UpHealth, Inc. [UPH] Filings

10-Q 1 uph-20220930.htm 10-Q uph-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

___________________________________

FORM 10-Q

___________________________________

(Mark One)


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

For the quarterly period ended September 30, 2022


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

Commission File Number: 001-38924

UpHealth, Inc.

(Exact Name of Registrant as Specified in its Charter)


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

(888) 424-3646

(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

Common Stock, par value $0.0001 per share

UPH.BC

New York Stock Exchange

Redeemable Warrants, exercisable for one share of Common Stock at an exercise price of $115.00 per share

UPH.WS.BC

New York Stock Exchange

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

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

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

As of December 28, 2022, the registrant had 15,054,431 shares of common stock, $0.0001 par value per share, outstanding.

TABLE OF CONTENTS


			Page

Part I - Financial Information			3
Item 1. Financial Statements			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Operations			5
Condensed Consolidated Statements of Comprehensive Loss			6
Condensed Consolidated Statements of Stockholders’ Equity			7
Condensed Consolidated Statements of Cash Flows			9
Notes to Condensed Consolidated Financial Statements			11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Item 3. Quantitative and Qualitative Disclosures About Market Risk			53
Item 4. Controls and Procedures			53

Part II - Other Information			55
Item 1. Legal Proceedings			55
Item 1A. Risk Factors			59
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			65
Item 3. Defaults Upon Senior Securities			65
Item 4. Mine Safety Disclosures			65
Item 5. Other Information			65
Item 6. Exhibits			66
Signatures			67

Part 1 - Financial Information

Item 1. Financial Statements

UPHEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)


	September 30, 2022		December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	22,608	$	58,192
Restricted cash	—		18,609
Accounts receivable, net	22,626		22,761
Inventories	2,762		2,928
Due from related parties	21		40
Prepaid expenses and other current assets	4,077		4,217
Total current assets	52,094		106,747
Property and equipment, net	20,075		56,072
Intangible assets, net	56,474		115,313
Goodwill	195,028		284,268
Equity investment	21,200		—
Deferred tax assets	83		—
Other assets	454		6,907
Total assets	$	345,408	$	569,307
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	16,393	$	13,604
Accrued expenses	41,238		36,084
Deferred revenues	4,407		2,649
Due to related party	209		47
Income taxes payable	229		739
Related-party debt, current	403		657
Debt, current	10		22,093
Forward share purchase liability	—		18,051
Other liabilities, current	3,758		2,780
Total current liabilities	66,647		96,704
Related-party debt, noncurrent	343		331
Debt, noncurrent	143,303		98,417
Deferred tax liabilities	—		28,281
Warrant liabilities, noncurrent	61		252
Derivative liability, noncurrent	692		7,977
Other liabilities, noncurrent	2,880		3,502
Total liabilities	213,926		235,464
Commitments and Contingencies (Note 11)
Stockholders’ Equity:
Common stock	2		1
Additional paid-in capital	686,518		665,474
Treasury stock, at cost	(17,000)		—
Accumulated deficit	(538,854)		(343,209)
Accumulated other comprehensive loss	—		(3,802)
Total UpHealth, Inc., stockholders’ equity	130,666		318,464
Noncontrolling interests	816		15,379
Total stockholders’ equity	131,482		333,843
Total liabilities and stockholders’ equity	$	345,408	$	569,307

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

UPHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Services	$	27,600	$	21,977	$	81,382	$	45,563
Licenses and subscriptions	2,019		10,956		10,612		23,759
Products	9,047		12,259		26,312		20,568
Total revenues	38,666		45,192		118,306		89,890
Costs of revenues:
Services	13,440		12,434		42,647		26,497
License and subscriptions	463		6,350		913		13,020
Products	6,264		8,461		18,550		14,104
Total costs of revenues	20,167		27,245		62,110		53,621
Gross profit	18,499		17,947		56,196		36,269
Operating expenses:
Sales and marketing	4,771		3,090		10,983		5,670
Research and development	2,231		1,916		5,600		5,759
General and administrative	13,922		11,452		42,213		22,481
Depreciation and amortization	3,336		3,626		13,272		7,496
Stock-based compensation	2,126		410		4,588		410
Lease abandonment expenses	—		915		75		915
Goodwill and intangible asset impairment	106,096		—		112,270		—
Acquisition, integration, and transformation costs	6,049		1,227		15,182		36,566
Total operating expenses	138,531		22,636		204,183		79,297
Loss from operations	(120,032)		(4,689)		(147,987)		(43,028)
Other income (expense):
Interest expense	(6,708)		(8,145)		(20,306)		(13,760)
Gain on consolidation of equity investment	—		—		—		640
Loss on deconsolidation of subsidiary	(37,708)		—		(37,708)		—
Gain on fair value of derivative liability	223		49,885		6,893		49,885
Gain on fair value of warrant liabilities	—		373		190		1,447
Gain (loss) on extinguishment of debt	(14,610)		—		(14,610)		151
Other income, net, including interest income	32		259		30		40
Total other income (expense)	(58,771)		42,372		(65,511)		38,403
Income (loss) before income tax benefit (expense)	(178,803)		37,683		(213,498)		(4,625)
Income tax benefit (expense)	13,219		(6,695)		17,744		357
Net income (loss) before loss from equity investment	(165,584)		30,988		(195,754)		(4,268)
Loss from equity investment	—		—		—		(561)
Net income (loss)	(165,584)		30,988		(195,754)		(4,829)
Less: net income (loss) attributable to noncontrolling interests	178		231		(109)		147
Net income (loss) attributable to UpHealth, Inc.	$	(165,762)	$	30,757	$	(195,645)	$	(4,976)
Net income (loss) per share attributable to UpHealth, Inc.:
Basic	$	(11.17)	$	2.61	$	(13.41)	$	(0.52)
Diluted	$	(11.17)	$	2.60	$	(13.41)	$	(0.52)
Weighted average shares outstanding:
Basic	14,842		11,763		14,588		9,519
Diluted	14,842		11,807		14,588		9,519

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

UPHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	(165,584)	$	30,988	$	(195,754)	$	(4,829)
Foreign currency translation adjustments, net of tax	—		19		(3,857)		(3,459)
Comprehensive income (loss)	(165,584)		31,007		(199,611)		(8,288)
Comprehensive income (loss) attributable to noncontrolling interests	178		231		(109)		147
Comprehensive income (loss) attributable to UpHealth, Inc.	$	(165,762)	$	30,776	$	(199,502)	$	(8,435)

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

UPHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, unaudited)


	Common Stock					Treasury Stock
	Shares	Amount		Additional Paid-In Capital		Shares	Amount		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total UpHealth, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
Balance at December 31, 2021(1)	14,428	$	1	$	665,474	—	$	—	$	(343,209)	$	(3,802)	$	318,464	$	15,379	$	333,843
Equity award activity, net of shares withheld for taxes(1)	37	—		(67)		—	—		—		—		(67)		—		(67)
Stock-based compensation	—	—		1,374		—	—		—		—		1,374		—		1,374
Net loss	—	—		—		—	—		(17,445)		—		(17,445)		(260)		(17,705)
Foreign currency translation adjustments	—	—		—		—	—		—		(1,377)		(1,377)				(1,377)
Balance at March 31, 2022(1)	14,465	1		666,781		—	—		(360,654)		(5,179)		300,949		15,119		316,068
Equity award activity, net of shares withheld for taxes(1)	390	1		(1,160)		—	—		—		—		(1,159)		—		(1,159)
Stock-based compensation	—	—		1,088		—	—		—		—		1,088		—		1,088
Common stock repurchased in connection with forward share purchase agreement(1)	(170)	—		17,000		170	(17,000)		—		—		—		—		—
Purchase of noncontrolling interest	—	—		—		—	—		—		—		—		(139)		(139)
Distribution to noncontrolling interests	—	—		—		—	—		—		—		—		(30)		(30)
Net loss	—	—		—		—	—		(12,438)		—		(12,438)		(27)		(12,465)
Foreign currency translation adjustments	—	—		—		—	—		—		(2,480)		(2,480)		—		(2,480)
Balance at June 30, 2022(1)	14,685	2		683,709		170	(17,000)		(373,092)		(7,659)		285,960		14,923		300,883
Equity award activity, net of shares withheld for taxes(1)	206	—		(30)		—	—		—		—		(30)		—		(30)
Issuance of common stock in connection with 2025 Notes(1)	115	—		713		—	—		—		—		713		—		713
Stock-based compensation	—	—		2,126		—	—		—		—		2,126		—		2,126
Deconsolidation of subsidiary	—	—		—		—	—		—		7,659		7,659		(14,285)		(6,626)
Net loss	—	—		—		—	—		(165,762)		—		(165,762)		178		(165,584)
Balance at September 30, 2022(1)	15,006	$	2	$	686,518	170	$	(17,000)	$	(538,854)	$	—	$	130,666	$	816	$	131,482

(1)Amounts as of September 30, 2022 and before that date differ from those published in our prior condensed consolidated financial statements as they were retrospectively adjusted as a result of the Reverse Stock Split (as described below in Note 1, Organization and Business). Specifically, the number of common shares outstanding during periods before the Reverse Stock Split are divided by the exchange ratio of 10:1, such that each ten shares of common stock were combined and reconstituted into one share of common stock effective December 8, 2022.

UPHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, unaudited)


	Common Stock					Treasury Stock
	Shares	Amount		Additional Paid-In Capital		Shares	Amount		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total UpHealth, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
Balance at December 31, 2020(1)(2)	7,002	$	1	$	222,906	—	$	—	$	(2,186)	$	—	$	220,721	$	—	$	220,721
Issuance of common stock for formation(1)(2)	875	—		87,409		—	—		—		—		87,409		17,389		104,798
Net loss	—	—		—		—	—		(2,949)		—		(2,949)		(78)		(3,027)
Foreign currency translation adjustments	—	—		—		—	—		—		(1,159)		(1,159)		—		(1,159)
Balance at March 31, 2021(1)(2)	7,877	1		310,315		—	—		(5,135)		(1,159)		304,022		17,311		321,333
Issuance of common stock to consummate business combinations(1)(2)	2,616	—		243,587		—	—		—		—		243,587		(2,239)		241,348
Merger recapitalization(1)(2)	947	—		54,605		—	—		—		—		54,605		—		54,605
PIPE common stock issuance(2)	300	—		27,079		—	—		—		—		27,079		—		27,079
Forward share repurchase agreement(2)	—	—		(17,000)		—	—		—		—		(17,000)		—		(17,000)
Issuance of common stock for debt conversion(1)(2)	20	—		1,879		—	—		—		—		1,879		—		1,879
Net loss	—	—		—		—	—		(32,783)		—		(32,783)		(6)		(32,789)
Foreign currency translation adjustments	—	—		—		—	—		—		(2,319)		(2,319)		—		(2,319)
Balance at June 30, 2021(2)	11,760	1		620,465		—	—		(37,918)		(3,478)		579,070		15,066		594,136
Purchase consideration adjustment	—	—		677		—	—		—		—		677		—		677
Exercise of stock option, net(2)	20	—		319		—	—		—		—		319		—		319
Stock-based compensation	—	—		410		—	—		—		—		410		—		410
Net income	—	—		—		—	—		30,757		—		30,757		231		30,988
Foreign currency translation adjustments	—	—		—		—	—		—		19		19		—		19
Balance at September 30, 2021(2)

UpHealth, Inc. [UPH] Filings
UpHealth, Inc. [UPH-WT] Filings
10-Q	[2022-12-29]
10-Q	[2022-08-15]
10-Q	[2022-05-23]
10-K	[2022-04-18]
10-Q	[2021-11-10]
S-1	[2021-08-27]
10-Q	[2021-08-12]
10-Q	[2021-05-17]
10-K	[2021-04-01]
S-1	[2021-02-16]
10-Q	[2020-11-13]
10-Q	[2020-08-07]
10-Q	[2020-05-11]
10-K	[2020-03-30]
10-Q	[2019-11-06]
10-Q	[2019-08-07]
S-1	[2019-05-09]

UpHealth, Inc. [UPH] Filings

UpHealth, Inc. [UPH-WT] Filings