UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~June 30, ~~2020~~2022


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

For the transition period from to

Commission File Number: 001-39515

American Well Corporation

(Exact name of registrant as specified in its charter)


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

75 State Street, 26th Floor

Boston, MA02109

(Address of registrant’s principal executive offices)

~~(617)~~ (617) 204-3500

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value of $0.01 per share	AMWL	The New York Stock Exchange

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

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

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

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

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

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

~~Title of each class~~

~~Trading Symbol(s)~~

~~Name of each exchange on which registered~~

~~Class A common stock,~~

~~par value of $0.01 per share~~

~~AMWL~~

~~The New York Stock Exchange~~

As of ~~October 30, 2020,~~July 31, 2022, the number of shares of the registrant’s Class A common stock outstanding was ~~199,891,685,~~240,621,761, the number of shares of the registrant’s Class B common stock outstanding was ~~29,508,844~~27,390,397 and the number of shares of the registrant’s Class C common stock outstanding was ~~5,555,555.~~5,555,555.

American Well Corporation

QUARTERLY REPORT ON FORM 10-Q

For the period ended ~~September~~June 30, ~~2020~~2022

TABLE OF CONTENTS


			Page
			PART I	~~Page~~Financial Information	3
~~PART I~~	Item 1.	Financial ~~Information~~Statements			3
~~Item 1.~~		~~Financial Statements~~			3
		Condensed Consolidated Balance Sheet as of ~~September~~June 30, ~~2020~~2022 (unaudited) and December 31, ~~2019~~2021			3
		Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019~~2021			4
		Condensed Consolidated Statement of Stockholders’ Equity ~~(Deficit)~~ (unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019~~2021			5
		Condensed Consolidated Statement of Cash Flows (unaudited) for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019~~2021			7
		Notes to the Unaudited Condensed Consolidated Financial Statements			8
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations			23	22
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			36	34
Item 4.		Controls and Procedures			36	35
PART II		Other Information			38	36
Item 1.		Legal Proceedings			38	36
Item 1A.		Risk Factors			38	36
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			38	36
Item 3.		Defaults Upon Senior Securities			39	37
Item 4.		Mine Safety Disclosures			39	37
Item 5.		Other Information			39	37
Item 6.		Exhibits			40	37

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)


	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	257,189		$	746,416
Investments		372,880			—
Accounts receivable ($82 and $2,054, from related parties and net of allowances of $1,452 and $1,809, respectively)		44,675			51,375
Inventories		7,921			7,530
Deferred contract acquisition costs		1,781			1,697
Prepaid expenses and other current assets		22,148			20,278
Total current assets		706,594			827,296
Restricted cash		795			795
Property and equipment, net		1,498			2,235
Goodwill		433,840			442,761
Intangible assets, net		136,434			152,409
Operating lease right-of-use asset		14,511			16,422
Deferred contract acquisition costs, net of current portion		2,202			2,028
Other assets		1,233			1,722
Investment in minority owned joint venture		1,366			168
Total assets	$	1,298,473		$	1,445,836
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,490		$	12,156
Accrued expenses and other current liabilities		43,649			58,711
Operating lease liability, current		3,174			1,918
Deferred revenue ($867 and $1,860 from related parties, respectively)		63,971			68,841
Total current liabilities		116,284			141,626
Other long-term liabilities		3,677			5,136
Contingent consideration liabilities, net of current portion		—			16,450
Operating lease liability, net of current portion		12,842			14,694
Deferred revenue, net of current portion ($16 and $22 from related parties, respectively)		4,777			7,055
Total liabilities		137,580			184,961
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.01 par value; 100,000,000 shares authorized, 0 shares issued or outstanding as of June 30, 2022 and as of December 31, 2021		—			—
Common stock, $0.01 par value; 1,000,000,000 Class A shares authorized, 240,397,065 and 229,402,453 shares issued and outstanding, respectively; 100,000,000 Class B shares authorized, 27,390,397 and 26,913,579 shares issued and outstanding, respectively; 200,000,000 Class C shares authorized 5,555,555 issued and outstanding as of June 30, 2022 and as of December 31, 2021		2,734			2,620
Additional paid-in capital		2,108,576			2,054,275
Accumulated other comprehensive income		(20,845	)		(6,353	)
Accumulated deficit		(950,466	)		(811,284	)
Total American Well Corporation stockholders’ equity		1,139,999			1,239,258
Non-controlling interest		20,894			21,617
Total stockholders’ equity		1,160,893			1,260,875
Total liabilities and stockholders’ equity	$	1,298,473		$	1,445,836

   September 30,
2020 December 31,
2019
Current assets:

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


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


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


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

Current liabilities:

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


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


Total liabilities
   117,267 124,946


Commitments and contingencies (Note 12)

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

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


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


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


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

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

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2022			2021			2022			2021
Revenue
($14,868, $8,253, $44,028 and $24,404 from related parties, respectively)	$	62,551		$	34,744		$	184,833		$	103,825
( $1,163, $1,462, $2,377 and $3,089 from related parties, respectively)													$	64,516		$	60,217		$	128,748		$	117,816
Costs and operating expenses:
Costs of revenue, excluding depreciation and amortization of intangible assets		42,116			19,060			118,969			55,060			36,497			33,889		$	73,262		$	69,594
Research and development		25,275			13,602			57,848			39,169			37,067			22,378		$	74,548		$	45,418
Sales and marketing		13,758			11,309			39,978			33,951			18,721			14,789		$	39,875		$	28,521
General and administrative		43,113			14,654			138,537			40,189			34,911			24,212		$	67,627		$	45,566
Depreciation and amortization expense		2,576			1,868			7,371			5,668			6,724			2,484		$	13,322		$	4,990

Total costs and operating expenses		126,838			60,493			362,703			174,037			133,920			97,752			268,634			194,089

Loss from operations		(64,287	)		(25,749	)		(177,870	)		(70,212	)		(69,404	)		(37,535	)		(139,886	)		(76,273	)
Interest income and other income (expense), net		255			1,286			1,410			4,547

Loss before benefit (expense) from income taxes and loss from equity method investment		(64,032	)		(24,463	)		(176,460	)		(65,665	)
Benefit (expense) from income taxes		(78	)		392			(330	)		22
Interest income and other (expense) income, net														764			224		$	872		$	285
Loss before expense from income taxes and loss from equity method investment														(68,640	)		(37,311	)		(139,014	)		(75,988	)
Benefit (Expense) from income taxes														(461	)		(103	)	$	(129	)	$	(412	)
Loss from equity method investment		(486	)		—			(1,250	)		—			(551	)		(722	)	$	(762	)	$	(1,541	)

Net loss		(64,596	)		(24,071	)		(178,040	)		(65,643	)		(69,652	)		(38,136	)		(139,905	)		(77,941	)
Net loss attributable to non-controlling interest		(1,515	)		(56	)		(3,920	)		(884	)		(507	)		(277	)	$	(723	)	$	(894	)

Net loss attributable to American Well Corporation	$	(63,081	)	$	(24,015	)	$	(174,120	)	$	(64,759	)	$	(69,145	)	$	(37,859	)	$	(139,182	)	$	(77,047	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.92	)	$	(0.57	)	$	(3.38	)	$	(1.55	)	$	(0.25	)	$	(0.15	)	$	(0.51	)	$	(0.31	)
Weighted-average common shares outstanding, basic and diluted		68,499,106			41,933,597			51,492,988			41,805,929			273,320,740			249,366,652			273,615,031			246,471,733

Net loss	$	(64,596	)	$	(24,071	)	$	(178,040	)	$	(65,643	)	$	(69,652	)	$	(38,136	)	$	(139,905	)	$	(77,941	)
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale investments		(135	)		(226	)		(415	)		(938	)
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on available-for-sale investments														(111	)		(119	)		(1,362	)		(85	)
Foreign currency translation		37			(59	)		215			(188	)		(10,179	)		(20	)		(13,130	)		(72	)

Comprehensive loss		(64,694	)		(24,356	)		(178,240	)		(66,769	)		(79,942	)		(38,275	)		(154,397	)		(78,098	)
Less: Comprehensive loss attributable to non-controlling interest		(1,515	)		(56	)		(3,920	)		(884	)		(507	)		(277	)		(723	)		(894	)

Comprehensive loss attributable to American Well Corporation	$	(63,179	)	$	(24,300	)	$	(174,320	)	$	(65,885	)	$	(79,435	)	$	(37,998	)	$	(153,674	)	$	(77,204	)

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

AMERICAN WELL CORPORATION

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

(in thousands, except share amounts)

(unaudited)


	Convertible Preferred Stock						Common Stock, Class A, Class B and Class C shares						Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			American Well Corporation Stockholders’ Equity (Deficit)			Noncontrolling Interest			Total Stockholders’ Equity (Deficit)			Common Stock				Additional Paid-In			Accumulated Other Comprehensive			Accumulated			American Well Corporation Stockholders’			Noncontrolling			Total Stockholders’
	Shares			Amount			Shares			Amount																								Shares		Amount		Capital			Income (Loss)			Deficit			Equity			Interest			Equity
Balances as of December 31, 2019		14,012,935		$	655,799			42,302,845		$	423		$	(158	)	$	50,289		$	250		$	(357,927	)	$	(307,123	)	$	26,259		$	(280,864	)
Issuance of Series C convertible preferred stock, net of issuance costs of $261		170,000			12,489			—			—			—			—			—			—			—			—			—
Balances as of January 1, 2022																																			261,871,587	$	2,620	$	2,054,275		$	(6,353	)	$	(811,284	)	$	1,239,258		$	21,617		$	1,260,875
Exercise of common stock options		—			—			7,392			—			—			2			—			—			2			—			2			976,644		10		2,455			—			—			2,465			—			2,465
Vesting of restricted stock units		—			—			146,969			1			—			—			—			—			1			—			1			1,398,305		14		(14	)		—			—			—			—			—
Issuance of stock under employee stock purchase plan																																			425,114		4		1,497			—			—			1,501			—			1,501
Issuance of common stock related to Conversa earn-out settlement																																			1,020,964		10		4,288			—			—			4,298			—			4,298
Stock-based compensation expense		—			—			—			—			—			4,458			—			—			4,458			—			4,458			—		—		12,085			—			—			12,085			—			12,085
Retirement of treasury stock		—			—			—			—			158			(158	)		—			—			—			—			—
Capital contributed by selling shareholders of acquired businesses																																			—		—		2,019			—			—			2,019			—			2,019
Currency translation adjustment		—			—			—			—			—			—			(171	)		—			(171	)		—			(171	)		—		—		—			(2,951	)		—			(2,951	)		—			(2,951	)
Unrealized gains on available-for-sale securities, net of tax		—			—			—			—			—			—			43			—			43			—			43
Unrealized losses on available-for-sale securities, net of tax																																			—		—		—			(1,251	)		—			(1,251	)		—			(1,251	)
Net loss		—			—			—			—			—			—			—			(24,382	)		(24,382	)		(843	)		(25,225	)		—		—		—			—			(70,037	)		(70,037	)		(216	)		(70,253	)

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

Issuance of Series C convertible preferred stock, net of issuance costs of $750		1,342,750			133,525			—			—			—			—			—			—			—			—			—
Balances as of March 31, 2022																																			265,692,614		2,658		2,076,605			(10,555	)		(881,321	)		1,187,387			21,401			1,208,788
Exercise of common stock options		—			—			768,106			8			—			2,319			—			—			2,327			—			2,327			1,083,571		10		1,916			—			—			1,926			—			1,926
Vesting of restricted stock units		—			—			204,829			2			—			—			—			—			2			—			2			1,606,976		16		(16	)		—			—			—			—			—
Treasury stock		—			—			(61,600	)		—			(163	)		—			—			—			(163	)		—			(163	)
Issuance of common stock related to SilverCloud earn-out settlement																																			4,959,856		50		12,895			—			—			12,945			—			12,945
Receipt of Section 16(b) disgorgement																																			—		—		295			—			—			295			—			295
Stock-based compensation expense		—			—			—			—			—			67,638			—			—			67,638			—			67,638			—		—		14,907			—			—			14,907			—			14,907
Capital contributed by selling shareholders of acquired businesses																																			—		—		1,974			—			—			1,974			—			1,974
Currency translation adjustment		—			—			—			—			—			—			349			—			349			—			349			—		—		—			(10,179	)		—			(10,179	)		—			(10,179	)
Unrealized loss on available-for-sale securities, net of tax		—			—			—			—			—			—			(323	)		—			(323	)		—			(323	)
Unrealized losses on available-for-sale securities, net of tax																																			—		—		—			(111	)		—			(111	)		—			(111	)
Net loss		—			—			—			—			—			—			—			(86,657	)		(86,657	)		(1,562	)		(88,219	)		—		—		—			—			(69,145	)		(69,145	)		(507	)		(69,652	)

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

Exercise of common stock options		—			—			885,253			9			—			1,877			—			—			1,886			—			1,886
Vesting of restricted stock units		—			—			3,458,849			34			—			(34	)		—			—			—			—			—
Class A and Class B shares withheld related to net share settlement of loans		—			—			(1,340,354	)		(13	)		(24,157	)		13			—			—			(24,157	)		—			(24,157	)
Conversion of Series A, Series B, and Series C convertible preferred stock into Class A shares		(15,525,685	)		(801,813	)		136,625,900			1,366			—			800,447			—			—			801,813			—			801,813
Issuance of Class A shares in connection with initial public offering, net of offering costs and underwriting discounts of $53,730		—			—			45,681,499			457			—			768,080			—			—			768,537			—			768,537
Issuance of Class C shares in connection with Google Private Placement, net of offering costs of $900		—			—			5,555,555			56			—			99,044			—			—			99,100			—			99,100
Stock-based compensation expense		—			—			—			—			—			34,420			—			—			34,420			—			34,420
Currency translation adjustment		—			—			—			—			—			—			37			—			37			—			37
Unrealized loss on available-for-sale securities, net of tax		—			—			—			—			—			—			(135	)		—			(135	)		—			(135	)
Net loss		—			—			—			—			—			—			—			(63,081	)		(63,081	)		(1,515	)		(64,596	)

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

Balances as of June 30, 2022																																			273,343,017	$	2,734	$	2,108,576		$	(20,845	)	$	(950,466	)	$	1,139,999		$	20,894		$	1,160,893

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

AMERICAN WELL CORPORATION

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

(in thousands, except share amounts)

(unaudited)


	Convertible Preferred Stock				Common Stock								Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)								American Well Corporation Stockholders’ Deficit							Total Stockholders’ Deficit				Common Stock								Treasury				Additional Paid-In				Accumulated Other Comprehensive				Accumulated				American Well Corporation Stockholders’				Noncontrolling				Total Stockholders’
	Shares		Amount		Shares			Amount		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit					American Well Corporation Stockholders’ Deficit			Noncontrolling Interest				Total Stockholders’ Deficit			Shares				Amount				Stock				Capital				Income (Loss)				Deficit				Equity				Interest				Equity
Balances as of December 31, 2018		12,927,549	$	575,713		41,393,622		$	414		—			$	37,127		$	1,351			$	(270,737	)		$	(231,845	)		$	27,435		$	(204,410	)
Balances as of January 1, 2021																																				235,604,105				2,357			$	(37,568	)			1,841,405			$	297			$	(582,359	)		$	1,224,132			$	22,065			$	1,246,197
Exercise of common stock options		—		—		443,846			4		—			357			—				—				361				—			361				3,474,375				34				—				10,096				—				—				10,130				—				10,130
Vesting of restricted stock units																																				853,842				9				—				(9	)			—				—				—				—				—
Retirement of treasury stock purchased in 2020																																				—				—				37,568				(15	)			—				(37,553	)			—				—				—
Shares withheld related to net share settlement and retired treasury stock in 2021																																				(402,060	)			(4	)			—				4				—				(9,771	)			(9,771	)			—				(9,771	)
Stock-based compensation expense		—		—		—			—		—			2,600			—				—				2,600				—			2,600				—				—				—				8,642				—				—				8,642				—				8,642
Currency translation adjustment		—		—		—			—		—			—			(49	)			—				(49	)			—			(49	)			—				—				—				—				(52	)			—				(52	)			—				(52	)
Unrealized loss on available-for-sale securities, net of tax		—		—		—			—		—			—			(333	)			—				(333	)			—			(333	)
Unrealized gains on available-for-sale securities, net of tax																																				—				—				—				—				34				—				34				—				34
Net loss		—		—		—			—		—			—			—				(21,131	)			(21,131	)			(384	)		(21,515	)			—				—				—				—				—				(39,188	)			(39,188	)			(617	)			(39,805	)

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

Balances as of March 31, 2021																																				239,530,262				2,396				—				1,860,123				279				(668,871	)			1,193,927				21,448				1,215,375
Exercise of common stock options		—		—		11,546			—		—			18			—				—				18				—			18				1,812,491				18				—				6,656				—				—				6,674				—				6,674
Vesting of restricted stock units																																				844,900				9				—				(9	)			—				—				—				—				—
Shares withheld related to net share settlement and retired treasury stock in 2021																																				(68,750	)			(1	)			—				1				—				(1,857	)			(1,857	)			—				(1,857	)
Stock-based compensation expense		—		—		—			—		—			2,471			—				—				2,471				—			2,471				—				—				—				10,726				—				—				10,726				—				10,726
Currency translation adjustment		—		—		—			—		—			—			(80	)			—				(80	)			—			(80	)			—				—				—				—				(20	)			—				(20	)			—				(20	)
Unrealized loss on available-for-sale securities, net of tax		—		—		—			—		—			—			(379	)			—				(379	)			—			(379	)
Unrealized gains on available-for-sale securities, net of tax																																				—				—				—				—				(119	)			—				(119	)			—				(119	)
Net loss		—		—		—			—		—			—			—				(19,613	)			(19,613	)			(444	)		(20,057	)			—				—				—				—				—				(37,859	)			(37,859	)			(277	)			(38,136	)

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

Exercise of common stock options		—		—		75,647			1		—			229			—				—				230				—			230
Vesting of restricted stock units		—		—		146,968			1		—			—			—				—				1				—			1
Stock-based compensation expense		—		—		—			—		—			3,604			—				—				3,604				—			3,604
Treasury Stock		—		—		(35,834	)		—		(158	)		—			—				—				(158	)			—			(158	)
Currency translation adjustment		—		—		—			—		—			—			(59	)			—				(59	)			—			(59	)
Unrealized loss on available-for-sale securities, net of tax		—		—		—			—		—			—			(226	)			—				(226	)			—			(226	)
Net loss		—		—		—			—		—			—			—				(24,015	)			(24,015	)			(56	)		(24,071	)

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

Balances as of June 30, 2021																																				242,118,903			$	2,422			$	-			$	1,877,497			$	140			$	(708,587	)		$	1,171,472			$	21,171			$	1,192,643

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

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share and per share amounts)

(unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2020			2019			2022			2021
Cash flows from operating activities:
Net loss	$	(178,040	)	$	(65,643	)	$	(139,905	)	$	(77,941	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		7,371			5,668			13,132			4,990
Provisions for doubtful accounts		1,236			621
Provisions for credit losses								(308	)		(57	)
Amortization of deferred contract acquisition costs		852			797			847			731
Amortization of deferred contract fulfillment costs		510			531			288			351
Noncash compensation costs incurred by selling shareholders								3,993			—
Stock-based compensation expense		106,516			8,675			27,598			19,368
Loss on equity method investment		1,250			—			762			1,541
Deferred income taxes								(1,164	)		—
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		(8,468	)		11,878			5,763			9,809
Inventories		(4,671	)		(500	)		(391	)		199
Deferred contract acquisition costs		(1,575	)		(1,115	)		(1,135	)		(618	)
Prepaid expenses and other current assets		(1	)		(797	)		(1,714	)		284
Other assets		426			(846	)		489			184
Accounts payable		(135	)		13			(6,525	)		(624	)
Accrued expenses and other current liabilities		2,353			553			(490	)		(16,063	)
Other long-term liabilities		(194	)		(902	)		(15	)		(38	)
Deferred revenue		(15,364	)		(25,548	)		(6,624	)		(9,506	)

Net cash used in operating activities		(87,934	)		(66,615	)		(105,399	)		(67,390	)

Cash flows from investing activities:
Purchases of property and equipment		(3,261	)		(1,098	)		(58	)		(283	)
Investment in minority owned joint venture		(2,940	)		—
Investment in less than majority owned joint venture								(1,960	)		(2,548	)
Purchases of investments		(159,608	)		(78,946	)		(499,223	)		—
Proceeds from sales and maturities of investments		69,132			226,509			124,981			100,000

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

Net cash used in and provided by investing activities								(376,260	)		97,169
Cash flows from financing activities:
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs		146,014			—
Proceeds from exercise of common stock options		4,235			610			4,465			16,733
Proceeds from employee stock purchase plan								1,501			—
Payments for the purchase of treasury stock		(18,417	)		(158	)		—			(11,628	)
Proceeds from issuance of common stock in initial public offering, net of underwriting costs and commissions		772,931			—
Proceeds from issuance of common stock to Google		100,000			—
Payment of deferred offering costs		(1,456	)		—			—			(1,613	)

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

Net increase in cash, cash equivalents, and restricted cash		818,696			80,302
Proceeds from Section 16(b) disgorgement								295
Payment of contingent consideration								(11,790	)		—
Net cash used in and provided by financing activities								(5,529	)		3,492
Effect of exchange rates changes on cash, cash equivalents, and restricted cash								(2,039	)		—
Net decrease in cash, cash equivalents, and restricted cash								(489,227	)		33,271
Cash, cash equivalents, and restricted cash at beginning of period		138,816			54,070			747,211			942,711

Cash, cash equivalents, and restricted cash at end of period	$	957,512		$	134,372		$	257,984		$	975,982

Cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents		956,417			133,277			257,189			975,187
Restricted cash		1,095			1,095			795			795

Total cash, cash equivalents, and restricted cash at end of period	$	957,512		$	134,372		$	257,984		$	975,982

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	138		$	—
Cash (refunded) paid for income taxes							$	13		$	955
Supplemental disclosure of non-cash investing and financing activities:
Additions to property and equipment included in accrued expenses and accounts payable	$	19		$	—
Initial public offering and Google common stock offering costs in accrued expenses	$	3,838		$	—
Treasury stock costs in accrued expenses	$	5,903		$	—
Issuance of common stock in settlement of earnout							$	17,243		$	—
Receivable related to exercise of common stock options							$	—		$	71

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

AMERICAN WELL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

(unaudited)

1. Organization and Description of Business

Description of Business

American Well Corporation (the “Company”) was incorporated under the laws of the State of Delaware in June 2006. The Company is headquartered in Boston, Massachusetts. The Company is a leading ~~telehealth~~enterprise software company ~~that enables the~~enabling digital ~~distribution and~~ delivery of care for healthcare’s key stakeholders. The ~~Company’s scalable~~Company empowers our clients with the core technology ~~is deployed at the enterprise level of clients, embeds into existing offerings~~ and ~~workflows, spans the continuum of~~services necessary to successfully develop and distribute virtual care programs that meet their strategic, operational, financial and ~~enables the delivery of this care across a wide variety of~~ clinical ~~retail, school~~objectives under their own brands.

Acquisitions

On August 9, 2021 and ~~home settings.~~

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

~~Initial Public Offering~~

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

~~Google Private Placement~~

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

~~Stock Split~~

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

Liquidity and Capital Resources

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

The Company expects that its cash, cash equivalents and investments balance as of June 30, 2022 of $630,069 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months.

2. Summary of Significant Accounting Policies

There have been no material changes to the significant accounting policies described in the Company’s ~~final prospectus, as amended, filed~~Form 10-K for the fiscal year ended December 31, 2021, that have had a material impact on ~~September 18, 2020 with~~ the ~~SEC pursuant to Rule 424(b) under the Securities Act of 1933 (the “Prospectus”) during the nine months ended September 30, 2020.~~consolidated financial statements and related notes.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary for the fair statement of the Company’s the financial position, results of operations and cash flows at the dates and for the periods indicated. The interim results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 are not necessarily indicative of results for the full ~~2020~~2022 calendar year or any other future interim periods. The information included in the interim financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in the ~~Prospectus.~~Form 10-K.

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

~~For substantially all of the~~The Company’s ~~subsidiaries the functional~~reporting currency is the U.S. dollar. The Company determines the functional currency of each subsidiary based on the currency of the primary economic environment in which each subsidiary operates. Items included in the financial statements of such subsidiaries are measured using that functional currency. Foreign currency denominated monetary assets and liabilities are remeasured into U.S. dollars at current exchange rates and foreign currency denominated nonmonetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. Gains or losses from foreign currency remeasurement and settlements are included in interest income and other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

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

Use of Estimates

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

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

Segment Information

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

Variable Interest Entities

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

The aggregate carrying value of total assets and total liabilities included on the condensed consolidated balance sheets for the PCs after elimination of intercompany transactions were ~~$31,987~~$26,879 and ~~$2,216,~~$1,508, respectively, as of ~~September~~June 30, ~~2020~~2022 and ~~$35,714~~$29,770 and ~~$5,777,~~$1,485, respectively as of December 31, ~~2019.~~2021.

Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was ~~$18,206~~$17,400 and ~~$3,698~~$17,585 for the three ~~months~~ ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively. Net ~~income~~loss included on the condensed consolidated statements of operations and comprehensive loss ~~for the PCs after elimination of intercompany transactions $12,258 and $3,562~~was not material for the three months ended ~~September~~June 30, ~~2020~~2022 and ~~2019, respectively.~~2021. Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was ~~$61,596~~$35,792 and ~~$13,905~~$35,154 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively. Net ~~income~~loss included on the condensed consolidated statements of operations and comprehensive loss was not material for the ~~PCs after elimination of intercompany transactions was $42,644 and $13,267 for the nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019.~~2021

Investment in Minority Owned Joint Venture

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

~~During the nine months ended September 30,~~9

In 2020 the Company contributed ~~$2,940~~$2,940 as its initial investment for a ~~49%~~49% interest in CCAW, JV LLC. The agreement also requires aggregate total capital contributions by the Company up to an additional ~~$11,800~~$11,800 in two phases, which is yet to be defined. During the three months ended March 31, 2021, the Company made a capital contribution of $2,548, related to a portion of the phase one capital commitment. In April 2022 the Company made a capital contribution of $1,960 related to a portion of the phase one capital commitment.

For the three months ended June 30, 2022 and ~~nine months ended September 30, 2020,~~2021, the Company recognized a loss of ~~$486~~$551 and ~~$1,250~~$722 as its proportionate share of the joint venture’s results of operations, respectively. For the six months ended June 30, 2022 and 2021, the Company recognized a loss of $762 and $1,541, respectively. Accordingly, the carrying value of the equity method investment as of ~~September~~June 30, ~~2020~~2022 and December 31, 2021 was ~~$1,690.~~$1,366 and $168, respectively.

Concentrations of Credit Risk and Significant Customers

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

The Company performs ongoing assessments and credit evaluations of its customers to assess the collectability of the accounts based on a number of factors, including past transaction experience, age of the accounts receivable, review of the invoicing terms of the contracts, and recent communication with customers. The Company has not experienced significant credit losses from its accounts receivable. As of ~~September~~June 30, ~~2020~~2022 and December 31, ~~2019, no~~2021, one customer accounted for ~~10% or greater~~15% and 19% of outstanding accounts ~~receivable.~~receivable, respectively.

During the three ~~and nine~~ months ended ~~September~~June 30, ~~2020,~~2022 and 2021, sales to one ~~related party~~ customer represented ~~22%~~24% and 25% of the Company’s total revenue, ~~for both periods.~~respectively. During the ~~three and nine~~six months ended ~~September~~June 30, ~~2019,~~2022 and 2021, sales to one customer (who was a related party ~~customer~~during the 2021 period) represented ~~23%~~25% and ~~22%~~25% of the Company’s total revenue, respectively.

~~Emerging Growth Company Status~~

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

Recently Adopted Accounting Pronouncements

In ~~August 2018,~~December 2019, the FASB issued ASU ~~No. 2018-13,~~~~Fair Value Measurement (Topic 820): Disclosure Requirements~~2019-12, Simplifying the Accounting for ~~Fair Value Measurement~~ ~~(‘‘~~Income Taxes (“ASU ~~2018-13’’~~2019-12”), which ~~modifies~~simplifies the accounting for income taxes by removing certain exceptions and clarifying and amending existing disclosure requirements for fair value measurements in Topic 820. The new disclosure requirements include disclosure related to changes in unrealized gains or losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of each reporting period and the explicit requirement to disclose the range and weighted-average of significant unobservable inputs used for Level 3 fair value measurements. The other provisions of ASU ~~2018-13~~ ~~include eliminated and modified disclosure requirements. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU~~ ~~2018-13~~ and delay adoption of the additional disclosures until their effective date. For all entities, this guidance is required to be adopted for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted.guidance. The guidance was adopted effective January 1, ~~2020~~2021 and did ~~not~~not have a material impact on the condensed consolidated financial statements and disclosures.

In ~~August 2018,~~October 2021, the FASB issued ASU ~~2018-15,~~ ~~Intangibles-Goodwill and~~ ~~Other-Internal-Use~~ ~~Software (Subtopic~~ ~~350-40)~~2021-08, Business Combinations(Topic 805): ~~Customer’s~~ Accounting for ~~Implementation Costs Incurred~~Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a ~~Cloud Computing~~~~Arrangement That Is a Service Contract~~~~, which aligns~~business combination in accordance with Topic 606. At the ~~requirements~~acquisition date, an acquirer should account for ~~capitalizing implementation costs incurred~~the related revenue contracts in ~~a cloud computing arrangement that is a service~~accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the ~~requirements for capitalizing implementation costs incurred to develop or obtain~~ ~~internal-use-software.~~ ~~The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted.~~acquiree’s financial statements. The guidance was adopted effective ~~January~~July 1, ~~2020~~2021 and ~~did not have a material impact on~~impacted the ~~condensed consolidated financial statements~~accounting of acquired deferred revenue for the Conversa and ~~disclosures.~~SilverCloud acquisitions that occurred in August 2021.

~~Recently Issued Accounting Pronouncements~~10

In June 2016, the FASB issued ASU No. 2016-13,Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (‘‘ASU 2016-13’’), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19,Codification Improvements toTopic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05,Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (‘‘ASU 2019-05’’). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. ~~For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU~~ ~~2016-13~~ ~~is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU~~ ~~2016-13~~ is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. This standard will be effective for the Company on January 1, 2023. The Company ~~is currently evaluating~~adopted ASU 2016-13 and the ~~impact that~~related clarifications in 2021. The adoption did not have a material effect on the ~~adoption of ASU~~ ~~2016-13~~ ~~will have on its condensed~~Company’s consolidated financial statements.

~~In December 2019, the FASB issued ASU~~ ~~2019-12,~~ ~~Simplifying the Accounting for Income Taxes (“ASU~~ ~~2019-12”),~~ which simplifies the accounting for income taxes by removing certain exceptions and clarifying and amending existing guidance. For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU ~~2019-12~~ is effective for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. The Company is planning on early adopting this standard on January 1, 2021. The Company is currently evaluating the impact that the adoption of ASU ~~2019-12~~ ~~will have on its condensed consolidated financial statements.~~

3. Revenue

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2022		2021		2022		2021
Platform subscription	$	25,834	$	21,959	$	72,048	$	60,849	$	29,592	$	26,780	$	58,283	$	51,376
Visits		28,455		7,177		90,936		25,681		29,750		27,532		60,486		55,353
Other		8,262		5,608		21,849		17,295		5,174		5,905		9,979		11,087

Total Revenue	$	62,551	$	34,744	$	184,833	$	103,825	$	64,516	$	60,217	$	128,748	$	117,816

Accounts Receivable, Net

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

Changes in the allowance for ~~doubtful accounts~~credit losses were as follows:


	Nine Months Ended September 30, 2020			Year Ended December 31, 2019			Six Months Ended June 30, 2022			Year Ended December 31, 2021
Allowance for doubtful accounts, beginning of the period	$	686		$	396
Allowance for credit losses, beginning of the period							$	1,809		$	1,556
Provisions		1,236			717			(308	)		714
Write-offs		(589	)		(427	)		(49	)		(461	)

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

Allowance for credit losses, end of the period							$	1,452		$	1,809

The Company has rights to consideration for services completed but not billed at the reporting date. Unbilled receivables are classified as receivables when the Company has the right to invoice the customer. The amount of unbilled accounts receivable ~~was $3,294 and $1,622 as of September 30, 2020 and December 31, 2019, and has been~~ included within accounts receivable on the ~~condensed~~ consolidated balance ~~sheet.~~sheet was $4,339 and $5,697 as of June 30, 2022 and December 31, 2021, respectively. The amount of unbilled accounts receivable included within other assets on the consolidated balance sheet was 0 as of June 30, 2022 and $781as of December 31, 2021, respectively.

Deferred Revenue

Contract liabilities consist of deferred revenue and include billings in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. For the three months ended June 30, 2022 and ~~nine-months ended September 30, 2020,~~2021, the Company recognized revenue of ~~$43,656~~$16,845 and ~~$61,775,~~$21,238, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. For the ~~three~~six months ended June 30, 2022 and ~~nine-months ended September 30, 2019,~~2021, the Company recognized revenue of ~~$25,229~~$39,992 and ~~$57,128~~$39,146, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented.

~~Significant changes~~11

Changes in the Company’s deferred revenue balance for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~the year ended~~ December 31, ~~2019~~2021 were as follows:


	Nine Months Ended September 30, 2020			Year Ended December 31, 2019			Six Months Ended June 30, 2022			Year Ended December 31, 2021
Total deferred revenue, beginning of the period	$	77,386		$	93,299		$	75,896		$	74,800
Additions		56,825			85,167			50,690			123,717
Recognized		(72,407	)		(101,080	)		(57,838	)		(122,621	)

Total deferred revenue, end of the period	$	61,804		$	77,386		$	68,748		$	75,896

Current deferred revenue								63,971			68,841
Non-current deferred revenue								4,777			7,055
Total							$	68,748		$	75,896

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




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

Transaction Price Allocated to Remaining Performance Obligations

As of ~~September~~June 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$170,168~~$192,836 and ~~$162,230,~~$219,893, respectively. The substantial majority of the unsatisfied performance obligations will be satisfied over the next three ~~years.~~years.

As it pertains to the ~~December 31, 2019~~June 30, 2022 amount, the Company expects to recognize ~~45%~~45% of the transaction price in the ~~year ending December 31, 2020~~12 month period ended June 30, 2023, in its condensed consolidated statement of operations and comprehensive loss with the remainder recognized thereafter. As it pertains to the September 30, 2020 amount, the Company expects to recognize 45% of the transaction price in the 12 month period ended September 30, 2021, in its condensed consolidated statement of operations and comprehensive loss with the remainder recognized thereafter.

4. National Telehealth Network

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

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

The proportionate share of the ~~income (loss)~~loss attributed to the non-controlling interest amounted to ~~$(1,515)~~$507 and ~~($56)~~$277 for the three months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively. The proportionate share of the loss attributed to the non-controlling interest amounted to ~~($3,920)~~$723 and ~~($884)~~$894 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively.

The carrying value of the non-controlling interest was ~~$22,339~~$20,894 and ~~$26,259~~$21,617 as of ~~September~~June 30, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively.

5. Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

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

•

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

•

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

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


	September 30, 2020								June 30, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market funds	$	52,955	$	—	$	—	$	52,955	$	167,560	$	—	$	—	$	167,560
Investments		—		129,914		—		129,914

		52,955		129,914		—	$	182,869


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

		62,113		39,953		—		102,066

U.S government securities										—		372,880		—	$	372,880
Total financial assets:									$	167,560	$	372,880	$	—	$	540,440


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Money market funds	$	671,107	$	—	$	—	$	671,107
Total financial assets:	$	671,107	$	—	$	—	$	671,107
Contingent consideration	$	—	$	—	$	16,450	$	16,450
Total financial liabilities:	$	—	$	—	$	16,450	$	16,450

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

The Company has classified its net liability for contingent earnout considerations relating to the Acquisitions within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which included the Monte Carlo method that uses key assumptions to model future revenue and costs of goods sold projections. A description of the Acquisitions is included within Note 7. The contingent earnout payments for each acquisition are based on the achievement of certain revenue thresholds. During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2022 the fair value of the contingent earnout consideration decreased due to the Company signing an amendment to the agreement accelerating the determination of the Conversa revenue earn-out as of March 31, 2022 that resulted in the issuance of 1,020,964 shares of Class A Common Stock, and signing an amendment to the agreement accelerating the determination of the SilverCloud revenue earn-out as of May 11, 2022 that resulted in the issuance of 4,959,856 shares of Class A Common Stock, which resulted in a net accretion to the contingent considerations of $793.


	Six Months Ended June 30, 2022
Beginning Balance as of January 1	$	16,450
Accretion of contingent consideration		793
Fair value adjustment		—
Earned amount issued to shareholders in Class A Common Stock		(17,243	)
Ending Balance	$	—

During the six months ended June 30, 2022, there were no0 transfers between fair value measurement levels.

6. Investments

As of ~~September~~June 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the fair value of the Company’s investments by type of security was as follows:


	September 30, 2020								June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Assets:
U.S government securities	$	129,831	$	83	$	—	$	129,914	$	374,242		—	$	(1,362	)	$	372,880
									$	374,242	$	—	$	(1,362	)	$	372,880
		129,831		83		—		129,914


	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Assets:
U.S government securities	$	39,355	$	598	$	—	$	39,953

		39,355		598		—		39,953

December 31, 2021

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Assets:

U.S government securities

—

7. Business Combinations

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

The Company signed an amendment to the agreement accelerating the determination of the SilverCloud revenue earn-out as of May 11, 2022, which resulted in the issuance of 4,959,856 shares of Class A Common Stock. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were ~~$1,494~~$4,854 which included transaction costs from financial and legal advisors and other transaction related fees and were recognized as ~~general and administrative expense~~incurred in the ~~condensed~~

Company’s consolidated ~~statements~~statement of operations and comprehensive loss ~~during~~in general and administrative expenses.

On August 9, 2021, the Company completed the acquisition of Conversa through a merger in which Conversa became a wholly-owned subsidiary of the Company. The cash consideration paid was $51,331 net of cash acquired of $9,735. The stock consideration was comprised of 4.7 million shares of the Company’s Class A common stock valued at $52,160. Conversa is a leader in automated virtual healthcare. The Company is obligated to pay an earn-out of up to $30,000 contingent upon Conversa achieving certain integration thresholds in the first quarter of 2022, and certain revenue thresholds for the year ~~ended~~ending December 31, ~~2019.~~2022. The Company estimated the fair value of the contingent consideration as of the acquisition date to be $15,230. The contingent consideration is subject to remeasurement at each reporting date until December 31, 2022, with the remeasurement adjustment reported in the consolidated statement of operations and comprehensive loss. The integration milestone was achieved in December 2021 and $15,000 was paid in January 2022. The Company signed an amendment to the agreement accelerating the determination of the Conversa revenue earn-out as of March 31, 2022, which resulted in the issuance of 1,020,964 shares of Class A Common Stock. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $2,435 which included transaction costs from financial and legal advisors and other transaction related fees and were recognized as incurred in the Company’s consolidated statement of operations and comprehensive loss in general and administrative expenses.

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

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

intangible assets with significant estimates such as revenue projections. The ~~final~~ allocation of the ~~purchase~~ consideration transferred to the assets acquired and the liabilities assumed for the Acquisitions remains preliminary, and therefore can be revised as a result of ~~$82,948 is as follows:~~additional information obtained due to completing the assessment of the tax attributes of the business combination. Additional adjustments may be recorded within the measurement period, which will not exceed one year from the acquisition date.

Identifiable assets acquired and liabilities assumed:


	Amount			SilverCloud			Conversa Health
Cash	$	2,938
Purchase consideration:
Cash consideration, net of cash acquired				$	105,195		$	51,331
Stock consideration					85,571			52,160
Contingent consideration					29,360			15,230
Escrow share consideration					6,376
Working capital adjustment					(300	)		(127	)
Total consideration transferred				$	226,202		$	118,594

Allocation of consideration transferred:
Accounts receivable		3,612		$	2,630		$	3,651
Identifiable intangible assets		14,100			78,146			34,700
Other assets		179			491			4,604

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

Deferred revenue					5,813			4,655
Other long-term liabilities					11,557			115
Total liabilities assumed		(4,490	)		19,525			13,233

Goodwill		66,609		$	164,460		$	88,872
				$	226,202		$	118,594
Total purchase consideration	$	82,948

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

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

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



Total
   $ 14,100

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


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

8. Goodwill and Intangible Assets

Goodwill consisted of the following:


	Nine Months Ended September 30, 2020		Year Ended December 31, 2019
	Nine Months Ended September 30, 2020		Year Ended December 31, 2019
Beginning Balance as of January 1	$	193,877	$	127,268	$	442,761
Goodwill acquired (Note 7)		—		66,609

Goodwill acquired						—
Currency translation adjustments						(8,921	)
Ending Balance	$	193,877	$	193,877	$	433,840

Identified intangible assets consisted of the following:


	Gross Amount		Accumulated Amortization			Carrying Value		Weighted Average Remaining Life		Gross Amount		Accumulated Amortization			Carrying Value		Weighted Average Remaining Life
December 31, 2019
June 30, 2022
Customer relationships										$	80,201	$	(20,852	)	$	59,349		7.9
Contractor relationships											535		(268	)		267		6.5
Tradename											13,688		(1,781	)		11,907		5.5
Technology											88,575		(23,664	)		64,911		4.7
										$	182,999	$	(46,565	)	$	136,434

										Gross Amount		Accumulated Amortization			Carrying Value		Weighted Average Remaining Life
December 31, 2021
Customer relationships	$	38,782	$	(7,416	)	$	31,366		8.0	$	81,053	$	(16,842	)	$	64,211		8.2
Contractor relationships		535		(165	)		370		9.0		535		(247	)		288		7.0
Trade name		300		(4	)		296		6.9		14,435		(706	)		13,729		5.8
Technology		37,063		(5,560	)		31,503		8.5		90,464		(16,283	)		74,181		5.0
										$	186,487	$	(34,078	)	$	152,409
	$	76,680	$	(13,145	)	$	63,535

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

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







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

Amortization expense related to intangible assets for the three ~~and nine~~ months ended ~~September~~June 30, ~~2020~~2022 and 2021 was ~~$1,940~~$6,328 and ~~$5,817,~~$1,928, respectively. Amortization expense related to intangible assets for the ~~three and nine~~six months ended ~~September~~June 30, ~~2019~~2022 and 2021 was ~~$1,435~~$12,514 and ~~$4,305,~~$3,856, respectively. Estimated future amortization expense of the identified intangible assets as of ~~September~~June 30, ~~2020,~~2022, is as follows:


2020	$	1,938
2021		7,755
2022		7,755	$	12,205
2023		7,755		24,361
2024		7,755		24,377
2025				24,361
2026				20,102
Thereafter		24,760		31,028
			$	136,434

9. Accrued Expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:


	September 30, 2020		December 31, 2019		June 30, 2022		December 31, 2021
	September 30, 2020		December 31, 2019
Employee compensation, benefits, and payroll taxes	$	18,133	$	11,698
Employee compensation and benefits					$	15,876	$	21,572
Professional services		3,805		3,351		14,983		8,766
Earned contingent consideration						—		15,000
Provider services		4,043		2,709		4,483		5,473
Transaction costs		2,518		—
Other		9,802		9,593		8,307		7,900

Total	$	38,301	$	27,351	$	43,649	$	58,711

~~10. Line of Credit~~

In January 2011, the Company entered into a credit agreement (the “Line of Credit”) with a financial institution that provides for maximum borrowings in one or more advances of an amount up to $5,000. Borrowings under the Line of Credit accrue interest at the London Interbank Offered Rate plus 1.25%. Borrowings are repayable immediately upon demand by the financial institution. In November 2017, the Line of Credit was amended to increase the maximum borrowings to $7,000. As of September 30, 2020 and December 31, 2019, the Company had no outstanding borrowings under the Line of Credit.16

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

~~11.~~10. Stockholders’ Equity

~~Convertible~~Undesignated Preferred Stock

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

   Shares
Authorized    Shares Issued    Shares
Outstanding    Liquidation
Preference    Carrying
Value
Series A
   3,200,000    3,178,650    3,130,077    51,741    28,889
Series B
   833,334    787,725    787,725    37,060    23,632
Series C
   13,711,111    10,095,133    10,095,133    519,648    603,278










   17,744,445    14,061,508    14,012,935    608,449    655,799

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

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

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

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

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

~~Common Stock~~

~~In September 2020, upon completion of the IPO, the Company sold 45,681,499~~NaN shares of ~~Class A common~~preferred stock ~~at an offering price~~were issued or outstanding as of ~~$18.00 per share, including 4,459,277 shares of Class A common stock pursuant to the exercise in full of the underwriters’ option to purchase additional shares.~~ June 30, 2022 and December 31, 2021.

Common Stock

The Company received net proceeds of $768,537, after deducting underwriting discounts and commissions of $49,336 and offering costs of approximately $4,394. In September 2020, the Company sold 5,555,555 shares of Class C common stock in connection with the stock purchase agreement with Google, LLC for net proceeds of $99,100, after deducting offering costs of $900.

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

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

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

In the three and six months ended June 30, 2022, 0 shares of Class B common stock were converted to Class A common stock. As of ~~September~~June 30, ~~2020~~2022, the par value of the Class A, Class B and Class C shares was ~~$1,997, $290,~~$2,403, $275, and ~~$56,~~$56, respectively.


	Shares Authorized		Shares Issued		Shares Outstanding		Shares Authorized		Shares Issued		Shares Outstanding
Class A		1,000,000,000		200,131,318		199,647,646		1,000,000,000		240,397,065		240,397,065
Class B		100,000,000		29,950,326		29,032,042		100,000,000		27,390,397		27,390,397
Class C		200,000,000		5,555,555		5,555,555		200,000,000		5,555,555		5,555,555
								1,300,000,000		273,343,017		273,343,017
		1,300,000,000		235,637,199		234,235,243

As of ~~September~~June 30, ~~2020,~~2022 and December 31, 2021, the Company had reserved ~~63,226,337~~74,437,861 and 61,989,749 shares of common stock for the exercise of outstanding stock options, the vesting of restricted stock units and the number of shares remaining available for future grant. As of December 31, 2019, the Company had reserved 157,998,948 shares of common stock for the conversion of the outstanding shares of Preferred Stock, the exercise of outstanding stock options, the vesting of restricted stock units and the number of shares remaining available for future grant.grant, respectively.

Stock Plans and Stock Options

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

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

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

Activity under the Plans is as follows:

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





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








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








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


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of January 1, 2022		15,893,755		$	4.81		5.9	$	23,876
Granted		—		$	—
Forfeited		(953,627	)	$	6.64
Expired		(49,542	)	$	5.63
Exercised		(2,060,215	)	$	2.13
Outstanding as of June 30, 2022		12,830,371			4.81		5.8	$	6,198
Vested and expected to vest as of December 31, 2021		15,395,398		$	4.61		5.8	$	23,752
Vested and expected to vest as of June 30, 2022		12,630,154		$	4.91		5.7	$	6,194
Options exercisable as of December 31, 2021		13,407,882		$	4.38		5.5	$	23,120
Options exercisable as of June 30, 2022		11,634,556		$	4.82		5.6	$	6,198

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

NaN options were granted in the ~~three~~six months ended ~~September~~June 30, ~~2019. The weighted-average grant date fair value of common stock options granted during the nine months ended September 30, 2020~~2022 and September 30, 2019, was $4.17 and $2.78, respectively. As of September 30, 2020, the unrecognized stock-based compensation expense related to outstanding stock options was $12,688, which is expected to be recognized over a weighted-average period of 2.62 years.2021.

~~Executive Equity Awards~~

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

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

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

Restricted Stock Units

During the year ended December 31, 2019, the Company granted 2,616,345 restricted stock units which vest over the service period of two to four years. During the nine months ended September 30, 2020, the Company granted 13,039,392 restricted stock units which were either fully vested upon issuance or vest over the service period of three to four years.

Activity for the restricted stock units is as follows:


	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2019		2,322,408		$	5.79
Unvested as of January 1, 2022							11,718,813		$	19.63
Granted		13,039,392			13.41		10,622,982			4.09
Vested		(3,810,645	)		9.50		(3,005,281	)		12.55
Forfeited							(1,787,601	)		9.04
Unvested as of June 30, 2022							17,548,913		$	7.75

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




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

The ~~amount~~total grant date fair value of ~~compensation costs recognized~~RSU’s granted for the ~~three~~six months ended ~~September~~June 30, ~~2020 and 2019 on~~2022 was $43,456. Restricted stock units vest over the service period of one to four years. The aggregate intrinsic value of restricted stock units ~~expected to vest was $31,253 and $1,297, respectively. The amount of compensation costs recognized~~vested for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019 on~~2021 was $13,180 and $35,223, respectively.

Restricted Stock Units with a Market Condition

In the ~~restricted~~six months ended June 30, 2022 the Company granted performance-based market condition share awards to certain members of the Company’s management team, which entitle these employees with the right to receive shares of common stock, ~~units expected~~upon achievement of certain market capitalization milestones measured over a rolling thirty day trading-period, subject to ~~vest was $91,168 and $1,297, respectively.~~the satisfaction of the applicable service vesting conditions. The performance-based market condition share awards for management (other than the co-CEOs) consist of 6 tranches with six separate specified award values that become payable upon achievement of certain market capitalization milestones, which can result in a vesting range of up to 10,423,674 shares. Also in 2022 the Company granted performance-based market condition share awards to the co-CEOs, which entitle these employees with the right to receive shares of common stock, upon achievement of certain market capitalization milestones measured over a rolling thirty day trading-period, subject to the satisfaction of the applicable service vesting conditions. The performance-based market condition share awards for the co-CEOs consist of 8 tranches with eight separate specified award values that become payable upon achievement of certain market capitalization milestones (subject to specified vesting caps during each of the first two years of the performance period), which can result in a vesting range of up to 7,500,000 shares for each co-CEO. As of ~~September~~June 30, ~~2020,~~2022, the ~~unrecognized stock-based compensation expense related~~performance-based market conditions for the awards to ~~these restricted~~management and the co-CEOs have not been met. These performance-based market condition share awards ~~was $39,449, which is expected to be recognized over~~have a ~~weighted-average~~performance period of ~~3.0 years.~~three years.

~~Stock-Based Compensation~~


	Shares			Weighted Average Grant Date Fair Value
Unvested as of January 1, 2022		—		$	—
Granted		25,423,674			2.21
Vested		—			—
Cancelled/Forfeited		(1,568,889	)		2.62
Unvested as of June 30, 2022		23,854,785		$	2.18

The total grant-date fair value of performance-based market condition share awards granted during the six months ended June 30, 2022 was $56,109 million and 0 performance-based market condition share awards were granted during the six months ended June 30, 2021.

The weighted average ~~of assumptions that the Company used to determine the~~estimated fair value of the ~~common stock options~~performance-based market condition share awards granted ~~to employees and directors were as follows:~~during the six months ended June 30, 2022 was determined using a Monte-Carlo valuation simulation, with the following most significant weighted-average assumptions:


	Nine Month Ended September 30,						Six Months Ended June 30,
	2020			2019			2022
Risk-free interest rate		1.09	%		2.44	%
Expected term (in years)		6.1			6.1
Risk-free rate								2.28	%
Term to end of performance period (yrs)							3 years
Valuation date stock price							$	3.43
Expected volatility		52	%		50	%		75	%
Expected dividend yield		0	%		0	%		0	%

2020 Employee Stock Purchase Plan

During the six months ended June 30, 2021, the Company had 0t issued any shares under the ESPP. During the six months ended June 30, 2022, the Company issued 425,114 shares under the ESPP. As of June 30, 2022 4,779,994 shares remained available for issuance.

Stock-Based Compensation

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2022		2021		2022		2021
Cost of revenues	$	309	$	124	$	668	$	360	$	426	$	521	$	761	$	910
Research and development		2,083		360		3,519		1,169		2,699		2,171		4,881		3,678
Selling and marketing		1,138		540		2,684		1,848		1,304		2,100		3,099		3,989
General and administrative		30,890		2,580		99,645		5,298		10,478		5,934		18,251		10,791

Total	$	34,420	$	3,604	$	106,516	$	8,675	$	14,907	$	10,726	$	26,992	$	19,368

~~2020 Employee Stock Purchase Plan~~

~~In July and August 2020,~~As of June 30, 2022, the ~~Company’s board of directors adopted, and the Company’s stockholders approved, the 2020 Employee Stock Purchase Plan (“ESPP”). A total of 3,084,218 shares of Class A~~unrecognized stock-based compensation expense related to unvested common ~~stock were reserved for issuance under the ESPP. The ESPP~~stock-based awards was $116,818, which is expected to ~~become effective January 1, 2021. Rights granted under the ESPP will~~ be ~~issued only with respect to shares~~recognized over a weighted-average period of Class A common stock. Subject to any limitations contained therein, under the ESPP an employee will be permitted to accrue the right to purchase stock under the ESPP up to $25,000 worth of shares during any calendar year. The purchase price of the shares will not be less than 85% of the fair market value of Class A common stock on the lower of the purchase date, which will be the final trading day of the purchase period, or the enrollment date, which will be the first trading day of the offering period.2.6 years.

~~12.~~11. Commitments and Contingencies

Indemnification

The Company’s arrangements generally include certain provisions for indemnifying customers against third-party claims asserting infringement of certain intellectual property rights in the ordinary course of business. The Company also regularly indemnifies customers against third-party claims that the company’s products or services breach applicable law or regulation or from claims resulting from a breach of the business associate agreement in place with the customer. In addition, the Company indemnifies its officers, directors and certain key employees while they are serving in good faith in their capacities. Through ~~September~~June 30, ~~2020~~2022 and December 31, ~~2019,~~2021, there have been no0 claims under any indemnification provisions.

~~Litigation~~

Litigation

From time to time, and in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. On September 14, 2020, the Company received a letter from Teladoc Health, Inc. ("Teladoc") alleging that certain of the Company’s cart products and associated peripherals infringe upon their patents. On October 12, 2020, Teladoc ~~Health, Inc~~ filed a claim against the Company related to these allegations. ~~The Company believes that these claims lack merit and intends~~On June 30, 2022, the claim was dismissed pursuant to ~~defend against them vigorously.~~a confidential settlement between the parties. As of ~~September~~June 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the Company did ~~not~~0t have any pending claims, charges or litigation that it expects would have a material adverse effect on its consolidated financial position, results of operations or cash flows.

~~13.~~12. Income Taxes

As a result of the Company’s history of net operating losses (“NOL”), the Company ~~has provided for~~continues to maintain a full valuation allowance against its domestic net deferred tax assets. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2022, the Company recognized an income tax expense of ~~$78~~$461 and ~~$330, respectively,~~$129, primarily due to the amortization of acquired intangibles and stock compensation deductions. For the three months and nine months ended September 30, 2019, the Company recognized an income tax benefit of $392 and $22, respectively, related to certain United Statesstate and foreign income ~~as well as amortization~~tax. During the three and six months ended June 30, 2021, the Company recorded income tax expense of ~~tax-deductible~~ ~~goodwill, which partially benefits the realization of its indefinite lived NOL in the United States.~~$103 and $412, primarily due to estimated state and foreign income taxes.

~~14.~~13. Related-Party Transactions

~~Teva Pharmaceuticals, Industries Ltd~~Philips Holding USA, Inc.

~~Teva Pharmaceuticals, Industries Ltd~~Philips Holding USA, Inc. (“~~Teva”~~Philips”) iswas determined to be a related party through June 2021, because a member of the Company’s board of directors iswas the ~~Executive Vice President and Head~~Business Leader of ~~Teva Pharmaceuticals’ North America Commercial.~~Philips Population Health Management. In addition, Teva is a shareholder of the Company. As of September 30, 2020 and December 31, 2019, short-term and long-term deferred revenue from this customer was not material. As of September 30, 2020 and December 31, 2019, there were no amounts due from Teva.

~~During~~ the three and six months ended ~~September~~June 30, ~~2020~~2021 the Company recognized revenue of $758 and ~~2019, and the nine months ended September 30, 2020 and 2019, revenues recognized~~1,658, respectively from contracts with this ~~customer were not material.~~customer.

~~Philips Holding USA,~~Anthem Inc.

~~Philips Holding USA,~~Anthem Inc. (“~~Philips”~~Anthem”) iswas determined to be a related party through February 2021, because a member of the Company’s board of directors isserved as the ~~Business Leader~~Vice President of ~~Philips Population Health Management. In addition, Philips is a shareholder of the Company. As of September 30, 2020 and December 31, 2019,~~Anthem. Prior to that director's departure from Anthem in February 2021 the Company ~~held short-term and long-term deferred~~recognized revenue of ~~$1,195 and $2,549, respectively~~$7,218 from contracts with this customer. ~~As of September 30, 2020 and December 31, 2019, amounts due from Philips were not material.~~

During the three months ended September 30, 2020 and 2019, the Company recognized revenue of $418 and $146, respectively from contracts with this customer. During the nine months ended September 30, 2020 and 2019, the Company recognized revenue of $1,126 and $372, respectively from contracts with this customer.

~~Anthem Inc.~~

Anthem Inc. (“Anthem”) is a related party because a member of the Company’s board of directors is a Vice President of Anthem. In addition, Anthem is a shareholder of the Company. As of September 30, 2020 and December 31, 2019, the Company held short-term and long-term deferred revenue of $4,671 and $11,561, respectively from contracts with this customer. As of September 30, 2020 and December 31, 2019, amounts due from Anthem were $1,178 and $2,499, respectively.

During the three months ended September 30, 2020 and 2019, the Company recognized revenue of $13,522 and $7,837, respectively from contracts with this customer. During the nine months ended September 30, 2020 and 2019, the Company recognized revenue of $40,677 and $23,120, respectively from contracts with this customer.

Cleveland Clinic

Cleveland Clinic is a related party because a member of the Company’s board of directors is an executive advisor to Cleveland Clinic. As of ~~September~~June 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the Company held ~~short-term and long-term~~total deferred revenue of ~~$457~~$261 and ~~$180,~~$456, respectively from contracts with this customer. As of ~~September~~June 30, ~~2020,~~2022 and December 31, 2021, amounts due from Cleveland Clinic were ~~$205. As of December 31, 2019, amounts due from Cleveland Clinic were not material.~~

$82 and $441, respectively.

During the three months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, the Company recognized revenue of ~~$514~~$694 and ~~$262,~~$279, respectively, from contracts with this customer. During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, the Company recognized revenue of ~~$1,004~~$1,454 and ~~$889,~~$530, respectively, from contracts with this customer.

CCAW, JV LLC

CCAW, JV LLC is a related party because it is a joint venture formed between the Company and Cleveland Clinic for which the Company has a minority owned interest in. During the ~~nine months~~year ended ~~September 30,~~December 31, 2020, the Company made an initial investment in CCAW, JV LLC of ~~$2,940~~$2,940 for its less than ~~50%~~50% interest in the joint venture. During the three ~~and nine~~ months ended ~~September~~June 30, ~~2020~~2021, the Company made a capital contribution of $2,548, related to a portion of the phase one capital commitment. During the three months ended June 30, 2022 the Company made a capital contribution of $1,960 related to a portion of the phase one capital commitment.

During the three months ended June 30, 2022 and 2021 the Company recognized revenue of ~~$404~~$469 and ~~$1,190~~$412 from contracts with this customer, respectively. During the six months ended June 30, 2022 and 2021, the Company recognized revenue of $923 and $874 from contracts with this customer, respectively.

As of ~~September~~June 30, ~~2020,~~2022 and December 31, 2021, the Company held ~~short and long term~~total deferred revenue of ~~$277~~$622 and $1,426, respectively, from contracts with this customer. As of ~~September~~June 30, ~~2020,~~2022 and December 31, 2021, amounts due from CCAW, JV LLC were ~~not material.~~

~~Loans to Officers~~

During the year ended December 31, 2019, the Company entered into secured promissory notes with the Company’s Chief Financial Officer in the amount of $1,781. During 2020, the Company entered into additional secured promissory notes with the Chief Financial Officer0 and other executive officers in the amount of $16,441. These loans were to fund the taxes associated with the restricted stock units and were collateralized by all of the capital stock of the Company that the employee owned or would own in the future and the employees’ personal assets. These loans are recorded within prepaids and other current assets in the Company’s condensed consolidated balance sheet. All outstanding loans with officers were repaid in August 2020 prior to the Company’s IPO.$1,613.

~~15.~~20

14. Net Loss per Share

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2022			2021			2022			2021
Numerator:
Net loss	$	(64,596	)	$	(24,071	)	$	(178,040	)	$	(65,643	)	$	(69,652	)	$	(38,136	)	$	(139,905	)	$	(77,941	)
Net income (loss) attributable to non-controlling interest		(1,515	)		(56	)		(3,920	)		(884	)

Net loss attributable to non-controlling interest														(507	)		(277	)		(723	)		(894	)
Net loss attributable to American Well Corporation	$	(63,081	)	$	(24,015	)	$	(174,120	)	$	(64,759	)	$	(69,145	)	$	(37,859	)	$	(139,182	)	$	(77,047	)

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

Weighted-average common shares outstanding —basic and diluted														273,320,740			249,366,652			273,615,031			246,471,733
Net loss per share attributable to common stockholders—basic and diluted	$	(0.92	)	$	(0.57	)	$	(3.38	)	$	(1.55	)	$	(0.25	)	$	(0.15	)	$	(0.51	)	$	(0.31	)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Unvested restricted stock units		14,856,621		7,724,006		14,856,621		7,724,006
Unvested performance market-based stock units		23,854,785		—		23,854,785		—
Options to purchase shares of common stock		12,830,371		17,562,754		12,830,371		17,562,754
		51,541,777		25,286,760		51,541,777		25,286,760

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2020    2019    2020    2019
Convertible preferred stock (as converted to common stock)
   —      113,762,320    —      113,762,320
Unvested restricted stock units
   5,455,654    —      5,455,654    —
Options to purchase shares of common stock
   24,064,300    23,712,967    24,064,300    23,712,967








   29,519,954    137,475,287    29,519,954    137,475,287

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

Special Note Regarding Forward-Looking Statements

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

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

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

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

•

weak growth and increased volatility in the telehealth market;

•

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

•

inability to adapt to rapid technological changes;

•

our ability to successfully launch our new Converge platform without significant cost overruns or disruptions to our business and our customers’ acceptance of this new platform;

•

our limited number of significant clients and the risk that we may lose their business;

•

increased competition from existing and potential new participants in the healthcare industry;

•

changes in healthcare laws, regulations or trends and our ability to operate in the heavily regulated healthcare industry;

•

compliance with regulations concerning personally identifiable information and personal health industry;

•

slower than expected growth in patient adoption of telehealth and in platform usage by either clients or patients;

•

inability to grow our base of affiliated and non-affiliated providers sufficient to serve patient demand;

•

our ability to comply with federal and state privacy regulations and the significant liability that could result from a cybersecurity breach or our failure to comply with such regulations;

•

our ability to establish and maintain strategic relationships with third parties;

•

our ability to complete, integrate and realize the anticipated benefits of strategic acquisitions;

•

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

and

•

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

exposures.

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

The foregoing list of factors is not exhaustive and does not necessarily include all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. The information in this Quarterly Report should be read carefully in conjunction with other uncertainties and potential events described in our ~~final prospectus~~Form 10-K filed with the SEC ~~pursuant to Rule 424(b) under the Securities Act of 1933, as amended,~~ on ~~September 18, 2020~~February 28, 2022 (the ~~“Prospectus”~~“Form 10-K”).

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

~~Overview~~

Overview

We are a leading ~~telehealth~~enterprise software company enabling digital delivery of care for healthcare’s key stakeholders. We empower our clients ~~at the enterprise level~~ with the core technology and services necessary to successfully develop and distribute ~~telehealth~~virtual care programs that meet their strategic, operational, financial and ~~social~~clinical objectives under their own brands. The Amwell Platform is a complete digital care delivery solution that equips our health system, health plan, government, and innovator ~~including government,~~ clients with the tools to enable new models of care for their patients and members. Our scalable technology ~~embeds~~integrates with our clients’ existing offerings and clinical workflows, spanning the continuum of care and enabling care delivery across a wide variety of clinical, retail, school and home settings. Our client-focused approach drives our success as one of the largest ~~telehealth~~global digital healthcare enterprise software companies. As of ~~September 30, 2020,~~December 31, 2021, we powered the digital care programs of over 55 health plans, which ~~support over 36,000 employers and~~ collectively represent more than 80 million covered lives, as well as ~~over~~approximately 150 of the nation’s largest health systems, encompassing more than 2,000 hospitals. Since inception, we have powered over ~~7.0~~17.7 million telehealth visits for our clients, including more than ~~4.3~~3.3 million in the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2022.

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

We believe Amwell makes this digital care transformation possible for the healthcare ecosystem. The Amwell ~~Platform~~telehealth platform ("Amwell Platform") enables virtual and automated care delivery across the full healthcare continuum – from primary and urgent care in the home to high acuity specialty consults, such as telestroke and telepsychiatry, in the hospital. We support both on-demand and scheduled consultations and offer 40 pre-packaged care modules and programs that power over 100 unique use cases today. ~~Our platform~~The Amwell Platform can be fully ~~embedded~~integrated into our clients’ patient/member portals and provider workflows. Providers can launch telehealth directly from their native EHRs, with seamless integration to their payer eligibility and claims systems. Providers, patients and members can access this care through a full range of Carepoints™, including via mobile, web, phone and our proprietary ~~kiosks and~~ carts that support multi-way video, phone or secure messaging interactions. Through our recent acquisitions of Conversa Health, Inc. (“Conversa”) and SilverCloud Health Holdings, Inc (“SilverCloud”) (together, the “August 2021 Acquisitions”), we enable automated care touchpoints, support ongoing treatment and care through digital engagements, and escalate care when needed to a live clinician. As of ~~September~~June 30, ~~2020, over 62,000~~2022, approximately 100,000 of our ~~active~~clients’ providers use the Amwell Platform to serve their patients and members. When needed, we augment and extend our clients’ clinical capabilities with ~~AMG,~~Amwell Medical Group (“AMG”), a nationwide ~~clinical~~ network of clinical entities with over ~~5,000~~6,500 multi-disciplinary providers covering 50 states with 24/7/365 coverage.

Converge™ is the latest version of the Amwell ~~exists~~Platform and is designed to ~~empower healthcare’s leading players, who have earned~~be reliable, flexible, scalable, secure and fully integrated with other healthcare software systems. Converge offers state-of-the-art data architecture and video capabilities, flexibility and scalability, and a user experience focused on the ~~deep trust~~needs of ~~their~~ patients and ~~members over decades,~~providers. Converge has been designed from the ground up with the holistic understanding that the future care of any one patient will inevitably blend a mix of physical, digital, and ~~does not~~automated experiences. The virtual care of today has grown to encompass hybrid care models, asynchronous and automated care, remote patient monitoring, patient and provider engagement — and the flow of data that drives all of the above.

With Converge, the digital care capabilities that health systems and health plans care about — for example virtual primary care, post-discharge follow-up, chronic condition management, remote patient monitoring — are aligned into a single digital care operating system that aggregates all of the data from these care experiences to provide real-time insight. By providing a single platform for the digital distribution of care, Converge will accelerate innovation and interoperability for health system and health plan clients as well as other healthcare innovators, who aim ~~to compete with or replace them. We help our clients white-label and embed telehealth within their existing healthcare offerings for their patients and members. Thus we enable our provider customers~~ to offer a seamless experience ~~that blends online convenience when needed with~~ ~~in-person~~ ~~care by known, trusted~~for providers, ~~as part of a complete care program that offers~~ patients ~~continuity of care. In this way, providers can use our telehealth platform as an effective augmentation~~ and ~~not a replacement of their traditional care delivery.~~members.

Our Business Model

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

Total subscription fees received ~~from Health System, Health Plan and Innovator clients~~ were ~~$25.8~~$29.6 million and ~~$22.0~~$26.8 million for the three months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively, and ~~$72.0~~$58.3 million and ~~$60.8~~$51.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively.

Health Systems

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

~~• Acute Behavioral Health~~

~~• Urgent Care~~

~~• Specialty Consult~~

~~• School Health~~

~~• Telestroke~~

~~• Behavioral Health Therapy~~

~~• Retail Health~~

~~• Triage in the ED~~

~~• Dialysis~~

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

Health Plans

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

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

~~• Urgent Care~~

~~• Nutrition~~

~~• Sleep Therapy~~

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

~~• Women’s Health~~

~~• Behavioral Health~~
~~Therapy~~

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

Innovators

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

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

Visits

Amwell’s ~~partner~~clinical affiliate AMG has built a network of over ~~5,000~~6,500 providers who are registered and credentialed to deliver care on the Amwell Platform. This clinical network is designed and operated in a way that allows us to meet the aggregate visit demand requirements of our health plan and health system clients, spanning ~~the following specialties:~~a broad mix of specialties including, for example, internal medicine, Family Medicine, Psychiatry, Gynecology, Anesthesiology, Nutritionist, Sleep Medicine, Pain Management, Psychology, Pulmonology, Urology, Health Coach, Orthopedic Surgery, Case Manager, Emergency Medicine, Gastroenterology, Nephrology, Pediatrician, Lactation Consultant, Social Worker, Vascular Surgery.


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

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

Fees received from AMG-related visits were ~~$28.5~~$29.7 million and ~~$7.2~~$27.5 million for the three months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively, and ~~$90.9~~$60.5 million and ~~$25.7~~$55.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively.

Services & Carepoints

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

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

Fees received from the provision of services and Carepoints were ~~$8.3~~$5.2 million and ~~$5.6~~$5.9 million for the three months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively, and ~~$21.8~~$10.0 million and ~~$17.3~~$11.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and ~~2019,~~2021, respectively.

Acquisitions

We have expanded and intend to continue to expand our Platform through research and development as well as the pursuit of selective acquisitions. We have completed multiple acquisitions since our inception, which we believe have expanded the channels that we serve and our distribution capabilities as well as broadening our service offering. Our acquisitions of SilverCloud and Conversa add proven longitudinal care and behavioral healthcare capabilities to our digital care enablement platform. SilverCloud is a leading digital mental health platform. Conversa is a leader in automated virtual healthcare. Acquisition costs and integration costs are an additional one time cost incurred as part of the acquisitions and investment in the future growth of the business.

Key Factors Affecting Our Performance

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

Telehealth Utilization

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

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

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

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

We continue to experience these levels of telehealth adoption and usage of our Platform and products. In the six months ended June 30, 2022, our clients completed a total of 3.3 million visits on the Amwell Platform, while in the six months ended June 30, 2021 2.9 million visits were completed. AMG providers accounted for 23% of total visits performed on the Amwell Platform during the six months ended June 30, 2022 and 2021, respectively. We demonstrated that virtual care goes beyond urgent care pandemic needs through the increase in scheduled visits. Scheduled visits increased to 2.4 million from 2.1 million during the six months ended June 30, 2022 and 2021, respectively.

Total Overall Quarterly Visits

Quarter Ended

Overall Visits

Performed by Customer Providers

June 30, 2022

1,525,000

76
%
March 31, 2022

1,775,000

78
%
December 31, 2021

1,525,000

75
%
September 30, 2021

1,425,000

75
%
June 30, 2021

1,300,000

75
%
March 31, 2021

1,575,000

80
%

Active Providers

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

•

the number of modules and use cases deployed within health systems

•

the adoption of telehealth by providers across the spectrum of care

•

the expansion of modules and programs through acquisitions, including Conversa Health and SilverCloud

•

the number of programs offered through health plans

•

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

•

the ongoing consumerization of healthcare

We continued to experience growth in core Active Providers in the current quarter, in which approximately 12,000 Active Providers were added to the Amwell Platform all coming from our Health System and Health Plan customers.


Total Active Providers
Quarter Ended	Total Active Providers		Customer Providers		AMG
June 30, 2022		103,500		100,000		3,500
March 31, 2022		102,000		98,500		3,500
December 31, 2021		91,500		88,000		3,500
September 30, 2021		80,000		76,000		4,000
June 30, 2021		71,000		67,000		4,000
March 31, 2021		81,000		76,000		5,000

Regulatory Environment

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

~~Business Combinations~~26

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

~~Seasonality~~

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

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with GAAP, we believe adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance. We use adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. A reconciliation is provided below for our non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of this non-GAAP financial measure to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Adjusted EBITDA

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes and in evaluating acquisition opportunities.

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

The following table presents a reconciliation of adjusted EBITDA from the most comparable GAAP measure, net loss, for the three and ~~the nine~~six months ended ~~September~~June 30, ~~2019~~2022 and ~~2020:~~2021:


	Three months ended September 30,						Nine months ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020			2019			2020			2019			2022			2021			2022			2021
Net loss	$	(64,596	)	$	(24,071	)	$	(178,040	)	$	(65,643	)	$	(69,652	)	$	(38,136	)	$	(139,905	)	$	(77,941	)
Add:
Depreciation and amortization		2,576			1,868			7,371			5,668			6,724			2,484			13,322			4,990
Interest and other income, net		(255	)		(1,286	)		(1,410	)		(4,547	)
Expense (Benefit) from income taxes		78			(392	)		330			(22	)
Interest income and other (expense) income, net														(764	)		(224	)		(872	)		(285	)
Benefit (Expense) from income taxes														461			103			129			412
Stock-based compensation		34,420			3,604			106,516			8,675			14,907			10,726			26,992			19,368
Initial public offering expenses		1,362			—			2,039			6
Public offering expenses(1)														—			—			—			1,223
Acquisition-related expenses		—			—			(48	)		95			—			587			—			587
COVID-19-related expenses⁽¹⁾		191			—			5,933			—

Noncash expenses and contingent consideration adjustments(2)														1,259			—			4,996			—
Litigation expense														4,261			808			5,399			1,547
Adjusted EBITDA	$	(26,224	)	$	(20,277	)	$	(57,309	)	$	(55,768	)	$	(42,804	)	$	(23,652	)	$	(89,939	)	$	(50,099	)

~~(1)~~

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

(1)

Public offering expenses include non-recurring expenses incurred in relation to our secondary offering for the six months ended June 30, 2021.

(2)

Noncash expenses and contingent consideration adjustments include, noncash compensation costs incurred by selling shareholders and adjustments made to the contingent consideration.

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

Components of Statement of Operations

Revenue

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

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

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

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

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

Operating Expenses

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

Research and Development Expenses

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

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

Sales and Marketing Expenses

Sales expenses consist primarily of employee-related expenses, including salaries, benefits, commissions, travel and stock-based compensation costs for our employees engaged in sales. We expect our sales expenses to increase as we continue to invest in the expansion of our business. We expect to hire additional sales personnel and related account management and sales support personnel to properly service our growing client base and to identify and capitalize on new strategic market opportunities.

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

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

General and Administrative Expenses

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

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

Depreciation and Amortization Expense

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

Interest Income and Other Income (Expense), Net

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

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

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

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

Consolidated Results of Operations

The following table sets forth our summarized condensed consolidated statement of operations data for the three and six months ended ~~September~~June 30, ~~2020,~~2022 and ~~2019~~2021 and the dollar and percentage change between the respective periods:


	Three Months Ended September 30,												Nine Months Ended September 30,												Three Months Ended June 30,												Six Months Ended June 30,
	2020			2019			Variance			% Change			2020			2019			Variance			% Change
(in thousands)																									2022			2021			Change			%			2022			2021			Change			%
Revenue	$	62,551		$	34,744		$	27,807			80	%	$	184,833		$	103,825		$	81,008			78	%	$	64,516		$	60,217		$	4,299			7	%	$	128,748		$	117,816		$	10,932			9	%
Costs and operating expenses:
Costs of revenue, excluding depreciation and amortization of intangible assets		42,116			19,060			23,056			121	%		118,969			55,060			63,909			116	%		36,497			33,889			2,608			8	%		73,262			69,594			3,668			5	%
Research and development		25,275			13,602			11,673			86	%		57,848			39,169			18,679			48	%		37,067			22,378			14,689			66	%		74,548			45,418			29,130			64	%
Sales and marketing		13,758			11,309			2,449			22	%		39,978			33,951			6,027			18	%		18,721			14,789			3,932			27	%		39,875			28,521			11,354			40	%
General and administrative		43,113			14,654			28,459			194	%		138,537			40,189			98,348			245	%		34,911			24,212			10,699			44	%		67,627			45,566			22,061			48	%
Depreciation and amortization expense		2,576			1,868			708			38	%		7,371			5,668			1,703			30	%		6,724			2,484			4,240			171	%		13,322			4,990			8,332			167	%

Total costs and operating expenses		126,838			60,493			66,345			110	%		362,703			174,037			188,666			108	%		133,920			97,752			36,168			37	%		268,634			194,089			74,545			38	%
Loss from operations		(64,287	)		(25,749	)		(38,538	)		150	%		(177,870	)		(70,212	)		(107,658	)		153	%		(69,404	)		(37,535	)		(31,869	)		85	%		(139,886	)		(76,273	)		(63,613	)		83	%
Interest income and other income (expense), net		255			1,286			(1,031	)		(80	)%		1,410			4,547			(3,137	)		(69	%)

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

Benefit (expense) from income taxes		(78	)		392			(470	)		(120	)%		(330	)		22			(352	)		(1,600	%)
Interest income and other (expense) income, net																										764			224			540			241	%		872			285			587			206	%
Loss before expense from income taxes and loss from equity method investment																										(68,640	)		(37,311	)		(31,329	)		84	%		(139,014	)		(75,988	)		(63,026	)		83	%
Benefit (Expense) from income taxes																										(461	)		(103	)		(358	)		348	%		(129	)		(412	)		283			(69	)%
Loss from equity method investment		(486	)		—			(486	)		N/A			(1,250	)		—			(1,250	)		N/A			(551	)		(722	)		171			(24	)%		(762	)		(1,541	)		779			(51	)%

Net loss	$	(64,596	)	$	(24,071	)		(40,525	)		168	%	$	(178,040	)	$	(65,643	)		(112,397	)		171	%		(69,652	)		(38,136	)		(31,516	)		83	%		(139,905	)		(77,941	)		(61,964	)		80	%

Net loss attributable to noncontrolling interest		(1,515	)		(56	)		(1,459	)		2,605	%		(3,920	)		(884	)		(3,036	)		343	%
Net loss attributable to non-controlling interest																										(507	)		(277	)		(230	)		83	%		(723	)		(894	)		171			(19	)%
Net loss attributable to American Well Corporation	$	(63,081	)	$	(24,015	)	$	(39,066	)		163	%	$	(174,120	)	$	(64,759	)	$	(109,361	)		169	%	$	(69,145	)	$	(37,859	)	$	(31,286	)		83	%	$	(139,182	)	$	(77,047	)	$	(62,135	)		81	%

~~Revenue~~

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

For the three months ended ~~September~~June 30, ~~2020, compared~~2022, subscription revenue increased by $2.8 million. Subscription revenue increase was driven by the expanded use of the Amwell Platform by existing customers. In addition, visit revenue increased by $2.4 million due to ~~$34.7 million during~~increased visit volume in urgent care, primarily associated with the ~~three~~Omicron variant.

For the six months ended ~~September~~June 30, ~~2019, an increase~~2022, subscription revenue increased by $6.9 million. This was a result of ~~$27.8 million, or 80%. This increase was substantially driven by an increase in~~new customers subscribing to the Amwell Platform and existing customers expanding their use of the Amwell Platform. In addition, visit revenue ~~volume ($21.3~~increased by $5.1 million increase). Total revenue was $184.8 million for the nine months ended September 30, 2020, compared to $103.8 million during the nine months ended September 30, 2019, an increase of $81.0 million, or 78%. This increase was also substantially driven by an increase in visit revenue volume ($65.3 million increase). Visit revenue has increased due to increased visit volume in urgent care, primarily associated with the ~~impact of the~~ ~~COVID-19~~ crisis as well as the contribution of the Aligned Acquisition (which closed in the fourth quarter of 2019). Revenue increase was also attributable to new clients using our platform and existing clients adding additional modules to their platform subscriptions, such as our ~~COVID-19~~ ~~module. We believe that the strength of our technology platform will continue to serve as the foundation for our revenue growth.~~Omicron variant.

Subscription revenue was $25.8 million for the three months ended September 30, 2020, compared to $22.0 million during the three months ended September 30, 2019, an increase of $3.9 million, or 18%. Subscription revenue was $72.0 million for the nine months ended September 30, 2020, compared to $60.8 million during the nine months ended September 30, 2019, an increase of $11.2 million, or 18%. Revenue earned from AMG patient visits increased by $21.3 million, or 296%, from $7.2 million in the three months ended September 30, 2019 to $28.5 million in the three months ended September 30, 2020. Revenue earned from AMG patient visits increased by $65.3 million, or 254%, from $25.7 million in the nine months ended September 30, 2019 to $90.9 million in the nine months ended September 30, 2020. The increases were primarily driven by increased utilization across our health system and health plan clients primarily from the ~~COVID-19~~ pandemic as well as overall increased acceptance of telemedicine. AMG paid visits constituted 27% of the total visits for the three months ended September 30, 2020, compared to 62% for the three months ended September 30, 2019. AMG paid visits constituted 29% of the total visits for the nine months ended September 30, 2020, compared to 66% for the nine months ended September 30, 2019. Revenue earned from services and Carepoints were $8.3 million for the three months ended September 30, 2020, compared to $5.6 million for the three months ended September 30, 2019, an increase of $2.7 million, or 47%. Revenue earned from services and Carepoints were $21.8 million for the nine months ended September 30, 2020, compared to $17.3 million for the nine months ended September 30, 2019, an increase of $4.6 million, or 26%. The increase in services and Carepoints revenue was largely due to the overall increased volume of Carepoints sales and partially the result of timing with respect to the performance of services and the timing of delivery of Carepoints.

Costs of Revenue, Excluding Amortization of Acquired Intangible Assets

~~Cost of revenue was $42.1 million for~~For the three months ended ~~September~~June 30, ~~2020, compared to $19.1 million for~~2022, the ~~three months ended September 30, 2019, an~~ increase ~~of $23.1 million, or 121%. Cost~~in cost of revenue was ~~$119.0 million for the nine months ended September 30, 2020, compared to $55.1 million for the nine months ended September 30, 2019, an increase of $63.9 million, or 116%. These increases were~~ primarily due to an increase of ~~$15.4~~$1.3 million ~~and $47.9 million, for the three and nine months ended September 30, 2020, respectively, in provider~~ related ~~costs, with some portion of these provider~~to employee-related costs due ~~both~~ to increased ~~visit volumes as well as the Aligned Acquisition. Some portion of these provider costs were above typical levels due to the~~ ~~COVID-19~~ emergency rapid expansion of active providers. The increase in visit volume also resulted in the need to utilize a significantly higher level of non-clinical contractor resources to properly service visit demand. The Company experienced a $2.1 million and $5.5 million increase, for the three and nine months ended September 30, 2020, respectively, in employee-related expense (primarily in the form of variable compensation and stock compensation expense). Hardware costs increased $2.5 and $5.2 million, for the three and nine months ended September 30, 2020, respectively, related to the increase in sale of devices.headcount. There was also an increase in hardware costs of ~~$2.0 million and $3.9 million, for~~$0.4 million.

For the ~~three and nine~~six months ended ~~September~~June 30, ~~2020, respectively,~~2022, the increase in ~~marketing services performed on behave of customers. As a percentage~~cost of revenue ~~cost~~was primarily due to an increase of ~~revenues has~~$2.2 million related to employee-related costs due to increased ~~as a result~~headcount. There was also an increase in provider costs of ~~the shift in revenue mix. The impact of~~ ~~COVID-19~~ ~~has~~$0.7 million due to increased ~~our visit revenue, which generates a lower gross margin contribution.~~visits.

Research and Development Expenses

~~Research and development expenses were $25.3 million for~~For the three months ended ~~September~~June 30, ~~2020, compared to $13.6 million for~~2022, the ~~three months ended September 30, 2019, an~~ increase ~~of $11.7 million, or 86%. Research~~in research and development expenses were $57.8 million for the nine months ended September 30, 2020, compared to $39.2 million for the nine months ended September 30, 2019, an increase of $18.7 million, or 48%. These increases wereexpense was primarily driven by an increase of $9.9 million in consulting services for Converge and $4.0 million ~~and $7.4 million, for the three and nine months ended September 30, 2020, respectively,~~ in employee-related costs (inclusive of stock compensation expense)~~. The~~ due to increased headcount.

For the six months ended June 30, 2022, the increase in research and development expense was ~~further~~primarily driven by ~~a $7.0~~an increase of $20.3 million ~~and $8.7 million increase, for the three and nine months ended September 30, 2020, respectively,~~ in consulting services ~~used by the research~~for Converge and ~~development group. In the nine months ended September 30, 2020 there was also an increase in product development costs of $0.9 million and $0.5~~$7.1 million in ~~third party software costs.~~employee-related costs (inclusive of stock compensation expense) due to increased headcount.

Sales and Marketing Expenses

~~Sales and marketing expenses were $13.8 million for~~For the three months ended ~~September~~June 30, ~~2020, compared to $11.3 million for~~2022, the ~~three months ended September 30, 2019, an~~ increase of $2.4 million, or 22%. Sales and marketing expenses were $40.0 million for the nine months ended September 30, 2020, compared to $34.0 million for the nine months ended September 30, 2019, an increase of $6.0 million, or 18%. These increases in sales and marketing expense primarily consisted of ~~a $3.0~~$2.0 million ~~and $6.8 million increase, for the three and nine months ended September 30, 2020, respectively,~~ in employee-related costs (inclusive of commissions and stock compensation expense)~~. The~~ due to increased headcount. There was also an increase ~~also~~of $0.7 million related to company meetings that did not occur in the prior year and consulting expense of $0.8 million mainly related to marketing campaigns and services for system integration.

For the six months ended June 30, 2022, the increase in sales and marketing expense primarily consisted of $5.2 million in employee-related costs (inclusive of commissions and stock compensation expense) due to increased headcount. There was also an increase in ~~third party software~~marketing expenses of $2.1 million related to conferences and an increase of $1.1 million related to company meetings that did not occur in the prior year. In addition there was an increase in consulting expense of $1.9 million mainly related to marketing campaigns and services for system integration.

General and Administrative Expenses

For the three months ended June 30, 2022, the increase in general and administrative expense was driven by an increase related to employee-related costs (inclusive of ~~$0.5~~$4.5 million of stock compensation expense) of approximately $7.4million, due to additional equity awards granted in 2022 and ~~$1.3~~ headcount increase. There was also a $3.8million increase in legal costs mainly due to the fees paid for the ~~three and nine~~Teladoc litigation.

For the six months ended ~~September~~June 30, ~~2020, respectively. The~~2022, the increase in general and administrative expense was driven by an increase related to employee-related costs (inclusive of $7.5 million of stock compensation expense) of approximately $14.4million, due to additional equity awards granted in March and May 2022 and headcount increase. There was also a $3.5million increase in legal costs mainly due to the fees paid for the Teladoc litigation. There was an increase of $1.8 million in system costs to enhance administrative processing. In addition, there was an increase in contingent consideration adjustments recorded of $1.0 million related to the Conversa and SilverCloud revenue earnouts.

Depreciation and Amortization Expense

Depreciation expense remained consistent for the three months ended ~~September~~June 30, ~~2020 was offset~~2022. Amortization expense increased by ~~reduced travel expenses of $1.4 million and the increase for the nine months ended September 30, 2020 was offset by a decrease in marketing and promotional items of $2.0 million~~

~~General and Administrative Expenses~~

~~General and administrative expenses were $43.1~~ $4.4million for the three months ended ~~September~~June 30, ~~2020, compared~~2022. The increase in amortization was related to ~~$14.7 million~~the intangible assets acquired in 2021.

Depreciation expense remained consistent for the ~~three~~six months ended ~~September~~June 30, 2019, an increase of $28.5 million, or 194%. General and administrative expenses were $138.5 million for the nine months ended September 30, 2020, compared to $40.2 million for the nine months ended September 30, 2019, an increase of $98.3 million, or 245%. These increases were driven by stock-based compensation expense of $28.3 million and $94.3 million, for the three and nine months ended September 30, 2020, respectively, (predominantly related to restricted stock units granted to the ~~co-CEOs).~~ Additionally, the increases consisted of employee-related costs (excluding compensation and stock compensation expense) of approximately $1.9 million and $6.4 million, for the three and nine months ended September 30, 2020, respectively. Each of these expenses were partially offset by savings in consulting expenses of $1.9 million and $2.2 million respectively (as the Company required less reliance on outside third parties). General and administrative expenses, excluding the increase in stock-based compensation, are expected to continue to increase (in absolute dollars) in future periods as we continue to grow in size and complexity while at the same time recognizing the full year impact of the regulatory and compliance costs associated with being a publicly traded company.

~~Depreciation and Amortization Expense~~

Depreciation and amortization expenses were $2.6 million for the three months ended September 30, 2020, compared to $1.9 million for the three months ended September 30, 2019, an increase of $0.7 million, or 38%. Depreciation and amortization expenses were $7.4 million for the nine months ended September 30, 2020, compared to $5.7 million for the nine months ended September 30, 2019, an increase of $1.7 million, or 30%. Depreciation expense increased by $0.2 million and $0.2 million for the three and nine months ended September 30, 2020, respectively.2022. Amortization expense increased by ~~$0.5~~ $8.7million ~~and $1.5 million for the three and nine~~six months ended ~~September~~June 30, ~~2020, respectively.~~2022. The increase in amortization was related to the intangible assets acquired in 2021.

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

~~Interest~~For the three and six months ended June 30, 2022 and 2021, interest income and other ~~expenses were $0.3 million for the three months ended September 30, 2020, compared to $1.3 million for the three months ended September 30, 2019, a decrease of $1 million, or 80%. Interest~~(expense) income, and other expenses were $1.4 million for the nine months ended September 30, 2020, compared to $4.5 million for the nine months ended September 30, 2019, a decrease of $3.1 million, or 69%. These amountsnet consist entirely of interest income and gains from our cash equivalents and short-term investments.

~~Benefit (Expense)~~Expense from Income Taxes

Income tax expense was $0.5 million and $0.1 million for the three and six months ended ~~September~~June 30, ~~2020,~~2022, compared to income tax ~~benefit~~expense of $0.1 million and $0.4 million for the three and six months ended ~~September~~June 30, 2019, a decrease of $0.5 million, or 120%. Income tax expense was $0.3 million for the nine months ended September 30, 2020, compared to $0.0 million for the nine months ended September 30, 2019, a decrease of $0.3 million, or 1,600%.2021.

Loss from Equity Method Investment

The Company and Cleveland Clinic partnered to form a joint venture, under the name CCAW, JV LLC, to provide broad access to comprehensive and high acuity care services via telehealth. The Company does not have a controlling financial interest in CCAW, JV LLC, but it does have the ability to exercise significant influence over the operating and financial policies of CCAW, JV LLC. Therefore, the Company accounts for its investments in CCAW, JV LLC using the equity method of accounting.

During the three months ended ~~September~~June 30, ~~2020,~~2022 and 2021, the Company recognized a loss of ~~$0.5~~$0.6 million and $0.7 million, respectively, as its proportionate share of the joint venture results of operations. During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2022 and 2021, the Company recognized a loss of ~~$1.3~~$0.8 million and $1.5 million, respectively, as its proportionate share of the joint venture results of operations.

Liquidity and Capital Resources

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

Nine Months Ended
September 30,

   2020    2019
Condensed Consolidated Statements of Cash Flows Data:

Net cash used in operating activities
   $ (87,934 )    $ (66,615 )
Net cash provided by investing activities
   (96,677 )    146,465
Net cash provided by financing activities
   1,003,307    452




Total
   $ 818,696    $ 80,302


	Six Months Ended June 30,
	2022			2021
Consolidated Statements of Cash Flows Data:
Net cash used in operating activities	$	(105,399	)	$	(67,390	)
Net cash used in and provided by investing activities		(376,260	)		97,169
Net cash used in and provided by financing activities		(5,529	)		3,492
Total	$	(487,188	)	$	33,271

Sources of Financing

Our principal sources of liquidity were cash, cash equivalents and short-term investments totaling ~~$177.6~~$630.1 million and ~~$1,086.3~~$746.4 million as of June 30, 2022 and December 31, ~~2019 and September 30, 2020,~~2021, respectively, which were held for a variety of growth initiatives and investments as well as working capital purposes. Our cash, cash equivalents and short-term investments are comprised of money market funds and marketable securities including U.S. Treasury bills.

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

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

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

As shown in the accompanying condensed consolidated financial statements, the Company incurred a loss from operations of ~~$177.9~~$139.9 million and a net loss of ~~$178.0~~$139.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2022 and had an accumulated deficit of ~~$532.0~~$950.5 million as of ~~September~~June 30, ~~2020.~~2022.

The Company has no debt as of ~~September~~June 30, ~~2020~~2022 or December 31, ~~2019~~2021 and expects to generate operating losses in future years.

We believe that our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months from the issuance date of the financial statements. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, number of consultations on our ~~platform,~~Platform, the timing and extent of spending to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced services offerings, and the continuing market acceptance of telehealth services. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies and intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations would be adversely affected.

~~Indebtedness & Lines of Credit~~

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

During any period that the Line of Credit is in effect, the Company can request the financial institution issue a letter of credit with a maximum maturity not to exceed twelve months. Any letters of credit issued by the financial instrument reduce the maximum borrowings available under the Line of Credit. As of September 30, 2020 and December 31, 2019, the maximum borrowing available to the Company is $5.9 million based on the outstanding letters of credit of $1.1 million that have been issued by the financial institution.

~~Nine~~Six months ended ~~September~~June 30, ~~2020,~~2022, vs. ~~nine~~six months ended ~~September~~June 30, ~~2019~~2021

Cash Used in Operating Activities

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2022, cash used in operating activities was ~~$87.9~~$105.4 million. The primary driver of this use of cash was our net loss of ~~$178.0~~$139.9 million. The net loss ~~for the year~~ was reflective of the ~~expenses incurred with our response to~~ ~~COVID-19~~ ~~and our continued~~ investments made back into the ~~Company’s infrastructure,~~Company (from a technology perspective), partially offset by the ~~revenue~~overall growth ~~discussed above.~~of our business including expansion of business with existing clients. The net loss was partially offset by non-cash expenses of ~~$117.7~~$45.1 million (primarily stock-based compensation of ~~$106.5~~$27.6 million and depreciation and amortization of ~~$7.4~~$13.1 million).

For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2021, cash used in operating activities was ~~$66.6~~$67.4 million. The primary driver of this use of cash was our net loss of ~~$65.6~~$77.9 million. The ~~cash used~~net loss for ~~operating activities~~the year was ~~primarily driven by investment in corporate infrastructure as~~reflective of the investments made back into the Company ~~integrated~~(from both a personnel and technology perspective), partially offset by the ~~Avizia acquisition~~overall growth of our business including an increase in new clients and ~~prepared for public company requirements.~~expansion of business with existing clients. The net loss was partially offset by non-cash ~~charges totaling $16.3~~ expenses of $26.9 million (primarily ~~comprised of~~ stock-based compensation of ~~$8.7~~$19.4 million and depreciation and amortization ~~expense~~ of ~~$5.7 million.)~~$5.0 million).

Cash Used in and Provided by Investing Activities

Cash used in investing activities was ~~$96.7~~$376.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2022. Cash used in investing activities consisted of $2.0 million investment in the less than majority owned joint venture, $0.1 million in the purchases of property and equipment and purchases of short-term investments of $499.2 million, partially offset by sales and maturities of investments of $125.0 million.

Cash provided by investing activities was $97.2 million for the six months ended June 30, 2021. Cash provided by investing activities consisted of ~~$69.1 million in~~ proceeds from ~~the~~ maturities of investments of $100.0 million, partially offset by ~~$159.6 million in purchases of investments. Further, cash used in investing activities included~~ a ~~$2.9~~$2.5 million investment in the CCAW, JV LLC joint venture with Cleveland Clinic and ~~$3.3~~$0.3 million in the purchases of property and equipment.

Cash ~~provided~~Used in and Provided by ~~investing~~Financing Activities

Cash used in financing activities ~~was $146.5 million~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2022, was $5.5 million. Cash ~~provided by investing~~used in financing activities consisted of ~~$226.5~~$11.8 million inrelated to the payment of the Conversa integration earnout, partially offset by $6.0 million of proceeds from the ~~maturities~~exercise of ~~investments, which were partially offset by the~~employee stock options and employee stock purchase ~~of $78.9 million in investments. Further, the Company used $1.1 million for purchases of property and equipment.~~plan.

~~Cash Provided by Financing Activities~~

Cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, was ~~$1,005.1~~$3.5 million. Cash provided by financing activities consisted of ~~$146.0~~$16.7 million of ~~cash proceeds from our issuance of Series C Convertible Preferred Stock, net of issuance costs, $772.9 million of cash proceeds from our IPO, net of underwriting commissions and $100 million cash~~ proceeds from the ~~issuance~~exercise of ~~Class C common~~employee stock ~~to Google, LLC in a private placement offering.~~options. These proceeds were offset by cash payments primarily for the purchase of treasury stock of ~~$18.4~~$11.6 million.

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

Off-Balance Sheet Arrangements

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

Contractual Obligations and Commitments

As of ~~September~~June 30, ~~2020,~~2022, there have been no material changes from the contractual obligations and commitments previously disclosed in our ~~Prospectus.~~Form 10-K.

Critical Accounting Policies and Estimates

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

Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements in our ~~Prospectus~~Form 10-K and Note 2, Summary of Significant Accounting Policies to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. There have been no significant changes to these policies during the ~~three~~six months ended ~~September~~June 30, ~~2020.~~2022.

Recently Issued Accounting Pronouncements Adopted

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

New Accounting Pronouncements Not Yet Adopted

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

~~Emerging Growth Company Status~~

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

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

Item 3. Qualitative and Quantitative Disclosure about Market Risk

Interest Rate Risk

We had cash and cash equivalents totaling ~~$956.4~~$257.2 million, and ~~$137.7~~$746.4 million as of ~~September~~June 30, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. The Company also held investments totaling ~~$129.9 million and $40.0~~$372.9 million as of ~~September~~June 30, ~~2020, and~~2022 . The Company held no investments as of December 31, ~~2019, respectively.~~2021. These amounts were primarily invested in money markets and U.S. Treasury bills. The cash and cash equivalents are held for a variety of growth and investments as well as working capital purposes. Our investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes. All our investments are denominated in U.S. dollars.

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

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

Foreign Currency Exchange Risk

To date, a substantial majority of our revenue from customer arrangements has been denominated in U.S. dollars. We have limited operations outside the United States. As of ~~September~~June 30, ~~2020~~2022 and December 31, ~~2019,~~2021, we had four foreign subsidiaries with functional currencies of the Euro, British pound, Australian dollars and New Israeli Shekel. As of June 30, 2021 the Company had one foreign ~~subsidiary. The~~subsidiary in Israel, the functional currency of ~~our foreign~~that subsidiary is the U.S. ~~dollar. The~~dollar, and Company ~~also has~~had a branch with a functional currency of the New Israeli ~~Shekel, however~~Shekel. The activity for these entities in the ~~New Israeli Shekel is~~six months ended June 30, 2022 and 2021 was not considered significant. Accordingly, we believe we do not have a material exposure to foreign currency risk. We may choose to focus on international expansion, which may increase our exposure to foreign currency exchange risk in the future.

Inflation Risk

We do not believe that inflation had a material effect on our business, financial condition or results of operations in the last two years. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition or results of operations.

Item 4. Controls and Procedures

~~Evaluation~~Managements Report on Internal Control over Financial Reporting

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of ~~Disclosure Controls~~achieving the desired control objectives and ~~Procedures~~management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our principal executive officers and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on ~~such~~this evaluation, our principal executive officers and principal financial officer ~~have~~ concluded that as of ~~such date,~~June 30, 2022, our disclosure controls and procedures were ~~not effective at a reasonable assurance level as of September 30, 2020 due~~effective. Disclosure controls and procedures are our controls and other procedures that are designed to ~~material weaknesses~~ensure that information required to be disclosed by us in ~~internal control over financial reporting, as described below:~~

~~The management of~~ the ~~company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules~~ ~~13a-15(f)~~ ~~and~~ ~~15d-15(f)~~reports that we file or submit under the Exchange ~~Act. As of December 31, 2019, we identified material weaknesses~~Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial ~~reporting. The material weaknesses we identified were as follows:~~

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

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

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

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

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

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

hired additional full-time accounting resources with appropriate levels of accounting knowledge and experience, including but not limited to a Chief Financial Officer in the second half of 2018, a Vice President of Accounting, Vice President of FP&A and Director of Revenue in the first half of 2019;

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

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

implemented controls to provide for a robust review of the accounting for taxes including the work prepared by the third party as well as identification of changes to tax regulation to ensure all tax regulation changes that impact the Company are being evaluated timely and properly.

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

~~Changes in Internal Control over Financial Reporting~~

~~During the third quarter, we have designed and implemented controls related to the accounting for taxes, including both income and non-income based taxes,~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~Other than these changes, there have been no other changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules~~ ~~13a-15(d)~~ or ~~15d-15(d)~~ ~~of the Exchange Act during the period covered by this Quarterly Report on Form~~ ~~10-Q~~ ~~that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~

~~Limitations on Effectiveness of Controls and Procedures~~35

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

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

On September 14, 2020, we received a letter from Teladoc Health, Inc. ("Teladoc") alleging that certain of our cart products and associated peripherals infringe upon their patents. On October 12, 2020, Teladoc ~~Health, Inc~~ filed a claim against the Company related to these allegations. ~~While we can provide no guarantees about~~On June 30, 2022, the ~~outcome of any potential dispute, we believe that these claims lack merit and we intend~~claim was dismissed pursuant to ~~defend against them vigorously. Moreover, even if we were found to infringe upon any valid claim of these patents, our revenues from~~a confidential settlement between the ~~Carepoints products approximated 5% of our revenues in 2019. See “Risk Factors—~~Third parties may challenge the validity of our patents and trademarks, or oppose our patent and trademark applications. We may not be able to obtain and enforce additional patents to protect our proprietary rights from use by potential competitors. Companies with other patents could require us to stop using or pay to use required technology” ~~and “Risk Factors—~~~~We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights”~~ ~~in our Prospectus.~~parties.

Item 1A. Risk Factors

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

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

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

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

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

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

~~Use of Proceeds~~

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

Concurrent with the IPO we closed on the Google LLC private placement and issued 5,555,555 shares of Class C common stock for proceeds of $99.1 million, net of offering costs of $0.9 million. No offering costs were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10% or more of any class of ourunregistered equity securities ~~or to any other affiliates. As of September~~during the quarter ended June 30, 2020, approximately $1.5 million of expenses incurred in connection with our IPO had been paid. There has been no material change in the planned use of proceeds from our IPO from those disclosed in the Prospectus. In September 2020, the Company repurchased 1,340,354 shares of Class A and Class B common stock from certain executive officers and other employees, to permit such executive officers and other employees to pay taxes owed in connection with the vesting of equity awards, including the repayment of third party loans incurred to finance the payment of such taxes.2022.

Issuer Purchases of Equity Securities

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

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

Period

~~Represents~~

(a) Total
number
of shares ~~repurchased from certain officers using a portion~~
(or units)
purchased*

(b) Average
price paid per
share (or unit)*

(d) Maximum
number (or
approximate
dollar value)
of shares (or
units) that may
yet be purchased
under the ~~net proceeds from the IPO, approximately $24.2 million, as discussed in~~ ~~Use of Proceeds~~.plans
or programs

April 1 to April 30

—

May 1 to May 31

—

June 1 to June 30

—

Total

—

* Shares withheld to cover tax withholding obligations under the net settlement provision upon vesting of restricted stock units and exercising of options.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

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


~~10.1~~ 4.2*		Amendment ~~No. 5 and Joinder~~No 1 to the ~~Company’s Second Amended~~Agreement and ~~Restated Investors’ Rights~~Plan of Merger by and among Parent, the Company, Shannon Merger Subsidiary, Inc., Shannon merger Sister Subsidiary, LLC, and the Fortis Advisors, LLC, as the Security Representative, dated July 28, 2021.

10.1#		Employment Agreement ~~(Exhibit~~between American Well Corporation and Phyllis Gotlib, dated April 8, 2022 (incorporated by reference to the Exhibit 10.1 to the Company’s Current Report on Form 8-K filed ~~September 22, 2020 and incorporated by reference herein)~~on April 14, 2022)

~~31.1~~ 10.3#*		Performance Share Unit Agreement between American Well Corporation and Ido Schoenberg, dated May 11, 2022

10.4#*		Performance Share Unit Agreement between American Well Corporation and Roy Schoenberg, dated May 11, 2022

31.1*		Chief Executive Officers Certifications

~~31.2~~ 31.2*		Chief Financial Officer Certification

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

32.2*		CFO Certifications of Quarterly Report

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

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101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

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


~~32.2~~ *		~~CFO Certification of Quarterly Report~~ Filed herewith


~~101~~ #		~~Interactive Data File~~ Indicates a management contract or compensatory plan

~~SIGNATURES~~

SIGNATURES

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



							AMERICAN WELL CORPORATION

Date:	~~November 13, 2020~~August 5, 2022		By:		/s/ Ido Schoenberg, MD
							Co-Chief Executive Officer
							(Principal Executive Officer)

Date:	~~November 13, 2020~~August 5, 2022		By:		/s/ Roy Schoenberg, MD, MPH
							Co-Chief Executive Officer
							(Principal Executive Officer)

~~Date:~~	~~November 13, 2020~~		~~By:~~		~~/s/ Keith Anderson~~
				Date:	August 5, 2022	By:	/s/ Robert Shepardson
		Chief Financial Officer
							(Principal Financial Officer)

Date:	~~November 13, 2020~~August 5, 2022		By:		/s/ Paul McNeice
							Vice President of Accounting
							(Principal Accounting Officer)

4138


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

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

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

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

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

Total liabilities		117,267			124,946

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

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

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

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


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

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

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

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


Total Overall Quarterly Visits
Quarter Ended	Overall Visits		Performed by Customer Providers
June 30, 2022		1,525,000		76	%
March 31, 2022		1,775,000		78	%
December 31, 2021		1,525,000		75	%
September 30, 2021		1,425,000		75	%
June 30, 2021		1,300,000		75	%
March 31, 2021		1,575,000		80	%


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

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Smaller reporting company

Emerging growth company