		2,945		14,108
2023	3,092		8,063		2,945		14,100
2024	2,674		8,063		2,945		13,682
2025	2,650		8,063		2,945		13,658
Thereafter	18,232		23,552		19,077		60,861
	$	31,298	$	59,836	$	32,329	$	123,463

6.Investment in Unconsolidated Entities

On November 20, 2020, we entered into a stock purchase agreement to acquire 43.46% of Glocal in exchange for a promissory note for future cash consideration, as defined in the stock purchase agreement, and common stock interests in UpHealth, for a purchase price of $57.4 million. Since we did not have a controlling financial interest, this investment was presented as an equity method investment in our condensed consolidated balance sheets for the year ended December 31, 2020. For the period from November 20, 2020 through December 31, 2020, our share of the net income (loss) of Glocal included amortization expense of $0.5 million related to intangible assets being amortized into income over the estimated remaining lives of the assets. For the period

from January 1, 2021 through March 25, 2021, our share of the net income (loss) of Glocal included amortization expense of $1.1 million.

We acquired a controlling financial interest in Glocal on March 26, 2021, increasing our ownership to 89.40%, and recognized a fair value gain on the step-acquisition of $0.6 million, prior to consolidation.

On May 14, 2021 and June 21, 2021 UpHealth Holdings completed the acquisition of an additional 1.0% and 1.8% of Glocal, respectively, bringing our total ownership to 92.2% as of June 30, 2021.

See Note 3, Business Combinations, for further information.

7.Accrued Expenses

Accrued expenses consisted of the following:


(In thousands)	June 30, 2021		December 31, 2020
Accrued professional fees	$	13,705	$	4,246
Accrued software licenses	6,091		691
Accrued interest on debt	6,781		142
Accrued payroll and bonuses	2,878		1,545
Accrued taxes in connection with shareholder distribution	1,493		1,493
Other accruals	2,816		365
Total accrued expenses	$	33,764	$	8,482

8.Debt

Debt consisted of the following:


(In thousands)	June 30, 2021		December 31, 2020
Convertible notes	$	160,000	$	0
Other debt facilities (various maturities and interest rates)	23,147		0
Paycheck Protection Program loans	1,015		1,545
Provider Relief Funds	735		230
Seller notes	29,831		21,100
Total debt	214,728		22,875
Less: unamortized original issue discount and derivative liability	(69,110)		0
Total debt, net of unamortized original issued discount and derivative liability	145,618		22,875
Less: current portion of debt	(49,487)		(22,531)
Noncurrent portion of debt	$	96,131	$	344

Unsecured Convertible Notes and Indenture

On January 20, 2021, GigCapital2 entered into convertible note subscription agreements, each dated January 20, 2021 and amended on June 8, 2021, with certain institutional investors, pursuant to which GigCapital2 agreed to issue and sell unsecured convertible notes in a private placement to close immediately prior to the closing of the Business Combinations.

On June 15, 2021, in connection with the closing of the Business Combinations, we entered into an indenture (the “Indenture”) with Wilmington Trust, National Association, a national banking association, (the “Indenture Trustee”) in its capacity as trustee thereunder, in respect of the $160.0 million of unsecured convertible notes due in 2026 (the “2026 Notes”) that were issued to certain institutional investors. The 2026 Notes bear interest at a rate of 6.25% per annum, payable semi-annually, and are convertible into approximately 15,023,475 shares of common stock at a conversion price of $10.65 in accordance with the terms of the Indenture, and will mature on June 15, 2026. The total proceeds received from the 2026 Notes were $151.9 million, net of debt issuance costs of $8.1 million. In accounting for the 2026 Notes, we bifurcated and accounted for the conversion option as a derivative measured at fair value on the issuance date in accordance with ASC 815, Derivatives and Hedging. The difference between the proceeds allocated to the 2026 Notes at issuance and the fair value of the conversion option was allocated to the host debt contract. At June 30, 2021, the fair value of the derivative was $61.8 million, of which $38.6 million was included in derivative liability, current, and $23.2 million was included in derivative liability, noncurrent, in the condensed consolidated balance sheet. Total interest expense for the three and six

months ended was $1.4 million, of which $0.6 million related to contractual interest expense, $0.7 million related to derivative accretion, and $0.1 million related to debt issuance costs amortization.

We may, at our election, force conversion of the 2026 Notes after the first anniversary of the issuance of the 2026 Notes, subject to a holder’s prior right to convert, if the last reported sale price of our common stock exceeds 130% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter, and the 30-day average daily trading volume of our common stock ending on, and including, the last trading day of the applicable exercise period is greater than or equal to $2.0 million. Following certain corporate events that occur prior to the maturity date or if we force a mandatory conversion, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or has its notes mandatorily converted, as the case may be. In addition, in the event that a holder of the 2026 Notes elects to convert its 2026 Notes prior to the second anniversary of the issuance of the 2026 Notes, we will be obligated to pay an amount equal to twelve months of interest, or if on or after such second anniversary of the issuance of the 2026 Notes, any remaining amounts that would be owed to, but excluding, the third anniversary of the issuance of the 2026 Notes (the “Interest Make-Whole Payment”). The Interest Make-Whole Payment will be payable in cash or shares of our common stock as set forth in the Indenture.

In addition, we agreed to conduct one or more primary offerings of our equity securities in the aggregate amount of $35.0 million (the “Equity Offering”) and that such equity securities shall be subordinate in right of payment to the 2026 Notes. In the event that such Equity Offering is not consummated by October 9, 2022, the interest rate on the 2026 Notes will increase by an additional 1.0% per annum on the principal amount of the 2026 Notes on and after October 9, 2022 until maturity (unless further increased pursuant to this section), and if the Equity Offering is not consummated by (a) April 9, 2023, (b) October 9, 2023 or (c) April 9, 2024, the interest rate on the 2026 Notes will increase by an additional 1.0% per annum on the principal amount of the 2026 Notes on and after each such date until maturity. For the avoidance of doubt, the interest rate on the 2026 Notes shall not exceed 10.25% per annum, and if the Equity Offering is consummated by us prior to any of the above referenced dates, there will be no increase in the interest rate on the 2026 Notes beyond the rate in effect at such time of consummation of the Equity Offering.

Revolving Line of Credit and Term Loan

One of our subsidiaries had a loan and security agreement (the “Loan Agreement”) with a bank that allowed for maximum borrowings of $1.8 million on a revolving line of credit and a $10.8 million term loan. On June 9, 2021, in connection with the GigCapital2 merger, we paid off the revolving line of credit and term loan balance of $1.8 million and $9.1 million, respectively, and terminated the Loan Agreement. There were 0 unamortized debt issuance costs and thus 0 gain or loss was recognized on extinguishment.

Other Debt Facilities

Glocal’s debt facilities include INR-denominated term loans with an aggregate carrying value of $19.1 million (or INR 1.4 billion) as of June 30, 2021. These term loans are primarily utilized for financing the construction of hospitals, administrative offices, equipment, and working capital and are required to be repaid in monthly and quarterly installments with maturity dates extending to March 31, 2025. The loans are secured by mortgages on real property and personal guarantee of two Glocal Directors. The loans bear interest rates between 11.15%% up to 16.25% per annum. At June 30, 2021 accrued interest on Glocal's debt facilities was $5.7 million and is included in accrued expenses in the condensed consolidated balance sheet. For the three months ended June 30, 2021 interest expense was $0.5 million.

Prior to our acquisition of Glocal, it had been negotiating with its banks to restructure the payment terms of some of the debt facilities above; however, due to the impact of the COVID-19 pandemic, there has been a delay in approvals from the banks. The term loans are classified in long-term debt, current, in the condensed consolidated balance sheet due to their default status while negotiations continue. We belief that no penal interest will be charged by the banks and hence no additional provision has been recognized in the condensed consolidate statement of operations, other than the accrued interest discussed above. We expect to be able to restructure Glocal's debt by the end of 2021.

In March 2018, a VIE of one of our subsidiaries entered into a fifteen-year, 5.12% real estate loan secured by a deed on the real estate. The loan proceeds of $3.4 million were used to purchase the building used for our subsidiary’s headquarters. Monthly principal and interest payments are $20 thousand, plus an estimated lump sum payment of approximately $1.9 million due at maturity on March 23, 2033. At June 30, 2021 the outstanding balance of the loan was $3.2 million.

In March 2020, the VIE discussed above, also entered into a ten year, 3.09% real estate loan secured by a second trust deed on the real estate. The loan proceeds of $0.9 million were used for the purpose of financing the additions to the building during 2019. Monthly payments of principal and interest are $5 thousand, plus an estimated lump sum payment of approximately $0.5 million at maturity on March 11, 2030. At June 30, 2021, the outstanding balance of the loan was $0.9 million.

At June 30, 2021, for both of the real estate loans discussed above, accrued interest was $6 thousand and for the three months ended June 30, 2021, interest expense was $48 thousand.

Convertible Notes

On March 23, 2021, we issued a $4.1 million principal amount, 15.0% convertible note (the “2021 Note”) of which $0.5 million was to be converted and repaid in UpHealth common stock and the remainder in cash. The 2021 Note bears interest at a fixed rate of 15.0% per year, to begin accruing on June 15, 2021 if not repaid previous to this date. Total proceeds received from the 2021 Note were $3.0 million, net of original issue discount of $1.0 million. Additional debt issuance costs of $0.1 million for a placement fee were accrued, and paid at the closing. The principal and accrued interest of the 2021 Note was due and payable by us to the holder on the earlier of (1) the date that is one business day after the closing of the Business Combinations and we begin public trading, (2) the maturity date, which is nine months from the issuance of the 2021 Note, or (3) November 23, 2021, pursuant to its payment provisions. On June 9, 2021, in connection with the closing of the Business Combinations, we paid the holder of the 2021 Note the sum of $3.6 million and the remaining $0.5 million balance due to the holder was converted and exchanged into 50,000 shares of UpHealth common stock. Original issue discount and debt issuance costs of $0.5 million were written-off and a $31 thousand gain on extinguishment of debt was recognized and included in other income (expense), net, including interest income, in the condensed consolidated statements of operations.

On January 6, 2021, we issued a $1.5 million principal amount, 5.0% convertible note due January 6, 2026 (the “2026 5% Note”). The 2026 5% Note is unsecured and bears interest at a fixed rate of 5.0% per year and, unless earlier converted, the principal and accrued interest of the 2026 5% Note will be due and payable by us at any time on or after the maturity date at our election or upon demand by the holder. On June 9, 2021, in connection with the closing of the Business Combinations, the 2026 5% Note was converted into 150,367 of UpHealth common stock representing the total outstanding principal balance and unpaid accrued interest of $1.5 million and $30 thousand, respectively. A $0.1 million gain on extinguishment was recognized and included in other income (expense), net, including interest income, in the condensed consolidated statements of operations.

Paycheck Protection Program Loans

In April 2020, three of our subsidiaries obtained a U.S. government subsidy of $0.5 million, $1.0 million, and $1.9 million (representing 5 loan agreements), respectively, under the Paycheck Protection Program (“PPP’). The PPP is a U.S. government temporary program created with the intent to provide a subsidy to assist businesses in keeping employees employed during the pandemic. The PPP loan may not need to be repaid if certain requirements are met. Under the Coronavirus Aid, Relief and Economic Security (“CARES Act”), as modified, any amounts not forgiven will be required to be repaid over a term having a minimum of five years and a maximum maturity of 10 years from the date on which the borrower applies for forgiveness. The loans carry a 1.0% interest rate.

One of our subsidiaries applied for forgiveness of its $0.5 million PPP loan during 2020 and it was forgiven in full and the subsidiary legally released from repaying the loan by the SBA in June 2021. The forgiveness was recognized as a measurement period adjustment to goodwill during the three months ended June 30, 2021 (see Note 5, Goodwill and Intangible Assets, for further information).

One of our subsidiaries submitted a request for forgiveness of its $1.0 million PPP loans. There can be no assurance that any portion of the PPP loan will be forgiven. In the event that the lender and SBA determine that all or a portion of the PPP loan is not forgivable, the subsidiary will be required to remit payments of $0.6 million in 2021 and $0.4 millionin 2022. The balance is classified as a current liability due to uncertainty regarding the subsidiary’s eligibility for the loan.

One of our subsidiaries applied for forgiveness of its $1.9 million PPP loans during 2020, of which 3 of the loans, totaling $0.7 million, were forgiven in full by the SBA and the subsidiary was legally released from repaying the loans. In February 2021 and March 2021, the remainder of the PPP loans totaling $0.9 million and $0.3 million, respectively, were forgiven by the SBA and the subsidiary was legally released from repaying the loans. We recorded this as a measurement period adjustment to goodwill during the three months ended March 31, 2021 (see Note 5, Goodwill and Intangible Assets, for further information).

Provider Relief Funds

Provider Relief Funds (“PFR”) were made available by the U.S. Department of Health and Human Services (“HHS”) as part of a $100 billion appropriation as part of the CARES Act’s Provider Relief Fund. In April and July 2020, one of our subsidiaries received PFR proceeds aggregating $0.2 million, and in January 2021, another subsidiary received PFR proceeds aggregating $0.5 million. The PFR amounts received will not require repayment as long as the subsidiaries comply with certain terms and conditions outlined by HHS. The terms and conditions first require the subsidiaries to identify health care-related expenses attributed to COVID-19 that another source has not reimbursed or is obligated to reimburse. If those ~~benefits~~expenses do not exceed the funding received, the subsidiaries then apply the funds to patient care lost revenue. On January 15, 2021 HHS released a Post-Payment Notice of Reporting Requirements Notice that provides healthcare providers three options to calculate patient care lost revenue.

As of June 30, 2021, the subsidiaries have recognized no patient care lost revenue in the condensed consolidated statements of operations. The subsidiaries have $0.2 million and $0.5 million, respectively, recorded within current portion of long-term debt in the condensed consolidated balance sheets as both subsidiaries have asserted they have not yet met all of the terms and conditions and restrictions for the CARES Act relative to these funds as of June 30, 2021. Both subsidiaries had until June 30, 2021 to use amounts remaining for expenses attributable to COVID-19 (but not reimbursed by other sources) and/or lost patient care revenue. HHS is entitled to recover PRF amounts received by both subsidiaries that are unused as for the purposes disclosed above.

Related Party Debt

One of our subsidiaries has notes payable to related parties totaling $0.7 million and $0.4 million at June 30, 2021 and December 31, 2020, respectively. The notes bear interest at rates ranging from 0.14% to 3.50% per annum. Notes totaling $0.6 million are payable in 8 quarterly installments starting from October 1, 2022, or upon a liquidity event, as defined in the note agreement, and a note totaling $39 thousand was payable on June 30, 2021. The accrued interest payable was $18 thousand and $9 thousand at June 30, 2021 and December 31, 2020, respectively, and is included in accrued expenses in the condensed consolidated balance sheets.

Seller Notes

As part of the purchase price consideration for several of UpHealth Holdings' merger entities, we entered into seller notes payable to their former shareholders, which accrue interest at specific rates, per the respective merger agreements. On June 9, 2021, in connection with the closing of the Business Combination, we paid $88.1 million of the seller notes. At June 30, 2021 and December 31, 2020, seller notes totaled $29.8 million and $21.1 million, respectively. In August 2021, the maturity date for $18.7 million of the seller notes was deferred to September 2022. The remaining seller notes mature in August 2021.

The accrued interest payable was $0.3 million and $0.1 million at June 30, 2021 and December 31, 2020, respectively, and is included in accrued expenses in the condensed consolidated balance sheets. Interest expense was $0.4 million and $0.8 million for the three and six months ended June 30, 2021, respectively.

Senior Debt Facility Fees

In March 2020, we agreed to pay a financial consulting firm, an affiliate of a related party, compensation related to finding and executing a senior financing facility, to be funded at the completion of the Business Combinations (see Note 1, Organization and Business, for further information). On June 9, 2021, in connection with the Business Combinations we paid the financial consulting firm total cash consideration of $0.5 million, for consummation of the senior financing.

Membership Redemptions and Due to Member

In November 2020, one of our subsidiaries entered into a redemption agreement with a member for $0.1 million. Consideration for the redemption agreement is in the form of a note payable that is non-interest bearing, nonsecured, and payable upon demand. The note was repaid in full during the three months ended March 31, 2021.

Contractual Maturities

At June 30, 2021, long-term debt contractual maturities, excluding unamortized original issue discount, were as follows:


(In thousands)
Remaining 2021	$	49,428
2022	120
2023	126
2024	131
2025	137
Thereafter	$	164,786
Total	$	214,728

9.Fair Value of Financial Instruments

We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate. As of June 30, 2021 and December 31, 2020, the fair values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses approximate their carrying values due to the short-term nature of these instruments. Additionally, the fair values of short-term and long-term debt instruments approximate their carrying values.

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. Fair value measurements are categorized into one of three levels of the fair value hierarchy based on the lowest level of significant input used. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Considerable judgment and a high degree of subjectivity are involved in developing these estimates. These estimates may differ from the actual amounts that we could realize upon settlement.

The fair value hierarchy is as follows:

Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 - Other observable inputs, either directly or indirectly, other than quoted prices included in Level 1, including:

•Quoted prices for similar assets/liabilities in active markets;

•Quoted prices for identical or similar assets/liabilities in non-active markets (e.g., few transactions, limited information, non-current prices, high variability over time);

•Inputs other than quoted prices that are observable for the asset/liability (e.g., interest rates, yield curves, volatilities, default rates); and

•Inputs that are derived principally from or corroborated by other observable market data.

Level 3 - Unobservable inputs that cannot be corroborated by observable market data.

The following tables present information about our financial assets and liabilities measured at fair value on are recurring basis:


	June 30, 2021
(In thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liability	$	0	$	0	$	61,823	$	61,823
Warrant liability	$	0	$	772	$	0	$	772
	$	0	$	772	$	61,823	$	62,595

Derivative Liability

In accounting for the 2026 Notes (see Note 8, Debt, for further information), we bifurcated and accounted for the conversion option as a derivative measured at fair value on the issuance date in accordance with ASC 815, Derivatives and Hedging. At June 30, 2021, the fair value of the derivative was $61.8 million, of which $38.6 million was included in derivative liability, current, and $23.2 million was included in derivative liability, noncurrent in the condensed consolidated balance sheet.

The fair value of the derivative liability is considered a Level 3 valuation and is determined using a Binomial Lattice Option Pricing Model. The significant assumptions used in the model were:


			June 30, 2021
Stock price			$9.93
Volatility			68.0%
Risk free rate			0.75%
Exercise price			$10.65
Expected life (in years)			5.02
Conversion periods			2-5 years
Future share price			$0.01-$151.53

Private Placement Warrants and PIPE Warrants

We have classified the Private Placement Warrants and PIPE Warrants (see Note 10, Capital Structure) as liabilities at fair value, due to their redemption characteristics, with subsequent changes in their fair values to be recognized ~~a tax position must be more-likely-than-not~~in the consolidated financial statements at each reporting date. At June 30, 2021, the fair value of the Private Placement Warrants and the PIPE Warrants was determined to be ~~sustained upon examination~~$0.89 per warrant, totaling $0.5 million and $0.3 million respectively, and are included in warrant liabilities in the condensed consolidated balance sheet. During the three and six months ended June 30, 2021, we recorded a $0.1 million loss due to the fair value changes in the Private Placement Warrants, and during the three and six months ended June 30, 2021, we recorded a $1.2 million gain due to the fair value changes in the PIPE Warrants, and is included in gain (loss) in fair value of warrant liabilities in the condensed consolidated statement of operations.

The fair value of the Private Placement Warrants and PIPE Warrants is considered a Level 1 valuation as we have derived their value by ~~taxing authorities.~~ using quoted market prices. The transfer of the Private Placement Warrants and PIPE Warrants to anyone other than the purchasers or their permitted transferees, would result in these Private Placement Warrants and PIPE Warrants having substantially the same terms as the Public Warrants, which are traded in active markets.

There were 0 unrecognized tax benefits as of September 30, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. The amount paid for interest and penaltiesno transfers between fair value levels during the ~~quarter~~three and six months ended ~~September~~June 30, ~~2020 was $724, which was related~~2021.

10.Capital Structure

The consolidated statements of stockholders’ equity has been retroactively adjusted for all periods presented to ~~2019 income taxes. The Company is currently not aware~~reflect the Business Combinations and reverse recapitalization exchange ratio (1.0 UpHealth Holdings shares converted to 10.28 GigCapital2 shares) as discussed in Note 3, Business Combinations.

Common Stock

Our Second Amended and Restated Certificate of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

~~Recent Accounting Pronouncements~~

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

~~3. OFFERING~~

~~On June 10, 2019,~~issuance of 300,000,000 shares of common stock, par value of $0.0001. Immediately following the ~~Company completed the initial~~ closing of the ~~Offering whereby the Company sold 15,000,000 Units at a price~~Business Combinations, and as of ~~$10.00 per Unit. On~~ June 13, 2019, the Company completed the second closing of the Offering with the exercise of the over-allotment option with the consummation of the sale of an additional 2,250,000 Units at a price of $10.00 per Unit. Each Unit consists of 1 share of the Company’s common stock, $0.0001 par value, one warrant to purchase one share30, 2021, there were 117,604,610 shares of common stock ~~(the “Warrants”)~~issued and outstanding.

As discussed in Note 3, Business Combinations, we have retroactively adjusted the shares issued and ~~one right~~outstanding prior to ~~receive one-twentieth (1/20~~)June 9, 2021 to give effect to the exchange ratio established in the business combinations agreement to determine the number of ~~one share~~shares of common stock ~~upon consummation~~into which they were converted.

Preferred Stock

Our Second Amended and Restated Certificate of Incorporation authorizes the issuance of 1,000,000 shares of preferred stock, par value $0.0001 with such designation, rights and preferences as may be determined from time to time by our board of directors. At June 30, 2021, there were 0 shares of preferred stock outstanding.

Public Warrants

Warrants (the "Public Warrants") issued in connection with GigCapital2's initial ~~Business Combination (the “Rights”). Warrants will be~~public offering are exercisable for $11.50 per share, and the exercise price and number of Public Warrant shares issuable on exercise of the Public Warrants may be adjusted in certain circumstances ~~as discussed~~including in ~~Note 6.~~

~~On June 26, 2019,~~ the ~~Company announced that~~event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger, or consolidation of GigCapital2 (now UpHealth, Inc.).

Each Public Warrant will become exercisable on the ~~holders~~later of 30 days after the completion of the ~~Company’s Units may elect~~Business Combinations or 12 months from the closing of GigCapital2's initial public offering and will expire five years after the completion of the Business Combinations or earlier upon redemption or liquidation. If UpHealth is unable to separately trade the securities underlying such Units which commenced on July 1, 2019. Any Units not separated will continue to trade on the New York Stock Exchange under the symbol “GIX.U”. Any underlyingdeliver registered shares of common stock to the holder upon exercise of the Public Warrants during the exercise period, there will be no net cash settlement of these Public Warrants and ~~Rights~~the Public Warrants will expire worthless, unless they may be exercised on a cashless basis in the circumstances described in the Public Warrant agreement. Once the Public Warrants become exercisable, UpHealth may redeem the outstanding Public Warrants in whole and not in part at a price of $0.01 per Public Warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that ~~are separated will trade~~the last sale price of UpHealth’s shares of common stock equals or exceeds $18.00 per share for any 20 trading days within the 30-trading day period ending on the ~~New York Stock Exchange~~third trading day before UpHealth sends the notice of redemption to the Public Warrant holders.

Under the terms of the Public Warrant agreement, UpHealth has agreed to use its best efforts to file a new registration statement under the ~~symbols “GIX,” “GIX WS”~~Securities Act, following the completion of the initial business combination, for the registration of the shares of common stock issuable upon exercise of the Public Warrants included in private placement units.

As of June 30, 2021, there were 18,117,494 warrants outstanding, including 17,250,000 Public Warrants, 567,500 Private Placement Warrants and ~~“GIX RT,” respectively.~~

~~4. RELATED PARTY TRANSACTIONS~~

299,994 PIPE Warrants (see Private Placement and Pipe Subscription Agreements below).

Founder Shares

During the period from March 6, 2019 (date of GigiCapital2's inception) to March 12, 2019, ~~the Sponsor~~GigCapital2's sponsor and Northland Gig2 Investment LLC purchased 2,500,000 shares of GigCapital2 common stock (the “Founder Shares”) for an aggregate purchase price of $25,000, or $0.01 per share. In April 2019, ~~the Company~~GigCapital2 effected a stock dividend of 0.493 shares of common stock for each outstanding share of common stock, resulting in the ~~Sponsor~~sponsor and Northland Gig2 Investment LLC holding an aggregate of 3,732,500 shares of its common stock. Subsequently, the ~~Sponsor~~sponsor and Northland Gig2 Investment LLC sold 68,041 shares and 31,959 shares, respectively, to ~~EarlyBird~~EarlyBirdCapital, Inc. and the EarlyBird Group, collectively, for an aggregate purchase price of $670, or $0.0067 per share. In June 2019, ~~the Company~~GigCapital2 effected a stock dividend of 0.1541 shares of common stock for each outstanding share of common stock, resulting in the ~~Sponsor,~~ sponsor, Northland Gig2 Investment ~~EarlyBird~~LLC, EarlyBirdCapital, Inc., and the

EarlyBird Group holding an aggregate of 4,307,500 shares of its common stock as of ~~September~~June 30, ~~2020.~~2021. The Founder Shares are identical to the common stock included in the Units sold in ~~the Offering~~GigCapital2's initial public offering except that the Founder Shares are subject to certain transfer restrictions, as described in more detail below.

Private Placement

The ~~Founders~~GigCapital2 (now Uphealth, Inc.) founders purchased ~~from the Company an aggregate of 492,500 Private Placement Units at a price of $10.00 per unit~~ in a private placement sale (the "Private Placement"), that occurred simultaneously with the completion of the ~~initial~~ closing of the ~~Offering.~~GigCapital2 initial public offering an aggregate of 492,500 units (the "Private

Placement Units") at a price of $10.00 per unit. The ~~Founders~~founders also purchased from ~~the Company~~GigCapital2 an aggregate of 75,000 ~~Private Placement Units~~private placement units at a price of $10.00 per unit in a private placement that occurred simultaneously with the completion of the second closing of the ~~Offering~~GigCapital2 initial public offering with the exercise of the over-allotment ~~option.~~option, for a total of 567,500 Private Placement Units. Among the Private Placement Units, 481,250 units were purchased by ~~the Sponsor,~~GigCapital2's sponsor, 29,900 units were purchased by ~~EarlyBird,~~EarlyBirdCapital, Inc., a GigCapital2 underwriter, and 56,350 units were purchased by Northland ~~Investment.~~Gig2 Investment LLC, a GigCapital2 underwriter. Each Private Placement Unit consists of 1 share of ~~the Company’s~~GigCapital2’s common stock, $0.0001 par value, 1 ~~Warrant,~~warrant, and 1 right to receive one-twentieth (1/20) of a share of common stock upon the consummation of ~~the Company’s~~GigCapital2's initial ~~Business Combination.~~business combination. Warrants (the "Private Placement Warrants") will be exercisable for $11.50 per share, and the exercise price of the Private Placement Warrants may be adjusted in certain circumstances as described in ~~Note 6.~~

~~One~~terms of the ~~Company’s underwriters,~~ Private Placement Warrants agreement.

Northland Gig2 Investment LLC, purchased 100,000 ~~Private~~private underwriter shares (the "Private Underwriter ~~Shares,~~Shares"), at a purchase price of $10.00 per share in a private placement that occurred simultaneously with the completion of the initial closing of the ~~Offering.~~GigCapital2 initial public offering. Northland Gig2 Investment LLC also purchased from ~~the Company~~GigCapital2 an aggregate of 20,000 Private Underwriter Shares at a price of $10.00 per share in a private placement that occurred simultaneously with the completion of the second closing of the ~~Offering~~GigCapital2 initial public offering with the exercise of the over-allotment option. The Private Underwriter Shares are identical to the shares of common stock included in the Private Placement Units.

~~The Company’s Founders~~

GigCapital2’s founders and underwriters have agreed not to transfer, assign, or sell any of their Founder Shares, Private Placement Units, shares, or other securities underlying such Private Placement Units, or Private Underwriter Shares until the earlier of (i) twelve months after the completion of ~~the Company’s~~GigCapital2's initial ~~Business Combination,~~business combination, or earlier if, subsequent to the ~~Company’s~~GigCapital2’s initial ~~Business Combination,~~business combination, the last sale price of the ~~Company’s~~GigCapital2’s common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 90 days after ~~the Company’s~~GigCapital2’s initial ~~Business Combination~~business combination, or (ii) the date on which ~~the Company~~GigCapital2 completes a liquidation, merger, stock exchange, or other similar transaction after ~~the~~GigCapital2's initial ~~BusinessCombination~~business combination that results in all of ~~the Company’s~~gigCapital2’s stockholders having the right to exchange their shares of common stock for cash, securities, or other property.

Unlike the Public Warrants included in the ~~Units~~units sold in ~~the Offering,~~GigCapital2's initial public offering, if held by the original holder or its permitted transferees, the Private Placement Warrants included in the Private Placement Units are not redeemable by ~~the Company~~GigCapital2 and subject to certain limited exceptions, will be subject to transfer restrictions until one year following the consummation of ~~the Business Combination.~~GigCapital2's initial business combination. If ~~the Warrants included in~~ the Private Placement ~~Units~~Warrants are held by holders other than the initial holders or their permitted transferees, the ~~Warrants included in the~~ Private Placement ~~Units~~Warrants will be redeemable by ~~the Company~~GigCapital2 and exercisable by holders on the same basis as the Public Warrants.

We accounted for the Private Placement Warrants ~~included~~as liabilities at fair value (see Note 9, Fair Value of Financial Instruments) on the condensed consolidated balance sheets, due to their redemption characteristics, with changes in fair value recognized as a component of other income (expense) in the ~~Offering.~~

Ifcondensed consolidated statements of operations. At June 30, 2021, the ~~Company does not complete a Business Combination, then a portion of the proceeds from the sale~~fair value of the Private Placement ~~Units~~Warrants was $0.5 million, which is included in warrant liabilities in the condensed consolidated balance sheet. During the three and ~~all~~six months ended June 30, 2021, we recorded a $(0.1) million loss due to the fair value changes in the Private Placement Warrants, which is included in gain (loss) in fair value of warrant liabilities in the condensed consolidated statement of operations.

PIPE Subscription Agreements

On January 20, 2021, GigCapital2 (now UpHealth, Inc.) entered into subscription agreements, each dated January 20, 2021 and amended June 8, 2021 (the "PIPE Subscription Agreements"), with certain institutional investors (collectively the "PIPE Investors"), pursuant to which GigCapital2 agreed to issue and sell to the PIPE Investors, in private placements to close immediately prior to the closing of the ~~proceeds from the sale~~Business Combinations, an aggregate of ~~the Private Underwriter Shares will be part of the liquidating distribution to the public stockholders.~~

~~Registration Rights~~

On June 5, 2019, the Company entered into a Registration Rights Agreement with its Founders, Northland and Ms. McDonough. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering the securities under the Registration Rights Agreement. Upon cancellation of Ms. McDonough’s insider3,000,000 shares ~~following her resignation, effective as of August 12, 2019, she was no longer subject to the terms and conditions set forth in the Registration Rights Agreement.~~

~~Underwriters Agreement~~

~~The Company granted the underwriters a 45-day option~~(the “PIPE Shares”) at $10.00 per share, plus warrants to purchase up to ~~2,250,000~~an additional ~~Units to cover any over-allotments,~~300,000 shares of common stock (1 warrant for every 10 PIPE Shares purchased) at ~~the Offering~~an exercise price ~~less deferred underwriting discounts and commissions. On June 13, 2019, the underwriters elected to fully exercise their over-allotment option to purchase 2,250,000 Units at a~~of $11.50 per share (the "PIPE Warrants"), for an aggregate purchase price of ~~$10.00 per unit.~~

$30.0 million (collectively the "PIPE Investment"). The ~~Company paid an underwriting discount of $0.20 per Unit~~PIPE Investment was consummated immediately prior to the ~~underwriters.~~

closing of the Business Combinations. The total proceeds received from the PIPE Investment were $28.5 million, net of placement fee costs of $1.5 million.

We accounted for the PIPE Warrants as liabilities at fair value (see Note 9, Fair Value of Financial Instruments) in the condensed consolidated balance sheets, due to their redemption characteristics, with changes in fair value recognized in gain (loss) on fair value of warrant liabilities in the condensed consolidated statements of operations. At June 30, 2021, the fair value of the PIPE Warrants was $0.3 million, which is included in warrant liabilities in the condensed consolidated balance sheet. During the three and six months ended June 30, 2021, we recorded a $1.2 million gain due to the fair value changes in the PIPE Warrants, which is included in gain (loss) in fair value of warrant liabilities in the condensed consolidated statement of operations.

Forward Share Purchase Agreement

On June 3, 2021, we entered into a forward share purchase agreement (the "Purchase Agreement") with Kepos Alpha Fund L.P. (“KAF”), a Cayman Islands limited partnership, pursuant to which KAF may elect to sell and transfer to us and we will purchase from

~~Administrative Services~~

KAF, on September 8, 2021 or, in KAF’s sole discretion, any one calendar month anniversary of that date (the “Closing Date”), up to 1,700,000 shares of our common stock that are held by KAF at the closing of the Business Combinations. In August 2021, we entered into an amendment to the Purchase Agreement, ~~and Other Agreements~~

which deferred the Closing Date to no earlier than January 9, 2022, provided if (a) we issue any new equity securities, whether of existing or new classes, or (b) an event occurs having a material adverse effect on our management operations, KAF will have the right to designate a Closing Date following such issuance or occurrence on 3 business days' notice to us. The ~~Company~~per share price at which KAF has the right to sell the KAF Shares to us is (a) $10.30225 per KAF Share, plus (b) in the event that the Closing Date occurs after September 8, 2021, $0.0846 per KAF Share for each month (prorated for a partial month) following September 8, 2021.

Notwithstanding anything to the contrary in the Purchase Agreement, KAF is allowed at its election to sell any or all of the KAF Shares in the open market commencing after the closing of the Business Combinations, as long as the sales price is above $10.10 per Share. Nothing in the Purchase Agreement prohibits or restricts KAF with respect to the purchase or sale of our warrants. In exchange for our commitment to purchase the KAF Shares on the Closing Date, KAF agreed to ~~pay $20,000~~continue to hold, and not offer, sell, contract to sell, pledge, transfer, assign, or otherwise dispose of, directly or indirectly, or hedge (including any transactions involving any derivative securities and including any Short Sales (as defined below) involving any of our securities) the KAF Shares prior to Closing Date. “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Securities and Exchange Act of 1934 (the “Exchange Act”), whether or not against the box, and all types of direct and indirect stock pledges, forward sales contracts, options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements (including on a ~~month for office space, administrative services~~total return basis), and ~~secretarial support~~sales and other transactions through non-U.S. broker dealers or foreign regulated brokers. KAF is permitted to ~~an affiliate of~~pledge the Sponsor, GigFounders, LLC. Services commence on June 6, 2019, the date the securities were first listed on the New York Stock Exchange and will terminate upon the earlier of the consummation by the Company of an initial Business Combination or the liquidation of the Company.

~~5. COMMITMENTS AND CONTINGENCIES~~

~~Business Combination Marketing Agreement~~

The Company engaged its underwriters as advisors to assist it in holding meetings with its stockholders to discuss the potential Business Combination and the Target Business’s attributes, introduce it to potential investors that are interested in purchasing its securitiesKAF Shares in connection with a bona fide margin agreement (and such a pledge is not considered to be a transfer, sale or assignment of the ~~potential Business Combination, assist it~~KAF Shares). Due to its mandatorily redeemable for cash feature, we have recorded the Purchase Agreement as a forward share purchase liability in ~~obtaining stockholder approval~~our condensed consolidated balance sheet for up to the ~~Business Combination~~1,700,000 shares, at $10.00 per share, of our common stock that KAF may elect to sell and ~~assist it~~transfer to us and we will repurchase from KAF, plus imputed interest, totaling $17.1 million.

Equity Plans

Thrasys' 2019 Stock Incentive Plan

Contemporaneous with its ~~press releases~~merger with UpHealth Holdings on November 20, 2020, Thrasys entered into stock compensation agreements with employees pursuant to the Thrasys 2019 Stock Incentive Plan, a Restricted Stock Award (“RSA”) agreement, and ~~public filings~~a Restricted Stock Unit (“RSU”) award agreement, and awarded 536,184 RSA shares and 3,427,316 RSU shares to employees. On June 9, 2021, in connection with the Business ~~Combination. Pursuant~~Combinations, the RSAs and RSUs were settled with a combination of shares of UpHealth common stock and proceeds from the seller notes. Additionally, under the terms of the merger agreement, we will grant 4,660,226 RSUs to ~~that agreement,~~2 officers of Thrasys under the ~~Company will pay the underwriters a cash fee for such services~~2021 Equity Incentive Plan (the "2021 Incentive Plan"), upon the ~~consummation~~filing of ~~its initial~~a Form S-8 with the SEC, which occurred on August 12, 2021.

Cloudbreak 2015 Incentive Plan

On June 19, 2015, Cloudbreak created the 2015 Unit Incentive Plan (the “Cloudbreak Plan”), which had a maximum aggregate number of 2,200,000 common units. Cloudbreak measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period.

Upon completion of the Business ~~Combination~~Combinations, UpHealth assumed 1,573,690 options, which were included in purchase consideration, and 134,690 unvested options, which are subject to continued vesting and will be recorded as stock-based compensation prospectively. Cloudbreak ceased granting awards under the Cloudbreak Plan.

2021 Equity Incentive Plan

On June 4, 2021, the GigCapital2 stockholders considered and approved the 2021 Incentive Plan and reserved 16,420,813 shares of UpHealth common stock for issuance thereunder. The 2021 Incentive Plan was previously approved, subject to stockholder approval, by the Board of Directors of GigCapital2 on February 7, 2021. The 2021 Incentive Plan became effective immediately upon the closing of the Business Combinations. The number of shares of common stock reserved for issuance under the 2021 Incentive Plan will automatically increase on January 1 of each year, beginning on January 1, 2022 and each anniversary thereof during the effectiveness of the 2021 Incentive Plan, by an amount equal to in the ~~aggregate, 3.5%~~lesser of (i) five percent (5%) of the ~~gross proceeds~~total number of ~~the Offering, including any proceeds from the exercise of the over-allotment options.~~

~~6. STOCKHOLDERS’ EQUITY~~

~~Common Stock~~

The authorized common stock of the Company includes up to 100,000,000 shares. Holders of the Company’s common stock are entitled to one vote for each share of common stock. As of September 30, 2020, there were 5,262,100 shares of ~~common stock issued~~Company Common Stock outstanding on such date, and ~~outstanding and not subject to possible redemption. There were 16,982,900~~(ii) such lesser number of shares ~~of common stock subject to possible redemption issued and outstanding as of September 30, 2020.~~

~~Preferred Stock~~

~~The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences~~ as may be determined ~~from time to time~~ by the Company’s Board of ~~Directors (the “Board”). As of September~~Directors. During the three months ended June 30, ~~2020,~~2021, there were 0 shares granted under the 2021 Incentive Plan.

In conjunction with the approval of ~~preferred~~the 2021 Incentive Plan, the Company’s Board of Directors also adopted a form of Restricted Stock Units Agreement (the “RSU Agreement”) and a form of Stock Option Agreement (the “Stock Option Agreement”) that the Company will generally use for grants under its 2021 Incentive Plan. The RSU Agreement provides that restricted stock ~~issued~~units will vest over a fixed period and ~~outstanding.~~

~~Warrants~~

~~Warrants~~be paid as shares of common stock, and that the unvested restricted stock units will expire upon certain terminations of the grantees’ employment or other service relationship with the Company. The Stock Option Agreement

provides that stock options will vest over a fixed period, and that the unvested options will expire upon certain terminations of the grantees’ employment or other service relationship with the Company.

11.Revenue

Disaggregation of Revenue

Revenue by service offering consisted of the following:


(In thousands)	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Services	$	14,773	$	22,911
Licenses and subscriptions	9,145		12,803
Products	7,964		8,984
Total revenue	$	31,882	$	44,698

Revenue by geography consisted of the following:


(In thousands)	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Americas	$	20,126	$	29,352
Europe	7,800		10,800
Asia	3,956		4,546
Total revenue	$	31,882	$	44,698

Our revenue is entirely derived from the healthcare industry. Revenue recognized over-time was approximately 75% and 73% of total revenue during the three and six months ended June 30, 2021.

ContractAssets

There were 0 impairments of contract assets, consisting of unbilled receivables, during the six months ended June 30, 2021.

The change in contract assets was as follows:


(In thousands)	Six Months Ended June 30, 2021
Unbilled receivables, beginning of period	$	3,536
Reclassifications to billed receivables	(1,192)
Revenues recognized in excess of period billings	9,783
Unbilled receivables, end of period	$	12,127

Contract Liabilities

The change in contract liabilities, consisting of deferred revenue, was as follows:


(In thousands)	Six Months Ended June 30, 2021
Deferred revenue, beginning of period	$	397
Revenues recognized from balances held at the beginning of the period	(397)
Revenue deferred from period collections on unfulfilled performance obligations	6,572
Deferred revenue, end of period	$	6,572

Revenue recognized ratably over time is generally billed in advance and includes SaaS internet hosting, subscriptions, and related consulting, implementation, services support, and advisory services.

Revenue recognized as delivered over time includes professional services billed on a time and materials basis, and fixed fee professional services and training classes that are primarily billed, delivered, and recognized within the same reporting period.

Approximately 0.6% and 0.9% of revenue recognized during the three and six months ended June 30, 2021, respectively, was from the deferred revenue balance existing as of December 31, 2020.

Remaining Performance Obligations

Remaining performance obligations consisted of the following at June 30, 2021:


(In thousands)	Total		Remaining 2021	2022 - 2024
Subscriptions	$	10,411	2,607	7,804
Licenses	0		0	0
SaaS and hosting	147		98	49
Program management and services	0		0	0
	$	10,558	2,705	7,853

12.Income Taxes

The CARES Act was enacted on March 27, 2020 in the United States. The CARES Act provided a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief, government loans, grants, and investments. The CARES Act did not have a material impact on our income tax provision.

For interim period reporting, we record income taxes using an estimated effective tax rate for the period, including the forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate. At the end of each interim period, we update the estimated effective tax rate, and if the estimated tax rate changes based on new information, we make a cumulative adjustment in the period. We record the tax effect of an unusual or infrequently occurring item in the interim period in which it occurs as a discrete item of tax.

The income tax benefit was $6.6 million and 0 for the three months ended June 30, 2021 and 2020, respectively. The income tax benefit was $7.1 million and 0 for the six months ended June 30, 2021 and 2020, respectively.

The Internal Revenue Service (“IRS”) audited Thrasys’ 2008 and 2009 tax returns for the proper year of inclusion of approximately $15.0 million in long-term capital gain on the sale of certain intellectual property rights. Thrasys originally reported the gain on its 2010 S Corporation tax return, matching the year of inclusion for financial accounting purposes. The corporate level tax was paid to California and Thrasys passed the gain through to its shareholders. The IRS has asserted that Thrasys owes C Corporation tax of approximately $5.0 million for 2008, or in the alternative, Thrasys owes C Corporation tax of approximately $5.0 million for 2009 as a built-in gain. In addition, Thrasys could be assessed additional California franchise tax of approximately $1.3 million. Additionally, if additional income taxes are imposed, interest will be ~~exercisable~~charged at approximately 4% per year, compounded annually, resulting in potential interest of approximately $3.0 million. The IRS has not asked that penalties be imposed.

The matter is currently pending before the U.S. Tax Court, Docket 11565-15. There are related tax cases for some of the shareholders for additional income taxes due if the gain is shifted to 2009. On December 4, 2018, the IRS filed a motion for summary judgment in Thrasys, Inc. v. Commissioner (T.C. Memo 2018-199); however, Thrasys prevailed, and the motion was denied. In January 2020, Thrasys filed a motion for summary judgment arguing that either the gain was properly reported in 2010 and all taxes have been paid or in the alternative it should have been taxable in 2009 with no built-in gains tax. In both cases, there would be no additional income tax due for 2008 or 2009. The IRS filed an objection to Thrasys’ motion. On March 3, 2021, the U.S. Tax Court, without consideration of the merits of the case, issued a very brief court order dismissing Thrasys’ motion. Had the motion been granted, the need for a trial would have been obviated. Counsel for the IRS has contacted counsel for Thrasys and has offered to join Thrasys in a motion to have the case decided without trial. This and other alternatives are now under consideration. It is not likely this case will be resolved before the end of 2021. Thrasys intends to vigorously defend its position in the case and believes it will prevail if the case is taken to trial. Thrasys has accrued $0.2 million, representing probable additional taxes and interest imposed, in other current liabilities in the condensed consolidated balance sheets.

13.Earnings (Loss) Per Share

Basic income (loss) per share applicable to common stockholders is computed by dividing earnings applicable to common stockholders by the weighted-average number of common shares outstanding. Diluted income (loss) per share assumes the conversion of any convertible securities using the treasury stock method or the if-converted method.


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2021		2020		2021		2020
Numerator:
Net loss attributable to UpHealth, Inc.	$	(32,784)	$	(336)	$	(35,734)	$	(539)
Denominator:
Weighted average shares outstanding(1)	94,170		50,050		83,585		50,050
Diluted effect of stock awards	0		0		0		0
Weighted average shares outstanding assuming dilution	94,170		50,050		83,585		50,050
Net loss per share attributable to UpHealth, Inc.:
Basic	$	(0.35)	$	(0.01)	$	(0.43)	$	(0.01)
Diluted	$	(0.35)	$	(0.01)	$	(0.43)	$	(0.01)

(1) The shares and earnings per share available to our common stock holders, prior to the Business Combinations, have been recasted to reflect the exchange ratio established in the Business Combinations (1.0 UpHealth Holdings share to 10.28 GigCapital2 share). See Note 3, Business Combinations, for more information.

The calculation of dilutive earnings per share excluded outstanding warrants to purchase 18.1 million shares of common stock at $11.50 per ~~share,~~share; senior convertible notes, convertible into 15.0 million shares of common stock at $10.65 per share; and 1.7 million assumed equity awards, because the effect would be anti-dilutive.

14.Employee Benefit Plans

In connection with the acquisitions of Thrasys, BHS, TTC, Glocal, Innovations, and Cloudbreak we have 6 defined contribution plans, which cover substantially all employees, with the exception of union employees and employees acquired under a section 401(b)(6)(C) transaction. The plans provide for discretionary matching and profit-sharing contributions. For the three and six months ended June 30, 2021, there were 0 significant employer matching or employer profit sharing contributions to the plans.

In addition, with the acquisition of Glocal, we acquired a defined benefit plan, which entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/exit. As of June 30, 2021, the unfunded status of the defined benefit plan was $85 thousand. For the six months ended June 30, 2021, the net periodic pension cost of the defined benefit plan was $5 thousand.

15.Related Party Transactions

One of our subsidiaries had amounts due to the seller of the subsidiary, in a prior transaction unrelated to the merger with UpHealth Holdings, representing contingent consideration, accrued interest, and accrued preferred dividends totaling $4.2 million. The amount was paid in full during the three months ended June 30, 2021.

The subsidiary also has a management agreement with a related party (our chief financial officer, who is the former shareholder and chairman of the subsidiary). Management fee expenses incurred were approximately $0.1 million and $0.1 million for the three and six months ended June 30, 2021, respectively. Unpaid management fees were $42 thousand at June 30, 2021.

The consulting firm noted in Note 8, Debt, is a related party through an officer of the Company, who is also a significant shareholder and a member of our board of directors.

One of our subsidiaries has amounts due to related parties totaling $0.2 million at June 30, 2021. Amounts are noninterest-bearing, nonsecured and payable upon demand.

See Note 8, Debt, for related party long-term debt.

See Note 17, Commitments and Contingencies, for leases with related parties.

16.Segment Reporting

Our business is organized into 5 reportable segments:

•Integrated Care Management—through our Thrasys subsidiary;

•Global Telehealth—through our Glocal and Cloudbreak subsidiaries;

•Digital Pharmacy—through our Innovations subsidiary;

•Behavioral Health—through our BHS and TTC subsidiaries; and

•Corporate—through UpHealth and our UpHealth Holdings subsidiary.

The reportable segments are consistent with how management views our services and products and the ~~exercise price~~financial information reviewed by the chief operating decision makers. We manage our businesses as components of an enterprise for which separate information is available and ~~number~~is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and assess performance.

In the Integrated Care Management segment, we provide our customers with an advanced, comprehensive, and extensible technology platform, marketed under the umbrella “SyntraNetTM” to manage health, quality of ~~Warrant shares issuable~~care, and costs, especially for individuals with complex medical, behavioral health, and social needs.

In the Global Telehealth segment, we provide technology and process-based healthcare platforms providing our customers comprehensive primary care, specialty consultations, and translation services, through telemedicine, Digital Dispensaries, and technology-based hospital centers.

In the Digital Pharmacy segment, we provide custom compounded medications for the unique needs of every patient and prescriber. We are a full-service pharmacy filling prescriptions from our inventory of compounded medications, as well as drugs purchased from manufacturers.

In the Behavioral Health segment, we provide inpatient and outpatient substance abuse and mental health treatment services for individuals with drug and alcohol addiction and other behavioral health issues. We offer a complete continuum of care from detoxification services, residential care, partial hospitalization programs, and intensive outpatient and outpatient programs.

In the Corporate segment, we perform executive, administrative, finance, human resources, legal, and information technology services for UpHealth, Inc. and for its subsidiaries, managed in a corporate shared services environment. Since they are not the responsibility of segment operating management, they are not allocated to the operating segments and instead reported within Corporate.

We evaluate performance based on ~~exercise~~several factors, of which Revenue, Cost of Goods and Services, Adjusted EBITDA, and Total Assets by service and product, are the primary financial measures:

Revenue by segment consisted of the ~~Warrants~~following:


In thousands	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Integrated Care Management	$	11,280	$	17,570
Global Telehealth	6,964		7,554
Digital Pharmacy	5,299		5,299
Behavioral Health	8,339		14,275
Total revenue	$	31,882	$	44,698

Gross margin by segment consisted of the following:


In thousands	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Integrated Care Management	$	4,615	$	9,722
Global Telehealth	2,634		2,933
Digital Pharmacy	1,982		1,982
Behavioral Health	2,370		3,645
Total gross margin	$	11,601	$	18,282

Total assets by segment consisted of the following:


In thousands	June 30, 2021		December 31, 2020
Integrated Care Management	$	195,974	186,476
Global Telehealth	349,238		0
Digital Pharmacy	184,307		0
Behavioral Health	83,350		18,383
Corporate	85,184		57,531
Total assets	$	898,053	$	262,390

17.Commitments and Contingencies

Commitments

We lease various facilities with related parties in accordance with the terms of operating lease agreements that expire at various dates through December 2025. The leases require monthly payments ranging from $3 thousand to $13 thousand.

We lease various facilities and office equipment from third parties in accordance with the terms of operating lease agreements requiring monthly payments ranging from $239 to $68 thousand. The leases expire at various dates through November 2026. In accordance with the lease terms, we may be ~~adjusted~~required to deposit funds with the lessors in the form of a security deposit. The deposits may be returned to us if certain ~~circumstances~~conditions are met, as stated in the lease agreements. Security deposits totaled approximately $0.2 million as of June 30, 2021.

Total rent expense under related party and third-party agreements was approximately $0.8 million and $1.3 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2021, future minimum lease payments under non-cancelable operating leases were as follows:


(In thousands)	Related Party		Third- Party		Total
Remaining 2021	$	513	$	2,133	$	2,646
2022	1,031		2,561		3,592
2023	984		2,094		3,078
2024	928		1,934		2,862
2025	687		1,485		2,172
Thereafter	0		1,258		1,258
	$	4,143	$	11,465	$	15,608

Contingencies

From time to time, we may be subjected to claims or lawsuits which arise in the ordinary course of business, including the previously disclosed tax matter (see Note 12, Income Taxes, for further information) and matters described below. Estimates for resolution of legal and other contingencies are accrued when losses are probable and reasonably estimable in accordance with ASC 450, Contingencies. In the opinion of management, after consulting with legal counsel, none of these other claims are currently expected to have a material adverse effect on our consolidated results of operations, financial position or cash flows.

There are currently 2 medical malpractice suits against individual providers, other third parties, and BHS, as a whole. The medical malpractice suits assert that there is negligence by the providers in treating the patients named in the suits. One of the malpractice suits is seeking damages of approximately $3.7 million from all defendants, including BHS. The second malpractice suit has not specified monetary damages; however, in the event of an unfavorable outcome, BHS’ legal counsel estimates maximum damages of approximately $2.3 million. BHS is vigorously defending the malpractice suits and was named as a ~~stock dividend, extraordinary dividend~~secondary party in each suit. Although the outcome of these malpractice suits is not presently determinable, it is reasonably possible that that an unfavorable outcome, for the aforementioned damages sought, could occur. However, BHS, and the individual providers, do have insurance coverage (BHS carries a $1.0 million per occurrence insurance policy), which could mitigate some or ~~recapitalization, reorganization, merger or consolidation~~all of the ~~Company.~~financial effects of potential settlements or judgements. In ~~addition,~~the event that future settlements or judgements, if ~~(x)~~any, exceed insurance coverages, BHS may be required to fund a portion of the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.50 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s Board, anddifference. NaN provision has been made in the ~~case~~accompanying condensed consolidated financial statements for any potential settlement or judgement costs at June 30, 2021, and December 31, 2020, as an unfavorable outcome is not probable at this time.

On December 17, 2020, a former TTC employee filed an Equal Employment Opportunity Commission (“EEOC”) claim against TTC alleging discrimination based on disability. The former employee cannot file a suit under the federal law until the EEOC issues a notice of ~~any such issuance~~right to sue, but can file suit under Florida law if the Company’s Founders or their affiliates, without taking into account any Founder Shares held by them prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60%investigating agency has not rendered a decision within 180 days of the ~~total equity proceeds, and interest thereon, available for~~date the ~~funding~~charge was filed. As of ~~the Company’s initial Business Combination on~~ the date of this report, no lawsuit has been filed. TTC plans to vigorously defend the ~~consummation of its initial Business Combination (net of redemptions),~~case, if filed, and ~~(z) the volume weighted average trading price~~does not believe that there is any reasonably estimable loss. However, TTC does have insurance coverage, which could mitigate some or all of the ~~Company’s common stock~~financial effects of potential settlements or judgements. In the event that future settlements or judgements, if any, exceed insurance coverages, TTC would be required to fund the difference. NaN provision has been made in the accompanying condensed consolidated financial statements for any potential settlement or judgment costs at June 30, 2021 or December 31, 2020. The maximum exposure as it relates to claims made is approximately $0.4 million.

Advisory Services Agreement Dispute

We are in a services agreement dispute with a third-party advisory firm for fees due under the services agreement. Based on consultation with legal counsel, we have proposed a settlement in the amount of $8.0 million, which has been accrued for as of June 30, 2021, and is included in accrued expenses in the condensed consolidated balance sheet. However, if the settlement offer is not accepted, the amount of the ultimate loss may range from $8.0 million to $26.3 million.

COVID-19

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally. On March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic, and on March 25, 2020, the U.S. government reached a stimulus package deal. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report, and likewise, the full impact of the pandemic on our consolidated financial condition, liquidity, and future results of operations is uncertain. Management is actively monitoring the impact of the global situation on our consolidated financial condition, liquidity, operations, vendors, industry, and workforce. Despite the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we have not experienced any material impact on our consolidated results of operations, financial condition, or liquidity during the ~~20 trading-day period starting~~year ended December 31, 2020 or the three and six months ended June 30, 2021.

On March 27, 2020, the CARES Act, was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, provides for non-income tax-related relief such as refundable employee retention tax credits and the deferral of the employer-paid portion of social security taxes. We continue to evaluate the various provisions of the CARES Act and their impact on our condensed consolidated financial statements as a whole. See Note 8, Debt, for further information.

Indemnification

Certain of our agreements require us to indemnify our customers from any claim or finding of intellectual property infringements, as well as from any losses incurred relating to breach of representations, failure to perform, or specific events as outlined within the ~~trading day prior~~particular contract. We have not received any claims or estimated the maximum potential amount of indemnification liability under these agreements and have recorded no liabilities for these agreements.

18.Subsequent Events

Management has determined that no material events or transactions have occurred subsequent to the ~~day on which~~balance sheet date through August 12, 2021, other than those events noted below, that require disclosure in the ~~Company consummates its initial Business Combination (such price,~~condensed consolidated financial statements.

In August 2021, the ~~“Market Value”) is below $9.50 per share, the exercise price~~maturity date for $18.7 million of the ~~Warrants will be~~seller notes was deferred to September 2022 (see Note 8, Debt, for further information).

In August 2021, we entered into an amendment to the Purchase Agreement, which deferred the Closing Date and adjusted ~~(to~~ the ~~nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the~~share price at which ~~the Company issues the additional shares of common stock or equity-linked securities.~~

Each Warrant will become exercisable on the later of 30 days after the completion of the Company’s initial Business Combination or 12 months from the closing of the Offering and will expire five years after the completion of the Company’s initial Business Combination or earlier upon redemption or liquidation. However, if the Company does not complete its initial Business Combination on or prior to the 18-month period allotted to complete the Business Combination, the Warrants will expire at the end of such period. If the Company is unable to deliver registered shares of common stock to the holder upon exercise of the Warrants during the exercise period, there will be 0 net cash settlement of these Warrants and the Warrants will expire worthless, unless they may be exercised on a cashless basis in the circumstances described in the Warrant agreement. Once the Warrants become exercisable, the Company may redeem the outstanding Warrants in whole and not in part at a price of $0.01 per Warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that the last sale price of the Company’s shares of common stock equals or exceeds $18.00 per share for any 20 trading days within the 30-trading day period ending on the third trading day before the Company sends the notice of redemption to the Warrant holders.

~~Under the terms of the Warrant agreement, the Company~~KAF has agreed to use its best efforts to file a new registration statement under the Securities Act, following the completion of the Company’s initial Business Combination, for the registration of the shares of common stock issuable upon exercise of the Warrants included in the Units.

~~As of September 30, 2020, there were 17,817,500 Warrants outstanding.~~

~~Rights~~

~~Each holder of a right will receive one-twentieth (1⁄20~~) of one share of common stock upon consummation of an initial Business Combination, even if the holder of such right redeemed all shares of common stock held by it in connection with an initial Business Combination. No additional consideration will be required to be paid by a holder of rights in order to receive its additional shares upon consummation of an initial Business Combination, as the consideration related thereto has been included in the unit purchase price paid for by investors in the Offering. If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement therefore will provide for the holders of rights to receive the same per share consideration the holders of the common stock will receive in the transaction on an as-converted into common stock basis, and each holder of a right will be required to affirmatively convert its rights in order to receive the one-twentieth (1/20) share underlying each right (without paying any additional consideration) upon consummation of a Business Combination. More specifically, the right holder will be required to indicate its election to convert the rights into underlying shares as well as to return the original rights certificates to the Company.

If the Company is unable to complete an initial Business Combination within 18 months from the closing date of the Offering and the Company liquidates the funds held in the Trust Account, holders of rights will not receive any such funds with respect to their rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are 0 contractual penalties for failure to deliver shares of common stock to the holders of the rights upon consummation of an initial Business Combination. Additionally, in no event will the Company be required to net cash settle the rights.

~~As of September 30, 2020, there were 17,817,500 rights outstanding~~

~~Stock-based Compensation~~

The 5,000 shares issued to Ms. McDonough, the Company’s former Chief Financial Officer, were forfeited upon her resignation in August 2019. Since an initial Business Combination did not occur prior to the forfeiture of these shares, 0 stock-based compensation expense was recorded in the Company’s condensed statements of operations and comprehensive income (loss).

~~7. FAIR VALUE MEASUREMENTS~~

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

~~Level 1:~~

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

~~Level 2:~~

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

~~Level 3:~~

~~Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities.~~

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Description:

Level

September 30, 2020

Assets:

Cash and marketable securities held in Trust Account

1

$
174,284,387

The marketable securities held in the Trust Account are considered trading securities as they are generally used with the objective of generating profits on short-term differences in price and therefore, the realized and unrealized gain and loss are recorded in the condensed statements of operations and comprehensive income (loss) for the periods presented.

~~8. SUBSEQUENT EVENTS~~

~~Recent Developments~~

On October 27, 2020, the Company and Waste to Energy Partners LLC (dba Bolder Industries) (“Bolder Industries”) issued a joint press release announcing that the Company and Bolder Industries have entered into a non-binding letter of intent (the “Letter of Intent”) for a Business Combination. Under the terms of the Letter of Intent, the Company and Bolder Industries intend to negotiate a definitive agreement that they may enter into pursuant to which the Company would acquire Bolder Industries, with the existing equity holders of Bolder Industries receiving securities of the Company that would constitute a majority of the Company’s securities. Whether the parties enter into a definitive agreement is subject to a number of conditions, including the completion of due diligence to the Company’s satisfaction.

In addition, the Company’s initial public offering (“IPO”) prospectus and Amended and Restated Certificate of Incorporations (the “Charter”), provides that the Company initially has until December 10, 2020 (the date which is 18 months after the consummation of the IPO) to complete a Business Combination. Although the Company has made substantial progress towards entering into a definitive agreement for a Business Combination, including the entry into the Letter of Intent with Bolder Industries, the Board currently believes that there will not be sufficient time before December 10, 2020 to complete a Business Combination, whether with Bolder Industries or with another company. As a result, on November 2, 2020, the Company filed a definitive proxy statement with the SEC, to invite the stockholders of the Company to attend the 2020 annual meeting (the “Annual Meeting”) to be held on December 3, 2020. At the Annual Meeting, the stockholders will vote to amend (the “Extension Amendment”) the Charter to extend the date by which the Company must consummate a Business Combination (the “Extension”) from December 10, 2020 to March 10, 2021 (the date which is 21 months from the closing date of the IPO) (the “Extended Date”). In addition, the stockholders will vote (i) to elect five directors to serve as directors on the Company’s Board until the 2021 annual meeting of stockholders or until their successors are elected and qualified; (ii) to ratify the selection of the Board’s Audit Committee of BPM LLP (“BPM”) to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2020; and (iii) to consider such other matters as may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof.

In connection with the Extension Amendment, if approved by the requisite vote of stockholders, public stockholders may elect to redeem their shares for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to such approval, including interest earned on the trust account deposits (which interest shall be net of taxes payable), divided by the number of then outstanding public shares (the “Election”). However, the Company may not redeem the Company’s public shares in an amount that would cause our net tangible assets to be less than $5,000,001. If the Extension Amendment is approved by the requisite vote of stockholders, the remaining holders of public shares will retain the opportunity to have their public shares redeemed in conjunction with the consummation of a Business Combination, subject to any limitations set forth in the Company’s Charter, as amended. In addition, public stockholders who vote for the Extension Amendment and do not make the Election would be entitled to have their shares redeemed for cash if the Company has not completed a business combination by the Extended Date.

The Company estimates that the per-share price at which public shares may be redeemed from cash held in the trust account will be approximately $10.10 at the time of the annual meeting. The closing price of the Company’s common stock on November 11, 2020, was $10.08. The Company cannot assure stockholders that they will be able to sell their shares of the Company’s common stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in its securities when such stockholders wish to sell their shares.

If the Extension Amendment proposal is not approved and the Company does not consummate a Business Combination by December 10, 2020, as contemplated by the Charter, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, and subject to having lawfully available funds therefor, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust

account, including interest earned on the trust account deposits (which interest shall be net of taxes payable and after setting aside up to $100,000 to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to ~~receive~~sell the KAF Shares to us (see Note 10, Capital Structure, for further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our rights or warrants, which will expire worthless in the event the Company winds up.information).

~~The affirmative vote of 65% of the Company’s outstanding common stock will be required to approve the Extension Amendment.~~

The Board fixed the close of business on October 26, 2020 as the record date for determining the Company’s stockholders entitled to receive notice of and vote at the annual meeting and any adjournment thereof. Only holders of record of the Company’s common stock on that date are entitled to have their votes counted at the annual meeting or any adjournment thereof.

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

~~References~~Operations

Unless otherwise indicated or the context otherwise requires, references in this report (the “Quarterly Report”) to “we,” “our,” “us,” ~~“our”~~ or the “Company” refer to GigCapital2, Inc. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to GigAcquisitions2, LLC, and references to the “Founders” refer to the Sponsor, one of the underwriters, EarlyBirdCapital, Inc. (“EarlyBird”) and certain affiliates and employees of EarlyBird (the “EarlyBird Group”)"company", and ~~Northland Gig 2 Investment LLC, a Delaware limited liability company (“Northland Investment”).~~other similar terms refer to UpHealth, Inc and its consolidated subsidiaries. The following discussion and analysis of ~~the Company’s~~our financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the ~~Company’s~~company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek,” “may,” “might,” “plan,” “possible,” “potential,” “should, “would” and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section ~~of the Company’s final~~in our prospectus ~~for our initial public offering~~ filed with the ~~U.S.~~SEC pursuant to Rule 424(b)(3) under the Securities ~~and Exchange Commission~~Act of 1933, as amended, on June 29, 2021 (the ~~“SEC”~~“Prospectus”)., which is incorporated herein by reference. The ~~Company’s~~company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the ~~Company~~company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

~~Overview~~

Formation

UpHealth Services, Inc., a wholly-owned subsidiary of UpHealth Holdings, Inc. ("UpHealth Holdings"), was formed on November 5, 2019, and effectively began operations on January 1, 2020. It was formed for the purpose of effecting a combination of various companies engaged in digital medicine, and commenced negotiations with a number of companies, including those that are discussed below as having been acquired. It became a ~~Private-to-Public Equity (PPE)~~subsidiary of UpHealth Holdings through a reorganization when UpHealth Holdings was formed on October 26, 2020 as a Delaware corporation. UpHealth Holdings then entered into a series of transactions to develop its business across four segments: (a) Integrated Care Management—through its subsidiary Thrasys, Inc. (“Thrasys”); (b) Global Telehealth—through its subsidiary Glocal Healthcare Systems Private Limited (“Glocal”); (c); Digital Pharmacy—through its subsidiary Innovations Group, Inc. (“Innovations Group”), and (d) Behavioral Health—through its subsidiaries Behavioral Health Services, LLC (“BHS”) and TTC Healthcare, Inc. (“TTC”). On June 9, 2021, UpHealth (fka GigCapital2) acquired UpHealth Holdings and its subsidiaries, which added Cloudbreak Health, LLC ("Cloudbreak") to the Global Telehealth segment.

Completed Business Combinations

On November 20, 2020, UpHealth Holdings acquired BHS, pursuant to the terms of an Agreement and Plan of Merger between UpHealth Holdings and BHS, in exchange for consideration in the form of a promissory note in the amount of $1.2 million and shares of UpHealth Holdings. The operating results for BHS for the three and six months ended June 30 are included in the UpHealth, Inc. consolidated financial statements provided with this Quarterly Report.

On November 20, 2020, UpHealth Holdings acquired Thrasys pursuant to the terms of an Amended and Restated Plan of Merger between the parties, in exchange for consideration in the form of a promissory note in the amount of $20.0 million and shares of UpHealth Holdings common stock. The operating results for Thrasys for the three and six months ended June 30, 2021 are included in the UpHealth, Inc. consolidated financial statements provided with this Quarterly Report.

On January 25, 2021, UpHealth Holdings acquired TTC, which became a wholly-owned subsidiary, pursuant to the terms of an Agreement and Plan of Merger between UpHealth Holdings and TTC, in exchange for consideration in the form of a promissory note in the amount of $12.1 million and shares of UpHealth Holdings common stock. Subsequent to January 25, 2021, the results of operations of TTC are consolidated with those of UpHealth Holdings in the UpHealth, Inc. condensed consolidated financial statements provided with this Quarterly Report. The information set forth below includes only the results of operations and liquidity and capital resources of TTC from January 25, 2021 through June 30, 2021.

Glocal is now a controlled (but not wholly-owned) subsidiary of UpHealth Holdings. The acquisition of Glocal by UpHealth Holdings was structured to occur in multiple steps. Pursuant to the terms and conditions of a Share Purchase Agreement between UpHealth Holdings, Glocal, and certain Glocal shareholders, the first step concluded on November 20, 2020, when UpHealth Holdings acquired approximately

43.46% of the outstanding equity share capital of Glocal and delivered shares of UpHealth Holdings common stock and a $8.7 million note, which was paid in June 2021. As part of the second step, on March 26, 2021, UpHealth Holdings acquired additional equity share capital of Glocal, increasing its ownership to approximately 89.4% of the outstanding equity of Glocal, by way of capital investment into Glocal, with $3.0 million paid in March 2021 and $8.7 million paid in June 2021. On May 14, 2021, UpHealth Holdings acquired additional equity share capital of Glocal, increasing its ownership to approximately 90.4% of the outstanding equity of Glocal, and delivered shares of UpHealth Holdings common stock. The third step concluded on June 21, 2021, when UpHealth Holdings acquired additional equity share capital of Glocal, increasing its ownership to approximately 92.2% of the outstanding equity of Glocal, and delivered $9.2 million in cash to the selling shareholders. In the final steps, UpHealth Holdings, as the majority shareholder, will, in conjunction with the remaining Glocal shareholders, take steps to increase UpHealth Holdings’ ownership in Glocal through the acquisition of remaining shares, and/or any other manner acceptable to UpHealth Holdings and permitted under India law.

UpHealth Holdings accounted for its ownership in Glocal using the equity method from November 20, 2020 through March 25, 2021. Subsequent to March 25, 2021, the results of operations of Glocal are consolidated with those of UpHealth Holdings in the UpHealth, Inc. condensed consolidated financial statements provided with this Quarterly Report. The information set forth below includes only the results of operations and liquidity and capital resources of Glocal from March 25, 2021 through June 30, 2021.

On April 27, 2021, UpHealth Holdings acquired Innovations, which became a wholly-owned subsidiary, pursuant to the terms of an Agreement and Plan of Merger between UpHealth Holdings and Innovations, in exchange for consideration in the form of a promissory note in the amount of $30.0 million and shares of UpHealth Holdings common stock. Subsequent to April 27, 2021, the results of operations of Innovations are consolidated with those of UpHealth Holdings in the UpHealth condensed consolidated financial statements provided with this Quarterly Report. The information set forth below includes only the results of operations and liquidity and capital resources of Innovations from April 27, 2021 through June 30, 2021.

On June 9, 2021, UpHealth acquired Cloudbreak, which became a wholly-owned subsidiary, pursuant to the terms of a Business Combination Agreement between UpHealth and Cloudbreak, in exchange for consideration in the form of a promissory note in the amount of $36.6 million and shares of UpHealth common stock. Subsequent to June 9, 2021, the results of operations of Cloudbreak are consolidated with those of UpHealth in the UpHealth condensed consolidated financial statements provided with this Quarterly Report. The information set forth below includes only the results of operations and liquidity and capital resources of Cloudbreak from June 9, 2021 through June 30, 2021.

On June 9, 2021, UpHealth acquired UpHealth Holdings and its subsidiaries, which became a wholly-owned subsidiary, in an exchange of cash, notes, and shares of common stock for all the shares of UpHealth Holdings' capital stock issued and outstanding immediately prior to the effective time of the acquisition. The acquisition was accounted for as a reverse recapitalization, which is the equivalent of UpHealth Holdings issuing stock for the net assets of UpHealth, accompanied by a recapitalization, with UpHealth treated as the accounting acquiree. The determination of UpHealth as the accounting acquiree was primarily based on the fact that subsequent to the acquisition, UpHealth Holdings owns a majority of the voting power of the combined company, UpHealth Holdings will comprise 75% of the ongoing operations of the combined entity, UpHealth Holdings will control a majority of the governing body of the combined company, and UpHealth Holdings' senior management will comprise most of the senior management of the combined company. Subsequent to June 9, 2021, the results of operations of UpHealth are consolidated with those of UpHealth Holdings in the UpHealth condensed consolidated financial statements provided with this Quarterly Report. The information set forth below includes only the results of operations and liquidity and capital resources of UpHealth from June 9, 2021 through June 30, 2021.

Factors Affecting Comparability of Results

Covid-19

The current COVID-19 pandemic has affected and will continue to affect economies and business around the world. To date, various governmental authorities and private enterprises have implemented numerous measures to contain the pandemic, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns, which have led to severe disruptions to the global economies that may continue for a prolonged duration and trigger a recession or a period of economic slowdown. The magnitude and duration of the resulting decline in business activity and operations cannot be measured with any degree of certainty. At this stage, the extent and duration of the pandemic, and its foreseeable unfolding following the worldwide vaccine campaigns, is still uncertain and difficult to predict, also considering the severity of the second wave of the COVID-19 pandemic currently hitting the Indian regions. UpHealth is actively monitoring and managing its response and assessing actual and potential impacts to its operating results and financial condition, which could also impact trends and expectations.

UpHealth, Inc. Business Overview

Integrated Care Management Segment - Thrasys

Thrasys Overview

Thrasys provides its customers with an advanced, comprehensive, and extensible technology platform, marketed under the umbrella “SyntraNetTM,” to manage health, quality of care, and costs, especially for individuals with complex medical, behavioral health, and social needs. Thrasys focuses on both the United States and international markets. SyntraNet is offered as a software-as-a-service (“SaaS”) platform. Information, analytics, and applications are delivered to care team members on desktops, tablets, and phones, as needed. An advanced protected health information framework controls access to information based on roles, rights, policies, and scope of consent. The platform includes innovations in a number of areas: application and information models for connected care communities (an extension of multi-tenant architectures), integration and normalization of heterogeneous data sources, configurable software services and open application programming interfaces, advanced analytics and intelligence, scalable workflows and rules, protected health information management, and user interfaces ready for the proliferation of device types and interaction modes.

Thrasys Key Business Metrics

Revenue

Thrasys derives revenue broadly from the sales of (a) products—with associated license, subscription, and hosting fees and (b) services—largely to implement, configure, and extend the technology, and train and on-board users on the use of the platform and applications.

Licenses Fees. License revenues are typically associated with rights granted to customers to deploy the platform to a certain number of care communities of a certain size, usually measured as the total population of patients that can be included within a care community. License revenues are recognized based on the nature of the license provided, either fully on the date license rights are granted to the customer if there are no further performance obligations or ratably over the license term beginning on the effective date of each contract, the date the customer takes possession of the license rights.

Subscription Fees. Subscription fees are recurring fees charged for access to the platform and applications. Subscription fees are typically pegged to a measure of use, such as population size, number of providers, members enrolled in programs, or number of members managed by applications. Subscription fees can grow as customers subscribe to additional application features or launch additional programs. Revenues from subscription fees are recognized ratably over the subscription term.

Services Fees. The majority of Thrasys’ contracts to provide professional services are priced on time and materials basis, whereby revenues are recognized as the services are rendered. In some cases, Thrasys enters into professional services contracts where professional services fees are defined for specific milestones, whereby revenue are recognized upon achievement of the milestones.

Cost of Goods and Services

Cost of goods and services for Thrasys include: costs related to hosting SyntraNet in a HIPAA-compliant cloud environment; costs of third-party product licenses embedded with SyntraNet; costs of a core professional services team, and an allocation of facilities, information technology, and depreciation costs. Added compliance requirements for security infrastructure is likely to add some additional costs for hosting services. Thrasys also anticipates added costs for third-party licenses that will be added as the scope and footprint of the technology platform expands.

Hosting Infrastructure. Thrasys’ technology and solutions are designed to be agnostic to any particular cloud services provider. Currently, customer environments are hosted through contracts with two cloud service providers. Thrasys anticipates capabilities of cloud service providers to grow, and costs to become increasingly competitive, and will continue to evaluate offerings in the marketplace to determine the optimum mix of security, reliability, scalability, and performance to meet customer needs. Hosting infrastructure costs for Thrasys are related to the number and size of environments deployed for customers and also on the service level agreements (“SLAs”) negotiated with customers. As the average size of customers continues to grow, hosting infrastructure costs are expected to grow as a percentage of revenue.

Third-Party Product Licenses. SyntraNet embeds certain third-party technology components to support some of its technology capabilities. There are multiple vendors for these components, and Thrasys is not dependent on any specific vendor.

Professional Services Team. Thrasys’ professional services team works closely with the product team and is best understood as an “A-team” created to lead showcase implementations. The goal is to keep the professional services team small in order to focus it on deploying reference customers and facilitating the on-boarding and coaching of systems integration partners.

Operating Expenses

Sales and Marketing (“S&M”) Expenses. S&M expenses include an internal sales and marketing team and contracts with business development consultants to generate and qualify leads.

Research and Development (“R&D”) Expenses. Thrasys continues to invest in R&D. The core R&D team consists of a small team of very experienced software developers. Beginning in 2019, Thrasys added considerable capacity to a consulting group with whom it has been working for over ten years. The team, based in Chicago, functioned much like the Thrasys internal team, until they were brought in-house in June 2021.

General and Administrative (“G&A”) Expenses. G&A expenses include compensation and benefits expense, and other administrative costs, related to its executive, finance, human resources, legal, facilities, and information technology teams, net of allocations to cost of goods and services and S&M and R&D expenses.

Depreciation and Amortization Expenses. Depreciation expense relates to the depreciation of computer equipment, purchased software, furniture and fixtures, and office equipment, net of amounts allocated to cost of goods and services. Amortization expense relates to the amortization of intangible assets from the acquisition of Thrasys.

Global Telehealth Segment - Glocal and Cloudbreak

Glocal Overview

Glocal is a technology and process-based healthcare platform providing its customer comprehensive primary care and specialty consultations for a fraction of the cost, through telemedicine, digital dispensaries, and technology-based hospital centers. It has pioneered the development of a semantic algorithm and AI-based clinical decision support system called LitmusDX, which helps deliver healthcare through telemedicine on its Hellolyf CX Digital Dispensaries utilizing a telemedicine terminal called LitmusMX and an automated medicine dispenser called LitmusRX, and through Glocal’s smart hospitals. Glocal started its operation in India, but has spread internationally and is now in 10 countries.

Glocal has been awarded by the United Nation’s (“UN”) Innovation Exchange with the Public Appreciation Award 2020 as a cutting-edge technology to meet the sustainable development goals of the UN. Glocal’s customers are located in regions in India, Southwest Asia, and Africa. Glocal generates 85% of its revenue in India and the remainder from Africa and Southeast Asia.

Glocal’s Hellolyf CX Digital Dispensary was selected by United Nations AID as a cutting-edge technology solution to reach the UN’s sustainable development goals. Unlike other telemedicine centers seen today, Glocal’s Hellolyf CX Digital Dispensary is an innovative, hybrid, brick-and-mortar center, which provides complete primary and emergency healthcare solutions, such as consultation, confirmatory tests, and medicines, from a single point through the use of two path-breaking technological solutions, LitmusMX and LitmusRX.

LitmusMX is used for recording the vitals of the patient, consultations with a doctor over video conferencing from miles away, and routine card-based point-of-care tests, and also contains a fully automatic biochemistry analyzer. The software may also suggest further investigations. If the doctor agrees, they can order further rapid tests, such as for dengue or malaria, for which kits are available. When the doctor selects a prescription, the machine talks to the dispenser, which delivers the required dosages of the medicines. Theoretically, the algorithm can be fine-tuned to arrive at a final diagnosis and prescription on its own. LitmusRX is an automated medicine dispensing unit, which dispenses the medicine prescribed by the doctor, while the prescription is being printed. In addition to these solutions is one of the world’s top ten end-to-end Clinical Decision Support System (“CDSS”), named LitmusDX, along with a web interface, named Hellolyf, which integrates practice management with diagnostic algorithms, investigation interpretation, treatment protocols, drug safety checks, and electronic medical records.

Hellolyf.com, Glocal’s web-based telemedicine platform, provides world-class telemedicine solutions, which allows patients anywhere to consult with any doctor safely. The relay and IP addressing is done through STUN and TURN servers.

During the COVID-19 pandemic, Glocal’s innovative Hellolyf CX Digital Dispensaries successfully used ultraviolet C light disinfection, acrylic separation, and positive air pressure to create the first line of defense of health workers and patients against all forms of infectious and contagious diseases, including COVID-19.

Glocal is also focusing now on the business-to-business ("B2B") model where the Hellolyf CX Digital Dispensaries are sold to B2B partners/customers, who operate them with a revenue-share to Glocal. This results in lower revenues but higher margins.

Glocal’s telemedicine/Hellolyf CX Digital Dispensaries have been functional in India mainly through the government and are primarily housed in government facilities, which provide services that are free to the beneficiaries. After successful implementation of projects in the Indian states of Rajasthan, Odisha, and West Bengal, Glocal now has won a contract to set-up 550+ Digital Dispensaries in the Indian State of Madhya Pradesh, resulting in a total of 750+ government-placed nodes across India.

Glocal has moved to a revenue-sharing model where it partners in certain places to run and operate hospitals. Glocal is operating four hospitals itself and five hospitals under revenue sharing arrangements. Glocal is also under contract to build and furnish a hospital in the Indian state of Nagaland.

Glocal Key Business Metrics

Revenue

Glocal’s revenue is generated primarily from hospitals, including pharmacy and medicine sales and the sale of HelloLyf CX Digital Dispensaries, and transaction fees per telemedicine consult.

Cost of Goods and Services

Cost of goods and services consist primarily of costs of operating hospitals, including costs for the purchase of medicines, professional/doctor fees, the cost for HelloLyf CX Digital Dispensaries, and an allocation of facilities, information technology, and depreciation costs.

Operating Expenses

Sales and Marketing (“S&M”) Expenses. S&M expenses are comprised of compensation and benefits related to Glocal’s sales personnel, travel expenses, and expenses related to advertising, marketing programs, and events.

Depreciation and Amortization Expenses. Glocal’s operations are capital intensive. Depreciation expense relates to the depreciation of buildings, computer equipment, purchased software, furniture and fixtures, and office equipment, net of amounts allocated to cost of goods and services. Amortization expense relates to the amortization of intangible assets from the acquisition of Glocal.

Cloudbreak Overview

Cloudbreak is a leading provider of unified telemedicine solutions and digital health tools aimed at increasing access to healthcare and resolving health disparities across the care continuum, at each stage of healthcare acuity. Cloudbreak powers its client’s healthcare digital transformation initiatives and provides digital health infrastructure enabling its partners to address healthcare disparities and implement unique, private-label, telehealth strategies customized to their specific needs and markets.

Cloudbreak's core offering, known as Martti (My Accessible Real-Time Trusted Interpreter), is a ~~blank check company or special purpose acquisition vehicle, incorporated~~video remote interpreting solution that puts qualified and certified medical interpreters at the fingertips of clinical care teams nationwide through Cloudbreak's proprietary software platform. Having one of the largest installed bases of video endpoints in the ~~State~~nation, Cloudbreak has expanded its operations to include other telemedicine use cases as well, including tele-stroke, tele-psychiatry, tele-urology, and tele-quarantine, among others, all over the same infrastructure. Cloudbreak has also recently launched a home health virtual visit platform enabling its healthcare system partners to see their patients remotely on any device, at anytime, anywhere the patient may be, and in any language they may speak. Cloudbreak's client base spans the entire healthcare continuum including hospitals and health systems, Federally Qualified Healthcare Clinics, urgent care centers, stand alone clinics and medical practices, employers, and schools.

Cloudbreak's Telemedicine-as-a-Service” ("TaaS") business model aligns interests between Cloudbreak and its clients, creating a partnership targeted towards forming long-term agreements with sustainable and mutually beneficial growth models for all stakeholders. Cloudbreak has specifically structured itself to not have a captive medical group as it believes that creates a conflict of ~~Delaware~~interest with its client base, as local health systems do not want to suffer patient leakage to a technology partner or be forced to use a provider network. As a result, Cloudbreak has the freedom to match its partners with centers of excellence on its network, who can satisfy their specific needs and strategy without fear of competing for the patient’s attention, and thereby avoid the employment and maintenance of a medical group, which is a lower margin and a more labor intensive activity.

Cloudbreak Key Business Metrics

Revenue

Cloudbreak derives the majority of its revenues from the sale of subscription-based fixed monthly minute and variable rate per unit of service medical language interpretation services. Cloudbreak also records ancillary revenue from the sale or lease of MARTTI devices and from the provision of information technology services that include connectivity and ongoing support of the MARTTI software platform. Generally,

Cloudbreak’s medical language interpretation and information technology services are invoiced monthly. Fixed monthly minute medical language interpretation subscription and information technology services fees are invoiced in advance in the period preceding the service. Variable rate per unit medical language interpretation and information technology services fees (including overage fees related to minutes used by the customer in excess of the fixed monthly minute subscription) are invoiced monthly in arrears. Sale of MARTTI devices are generally invoiced at contract execution (50%) and upon the delivery of the devices to the customer (50%). MARTTI device leases are invoiced monthly in advance in the period preceding the usage. Invoiced amounts are typically due within 30 days of the invoice date.

Cost of Goods and Services

Cost of goods and services primarily consist of costs related to supporting and hosting Cloudbreak’s product offerings and delivering services, and include the cost of maintaining Cloudbreak’s data centers, customer support team, and Cloudbreak’s professional services staff, in addition to third-party service provider costs such as data center and networking expenses, amortization of capitalized internal-use software development costs, the cost of purchased equipment inventory sold to customers, and an allocation of facilities, information technology, and depreciation costs.

Operating Expenses

Sales and Marketing (“S&M”) Expenses. S&M expenses consist of costs related to advertising, marketing programs, and events.

General and Administrative (“G&A”) Expenses. G&A expenses consist of compensation and benefits expense, and other administrative costs, related to its executive, finance, human resources, legal, facilities, and information technology teams, net of allocations to cost of goods and services and S&M.

Digital Pharmacy Segment - Innovations

Innovations Overview

Innovations is the parent company of the following wholly-owned operating subsidiaries: MedQuest Pharmacy, Inc. (“MedQuest Pharmacy”), WorldLink Medical, Inc (“WorldLink Medical”), Medical Horizons, Inc. (“Medical Horizons”), and Pinnacle Labs, Inc. (doing business as MedQuest Testing Services (“MTS”).

MedQuest Pharmacy is a full-service retail and compounding pharmacy licensed in 50 states and the District of Columbia that dispenses patient-specific medications and ships directly to patients. It delivers both compounded and legend (also referred to as manufactured) drugs and is capable of serving as a retail or national fulfillment center, as a personalized medication administration partner with prescribers, and as a lifestyle wellness direct-to-consumer offering. Its proprietary software and operating system, eMedplus ™ , is Electronic Prescribing of Controlled Substances Certified by the U.S. Drug Enforcement Administration and provides prescribers with a full-service prescription management system. In January 2020, eMedplus became SureScripts certified (SureScript's process is to validate that the software meets certain industry standards related to sending and receiving electronic messages and that it is providing open choice for medication selection and dispensing location), allowing any user of the SureScripts platform to prescribe medications dispensed by MedQuest Pharmacy.

Also under the Innovations suite of services is Worldlink Medical, Medical Horizons, and MedQuest Testing Services. Worldlink Medical is the educational services arm of Innovations, providing Continuing Medical Education (“CME”) educational courses accredited as a joint provider through the Accreditation Council for Continuing Medical Education (“ACCME”). Medical Horizons specializes in customized formulations and contract dietary supplement and nutraceuticals manufacturing as an own label distributor with its brand NUTRAscriptives ™ , as well as other brands. Its turnkey solutions include label design, printing, and application; custom packaging; daily packs; a selection of capsule sizes and colors; and convenient auto-reorder services. It features a staff of experts that is committed to excellence and outstanding customer service. MedQuest Testing Services focuses specifically on facilitating diagnostic testing between lab companies, such as LabCorp and Quest Diagnostics, patients, and providers.

MedQuest Pharmacy is accredited and recognized by the Accreditation Commission for Health Care and its Pharmacy Compounding Accreditation Board, among other high-quality providers and suppliers. MedQuest Pharmacy has achieved this elite level of quality by exceeding standards set by national accreditation bodies and quality-centered organizations.

In addition, to expanding its prescriber base through the SureScripts platform and testing services with new and existing lab companies and relationships, MedQuest Pharmacy plans to add new lines of specialty focus, including dermatology products in the second half of 2021, allowing it to offer its new product lines to existing customers while also expanding its customer base to include the dermatology ecosystem.

Medical Horizons also plans to launch Pure Collectives, an e-commerce platform to allow providers to sell Medical Horizons’ nutraceutical supplements line to their patients. Patients will have the ability to order Medical Horizons’ nutraceutical supplements line directly from their provider through Pure Collectives. The order will be sent to Medical Horizons and Medical Horizons will ship it directly to the patient, with the patient paying the provider and Medical Horizons billing the provider directly for the products provided.

MedQuest Pharmacy’s direct pharmacy capabilities offer direct-to-patient shipping of both manufactured and compounded drugs. MedQuest Pharmacy has relationships with both prescribers and patients and filled an average of approximately 850 prescriptions per day in 2020. Over the last five years, MedQuest Pharmacy has filled prescriptions for over 5,000 prescribers and over 65,000 different patients. The business model is driven by cash-pay and prescription volume-based revenue generated by physician electronic prescription order entry, as well as traditional prescriber-patient-pharmacist interactions, mailed, verbal, and faxed orders.

The condensed consolidated financial statements include the results of Innovations, its four wholly-owned subsidiaries discussed above, and a variable interest entity ("VIE"), B-17 Partners, LLC (“B-17”), in which Innovations has a controlling financial interest. This determination was based on the fact that Innovations absorbs a majority of the VIE’s expected losses and receives a majority of its expected residual returns. The VIE was formed for the purpose of acquiring ~~engaging in a share exchange, share reconstruction~~ and ~~amalgamation with, purchasing all or substantially all of~~holding real estate. The VIE’s sole activity is to lease the real estate to our subsidiary. At June 30, 2021, the VIE had total assets of ~~or engaging in any other similar business combination with one or more businesses or entities. We intend to effectuate our initial Business Combination using cash from the proceeds from the sale~~$4.5 million and total liabilities of units (the “Units”) in our initial public offering (the “Offering”), the sale of the units (the “Private Placement Units”) to our Founders and the sale of our common stock (the “Private Underwriter Shares”) to one of our underwriters, both of which occurred simultaneously with the completion of the Offering (the “Private Placement”), our common equity or any preferred equity that we may create in accordance with the terms of our charter documents, debt, or a combination of cash, common or preferred equity and debt. The Units sold in the Offering each consisted of one share of common stock, one warrant to purchase one share of common stock, and one right to receive one-twentieth (1/20) of one share of common stock upon or consummation of our initial Business Combination. The Private Placement Units were substantially similar to the Units sold in the Offering, but for certain differences in the warrants included in each of them. For clarity, the warrants included in the Units are referred to herein as the “public warrants”, and the warrants included in the Private Placement Units are referred to herein as the “private warrants”. ~~As set forth in~~ ~~Note 8 - Subsequent Events~~ ~~of the Unaudited Condensed Financial Statements,on October 27, 2020, the Company announced that it had entered into a non-binding Letter of Intent for a Business Combination with Bolder Industries.~~

~~The issuance of additional shares of common stock or the creation of one or more classes of preferred stock during our initial Business Combination:~~

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~~may significantly dilute the equity interest of investors in this offering who would not have pre-emption rights in respect of any such issue;~~

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may subordinate the rights of holders of common stock if the rights, preferences, designations and limitations attaching to the preferred shares are senior to those afforded our shares of common stock;

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

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

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~~may adversely affect prevailing market prices for our shares of common stock.~~

~~Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:~~

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

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

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

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

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~~our inability to pay dividends on our shares of common stock;~~

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

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

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

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

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

~~Results of Operations and Known Trends or Future Events~~

~~We have neither engaged in any operations nor generated any revenues to date.~~$4.1 million. For the ~~period from March 6, 2019 (date~~three month ended June 30, 2021, revenues of inception) through September 30, 2020, our only activities have been organizational activities, those necessary to prepare for the Offering and to identify a target business for the Business Combination. We do not expect to generate any operating revenues until after completion of our initial Business Combination. We expect to generate non-operating income$0.1 million were eliminated in the form of interest income on cash and marketable securities held in the Trust Account at UBS Financial Services, Inc. in New York, New York with Continental Stock Transfer & Trust Company acting as trustee, which was funded after the Offering to hold an amount of cash and marketable securities equal to that raised in the Offering. Due to the recent impact from the COVID-19 pandemic that started in March 2020, many investors sold U.S. treasuries to meet their investment objectives, including but not limited to, the purchase of depressed equities, the forced sale by losses on other positions, and the need to settle short-term debts. This created volatility in the financial markets and reduced return on investments in U.S. treasury bills. As a result, we shifted our investment portfolio held in the Trust Account from U.S. treasury bills to money market funds in May 2020. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

consolidation. For the three months ended ~~September~~June 30, 2021, expenses were $25 thousand, primarily for interest and depreciation. Creditors and beneficial holders of the VIE have no recourse to the assets or general credit of our subsidiary.

Innovations Key Business Metrics

Revenue

Revenue is generated primarily from the sale of prescription medications directly to patients and through the sale of products and services to providers. The majority of the customer revenue is billed and collected before the medications and products are shipped from the facility. MedQuest Pharmacy is Innovation’ largest subsidiary in terms of revenue and generates approximately 60% of its revenue from sales of compounded medications and approximately 40% of its revenue from sales of manufactured medications.

Cost of Goods and Services

Cost of goods and services primarily consist of costs of raw ingredients and materials to compound various drugs and supplements, the cost of manufactured product purchased directly from the distributors for resale, and an allocation of facilities, information technology, and depreciation costs. MedQuest Pharmacy purchases these items through a large industry distributor with many suppliers and also sources supplies directly with manufacturers. MedQuest Pharmacy is also able to leverage the size of its operations to purchase larger quantities of certain ingredients and materials at lower prices.

Operating Expenses

Sales and Marketing (“S&M”) Expenses. S&M expenses consist of costs related to advertising, marketing programs, and events.

Depreciation and Amortization Expenses. Depreciation expense relates to the depreciation of computer equipment, lab equipment, purchased software, furniture and fixtures, office equipment, and leasehold improvements, net of amounts allocated to cost of goods and services. Amortization expense relates to the amortization of intangible assets from the acquisition of Innovations.

Behavioral Health Segment - TTC and BHS

TTC Overview

TTC provides inpatient and outpatient mental health and substance abuse treatment services for individuals with behavioral health issues including post traumatic stress disorder and drug and alcohol addiction . TTC offers a complete continuum of care from its detoxification services, residential care, partial hospitalization programs, and intensive outpatient, and outpatient programs. During the COVID-19 pandemic, outpatient programs have been virtual for a majority of visits.

In March 2020, TTC formed Transformations Mending Fences, LLC to provide mental health and substance abuse disorder treatment, including equine therapy, to patients. TTC has an 80% controlling interest in the entity with the remaining 20% interest owned by an unrelated party. Operations began in December 2020, with the admission of the first patient occurring in January 2021.

In addition to inpatient and outpatient substance abuse treatment services, TTC performs screenings, urinalysis, and diagnostic laboratory services, and provides physician services to clients. TTC operates three subsidiaries located in Delray Beach, Florida and one facility in Morriston, Florida. These facilities consist of inpatient substance abuse treatment facilities, standalone outpatient centers, and sober living facilities focused on delivering effective clinical care and treatment solutions.

TTC Key Business Metrics

Revenue

Services. TTC generates revenue primarily through services provided to clients in both inpatient and outpatient treatment settings. TTC bills third-party payors weekly for the services provided in the prior week. Client-related services, such as inpatient and outpatient programs, are generally recognized over time as the performance obligation is satisfied at the estimated net realizable value amount from clients, third-party payors, and others for services provided. TTC receives the majority of payments from commercial payors at out-of-network rates. Client service revenue is recorded at established billing rates, less adjustments to estimate net realizable value. Provisions for estimated third party payor reimbursements are provided in the period related services are rendered and adjusted in future periods when actual reimbursements are received. A significant or sustained decrease in reimbursement rates could have a material adverse effect on operating results.

Laboratory Testing. TTC provides diagnostic laboratory testing services for its clients, which are recognized over time as the performance obligation is satisfied at the estimated net realizable value amount from clients, third-party payors, and others for services provided. Diagnostic laboratory service revenue is recorded at established billing rates, less adjustments to estimate net realizable value. Provisions for estimated third party payor reimbursements are provided in the period related services are rendered and adjusted in future periods when actual reimbursements are received.

Cost of Goods and Services

Cost of goods and services consist primarily of the costs of operating the facilities, professional/doctor fees, and an allocation of information technology and depreciation costs.

Operating Expenses

Sales and Marketing (“S&M”) Expenses. S&M expenses consist of costs related to advertising, marketing programs, and events.

General and Administrative (“SG&A”) Expenses. G&A expenses include compensation and benefits expense, and other administrative costs, related to its executive, finance, human resources, legal, facilities, and information technology teams, net of allocations to cost of goods and services and S&M expenses.

Depreciation and Amortization Expenses. Depreciation expense relates to the depreciation of computer equipment, purchased software, furniture and fixtures, office equipment, and leasehold improvements, net of amounts allocated to cost of goods and services. Amortization expense relates to the amortization of intangible assets from the acquisition of TTC.

BHS Overview

BHS operates through Psych Care Consultants, LLC, BHS Pharmacy, LLC, and Reimbursement Solutions, LLC, wholly-owned subsidiaries of BHS. Psych Care Consultants, LLC is a medical group that has four medical offices located in the St. Louis Metropolitan area (Missouri) and provides psychiatric and mental health services. BHS Pharmacy, LLC provides retail pharmacy services specializing in behavioral health through services, such as medication management, screenings, online portals, and delivery. Reimbursement Solutions, LLC provides billing services for Psych Care Consultants, LLC (which has allowed for more efficient payment for BHS clinicians) and third-party customers. Services include billings, collections, verification of benefits, authorization, and credentialing.

BHS provides its patients and providers with a reliable platform where a provider can address their patients’ needs efficiently with an infrastructure built to support the providers and address patient needs. This infrastructure consists of medical offices placed strategically for the convenience of providers and patients and trained staff to assist providers and patients in the delivery of quality health services that is timely and efficient, provide prescription dispensing for patients that is convenient to maintain compliance, and assist providers with billing and collection services through Reimbursement Solutions, LLC.

BHS providers work in collaboration with multiple area hospital systems (both in leadership and clinical positions) to provide and direct inpatient treatment. BHS’ business is generated by various referral sources developed over the years by BHS providers and their presence in the market for over twenty-five years. BHS offers in-office, virtual, and in-patient treatment. Common conditions treated by BHS practitioners include depression, bipolar disorder, attention disorders, schizophrenia, substance use disorders, post-traumatic stress disorder, Alzheimer’s disease and related disorders, and personality disorders.

BHS Key Business Metrics

Revenue

BHS generates revenue by providing psychiatric and mental health services, retail pharmacy services, and billing services. Although the underlying tasks will vary by service and by patient, medical professionals perform inquiries, obtain vital statistics, perform certain lab tests, administer therapy, and provide any additional goods and services as necessary depending on the information obtained.

Cost of Goods and Services

Cost of goods and services consist primarily of provider compensation expenses, the cost of pharmaceutical medications sold to patients, and an allocation of facilities, information technology, and depreciation costs. Provider compensation expenses include consulting payments to BHS’ healthcare providers, including medical doctors in psychiatry, psychologists, nurse practitioners, and clinical social workers. BHS has adopted an incentive-based compensation plan with provider agreements that compensate the providers based upon a percentage of revenue generated and ultimately collected for services provided. BHS primarily purchases pharmaceutical medications through a large industry distributor with many suppliers, but also purchases some directly from other suppliers.

Operating Expenses

Sales and Marketing (“S&M”) Expenses. S&M expenses include costs related to advertising, marketing programs, and events.

Depreciation Expense. Depreciation expense relates to the depreciation of computer equipment, purchased software, furniture and fixtures, and office equipment, net of amounts allocated to cost of goods and services. Amortization expense relates to the amortization of intangible assets from the acquisition of BHS.

UpHealth, Inc. Consolidated Results of Operations

Operating Results

As of June 30, 2021 and for the three and six months then ended, UpHealth’s operating results consist of (1) the results of operations for UpHealth Holdings, Thrasys, and BHS; (2) the results of operations for TTC, Glocal, and Innovations subsequent to the acquisition of those companies in 2021, as described above; and (3) the results of operations for UpHealth (fka GigCapital2) and Cloudbreak subsequent to June 9, 2021, as described above. As of June 30, 2020 ~~we had~~and for the three and six months then ended, UpHealth's operating results consist of the results of operations for UpHealth Holdings.

The following table sets forth the consolidated results of operations of UpHealth:


(Unaudited, in thousands)	Three Months Ended June 30,								Six Months Ended June 30,
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Revenue
Services	$	14,773	$	—	$	14,773	—	%	$	22,911	$	—	$	22,911	—	%
Licenses and subscriptions	9,145		—		9,145		—	%	12,803		—		12,803		—	%
Products	7,964		—		7,964		—	%	8,984		—		8,984		—	%
Total revenue	31,882		—		31,882		—	%	44,698		—		44,698		—	%
Cost of goods and services
Services	9,381		—		9,381		—	%	14,102		—		14,102		—	%
License and subscriptions	6,173		—		6,173		—	%	6,670		—		6,670		—	%
Products	4,727		—		4,727		—	%	5,644		—		5,644		—	%
Total cost of goods and services	20,281		—		20,281		—	%	26,416		—		26,416		—	%
Gross margin	11,601		—		11,601		—	%	18,282		—		18,282		—	%
Operating expenses
Sales and marketing	1,695		—		1,695		—	%	2,580		—		2,580		—	%
Research and development	872		—		872		—	%	2,630		—		2,630		—	%
General and administrative	8,974		336		8,638		2,571	%	12,254		539		11,715		2,173	%
Depreciation and amortization	2,966		—		2,966		—	%	3,870		—		3,870		—	%
Acquisition-related expenses	32,646		—		32,646		—	%	35,339		—		35,339		—	%
Total operating expenses	47,153		336		46,817		13,934	%	56,673		539		56,134		10,414	%
Loss from operations	(35,552)		(336)		(35,216)		10,481	%	(38,391)		(539)		(37,852)		7,023	%
Other income (expense)
Interest expense	(4,870)		—		(4,870)		—	%	(5,581)		—		(5,581)		—	%
Gain on consolidation of equity method investment	—		—		—		—	%	640		—		640		—	%
Gain on fair value of warrant liabilities	1,074		—		1,074		—	%	1,074		—		1,074		—	%
Gain on extinguishment of debt	151		—		151		—	%	151		—		151		—	%
Other expense, net, including interest income	(258)		—		(258)		—	%	(221)		—		(221)		—	%
Total other expense	(3,903)		—		(3,903)		—	%	(3,937)		—		(3,937)		—	%
Loss before income tax benefit	(39,455)		(336)		(39,119)		11,643	%	(42,328)		(539)		(41,789)		7,753	%
Income tax benefit	6,647		—		6,647		—	%	7,053		—		7,053		—	%
Net loss before loss from equity method investment	(32,808)		(336)		(32,472)		9,664	%	(35,275)		(539)		(34,736)		6,445	%
Loss from equity method investment	—		—		—		—	%	(561)		—		(561)		—	%
Net loss	(32,808)		(336)		(32,472)		9,664	%	(35,836)		(539)		(35,297)		6,549	%
Less: net loss attributable to noncontrolling interests	(24)		—		(24)		—	%	(102)		—		(102)		—	%
Net loss attributable to UpHealth, Inc.	$	(32,784)	$	(336)	$	(32,448)	9,657	%	$	(35,734)	$	(539)	$	(35,195)	6,530	%

The following table sets forth the consolidated results of operations of UpHealth as a ~~net loss~~percentage of ~~$330,234, which consisted~~total revenue:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue
Services	46	%	—	%	51	%	—	%
Licenses and subscriptions	29	%	—	%	29	%	—	%
Products	25	%	—	%	20	%	—	%
Total revenue	100	%	—	%	100	%	—	%
Cost of goods and services
Services	29	%	—	%	32	%	—	%
License and subscriptions	19	%	—	%	15	%	—	%
Products	15	%	—	%	13	%	—	%
Total cost of goods and services	64	%	—	%	59	%	—	%
Gross margin	36	%	—	%	41	%	—	%
Operating expenses
Sales and marketing	5	%	—	%	6	%	—	%
Research and development	3	%	—	%	6	%	—	%
General and administrative	28	%	—	%	27	%	—	%
Depreciation and amortization	9	%	—	%	9	%	—	%
Acquisition-related expenses	102	%	—	%	79	%	—	%
Total operating expenses	148	%	—	%	127	%	—	%
Loss from operations	(112)	%	—	%	(86)	%	—	%
Other income (expense)
Interest expense	(15)	%	—	%	(12)	%	—	%
Gain on consolidation of equity method investment	—	%	—	%	1	%	—	%
Gain on fair value of warrant liabilities	3	%	—	%	2	%	—	%
Gain on extinguishment of debt	—	%	—	%	—	%	—	%
Other expense, net, including interest income	(1)	%	—	%	—	%	—	%
Total other expense	(12)	%	—	%	(9)	%	—	%
Loss before income tax benefit	(124)	%	—	%	(95)	%	—	%
Income tax benefit	21	%	—	%	16	%	—	%
Net loss before loss from equity method investment	(103)	%	—	%	(79)	%	—	%
Loss from equity method investment	—	%	—	%	(1)	%	—	%
Net loss	(103)	%	—	%	(80)	%	—	%
Less: net loss attributable to noncontrolling interests	—	%	—	%	—	%	—	%
Net loss attributable to UpHealth, Inc.	(103)	%	—	%	(80)	%	—	%

As UpHealth Holdings effectively began operations on January 1, 2020 and other operating results are presented from the date of ~~operating expenses of $361,005~~acquisition, as described above, the numbers presented above are not directly comparable between periods.

Three months ended June 30, 2021 and ~~a provision for income taxes of $14,119 partially offset by interest income on marketable securities held in the Trust Account of $44,890. For~~2020

Revenue

In the three months ended ~~September~~June 30, ~~2019, we generated~~2021, revenue was $31.9 million, comprised of $14.8 million of services revenue, $9.1 million of licenses and subscriptions revenue, and $8.0 million of products revenue. There was no revenue in the three months ended June 30, 2020.

Cost of Goods and Services

In the three months ended June 30, 2021, cost of goods and services was $20.3 million, primarily consisting of $9.4 million of costs of services, $6.2 million of costs of licenses and subscriptions, and $4.7 million of costs of products. There was no cost of goods and services in the three months ended June 30, 2020

Operating Expenses

Sales and Marketing. In the three months ended June 30, 2021, S&M expenses were $1.7 million, primarily consisting of advertising, marketing programs, and events from the date of acquisition of each subsidiary. There were no S&M expenses in the three months ended June 30, 2020.

Research and Development.In the three months ended June 30, 2021, research and development expenses were $0.9 million, primarily consisting of compensation and benefits expense, and other administrative costs, related to Thrasys’ software development teams. There were no R&D expenses in the three months ended June 30, 2020.

General and Administrative.. In the three months ended June 30, 2021, general and administrative expenses were $9.0 million, primarily consisting of compensation and benefits expense, and other administrative costs, related to the executive, finance, human resources, legal, facilities, and information technology teams, net ~~income~~ of ~~$259,608, which consisted~~allocations to cost of goods and services and S&M and R&D expenses. In the three months ended June 30, 2020, general and administrative expenses were $0.3 million, consisting of deferred compensation and benefits expense.

Depreciation and Amortization. In the three months ended June 30, 2021, depreciation and amortization expenses were $3.0 million, primarily consisting of $2.7 million of amortization of intangible assets related to the acquisitions of Thrasys, BHS, TTC, Glocal, Innovations, and Cloudbreak, and $0.3 million of depreciation related to property and equipment, net of allocations to cost of goods and services. There was no depreciation and amortization in the three months ended June 30, 2020.

Acquisition-related Expenses. In the three months ended June 30, 2021, acquisition-related expenses were $32.6 million, primarily consisting of one-time transaction expenses related to the acquisitions of Thrasys, BHS, TTC, Glocal, Innovations, and Cloudbreak and UpHealth Holding's merger with UpHealth. There were no acquisition-related expenses in the three months ended June 30, 2020.

Other Income (Expense)

In the three months ended June 30, 2021, other expense was $3.9 million, primarily consisting of $4.9 million of interest expense, a $1.1 million gain on fair value of warrants, and $0.1 million of other expense, net. There was no other income ~~on marketable securities held~~(expense) in the ~~Trust Account~~three months ended June 30, 2020.

Income Tax Expense (Benefit)

In the three months ended June 30, 2021, the income tax benefit was $6.6 million, primarily attributable to the pre-tax loss. There was no income tax expense (benefit) in the three months ended June 30, 2020.

Six months ended June 30, 2021 and 2020

Revenue

In the six months ended June 30, 2021, revenue was $44.7 million, comprised of ~~$933,853 that~~$22.9 million of services revenue, $12.8 million of licenses and subscriptions revenue, and $9.0 million of products revenue. There was no revenue in the six months ended June 30, 2020.

Cost of Goods and Services

In the six months ended June 30, 2021, cost of goods and services was $26.4 million, primarily consisting of $14.1 million of costs of services, $6.7 million of costs of licenses and subscriptions, and $5.6 million of costs of products. There was no cost of goods and services in the six months ended June 30, 2020.

Operating Expenses

Sales and Marketing. In the six months ended June 30, 2021, S&M expenses were $2.6 million, primarily consisting of advertising, marketing programs, and events from the date of acquisition of each subsidiary. There were no S&M expenses in the six months ended June 30, 2020.

Research and Development.. In the six months ended June 30, 2021, research and development expenses were $2.6 million, primarily consisting of compensation and benefits expense, and other administrative costs, related to Thrasys’ software development teams. There were no R&D expenses in the six months ended June 30, 2020.

General and Administrative.. In the six months ended June 30, 2021, general and administrative expenses were $12.3 million, primarily consisting of compensation and benefits expense, and other administrative costs, related to the executive, finance, human resources, legal, facilities, and information technology teams, net of allocations to cost of goods and services and S&M and R&D expenses. In the six months ended June 30, 2021, general and administrative expenses were $0.5 million, consisting of deferred compensation and benefits expense.

Depreciation and Amortization. In the six months ended June 30, 2021, depreciation and amortization expenses were $3.9 million, primarily consisting of $3.5 million of amortization of intangible assets related to the acquisitions of Thrasys, BHS, TTC, Glocal, Innovations, and Cloudbreak, and $0.4 million of depreciation related to property and equipment, net of allocations to cost of goods and services. There was no depreciation and amortization in the six months ended June 30, 2020.

Acquisition-related Expenses. In the six months ended June 30, 2021, acquisition-related expenses were $35.3 million, primarily consisting of one-time transaction expenses related to the acquisitions of Thrasys, BHS, TTC, Glocal, Innovations, and Cloudbreak and UpHealth Holding's merger with UpHealth. There were no acquisition-related expenses in the six months ended June 30, 2020.

Other Income (Expense)

In the six months ended June 30, 2021, other expense was $3.9 million, primarily consisting of $5.6 million of interest expense, a $1.1 million gain on fair value of warrants, and $0.1 million of other expense, net, partially offset by $0.6 million of gain on consolidation of equity method investment. There was no other income (expense) in the six months ended June 30, 2020.

Income Tax Expense (Benefit)

In the six months ended June 30, 2021, the income tax benefit was $7.1 million, primarily attributable to the pre-tax loss. There was no income tax expense (benefit) in the six months ended June 30, 2020.

Segment Information

We evaluate performance based on several factors, of which revenue, cost of goods and services, and operating expenses by operating segment are the primary financial measures.

Revenue

Revenue by segment consisted of ~~$395,583~~the following:


In thousands	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Integrated Care Management	$	11,280	$	17,570
Global Telehealth	6,964		7,554
Digital Pharmacy	5,299		5,299
Behavioral Health	8,339		14,275
Total revenue	$	31,882	$	44,698

Three Months Ended June 30, 2021. Revenue from the integrated care management segment consisted of $2.2 million of services revenue and $9.1 million of licenses and subscriptions revenue. Revenue from the global telehealth segment consisted of $5.2 million of services revenue and $1.7 million of products revenue, and reflected a full quarter of revenue from Glocal, which was acquired on March 26, 2021, and a ~~provision for income taxes~~partial month of ~~$278,662. The decrease in interest income~~revenue from ~~marketable securities held in the Trust Account was primarily due to the decline in market value of these securities,~~Cloudbreak, which was ~~a direct result~~acquired on June 9, 2021. Revenue from the ~~pandemic as~~digital pharmacy segment consisted of $5.1 million of products revenue and $0.2 million of services revenue, and reflected a partial quarter of revenue from Innovations, which was acquired on April 27, 2021. Revenue from the ~~financial markets came to terms with~~behavioral health segment consisted of $7.2 million of services revenue and $1.2 million of products revenue. There was no revenue for the ~~damaging effects~~three months ended June 30, 2020.

Six Months Ended June 30, 2021. Revenue from the integrated care management segment consisted of $4.8 million of services revenue and $12.8 million of licenses and subscriptions revenue. Revenue from the global telehealth segment consisted of $5.8 million of services revenue and $1.7 million of products revenue, and reflected a partial period of revenue from Glocal, which was acquired on March 26, 2021, and a partial period of revenue from Cloudbreak, which was acquired on June 9, 2021. Revenue from the digital pharmacy segment consisted of $5.1 million of products revenue and $0.2 million of services revenue, and reflected a partial period of revenue from Innovations, which was acquired on April 27, 2021. Revenue from the behavioral health segment consisted of $12.1 million of services revenue and $2.2 million of products revenue. There was no revenue for the six months ended June 30, 2020.

Gross margin

Gross margin by segment consisted of the ~~COVID-19 pandemic starting in~~following:


In thousands	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Integrated Care Management	$	4,615	$	9,722
Global Telehealth	2,634		2,933
Digital Pharmacy	1,982		1,982
Behavioral Health	2,370		3,645
Total gross margin	$	11,601	$	18,282

Three Months Ended June 30, 2021. Gross margin from the integrated care management segment consisted of $1.7 million from services and $2.9 million from licenses and subscriptions. Gross margin from the global telehealth segment consisted of $1.3 million from services and $1.3 million from products, and reflected a full quarter of gross margin from Glocal, which was acquired on March ~~2020 when investors rushed out~~26, 2021, and a partial month of ~~U.S. treasuries~~gross margin from Cloudbreak, which was acquired on June 9, 2021. Gross margin from the digital pharmacy segment consisted of $1.8 million from products and ~~into cash.~~

~~For~~$0.2 million from services, and reflected a partial quarter of gross margin from Innovations, which was acquired on April 27, 2021. Gross margin from the ~~nine~~behavioral health segment consisted of $2.3 million from services and $0.1 million from products. There was no gross margin for the three months ended ~~September~~June 30, ~~2020, we had a net loss of $599,011, which~~2020.

Six Months Ended June 30, 2021. Gross margin from the integrated care management segment consisted of ~~operating expenses~~$3.6 million of ~~$1,346,525~~gross margin from services and $6.1 million of gross margin from licenses and subscriptions. Gross margin from the global telehealth segment consisted of $1.6 million of gross margin from services and $1.3 million of gross margin from products, and reflected a partial period of gross margin from Glocal, which was acquired on March 26, 2021, and a ~~provision for income taxes~~partial month of ~~$269,409 partially offset by interest income~~gross margin from Cloudbreak, which was acquired on ~~marketable securities held in~~June 9, 2021. Gross margin from the ~~Trust Account of $1,016,923. For the period from March 6, 2019 (Inception) through September 30, 2019, we generated net income of $230,806, which~~digital pharmacy segment consisted of ~~interest income~~$1.8 million of gross margin from products and $0.2 million of gross margin from services, and reflected a partial period of gross margin from Innovations, which was acquired on ~~marketable securities held in~~April 27, 2021. Gross margin from the ~~Trust Account~~behavioral health segment consisted of ~~$1,151,957 that was partially offset by operating expenses~~$3.5 million of ~~$577,407~~gross margin from services and $0.2 million of gross margin from products, and reflected a full period of gross margin from BHS and a ~~provision~~partial period of gross margin from TTC, which was acquired on January 25, 2021. There was no gross margin for ~~income taxes of $343,744.~~the six months ended June 30, 2020.

Liquidity and Capital Resources

On June 10, 2019, we consummated the initial closing of the Offering with the delivery of 15,000,000 Units at a price of $10.00 per unit, generating gross proceeds of $150,000,000. Simultaneously with the initial closing of the Offering, we consummated the initial closing of the Private Placement with the sale of 492,500 Private Placement Units at a price of $10.00 per unit and the sale of 100,000 Private Underwriter Shares at a price of $10.00 per share, generating aggregated gross proceeds of $5,925,000.

On June 13, 2019, in connection with the underwriters’ exercise in full of their option to purchase an additional 2,250,000 Units solely to cover over-allotments, if any (the “over-allotment option”), we consummated the sale of an additional 2,250,000 Units at a price of $10.00 per unit, generating gross proceeds of $22,500,000. Simultaneously with the closing of the sale of such additional Units, the Company consummated the second closing of the Private Placement resulting in the sale of an additional 75,000 Private Placement Units at a price of $10.00 per unit and the sale of 20,000 Private Underwriter Shares at a price of $10.00 per share, generating aggregated gross proceeds of $950,000.

Following the initial and second closings of the Offering and the Private Placement, a total of $172,500,000 was placed in the Trust Account. We incurred $4,332,430 in offering related costs, including $3,450,000 of underwriting fees and $882,430 of other costs.

As of ~~September~~June 30, 2021 and December 31, 2020, ~~we held~~UpHealth Holdings had free cash on hand of $98.1 million and $1.8 million, respectively, and restricted cash of $0.6 million and $0.5 million, respectively.

We believe our current cash, restricted cash, and ~~marketable securities in~~expected cash collections will be sufficient to fund our operations for at least twelve months after the ~~amount~~filing date of ~~$174,284,387 (including $2,889,624 of interest earned) in~~this Quarterly Report on Form 10-Q.

Cash Flows

The following tables summarize cash flows for the Trust Account. The marketable securities consisted of money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Interest income earned from the funds held in the Trust Account may be used by us to pay taxes. For the ninesix months ended ~~September~~June 30, 2021 (unaudited):


	Six Months Ended June 30,
(In thousands)	2021		2020
Net cash used in operating activities	$	(37,229)	$	—
Net cash provided by investing activities	3,860		—
Net cash provided by financing activities	129,801		—
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(99)		—
Net increase in cash, cash equivalents, and restricted cash	$	96,332	—

As UpHealth Holdings effectively began operations on January 1, 2020, ~~we withdrew $727,119 from~~ the ~~interest earned on~~numbers presented above are not directly comparable between periods.

In the ~~Trust Account to pay tax obligations.~~

~~For the nine~~six months ended ~~September~~June 30, ~~2020,~~2021, cash used in operating activities was ~~$1,916,197, consisting of a~~$37.2 million, primarily attributed to the net loss of ~~$599,011, interest earned on marketable securities held~~$35.8 million and the changes in ~~the Trust Account~~operating assets and liabilities, net of ~~$1,016,923, and a decrease in net operating liabilities~~effects of ~~$309,026, including timing~~acquisitions, of ~~payments for our year-to-date income taxes of $180,696 and other payables of $118,016, that were~~$1.1 million, partially offset by ~~a decrease~~$2.5 million of non-cash items (depreciation, deferred tax adjustments, gain on extinguishment of debt, loss on fair value of warrants, and debt issuance cost amortization). The changes in ~~net~~ operating assets and liabilities, net of ~~$8,763, including other non-current assets~~effects of ~~$33,327~~acquisitions, was primarily due to an increase in accounts receivable of $21.0 million due to billed and unbilled receivables from [two] customers during the quarter that ~~was~~were not collected as of June 30,

2021, partially offset by an increase in ~~prepaid operating~~accounts payable and accrued expenses of ~~$16,438~~$15.6 million due to delayed payments to vendors, and ~~receivable~~proceeds from ~~related parties~~Provider Relief Funds of ~~$8,126. For~~$0.5 million. In the ~~period from March 6, 2019 (date of inception) through September~~six months ended June 30, ~~2019,~~2020, cash ~~used in~~provided by (used in) operating activities was ~~$796,679,~~none, primarily attributed to the net loss of $0.5 million, offset by an increase in accounts payable and accrued expenses of $0.5 million.

In the six months ended June 30, 2021, cash provided by investing activities was $3.9 million, primarily consisting of a net ~~income~~cash acquired in acquisition of ~~$230,806, change in net operating assets~~businesses. In the six months ended June 30, 2020, cash provided by (used in) investing activities was none.

In the six months ended June 30, 2021, cash provided by financing activities was $129.8 million, primarily consisting of proceeds from convertible debt of $164.5 million, partially offset by repayments of debt of $17.3 million and ~~liabilities~~payments of ~~$124,472, and interest earned on marketable securities held~~amounts due to member of $4.3 million. In the six months ended June 30, 2020, cash provided by (used in) financing activities was none.

Long-Term Debt

See Note 8, Debt, in the ~~Trust Account~~Notes to Condensed Consolidated Financial Statements of ~~$1,151,957.~~

~~We intend~~this Quarterly Report on Form 10-Q for our long-term debt.

Contractual Obligations and Commitments

See Note 17, Commitments and Contingencies, in the Notes to ~~use substantially all~~Condensed Consolidated Financial Statements for information about our operating lease obligations and our non-cancellable contractual service and licensing obligations.

Off-Balance Sheet Arrangements

See Note 2, Summary of ~~the funds held~~Significant Accounting Policies, in the ~~Trust Account, including any amounts representing interest earned~~Notes to Condensed Consolidated Financial Statements of this Quarterly Report on ~~the Trust Account (which interest shall be net of taxes payable by us), to acquire~~Form 10-Q for a ~~target business or businesses to complete~~Variable Interest Entity (“VIE”) that is included in our initial Business Combination and to pay our expenses relating thereto. We may withdraw interest to pay taxes. We estimate our annual franchise tax obligations to be approximately $200,000. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. To the extent that our capital stock is used in whole or in part as consideration to effect our initial Business Combination, the remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business or businesses. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our initial Business Combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.

condensed consolidated financial statements.

As of ~~September~~June 30, ~~2020,~~2021, we had cash of $387,430 held outside the Trust Account. We intend to raise additional funds to ensure the proceeds not held in the Trust Account will be sufficient to allow us to operate for at least 21 months from the closing date of the Offering (as described above in the Subsequent Events section), assuming that a Business Combination is not consummated during that time. Over this time period, we intend to use these funds primarily for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.

If our estimates of the costs of undertaking in-depth due diligence and negotiating our initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to consummate our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. In order to finance operating and/or transaction costs in connection with a Business Combination, our Sponsor, executive officers, directors, or their affiliates may, but are not obligated to, loan us funds. In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units of the post-Business Combination entity at a price of $10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units.

~~Following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.~~

On November 2, 2020, the Company filed a definitive proxy statement with the SEC, to invite the stockholders of the Company to attend the 2020 annual meeting Annual Meeting to be held on December 3, 2020. At the Annual Meeting, the stockholders will vote on the Extension Amendment to extend the date by which the Company must consummate a Business Combination from December 10, 2020 to March 10, 2021 (the date which is 21 months from the closing date of the IPO). If the Company is unable to consummate its initial Business Combination by December 10, 2020 (or, if the Extension Amendment is approved, March 10, 2021), the Company (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining stockholders, as part of its plan of dissolution and liquidation. ~~The mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern.~~

~~Off-Balance Sheet Arrangements~~

As of September 30, 2020, we have not entered into any off-balance sheet financing arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any additional special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

~~Contractual Obligations~~

Recent Accounting Pronouncements

See Note 2, Summary of September 30, 2020, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay our Sponsor a monthly fee of $20,000 for office space, administrative services and secretarial support. We began incurring these fees on June 6, 2019 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination or the liquidation of the Company.

~~Critical~~Significant Accounting Policies

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

~~Emerging Growth Company~~

~~Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial~~this Quarterly Report on Form 10-Q for recently issued accounting standards ~~until private companies (that is, those~~ that could have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised accounting standard at the time private companies adopt the new or revised standard.

~~Net Loss Per Common Share~~

Net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding for the period. We apply the two-class method in calculating the net loss per common share. Shares of common stock subject to possible redemption as of September 30, 2020 have been excluded from the calculation of the basic net loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. When calculating our diluted net loss per share, we have not considered the effect of (i) the incremental number of shares of common stock to settle warrants sold in the Offering and Private Placement, as calculated using the treasury stock method; (ii) the contingently issuable shares associated with the rights sold in the Offering and Private Placement to receive one-twentieth (1/20) of one share of common stock upon the consummation of our initial business combination, and (iii) the insider shares issued to the former Chief Financial Officer representing 5,000 shares of common stock underlying restricted stock awards for the period they were outstanding. Since we were in net loss position during the periods after deducting net income attributable to common stock subject to redemption, diluted net loss per common share is the same as basic net loss per common share for the periods presented as the inclusion of all potential common shares outstanding would have been anti-dilutive.

In accordance with the two-class method, our net income (loss) is adjusted for net income that is attributable to common stock subject to redemption, as these shares only participate in the income of the Trust Account and not our losses. Accordingly, net loss per common share, basic and diluted, is calculated as follows:

For the Three
Months Ended
September 30,
2020

For the Three
Months Ended
September 30,
2019

For the Nine
Months Ended
September 30,
2020

Period from
March 6, 2019
(Inception)
through
September 30,
2019

Net income (loss)

$
(330,234
)
$
259,608

$
(599,011
)
$
230,806

Less: net income attributable to common stock subject to redemption

(23,492
)

(501,474
)

(570,688
)

(618,595
)
Net loss attributable to common stockholders

$
(353,726
)
$
(241,866
)

$
(1,169,699
)
$
(387,789
)
Weighted-average common shares outstanding, basic and diluted

5,245,947

5,223,704

5,218,968

4,675,325

Net loss per share common share, basic and diluted

$
(0.07
)
$
(0.05
)

$
(0.22
)
$
(0.08
)

~~Common Stock subject to possible redemption~~

Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, as of September 30, 2020, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.

~~Recent Accounting Pronouncements~~

~~We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material~~ effect on ~~our condensed financial statements.~~

us.

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

AsRisk

Interest Rate Risk

We had cash, cash equivalents, and restricted cash totaling $98.7 million as of ~~September~~June 30, ~~2020, we~~2021. Cash equivalents were ~~not subject to any market or interest rate risk. The funds held in the Trust Account are only to be~~ invested ~~in United States government treasury bills, bonds or notes having a maturity of 185 days or less, or~~primarily in money market ~~funds meeting~~funds. Our investment policy is focused on the ~~applicable conditions under Rule 2a-7 promulgated under~~preservation of capital and supporting our liquidity needs. Under the ~~Investment Company Act and that~~policy, we invest ~~solely~~ in highly-rated securities issued by the U.S. ~~treasuries. Due~~government or liquid money market funds. We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments. We utilize an external investment manager who adhere to the ~~short-term nature~~guidelines of ~~these investments,~~our investment policy.

A hypothetical 10% change in interest rates would not have a material impact on the value of our cash, cash equivalents, net loss, or cash flows.

Interest rates are highly sensitive to many factors, including international economic and political considerations, as well as other factors beyond our control. Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. As of June 30, 2021, we ~~believe~~have interest bearing debt of $214.7 million, of which $160.0 million related to the carrying value of the $160.0 million unsecured convertible notes due in 2026 (the "2026 Notes"), and $23.1 million related to loans held by our Glocal subsidiary, that are currently under negotiation for the restructuring of payment terms. The 2026 Notes bear interest at a rate of 6.25% per annum, payable semi-annually, and are convertible into approximately 15,023,475 shares of common stock at a conversion price of $10.65 in accordance with the terms of the indenture agreement. The $23.1 million term loans held by our Glocal subsidiary bear interest rates between 11.15%% up to 16.25% per annum. At June 30, 2021 accrued interest on Glocal's debt facilities was $5.7 million and is included in accrued expenses in the condensed consolidated balance sheet. For the three months ended June 30, 2021 interest expense was $0.5 million. Prior to our acquisition of Glocal, it had been negotiating with its banks to restructure the payment terms of some of the $23.1 million debt facilities; however, due to the impact of the COVID-19 pandemic, there has been a delay in approvals from the banks. The term loans are classified in long-term debt, current, in the condensed consolidated balance sheet due to their default status while negotiations continue. We belief that no penal interest will be charged by the banks and hence no ~~associated~~additional provision has been recognized in the condensed consolidate statement of operations, other than the $5.7 million accrued interest at June 30, 2021. We expect to be able to restructure Glocal's debt by the end of 2021.See Note 8, Debt, for more information about our debt facilities.

Inflation Risk

Inflation has not had, or currently has, a material ~~exposure~~effect on our business.

Foreign Currency Risk

We have foreign currency risks related to ~~interest rate risk.~~

our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the Indian rupee, causing both our revenue and its operating results to be impacted by fluctuations in the exchange rates.

Gains or losses from the revaluation of certain cash balances, accounts receivable balances, and intercompany balances that are denominated in these currencies impact our net loss. A hypothetical decrease in all foreign currencies against the U.S. dollar of 10% would not result in a material foreign currency loss on foreign-denominated balances, as of June 30, 2021. As our foreign operations expand, our results may be more materially impacted by fluctuations in the exchange rates of the currencies in which we do business.

At this time, we do not enter into financial instruments to hedge our foreign currency exchange risk, but we may in the future.

Item 4. Controls and ~~Procedures.~~

Procedures

Evaluation of Our Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal financial and accounting officer, respectively), evaluated the effectiveness of our disclosure controls and procedures ~~are~~as of June 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in ~~our~~the reports ~~filed~~that it files or ~~submitted~~submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in ~~our~~the reports ~~filed~~that it files or ~~submitted~~submits under the Exchange Act is accumulated and communicated to ~~our~~the company’s management, including ~~our Chief Executive Officer~~its principal executive and ~~Chief Financial Officer,~~principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

~~Evaluation~~

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of ~~Disclosure Controls~~achieving their objectives and ~~Procedures~~

~~As required by Rules 13a-15~~management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and ~~15d-15 under~~procedures. Based on the ~~Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an~~ evaluation ~~of the effectiveness of the design and operation~~ of our disclosure controls and procedures as of ~~September~~June 30, ~~2020. Based upon their evaluation,~~2021, and as a result of the material weakness described below, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report. Notwithstanding the identified material weakness, our management has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows for the three and six months ended June 30, 2021 and 2020, disclosed in accordance with U.S. GAAP.

Remediation Efforts to Address the Previously Disclosed Material Weakness

As previously disclosed in Part II, Item 9A of our Form 10-K/A, our management concluded that our disclosure controls and procedures ~~(as defined~~and internal controls over financial reporting were not effective as of December 31, 2020 due to a material weakness. The material weakness related to not having adequate controls over accounting for complex accounting instruments and, in ~~Rules 13a-15(e)~~particular, related to errors in the accounting for warrants issued in connection with UpHealth's (fka GigCapital2) Initial Public Offering and ~~15d-15(e) under~~recorded in its pre-Business Combination, historical condensed consolidated financial statements through March 31, 2021. In response to this material weakness, we have and will continue to implement a number of actions, as described below. Our management is committed to ensuring that our internal controls over financial reporting are designed and operating effectively. As previously disclosed, our remediation plan includes, but is not limited to, that we will improve the ~~Exchange Act) were effective.~~

process and controls in the determination of the appropriate accounting and classification of our financial instruments and key agreements. When fully implemented and operational, we believe the controls we have designed or plan to design will remediate the control deficiency that have led to the material weakness we have identified and strengthen our internal controls over financial reporting. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control ~~over~~Over Financial Reporting

During the three months ended June 30, 2021, we completed the Business Combination and the internal controls of UpHealth Holdings became our ~~most recently completed fiscal quarter, there has been no change~~internal controls. We are engaged in the process of design and implementation of our internal control over financial reporting ~~that has materially affected, or~~(as such term is ~~reasonably likely~~defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) in a manner commensurate with the scale of our operations subsequent to ~~materially affect,~~the Business Combination, including the enhancement of our internal ~~control over financial reporting.~~

and external technical accounting resources.

~~PART II—OTHER INFORMATION~~

Part II - Other Information

Item 1. Legal ~~Proceedings.~~

~~None.~~

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.

Item 1A. Risk ~~Factors.~~

AsFactors

The risk factors previously disclosed in Part I, Item 1A of ~~the date of this Quarterly~~our Annual Report on Form ~~10-Q, there~~10-K for the fiscal year ended December 31, 2020 do not address the risks and uncertainties that could significantly and negatively affect our business, financial condition, results of operations, cash flows and prospects following the business combination. For risk factors relating to our business following the business combination, please refer to the section titled “Risk Factors” in our prospectus filed with the SEC pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended, on June 29, 2021 (the “Prospectus”), which is incorporated herein by reference. There have been no material changes to ~~the~~our risk factors ~~disclosed in our Annual Report on Form 10-K filed with~~since the SEC on March 30, 2020. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

The Company has no operating history and is subject to a mandatory liquidation and subsequent dissolution requirement. If the Company is unable to consummate a business combination, including the Business Combination, its public stockholders may be forced to wait until after December 10, 2020, or if the Extension Amendment is approved, March 10, 2021, before receiving distributions from the Trust Account.

The Company is a blank check company, and has no operating history and is subject to a mandatory liquidation and subsequent dissolution requirement. The Company has until December 10, 2020 to complete a business combination, subject to the Extension Amendment, in which case that date will be extended to March 10, 2021. The Company has no obligation to return funds to investors prior to such date unless (i) it consummates a business combination prior thereto or (ii) it seeks to amend its current certificate of corporation prior to consummation of a business combination, and only then in cases where investors have sought to convert or sell their shares to the Company. Only after the expiration of this full time period will public security holders be entitled to distributions from the Trust Account if the Company is unable to complete a business combination. Accordingly, investors’ funds may be unavailable to them until after such date and to liquidate their investment, public security holders may be forced to sell their public shares, rights or warrants, potentially at a loss. In addition, if the Company fails to complete an initial business combination by December 10, 2020, or March 10, 2021 if the Extension Amendment is approved, there will be no redemption rights or liquidating distributions with respect to the rights and warrants, which will expire worthless, unless the Company amends its certificate of incorporation to extend its life and certain other agreements it has entered into.

The requirement that we complete a business combination by December 10, 2020, or if the Extension Amendment is approved, March 10, 2021, could limit the amount of time we have to negotiate the terms of a potential business combination, and conduct due diligence on potential business combination targets, which could adversely affect our ability to consummate our initial business combination on terms that would produce the greatest value for our stockholders.

Any potential target business with which we enter into negotiations concerning our initial business combination will be aware that we must consummate our initial business combination by December 10, 2020, or March 10, 2021 if the Extension Amendment is approved. Consequently, we will have a limited amount of time to negotiate the terms of a potential business combination, and to conduct due diligence on a potential business combination target. Consequently, there are no assurances that we will be able to complete our initial business combination with any target business by December 10, 2020or March 10, 2021 if the Extension Amendment is approved. The risk will increase as we get closer to the timeframe described above. In addition, while we intend to pursue a business combination only if our Board determines that it is in the best interests of our stockholders, due to the limited time we have to negotiate the terms of a potential business combination and to conduct due diligence we not be able to consummate our initial business combination on terms that would produce the greatest value for our stockholders.

We have no operating or financial history and our results of operations and those of the post-combination company may differ significantly from the unaudited pro forma financial data that will be included in the proxy statement/prospectus for the Business Combination.

We are a blank check company and we have no operating history and no revenues. The proxy statement/prospectus for the Business Combination will include unaudited pro forma condensed combined financial statements for the post-combination company. The unaudited pro forma condensed combined financial statements are to be presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the Business Combination been consummated on the dates indicated in the proxy statement/prospectus for the Business Combination, or the future consolidated results of operations or financial position of the post-combination company. Accordingly, the post-combination company’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in the proxy statement/prospectus.

There can be no assurance that a definitive agreement will be entered into and even if a definitive agreement is entered into, there can be no assurance that the Business Combination will be consummated.

On October 27, 2020, we entered into a non-binding letter of intent with Bolder Industries for a business combination. Under the terms of the Letter of Intent, the Company and Bolder Industries intend to negotiate a definitive agreement that they may enter into pursuant to which the Company would acquire Bolder Industries, with the existing equity holders of Bolder Industries receiving securities of the Company that would constitute a majority of the Company’s securities. We can offer no assurance that a definitive agreement will be executed on terms acceptable to the parties, or at all. Furthermore, even if a definitive agreement is entered into, all of the conditions to the closing of the business combination would have to be satisfied or, if permissible, waived. Many of these conditions to closing could be outside of our control. Further, even if a definitive agreement is entered into, we will not know whether the conditions to the closing of the transaction will be satisfied and that the transaction will in fact occur.

Following the consummation of a Business Combination, our only significant asset will be our ownership interest in Bolder Industries, or such other company with which we combine, and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or satisfy our other financial obligations.

Following the consummation of the Business Combination, we will have no direct operations and no significant assets other than our ownership of Bolder Industries or such other company with which we combine. We and certain investors, the equity holders of the company with which we company, and certain of the directors and officers of such company and its affiliates will become stockholders of the post-combination company at that time. We will depend on the operating company that owns the assets that are acquired for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company and to pay any dividends with respect to our common stock. The financial condition and operating requirements of such operating company may limit our ability to obtain cash from it. The earnings from, or other available assets of, such operating company may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or satisfy our other financial obligations.

The ability of the operating company that owns the assets that are acquired to make distributions, loans and other payments to us for the purposes described above and for any other purpose may be limited by credit agreements to which such operating company is party from time to time. Any loans or other extensions of credit to us from such operating company will be permitted only to the extent there is an applicable exception to the investment covenants under these credit agreements. Similarly, any dividends, distributions or similar payments to us from the operating company that owns the assets that are acquired will be permitted only to the extent there is an applicable exception to the dividends and distributions covenants under these credit agreements.

There can be no assurance that the common stock of the post-combination company will be approved for listing on the NYSE or that Bolder Industries, or such other company with which we combine, will be able to comply with the continued listing standards of NYSE.

In connection with the closing of the Business Combination, we intend to list the common stock of the post‑combination and warrants on the NYSE. The continued eligibility of the company with which we combine to be listed may depend on the number of the Company’s shares that are redeemed. If, after the Business Combination, the NYSE delists the shares of the post-combination company from trading on its exchange for failure to meet the listing standards, the company with which we combine and its stockholders could face significant material adverse consequences including:

~~• a limited availability of market quotations for the post-combination company’s securities;~~

• a determination that the common stock of the post-combination company is a “penny stock” which will require brokers trading in such common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of such common stock;

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

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

The NYSE may not list the securities of the post-combination company on its exchange, which could limit investors’ ability to make transactions in such securities and subject the post-combination company to additional trading restrictions.

In connection with the Business Combination, in order to obtain the listing of the post-combination company’s securities on the NYSE, we will be required to demonstrate compliance with the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements. We will seek to have the post-combination company’s securities listed on the NYSE upon consummation of the Business Combination. We cannot assure you that we will be able to meet all initial listing requirements. Even if the post-combination company’s securities are listed on the NYSE, we may be unable to maintain the listing of its securities in the future.

If we fail to meet the initial listing requirements and the NYSE does not list the post-combination company’s securities on its exchange, the company with which we combine would not be required to consummate the Business Combination. In the event that

such company elected to waive this condition, and the Business Combination was consummated without the post-combination company’s securities being listed on the NYSE or on another national securities exchange, we could face significant material adverse consequences, including:

•

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

Prospectus.

•

~~reduced liquidity for our securities;~~

•

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

•

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

•

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

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If the post-combination company’s securities were not listed on the NYSE, such securities would not qualify as covered securities and we would be subject to regulation in each state in which we offer our securities because states are not preempted from regulating the sale of securities that are not covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state, other than the State of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states.

Subsequent to the consummation of the Business Combination, the post-combination company may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.

Although the Company will conduct due diligence on Bolder Systems, or such other company with which it combines, the Company cannot assure you that this diligence revealed all material issues that may be present in the business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the Company’s and such target company’s control will not later arise. As a result, the post-combination company may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if the Company’s due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with the Company’s preliminary risk analysis. Even though these charges may be non-cash items and may not have an immediate impact on the post-combination company’s liquidity, the fact that the post-combination company reports charges of this nature could contribute to negative market perceptions about it or its securities. In addition, charges of this nature may cause the post-combination company to be unable to obtain future financing on favorable terms or at all.

Following the consummation of the Business Combination, the post-combination company will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.

Following the consummation of the Business Combination, the operating company with which the Company combines will face increased legal, accounting, administrative and other costs and expenses as a public company that such company does not incur as a private company. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, Public Company Accounting Oversight Board (the “PCAOB”) and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements will require the post-combination company to carry out activities a private operating company has not done previously. For example, there will be Board committees and internal controls and disclosure controls and procedures that such company does not currently have in place. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), the post-combination company could incur additional costs rectifying those issues, and the existence of those issues could adversely affect the reputation of the company with which we combine or investor perceptions of it. It may also be more expensive to obtain director and officer liability insurance. Risks associated with such company’s status as a public company may make it more difficult to attract and retain qualified persons to serve on the post-combination company’s Board or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require the post-combination company to divert a significant amount of money that could otherwise be used to expand the business and

~~achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.~~

The unaudited pro forma condensed combined financial information that will be included in the proxy statement/prospectus may not be indicative of what the Company’s actual financial position or results of operations would have been.

The unaudited pro forma condensed combined financial information that will be in the proxy statement/prospectus will be presented solely for illustrative purposes only and is not necessarily indicative of what the Company’s actual financial position or results of operations would have been had the Business Combination been completed on the dates that will be indicated.

~~Even if the Company consummates the Business Combination, there is no guarantee that the warrants will ever be in the money, and they may expire worthless and the terms of warrants may be amended.~~

The exercise price for the warrants is $11.50 per share of Common Stock. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

In addition, the Company’s warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and the Company. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any other change. Accordingly, the Company may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment. Although the Company’s ability to amend the terms of the warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares and their respective affiliates and associates have of Common Stock purchasable upon exercise of a warrant.

The Company’s ability to successfully effect the Business Combination and to be successful thereafter will be totally dependent upon the efforts of its key personnel, including the key personnel of the company with which we combine, all of whom are expected to join the Company following the Business Combination. While the Company intends to closely scrutinize any individuals it engages after the Business Combination, it cannot assure you that its assessment of these individuals will prove to be correct.

The Company’s ability to successfully effect the Business Combination is dependent upon the efforts of key personnel of the company with which we combine and of the Company, including its chief executive officer. Although the Company expects all of the key personnel of the company with which it combines to remain with the post-combination company following the Business Combination, it is possible that the post-combination company will lose some key personnel, the loss of which could negatively impact the operations and profitability of the post-combination company. While the post-combination company intends to closely scrutinize any individuals it engages after the Business Combination, it cannot assure you that its assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a public company which could cause the post-combination company to have to expend time and resources helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect its operations.

~~The Company and the company with which it combines will be subject to business uncertainties and contractual restrictions while the Business Combination is pending.~~

Uncertainty about the effect of the Business Combination on employees and third parties may have an adverse effect on the Company and the company with which it combines. These uncertainties may impair our or such company’s ability to retain and motivate key personnel and could cause third parties that deal with any of us or them to defer entering into contracts or making other decisions or seek to change existing business relationships. If key employees depart because of uncertainty about their future roles and the potential complexities of the Business Combination, our or such target company’s business could be harmed.

~~We and the company with which we combine will incur significant transaction and transition costs in connection with the Business Combination.~~

We and the company with which we combine expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the consummation of the Business Combination. We and such company may also incur additional costs to retain key employees. All expenses incurred in connection with the Business Combination Agreement and the transactions contemplated thereby (including the Business Combination), including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs or paid by the Company following the closing of the Business Combination.

Our Founders, directors or officers or their affiliates may elect to purchase shares or warrants from public stockholders, which may influence a vote on a proposed Business Combination and the other proposals as will be described in the proxy statement/prospectus and reduce the public “float” of our common stock.

Our Founders, directors or officers or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our Business Combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Founders, directors, officers or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination or to satisfy closing conditions in the Business Combination Agreement regarding required amounts in the Trust Account equaling or exceeding certain thresholds where it appears that such requirements would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. This may result in the completion of our Business Combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.

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

The ability to execute the post-combination company’s strategic plan could be negatively impacted to the extent a significant number of stockholders choose to redeem their shares in connection with the Extension Amendment or the Business Combination.

Depending upon the aggregate amount of cash consideration the Company would be required to pay for all shares of Common Stock that are validly submitted for redemption, the post-combination company may be required to increase the financial leverage the post-combination company’s business would have to support. This may negatively impact its ability to execute on its own future strategic plan and its financial viability.

~~If the Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of the Company’s securities may decline.~~

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of the Company’s securities prior to the closing of the Business Combination may decline. The market values of the Company’s securities at the time of the Business Combination may vary significantly from their prices on the date the Business Combination was executed, the date of the proxy statement/prospectus, or the date on which the Company’s stockholders vote on the Business Combination.

In addition, following the Business Combination, fluctuations in the price of the Company’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there has not been a public market for stock in any company with which we may combine and trading in the shares of Company Common Stock has not been active. Accordingly, the valuation that will be ascribed to any company with which we may combine and Company common stock in a Business Combination may not be indicative of the price that will prevail in the trading market following the Business Combination. If an active market for the Company’s securities develops and continues, the trading price of the Company’s securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond the Company’s control. Any of the factors listed below could have a material adverse effect on your investment in the Company’s securities and the Company’s securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of the Company’s securities may not recover and may experience a further decline.

~~Factors affecting the trading price of the Company’s securities following the Business Combination may include:~~

•

actual or anticipated fluctuations in the post-combination company’s quarterly financial results or the quarterly financial results of companies perceived to be similar to the post-combination company;

•

~~changes in the market’s expectations about the post-combination company’s operating results;~~

•

~~success of competitors;~~

•

~~the post-combination company’s operating results failing to meet the expectation of securities analysts or investors in a particular period;~~

•

~~changes in financial estimates and recommendations by securities analysts concerning the post-combination company or the market in general;~~

•

~~operating and stock price performance of other companies that investors deem comparable to the post-combination company’s;~~

•

~~the post-combination company’s ability to market new and enhanced services and products on a timely basis;~~

•

~~changes in laws and regulations affecting the post-combination company’s business;~~

•

~~commencement of, or involvement in, litigation involving the Company;~~

•

~~changes in the post-combination company’s capital structure, such as future issuances of securities or the incurrence of additional debt;~~

•

~~the volume of shares of the post-combination company’s securities available for public sale;~~

•

~~any major change in the Board or management;~~

•

~~sales of substantial amounts of Common Stock by the post-combination company’s directors, executive officers or significant stockholders or the perception that such sales could occur; and~~

•

~~general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.~~

Broad market and industry factors may materially harm the market price of the Company’s securities irrespective of its operating performance. The stock market in general and the NYSE have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of the Company’s securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the Company could depress the Company’s stock price regardless of the Company’s business, prospects, financial condition or results of operations. A decline in the market price of the Company’s securities also could adversely affect the Company’s ability to issue additional securities and the Company’s ability to obtain additional financing in the future.

Following the Business Combination, if securities or industry analysts do not publish or cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding the Company’s securities adversely, the price and trading volume of the Company’s securities could decline.

The trading market for the post-combination company’s securities will be influenced by the research and reports that industry or securities analysts may publish about the post-combination company, its business, its market, or its competitors. Securities and industry analysts do not currently, and may never, publish research on the post-combination company. If no securities or industry analysts commence coverage of the post-combination company, the post-combination company’s stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the post-combination company, change their recommendation regarding the post-combination company’s stock adversely, or provide more favorable relative recommendations about the post-combination company’s competitors, the price of the post-combination company’s securities would likely decline. If any analyst who may cover the post-combination company were to cease coverage of the post-combination company or fail to regularly publish reports on it, the post-combination company could lose visibility in the financial markets, which could cause its stock price or trading volume to decline.

~~The future sales of shares by existing stockholders may adversely affect the market price of the Company’s common stock.~~

Sales of a substantial number of shares of the Company’s common stock in the public market could occur at any time. If the Company’s stockholders sell, or the market perceives that the Company’s stockholders intend to sell, substantial amounts of the Company’s common stock in the public market, the market price of the Company’s common stock could decline.

~~Resales of the shares of common stock included in the stock consideration could depress the market price of our common stock.~~

There may be a large number of shares of common stock sold in the market following the completion of the Business Combination or shortly thereafter. The shares held by the Company’s public stockholders are freely tradable, and the shares of common stock held by the Subscribers will be freely tradable following effectiveness of the registration statement that we have agreed to file in connection with the Business Combination covering the resales of such shares. In addition, the Company will be obligated to register the resale of shares of common stock issued as merger consideration, which shares will become available for resale following the expiration of any applicable lockup period. We also expect that Rule 144 will become available for the resale of shares of our common stock that are not registered for resale once one year has elapsed from the date that we file the Current Report on Form 8-K following the Closing that includes the required Form 10 information that reflects we are no longer a shell company. Such sales of shares of common stock or the perception of such sales may depress the market price of our common stock.

Activities taken by the Company’s affiliates to purchase, directly or indirectly, public shares will increase the likelihood of approval of the Business Combination and the other proposals presented to our stockholders in connection with the Business Combination and may affect the market price of the Company’s securities.

The Company’s Founders, directors, officers, advisors or their affiliates may purchase shares in privately negotiated transactions either prior to or following the consummation of the Business Combination. None of the Company’s Founders, directors, officers, advisors or their affiliates will make any such purchases when such parties are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. Although none of the Company’s

Founders, directors, officers, advisors or their affiliates currently anticipate paying any premium purchase price for such public shares, in the event such parties do, the payment of a premium may not be in the best interest of those stockholders not receiving any such additional consideration. There is no limit on the number of shares that could be acquired by the Company’s Founders, directors, officers, advisors or their affiliates, or the price such parties may pay.

If such transactions are effected, the consequence could be to cause the Business Combination to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the Business Combination and other proposals presented to our stockholders in connection with the Business Combination, and would likely increase the chances that such proposals would be approved. If the market does not view the Business Combination positively, purchases of public shares may have the effect of counteracting the market’s view, which would otherwise be reflected in a decline in the market price of the Company’s securities. In addition, the termination of the support provided by these purchases may materially adversely affect the market price of the Company’s securities.

As of the date of this Quarterly Report on Form 10-Q, no agreements with respect to the private purchase of public shares by the Company or the persons described above have been entered into with any such investor or holder. The Company will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or other proposals.

~~Any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus (COVID-19) outbreak.~~

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic.” A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be adversely affected in a material way.

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

~~Founder Shares~~

During the period from March 6, 2019 (date of inception) to March 12, 2019, the Sponsor and Northland Investment purchased 2,500,000 Founder Shares for an aggregate purchase price of $25,000, or $0.01 per share. In April 2019, we effected a stock dividend of 0.493 shares of common stock for each outstanding share of common stock, resulting in the Sponsor and Northland Investment holding an aggregate of 3,732,500 Founder Shares. On April 29, 2019, the Sponsor and Northland Investment sold 68,041 shares and 31,959 shares, respectively, to EarlyBird and the EarlyBird Group collectively for an aggregate purchase price of $670, or $0.0067 per share. In June 2019, we effected a stock dividend of 0.1541 shares of common stock for each outstanding share of common stock. As a result, there were 4,307,500 Founder Shares outstanding as of September 30, 2020.

The Founder Shares were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). Each holder of Founder Shares is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act.

~~Private Placement~~

On June 5, 2019, the Founders purchased from the Company an aggregate of 492,500 Private Placement Units at a price of $10.00 per unit in a private placement that occurred simultaneously with the completion of the initial closing of the Offering. On June 13, 2019, the Founders also purchased from the Company an aggregate of 75,000 Private Placement Units at a price of $10.00 per unit in a private placement that occurred simultaneously with the completion of the second closing of the Offering with the exercise of the over-allotment option. Each Private Placement Unit consists of one share of the Company’s common stock, one warrant, and one right to receive one-twentieth (1/20) of a share of common stock upon the consummation of the Company’s initial Business Combination. Warrants will be exercisable for $11.50 per share, and the exercise price of the warrants may be adjusted in certain circumstances as described in Note 6. Unlike the warrants included in the Units sold in the Offering, if held by the original holder or its permitted

Proceeds

None.

transferees, the warrants included in the Placement Units are not redeemable by the Company and subject to certain limited exceptions, will be subject to transfer restrictions until one year following the consummation of the Business Combination. If the warrants included in the Private Placement Units are held by holders other than the initial holders or their permitted transferees, the warrants included in the Private Placement Units will be redeemable by the Company and exercisable by holders on the same basis as the warrants included in the Offering.

On June 5, 2019, one of the Company’s underwriters, Northland, purchased 100,000 Private Underwriter Shares at a purchase price of $10.00 per share in a private placement that occurred simultaneously with the completion of the initial closing of the Offering. Northland also purchased from the Company an additional 20,000 Private Underwriter Shares at a price of $10.00 per share in a private placement that occurred simultaneously with the completion of the second closing of the Offering with the exercise of the over-allotment option. The Private Underwriter Shares are identical to the shares of common stock included in the Private Placement Units.

The Private Placement Units and the Private Underwriter Shares were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Founders and Northland are each an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act.

~~Insider Shares~~

Simultaneously with the completion of the initial closing of the Offering, we issued 5,000 insider shares, in consideration of future services, to Ms. Tara McDonough, our former Vice President and Chief Financial Officer. The insider shares were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Our Chief Financial Officer is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act. The insider shares were forfeited upon Ms. McDonough’s resignation on August 12, 2019.

~~Use of Proceeds~~

On June 10, 2019, the completed the initial closing of the Offering whereby the Company sold 15,000,000 Units. On June 13, 2019, the Company completed the second closing of the Offering with the exercise of the over-allotment option with the consummation of the sale of an additional 2,250,000 Units. Each Unit consists of one share of the Company’s common stock, one warrant to purchase one share of common stock, and one right to receive one-twentieth (1/20) of one share of common stock upon consummation of the initial Business Combination. The Units in the Offering were sold at an offering price of $10.00 per unit, generating total gross proceeds from the initial and second closings of the Offering in the aggregate amount of $172,500,000. The Units sold in the Offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-231337 and 333-231979), which were declared effective by the SEC on June 5, 2019. The underwriters for the Offering were EarlyBird, Northland and Odeon Capital Group LLC.

The Company incurred $4,332,430 in transaction costs, consisting of $3,450,000 of underwriting fees and $882,430 of offering costs. After deducting the underwriting discounts and commissions and offering expenses, the total net proceeds from the Offering and Private Placement was $175,042,570 of which $172,500,000 were placed in Trust Account at UBS Financial Services Inc. in New York, New York with Continental Stock Transfer & Trust Company acting as trustee. Using a portion of the net proceeds of the Offering that was not placed in the Trust Account, we repaid a promissory note issued to our Sponsor, which bore the outstanding principal amount of $99,937, when we repaid it upon the initial closing of the Offering. The proceeds held in the Trust Account may be invested by the trustee only in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations.

~~As of September 30, 2020, we had cash of $387,430 held outside the Trust Account for working capital purposes.~~

Item 3. Defaults Upon Senior ~~Securities.~~

~~Not Applicable.~~

Securities

None.

Item 4. Mine Safety ~~Disclosures.~~

Disclosures

Not ~~Applicable.~~

applicable.

Item 5. Other ~~Information.~~

Information

None.

Item 6. ~~Exhibits.~~

Exhibits

(a)

~~Exhibit~~ ~~Number~~	~~Description~~
Exhibit No.		Description

2.1†**		UpHealth Business Combination Agreement, dated as of November 20, 2020 (as amended by the First Amendment dated as of January 29, 2021, the Second Amendment, dated as of March 23, 2021, and the Third Amendment, dated as of April 23, 2021), by and among GigCapital2, Inc., UpHealth Merger Sub, Inc. and UpHealth Holdings, Inc. (included as Annex A to GigCapital2, Inc.'s Proxy Statement/Prospectus filed under Rule 424(b)(3) on May 13, 2021).

2.2†**		Cloudbreak Business Combination Agreement, dated as of November 20, 2020 (as amended by the Amendment, dated as of April 23, 2021), by and among GigCapital2, Inc., Cloudbreak Merger Sub, LLC. Cloudbreak Health, LLC, solely with respect to Section 7.15, Chirinjeev Kathuria and Mariya Pylypiv and UpHealth Holdings, Inc., and Shareholder Representative Services LLC. (included as Annex B to igCapital2, Inc.'s Proxy Statement/Prospectus filed under Rule 424(b)(3) on May 13, 2021).

2.3**		Fourth Amendment to Business Combination Agreement, dated as of May 30, 2021, by and among GigCapital2, Inc., UpHealth Holdings, Inc. and UpHealth Merger Sub, Inc. (incorporated by reference to Exhibit 10.1 to GigCapital2, Inc.'s Current Report on Form 8-K, filed by the Registrant on June 2, 2021).



2.4**						Second Amendment, dated as of June 9, 2021, to the Business Combination Agreement, dated as of November 20, 2020, by and among GigCapital2, Inc., Cloudbreak Health, LLC, Cloudbreak Merger Sub, LLC, solely with respect to Section 7.15, Chirinjeev Kathuria and Mariya Pylypiv and UpHealth Holdings, Inc., and Shareholder Representative Services LLC (incorporated by reference to Exhibit 2.4 to the Company’s Current Report on Form 8-K filed with the SEC on June 15, 2021).

3.1**						Second Amended and Restated Certificate of Incorporation of UpHealth, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 14, 2021).

3.2**						Amended and Restated Bylaws of UpHealth, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 14, 2021).

4.1**						Specimen Common Stock Certificate of GigCapital2, Inc. (incorporated by reference to Exhibit 4.2 of GiGapital2, Inc.’s Registration Statement on Form S-1 (Registration No. 333-231337) filed with the SEC on May 9, 2019).

4.2**						Amended and Restated Warrant Agreement, dated June 9, 2021, by and between GigCapital2, Inc. and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 15, 2021).

4.3**						Indenture, dated June 9, 2021, by and between UpHealth, Inc. and Wilmington Trust, National Association, a national banking association, in its capacity as trustee thereunder (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 15, 2021).

10.1†**						Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., UpHealth BHS Merger Sub, Inc., Behavioral Health Service, LLC and AM Physicians LLC, dated as of November 2, 2020. (included as Exhibit 2.3 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).

10.2**						Waiver and First Amendment to Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., UpHealth BHS Merger Sub, Inc., BHS Merger Sub 1, LLC, Behavioral Health Service, LLC and the AM Physicians LLC, dated as of November 20, 2020. (included as Exhibit 2.4 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).

10.3**						Second Amendment to Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., Behavioral Health Service, LLC and the AM Physicians LLC, dated as of February 6, 2021. (included as Exhibit 2.5 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).

10.4†**						Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., UpHealth MedQuest Merger Sub, Inc., Innovations Group, Inc. and Jeffrey R. Bray, dated as of November 2, 2020. (included as Exhibit 2.6 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).

10.5**						First Amendment to Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., UpHealth MedQuest Merger Sub, Inc., Innovations Group, Inc. and Jeffrey R. Bray, dated as of January 19, 2021. (included as Exhibit 2.7 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).

10.6†**						Amended and Restated Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., UpHealth Thrasys Merger Sub, Inc., Thrasys, Inc. and Shareholder Representative Services LLC, dated as of November 20, 2020 (included as Exhibit 2.8 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).

10.7**						First Amendment to Amended and Restated Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., Thrasys, Inc. and Shareholder Representative Services LLC, dated as of February 17, 2021. (included as Exhibit 2.9 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).


10.8†**						Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., UpHealth TTC Merger Sub, Inc., TTC Healthcare, Inc. and TTC Healthcare Partners, LLC, dated as of October 30, 2020. (included as Exhibit 2.10 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).

10.9**						Waiver and First Amendment to Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., UpHealth TTC Merger Sub, Inc., TTC Healthcare, Inc. and TTC Healthcare Partners, LLC, dated as of January 25, 2021. (included as Exhibit 2.11 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).

10.10**						Second Amendment to Agreement and Plan of Merger, by and among UpHealth Holdings, Inc., UpHealth TTC Merger Sub, Inc., TTC Healthcare, Inc. and TTC Healthcare Partners, LLC, dated as of February 8, 2021. (included as Exhibit 2.12 to GigCapital2's Form S-4/A filed with the SEC on March 23, 2021).

10.11**						Forward Share Purchase Agreement dated June 3, 2021, by and between GigCapital2, Inc. and Kepos Alpha Master Fund L.P. (incorporated by reference to Exhibit 10.1 to GigCapital2, Inc.'s Current Report on Form 8-K, filed by the Registrant on June 4, 2021).

10.12**						Registration Rights and Lockup Agreement, dated June 9, 2021, by and among UpHealth, Inc. and certain stockholders (Cloudbreak) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 15, 2021).

10.13**						Registration Rights and Lockup Agreement, dated June 9, 2021, by and among UpHealth, Inc. and certain stockholders (UpHealth Holdings) (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 15, 2021).

10.14#**						Cloudbreak Health LLC 2015 Unit Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 15, 2021).

10.15#**						Form of Cloudbreak Health LLC Unit Option Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 15, 2021).

10.16#**						2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 15, 2021).

10.17#**						Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 15, 2021).

10.18#**						Form of Option Agreement (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 15, 2021).

10.10#**						Amended & Restated Employment Offer Letter (Martin S.A. Beck) (included as Exhibit 10.10 to GigCapital2, Inc.'s Form S-4/A filed with the SEC on March 23, 2021).

10.11#**						Amended & Restated Employment Offer Letter (Alfonso W. Gatmaitan) (included as Exhibit 10.11 to GigCapital2, Inc.'s Form S-4/A filed with the SEC on March 23, 2021).

10.12#**						Amended & Restated Employment Offer Letter (Chirinjeev Kathuria) (included as Exhibit 10.12 to GigCapital2, Inc.'s Form S-4/A filed with the SEC on March 23, 2021).

10.13#**						Amended & Restated Employment Offer Letter (Mariya Pylypiv) (included as Exhibit 10.13 to GigCapital2, Inc.'s Form S-4/A filed with the SEC on March 23, 2021).

10.14#**						Ramesh Balakrishnan Employment Agreement (included as Exhibit 10.14 to GigCapital2, Inc.'s Form S-4/A filed with the SEC on March 23, 2021).



Exhibit No.			Description

31.1*			Rule 13a-14(a) Certification of ~~Principal~~Chief Executive Officer ~~Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

31.2*			Rule 13a-14(a) Certification of ~~Principal~~Chief Financial Officer ~~Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32.1***			Section 1350 Certification of ~~Principal~~Chief Executive Officer ~~Pursuant to 18 U.S.C.~~

32.2***			Section 1350 ~~as Adopted Pursuant to Section 906~~Certification of ~~the Sarbanes-Oxley Act of 2002.~~Chief Financial Officer

101.INS*		32.2*		~~Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~	~~Inline~~ XBRL Instance Document

~~101.SCH~~101.SCH*			~~Inline~~ XBRL Taxonomy Extension Schema Document

~~101.CAL~~101.CAL*			~~Inline~~ XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF~~101.DEF*			~~Inline~~ XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB~~101.LAB*			~~Inline~~ XBRL Taxonomy Extension ~~Label~~Labels Linkbase Document

~~101.PRE~~101.PRE*			~~Inline~~ XBRL Taxonomy Extension Presentation Linkbase Document

~~104~~	~~Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)~~

*	~~Filed herewith.~~


*			Filed herein.

**			Previously filed.

***			Furnished herewith.

†			Certain exhibits and schedules to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish a copy of the omitted exhibits and schedules to the SEC on a supplemental basis upon its request.

#			Indicates management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities ~~Exchange~~ Act of ~~1934,~~1933, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly ~~authorized.~~

authorized on August 12, 2021.

	~~Company Name~~

~~Date: November 13, 2020~~					~~By:~~	~~/s/ Raluca Dinu~~ UPHEALTH, INC.
					~~Dr. Raluca Dinu~~
By:			/s/ Dr. Ramesh Balakrishnan
Name:		~~President and~~	Dr. Ramesh Balakrishnan
Title:			Chief Executive Officer (Principal Executive Officer)

~~Date: November 13, 2020~~ By:			~~By:~~	/s/ ~~Brad Weightman~~ Martin Beck
Name:				~~Brad Weightman~~ Martin S. A. Beck
Title:				~~Vice President and~~ Chief Financial Officer (Principal Accounting and Financial ~~and Accounting~~ Officer)

	September 30, 2020			December 31, 2019
ASSETS
Current Assets
Cash	$	387,430		$	1,576,508
Prepaid expenses		178,047			161,609
Receivable from related parties		10,078			1,952
Total current assets		575,555			1,740,069
Cash and marketable securities held in Trust Account		174,284,387			173,994,583
Other non-current assets		—			33,327
TOTAL ASSETS	$	174,859,942		$	175,767,979
LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	24,597		$	142,613
Payable to related parties		6,185			16,649
Accrued liabilities		150			—
Other current liabilities		—			180,696
Total liabilities		30,932			339,958
Commitments and contingencies (Note 5)
Common stock subject to possible redemption, 16,982,900 and 17,042,802 shares as of September 30, 2020 and December 31, 2019, respectively, at a redemption value of $10.00 per share		169,829,000			170,428,020
Stockholders’ equity
Preferred stock, par value of $0.0001 per share; 1,000,000 shares authorized; NaN issued or outstanding		—			—
Common stock, par value of $0.0001 per share; 100,000,000 shares authorized; 5,262,100 and 5,202,198 shares issued and outstanding as of September 30, 2020 and December 31, 2019		526			520
Additional paid-in capital		5,238,044			4,639,030
Retained earnings (accumulated deficit)		(238,560	)		360,451
Total stockholders’ equity		5,000,010			5,000,001
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	174,859,942		$	175,767,979

	For the Three Months Ended September 30, 2020			For the Three Months Ended September 30, 2019			For the Nine Months Ended September 30, 2020			Period from March 6, 2019 (Inception) through September 30, 2019
Revenues	$	—		$	—		$	—		$	—
General and administrative expenses		361,005			395,583			1,346,525			577,407
Loss from operations		(361,005	)		(395,583	)		(1,346,525	)		(577,407	)
Other income
Interest income on cash and marketable securities held in Trust Account		44,890			933,853			1,016,923			1,151,957
Income (loss) before provision for income taxes		(316,115	)		538,270			(329,602	)		574,550
Provision for income taxes		14,119			278,662			269,409			343,744
Net income (loss) and comprehensive income (loss)	$	(330,234	)	$	259,608		$	(599,011	)	$	230,806
Net loss attributable to common stockholders	$	(353,726	)	$	(241,866	)	$	(1,169,699	)	$	(387,789	)
Weighted-average common shares outstanding, basic and diluted		5,245,947			5,223,704			5,218,968			4,675,325
Net loss per share common share, basic and diluted	$	(0.07	)	$	(0.05	)	$	(0.22	)	$	(0.08	)

	Common Stock				Additional		Retained Earnings
Three Months Ended September 30, 2020	Shares		Amount		Paid-In Capital		(Accumulated Deficit)			Stockholders’ Equity
Balance as of June 30, 2020		5,229,076	$	523	$	4,907,807	$	91,674		$	5,000,004
Shares subject to redemption		33,024		3		330,237					330,240
Net loss		—		—		—		(330,234	)		(330,234	)
Balance as of September 30, 2020		5,262,100	$	526	$	5,238,044	$	(238,560	)	$	5,000,010

	Common Stock						Additional
Period from March 6, 2019 (Inception) through September 30, 2019	Shares			Amount			Paid-In Capital			Accumulated Deficit		Stockholders’ Equity
Balance as of March 6, 2019 (Inception)		0		$	0		$	0		$	0	$	0
Sale of common stock to Founders at $0.005804 per share		4,307,500			431			24,569			—		25,000
Sale of common stock to Founders in private placement at $10 per share		567,500			57			5,674,943			—		5,675,000
Sale of common stock to underwriters at $10 per share		120,000			12			1,199,988			—		1,200,000
Issuance of Insider shares for no consideration		5,000			1			(1	)		—		—
Cancellation of insider shares		(5,000	)		(1	)		1			—		—
Sale of common stock in Initial Public Offering, net of offering costs		17,250,000			1,725			168,165,845			—		168,167,570
Shares subject to redemption		(17,029,837	)		(1,703	)		(170,296,667	)		—		(170,298,370	)
Net income		—			—			—			230,806		230,806
Balance as of September 30, 2019		5,215,163		$	522		$	4,768,678		$	230,806	$	5,000,006

	For the Nine Months Ended September 30, 2020			Period from March 6, 2019 (Inception) through September 30, 2019
OPERATING ACTIVITIES
Net income (loss)	$	(599,011	)	$	230,806
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Interest earned on cash and marketable securities held in Trust Account		(1,016,923	)		(1,151,957	)
Change in operating assets and liabilities:
Prepaid expenses		(16,438	)		(187,100	)
Receivable from related parties		(8,126	)		(30,054	)
Other non-current assets		33,327			(53,368	)
Accounts payable		(118,016	)		96,632
Payable to related parties		(10,464	)		—
Accrued liabilities		150			5,000
Other current liabilities		(180,696	)		293,362
Net cash and cash equivalents used in operating activities		(1,916,197	)		(796,679	)
INVESTING ACTIVITIES
Investment of cash in Trust Account		—			(172,500,000	)
Cash withdrawn from Trust Account		727,119			71,590
Net cash and cash equivalents provided by (used in) investing activities		727,119			(172,428,410	)
FINANCING ACTIVITIES
Proceeds from sale of common stock to Founders		—			25,000
Borrowing from related party		—			99,937
Repayment of borrowing from related party		—			(99,937	)
Proceeds from sale of Private Placement Units		—			5,675,000
Proceeds from sale of common stock to underwriters		—			1,200,000
Proceeds from sale of Units, net of underwriting discounts paid		—			169,050,000
Payment of offering costs		—			(689,210	)
Net cash and cash equivalents provided by financing activities		—			175,260,790
Net change in cash and cash equivalents during period		(1,189,078	)		2,035,701
Cash and cash equivalents, beginning of period		1,576,508			—
Cash and cash equivalents, end of period	$	387,430		$	2,035,701
SUPPLEMENTAL DISCLOSURES
Cash paid for income taxes	$	462,238		$	50,382
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Offering costs included in accounts payable	$	—		$	193,220
Change in value of common stock subject to possible redemption	$	(599,020	)	$	2,130,800

Description:	Level	September 30, 2020
Assets:
Cash and marketable securities held in Trust Account	1	$	174,284,387