EXHIBIT 99.1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction
On February 26, 2023, UpHealth Holdings, Inc., a Delaware corporation (“UpHealth Holdings”) and a wholly-owned subsidiary of UpHealth, Inc. (“UpHealth” or the “Company”), agreed to sell 100% of the outstanding capital stock of UpHealth Holdings’ wholly-owned subsidiary, Innovations Group, Inc., a Utah corporation (“IGI” and, together with each of IGI’s wholly-owned subsidiaries, the “Group Companies”), to Belmar MidCo, Inc., a Delaware corporation (“Buyer”) and a wholly-owned subsidiary of Belmar Holdings, Inc., a Delaware corporation (“Buyer Parent”), a portfolio company of Webster Capital IV, L.P., a Delaware limited partnership (“Webster Capital IV”), pursuant to a stock purchase agreement (the “Stock Purchase Agreement”), dated February 26, 2023, by and among the Company, UpHealth Holdings, IGI and Buyer (the sale of the capital stock of IGI contemplated by the Stock Purchase Agreement, the “Transaction”). The Transaction is expected to close in the second quarter of 2023 (the “Closing” and such date, the “Closing Date”)
The following unaudited pro forma condensed financial information as of and for the year ended December 31, 2022 is based on the audited historical consolidated financial statements of UpHealth as of and for the year ended December 31, 2022 and the unaudited historical financial information of IGI as of and for the year ended December 31, 2022.
The unaudited pro forma condensed statement of operations for the year ended December 31, 2022 gives effect to the Transaction as if it had occurred on January 1, 2022.
The unaudited pro forma condensed financial information does not necessarily reflect what the Company’s financial condition or results of operations would have been had the divestiture occurred on the dates indicated. It also may not be useful in predicting the future financial condition and results of operations of the Company. The actual financial condition and results of operations of the Company may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 2022
In thousands, unaudited | UpHealth, Inc. | Transaction Accounting Adjustments | Notes | Pro Forma | ||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 15,557 | $ | 43,577 | (a),(c) | $ | 59,134 | |||||||||
Accounts receivable, net | 21,851 | — | 21,851 | |||||||||||||
Inventories | 161 | — | 161 | |||||||||||||
Due from related parties | 14 | — | 14 | |||||||||||||
Prepaid expenses and other current assets | 2,991 | — | 2,991 | |||||||||||||
Assets held for sale, current | 2,748 | (2,748 | ) | (b) | — | |||||||||||
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Total current assets | 43,322 | 40,829 | 84,151 | |||||||||||||
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Property, plant and equipment, net | 14,069 | — | 14,069 | |||||||||||||
Operating lease right-of-use assets | 7,213 | — | 7,213 | |||||||||||||
Intangible assets, net | 31,362 | — | 31,362 | |||||||||||||
Goodwill | 159,675 | — | 159,675 | |||||||||||||
Equity investment | 21,200 | — | 21,200 | |||||||||||||
Other assets | 438 | — | 438 | |||||||||||||
Assets held for sale, noncurrent | 62,525 | (62,525 | ) | (b) | — | |||||||||||
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Total assets | $ | 339,804 | $ | (21,696 | ) | $ | 318,108 | |||||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: | ||||||||||||||||
Accounts payable | 17,983 | $ | — | $ | 17,983 | |||||||||||
Accrued expenses | 38,763 | — | 38,763 | |||||||||||||
Deferred revenue | 2,738 | — | 2,738 | |||||||||||||
Due to related parties | 229 | — | 229 | |||||||||||||
Income taxes payable | 388 | — | 388 | |||||||||||||
Lease liabilities, current | 5,475 | — | 5,475 | |||||||||||||
Other liabilities, current | 74 | — | 74 | |||||||||||||
Liabilities held for sale, current | 3,319 | (3,319 | ) | (b) | — | |||||||||||
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Total current liabilities | 68,969 | (3,319 | ) | 65,650 | ||||||||||||
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Related party debt, noncurrent | 281 | — | 281 | |||||||||||||
Debt, noncurrent | 145,962 | (10,590 | ) | (c) | 135,372 | |||||||||||
Deferred tax liabilities | 1,200 | — | 1,200 | |||||||||||||
Warrant liabilities, noncurrent | 9 | — | 9 | |||||||||||||
Derivative liabilities, noncurrent | 56 | — | 56 | |||||||||||||
Lease liabilities, noncurrent | 8,741 | — | 8,741 | |||||||||||||
Other liabilities, noncurrent | 662 | — | 662 | |||||||||||||
Liabilities held for sale, noncurrent | 7,787 | (7,787 | ) | (b) | — | |||||||||||
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Total liabilities | 233,667 | (21,696 | ) | 211,971 | ||||||||||||
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Stockholders’ equity: | ||||||||||||||||
Common stock | 2 | — | 2 | |||||||||||||
Additional paid-in capital | 688,355 | — | 688,355 | |||||||||||||
Treasury stock, at cost | (17,000 | ) | — | (17,000 | ) | |||||||||||
Accumulated deficit | (566,209 | ) | — | (566,209 | ) | |||||||||||
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Total UpHealth, Inc., stockholders’ equity | 105,148 | — | 105,148 | |||||||||||||
Noncontrolling interest | 989 | — | 989 | |||||||||||||
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Total stockholders’ equity | 106,137 | — | 106,137 | |||||||||||||
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Total liabilities and stockholders’ equity | $ | 339,804 | $ | (21,696 | ) | $ | 318,108 | |||||||||
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UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2022
In thousands, except per share amounts, unaudited | UpHealth, Inc. | Transaction Accounting Adjustments | Notes | Pro Forma | ||||||||||
Revenues | $ | 158,803 | $ | (32,308 | ) | (d) | $ | 126,495 | ||||||
Cost of revenues | 88,648 | (20,349 | ) | (d) | 68,299 | |||||||||
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Gross profit | 70,155 | (11,959 | ) | 58,196 | ||||||||||
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Operating expenses: | ||||||||||||||
Sales and marketing | 15,951 | (2,458 | ) | (e) | 13,493 | |||||||||
Research and development | 7,888 | (49 | ) | (e) | 7,839 | |||||||||
General and administrative | 48,755 | (4,129 | ) | (e) | 44,626 | |||||||||
Depreciation and amortization | 16,140 | (202 | ) | (e) | 15,938 | |||||||||
Stock-based compensation | 6,464 | (3,650 | ) | (e) | 2,814 | |||||||||
Lease abandonment expenses | 75 | — | (e) | 75 | ||||||||||
Goodwill and intangible asset impairment | 114,061 | (1,791 | ) | (e) | 112,270 | |||||||||
Acquisition, integration, and transformation costs | 22,214 | (520 | ) | (e) | 21,694 | |||||||||
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Total operating expenses | 231,548 | (12,799 | ) | 218,749 | ||||||||||
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Loss from operations | (161,393 | ) | 840 | (160,553 | ) | |||||||||
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Other income (expense): | ||||||||||||||
Interest expense | (26,500 | ) | — | (26,500 | ) | |||||||||
Loss on deconsolidation of subsidiary | (37,708 | ) | — | (37,708 | ) | |||||||||
Gain on fair value of derivative liability | 7,529 | — | 7,529 | |||||||||||
Gain on fair value of warrant liabilities | 242 | — | 242 | |||||||||||
Loss on extinguishment of debt | (14,610 | ) | — | (14,610 | ) | |||||||||
Other income, net, including interest income | 121 | 36 | (f) | 157 | ||||||||||
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Total other income (expense) | (70,926 | ) | 36 | (70,890 | ) | |||||||||
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Net loss before income tax benefit | (232,319 | ) | 876 | (231,443 | ) | |||||||||
Income tax benefit | 9,384 | (1,100 | ) | (g) | 8,284 | |||||||||
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Net loss | (222,935 | ) | (224 | ) | (223,159 | ) | ||||||||
Less: net loss attributable to noncontrolling interest | 65 | — | 65 | |||||||||||
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Net loss attributable to UpHealth, Inc. | $ | (223,000 | ) | $ | (224 | ) | $ | (223,224 | ) | |||||
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Loss per share attributable to UpHealth, Inc.: | ||||||||||||||
Basic | $ | (15.17 | ) | $ | (0.02 | ) | $ | (15.19 | ) | |||||
Diluted | $ | (15.17 | ) | $ | (0.02 | ) | $ | (15.19 | ) | |||||
Weighted average shares outstanding: | ||||||||||||||
Basic | 14,699 | 14,699 | 14,699 | |||||||||||
Diluted | 14,699 | 14,699 | 14,699 |
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
(In thousands, unaudited)
1. Basis of Presentation
See “Introduction” for more information regarding the basis of presentation for the unaudited pro forma condensed financial information.
2. Transaction Accounting Adjustments
The unaudited pro forma condensed financial information reflects the impact of the following pro forma transaction accounting adjustments to the:
1) | UpHealth condensed balance sheet, primarily consisting of: |
a) | the receipt of cash consideration at the closing of the transaction and |
b) | the elimination of assets and liabilities attributable to the IGI business. |
c) | the required offering to repurchase a portion of the 2025 convertible notes with 20% of the net proceeds from the sale of the IGI business. This adjustment assumes that the 2025 convertible noteholders accept the full offer to repurchase. |
2) | UpHealth condensed statement of operations, primarily consisting of: |
d) | the elimination of revenues and cost of revenues of the IGI business; |
e) | the elimination of operating expenses at the IGI business; |
f) | the elimination of other expenses at the IGI business; and |
g) | the elimination of income tax benefit at the IGI business. |