T a b l e o f C o n t e n t s

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON~~Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________


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

For the quarterly period ended ~~September~~March 3031, ~~2023~~2024


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

For the transition period from ________ to ________

Commission ~~File~~file ~~Number:~~number 001-38924

UpHealth, Inc.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in its ~~Charter~~charter)

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

(888) 424-3646

(Registrant’s telephone number, including area code)

~~(Former name, former address and former fiscal year, if changed since last report): N/A~~________________________________________________________

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(1)

New York Stock Exchange

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

UPH

New York Stock Exchange

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

UPH.WS

New York Stock Exchange

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

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

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☒

AsAPPLICABLE ofONLY ~~November~~TO ~~17,~~REGISTRANTS ~~2023,~~INVOLVED ~~the~~IN ~~registrant~~BANKRUPTCY ~~had 17,775,498 shares of common stock, $0.0001 par value per share, outstanding.~~

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. o Yes o No

As of June 5, 2024, the registrant had outstanding 18,932,192 shares of common stock, $0.0001 par value per share.

(1)On December 11, 2023, UpHealth, Inc. (the “Company”) received written notice from the staff of NYSE Regulation that it has commenced proceedings to delist the common stock, par value $0.0001 per share, of the Company (ticker symbol: UPH), from the New York Stock Exchange (“NYSE”), and suspended trading in the common stock pending the completion of such proceedings. As a result, effective December 12, 2023, the common stock is trading in the over-the-counter market under the symbol “UPHL.” The Company timely filed an appeal of this determination with the NYSE and requested a hearing before the NYSE Regulatory Oversight Committee’s Committee for Review. On January 12, 2024, the NYSE granted the Company’s request for a hearing, which was originally scheduled to occur on April 17, 2024 but has since been rescheduled to July 18, 2024.

T a b l e o f C o n t e n t s


		Page
PART I	Fi nancial Information	4
Item 1 .	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	48

PART II	Other Information	50
Item 1 .	Legal Proceedings	50
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities. Use of Proceeds and Issuer Purchases of Equity Securities	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	59
Item 6.	Exhibits	60
Signatures		62

~~TABLE~~Table OFof ~~CONTENTS~~Contents

			Page
Part I - Financial Information			4
Item 1. Financial Statements			4
Condensed Consolidated Balance Sheets			5
Condensed Consolidated Statements of Operations			6
Condensed Consolidated Statements of Comprehensive Loss			7
Condensed Consolidated Statements of Stockholders’ Equity			8
Condensed Consolidated Statements of Cash Flows			10
Notes to Condensed Consolidated Financial Statements			12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			40
Item 3. Quantitative and Qualitative Disclosures About Market Risk			58
Item 4. Controls and Procedures			58
Part II - Other Information			59
Item 1. Legal Proceedings			59
Item 1A. Risk Factors			65
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities			69
Item 3. Defaults Upon Senior Securities			69
Item 4. Mine Safety Disclosures			69
Item 5. Other Information			69
Item 6. Exhibits			74
Signatures			76

PART I - Financial Information

Part 1 - Financial Information

Item 1. Financial Statements

UPHEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts, unaudited)

	September 30, 2023		December 31, 2022
	March 31, 2024		December 31, 2023
ASSETS
Current Assets:
Current assets:
Cash and cash equivalents	$	~~3,342~~955	$	152,~~557~~548
Accounts receivable, net	16,527		21,851
Restricted cash	169,388		—
Inventories	—		161
Prepaid expenses and other current assets	1,563		2,064
Due from related parties	—		14
Assets held for sale, current	—		15,597
Prepaid expenses and other current assets	2,140		2,991
Total current assets	171,906		20,209
Assets held for sale, current	—		2,748
Property and equipment, net	534		704
Total current assets	22,009		43,322
Operating lease right-of-use assets	344		370
Property and equipment, net	10,228		14,069
Equity investments	96,768		96,768
Operating lease right-of-use assets	1,653		7,213
Other assets	182		207
Intangible assets, net	23,683		31,362
Assets held for sale, noncurrent	—		113,550
Goodwill	80,310		159,675
Total assets	$	269,734	$	231,808
Equity investments	96,768		21,200
Other assets	493		438
Assets held for sale, noncurrent	—		62,525
Total assets	$	235,144	$	339,804
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current liabilities:
Accounts payable	$	53,~~187~~739	$	176,~~983~~889
Accrued expenses	119,~~032~~513		398,~~151~~232
Deferred revenue	52		2,738
Due to related party	1,533		948
Due to related parties	2,544		229
Lease liabilities, current	188		183
Debt, current	143,889		—
Income taxes payable	18,662		—
Lease liabilities, current	3,664		5,475
Debt, current	111,891		—
Other liabilities, current	—		74
Liabilities held for sale, current	—		10,579
Liabilities held for sale, current	—		3,319
Total current liabilities	145,526		26,831
Total current liabilities	166,368		68,969
Debt, noncurrent	37,268		146,524
Related-party debt, noncurrent	—		281
Lease liabilities, noncurrent	560		610
Debt, noncurrent	—		145,962
Other liabilities, noncurrent	4,595		76
Deferred tax liabilities	1,202		1,200
Liabilities held for sale, noncurrent	—		2,663
Lease liabilities, noncurrent	3,297		8,741
Total liabilities	187,949		176,704
Other liabilities, noncurrent	147		727
Commitments and contingencies (Note 14)
Liabilities held for sale, noncurrent	—		7,787
Stockholders’ equity:
Total liabilities	171,014		233,667
Preferred stock, $0.1000 par value, 1,000,000 shares authorized; none issued or outstanding at March 31, 2024 and December 31, 2023, respectively.	—		—
Commitments and Contingencies (Note 16)
Common stock, $0.1000 par value, 300,000 shares authorized, 18,981 and 18,841 shares issued, 18,811 and 18,671 shares outstanding as of March 31, 2024 and December 31, December 31, 2023, respectively	2		2
Stockholders’ Equity:
Additional paid-in capital	697,410		696,150
Common stock	2		2
Additional paid-in capital	695,152		688,355
Treasury stock, at cost	(17,000)		(17,000)
Accumulated deficit	(~~614~~598,~~024~~627)		(~~566~~624,~~209~~048)
Total UpHealth, Inc., stockholders’ equity	64,130		105,148
Total stockholders’ equity	81,785		55,104
Noncontrolling interests	—		989
Total liabilities and stockholders’ equity	$	269,734	$	231,808
Total stockholders’ equity	64,130		106,137
Total liabilities and stockholders’ equity	$	235,144	$	339,804

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

T a b l e o f C o n t e n t s

UPHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2023		2022		2023		2022
	2024		2023
Revenues:
Services	$	~~30,825~~—	$	2713,~~600~~613	$	~~92,853~~	$	~~81,382~~
Licenses and subscriptions	~~1,760~~—		21,~~019~~936		~~6,548~~		~~10,612~~
Products	96—		9,~~047~~138		~~13,248~~		~~26,312~~
Total revenues	~~32,681~~—		3824,~~666~~687		~~112,649~~		~~118,306~~
Costs of revenues:
Services	~~14,493~~—		146,~~913~~518		~~43,191~~		~~46,903~~
License and subscriptions	~~425~~—		~~463~~319		~~1,147~~		~~913~~
Products	~~140~~—		65,~~264~~359		~~8,036~~		~~18,550~~
Total costs of revenues	~~15,058~~—		2112,~~640~~196		~~52,374~~		~~66,366~~
Gross profit	~~17,623~~—		1712,~~026~~491		~~60,275~~		~~51,940~~
Operating expenses:
Sales and marketing	~~2,745~~91		42,~~648~~527		~~9,785~~		~~11,621~~
Research and development	~~1,978~~21		21,~~175~~043		~~4,111~~		~~5,944~~
General and administrative	83,~~817~~992		1210,~~628~~553		~~32,591~~		~~36,975~~
Depreciation and amortization	~~1,828~~170		~~3,336~~525		~~5,175~~		~~13,272~~
Stock-based compensation	~~598~~920		~~2,126~~981		~~2,645~~		~~4,588~~
Impairment of goodwill, intangible assets, and other long-lived assets	41,217		106,096		49,958		112,345
Goodwill, intangible asset, and other long-lived asset impairments	—		495
Acquisition, integration, and transformation costs	~~33,229~~176		63,~~049~~400		~~40,319~~		~~15,182~~
Total operating expenses	905,~~412~~370		~~137~~19,~~058~~524		~~144,584~~		~~199,927~~
Loss from operations	(725,~~789~~370)		(~~120~~7,~~032~~033)		~~(84,309)~~		~~(147,987)~~
Other income (expense):
Other expense:
Interest expense	(65,~~709~~529)		(6,~~708~~758)		~~(20,703)~~		~~(20,306)~~
Gain (loss) on deconsolidation of subsidiary	59,065		(37,708)		59,065		(37,708)
Other income, net, including interest income	3,539		58
Gain (loss) on fair value of derivative liability	—		223		(3)		6,893
Total other expense	(1,990)		(6,700)
Loss on extinguishment of debt	—		(14,610)		—		(14,610)
Loss before income tax expense	(7,360)		(13,733)
Other income, net, including interest income	295		32		425		220
Income tax expense	(4,519)		—
Total other income (expense)	52,651		(58,771)		38,784		(65,511)
Net loss from continuing operations	(11,879)		(13,733)
Loss before income tax benefit (expense)	(20,138)		(178,803)		(45,525)		(213,498)
Net income from discontinued operations, net of tax	37,300		6,098
Income tax benefit (expense)	—		13,219		(867)		17,744
Net income (loss)	25,421		(7,635)
Net loss	(20,138)		(165,584)		(46,392)		(195,754)
Less: net income attributable to noncontrolling interests	—		448
Less: net income (loss) attributable to noncontrolling interests	467		178		1,423		(109)
Net income (loss) attributable to UpHealth, Inc.	$	25,421	$	(8,083)
Net loss attributable to UpHealth, Inc.	$	(20,605)	$	(165,762)	$	(47,815)	$	(195,645)
Net income (loss) per share - basic and diluted
Net loss per share attributable to UpHealth, Inc.:
Continuing operations	$	(0.64)	$	(0.87)
Basic and diluted	$	(1.12)	$	(11.17)	$	(2.74)	$	(13.41)
Discontinued operations, net of tax	$	1.99	$	0.39
Weighted average shares outstanding:(1)
Attributable to UpHealth, Inc.	$	1.36	$	(0.51)
Basic and diluted	18,428		14,842		17,459		14,588
Weighted average shares outstanding - basic and diluted	18,699		15,730

(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.

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

T a b l e o f C o n t e n t s

UPHEALTH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, unaudited)


	Three Months Ended March 31,
	2024		2023
Net income (loss)	$	25,421	$	(7,635)
Foreign currency translation adjustments, net of tax	—		—
Comprehensive income (loss)	25,421		(7,635)
Less: comprehensive income attributable to noncontrolling interests	—		448
Comprehensive income (loss) attributable to UpHealth, Inc.	$	25,421	$	(8,083)

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

T a b l e o f C o n t e n t s

UPHEALTH, INC.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE~~STOCKHOLDERS’ ~~LOSS~~EQUITY

(In thousands, unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Common Stock							Treasury Stock
	2023		2022		2023			2022
	Shares		Amount		AdditionalPaid-InCapital			Shares		Amount		AccumulatedDeficit		TotalStockholders’Equity
Net loss	$	(20,138)	$	(165,584)	$	(46,392)		$	(195,754)
Balance as of January 1, 2024	18,671		$	2	$	696,150		170		$	(17,000)	$	(624,048)	$	55,104
Foreign currency translation adjustments, net of tax	—		—		—			(3,857)
Equity award activity, net of shares withheld for taxes	140		—		—			—		—		—		—
Comprehensive loss	(20,138)		(165,584)		(46,392)			(199,611)
Stock-based compensation	—		—		1,260		1	—		—		—		1,260
Comprehensive income (loss) attributable to noncontrolling interests	467		178		1,423			(109)
Net income	—		—		—			—		—		25,421		25,421
Comprehensive loss attributable to UpHealth, Inc.	$	(20,605)	$	(165,762)	$	(47,815)		$	(199,502)
Balance as of March 31, 2024	18,811		$	2	$	697,410		170		$	(17,000)	$	(598,627)	$	81,785


	Common Stock					Treasury Stock
	Shares	Amount		Additional Paid-In Capital		Shares	Amount		Accumulated Deficit		Total UpHealth, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
Balance as of January 1, 2023	15,054	$	2	$	688,355	170	$	(17,000)	$	(566,209)	$	105,148	$	989	$	106,137
Equity award activity, net of shares withheld for taxes	80	—		(3)		—	—		—		(3)		—		(3)
Issuance of common stock in connection with 2023 private placement, net of issuance costs of $348	1,650	—		4,155		—	—		—		4,155		—		4,155
Stock-based compensation	—	—		989		—	—		—		989		—		989
Net loss	—	—		—		—	—		(8,083)		(8,083)		448		(7,635)
Distribution to noncontrolling interests	—	—		—		—	—		—		—		(44)		(44)
Balance as of March 31, 2023	16,784	$	2	$	693,496	170	$	(17,000)	$	(574,292)	$	102,206	$	1,393	$	103,599

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

1 Includes $0.3 million from the acceleration of equity awards, which is included in net income from discontinued operations, net of tax, in the unaudited condensed consolidated statements of operations.

T a b l e o f C o n t e n t s

UPHEALTH, INC.

~~CONDENSED~~ CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~STOCKHOLDERS’~~CASH ~~EQUITY~~FLOWS

(In thousands, unaudited)

	Common Stock						Treasury Stock
	Three Months Ended March 31,
	Shares		Amount		AdditionalPaid-InCapital		Shares	Amount		AccumulatedDeficit		Total UpHealth, Inc.Stockholders’Equity		NoncontrollingInterests		TotalStockholders’Equity
	2024		2023
Balance as of January 1, 2023	15,054		$	2	$	688,355	170	$	(17,000)	$	(566,209)	$	105,148	$	989	$	106,137
Operating activities:
Equity award activity, net of shares withheld for taxes	80		—		(3)		—	—		—		(3)		—		(3)
Net income (loss)	$	25,421	$	(7,635)
Issuance of common stock in connection with 2023 private placement, net of issuance costs of $348	1,650		—		4,155		—	—		—		4,155		—		4,155
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation	—		—		989		—	—		—		989		—		989
Net income from discontinued operations, net of taxes	(37,300)		(6,098)
Distribution to noncontrolling interests	—		—		—		—	—		—		—		(44)		(44)
Depreciation and amortization	170		578
Net loss	—		—		—		—	—		(8,083)		(8,083)		448		(7,635)
Amortization of debt issuance costs and discount on convertible debt	2,635		2,659
Balance as of March 31, 2023	16,784		2		693,496		170	(17,000)		(574,292)		102,206		1,393		103,599
Stock-based compensation	920		981
Equity award activity, net of shares withheld for taxes	277		—		—		—	—		—		—		—		—
Goodwill, intangible asset, and other long-lived asset impairments	—		495
Exercise of pre-funded warrants	100		—		—		—	—		—		—		—		—
Amortization of operating lease right-of-use assets	26		402
Stock-based compensation	—		—		1,058		—	—		—		1,058		—		1,058
Other	—		(18)
Distribution to noncontrolling interests	—		—		—		—	—		—		—		(623)		(623)
Changes in operating assets and liabilities:
Net loss	—		—		—		—	—		(19,127)		(19,127)		508		(18,619)
Accounts receivable	10		(2,313)
Balance at June 30, 2023	17,161		2		694,554		170	(17,000)		(593,419)		84,137		1,278		85,415
Inventories	—		26
Equity award activity, net of shares withheld for taxes	45		—		—		—	—		—		—		—		—
Prepaid expenses and other current assets	516		(601)
Exercise of pre-funded warrants	549		—		—		—	—		—		—		—		—
Accounts payable and accrued expenses	1,333		3,058
Stock-based compensation	—		—		598		—	—		—		598		—		598
Operating lease liabilities	(45)		(412)
Distribution to noncontrolling interests	—		—		—		—	—		—		—		(288)		(288)
Income taxes payable	—		(19)
Deconsolidation of subsidiary	—				—		—	—		—		—		(1,457)		(1,457)
Deferred revenue	—		(1,260)
Net loss	—		—		—		—	—		(20,605)		(20,605)		467		(20,138)
Due to related parties	585		3,973
Balance at September 30, 2023	17,755		$	2	$	695,152	170	$	(17,000)	$	(614,024)	$	64,130	$	—	$	64,130
Other liabilities	4,519		(39)
Net cash used in operating activities - continuing operations	(1,210)		(6,223)
Net cash provided by (used) in operating activities - discontinued operations	(5,364)		2,184
Net cash used in operating activities	(6,574)		(4,039)
Investing activities:
Net cash received from sale of business	175,404		—
Purchases of property and equipment	—		(794)
Net cash provided by (used in) investing activities - continuing operations	175,404		(794)
Net cash used in investing activities - discontinued operations	(400)		(547)
Net cash provided by (used in) investing activities	175,004		(1,341)
Financing activities:
Proceeds from private placement, net of issuance costs of $348	—		4,152
Payments for taxes related to net settlement of equity awards	—		(3)
Distributions to noncontrolling interests	—		(44)
Payment of amount due to member	—		(50)
Net cash provided by financing activities - continuing operations	—		4,055
Net cash used in financing activities - discontinued operations	(635)		(899)
Net cash provided by (used in) financing activities	(635)		3,156
Net increase (decrease) in cash, cash equivalents, and restricted cash	167,795		(2,224)
Cash, cash equivalents, and restricted cash, beginning of period	2,548		15,557
Cash, cash equivalents, and restricted cash, end of period	$	170,343	$	13,333

~~UPHEALTH,~~Table ~~INC.~~of Contents

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Three Months Ended March 31,
	2024		2023
Supplemental cash flow information:
Cash paid for interest	$	2,370	$	2,283
Cash paid for income taxes	$	22	$	19

Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	955	$	13,333
Restricted cash	169,388		—
Total cash, cash equivalents, and restricted cash	$	170,343	$	13,333

(In thousands, unaudited)

	Common Stock					Treasury Stock
	Shares	Amount		AdditionalPaid-InCapital		Shares	Amount		AccumulatedDeficit		Accumulated OtherComprehensiveLoss		Total UpHealth, Inc.Stockholders’Equity		NoncontrollingInterests		TotalStockholders’Equity
Balance as of January 1, 2022(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 as of 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

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

T a b l e o f C o n t e n t s

UPHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED ~~STATEMENTS~~FINANCIAL ~~OF CASH FLOWS~~STATEMENTS

(In ~~thousands~~dollars, unaudited)

	Nine Months Ended September 30,
	2023		2022
Operating activities:
Net loss	$	(46,392)	$	(195,754)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	8,624		17,274
Amortization of debt issuance costs and discount on convertible debt	8,200		10,130
Stock-based compensation	2,645		4,588
Impairment of property and equipment, goodwill, intangible assets, and other long-lived assets	49,958		112,270
Provision for credit losses	(99)		—
Loss on extinguishment of debt	—		14,610
(Gain) loss on deconsolidation of subsidiary	(59,065)		37,708
Loss (gain) on fair value of warrant liabilities	8		(190)
Loss (gain) on fair value of derivative liability	3		(6,893)
Deferred income taxes	—		(17,485)
Amortization of operating lease right-of-use assets	1,932		—
Changes in operating assets and liabilities:
Accounts receivable	880		(5,200)
Inventories	144		(126)
Prepaid expenses and other current assets	(1,961)		(592)
Accounts payable and accrued expenses	18,583		10,475
Operating lease liabilities	(1,612)		—
Income taxes payable	(393)		(758)
Deferred revenue	961		2,382
Due from related parties	(209)		(39)
Other liabilities	(658)		49
Net cash used in operating activities	(18,451)		(17,551)
Investing activities:
Purchases of property and equipment	(3,307)		(5,238)
Due to related parties	—		(14)
Deconsolidation of cash (Note 1)	(35,606)		(8,743)
Proceeds from sale of business, net of expenses	54,835		—
Net cash provided by (used in) investing activities	15,922		(13,995)
Financing activities:
Proceeds from equity issuance	4,155		—
Repayments of debt	(10,273)		(48,234)
Proceeds of debt	—		67,500
Payment of debt issuance costs	—		(1,475)
Repayment of forward share purchase	—		(18,521)
Repayments of seller notes	—		(18,680)
Payments of finance and capital lease obligations	(2,510)		(2,544)
Payments for taxes related to net settlement of equity awards	(3)		(95)
Payments of amounts due to members	(100)		—
Distribution to noncontrolling interest	(955)		(139)
Net cash used in financing activities	(9,686)		(22,188)
Effect of exchange rate changes on cash and cash equivalents	—		(459)
Net decrease in cash and cash equivalents	(12,215)		(54,193)
Cash and cash equivalents, beginning of period	15,557		76,801
Cash and cash equivalents, end of period	$	3,342	$	22,608

1. Organization and Business

UpHealth, Inc.

UpHealth, Inc. (“UpHealth,” “we,” “us,” “our,” or the “Company”) is the parent company of UpHealth Holdings, Inc. (“UpHealth Holdings”) and Cloudbreak Health, LLC (“Cloudbreak”), the latter of which we sold on March 15, 2024.

GigCapital2, Inc. (“GigCapital2”), our predecessor, was incorporated in Delaware on March 6, 2019. GigCapital2 was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. The Company’s business combinations (the “Business Combinations”) were consummated on June 9, 2021, and in connection with the Business Combinations, GigCapital2 changed its corporate name to “UpHealth, Inc.”

On November 28, 2023, we received written notice from the staff of New York Stock Exchange (“NYSE”) Regulation of its determination to commence proceedings to delist the Company’s redeemable warrants, exercisable for one share of common stock of the Company, at an exercise price of $115.00 per share, from the NYSE and that trading in the warrants was suspended immediately. As a result, effective November 29, 2023, our warrants are trading in the over-the-counter market under the symbol “UPHLW.” The NYSE on December 13, 2023 filed a Form 25 with the U.S. Securities and Exchange Commission (“SEC”) to delist the warrants from the NYSE.

On December 11, 2023, we received written notice from the staff of NYSE Regulation that it has commenced proceedings to delist our common stock from the NYSE, and suspended trading in our common stock pending the completion of such proceedings. As a result, effective December 12, 2023, our common stock is trading in the over-the-counter market under the symbol “UPHL.” We timely filed an appeal of this determination with the NYSE and requested a hearing before the NYSE Regulatory Oversight Committee’s Committee for Review. On January 12, 2024, the NYSE granted the Company’s request for a hearing, which was originally scheduled to occur on April 17, 2024 but has since being rescheduled to July 18, 2024.

The over-the-counter market is a significantly more limited market than the NYSE, and quotation on the over-the-counter market likely results in a less liquid market for our existing and potential stockholders to trade the common stock and could further depress the trading price of our common stock. We can provide no assurance that our common stock will continue to trade on this market, that broker-dealers will continue to provide public quotes of our common stock on this market, or that the trading volume of our common stock will be sufficient to provide for an efficient trading market.

The transition of our common stock to the over-the-counter market will not affect the Company’s business operations or its reporting requirements under the rules of the SEC.

Chapter 11 Cases of UpHealth Holdings, Thrasys, and BHS

Since 2021, UpHealth Holdings has been a party to a legal action in state court in New York, entitled Needham & Company LLC (“Needham”) v. UpHealth Holdings, Inc. and UpHealth Services, Inc. (the “Needham Action”), which arose out of UpHealth Services’ engagement of Needham to assist with the acquisition of certain companies. On September 14, 2023, the trial court in New York issued a Decision and Order granting summary judgment in favor of Needham and denying UpHealth Holdings’ and UpHealth Services’ motion for summary judgment. The trial court in New York entered that Decision and Order on its docket on September 15, 2023. The Decision and Order concluded that Needham was entitled to a fee in the amount of $31.3 million, plus interest. On September 18, 2023, the trial court in New York signed a judgment against UpHealth Holdings and UpHealth Services in the amount of $31.3 million, plus prejudgment interest of $6.5 million, for a total judgment of $37.8 million, plus post-judgment interest of 9% per year.

Following the Decision and Order in the Needham Action, on September 19, 2023, UpHealth Holdings filed a voluntary petition for relief under Chapter 11 of Title 11 of the U.S. Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). In addition, on October 20, 2023, two of UpHealth Holdings’ wholly-owned subsidiaries, Thrasys, Inc. (“Thrasys”) and Behavioral Health Services, LLC (“BHS”), and each of the subsidiaries of Thrasys and BHS (such subsidiaries, collectively with UpHealth Holdings, Thrasys and BHS, being referred to individually herein and collectively as the “Debtors”), filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Chapter 11 cases of the Debtors are being jointly administered under the caption In re UpHealth Holdings, Inc., Case No. 23-11476 (U.S. Bankr. D. Del.), for procedural purposes only. Following the commencement of their Chapter 11 cases, the Debtors filed a number of ordinary “first-” and “second-day” motions to continue ordinary course operations and allow for a smooth transition into Chapter 11. On October 24, November 1 and November 17, 2023, the Bankruptcy Court approved all of the “first-” and “second-day” motions, including but not limited to confirming the worldwide automatic injunction of all litigation and creditor action against the Debtors, allowing the use of cash and the continued use of the Debtors’ cash management system, allowing payment to employees and independent contractors and setting a deadline for creditors to file proofs of claim. Accordingly, the Debtors continue to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On November 3, 2023, the U.S. Trustee appointed an official committee of unsecured creditors.

Supplemental cash flow information:
Cash paid for interest	$	10,652	$	5,269
Cash paid for income taxes	$	457	$	521
Non-cash investing and financing activity:
Property and equipment reclassified from other assets	$	—	$	3,751
Property and equipment acquired through capital lease and vendor financing arrangements	$	1,075	$	3,005
Issuance of common stock for debt issuance costs	$	—	$	713

T a b l e o f C o n t e n t s

Notwithstanding the filing of the voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and the automatic stay pursuant to section 362(a) of the Bankruptcy Code, the Clerk of Court of the Supreme Court of the State of New York entered the judgment in favor of Needham on the court’s docket on September 27, 2023. On November 13, 2023, UpHealth Holdings entered into a stipulation with Needham in the Bankruptcy Court providing that, to the extent it applies, the automatic stay pursuant to section 362(a) of the Bankruptcy Code shall be deemed modified for the sole and limited purpose of authorizing UpHealth Holdings and UpHealth Services, Inc. to appeal the New York court's judgment (and for Needham to be able to participate in the appeal). The ~~accompanying~~Bankruptcy ~~notes~~Court ~~are~~entered an ~~integral~~order ~~part~~approving ofthis ~~these~~stipulation ~~financial~~on ~~statements~~November 30, 2023.

On December 6, 2023, UpHealth Holdings and UpHealth Services, Inc. appealed the judgment entered by the Supreme Court of the State of New York to the Supreme Court of the State of New York Appellate Division, First Judicial Department. On April 18, 2024, a panel of the Supreme Court of the State of New York Appellate Division, First Judicial Department heard oral argument of the appeal, and on May 9, 2024, this panel rendered its decision affirming the previous judgment of the Supreme Court of the State of New York in favor of Needham and against the defendants in the amount of $37.8 million.

UpHealth Holdings intends to enforce the previously disclosed agreement executed by Dr. Chirinjeev Kathuria, Dr. Mariya Pylypiv and Dr. Al Gatmaitan (the “Indemnitors”), pursuant to which they agreed to be responsible for UpHealth Holding’s liabilities to Needham in excess of $8 million. There can be no assurance that UpHealth Holdings will be successful in collecting monies owed from the Indemnitors.

On November 16 and December 24, 2023, Thrasys filed motions to effectuate a transition of the Integrated Care Management segment to its customers, as disclosed in the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 filed by the Company with the SEC on November 21, 2023. This transition was substantially completed as of December 28, 2023 and Thrasys subsequently ceased all operations. In addition, a motion to pay retention bonuses to Thrasys employees involved in the transition of the Integrated Care Management segment was approved by the Bankruptcy Court on November 17, 2023.

On November 16, 2023, the Bankruptcy Court entered an order setting deadlines to file claims in the Chapter 11 cases. The deadline to file proofs of claim by general creditors of all Debtors passed on January 15, 2024 and the deadline for governmental entities to file proofs of claim against UpHealth Holdings passed on March 18, 2024 and passed on April 17, 2024 against the other Debtors.

On December 18, 2023, the Debtors filed their schedules of assets and liabilities and their statements of financial affairs. On January 23, 2024, the Bankruptcy Court entered an order extending the Debtors’ exclusive right to file a Chapter 11 plan through and including April 30, 2024, and extending the Debtors’ exclusive right to solicit such a plan through and including July 1, 2024. The Debtors have filed a motion requesting further extension of these deadlines, which automatically tolls the expiration of the applicable periods.

On May 21, 2024, the Bankruptcy Court entered an order approving, on an interim basis, the payment of certain expenses of the Company from funds held by UpHealth Holdings. A final hearing on this matter is currently scheduled for July 2, 2024.

Other than UpHealth Holdings, Thrasys, BHS and the subsidiaries of Thrasys and BHS, we and our other subsidiaries have not filed a petition for relief under Chapter 11 of the Bankruptcy Code, and we and our indirect subsidiary TTC Healthcare, Inc. (“TTC”) continue to operate outside of bankruptcy.

The filing of the Chapter 11 cases by the Debtors constituted an event of default under the Indentures (as defined below) governing UpHealth’s 6.25% Convertible Senior Notes due 2026 (the “2026 Notes” and all beneficial holders thereof, the “2026 Noteholders”) and UpHealth’s Variable Rate Convertible Senior Secured Notes due 2025 (the “2025 Notes” and all beneficial holders thereof, the “2025 Noteholders”), which accelerated our payment obligations in respect of the 2025 Notes. On February 9, 2024, we entered into the Waivers and Rescission Agreements (as defined below), providing for, among other things, the waiver of the specified events of default under the Indentures and the recission of the automatic acceleration the principal and interest due in respect of the 2025 Notes pursuant to the applicable Indenture. See Sale of Cloudbreak below for further information.

Award of Arbitration Regarding Control of Glocal Board of Directors

UpHealth Holdings has been a party to a commercial arbitration (the “Arbitration”) regarding control of Glocal Healthcare Systems Private Limited, an Indian company with its registered office in Kolkata, West Bengal, India (“Glocal”). The Arbitration is being administered by the International Court of Arbitration (the “ICA”) of the International Chamber of Commerce (the “ICC”). The Arbitration commenced on November 4, 2022, when UpHealth Holdings filed a Request for Arbitration against certain of UpHealth Holdings’ counterparties to a Share Purchase Agreement, dated October 30, 2020 (the “Original SPA”, and as amended on November 20, 2020 and March 4, 2021, the “SPA”), pursuant to which UpHealth Holdings had acquired Glocal. The SPA counterparties against whom UpHealth Holdings brought the Arbitration include Glocal, Dr. Syed Sabahat Azim (“Sabahat Azim”), Richa Sana Azim (“Richa Azim,” and together with Sabahat Azim, the “Azims”), Gautam Chowdhury (“Chowdhury”), Meleveetil Damodaran (“Damodaran”), and Kimberlite Social Infra Private Limited (“Kimberlite,” and together with Glocal, the Azims, Chowdhury and Damodaran, the “Respondents”). Sabahat Azim, Richa Azim, and Chowdhury have constituted the board of directors of Glocal (the “Glocal Board”) since UpHealth Holdings entered into the Original SPA. Damodaran is a current shareholder and former director of Glocal. Kimberlite is an Indian entity of which the Azims are shareholders and directors, and it is a shareholder of Glocal. UpHealth Holdings brought claims against the Respondents for breach of the SPA, violation of UpHealth Holdings’ rights under the Indian Company Act as supermajority shareholder of Glocal, and misrepresentation. UpHealth Holdings requested specific relief, damages and costs from the arbitral tribunal that was constituted by the ICA to decide UpHealth Holdings’ claims (the “Tribunal”).

~~UPHEALTH,~~Table ~~INC.~~of Contents

~~NOTES~~The TOTribunal ~~CONDENSED~~closed ~~CONSOLIDATED~~the ~~FINANCIAL~~Arbitration ~~STATEMENTS~~proceedings on February 5, 2024. On March 18, 2024, the ICA formally notified the final award in the Arbitration (the “Award”) of the Tribunal to the parties. The dispositive section of the Award reads substantially as follows, of which sub‑paragraphs (a) through (f) constitute the Tribunal’s findings and sub-paragraphs (g) through (u) constitute the relief ordered by the Tribunal:

~~(in~~a.The ~~dollars~~Tribunal has jurisdiction over Glocal, ~~unaudited)~~ the Azims, Chowdhury, Damodaran, and Kimberlite in the Arbitration;

1b.~~Organization~~The Tribunal has jurisdiction to hear and ~~Business~~determine the disputes in the Arbitration and rejects Glocal’s, the Azims’s, and Chowdhury’s jurisdictional objections;

c.UpHealth, ~~Inc.~~Holdings holds (~~“UpHealth,”~~i) ~~“we~~7,~~” “us~~503,”016 ~~“our,”~~equity ~~“UpHealth,”~~shares orin Glocal (95.29% of the ~~“Company”~~total equity shares), is(ii) ~~the~~24,867 ~~parent~~preference ~~company~~shares in Glocal (37.52% of ~~both~~the ~~UpHealth~~total ~~Holdings~~preference shares), ~~Inc.~~and (~~“UpHealth Holdings”~~iii) ~~and~~94.81% ~~Cloudbreak~~of ~~Health,~~the ~~LLC~~total (~~“Cloudbreak”~~equity plus preference). shares in Glocal;

~~GigCapital2, Inc~~d.UpHealth ~~(“GigCapital2”),~~Holdings ~~the~~has ~~Company’s~~good ~~predecessor,~~and ~~was~~marketable ~~incorporated~~title inover ~~Delaware~~its onshareholding ~~March~~in 6,Glocal ~~2019.~~detailed ~~GigCapital2~~in ~~was~~sub-paragraph ~~formed~~(c) ~~for the purpose of effecting a merger~~above, ~~capital~~free ~~stock~~and ~~exchange,~~clear ~~asset~~of ~~acquisition,~~all ~~stock~~encumbrances ~~purchase,~~and ~~reorganization~~together ~~or similar business combination~~ with ~~one~~all ~~or more businesses. The Company’s business combinations (the “Business Combinations”) were consummated on June 9~~rights, ~~2021~~title, interest and inbenefits ~~connection~~appertaining ~~with the Business Combinations, GigCapital2 changed its corporate name to UpHealth, Inc.~~thereto;

~~Going~~e.The ~~Concern~~Extraordinary General Meeting held by Glocal on September 26, 2022 was carried out contrary to the terms of the SPA;

~~Since 2021, UpHealth Holdings has been a party to a legal action in the state court in New York entitled Needham & Company LLC (“Needham”) v~~f.The ~~UpHealth Holdings~~Azims, ~~Inc. and UpHealth Services~~Chowdhury, ~~Inc. (the “Needham Action”)~~Damodaran, ~~which arose out of UpHealth Services, Inc.’s engagement of Needham to provide placement~~ and ~~other~~Kimberlite ~~financial~~have ~~advisory~~breached ~~services. On September 14, 2023,~~ the ~~court in New York issued a Decision and Order granting summary judgment in favor of Needham and denying UpHealth Holdings’ and UpHealth Services~~SPA, ~~Inc.’s~~specifically ~~motion for summary judgment. The court in New York entered that Decision and Order on~~ its ~~docket~~Clause ~~on September 15~~5.2(b), ~~2023.~~(c) ~~The Decision~~ and ~~Order concluded that Needham is entitled to fees in the amount of $31.3 million~~(d), ~~plus~~as ~~interest.~~well Onas ~~September~~Clauses ~~18,~~10 ~~2023, the court in New York signed a judgment against UpHealth Holdings~~ and ~~UpHealth Services, Inc. in the amount of $31.3 million, plus prejudgment interest of $6.5 million, for a total judgment of $37.8 million, plus post-judgment interest of 9% per year.~~ 12;

~~Following the Decision and Order in the Needham Action, on September 19, 2023, UpHealth Holdings filed a voluntary petition for relief under Chapter 11 of the U~~g.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). In addition, on October 20, 2023, two of UpHealth Holdings’ wholly-owned subsidiaries, Thrasys, Inc. (“Thrasys”) and Behavioral Health Services, LLC (“BHS”), and each of the subsidiaries of Thrasys and BHS (such subsidiaries, collectively with UpHealth Holdings, Thrasys and BHS, being referred to individually herein and collectively as the “Debtors”), filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court. The ~~Chapter~~Tribunal 11issues cases of the Debtors are being jointly administered under the caption In re UpHealth Holdings, Inc., Case No. 23-11476 (U.S. Bankr. D. Del.), for procedural purposes only. Following the commencement of their Chapter 11 cases, the Debtors have filed a ~~number~~permanent ofmandatory ordinary “first-” and “second-day” motions to continue ordinary course operations and allow for a smooth transition into Chapter 11. On October 24, November 1 and November 17, 2023, the U.S. Bankruptcy Court approved all of the “first-” and “second-day” motions, including but not limited to confirming the worldwide automatic injunction of all litigation and creditor action against the Debtors, allowing the use of cash and the continued use of the Debtors’ cash management system, allowing payment to employees and independent contractors and setting a deadline for creditors to file proofs of claim. Accordingly, the Debtors continue to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the U.S. Bankruptcy Code and orders of the Bankruptcy Court. :

~~Thrasys~~1.Directing ~~has~~the ~~also~~Respondents ~~filed~~to ~~motions~~take all necessary steps to ~~effectuate~~(i) convene a ~~transition~~meeting of the ~~Integrated~~Glocal ~~Care~~Board ~~Management~~to ~~segment~~appoint toUpHealth ~~its~~Holdings’ ~~customers,~~designee(s) as ~~described~~director(s) inof ~~Note~~the ~~17.~~Glocal ~~Subsequent Events. In addition~~Board, aand ~~motion~~(ii) toat ~~pay~~that ~~retention~~meeting, ~~bonuses~~approve toand ~~Thrasys~~authorize ~~employees involved in~~ the ~~transition~~appointment of ~~the~~UpHealth ~~Integrated~~Holdings’ ~~Care~~designee(s) ~~Management~~as ~~segment~~director(s) ~~through~~of ~~year~~the ~~end~~Glocal ~~was~~Board, ~~approved~~pursuant byto ~~the~~Clauses U5.S2.1(b)(iii) ~~Bankruptcy~~and ~~Court~~12 onof ~~November~~the ~~17,~~Original ~~2023.~~SPA (as amended);

~~Notwithstanding the filing of the voluntary petition for relief under Chapter 11 of the U~~2.S.Directing ~~Bankruptcy~~Glocal, ~~Code in~~ the ~~Bankruptcy~~Azims, ~~Court~~Chowdhury, Damodaran and ~~the~~Kimberlite, ~~automatic~~both ~~stay~~individually ~~pursuant~~and jointly to ~~section~~file ~~362(a)~~Form ofDIR-12 ~~the~~with ~~U.S. Bankruptcy Code,~~ the ~~Clerk~~jurisdictional ofregistrar ~~Court~~ of ~~the~~companies ~~court~~ in ~~New~~relation ~~York~~to ~~entered~~ the ~~judgment~~appointment onof ~~the court’s docket on September 27, 2023. On November 13, 2023,~~ UpHealth Holdings’ ~~entered~~designee(s) ~~into a stipulation with Needham in the Bankruptcy Court providing that,~~ to the ~~extent~~Glocal itBoard ~~applies, the automatic stay~~ pursuant to ~~section~~Clauses ~~362~~5.2.1(ac) ~~of the U.S. Bankruptcy Code shall be deemed modified for the sole~~ and ~~limited~~12 ~~purpose~~ of ~~authorizing UpHealth Holdings and UpHealth Services, Inc. to appeal~~ the ~~New~~Original ~~York~~SPA ~~court’s judgment~~ (~~and~~as ~~for Needham to be able to participate in the appeal~~amended)~~. We are awaiting the Bankruptcy Court’s entry of an order approving the stipulation. When it does so, we will appeal the judgment in the Needham Action.~~;

~~Neither~~3.Directing weGlocal, ~~nor~~the ~~any~~Azims, ~~other~~Chowdhury, ~~direct~~Damodaran orand ~~indirect subsidiary of us besides UpHealth Holdings~~Kimberlite, ~~Thrasys,~~both ~~BHS~~individually and ~~the~~jointly, ~~subsidiaries~~to ofprovide ~~Thrasys~~UpHealth ~~and~~Holdings ~~BHS~~with ~~have~~true ~~filed~~extracts, aduly ~~petition~~certified ~~for~~by ~~relief~~the ~~under~~Glocal ~~Chapter~~Board, 11 of ~~the~~board ~~U.S.~~resolutions ~~Bankruptcy~~appointing ~~Code,~~UpHealth ~~and~~Holdings’ ~~we,~~designee(s) ~~Cloudbreak~~to ~~Health,~~the ~~LLC~~Glocal Board, ~~and~~following ~~TTC~~such ~~Healthcare,~~appointment ~~Inc.~~Clauses 5.2.1(~~“TTC”~~d) ~~continue~~and to12 ~~operate~~of ~~outside~~the ofOriginal ~~bankruptcy.~~SPA (as amended);

4.Pursuant to Clauses 10.2 and 12 of the Original SPA (as amended), directing Glocal, the Azims, Chowdhury, Damodaran, and Kimberlite to cooperate with UpHealth Holdings to increase UpHealth Holdings’ ownership to 100% of the share capital of Glocal, in a form and manner acceptable to UpHealth Holdings; and

5.Prohibiting Glocal, the Azims, Chowdhury, Damodaran, and Kimberlite from acting in violation of Clause 12 of the SPA and requiring Glocal, the Azims, Chowdhury, Damodaran, and Kimberlite to provide UpHealth Holdings access to all financial statement(s), information, data, documents, books and records in the form and manner requested by UpHealth Holdings.

h.The Azims, Chowdhury, Damodaran, and Kimberlite are ordered to comply with the terms of the SPA as amended by observing the requests of UpHealth Holdings to fulfill the terms of the SPA;

i.The Tribunal orders the Azims, Chowdhury, Damodaran, and Kimberlite to severally pay UpHealth Holdings Primary Damages (as defined in the Award) in the sums set out below:

1.Sabahat Azim – USD $10,140,625.00

2.Richa Azim – USD $10,140,625.00

3.Chowdhury – USD $1,382,812.50

4.Damodaran – USD $6,650,669.64

5.Kimberlite – USD $1,185,267.86

~~The~~Table ~~filing~~ of ~~the Chapter 11 case by UpHealth Holdings constitutes an event of default that accelerated our obligations under the following debt instruments:~~Contents

~~•Indenture,~~j.In ~~dated~~the ~~June~~event 9,that ~~2021~~Glocal, bythe ~~and~~Azims, ~~between~~Chowdhury, ~~UpHealth~~Damodaran and ~~Wilmington Trust~~Kimberlite, ~~National~~at ~~Association,~~any atime ~~national~~prior ~~banking~~to ~~association~~September ~~(the~~30, ~~“Indenture Trustee”)~~2024, inoffer ~~its~~to ~~capacity~~give ~~as trustee thereunder (the “Unsecured Notes Indenture”), governing~~ UpHealth’s ~~6.25%~~Holdings ~~Convertible~~actual ~~Senior~~control ~~Notes~~of ~~due~~Glocal ~~2026~~without ~~(the “2026 Notes” and~~ all ~~beneficial~~or ~~holders~~some ~~thereof,~~of the ~~“2026~~assets ~~Noteholders”)~~provided ~~which,~~for ~~subject~~and/or tocontemplated ~~the event of default triggered~~ by the ~~Chapter 11 case~~SPA, ~~mature~~UpHealth onHoldings ~~June~~may ~~15,~~forthwith ~~2026.~~elect to:

~~•Indenture,~~1.Receive ~~dated~~actual ascontrol of ~~August~~Glocal ~~18,~~notwithstanding ~~2022, by and between UpHealth and~~ the ~~Indenture~~diminution ~~Trustee,~~of in its ~~capacity~~assets; as trustee and as collateral agent thereunder (the “Senior Secured Notes Indenture” and together with the Unsecured Notes Indenture, the “Indentures”), governing UpHealth’s Variable Rate Convertible Senior Secured Notes due 2025 (the “2025 Notes” and all beneficial holders thereof, the “2025 Noteholders”) which, subject to the event of default triggered by the Chapter 11 case, mature on December 15, 2025.or

~~The~~2.Recover ~~Indentures~~from ~~provide that upon~~ the ~~filing~~Azims, ofChowdhury, ~~the Chapter 11 case~~Damodaran, ~~the principal~~ and ~~interest~~Kimberlite ~~due~~Additional ~~thereunder~~Damages ~~shall~~(as bedefined ~~immediately due and payable. As a result of such acceleration of our debt obligations~~ in ~~respect of~~ the ~~2025~~Award) ~~Notes~~amounting ~~and 2026 Notes, we believe there is substantial doubt about our ability~~ to ~~continue~~USD as$80.7 million afor ~~going~~the ~~concern,~~permanent asloss ~~described~~of inactual ~~this Quarterly Report on Form 10-Q (this “Quarterly Report”)~~control.

Onk.If ~~November~~UpHealth ~~16,~~Holdings ~~2023,~~does wenot ~~agreed~~secure toactual ~~sell~~control ~~100%~~ of ~~the~~Glocal ~~outstanding~~on ~~equity~~or ~~interests~~before ofSeptember ~~Cloudbreak~~30, ~~our~~2024 ~~wholly~~with owned subsidiary, to Forest Buyer, LLC, a Delaware limited liability company (“Buyer”) and an affiliate of GTCR LLC, a leading private equity firm (“GTCR”), pursuant to a membership interests purchase agreement, dated November 16, 2023 (the ~~“Purchase~~assets ~~Agreement”),~~provided byfor ~~and~~or ~~among the Company, Cloudbreak and Buyer (the “Sale” and all of the transactions~~ contemplated byin the ~~Purchase~~SPA ~~Agreement, as supplemented by the terms~~ and ~~conditions~~sub-paragraph ~~of the Transaction Support Agreement~~ (~~as defined below~~j), ~~including~~above ~~entry~~does ~~into~~not ~~the~~take ~~Escrow~~effect ~~Agreement~~then ~~(as~~UpHealth ~~defined~~Holdings ~~below),~~is ~~the~~entitled ~~Supplemental Indentures (as defined below) and any documents or instruments relating~~ to recover the ~~Fundamental~~Additional ~~Change~~Damages ~~Repurchase Offer~~ (as defined ~~below),~~in ~~collectively,~~ the ~~“Transactions”~~Award). Wefor ~~will utilize~~ the ~~proceeds~~permanent ~~from~~loss ~~the~~of ~~Sale~~actual ~~for~~control ~~payment~~from ~~in full or in part of~~ the ~~Company’s~~Azims, ~~2026 Notes and 2025 Notes~~Chowdhury, ~~as well as other expenses related to the Transactions. The Transactions are expected to close (the “Closing”) in the first half of 2024~~Damodaran, ~~subject to obtaining customary regulatory~~ and ~~stockholder approval (such date, the “Closing Date”).~~Kimberlite;

~~Pursuant to the terms of the Purchase Agreement, the “Cash Consideration” for the Sale means an amount equal to $180~~l.~~0 million,~~If ~~with~~UpHealth ~~adjustments~~Holdings ~~for~~elects ~~debt as of immediately prior~~ to ~~the~~recover ~~Closing and cash as of 11:59 p.m. (Delray Beach, Florida time) on~~ the ~~day~~Additional ~~immediately~~Damages ~~prior~~under tosub-paragraphs ~~the Closing Date~~ (~~the “Calculation Time”~~j), Cloudbreak’s net working capital as of the Calculation Time, and unpaid expenses related to the Transactions. The consideration delivered to the Company at the Closing shall equal $180.0 million, subject to adjustments for the estimated closing debt and cash and the estimated unpaid expenses related to the Transactions (~~the “Estimated Cash Consideration”~~2), ~~with~~or ~~all such Estimated Cash Consideration to be delivered by Buyer to an escrow agent~~ (~~the “Escrow Agent”~~k) ~~for deposit into certain segregated escrow accounts to be established pursuant to the Escrow Agreement~~above, ~~as described below. Following~~ the ~~Closing,~~Tribunal inorders ~~connection with a customary adjustment to~~ the ~~Cash Consideration~~Azims, ~~which adjustment is expected~~Chowdhury, ~~in the absence of any disagreement~~Damodaran, to be determined within 120 days following the Closing Date, to the extent that the Cash Consideration exceeds the Estimated Cash Consideration, a payment shall be made for the purpose of repurchasing the 2026 Notes and~~/or~~ ~~the~~Kimberlite ~~2025 Notes of an amount equal~~ to ~~the~~severally ~~amount~~pay byUpHealth ~~which~~Holdings ~~the~~damages Cash Consideration exceeds the Estimated Cash Consideration (up to an excess equal to the amount of the Adjustment Escrow Amount (as defined below)). To the extent that following such customary adjustment to the Cash Consideration, the Estimated Cash Consideration is greater than the Cash Consideration, Buyer and the Company shall cause the Escrow Agent (including by delivering joint written instructions to the Escrow Agent) to make payment to Buyer (or its designees) of an amount equal to the lesser of (i) an amount equal to the amount by which the Estimated Cash Consideration exceeds the Cash Consideration, and (ii) the Adjustment Escrow Amount held in the ~~Adjustment~~sums Escrow Account, including any dividends, interest, distributions and other income received in respect thereof, less any losses on investment thereof, less distributions thereof in accordance with the Purchase Agreement and the Escrow Agreement (as defined below) (the “Adjustment Escrow Funds”), in each case, from the Adjustment Escrow Account, and after any such payments are made to Buyer, the remaining Adjustment Escrow Funds (if any) shall be paid for the purpose of repurchasing the 2026 Notes and/or the 2025 Notes.:

Pursuant to the terms of the Purchase Agreement, prior to the Closing, the Company, Buyer and the Escrow Agent will enter into one or more escrow agreements in a customary form to be agreed upon as provided under the Purchase Agreement by Buyer, the Company, the Required Noteholders (as defined below) and the Escrow Agent (the “Escrow Agreement”), pursuant to which, at the Closing, Buyer will remit to the Escrow Agent all of the Estimated Cash Consideration to be deposited as follows: (i) $31.~~0 million~~Sabahat ~~(the~~Azim ~~“Adjustment~~– ~~Escrow~~USD ~~Amount”) shall be deposited in a segregated escrow account to satisfy any downward adjustment to the Cash Consideration (the “Adjustment Escrow Account”); (ii)~~ $27~~.0 million (the “Tax Escrow Amount”)~~, subject to reduction if the Company and Buyer mutually determine prior to the Closing that the maximum possible amount of taxes that would become due and payable by the Company as a result of the Transactions (the “Maximum Seller Tax Amount”) should be less than $27.0 million740, in which case the Tax Escrow Amount shall be reduced to an amount equal to the agreed-upon Maximum Seller Tax Amount, shall be deposited in a segregated escrow account to enable the Company to pay any and all taxes that become due and payable by the Company as a result of the Transactions (the “Tax Escrow Account”); provided, that any amounts remaining in the Adjustment 625.00

2.Richa Azim – USD $27,740,625.00

3.Chowdhury – USD $3,782,812.50

4.Damodaran – USD $18,193,526.79

5.Kimberlite – USD $3,242,410.71

m.In the event that UpHealth Holdings elects to receive the Additional Damages under sub-paragraphs (j)(2) or (k) above, the Azims, Chowdhury, Damodaran, and Kimberlite are not required to comply with the following orders/paragraphs in the dispositive part of the Award:

1.Sub-paragraph (g);

2.Sub-paragraph (h);

3.Sub-paragraph (r); and

4.Sub-paragraph (s).

n.The Azims, Chowdhury, Damodaran, and Kimberlite must, severally in the proportions set out in sub-paragraphs (i) and (l) above, pay UpHealth Holdings all withholding tax applied to the interest on the damages awarded to UpHealth Holdings, subject to UpHealth Holdings providing the enforcement court with sufficient evidence of the amount of withholding tax applied to the interest on damages awarded;

o.The Azims and Chowdhury must in equal shares pay UpHealth Holdings’ costs and expenses amounting to USD $868,440 reasonably incurred in relation to the emergency arbitration;

p.The Azims, Chowdhury, Damodaran, and Kimberlite must in equal shares pay UpHealth Holdings its costs and expenses amounting to USD $4,488,562 reasonably incurred in relation to this Arbitration (excluding the emergency-arbitration stage);

q.The Azims, Chowdhury, Damodaran, and Kimberlite must pay UpHealth Holdings post-award interest on the sums they are individually liable to pay from the date of the Award until full payment at a rate of nine percent (9%) per annum on a simple basis;

r.UpHealth Holdings and the Respondents must give continuing effect to subparts (c), (e), and (f) of Section VII (the dispositif) of the emergency arbitrator’s order, as amended below, pursuant to the Tribunal’s authority under Article 29(3) of the ICC Rules and Article 6(6)(c) of Appendix V to the ICC Rules:

1.Glocal, the Azims, and Chowdhury are directed, both individually and jointly, to cooperate with UpHealth Holdings and with any PCAOB-registered accounting firm identified by UpHealth Holdings, in providing access to all unaudited financial statement(s), data, documents, books and records of Glocal, as and when required in the form and manner requested by UpHealth Holdings;

~~Escrow~~Table ~~Account after the post-Closing adjustment or in the Tax Escrow Account after the payment~~ of all taxes shall (x) if the Fundamental Change Repurchase Date (as defined in the Senior Secured Notes Indenture) has not yet occurred, be paid to the Notes Escrow Account (as defined below) by wire transfer of immediately available funds for purposes of making an offer to repurchase the 2026 Notes and the 2025 Notes, or (y) if the Fundamental Change Repurchase Date has occurred, be released to the Company (and held in a deposit account subject to a control agreement in favor of the Consenting Noteholders) for the sole purpose of complying with mandatory repurchase requirements set forth in the Senior Secured Notes Supplemental Indenture with respect to any remaining 2025 Notes; and (iii) the remaining portion of the Estimated Cash Consideration (such amount, the “Notes Escrow Amount”), shall be deposited in a segregated escrow account (the “Notes Escrow Account”, and together with the Adjustment Escrow Account and the Tax Escrow Account, the “Escrow Accounts”), the purpose of which shall be to fund the offer, on behalf of the Company, (a) to repurchase all of the Company’s 2026 Notes issued under the Unsecured Notes Indenture, which repurchase shall use a portion of the Notes Escrow Account, together with any dividends, interest, distributions and other income received in respect thereof, less any losses on investment thereof, less distributions thereof in accordance with the Purchase Agreement and the Escrow Agreement (the “Notes Escrow Fund”), which portion as of the date of the Purchase Agreement and based on certain assumptions that are subject to change, is currently estimated to be equal to $115.0 million, and which payment is expected to occur on or around June 3, 2024, together with the payment of any other amounts to be made to the 2026 Noteholders concurrently with the payment of such portion of the Notes Escrow Funds as specified by the Unsecured Notes Indenture following a Fundamental Change (as such term is defined in the Unsecured Notes Indenture), which other amounts may be paid using amounts of the Notes Escrow Funds, and (b) in addition to the repurchase of up to all of the 2026 Notes, to repurchase in accordance with the terms of the Senior Secured Notes Indenture (as defined below) in the event of a Fundamental Change (as defined in the Senior Secured Notes Indenture) the maximum principal amount of the Company’s 2025 Notes issued under the Senior Secured Notes Indenture, which, as of the date of the Purchase Agreement and based on certain assumptions that are subject to change and presuming that all of the 2026 Noteholders accept the repurchase of the 2026 Notes as well as any other amounts of the Notes Escrow Funds paid in respect of the repurchase of the 2026 Notes, is estimated to be approximately $25.8 million, and the Company, in accordance with such terms of the Senior Secured Notes Indenture, shall make such payments of other amounts required to be made in connection with such repurchase, which other amounts may be paid using amounts of the Notes Escrow Funds, such that following the payment of the amounts to be paid for such initial repurchase of the 2025 Notes, which payment is expected to occur on or around June 3, 2024, a portion of the 2025 Notes shall remain outstanding (which, as of the date of the Purchase Agreement and based on certain assumptions that are subject to change, is estimated to be approximately $31.4 million in aggregate principal amount), the terms of which shall be governed by the 2025 Notes and the Senior Secured Notes Indenture and the Senior Secured Notes Supplemental Indenture (it being acknowledged and agreed that all of the 2025 Noteholders that have not signed the Transaction Support Agreement will be repurchased in full with respect to their 2025 Notes to the extent such noteholders so elect and all of the 2025 Noteholders that have signed the Transaction Support Agreement will be partially repurchased with respect to their 2025 Notes on a pro rata basis). In the event that any amounts remain outstanding of the Notes Escrow Funds, those amounts shall be used to offer to repurchase in part such anticipated outstanding amount of the 2025 Notes in accordance with the terms of the Senior Secured Notes Indenture in the event of a Fundamental Change (as such term is defined in the Senior Secured Notes Indenture). Furthermore, any repurchases of the 2025 Notes in accordance with the Purchase Agreement will be made at a premium of 5.0% to the principal amount of such 2025 Notes.Contents

~~In connection and concurrently with the entry into the Purchase Agreement~~2.Glocal, the ~~Company,~~Azims ~~Cloudbreak~~ and ~~Buyer~~Chowdhury ~~entered~~are ~~into a transaction support agreement~~directed, ~~dated~~both asindividually ofand ~~November 16~~jointly, ~~2023~~to ~~(the~~cooperate ~~“Transaction Support Agreement”),~~ with ~~certain~~any ~~beneficial~~PCAOB‑registered ~~holders~~accounting offirm ~~the~~identified ~~2025~~by ~~Notes~~UpHealth ~~(being~~Holdings ~~the~~in ~~holders~~their ofreview ~~at least 69%~~ of the ~~2025~~information ~~Notes,~~provided ~~the~~pursuant ~~“Consenting~~to ~~Senior~~sub-paragraph ~~Secured Noteholders”~~(r) ~~and certain beneficial holders of the 2026 Notes~~ (~~being~~1) ~~the holders of at least 88% of the 2026 Notes~~above, ~~the~~including ~~“Consenting~~responding ~~Unsecured~~to ~~Noteholders”,~~any ~~and together with the Consenting Senior Secured Noteholders~~questions, ~~the~~making ~~“Consenting~~any ~~Noteholders”),~~company ~~pursuant~~employees toor ~~which~~officers ~~the~~available ~~parties have agreed, among other things,~~ to ~~support~~respond ~~the Purchase Agreement and the Transactions and~~ to ~~enter~~questions, ~~into~~ and ~~effect~~complying ~~the Escrow Agreements, Supplemental Indentures in connection~~ with ~~the~~any ~~Fundamental~~requests ~~Change~~for ~~Repurchase~~further ~~Offer~~information toor beclarifications; ~~made by the Company~~ and ~~each other Definitive Document (as defined in the Transaction Support Agreement), in each case, subject to the terms and conditions set forth in the Transaction Support Agreement.~~

~~The~~3.Glocal, ~~Transaction Support Agreement provides that (i)~~ the ~~Company~~Azims, and ~~Cloudbreak~~Chowdhury ~~will abide by the proceeds waterfall set forth in the Purchase Agreement as described above~~are, ~~the~~jointly ~~Escrow Agreements~~ and ~~the Supplemental Indentures~~individually, ~~including,~~ordered ~~for the avoidance of doubt, releasing the Notes Escrow Funds as set forth in the Escrow Agreement, commencing offers~~ to ~~repurchase~~refrain ~~the~~from ~~2025~~(i) ~~Notes~~taking ~~and the 2026 Notes in accordance with the terms of the applicable Indenture as a result of~~ any orsteps ~~all~~to ofaccess the ~~Transactions~~funds ~~constituting a Fundamental Change (as such term is defined~~ in ~~each~~Glocal’s ofbank ~~the~~account ~~Indentures)~~at ~~under~~ICICI ~~the applicable Indenture (each~~Bank, aaccount ~~“Fundamental~~number ~~Change~~104905001983 ~~Repurchase~~whether ~~Offer”)~~on ~~and delivering~~ the ~~applicable~~basis ~~Fundamental Change Company Notices (as such terms are defined in each~~ of the ~~Indentures)~~August ~~pursuant~~15, to2022 ~~the~~board ~~applicable~~resolution ~~Indenture,~~or ~~in each case~~otherwise, ~~at the times and pursuant to the terms specified in the Supplemental Indentures;~~ (ii) ~~the~~making, ~~Buyer~~or ~~will~~causing ~~abide~~to bybe ~~the proceeds waterfall set forth in the Purchase Agreement as described above~~made, ~~the~~any ~~Escrow~~changes ~~Agreements~~to ~~and~~ the ~~Supplemental~~authorized ~~Indentures,~~signatory ~~including,~~that ~~for~~can ~~the~~access ~~avoidance~~such ofbank ~~doubt~~account, ~~depositing~~ and ~~releasing the Escrow Funds as set forth in the Escrow Agreement; and~~ (iii) ~~the Consenting Noteholders will~~ making, soor ~~long~~causing asto ~~the~~be ~~Company complies with the applicable terms~~made, ~~conditions and procedures set forth in the Indentures, participate in and comply with the terms set forth in respect of~~ any ~~Fundamental~~other ~~Change~~changes Company Notice given under (and as defined in) the respective Indenture and applicable Supplemental Indenture in connection with each relevant Fundamental Change Repurchase Offer. The Company and each Consenting Noteholder, in their separate and individual capacities, represent in the Transaction Support Agreement that, as of the date thereof and to ~~the~~such ~~best~~bank of account.

s.Martin Beck and/or Jeremy Livianu and/or such other person as may be designated by the board of directors of UpHealth Holdings, by board resolution (and notified in writing to ICICI Bank by the Chief Executive Officer of UpHealth Holdings, attaching a certified copy of the resolution of the board of directors of UpHealth Holdings designating such person), may, jointly or severally, be permitted to access and operate Glocal’s bank account at ICICI Bank, account number 104905001983;

t.The Tribunal dismisses all other claims by UpHealth Holdings, including its claim for damages for misrepresentations; and

u.All other claims and defenses are dismissed.

Rule 36 of the ICC Rules gives all parties to the Arbitration 30 days from the date the Award was notified to apply to the ICC for the correction of “clerical, computational or typographical error[s], or any errors of a similar nature.” In the same thirty-day window, the parties may apply to the ICC for “interpretation” of the Award. On April 12, 2024, UpHealth Holdings made an Application to the ICC for certain corrections and an interpretation of the Award (“Corrections Application”) with respect to the election option at sub-paragraph (j) above, granted to UpHealth Holdings by the Tribunal. After submissions by UpHealth Holdings and Damodaran in respect of the Corrections Application, the Secretariat of the ICC in New York informed all parties on May 13, 2024 that it has received the draft decision by the Tribunal which will be scrutinized by the ICC at one of its next sessions.

Proposed Sale of TTC

Through ongoing discussions with its key economic stakeholders, including a group of certain of the beneficial holders of the Company’s 2025 Notes and the Creditors’ Committee in the bankruptcy case (collectively, the “Consultation Parties”), UpHealth Holdings has determined that the sale of UpHealth Holdings’ equity interest in TTC may be appropriate to maximize value to the UpHealth Holdings’ estate because a sale of the equity interests in TTC may provide funding necessary for UpHealth Holdings to consummate a Chapter 11 plan and successfully exit its Chapter 11 case. UpHealth Holdings anticipates that it will pursue a motion before the Bankruptcy Court to approve procedures applicable to the sale of its equity interests in TTC, and eventually, authorize the sale of such equity interests free and clear of all liens, claims, encumbrances and other interests. In addition, UpHealth Holdings anticipates that it will pursue confirmation of a liquidating plan (including seeking approval of a related disclosure statement) alongside of the sale process, which UpHealth Holdings is hopeful will provide payment in full to creditors at UpHealth Holdings and, potentially, a dividend to the Company.

In furtherance of the anticipated sales process, UpHealth Holdings, after consulting with the Consultation Parties, has selected an investment banker, Stout Capital, LLC (“Stout”), to assist in a marketing and sale process to identify a party ready, willing and able to consummate a transaction. As of this time, UpHealth Holdings has not marketed the equity interests in TTC for sale, and it would not expect to do so until after the Bankruptcy Court has granted a motion approving procedures applicable to the sale of its equity interests in TTC and related relief, and authorizing procedures applicable to the sale of its equity interests in TTC and related relief. Furthermore, UpHealth Holdings anticipates submitting an application to the Bankruptcy Court to employ Stout to provide financial and investment banking services in connection with a sale of UpHealth Holdings’ equity interests in TTC. Stout would not be expected to provide any services to UpHealth Holdings unless Stout’s retention is approved by the Bankruptcy Court.

Sale of Cloudbreak

On November 16, 2023, the Company and Cloudbreak, entered into a membership interests purchase agreement (the “Membership Interests Purchase Agreement”) with Forest Buyer, LLC, a Delaware limited liability company (“Forest Buyer”) and an affiliate of GTCR LLC, a leading private equity firm, pursuant to which we agreed to sell all of the outstanding equity interests of Cloudbreak and the wholly-owned subsidiaries of Cloudbreak to Forest Buyer for $180.0 million in cash, subject to certain adjustments for closing indebtedness, net working capital, cash and unpaid transaction expenses related to the transactions contemplated by the Membership Interests Purchase Agreement (the “Sale” and all of the transactions contemplated by the Membership Interests Purchase Agreement, collectively, the “Transactions”). See Note 3, Discontinued Operations, for further information.

In connection and concurrently with the entry into the Membership Interests Purchase Agreement, the Company, Cloudbreak and Forest Buyer entered into a transaction support agreement, dated as of November 16, 2023 (the “Transaction Support Agreement”), with certain beneficial holders of our 2025 Notes (being the holders of at least 69% of the 2025 Notes, the “Consenting 2025 Noteholders”) and certain beneficial holders of our 2026 Notes (being the holders of at least 88% of the 2026 Notes, the “Consenting 2026 Noteholders,” and together the Consenting Senior Secured Noteholders, the “Consenting Noteholders”), pursuant to which the parties thereto agreed, among other things,

~~their~~Table knowledge, and assuming that all coupon payments on the 2025 Notes and the 2026 Notes due prior to June 3, 2024 are paid in full: if the Sale were to occur on March 15, 2024, (i) the outstanding amount due and payable in the aggregate to the 2025 Noteholders arising under or in connection with a Fundamental Change Repurchase Offer under the Senior Secured Notes Indenture to be consummated on June 3, 2024 would be $62.2 million, consisting of (a) $57.2 million in aggregate principal amount of the 2025 Notes (assuming 100% participation), (b) $2.9 million premium payable in respect of the 2025 Notes, and (c) $2.1 million in accrued and unpaid interest; and (ii) the outstanding amount due and payable in the aggregate to the 2026 Noteholders arising under or in connection with a Fundamental Change Repurchase Offer under the Unsecured Notes Indenture to be consummated on June 3, 2024 would be $119.6 million, consisting of (x) $115.0 million in aggregate principal amount of the 2026 Notes (assuming 100% participation) and (y) $4.6 million of accrued and unpaid interest.Contents

Into ~~accordance~~support ~~with~~ the ~~terms~~Membership ofInterests ~~the~~ Purchase Agreement and the ~~Transaction Support Agreement~~Transactions, including the ~~Company~~Sale, and ~~the~~to ~~Indenture Trustee will~~ enter into ~~a supplement to the Senior Secured Notes Indenture, to be agreed~~ and ~~effected~~effect ~~no later than December 20, 2023 (~~the ~~“Senior Secured Notes~~ Supplemental ~~Indenture”),~~Indentures ~~that~~(as ~~will,~~defined ~~among other things (a~~below) ~~provide~~in ~~for~~connection ~~the waiver,~~ with ~~respect to~~ the ~~Company~~offers and Cloudbreak, of the specified events of default under the Senior Secured Notes Indenture resulting from the commencement of the Chapter 11 cases (the “2025 Indenture Events of Default”); (b) rescind, with respect to ~~the~~repurchase ~~Company~~certain ~~and Cloudbreak, the acceleration~~ of the 2025 Notes ~~resulting~~and ~~from~~ the ~~occurrence~~2026 ~~of the foregoing events of default (the “2025~~ Notes ~~Acceleration”); (c) provide for certain changes to certain of the definitions~~ in ~~the~~accordance ~~Senior Secured Notes Indenture, including “Permitted Indebtedness”; (d) provide for certain modifications to covenants of the Company and certain changes~~ with ~~respects to events of default; (e) provide a carveout for~~ the ~~Sale from the~~ terms of the ~~Senior~~applicable ~~Secured Notes~~ Indenture ~~with~~as ~~respect~~a toresult ~~mergers~~of ~~and~~any ~~sale~~or ~~transactions;~~all ~~and~~of ~~(f) delete~~ the ~~rule~~Transactions ~~prohibiting~~constituting ~~repurchases in connection with~~ a Fundamental Change (as ~~defined~~such interm ~~the~~is ~~Senior~~defined ~~Secured~~in ~~Notes~~each ~~Indenture)~~of ~~arising from~~ the ~~Sale~~Indentures) atunder the ~~time~~applicable ~~the~~Indenture ~~2025 Notes have been accelerated~~(each, ~~and will modify the provisions in respect of repurchases of 2025 Notes as~~ a ~~result of a~~ “Fundamental Change ~~for~~Repurchase ~~the~~Offer”) ~~Consenting Noteholders in respect of the Sale~~ to ~~account~~be ~~for~~made aby ~~multi-step~~us ~~process~~pursuant ~~for the repurchase of the 2025 Notes (i.e.,~~ to ~~require a repurchase offer at Closing and in connection with subsequent paydowns with~~ the ~~proceeds~~terms of ~~released funds from~~ the ~~Escrow~~Transaction ~~Accounts),~~Support ~~in each case, at a 5~~Agreement.~~0% premium to the principal amount of such 2025 Notes.~~

InFurthermore, ~~addition~~on February 9, 2024, in accordance with the terms of the Membership Interests Purchase Agreement and the Transaction Support Agreement, ~~the~~we ~~Company~~entered ~~and the Indenture Trustee will enter~~ into a ~~supplement~~supplemental toindenture ~~the~~and ~~Unsecured~~amendment ~~Notes Indenture,~~ to besecurity ~~agreed~~ and ~~effected~~pledge noagreement, ~~later~~dated ~~than~~as ~~December~~of 20February 9, ~~2023~~2024 (the “~~Unsecured~~First ~~Notes~~Lien Supplemental Indenture” and ~~together~~Amendment ~~with~~to ~~the~~Security ~~Senior~~Agreement”), ~~Secured~~which ~~Notes~~amended ~~Supplemental~~the ~~Indenture,~~terms of the ~~“Supplemental Indentures”)~~indenture, ~~that~~dated ~~will,~~as ~~among~~of ~~other~~August ~~things~~18, ~~(a)~~2022, ~~provide~~by ~~for~~and among the ~~waiver~~Company, ~~with~~the ~~respect~~Guarantors to(as ~~the~~defined ~~Company~~below) party thereto and ~~Cloudbreak~~Wilmington Trust, ofNational ~~the~~Association ~~specified~~(“Wilmington ~~events~~Trust”), ofin ~~default~~its ~~under~~capacity ~~the~~as ~~Unsecured~~trustee ~~Notes~~and ~~Indenture~~collateral ~~resulting~~agent ~~from~~thereunder, relating to the 2025 Notes ~~Acceleration~~(as ~~and~~amended, ~~the~~restated, ~~commencement~~supplemented ofor ~~the~~otherwise ~~Chapter~~modified 11from ~~cases~~time ~~(the~~to ~~“2026~~time, ~~Indenture~~including ~~Events~~pursuant ofto ~~Default”~~the ~~and~~First ~~together~~Lien ~~with~~Supplemental ~~the~~Indenture ~~2025~~and ~~Indenture~~Amendment ~~Events~~to ofSecurity ~~Default~~Agreement as described below, the “~~Specified~~First ~~Defaults~~Lien Indenture”);, ~~(b)~~and ~~add~~the ~~each~~security ~~subsidiary~~and pledge agreement, dated as of August 18, 2022, by and among the Company, ~~other~~the ~~than~~Guarantors ~~any~~from ~~subsidiary~~time ofto ~~the~~time ~~Company~~party ~~that~~thereto isand Wilmington Trust, as ofcollateral ~~the~~agent, ~~date~~relating ofto the ~~Unsecured~~2025 Notes ~~Supplemental~~(as ~~Indenture~~amended, arestated, ~~debtor~~supplemented or ~~debtor~~otherwise inmodified ~~possession~~from intime ~~any~~to ~~bankruptcy proceeding~~time, including pursuant to the ~~Chapter~~First 11Lien ~~cases,~~Supplemental asIndenture aand ~~guarantor~~Amendment ofto ~~the~~Security ~~obligations~~Agreement ~~under~~as described below, the ~~2026~~“First ~~Notes~~Lien ~~pursuant~~Security toAgreement” and together with the ~~Unsecured~~First ~~Notes~~Lien Indenture;, (cthe “First Lien Documents”). ~~cause~~The ~~the~~First ~~Company~~Lien ~~and~~Supplemental ~~each~~Indenture ofand ~~its~~Amendment ~~subsidiaries,~~to ~~other~~Security ~~than~~Agreement ~~any~~amended ~~subsidiary~~the terms of the ~~Company~~First ~~that~~Lien isIndenture to, asamong ofother ~~the~~things, ~~date~~(a) provide for certain changes to certain of the ~~Unsecured~~definitions ~~Notes~~in ~~Supplemental~~the First Lien Indenture, aincluding ~~debtor~~“Permitted orIndebtedness,” ~~debtor~~“Permitted inInvestments,” ~~possession~~“Permitted inLiens,” ~~any~~“Asset ~~bankruptcy~~Sale,” ~~proceeding~~“Excluded Subsidiary,” ~~including~~and “Significant Subsidiary;” (b) provide for certain modifications to covenants of the ~~Chapter~~Company 11and ~~cases,~~certain changes with respects to ~~grant~~events aof ~~second-priority~~default; ~~security~~(c) ~~interest~~provide ona carveout for the ~~same~~Sale ~~collateral~~from ~~that~~the ~~secures~~terms of the ~~2025~~First ~~Notes~~Lien Indenture with respect to mergers and sale transactions; (d) delete the rule prohibiting repurchases in connection with ~~those~~a ~~items~~Fundamental ~~described~~Change inarising ~~clauses~~from ~~(b)~~the Sale at the time the 2025 Notes have been accelerated, and (ce) ~~above,~~modify ~~incorporate~~the provisions ~~similar~~in torespect ~~those~~of inrepurchases ~~the~~of ~~Senior~~2025 ~~Secured~~ Notes ~~Indenture~~as ~~including~~a ~~with~~result of a Fundamental Change for the Consenting 2025 Noteholders in respect of the Sale to ~~covenants~~account ~~and~~for ~~events~~a multi-step process for the repurchase of ~~default~~the 2025 Notes (i.e., to require a repurchase offer at Closing and asin ~~modified~~connection bywith subsequent paydowns with the ~~Senior~~proceeds ~~Secured~~of ~~Notes~~released ~~Supplemental~~funds ~~Indenture;~~from ~~and~~the Escrow Accounts (eas defined below)), ~~provide~~in aeach ~~carveout~~case, ~~for~~at ~~the~~a ~~Sale~~5.00% ~~from~~premium to the ~~terms~~principal amount of ~~the~~such ~~Unsecured~~2025 Notes ~~Indenture~~pursuant ~~with~~to ~~respect~~the toterms ~~mergers~~of ~~and~~the ~~sale~~Transaction ~~transactions~~Support Agreement.

~~Pursuant~~In toaddition, in accordance with the terms of the Membership Interests Purchase Agreement and the Transaction Support Agreement, ~~each~~we ofentered into a supplemental indenture (the ~~Company~~“Second Lien Supplemental Indenture” and ~~Cloudbreak~~together ~~has~~with ~~agreed~~the ~~(severally~~First ~~and~~Lien ~~not~~Supplemental ~~jointly~~Indenture, the “Supplemental Indentures”) to ~~(a)~~the ~~grant~~indenture, ~~liens~~dated inJune ~~favor~~9, of2021, ~~the~~by ~~2025~~and ~~Noteholders~~between the Company and ~~2026~~The ~~Noteholders~~Bank ~~with~~of ~~respect~~New toYork ~~the~~Mellon ~~Escrow~~Trust ~~Accounts~~Company, N.A. (“BNY Mellon”), in its capacity as successor trustee and ~~the~~as ~~funds~~collateral ~~held~~agent ~~therein,~~thereunder (as ~~applicable~~amended, ~~subject~~restated, supplemented or otherwise modified from time to ~~the~~time, ~~terms~~including ofpursuant to the Second Lien Supplemental ~~Indentures~~Indenture and ~~any~~the ~~related~~Second ~~intercreditor~~Lien ~~agreements;~~Security ~~and~~Agreement ~~(b)~~as indescribed ~~connection~~below, the “Second Lien Indenture” and together with the ~~Unsecured~~First ~~Notes~~Lien ~~Supplemental~~ Indenture, ~~grant~~the a“Indentures”), ~~second~~the ~~priority~~terms ~~lien~~of onwhich amended the ~~assets~~Second Lien Indenture to, among other things, (a) add each subsidiary of ~~the~~UpHealth, ~~Company~~other ~~and~~than ~~Cloudbreak~~Glocal Healthcare Systems Private Limited, UPH Digital Health Services Private Limited and any ~~subsidiaries~~subsidiary of ~~the~~UpHealth ~~Company~~that ~~and~~is, ~~Cloudbreak~~as ~~that~~of ~~are~~the ~~not~~date atof ~~such~~the ~~time~~Supplemental Indentures, a debtor or debtor in possession in any bankruptcy proceeding, including the Chapter 11 ~~cases~~Proceedings (as defined below) (collectively, ~~provided~~the “Guarantors”), ~~that~~as ~~any~~a ~~such~~guarantor ~~liens~~of the obligations under the 2026 Notes pursuant to the Second Lien Indenture; (b) cause UpHealth and the Guarantors to grant a second-priority security interest on the ~~issued~~same collateral that secures the 2025 Notes; (c) in connection with those items described in clauses (a) and ~~outstanding~~(b) ~~equity~~above, ~~interests~~incorporate provisions similar to those in the First Lien Indenture, including with respect to covenants and events of ~~Cloudbreak~~default, oras previously disclosed by the Company and as modified by the First Lien Supplemental Indenture; and (d) provide a carveout for the Sale from the terms of the Second Lien Indenture with respect to mergers and sale transactions. Pursuant to the terms of the Second Lien Indenture, the 2026 Notes are secured by a second-priority lien, subject only to certain permitted liens, in substantially all assets of ~~Cloudbreak~~the Company and ~~its~~the ~~subsidiaries~~Guarantors, ~~will~~subject to customary exclusions, pursuant to a security and pledge agreement, dated as of February 9, 2024 (as it may be ~~released~~amended, atmodified, or ~~prior~~supplemented from time to time, the ~~Closing~~“Second Lien Security Agreement” and together with the Second Lien Indenture, the “Second Lien Documents”), by and among the Company, the Guarantors and BNY Mellon, as collateral agent on behalf of the 2026 Noteholders.

~~The~~In ~~accompanying~~connection ~~unaudited~~with ~~condensed~~the ~~consolidated~~entry ~~financial~~into ~~statements~~the ~~have~~Supplemental ~~been~~Indentures, ~~prepared~~ on aFebruary ~~going~~9, ~~concern basis~~2024, ~~which~~in ~~contemplates~~accordance with the ~~continuity~~terms of ~~operations,~~ the ~~realization~~Membership ofInterests ~~assets~~Purchase Agreement and the ~~satisfaction~~Transaction ofSupport ~~liabilities~~Agreement, in the ~~normal~~Company, ~~course~~Cloudbreak ofand ~~business.~~the ~~However,~~Consenting ~~given~~2025 ~~the~~Noteholders ~~events~~entered ~~described~~into ~~above,~~a inwaiver ~~particular~~and rescission agreement, ~~the~~dated ~~filing~~as of ~~the~~February ~~Chapter~~9, 112024 ~~cases by~~ (the ~~Debtors~~“Waiver ~~which~~and ~~constituted~~Recission anAgreement”), ~~event~~pursuant ofto ~~default~~which ~~under~~ the ~~Indentures~~Consenting ~~that~~2025 ~~accelerated~~Noteholders ~~the~~have ~~obligations~~agreed ofto ~~the~~waive, ~~Company~~ with respect to the ~~2025~~Company ~~Notes~~ and ~~2026 Notes~~Cloudbreak, wethe ~~believe~~specified ~~there~~events isof ~~substantial~~default ~~doubt~~under ~~about~~the ~~our~~First ~~ability~~Lien toIndenture ~~continue~~resulting asfrom athe ~~going~~commencement ~~concern.~~of ~~However,~~the ~~upon~~Chapter 11 Proceedings (the ~~entry~~“2025 ~~into~~Indenture ~~the~~Events ~~Supplemental~~of ~~Indentures~~Default”) ~~pursuant~~and rescind, with respect to the ~~terms~~Company ofand Cloudbreak, the ~~Transaction~~automatic ~~Support~~acceleration ~~Agreement,~~of the ~~Specified~~2025 ~~Defaults~~Notes ~~will~~resulting ~~each~~from bethe ~~waived~~occurrence ~~and~~of the 2025 ~~Notes~~Indenture ~~Acceleration~~Events ~~will~~of beDefault ~~rescinded.~~(the “2025 Notes Acceleration”).

~~Deconsolidation~~Furthermore, on February 9, 2024, in accordance with the terms of ~~UpHealth~~the ~~Holdings~~Membership Interests Purchase Agreement and the Transaction Support Agreement, ~~Inc.~~the Company and ~~Subsidiaries~~the Consenting 2026 Noteholders entered into a waiver agreement, dated as of February 9, 2024 (the “Waiver Agreement” and together with the Waiver and Recission Agreement, the “Waivers and Rescission Agreements”), pursuant to which the Consenting 2026 Noteholders have agreed to waive, with respect to the Company and Cloudbreak, the specified events of default under the Second Lien Indenture resulting from the 2025 Notes Acceleration and the commencement of the Chapter 11 Proceedings (the “2026 Indenture Events of Default”).

AsUpon athe ~~result~~effectiveness of the ~~bankruptcy~~Waivers ~~proceedings~~and ~~described~~Rescission ~~above~~Agreements and until the ~~designation~~earlier of ~~UpHealth~~(i) ~~Holdings,~~the ~~Thrasys,~~completion ~~BHS~~of ~~and~~ the ~~subsidiaries~~Company’s ofinitial ~~Thrasys~~Fundamental ~~and~~Change ~~BHS,~~Repurchase asOffer ~~“debtors-~~in~~-possession,”~~ werespect ~~determined~~of ~~that~~the a2026 ~~reconsideration~~Notes ~~event~~or ~~occurred~~(ii) onthe ~~September~~termination ~~19,~~of ~~2023,~~the ~~which~~Transaction ~~required~~Support usAgreement toin ~~reassess~~accordance ~~whether~~with ~~UpHealth~~the ~~Holdings~~terms ~~was~~thereof, aeach ~~Variable~~of ~~Interest~~the ~~Entity~~Consenting ~~(“VIE”)~~Noteholders ~~and~~has ~~whether~~agreed wenot ~~continued~~to consent to, execute or otherwise participate in any

~~have~~Table a controlling financial interest in UpHealth Holdings. Based on this assessment, we concluded that UpHealth Holdings was a VIE, and furthermore, that we no longer had the ability to direct any activities of UpHealth Holdings and no longer have a controlling financial interest. As a result, effective September 30, 2023, we deconsolidated UpHealth Holdings and recorded a $59.1 million gain on deconsolidation of equity investment in our unaudited condensed consolidated statements of operations, measured as the difference between the fair value of UpHealth Holdings of $75.6 million and the carrying amount of UpHealth Holdings’ assets and liabilities as of September 30, 2023. Management concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material. The fair value of UpHealth Holdings, which is included in equity investment in our unaudited condensed consolidated balance sheets, was determined based upon generally accepted valuation approaches, including the income and market approaches.Contents

~~Further,~~way wein ~~assessed~~any declaration of acceleration of the ~~prospective~~principal ~~accounting~~amount ~~for~~of ~~our~~the ~~equity~~2025 ~~investment~~Notes inand ~~UpHealth~~2026 ~~Holdings.~~Notes ~~Since~~(as weapplicable) noas ~~longer~~a ~~had~~result of the ~~ability~~failure of the Company to ~~exercise~~issue ~~significant~~a ~~influence~~Fundamental ~~over~~Change ~~operating~~Company ~~and~~Notice ~~financial~~(as ~~policies~~defined ofin ~~UpHealth~~the ~~Holdings,~~applicable weIndenture) ~~concluded~~or ~~the~~to ~~investment~~conduct ~~should~~or beconsummate ~~accounted~~a ~~for~~Fundamental ~~utilizing~~Change ~~the~~repurchase ~~Financial~~pursuant ~~Accounting~~to ~~Standards~~Article ~~Board~~15 ~~(“FASB”)~~of ~~Accounting~~the ~~Standards~~Indenture, ~~Codification~~in ~~Topic~~each ~~321~~case, ~~Investments~~in -the ~~Equity~~event ~~Securities~~that ~~(“ASC~~the ~~321”)~~Company’s ~~measurement~~common ~~alternative~~stock, ~~whereby~~par ~~the~~value ~~investment~~$0.0001 ~~was~~per ~~measured~~share, atceases ~~cost~~to ~~and~~be ~~will~~listed ~~continue~~on toa benational ~~evaluated~~securities ~~for~~exchange ~~any~~(the ~~indicators~~“Delisting ofFundamental ~~impairment~~Change”).

~~The~~At ~~financial~~a ~~position~~special meeting of ~~UpHealth~~our ~~Holdings~~stockholders asheld ofon ~~December~~February 3129, ~~2022~~2024, ~~and~~the ~~financial~~stockholders ~~results~~ of ~~UpHealth~~the ~~Holdings~~Company inapproved the ~~three~~Membership ~~and~~Interests ~~nine~~Purchase ~~months~~Agreement ~~ended~~providing ~~September~~for ~~30,~~the ~~2023~~Sale ~~are~~of ~~included~~Cloudbreak inand ~~our~~the ~~unaudited~~wholly-owned ~~condensed~~subsidiaries ~~consolidated~~of ~~financial~~Cloudbreak ~~statements~~to ~~and~~Forest ~~the~~Buyer, ~~financial~~as ~~position~~such ofSale ~~UpHealth~~constituted ~~Holdings~~the assale of ~~September~~substantially ~~30,~~all ~~2023~~of isthe ~~not~~assets ~~included~~of inthe ~~our~~Company ~~unaudited~~under ~~condensed~~Delaware ~~consolidated financial statements~~law.

~~The~~On ~~following~~March ~~table~~15, ~~sets~~2024 ~~forth~~(the ~~details~~“Closing Date”), we completed the closing of the ~~unaudited~~Transactions ~~condensed~~(the ~~consolidated~~“Closing”). ~~balance~~Pursuant ~~sheet~~to the terms of ~~UpHealth~~the ~~Holdings~~Membership Interests Purchase Agreement, the “Cash Consideration” for the Sale was an amount equal to $180.0 million, with adjustments for debt as of immediately prior to the Closing and ~~subsidiaries~~cash as of 11:59 p.m. (Delray Beach, ~~which~~Florida time) on the day immediately prior to the Closing Date (the “Calculation Time”), Cloudbreak’s net working capital as of the Calculation Time, and unpaid expenses related to the Transactions (collectively, the “Estimated Cash Consideration”). All of the Estimated Cash Consideration was ~~deconsolidated~~delivered ~~effective~~by ~~September~~Forest 30Buyer to an escrow agent (the “Escrow Agent”) and deposited into three segregated escrow accounts established pursuant an escrow agreement, ~~2023~~dated March 15, 2024, entered into in accordance with the terms of the Membership Interests Purchase Agreement by the Company, Forest Buyer and the Escrow Agent (the “Escrow Agreement”), as follows: (i) $3 million (the “Working Capital Escrow Amount”) was deposited in a segregated escrow account to satisfy any adjustment to the Cash Consideration (as defined below) (the “Working Capital Escrow Account”); (ii) $27 million (the “Tax Escrow Amount”) was deposited in a segregated escrow account to enable the Company to pay any and all taxes that become due and payable by the Company as a result of the Transactions (the “Tax Escrow Account”); and (iii) the remaining portion of the Estimated Cash Consideration equal to approximately $139 million (such amount, the “Notes Escrow Amount”), was deposited in a segregated escrow account (the “Notes Escrow Account,” and together with the Working Capital Escrow Account and the Tax Escrow Account, the “Escrow Accounts”), the purpose of which is to fund the Fundamental Change Repurchase Offers. The funds in the Notes Escrow Account have been released on June 3, 2024, and have been used to satisfy in full, plus accrued interest, the 2026 Notes and to repurchase approximately $19.7 million of the 2025 Notes, plus accrued interest, following which approximately $37.3 million in aggregate principal amount of 2025 Notes remain outstanding, excluding $0.2 million of unamortized debt issuance costs, which will constitute the entirety of our outstanding debt. Funds in the Tax Escrow Account will be used to satisfy our 2024 tax liability in respect of the Transactions and any funds not required for this purpose will be used to repurchase additional 2025 Notes. Funds in the Working Capital escrow will be used to satisfy any of our obligations resulting from a difference between Cloudbreak’s targeted and actual working capital as of the Closing, and any funds not used for this purpose will be used to repurchase additional 2025 Notes.

(In thousands)	As of September 30, 2023
Cash and cash equivalents	$	35,606
Accounts receivable, net	4,647
Inventories	17
Due from related parties	3,681
Prepaid expenses and other current assets	457
Property and equipment, net	694
Operating lease right-of-use assets	3,615
Goodwill	38,376
Other assets	499
Total assets	87,592
Accounts payable	1,986
Accrued expenses	57,626
Deferred revenue, current	3,646
Due to related party	12,439
Related-party debt	181
Lease liabilities, current	1,591
Other liabilities, current	641
Lease liabilities, noncurrent	2,903
Additional paid in capital	450,096
Accumulated deficit	(461,477)
Noncontrolling interests	1,457
Total liabilities and stockholder's equity	71,089
Carrying value of Holdings and subsidiaries at deconsolidation	16,503
Fair value of Holdings and subsidiaries at deconsolidation	75,568
Gain on deconsolidation of equity investment	$	59,065

Following the Closing, in connection with a customary adjustment to the Cash Consideration, which adjustment is expected, in the absence of any disagreement, to be determined within 120 days following the Closing Date, to the extent that the Cash Consideration exceeds the Estimated Cash Consideration, a payment shall be made for the purpose of repurchasing the 2026 Notes and/or the 2025 Notes of an amount equal to the amount by which the Cash Consideration exceeds the Estimated Cash Consideration (up to an excess equal to the amount of the Working Capital Escrow Amount). To the extent that following such customary adjustment to the Cash Consideration, the Estimated Cash Consideration is greater than the Cash Consideration, Forest Buyer and the Company shall cause the Escrow Agent to make payment to Forest Buyer (or its designees) of an amount equal to the lesser of (i) the amount by which the Estimated Cash Consideration exceeds the Cash Consideration, and (ii) the Working Capital Escrow Amount held in the Working Capital Escrow Account, including any dividends, interest, distributions and other income received in respect thereof, less any losses on investment thereof, less distributions thereof in accordance with the Membership Interests Purchase Agreement and the Escrow Agreement (the “Working Capital Escrow Funds”), in each case, from the Working Capital Escrow Account, and after any such payments are made to Forest Buyer, the remaining Working Capital Escrow Funds (if any) shall be used for the repurchase of 2026 Notes and/or 2025 Notes.

Deconsolidation of ~~Glocal~~UpHealth Holdings and Subsidiaries

As a result of ~~events~~the ~~which~~bankruptcy ~~occurred~~proceedings described above and the designation of UpHealth Holdings and its subsidiaries, Thrasys, BHS and the subsidiaries of Thrasys and BHS, as “debtors-in-possession,” it was concluded that UpHealth Holdings was a Variable Interest Entity (“VIE”), and furthermore, that we no longer had the ~~three~~ability ~~months~~to ~~ended~~direct any activities of UpHealth Holdings and no longer have a controlling financial interest. As a result, effective September 30, ~~2022~~2023, we ~~determined~~deconsolidated ~~that~~UpHealth Holdings and its subsidiaries and recorded a ~~reconsideration~~$59.1 million ~~event~~gain ~~occurred~~on deconsolidation of equity investment in ~~July~~our ~~2022,~~unaudited ~~which~~condensed ~~required~~consolidated usstatements of operations measured as a difference between the fair value of $75.6 million and the carrying value of $16.5 million of UpHealth Holdings and its subsidiaries. We continue to ~~reassess~~account ~~whether~~for ~~Glocal~~our ~~Healthcare~~investment ~~Systems~~in ~~Private~~UpHealth ~~Limited~~Holdings by utilizing the Financial Accounting Standards Board (“~~Glocal~~FASB”), ~~which~~Accounting ~~was~~Standards ~~included~~Codification in(“ASC”) ~~our~~Topic ~~Virtual~~321, ~~Care~~Investments ~~Infrastructure~~- ~~segment~~Equity Securities (“ASC 321”) measurement alternative, whereby the investment was ameasured ~~VIE~~at cost and ~~whether~~will wecontinue ~~continued~~ to ~~have~~be aevaluated ~~controlling~~for ~~financial~~any ~~interest~~indicators inof impairment.

16The financial position of UpHealth Holdings as of March 31, 2024 and December 31, 2023 and the result of operations for the three months ended March 31, 2024 are not included in our unaudited condensed consolidated financial statements, and the results of operations for the three months ended March 31, 2023 are included in our unaudited condensed consolidated financial statements.

Glocal. Based on this assessment, we concluded that Glocal was a VIE, and furthermore, that we no longer had the ability to direct any activities of Glocal and no longer have a controlling financial interest. As a result, effective July 2022, we deconsolidated Glocal and recorded a $37.7 million loss on deconsolidation of equity investment in our unaudited condensed consolidated statements of operations, measured as the difference between the probability-weighted fair value of Glocal of $21.2 million and the carrying amount of Glocal’s assets and liabilities as of July 1, 2022. The probability-weighted fair value of Glocal, which is included in equity investment in our unaudited condensed consolidated balance sheets, incorporated scenarios where control of Glocal was gained and Glocal would continue as a going concern, control of Glocal was gained and Glocal would need to be liquidated, and control of Glocal was not gained and the equity investment in Glocal would be worthless. Further, we assessed the prospective accounting for our equity investment in Glocal. Since we no longer had the ability to exercise significant influence over operating and financial policies of Glocal, we concluded the investment should be accounted for utilizing the ASC 321 measurement alternative, whereby the investment was measured at cost and will continue to be evaluated for any indicators of impairment. In addition, we derecognized $14.3 million of noncontrolling interests related to Glocal. In the nine months ended September 30, 2023, there has been no change in the status of Glocal, and accordingly, we continue to account for it as an equity investment. If through legal processes we are able to obtain the ability to direct the activities of Glocal, and it is our intent to exercise all legal rights and remedies to achieve such a result, then we will further reassess the appropriate accounting treatment of our investment in Glocal.

The financial results of Glocal in the six months ended June 30, 2022 are included in our unaudited condensed consolidated financial statements, and the financial position of Glocal as of September 30, 2023 and December 31, 2022 and the financial results of Glocal in the three months ended September 30, 2022 and the three and nine months ended September 30, 2023 are not included in our unaudited condensed consolidated financial statements.

Reverse Stock Split

On December 5, 2022, our stockholders approved an amendment to our Second Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) to effect a reverse split of the outstanding shares of our common stock, par value $0.0001 per share, at a specific ratio within a range of 4:1 to 10:1, with the specific ratio to be fixed within this range by our board of directors in its sole discretion without further stockholder approval (the “Reverse Stock Split”). Our board of directors fixed the Reverse Stock Split ratio at 10:1, such that each ten shares of common stock were combined and reconstituted into one share of common stock effective December 8, 2022. Except as noted, all share, stock option, restricted stock unit (“RSU”), and per share information throughout this Quarterly Report has been retroactively adjusted to reflect this Reverse Stock Split.

Sale of Innovations Group

On February 26, 2023, weUpHealth Holdings agreed to sell 100% of the outstanding capital stock of ~~our~~its wholly owned subsidiary, Innovations Group, Inc. (d/b/a MedQuest) (“Innovations Group”), to Belmar MidCo, Inc., a Delaware corporation and a wholly owned subsidiary of Belmar Holdings, Inc., a Delaware corporation, a portfolio company of Webster Capital IV, L.P., a Delaware limited partnership, pursuant to a stock purchase agreement (the “Stock Purchase Agreement”), dated February 26, 2023. The sale closed on May 11, 2023 for gross proceeds of $56.0 million, subject to working capital, closing debt, and other adjustments. See Note 3. Significant Transactions, for further information.

~~UpHealth Holdings, Inc. Debtor-In-Possession Condensed Consolidated Balance Sheet~~16

~~The~~Table ~~following table sets forth details~~ of the unaudited condensed consolidated balance sheet of UpHealth Holdings, which was deconsolidated effective September 30, 2023. No condensed consolidated statement of operations (debtor-in-possession) or condensed consolidated statement of cash flows (debtor-in-possession) have been presented for UpHealth Holdings, as the deconsolidation occurred on September 30, 2023.Contents

17the Stock Purchase Agreement dated February 26, 2023. The sale closed on May 11, 2023 for gross proceeds of $56.0 million, subject to working capital, closing debt, and other adjustments. Accordingly, the financial results of Innovations Group for the three months ended March 31, 2023 are included in our unaudited condensed consolidated financial statements.

UPHEALTH HOLDINGS
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, unaudited)
	September 30, 2023
ASSETS
Cash and cash equivalents	$	34,268
Investment in subsidiaries	231,078
Total assets	265,346
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	200
Accrued expenses	37,830
Due to related party	7,813
Total liabilities	45,842
Additional paid in capital	450,096
Accumulated deficit	(230,592)
Total stockholders’ equity	219,504
Total liabilities and stockholders’ equity	$	265,346

In connection with the held for sale classification, upon the remeasurement of the disposal group to its fair value, less cost to sell, we recorded a loss of $0.5 million in the three months ended March 31, 2023, which was recorded in goodwill, intangible assets, and other long-lived assets impairment in the unaudited condensed consolidated statements of operations. In connection with the sale closing on May 11, 2023, based on net proceeds of $54.9 million, we recorded an additional loss of $1.4 million in the three months ended June 30, 2023, which was recorded in impairment of goodwill, intangible assets, and other long-lived assets in our unaudited condensed consolidated statements of operations.

~~2.Summary~~Deconsolidation of ~~Significant~~Glocal ~~Accounting~~and ~~Policies~~Subsidiaries

Since July 2022 when we deconsolidated Glocal, we continue to account for our investment in Glocal by utilizing the ASC 321 measurement alternative, whereby the investment was measured at cost and will continue to be evaluated for any indicators of impairment. As of March 31, 2024 and for the three months ended March 31, 2024, there has been no change in the status of Glocal. If through legal processes we are able to obtain the ability to direct the activities of Glocal, and it is our intent to exercise all legal rights and remedies to achieve such a result, then we will further reassess the appropriate accounting treatment of our investment in Glocal. See Award of Arbitration Regarding Control of Glocal Board of Directors above for further information.

The financial results and the financial position of Glocal and its subsidiaries are not included in our unaudited condensed consolidated financial statements as of March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and 2023.

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets, and the satisfaction of liabilities in the normal course of business. Cash and cash equivalents on hand were $1.0 million as of March 31, 2024, excluding the $169.4 million of restricted cash. Historically, we have incurred losses and negative cash flows from operations, and as of March 31, 2024, we had an accumulated deficit of $598.6 million.

As discussed in Proposed Sale of TTC above, UpHealth Holdings has determined that the sale of UpHealth Holdings’ equity interest in TTC may be appropriate to maximize value to the UpHealth Holdings’ estate because a sale of the equity interests in TTC may provide funding necessary for UpHealth Holdings to consummate a Chapter 11 plan and successfully exit its Chapter 11 case. Should a sale of TTC be completed, we would no longer have ongoing operations that generate cash flow. Also, if UpHealth Holdings successfully exits its Chapter 11 case, there may be little to no residual value remaining at UpHealth Holdings. As a result, we believe there is substantial doubt about our ability to continue as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with ~~U.S.~~accounting principles generally accepted ~~accounting~~in ~~principles~~the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the ~~Securities and Exchange Commission (“~~SEC”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Our unaudited condensed consolidated financial statements, including the condensed notes thereto, are unaudited and exclude some of the disclosures required in audited consolidated financial statements. Our unaudited condensed consolidated balance sheet as of December 31, ~~2022~~2023 has been derived from our audited consolidated financial statements as of that date, but do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

In the opinion of management, our accompanying unaudited condensed consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with U.S. GAAP. The results of operations in the three ~~and nine~~ months ended ~~September 30~~March 31, ~~2023~~2024 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2023~~2024 or any future period. Our accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, ~~2022~~2023.

Our unaudited condensed consolidated financial statements include the accounts of UpHealth and its consolidated subsidiaries. As described in Note 1. Organization and Business, our Glocal subsidiary was deconsolidated effective July 1, 2022 and our UpHealth Holdings subsidiary was deconsolidated effective September 30, 2023. As also described in Note 1. Organization and Business, our Innovations Group subsidiary was sold effective May 11, 2023, and our Cloudbreak subsidiary was sold effective March 15, 2024.

We follow the FASB ASC guidance for identification and reporting of entities over which control is achieved through means other than voting rights. The guidance defines such entities as VIEs. We consolidate VIEs when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met.

T a b l e o f C o n t e n t s

All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates and Assumptions

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements and accompanying notes thereto.

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

•The identification and reporting of VIEs. We consolidate VIEs when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met.;

•The valuation of equity investments~~, including our determination of the carrying value of Glocal and UpHealth Holdings~~;

•The valuation of assets acquired and liabilities assumed for business combinations, including intangible assets and goodwill;

•The estimated economic lives and recoverability of intangible assets;

•The valuations prepared in connection with the review of goodwill, intangible assets, and other long-lived assets for impairment:;

•The timing and amount of revenues to be recognized, including standalone selling price (“SSP”) of performance obligations for revenue contracts with multiple performance obligations;

•The identification of and provision for uncollectible accounts receivable;

•The capitalization and useful life of internal-use software development costs;

•The valuation of derivatives and warrants; and

•The recognition, measurement, and valuation of current and deferred income taxes and uncertain tax positions.

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

~~Allowance for Expected Credit Losses~~Reclassifications

WeThe ~~closely~~accompanying ~~monitor~~unaudited ~~our~~condensed consolidated financial statement include accounts ~~receivable~~of ~~balances~~UpHealth and ~~estimate~~its wholly owned subsidiaries (the ~~allowance~~“Company”). ~~for~~All ~~expected~~intercompany ~~credit~~balances ~~losses~~and transactions have been eliminated in consolidation. ~~The~~Certain ~~estimate~~reclassifications ishave ~~primarily~~been ~~based~~made onto ~~historical~~the ~~collection~~fiscal ~~experience~~year ~~and~~2023 ~~other~~condensed ~~factors,~~consolidated ~~including~~financial ~~those~~statements ~~related~~to conform to ~~current~~the ~~market~~fiscal ~~conditions~~year ~~and~~2024 ~~events~~presentation. ~~Credit~~The ~~losses~~reclassification ~~associated~~had ~~with~~no ~~accounts~~impact ~~receivable~~on ~~have~~net ~~not~~loss, ~~been~~total ~~material~~assets, ~~historically~~total liabilities, or stockholders' equity.

Equity Investment

As discussed in Deconsolidation of Equity Investment in Note 1. Organization and Business, as of September 30, 2023 and December 31, 2022, we held an interest in the privately-held equity securities of Glocal in which we did not have a controlling interest and were unable to exercise significant influence. Additionally, as of September 30, 2023, we held an interest in the privately-held equity securities of UpHealth Holdings in which we did not have a controlling interest and were unable to exercise significant influence. Based on the terms of these privately-held securities, we concluded the investments should be accounted for utilizing the ASC 321 measurement alternative, whereby the investments were measured at cost and will continue to be evaluated for any indicators of impairment.

Held for Sale

Assets and liabilities to be disposed of by sale (“disposal groups”) are reclassified into assets and liabilities held for sale on our consolidated balance sheets as of December 31, 2022. The reclassification occurs when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying value or fair value less costs to sell and are not depreciated or amortized. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. and reported in impairment of goodwill, intangible assets, and other long-lived assets in our unaudited condensed consolidated statements of operations.

New Accounting Pronouncements Not Yet Adopted

In ~~August~~November ~~2020~~2023, the FASB issued Accounting Standards Update (“ASU”) ~~2020~~2023-0607, ~~Debt—Debt~~Segment ~~with~~Reporting ~~Conversion and Other Options~~ (~~Subtopic~~Topic ~~470-20~~280): ~~and~~Improvements ~~Derivatives~~to ~~and~~Reportable ~~Hedging—Contracts~~Segment ~~in Entity’s Own Equity (Subtopic 815-40)~~Disclosures. This ASU ~~simplifies~~updates ~~the~~reportable ~~accounting~~segment ~~for~~disclosure ~~convertible~~requirements ~~instruments~~ by ~~eliminating~~requiring ~~the~~disclosures ~~conversion~~of ~~option~~significant ~~separation~~reportable ~~model~~segment ~~for~~expenses ~~convertible debt~~ that ~~can~~are beregularly ~~settled~~provided into ~~cash and by eliminating~~ the ~~measurement~~Chief ~~model~~Operating ~~for~~Decision ~~beneficial~~Maker ~~conversion features. Convertible instruments that continue to be subject to separation models are~~ (1the “CODM”) ~~those~~ ~~with conversion options that are required to be accounted for as bifurcated derivatives~~ and ~~(2) convertible~~included ~~debt~~within ~~instruments~~each ~~issued~~reported ~~with~~measure ~~substantial~~of ~~premiums~~a ~~for~~segment’s ~~which~~profit ~~the~~or ~~premiums are recorded as paid-in capital~~loss. ~~This~~The ASU ~~also~~is ~~requires~~effective ~~entities to use the if-converted method~~ for ~~all~~fiscal ~~convertible~~years ~~instruments~~beginning inafter ~~the~~December ~~diluted~~15, ~~earnings~~2023 ~~per share calculation~~ and ~~include~~interim ~~the~~periods ~~effect~~beginning ofafter ~~share~~December ~~settlement for instruments that may be settled in cash or shares~~15, ~~except~~2024. ~~for~~Adoption ~~certain~~of ~~liability-classified~~the ~~share-based payment awards. This~~ ASU ~~will~~should be ~~effective~~applied ~~for~~retrospectively usto onall ~~January~~prior 1,periods ~~2024.~~presented ~~Early~~in ~~adoption is permitted, but no earlier than~~ the ~~fiscal~~financial ~~year~~statements ~~beginning~~and onearly ~~January 1,~~adoption ~~2021,~~is ~~including interim periods within that fiscal year~~permitted. We are currently evaluating the ~~effect~~impact of ~~the~~adopting ~~adoption of~~ this ASU ~~will have~~ on our ~~unaudited condensed~~ consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as additional disclosure on income taxes paid. The ASU is effective on a prospective basis for fiscal years beginning after December 15, 2024 for public entities and early adoption is permitted. We are currently evaluating the impact of adopting of this ASU on our consolidated financial statements.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for convertible instruments by eliminating the conversion option separation model for convertible debt that can be settled in cash and by eliminating the measurement model for beneficial conversion features. Convertible instruments that continue to be subject to separation models are (1) those with conversion options that are required to be accounted for as bifurcated derivatives and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. This ASU also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This ASU was effective for us on January 1, 2024. Early adoption is permitted, but no earlier than the fiscal year beginning on January 1, 2021, including interim periods within that fiscal year. The adoption of this ASU did not have a material impact on our unaudited condensed consolidated financial statements.

T a b l e o f C o n t e n t s

3. Discontinued Operations

As discussed in Note 1, Organization and Business, on November 16, 2023, we agreed to sell 100% of the outstanding equity interests of Cloudbreak, our wholly owned subsidiary, to Forest Buyer, LLC, a Delaware limited liability company and an affiliate of GTCR, pursuant to the Purchase Agreement. We will utilize the proceeds from the Sale for payment in full or in part of the 2026 Notes and 2025 Notes, as well as other expenses related to the Transactions. The sale closed on March 15, 2024. Accordingly, we have presented the financial position of Cloudbreak as of December 31, 2023 as held for sale and the results of operations of Cloudbreak for the period from January 1, 2024 to March 15, 2024 and for the three months ended March 31, 2023 as discontinued operations in the accompanying unaudited condensed consolidated financial statements.

The following table presents information related to the major classes of assets and liabilities of Cloudbreak that were classified as held for sale in our unaudited condensed consolidated balance sheets (in thousands):


(In thousands)	March 14, 2024		December 31, 2023
Current assets:
Accounts receivable, net	$	16,453	$	14,655
Prepaid expenses and other current assets	908		942
Assets held for sale, current	17,361		15,597

Property and equipment, net	8,463		8,823
Operating lease right-of-use assets	1,436		1,532
Intangible assets, net	21,891		22,717
Goodwill	80,310		80,310
Other assets	108		168
Assets held for sale, noncurrent	112,208		113,550
Total assets held for sale	$	129,569	$	129,147

Current liabilities:
Accounts payable	$	4,069	$	4,834
Accrued expenses	3,287		2,358
Deferred revenue	39		48
Lease liabilities, current	3,108		3,339
Liabilities held for sale, current	10,503		10,579

Lease liabilities, noncurrent	2,133		2,663
Liabilities held for sale, noncurrent	2,133		2,663
Total liabilities held for sale	$	12,636	$	13,242

InTable ~~June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement~~ of Credit Losses on Financial Instruments, and subsequently issued several supplemental/clarifying ASUs (collectively, “ASC 326”). This ASU requires entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables, other long-term financings including available for sale and held-to-maturity debt securities, and loans. Subsequently, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which amended the scope of ASC 326 and clarified that receivables arising from operating leases are not within the scope of the standard and should continue to be accounted for in accordance with Accounting Standards Codification Topic (“ASC”) 842. This ASU was effective for us on January 1, 2023, and the adoption did not have a material effect on our unaudited condensed consolidated financial statements.Contents

~~Reclassifications~~The following table presents information related to the major classes of line items constituting the net income from discontinued operations, net of tax, in our unaudited condensed consolidated statements of operations (in thousands):

Certain prior period amounts have been reclassified on our unaudited condensed consolidated statements of operations to conform to the current year presentation as shown below:


(In thousands)	Period from January 1 to March 14, 2024		Three Months Ended March 31, 2023
Revenues:
Services	$	15,168	$	17,328
Products	68		130
Total revenues	15,236		17,458
Costs of revenues:
Services	6,840		7,226
Licenses and subscriptions	4		—
Products	114		47
Total costs of revenues	6,958		7,273
Gross profit	8,278		10,185
Operating expenses:
Sales and marketing	1,444		2,092
Research and development	253		242
General and administrative	1,301		456
Depreciation and amortization	959		1,086
Stock compensation expense	—		8
Acquisition, integration, and transformation costs	—		46
Total operating expenses	3,957		3,930
Income from operations	4,321		6,255
Other income (expense):
Gain on sale of business	53,104		—
Other expense, net, including interest income	(202)		(157)
Total other income (expense)	52,902		(157)
Income from discontinued operations before income taxes	57,223		6,098
Income tax expense	(19,923)		—
Net income from discontinued operations, net of tax	$	37,300	$	6,098

	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	As Reported		Reclassifications		As Adjusted		As Reported		Reclassifications		As Adjusted
Revenues:
Services	$	27,600	$	—	$	27,600	$	81,382	$	—	$	81,382
Licenses and subscriptions	2,019		—		2,019		10,612		—		10,612
Products	9,047		—		9,047		26,312		—		26,312
Total revenues	38,666		—		38,666		118,306		—		118,306
Costs of revenues:
Services	13,440		1,473		14,913		42,647		4,256		46,903
License and subscriptions	463		—		463		913		—		913
Products	6,264		—		6,264		18,550		—		18,550
Total costs of revenues	20,167		1,473		21,640		62,110		4,256		66,366
Gross profit	18,499		(1,473)		17,026		56,196		(4,256)		51,940
Operating expenses:
Sales and marketing	4,771		(123)		4,648		10,983		638		11,621
Research and development	2,231		(56)		2,175		5,600		344		5,944
General and administrative	13,922		(1,294)		12,628		42,213		(5,238)		36,975
Depreciation and amortization	3,336		—		3,336		13,272		—		13,272
Stock-based compensation	2,126		—		2,126		4,588		—		4,588
Impairment of goodwill, intangible assets, and other long-lived assets	106,096		—		106,096		112,345		—		112,345
Acquisition, integration, and transformation costs	6,049		—		6,049		15,182		—		15,182
Total operating expenses	138,531		(1,473)		137,058		204,183		(4,256)		199,927
Loss from operations	(120,032)		—		(120,032)		(147,987)		—		(147,987)
Other income (expense):
Interest expense	(6,708)		—		(6,708)		(20,306)		—		(20,306)
Loss on deconsolidation of subsidiary	(37,708)		—		(37,708)		(37,708)		—		(37,708)
Gain (loss) on fair value of derivative liability	223		—		223		6,893		—		6,893
Loss on extinguishment of debt	(14,610)		—		(14,610)		(14,610)		—		(14,610)
Other income, net, including interest income	32		—		32		220		—		220
Total other income (expense)	(58,771)		—		(58,771)		(65,511)		—		(65,511)
Loss before income tax benefit	(178,803)		—		(178,803)		(213,498)		—		(213,498)
Income tax benefit	13,219		—		13,219		17,744		—		17,744
Net loss	(165,584)		—		(165,584)		(195,754)		—		(195,754)
Less: net income (loss) attributable to noncontrolling interests	178		—		178		(109)		—		(109)
Net loss attributable to UpHealth, Inc.	$	(165,762)	$	—	$	(165,762)	$	(195,645)	$	—	$	(195,645)

Certain other prior period amounts have been reclassified on our unaudited condensed consolidated balance sheets to conform with our current period presentation.

3. Significant Transactions

Sale of Innovations Group

On February 26, 2023, we agreed to sell 100% of the outstanding capital stock of our wholly owned subsidiary, Innovations Group, to Belmar MidCo, Inc., a Delaware corporation and a wholly owned subsidiary of Belmar Holdings, Inc., a Delaware corporation, a portfolio company of Webster Capital IV, L.P., a Delaware limited partnership, pursuant to the Stock Purchase Agreement dated February 26, 2023. The sale closed on May 11, 2023 for gross proceeds of $56.0 million, subject to working capital, closing debt, and other adjustments. Accordingly, the financial results of Innovations Group for the period from January 1, 2023 through May 10, 2023, and the three and nine months ended September 30, 2022, and the financial position of Innovations Group as of December 31, 2022 are included in our unaudited condensed consolidated financial statements.

In connection with entering into this agreement, we concluded that the disposal group met the held for sale criteria and classified the assets and liabilities as held for sale as of December 31, 2022. Assets and liabilities that were classified as held for sale were $65.3 million and $11.1 million, respectively, as of December 31, 2022. There were no businesses classified as held for sale as of September 30, 2023.

In connection with the held for sale classification, upon the remeasurement of the disposal group to its fair value, less cost to sell, we recorded a loss of $0.5 million in the three months ended March 31, 2023 and a loss of $1.8 million in the three months ended December 31, 2022, which were recorded in impairment of goodwill, intangible assets, and other long-lived assets in the unaudited condensed consolidated statements of operations. In connection with the sale closing on May 11, 2023, based on net proceeds of $54.9 million, we recorded an additional loss of $1.4 million in the three months ended June 30, 2023, which was recorded in impairment of goodwill, intangible assets, and other long-lived assets in our unaudited condensed consolidated statements of operations.

4. Revenues

As discussed in Note 1., Organization and Business, we deconsolidated UpHealth Holdings and its subsidiaries as of September 30, 2023; accordingly, the financial ~~position~~results of UpHealth Holdings ~~as of December 31, 2022~~ and ~~financial~~its ~~results~~subsidiaries offor ~~UpHealth Holdings in~~ the three ~~and~~month ~~nine months~~ ended ~~September~~March 3031, 2023 are included in our unaudited condensed consolidated financial statements and the financial position of UpHealth Holdings as of ~~September~~March 3031, ~~2023~~2024 isand ~~not~~December ~~included~~31, in2023 ~~our~~and ~~unaudited~~the ~~condensed consolidated~~ financial ~~statements.~~results ~~The filing~~ of aUpHealth ~~voluntary~~Holdings ~~petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as discussed in Note 1. Organization~~ and ~~Business,~~its ~~occurred~~subsidiaries onfor ~~September 19, 2023. Management concluded that it would use~~ the ~~September~~three ~~30,~~months ~~2023~~ended ~~date~~March ~~for deconsolidation~~31, as2024 ~~the~~are ~~last~~not 12included ~~days~~ in ~~the~~our ~~month~~unaudited ~~were~~condensed ~~determined~~consolidated tofinancial ~~not be material~~statements.

AsAlso, ~~also~~as discussed in Note 1.3 ~~Organization~~Discontinued ~~and Business~~Operations, weon ~~deconsolidated~~November ~~Glocal~~16, as2023 ofwe ~~July~~agreed 1,to ~~2022;~~sell ~~accordingly,~~100% of the ~~financial~~equity ~~results~~interest ~~of Glocal~~ in ~~the~~Cloudbreak ~~six~~to ~~months~~Forest ~~ended June 30~~Buyer, ~~2022~~LLC. ~~are~~The ~~included~~Sale inclosed ~~our~~on ~~unaudited~~March ~~condensed~~15, ~~consolidated~~2024. ~~financial statements~~Accordingly, ~~and~~we have presented the financial position of ~~Glocal~~Cloudbreak as of ~~September~~December 3031, 2023 ~~and~~as ~~December~~held ~~31,~~for ~~2022~~sale and the ~~financial~~ results of ~~Glocal~~operations inof Cloudbreak for the ~~three~~period ~~months~~from ~~ended~~January ~~September~~1, 302024 to March 15, ~~2022~~2024 and for the three ~~and nine~~ months ended ~~September~~March 3031, 2023 ~~are~~as ~~not~~discontinued ~~included~~operations in ~~our~~the accompanying unaudited condensed consolidated financial statements.

Revenues by ~~geography~~service offering consisted of the following:

	Three months ended September 30,				Nine months ended September 30,
	Three Months Ended March 31,
(In thousands)	~~2023~~2024		~~2022~~2023		~~2023~~		~~2022~~
Americas	$	32,681	$	38,666	$	112,649	$	111,402
Services	$	—	$	13,613
Asia	—		—		—		6,904
Licenses and subscriptions	—		1,936
Total revenues	$	32,681	$	38,666	$	112,649	$	118,306
Products	—		9,138
Total revenues	$	—	$	24,687

Our revenues ~~are~~were entirely derived from the healthcare industry. ~~Revenues recognized over-time were approximately 96% and 75% of the total revenues~~ in the ~~three months ended September 30, 2023 and 2022, respectively~~Americas. ~~Revenues~~Revenue recognized atover ~~a point-in-~~time ~~were~~was approximately 458% ~~and 25%~~ of ~~the~~ total revenues induring the three months ended ~~September~~March 3031, 2023 ~~and 2022, respectively~~. Revenues recognized over-time were approximately 85% and 73% of the total revenues in the nine months ended September 30, 2023 and 2022, respectively. Revenues recognized at a point-in-time were approximately 15% and 27% of the total revenues in the nine months ended September 30, 2023 and 2022, respectively.

T a b l e o f C o n t e n t s

Contract Assets

There were no impairments of contract assets, consisting of unbilled receivables, induring the three ~~and nine~~ months ended ~~September 30~~March 31, ~~2023~~2024 and ~~2022~~2023, respectively.

The change in contract assets, consisting of unbilled receivables, was as follows:


(In thousands)	March 31, 2024		March 31, 2023
Unbilled receivables, beginning of period	$	—	$	694
Reclassifications to billed receivables	—		(694)
Revenues recognized in excess of period billings	—		668
Unbilled receivables, end of period	$	—	$	668

	Nine Months Ended September 30,
(In thousands)	2023		2022
Unbilled receivables, beginning of period	$	694	$	784
Reclassifications to billed receivables	(694)		(784)
Revenues recognized in excess of period billings	603		896
Deconsolidation of subsidiary	(603)		—
Unbilled receivables, end of period	$	—	$	896

Contract Liabilities

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

	Nine Months Ended September 30,
(In thousands)	March 31, 2024		March 31, 2023
(In thousands)	2023		2022
Deferred revenue, beginning of period	$	—	$	2,659
Deferred revenue, beginning of period	$	2,738	$	2,649
Revenues recognized from balances held at the beginning of the period	—		(1,442)
Revenues recognized from balances held at the beginning of the period	(2,760)		(2,023)
Revenues deferred from period collections on unfulfilled performance obligations	—		253
Revenues deferred from period collections on unfulfilled performance obligations	3,720		4,403
Deferred revenue, end of period	$	—	$	1,470
Deconsolidation of subsidiary	(3,646)		(622)
Deferred revenue, end of period	$	52	$	4,407

AsRevenue ~~of September 30, 2023, the deferred revenue is expected to be~~ recognized ~~within a year, and as such, is classified as current on the condensed consolidated balance sheets. Revenues recognized~~ ratably over time ~~are~~is generally billed in advance and includes ~~software-as-a-service (“~~SaaS”) internet hosting, subscriptions, ~~construction of digital hospitals~~ and ~~dispensaries, and~~ related consulting, implementation, services support, and advisory services.

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

Approximately 05.48% ~~and 2.5%~~ of ~~revenues recognized in~~ the ~~three and nine months ended September 30, 2023, were from the deferred~~ revenue ~~balance existing as of December 31, 2022. Approximately 0.1% and 1.7% of revenues~~ recognized induring the three ~~and nine~~ months ended ~~September 30,~~March ~~2022~~31, ~~were~~2023 was from the deferred revenue balance existing as of December 31, ~~2021~~2022.

5. Supplemental Financial Statement Information

As discussed in Note 1., Organization and Business, we deconsolidated UpHealth Holdings and its subsidiaries as of September 30, 2023; accordingly, the financial ~~position~~results of UpHealth Holdings ~~as of December 31, 2022~~ and ~~financial~~its ~~results~~subsidiaries offor ~~UpHealth Holdings in~~ the three ~~and~~month ~~nine months~~ ended ~~September~~March 3031, 2023 are included in our unaudited condensed consolidated financial statements and the financial position of UpHealth Holdings as of ~~September~~March 3031, ~~2023~~2024 isand ~~not~~December ~~included~~31, in2023 ~~our~~and ~~unaudited~~the ~~condensed consolidated~~ financial ~~statements.~~results ~~The filing~~ of aUpHealth ~~voluntary~~Holdings ~~petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as discussed in Note 1, Organization~~ and ~~Business,~~its ~~occurred~~subsidiaries onfor ~~September 19, 2023. Management concluded that it would use~~ the ~~September~~three ~~30,~~months ~~2023~~ended ~~date~~March ~~for deconsolidation~~31, as2024 ~~the~~are ~~last~~not 12included ~~days~~ in ~~the~~our ~~month~~unaudited ~~were~~condensed ~~determined~~consolidated tofinancial ~~not be material~~statements.

~~Impairment~~Property ofand ~~goodwill~~equipment, ~~intangible~~net ~~assets, and other long-lived assets~~ consisted of the following:


(In thousands)	March 31, 2024		December 31, 2023
Computer equipment, furniture and fixtures	43		43
Capitalized software development costs	1,997		1,997
	2,040		2,040
Accumulated depreciation and amortization	(1,506)		(1,336)
Total property and equipment, net	$	534	$	704

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Impairment of goodwill	$	34,632	$	89,149	$	42,924	$	94,643
Impairment of intangible assets	4,203		16,947		4,203		17,627
Impairment of long-lived assets	2,382		—		2,831		75
Total impairment of goodwill, intangible assets, and other long-lived assets:	$	41,217	$	106,096	$	49,958	$	112,345

As discussed in Note 3, Discontinued Operations, $8.8 million of property and equipment, net are included in assets held for sale, noncurrent in the unaudited condensed consolidated balance sheet as of December 31, 2023.

~~The~~Depreciation ~~impairment~~expense ofwas ~~goodwill~~$0.2 inmillion ~~the~~and ~~nine months ended September 30, 2023 includes a goodwill impairment charge of~~ $10.9 4 million ~~related to our Pharmacy business, which was classified as held~~ for ~~sale~~the asthree ofmonths ~~December~~ended 21March 31, ~~2022~~2024 and ~~was sold in the second quarter of~~ 2023., respectively.

~~Property and equipment consisted of the following:~~ 21

(In thousands)	September 30, 2023		December 31, 2022
Leasehold improvements	$	—	$	868
Electrical and other equipment	—		21
Computer equipment, furniture and fixtures	16,790		16,222
Vehicles	9		302
Capitalized software development costs	4,967		4,404
Capitalized software development costs in progress	1,469		2,590
	23,235		24,407
Accumulated depreciation and amortization	(13,007)		(10,338)
Total property and equipment, net	$	10,228	$	14,069

T a b l e o f C o n t e n t s

Depreciation expense was $1.8 million and $1.8 million in the three months ended September 30, 2023 and 2022, respectively, and $5.0 million and $5.1 million in the nine months ended September 30, 2023 and 2022, respectively.

In the three and nine months ended September 30, 2023, we recorded impairment charges on long-lived assets of $2.4 million and $2.8 million, respectively, in the Integrated Care Management segment.

Accrued expenses consisted of the following:

(In thousands)	~~September~~March 3031, ~~2023~~2024		December 31, ~~2022~~2023
Accrued professional fees	$	~~4,733~~527	$	141,~~245~~499
Accrued products and licenses	—		17,820
Accrued payroll and bonuses	6,309		5,691
Accrued interest on debt	2,~~474~~495		~~741~~846
Accrued payroll and bonuses	3,763		5,163
Other accruals	182		196
Income tax payable	62		388
Total accrued expenses	$	9,513	$	8,232
Other accruals	—		794
Total accrued expenses	$	11,032	$	39,151

As discussed in Note 3, Discontinued Operations, $2.4 million of accrued expenses are included in liabilities held for sale, noncurrent in the unaudited condensed consolidated balance sheet as of December 31, 2023.

Other liabilities, noncurrent consisted of the following:

(In thousands)	~~September~~March 3031, ~~2023~~2024		December 31, ~~2022~~2023
Derivative liability, noncurrent	$	59	$	5659
Warrant liabilities, noncurrent	17		917
Other liabilities, noncurrent	71		662
Liability for uncertain tax positions, noncurrent	4,519		$	—
Total other liabilities, noncurrent	$	~~147~~4,595	$	~~727~~76

~~Other~~6. Goodwill ~~income,~~and ~~net,~~Intangible ~~including interest income consisted of the following:~~Assets

23As discussed in Note 1, Organization and Business, we deconsolidated UpHealth Holdings and its subsidiaries as of September 30, 2023; accordingly, the financial results of UpHealth Holdings and its subsidiaries for the three month ended March 31, 2023 are included in our unaudited condensed consolidated financial statements and the financial position of UpHealth Holdings as of March 31, 2024 and December 31, 2023 and the financial results of UpHealth Holdings and its subsidiaries for the three months ended March 31, 2024 are not included in our unaudited condensed consolidated financial statements.

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Gain (loss) on fair value of warrant liabilities	$	—	$	—	$	(8)	$	190
Other income, net, including interest income	295		32		433		30
Total other income, net, including interest income	$	295	$	32	$	425	$	220

6As discussed in Note 3, Discontinued Operations, $80.3 million of goodwill and ~~Intangible~~$22.7 ~~Assets~~million of intangible assets are included in assets held for sale, noncurrent, in the unaudited condensed consolidated balance sheet as of December 31, 2023.

AsIn ~~discussed in Note 1. Organization and Business, we deconsolidated UpHealth Holdings as of September 30, 2023; accordingly,~~ the ~~financial position of UpHealth Holdings as of December 31, 2022 and financial results of UpHealth Holdings in the~~ three ~~and nine~~ months ended ~~September~~March 3031, 2023 ~~are included in our unaudited condensed consolidated financial statements and the financial position of UpHealth Holdings as of September 30~~, ~~2023~~we isrecorded ~~not included in our unaudited condensed consolidated financial statements. The filing of~~ a ~~voluntary~~goodwill ~~petition~~impairment ~~for~~charge ~~relief under Chapter 11~~ of ~~the U~~$0.S.5 ~~Bankruptcy Code~~million, asresulting ~~discussed~~from inthe ~~Note~~remeasurement 1.of ~~Organization~~the ~~and~~Innovations ~~Business,~~Group ~~occurred~~disposal ongroup ~~September~~to ~~19, 2023. Management concluded that it would use~~ the ~~September~~expected 30proceeds, ~~2023~~less ~~date~~cost ~~for deconsolidation, as the last 12 days in the month were determined~~ to ~~not be material~~sell.

As ~~also discussed in Note 1~~7. Organization and Business, we deconsolidated Glocal as of July 1, 2022; accordingly, the financial results of Glocal in the six months ended June 30, 2022 are included in our unaudited condensed consolidated financial statements, and the financial position of Glocal as of September 30, 2023 and December 31, 2022 and the financial results of Glocal in the three months ended September 30, 2022 and the three and nine months ended September 30, 2023 are not included in our unaudited condensed consolidated financial statements. Debt

~~The~~As ~~following~~discussed ~~table~~in ~~summarizes~~Note 1, Organization and Business, we deconsolidated UpHealth Holdings and its subsidiaries as of September 30, 2023; accordingly, the ~~gross~~financial ~~carrying~~results ~~amount~~of UpHealth Holdings and ~~accumulated~~its ~~amortization~~subsidiaries for ~~intangible~~the ~~assets~~three month ended March 31, 2023 are included in our unaudited condensed consolidated financial statements, and the financial position of UpHealth Holdings as of ~~September 30~~March 31, 2024 and December 31, 2023: and the financial results of UpHealth Holdings and its subsidiaries for the three months ended March 31, 2024 are not included in our unaudited condensed consolidated financial statements.

(In thousands)	Trade Names		Technology and Intellectual Property		Customer Relationships		Total
Gross carrying amount as of September 30, 2023	$	12,975	$	5,825	$	13,675	$	32,475
Accumulated amortization	(2,995)		(2,641)		(3,156)		(8,792)
Intangible assets, net as of September 30, 2023	$	9,980	$	3,184	$	10,519	$	23,683

~~The following table summarizes the gross carrying amount and accumulated amortization for intangible assets as of December 31, 2022:~~22

(In thousands)	Trade Names		Technology and Intellectual Property		Customer Relationships		Total
Gross carrying amount as of December 31, 2022	$	15,242	$	10,634	$	17,613	$	43,489
Accumulated amortization	(3,295)		(4,762)		(4,070)		(12,127)
Intangible assets, net as of December 31, 2022	$	11,947	$	5,872	$	13,543	$	31,362

T a b l e o f C o n t e n t s

In the three and nine months ended September 30, 2023, we recorded an impairment charge of $4.2 million in the Integrated Care Management segment. In the three months ended September 30, 2022, we recorded impairment charges of $16.9 million, consisting of $16.8 million in our Integrated Care Management segment and $0.1 million in our Services segment. In the nine months ended September 30, 2022, we recorded impairment charges of $17.6 million, consisting of $16.8 million in our Integrated Care Management segment and $0.8 million in our Services segment.

The estimated useful lives of trade names are 3-10 years, the estimated useful lives of technology and intellectual property are 5-7 years, and the estimated useful life of customer relationships is 10 years.

Amortization expense was $1.2 million and $2.7 million in the three months ended September 30, 2023 and 2022, respectively. Amortization expense was $3.5 million and $12.0 million in the nine months ended September 30, 2023 and 2022, respectively.

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

(In thousands)	Trade Name Amortization		Technology and Intellectual Property Amortization		Customer Relationships Amortization		Total
Remaining 2023	$	364	$	286	$	345	$	995
2024	1,298		1,165		1,368		3,831
2025	1,298		1,165		1,368		3,831
2026	1,298		568		1,368		3,234
2027	1,298		—		1,368		2,666
Thereafter	4,424		—		4,702		9,126
	$	9,980	$	3,184	$	10,519	$	23,683

7. Goodwill

As discussed in Note 1. Organization and Business, we deconsolidated UpHealth Holdings as of September 30, 2023; accordingly, the financial position of UpHealth Holdings as of December 31, 2022 and financial results of UpHealth Holdings in the three and nine months ended September 30, 2023 are included in our unaudited condensed consolidated financial statements and the financial position of UpHealth Holdings as of September 30, 2023 is not included in our unaudited condensed consolidated financial statements. The filing of a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as discussed in Note 1. Organization and Business, occurred on September 19, 2023. Management concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material.

As also discussed in Note 1. Organization and Business, we deconsolidated Glocal as of July 1, 2022; accordingly, the financial results of Glocal in the six months ended June 30, 2022 are included in our unaudited condensed consolidated financial statements, and the financial position of Glocal as of September 30, 2023 and December 31, 2022 and the financial results of Glocal in the three months ended September 30, 2022 and the three and nine months ended September 30, 2023 are not included in our unaudited condensed consolidated financial statements.

As a result of UpHealth Holdings filing a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code on September 19, 2023 (See Note 1. Organization and Business, for further information), which was determined to be an indicator of impairment, we performed a goodwill impairment assessment as of September 30, 2023. As a result, in the three months ended September 30, 2023, we recorded a $34.6 million impairment charge in our Integrated Care Management segment. In the nine months ended September 30, 2023, we recorded a $41.0 million impairment charge, consisting of $34.6 million in our Integrated Care Management segment and $6.4 million in our Services segment.

As a result of indicators of impairment identified in the three months ended September 30, 2022, we performed a goodwill impairment assessment as of September 30, 2022, which included both qualitative and quantitative assessments. Our assessment included a comparison of the carrying value to an estimated fair value using a market approach based on our market capitalization. Based on this assessment, we concluded the fair value of two segments were below the carrying value primarily due to the recent change in our market valuation and financial performance and recorded a goodwill impairment in the amount of $89.1 million, consisting of $87.5 million in our Integrated Care Management segment and $1.6 million in our Services segment. In the nine months ended September 30, 2022, we recorded a $94.6 million impairment charge, consisting of $87.5 million in our Integrated Care Management segment and $1.6 million in our Services segment, and as a result of measurement period adjustments in our Virtual Care Infrastructure segment, we increased goodwill in the amount of $5.5 million, which was immediately impaired.

The carrying amount of goodwill consisted of the following:

(In thousands)	Goodwill
Balance as of December 31, 2022	$	159,675
Impairments	(40,989)
Deconsolidation of subsidiary	(38,376)
Balance as of September 30, 2023	$	80,310

8. Debt

Organization and Business, occurred on September 19, 2023. Management concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material.

Debt consisted of the following:

(In thousands)	~~September~~March 3031, ~~2023~~2024		December 31, ~~2022~~2023
2025 Notes	$	~~115~~57,~~000~~227	$	6757,~~500~~227
2026 Notes	57115,~~227~~000		115,000
Total debt	172,227		~~182~~172,~~500~~227
Less: unamortized original issue and debt discount	(2823,~~338~~068)		(3625,~~538~~703)
Total debt, net of unamortized original issue and debt discount	~~143~~149,~~889~~159		~~145~~146,~~962~~524
Less: current portion of debt	(~~143~~111,~~889~~891)		—
Noncurrent portion of debt	$	—37,268	$	~~145~~146,~~962~~524

2025 Senior Secured Convertible Notes and Indenture

On August 12, 2022, we entered into the ~~Senior~~Indenture ~~Secured~~governing ~~Notes~~our ~~Indenture~~2025 Notes with ~~the~~Wilmington Trust, ~~Indenture~~National ~~Trustee~~Association, a national banking association (“Wilmington Trust”) in its capacity as trustee thereunder, in respect of the $67.5 million in aggregate principal amount of 2025 Notes issued to holders of our 2026 Notes in a private placement transaction (“2025 Notes Offering”), raising approximately $22.5 million in gross cash proceeds, net of debt issuance costs of $2.2 million, after paying for a repurchase of $45.0 million of the 2026 Notes, which net proceeds were used in part to fully repay the Seller Notes (see below). The debt issuance costs consisted of cash paid in the amount of $1.5 million and the issuance of 115,000 shares of common stock, ~~following the reverse stock split,~~ with a value of $0.7 million. The 2025 Notes are convertible ~~following the reverse split of our shares~~ into 3,857,142 shares of our common stock at a conversion price, subject to the occurrence of certain corporate events, of $17.50 per share. The 2025 Notes are senior secured obligations of UpHealth, secured by substantially all of our assets and those of our domestic subsidiaries, and accrue interest at a rate equal to the daily secured overnight financing rate (“SOFR”) plus 9.0% per annum, with a minimum rate of 10.5% per annum, payable quarterly in arrears, for a quarterly rate of 1214.2141% for our December 15, ~~2022~~2023 interest payment date. The 2025 Notes will mature on December 15, 2025, unless earlier repurchased, redeemed or converted. Holders will have the right to convert their 2025 Notes at any time. Upon the occurrence of certain corporate events, holders of the 2025 Notes can require us to repurchase for cash all or part of their 2025 Notes in principal amounts of $1,000 or an integral multiple thereof at a repurchase price that will be equal to 105% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest thereon, if any. In the event that we sell assets with net proceeds in excess of $15.0 million, then itwe will make an offer to all holders of the 2025 Notes to repurchase the 2025 Notes for an aggregate amount of cash equal to 20.0% of the net proceeds of such asset sale, at a repurchase price per 2025 Note equal to 100.0% of the principal amount thereof, plus accrued and unpaid interest, if any. We may not otherwise seek to redeem the 2025 Notes prior to June 16, 2024. We will settle conversions solely in shares of ~~its~~our common stock, except for payments of cash in lieu of fractional shares.

As discussed in Note 3.1, ~~Significant~~Organization ~~Transactions~~and Business, on May 11, 2023 we completed the sale of 100% of the outstanding capital stock of Innovations Group. In accordance with the terms and conditions set forth in the Senior Secured Notes Indenture, on June 9, 2023, we commenced an offer to purchase up to $10.3 million (representing 20% of the net proceeds from the sale subject to adjustment to maintain the authorized denominations of the 2025 Notes) in aggregate principal amount of our 2025 Notes for cash, at a repurchase price per 2025 Note equal to 100% of the principal amount thereof, plus accrued and unpaid interest (if any), from the holders of the 2025 Notes (the “Offer”). On June 15, 2023, we completed the repurchase of $10.3 million in aggregate principal amount of 2025 Notes, which were validly tendered and accepted for repurchase by us in accordance with the terms and conditions of the Offer (the “Note Repurchase”), representing 15.222% of the outstanding principal amount of the 2025 Notes before the Note Repurchase. Following the completion of the Note Repurchase, there is $57.2 million in aggregate principal amount of 2025 Notes outstanding. The remaining 2025 Notes are convertible into 3,270,114 shares of our common stock at a conversion price, subject to the occurrence of certain corporate events, of $17.50 per share.

On February 9, 2024, in accordance with the terms of the Membership Interests Purchase Agreement and the Transaction Support Agreement, we entered into a supplemental indenture and amendment to security and pledge agreement which amended the terms of the Indenture governing our 2025 Notes. See Supplemental Indentures and Waivers and Rescission Agreements below for further information.

Total interest expense related to the 2025 Notes consisted of the following:


	Three Months Ended March 31,
(In thousands)	2024		2023
Contractual variable interest expense	$	1,749	$	2,298
Debt issuance costs amortization	138		162
Total interest expense	$	1,887	$	2,460

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Contractual variable interest expense	$	2,126	$	982	$	6,764	$	982
Debt issuance costs amortization	138		79		709		79
Total interest expense	$	2,264	$	1,061	$	7,473	$	1,061

In December 2023, Wilmington Trust, in its capacity as calculation agent, notified us of the quarterly rate reset of 14.38% for our March 15, 2024 interest payment date. In March 2024, Wilmington Trust, in its capacity as calculation agent, notified us of the quarterly rate reset of 14.33%. for our June 15, 2024 interest payment date.

Included in the debt issuance costs amortization in the three and nine months ended September 30, 2023 was a write-off of $0.3 million, which was the proportionate share of the remaining debt issuance costs related to the repurchased 2025 Notes.23

InTable ~~March 2023, the Indenture Trustee, in its capacity as calculation agent, notified us~~ of the quarterly rate reset of 14.03% for our June 15, 2023 interest payment date. In June 2023, the Indenture Trustee, in its capacity as calculation agent, notified us of the quarterly rate reset of 14.25% for our September 15, 2023 interest payment date. In September 2023, the Indenture Trustee, in its capacity as calculation agent, notified us of the quarterly rate reset of 14.41% for our December 15, 2023 interest payment date. Contents

The filing of the Chapter 11 case by UpHealth Holdings constitutes an event of default that accelerated our obligations under the Senior Secured Indenture. The Senior Secured Notes Indenture provides that upon the filing of the Chapter 11 case, the principal and interest due thereunder shall be immediately due and payable. However, pursuant to the terms of the November 16, 2023 Transaction Support Agreement, we will enter into a Supplemental Indenture to the Senior Secured Notes Indenture which will, among other things, (a) provide for the waiver, with respect to us and Cloudbreak, of the specified events of default under the Senior Secured Notes Indenture resulting from the commencement of the Chapter 11 cases and (b) rescind, with respect to us and Cloudbreak, the acceleration of the 2025 Notes resulting from the occurrence of the foregoing events of default.

2026 Unsecured Convertible Notes and Indenture

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

On June 15, 2021, in connection with the closing of the Business Combinations, we entered into ~~the~~an ~~Unsecured Notes~~ Indenture with ~~the~~Wilmington ~~Indenture~~Trust, ~~Trustee~~National Association, a national banking association, in its capacity as trustee thereunder, in respect of the $160.0 million in aggregate principal amount of unsecured convertible notes due in 2026 (the “2026 Notes”) that were issued to certain institutional investors. The 2026 Notes bear interest at a rate of 6.25% per annum, payable semi-annually, and ~~were~~are convertible ~~following the reverse split of our shares~~ into approximately 1,502,347 shares of common stock at a conversion price of $106.50 in accordance with the terms of the ~~Unsecured Notes~~ Indenture, and will mature on June 15, 2026. The total proceeds received from the 2026 Notes were $151.9 million, net of debt issuance costs of $8.1 million. In accounting for the 2026 Notes, we bifurcated and accounted for the conversion option as a derivative measured at fair value on the issuance date in accordance with ASC 815, Derivatives and Hedging. The difference between the proceeds allocated to the 2026 Notes at issuance and the fair value of the conversion option was allocated to the host debt contract. As of ~~September~~both March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the fair value of the derivative was $~~59 thousand and $~~0.1 million, ~~respectively, all of~~ which was included in other liabilities, noncurrent, in our unaudited condensed consolidated balance sheets.

~~The~~On ~~filing~~August of12, ~~the~~2022, ~~Chapter~~concurrently 11and ~~case~~in byconnection ~~UpHealth~~with ~~Holdings~~the ~~constitutes~~offering ~~an event~~ of ~~default~~our ~~that~~2025 ~~accelerated~~senior ~~our~~secured ~~obligations~~convertible ~~under~~notes ~~the~~and ~~Unsecured~~indenture ~~Notes~~(see ~~Indenture.~~below), ~~The~~Oppenheimer ~~Unsecured~~& ~~Notes~~Co. ~~Indenture~~Inc. ~~provides~~(“OpCo”) ~~that~~commenced ~~upon~~a ~~the~~private ~~filing~~offer ofto ~~the~~repurchase ~~Chapter~~approximately 11$45.0 million ~~case~~in ~~and~~aggregate ~~the~~principal ~~acceleration~~amount of ~~the~~our ~~obligations~~2026 ~~under~~Notes (the ~~Senior~~“2026 ~~Secured~~ Notes ~~Indenture,~~Repurchase”). In connection with the ~~principal~~2026 ~~and~~Notes ~~interest~~Repurchase, ~~due~~OpCo ~~thereunder~~entered ~~shall~~into bea ~~immediately~~note ~~due~~purchase ~~and~~agreement ~~payable.~~with ~~However,~~each institutional investor pursuant to ~~the~~which ~~terms~~OpCo ofagreed ~~the~~to ~~November~~purchase ~~16,~~2026 ~~2023~~Notes ~~Transaction~~from ~~Support~~each ~~Agreement~~investor, weconcurrently ~~will~~with ~~enter~~each ~~into~~investor’s apurchase ~~Supplemental~~of ~~Indenture~~2025 toNotes in the ~~Unsecured~~2025 Notes ~~Indenture~~Offering ~~which~~(see ~~will,~~below). ~~among~~At ~~other~~the ~~things~~closing, ~~provide~~each ~~for~~investor had the ~~waiver,~~ability ~~with~~to ~~respect~~sell to$2.0 million usin ~~and~~principal ~~Cloudbreak,~~amount of ~~the~~2026 ~~specified~~Notes ~~events~~at 100% of ~~default~~par ~~under~~value ~~the~~for ~~Unsecured~~each ~~Notes~~$3.0 million ~~Indenture~~in ~~resulting~~principal ~~from~~amount ~~the~~of ~~acceleration~~2025 ofNotes purchased in the 2025 Notes ~~resulting~~Offering. Concurrently and in connection with the closing on August 18, 2022, OpCo purchased from each investor the ~~occurrence~~principal amount of the ~~event~~2026 ofNotes ~~default~~set offorth ~~the~~in ~~Senior~~each ~~Secured~~investor’s ~~Notes~~note ~~Indenture~~purchase agreement, pursuant to and in accordance with the ~~commencement~~terms thereof. The remaining 2026 Notes are convertible into approximately 1,079,812 shares of common stock at a conversion price of $106.50 in accordance with the ~~Chapter~~terms 11of ~~cases~~the Indenture.

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Contractual fixed interest expense	$	1,874	$	2,184	$	5,468	$	7,184
Derivative accretion	2,210		2,730		6,629		8,899
Debt issuance costs amortization	287		351		862		1,152
Total interest expense	$	4,371	$	5,265	$	12,959	$	17,235

On February 9, 2024, in accordance with the terms of the Membership Interests Purchase Agreement and the Transaction Support Agreement, we entered into a supplemental indenture and security and pledge agreement which amended the terms of the Indenture governing our 2026 Notes. See Supplemental Indentures and Waivers and Rescission Agreements below for further information.

OnTotal ~~August~~interest ~~12,~~expense ~~2022,~~related ~~concurrently~~to ~~and~~the in2026 ~~connection~~Notes ~~with~~consisted ~~the issuance~~ of ~~our~~the ~~2025 senior secured convertible notes and indenture (see below), Oppenheimer & Co. Inc. (“OpCo”) commenced a private offer to repurchase approximately $45.0 million in~~ following:


	Three Months Ended March 31,
(In thousands)	2023		2022
Contractual variable interest expense	$	1,145	$	1,797
Derivative accretion	287		2,210
Debt issuance costs amortization	2,210		287
Total interest expense	$	3,642	$	4,294

~~aggregate~~Supplemental principal amount of our 2026 Notes (the “2026 Notes Repurchase”). In connection with the 2026 Notes Repurchase, OpCo entered into a note purchase agreement with each institutional investor pursuant to which OpCo agreed to purchase 2026 Notes from each investor, concurrently with each investor’s purchase of 2025 Notes in the 2025 Notes Offering (see below). At the closing, each investor had the ability to sell $2.0 million in principal amount of 2026 Notes at 100% of par value for each $3.0 million in principal amount of 2025 Notes purchased in the 2025 Notes Offering. Concurrently and in connection with the closing on August 18, 2022, OpCo purchased from each investor the principal amount of the 2026 Notes set forth in each investor’s note purchase agreement, pursuant to and in accordance with the terms thereof. Following the reverse split of shares, the remaining 2026 Notes are convertible into approximately 1,079,812 shares of common stock at a conversion price of $106.50 in accordance with the terms of the Indenture.Indentures

~~Seller~~On February 9, 2024, in accordance with the terms of the Membership Interests Purchase Agreement and the Transaction Support Agreement, we entered into the First Lien Supplemental Indenture and Amendment to Security Agreement, which amends the terms of the indenture, dated as of August 18, 2022, by and among the Company, the Guarantors (as defined below) party thereto and Wilmington Trust, in its capacity as trustee and collateral agent thereunder, relating to the 2025 Notes (as amended, restated, supplemented or otherwise modified from time to time, including pursuant to the First Lien Indenture), and the security and pledge agreement, dated as of August 18, 2022, by and among the Company, the Guarantors from time to time party thereto and Wilmington Trust, as collateral agent, relating to the 2025 Notes (as amended, restated, supplemented or otherwise modified from time to time, including pursuant to the First Lien Documents. The First Lien Supplemental Indenture and Amendment to Security Agreement amends the terms of the First Lien Indenture to, among other things, (a) provide for certain changes to certain of the definitions in the First Lien Indenture, including “Permitted Indebtedness,” “Permitted Investments,” “Permitted Liens,” “Asset Sale,” “Excluded Subsidiary,” and “Significant Subsidiary;” (b) provide for certain modifications to covenants of the Company and certain changes with respects to events of default; (c) provide a carveout for the Sale from the terms of the First Lien Indenture with respect to mergers and sale transactions; (d) delete the rule prohibiting repurchases in connection with a Fundamental Change arising from the Sale at the time the 2025 Notes have been accelerated, and (e) modify the provisions in respect of repurchases of 2025 Notes as a result of a Fundamental Change for the Consenting 2025 Noteholders in respect of the Sale to account for a multi-step process for the repurchase of the 2025 Notes (i.e., to require a repurchase offer at Closing and in connection with subsequent paydowns with the proceeds of released funds from certain segregated escrow accounts to be established prior to the Closing pursuant to one or more escrow agreements in a customary form to be agreed upon as provided under the Membership Interests Purchase Agreement by Forest Buyer, the Company, the Required Noteholders (as defined in the Proxy Statement) and an escrow agent), in each case, at a 5.00% premium to the principal amount of such 2025 Notes pursuant to the terms of the Transaction Support Agreement.

As part of the purchase price consideration for several of UpHealth Holdings’ merger entities, we entered into seller notes payable to their former shareholders, which accrue interest at specific rates, per the respective merger agreements. On June 9, 2021, in connection with the closing of the Business Combination, we paid $88.1 million of the seller notes. In August 2021, we paid an additional $11.1 million of the seller notes and deferred the maturity date to September 2022. In August 2022, we paid the remaining $18.7 million of seller notes plus accrued interest of $1.9 million. As of both September 30, 2023 and December 31, 2022, the seller notes totaled zero. 24

~~Accrued~~Table ~~interest payable was zero as~~ of both September 30, 2023 and December 31, 2022. Interest expense was zero and $0.3 million in the three months ended September 30, 2023 and 2022, respectively. Interest expense was zero and $1.2 million in the nine months ended September 30, 2023 and 2022, respectively.Contents

9.Furthermore, ~~Fair~~the ~~Value~~First Lien Supplemental Indenture and Amendment to Security Agreement amends the terms of ~~Financial~~the ~~Instruments~~First Lien Security Agreement to (i) reduce the deadline for timely performance of certain covenants by the Company and the Guarantors from 20 business days to 7 business days, and (ii) provide that in the event the collateral agent exercises certain voting and other rights in respect of the capital stock and other securities of the Guarantors upon the occurrence or during the continuation of an event of default under the First Lien Indenture, the collateral agent’s notice to a Guarantor may be provided concurrently with such exercise.

WeIn ~~estimate~~addition, ~~the~~on ~~fair~~February ~~value~~9, of2024, ~~our~~in ~~financial~~accordance ~~instruments~~with ~~using~~the ~~available~~terms ~~market~~of ~~information~~the Membership Interests Purchase Agreement and ~~valuation~~the ~~methodologies~~Transaction weSupport ~~believe~~Agreement, tothe beCompany ~~appropriate.~~entered Asinto ofthe ~~September 30~~Second Lien Supplemental Indenture by and between the Company and BNY Mellon, ~~2023~~in its capacity as successor trustee and ~~December 31~~as collateral agent thereunder (as amended, ~~2022~~restated, supplemented or otherwise modified from time to time, including pursuant to the ~~fair~~Indentures), ~~values~~the terms of ~~cash~~which ~~and~~amend ~~cash~~the ~~equivalents,~~Second ~~restricted~~Lien ~~cash~~Indenture to, ~~accounts~~among ~~receivable~~other things, ~~accounts~~(a) ~~payable~~add the Guarantors, ~~and~~as ~~accrued~~a ~~expenses~~guarantor ~~approximate~~of ~~their~~the ~~carrying~~obligations ~~values~~under ~~due~~the 2026 Notes pursuant to the ~~short~~Second Lien Indenture; (b) cause UpHealth and the Guarantors to grant a second-~~term~~priority ~~nature~~security interest on the same collateral that secures the 2025 Notes, subject only to certain permitted liens, pursuant to the Second Lien Security Agreement dated as of ~~these~~February ~~instruments.~~9, ~~Additionally~~2024; (c) in connection with those items described in clauses (a) and (b) above, incorporate provisions similar to those in the ~~fair~~First ~~values~~Lien Indenture, including with respect to covenants and events of ~~short-term~~default, as previously disclosed by the Company and ~~long-term~~as ~~debt~~modified ~~instruments~~by ~~approximate~~the ~~their~~First ~~carrying~~Lien ~~values~~Supplemental Indenture; and (d) provide a carveout for the Sale from the terms of the Second Lien Indenture with respect to mergers and sale transactions.

Pursuant to the terms of the Second Lien Indenture, the 2026 Notes are secured by a second-priority lien, subject only to certain permitted liens, in substantially all assets of the Company and the Guarantors, subject to customary exclusions, pursuant to the Second Lien Documents, by and among the Company, the Guarantors and BNY Mellon, as collateral agent on behalf of the 2026 Noteholders.

At any time when the Company and its subsidiaries receive Net Proceeds (as defined in the Second Lien Indenture) from an Asset Sale (as defined in the Second Lien Indenture), so long as the 2025 Notes have been repaid in full or to the extent the Company’s Fundamental Change Repurchase Offer in respect of the 2025 Notes has been declined by the holders of the 2025 Notes then outstanding, the Company will make an Asset Sale Offer to all 2026 Noteholders to repurchase 2026 Notes for an aggregate amount of cash equal to 100.0% of such Net Proceeds (excluding, for the avoidance of doubt, any Net Proceeds previously applied to the repurchase of any 2025 Notes or 2026 Notes pursuant to any preceding Asset Sale Offer), at a repurchase price per 2026 Note equal to 100.0% of the principal amount thereof, plus accrued and unpaid interest, if any, plus any remaining amounts that would be owed to, but not excluding, the Maturity Date.

In addition, each party to the Supplemental Indentures has expressly agreed that the Supplemental Indentures will be deemed not to affect any rights or obligations of any subsidiary of the Company that is, as of the date of the Supplemental Indentures, a debtor or debtor in possession in the Chapter 11 Proceedings. In accordance with the terms of the Indentures, the Company received consents to the Supplemental Indentures from the holders of $43,357,000 in aggregate principal amount of 2025 Notes, representing approximately 75.76% of the aggregate principal amount of the outstanding 2025 Notes, and the holders of $86,329,000 in aggregate principal amount of 2026 Notes, representing approximately 75.07% of the aggregate principal amount of the outstanding 2026 Notes.

The amendments set forth in the Supplemental Indentures became effective as of the date upon which the Company has paid all reasonable costs and expenses, disbursements and advances incurred or made by Wilmington Trust and BNY Mellon, respectively, in connection with the Supplemental Indentures to the extent due and payable pursuant to the terms of the First Lien Documents and the Second Lien Supplemental Indenture, respectively. As previously disclosed by the Company in the November 20 Current Report, pursuant to the terms of the Transaction Support Agreement, the Supplemental Indentures may not be amended, modified or terminated in a manner that is material and adverse to Forest Buyer without its prior written consent.

In connection with the entry into the Supplemental Indentures, on February 9, 2024, Wilmington Trust, in its capacity as trustee and collateral agent on behalf of the 2025 Noteholders, and BNY Mellon, in its capacity as successor trustee and collateral agent on behalf of the 2026 Noteholders, entered into an intercreditor agreement, dated as of February 9, 2024, and acknowledged by the Company and the Guarantors (the “Intercreditor Agreement”), the terms of which, among other things, confirm the relative priority of their respective Liens (as defined in the applicable Indenture) in the Collateral (as defined in the applicable Indenture) and provide for the application, in accordance with such priorities, of proceeds of such Collateral.

The foregoing description of the First Lien Supplemental Indenture and Amendment to Security Agreement, the Second Lien Supplemental Indenture, and the Second Lien Security Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the full text of the First Lien Supplemental Indenture and Amendment to Security Agreement, the Second Lien Supplemental Indenture, and the Second Lien Security Agreement, respectively.

Waivers and Rescission Agreements

In connection with the entry into the Supplemental Indentures, on February 9, 2024, in accordance with the terms of the Membership Interests Purchase Agreement and the Transaction Support Agreement, the Company, Cloudbreak and the Consenting 2025 Noteholders entered into the Waiver and Recission Agreement, pursuant to which the Consenting 2025 Noteholders have agreed to waive, with respect to the Company and Cloudbreak, the specified events of default under Indenture governing the 2025 Notes and rescind, with respect to the Company and Cloudbreak, the 2025 Notes Acceleration.

Furthermore, on February 9, 2024, in accordance with the terms of the Membership Interests Purchase Agreement and the Transaction Support Agreement, the Company and the Consenting 2026 Noteholders entered into the Waivers and Rescission Agreements, pursuant to

T a b l e o f C o n t e n t s

which the Consenting 2026 Noteholders have agreed to waive, with respect to the Company and Cloudbreak, the events of default under Indenture governing the 2026 Notes.

Upon the effectiveness of the Waivers and Rescission Agreements and until the earlier of (i) the completion of the Company’s initial Fundamental Change Repurchase Offer in respect of the 2026 Notes or (ii) the termination of the Transaction Support Agreement in accordance with the terms thereof, each of the Consenting Noteholders has agreed not to consent to, execute or otherwise participate in any way in any declaration of acceleration of the principal amount of the 2025 Notes and 2026 Notes (as applicable) as a result of the failure of the Company to issue a Fundamental Change Company Notice (as defined in the applicable Indenture) or to conduct or consummate a Fundamental Change repurchase pursuant to Article 15 of the Indenture, in each case, in the event of the Delisting Fundamental Change. Accordingly, the events of default were waived as of February 9, 2024.

As of March 31, 2024, the Notes Escrow Account, which is included in restricted cash in the accompanying unaudited condensed consolidated balance sheets, totaled $139 million. The funds in the Notes Escrow Account have been released on June 3, 2024, and have been used to satisfy in full, plus accrued interest, the 2026 Notes and to repurchase approximately $19.7 million of the 2025 Notes, plus accrued interest, following which approximately $37.3 million in aggregate principal amount of 2025 Notes remain outstanding, excluding $0.2 million of unamortized debt issuance costs, which will constitute the entirety of our outstanding debt. Accordingly, as of March 31, 2024, we classified $111.9 million of the debt, including unamortized original issue discount and debt issuance costs, as current and $37.3 million as non-current. As of December 31, 2023, we classified the entire $146.5 million of debt, including unamortized original issue discount and debt issuance costs, as noncurrent.

Contractual Maturities

As of March 31, 2024, long-term debt contractual maturities, excluding unamortized original issue discount and debt issuance costs, were as follows:


(In thousands)
2024 (remaining nine months)	$	134,706
2025	37,521
Total	$	172,227

8. Fair Value of Financial Instruments

We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate. As of March 31, 2024 and December 31, 2023, the fair values of cash and cash equivalents, restricted cash, prepaid assets and other current assets, accounts payable, and accrued expenses approximate their carrying values due to the short-term nature of these instruments. Additionally, the fair values of long-term debt instruments approximate their carrying values.

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

The fair value hierarchy is as follows:

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

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

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

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

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

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

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

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

	September 30, 2023
(In thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liability	$	—	$	—	$	59	$	59
Warrant liability	—		17		—		17
	$	—	$	17	$	59	$	76

28Table of Contents

	December 31, 2022
	March 31, 2024
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents - money market funds	$	1,681	$	—	$	—	$	1,681
	$	1,681	$	—	$	—	$	1,681
Liabilities:
Derivative liability	$	—	$	—	$	5659	$	5659
Warrant liability	—		917		—		917
	$	—	$	9	$	56	$	65
Total liabilities	$	—	$	17	$	59	$	76

Money Market Funds


	December 31, 2023
(In thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liability	$	—	$	—	$	59	$	59
Warrant liability	—		17		—		17
Total liabilities	$	—	$	17	$	59	$	76

As of September 30, 2023 and December 31, 2022, our cash equivalents consisted of money market funds which were classified as Level 1. We used observable prices in active markets in determining the classification of our money market funds as Level 1. There were no transfers between the hierarchy levels in the three and nine months ended September 30, 2023 and the year ended December 31, 2022.

The fair value and amortized cost of our cash equivalents - money market funds were both zero as of September 30, 2023.

Cash equivalents as of December 31, 2022 were as follows:

	December 31, 2022
(In thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
Cash equivalents:
Money market funds	$	1,681	$	—	$	—	$	1,681
	$	1,681	$	—	$	—	$	1,681

Derivative Liability

In accounting for the 2026 Notes, we bifurcated and accounted for the conversion option as a derivative measured at fair value on the issuance date in accordance with ASC 815, Derivatives and Hedging. As of ~~September~~both March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the fair value of the derivative was $~~59 thousand~~0.1 ~~and $56 thousand~~million, ~~respectively,~~ which ~~was~~were included in other liabilities, noncurrent, in ~~our~~the unaudited condensed consolidated balance sheets. ~~Other~~See ~~income~~Note 7, ~~net in the three months ended September 30~~Debt, ~~2023~~for ~~and~~further ~~2022~~information. ~~included~~The a gain (loss) on the fair value of the derivative liability offor ~~zero and $0.2 million, respectively. Other income, net in~~ the ~~nine~~three months ended ~~September 30~~March 31, ~~2023~~2024 and ~~2022~~2023, ~~included~~which ais ~~loss~~included onin ~~the~~other ~~fair~~income, ~~value~~net ofin the ~~derivative~~unaudited ~~liability~~condensed ofconsolidated ~~$3 thousand~~statements ~~and a gain on the fair value~~ of ~~the~~operations, ~~derivative~~was ~~liability~~not ~~of $6~~significant.9 ~~million, respectively~~

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

	September 30, 2023	December 31, 2022
Stock price	$1.90	$1.63
Volatility	100.0%	95.0%
Risk free rate	4.51%	4.17%
Exercise price	$106.50	$106.50
Expected life (in years)	2.95	3.44
Conversion periods	5 months-3 years	2-4 years
Future share price	$5.90-$594.30	$0.10-$405.60

The change in the fair value of the Level 3 derivative liability for the three months ended March 31, 2024 and 2023 was as follows:


(In thousands)	March 31, 2024		December 31, 2023
Fair value, beginning of period	$	59	$	56
Change in fair value	—		3
Fair value, end of period	$	59	$	59

2021 Private Placement Warrants and 2021 PIPE Warrants

29We have classified the 2021 Private Placement Warrants and 2021 PIPE Warrants (the “2021 Private Placement Warrants”) and the 2021 PIPE Warrants (the “2021 PIPE Warrants”) as liabilities at fair value, due to their redemption characteristics, with subsequent changes in their fair values to be recognized in the consolidated financial statements at each reporting date. See Note 9, Capital Structure, for further information. The fair value of the 2021 Private Placement Warrants and the 2021 PIPE Warrants, both of which are included in other liabilities, noncurrent in the unaudited condensed consolidated balance sheets, was not significant as of March 31, 2024 and December 31, 2023. The gain or loss due to the fair value changes in the 2021 Private Placement Warrants and the 2021 PIPE Warrants, both of which are included in other income, net in our unaudited condensed consolidated statements of operations, was not significant during the three months ended March 31, 2024 and December 31, 2023.

AsThe ~~of September 30, 2023, the~~ fair value of the ~~2021~~ Private Placement Warrants ~~(the “2021 Private Placement Warrants”)~~ and ~~the 2021~~ PIPE Warrants ~~(the~~is ~~“2021~~considered ~~PIPE~~a ~~Warrants”)~~Level ~~was~~2 ~~determined~~valuation toas bewe ~~$0.02~~have ~~per~~derived ~~warrant,~~their ~~totaling~~value ~~$11~~by ~~thousand~~using ~~and~~quoted $6market ~~thousand~~prices. ~~respectively,~~The ~~and~~transfer ~~are~~of ~~included~~the inPrivate ~~other~~Placement ~~liabilities,~~Warrants ~~noncurrent~~and inPIPE ~~our~~Warrants ~~unaudited~~to ~~condensed~~anyone ~~consolidated~~other ~~balance~~than ~~sheets.~~the Aspurchasers ofor ~~December 31,~~their ~~2022~~permitted transferees, ~~the~~would ~~fair~~result ~~value~~in ofthese ~~the 2021~~ Private Placement Warrants and ~~the 2021~~ PIPE Warrants ~~was~~having ~~determined~~substantially tothe besame ~~$0.01~~terms ~~per~~as ~~warrant,~~the ~~totaling~~Public ~~$6 thousand and $3 thousand respectively~~Warrants, ~~and~~which are ~~included~~traded in ~~other~~active ~~liabilities, noncurrent in our unaudited condensed consolidated balance sheets~~markets.

~~Gain~~There orwere ~~loss~~no ~~due~~transfers tobetween ~~the~~ fair value ~~changes~~levels induring the ~~2021~~three ~~Private~~months ~~Placement~~ended ~~Warrants~~March ~~and the 2021 PIPE Warrants~~31, ~~both~~2024 ofor ~~which are included in other income, net in our unaudited condensed consolidated statements of operations, consisted of the following:~~ 2023.

(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Gain (loss) on fair value of Private Placement warrant liabilities	$	—	$	—	$	(5)	$	124
Gain (loss) on fair value of PIPE warrant liabilities	—		—		(3)		66
	$	—	$	—	$	(8)	$	190

9. Capital Structure

~~There~~Preferred ~~were no transfers between fair value levels in the three and nine months ended September 30, 2023 and 2022.~~Stock

10Our Second Amended and Restated Certificate of Incorporation authorizes the issuance of 1,000,000,000 shares of preferred stock, par value $0.1000 ~~Capital~~with ~~Structure~~such designation, rights and preferences as may be determined from time to time by our board of directors. As of March 31, 2024 and December 31, 2023 there were no shares of preferred stock outstanding.

~~2023 Private Placement~~27

OnTable March 9, 2023, we entered into a Securities Purchase Agreement, with a single institutional investor, pursuant to which, in a private placement (the “2023 Private Placement”), we agreed to issue and sell (i) 1,650,000 shares of our common stock, par value $0.0001 per share; (ii) warrants that are exercisable six months from the date of issuance and will have a term of five years from the initial exercise date to purchase up to an additional 3,000,000 shares of our common stock (the “Series A Warrants”); (iii) warrants that are exercisable six months from the date of issuance and will have a term of two years from the initial exercise date to purchase up to an additional 3,000,000 shares of our common stock (the “Series B Warrants” and, collectively with Series A Warrants, the “Common Stock Purchase Warrants”); and (iv) pre-funded warrants (the “Pre-Funded Warrants,” and together with the Common Stock Purchase Warrants, the “Private Placement Warrants”) to purchase an additional 1,350,000 shares of our common stock (all of such shares issuable upon exercise of the Warrants, the “Warrant Shares”). On March 13, 2023, we announced that we completed the closing of the 2023 Private Placement. The purchase price of each share of common stock sold in the 2023 Private Placement was $1.50, the exercise price of each Common Stock Purchase Warrants (as defined above) is $2.04, and the exercise price of each Pre-Funded Warrant is $0.0001 and the purchase price of each Pre-Funded Warrant was $1.4999. The aggregate gross proceeds to us from the 2023 Private Placement were approximately $4.5 million, before deducting $0.3 million of placement agent fees and other offering expenses. We intend to use the net proceeds from the offering for general corporate purposes, including working capital.Contents

OnCommon ~~June 6, 2023, 100,000 Pre-Funded Warrants were exercised and on August 17, 2023, 549,000 Pre-Funded Warrants were exercised, bringing the total outstanding to 701,000 as of September 30, 2023.~~ Stock

Our Second Amended and Restated Certificate of Incorporation authorizes the issuance of 300,000,000 shares of common stock, par value of $0.1000. As of March 31, 2024, there were 18,981,398 shares of common stock issued, and 18,811,398 shares of common stock outstanding. As of December 31, 2023, there were 18,841,142 shares of common stock issued and 18,671,142 shares of common stock outstanding.

Common Stock Reserved for Future Issuance

~~The~~Shares ~~following table summarizes shares~~ of common stock reserved for future issuance as of ~~September~~March 3031, ~~2023~~2024 ~~(recorded~~were onas ~~a post-reverse split basis)~~follows:


(In thousands)			Number of Shares
Restricted stock units (“RSUs”) and stock options outstanding under 2021 EIP			2,396
RSUs outstanding under 2023 IEIP			200
Stock options outstanding under Cloudbreak Plan			48
Shares issuable upon conversion of 2025 Notes			3,270
Shares issuable upon conversion of 2026 Notes			1,080
Shares issuable upon conversion of 2021 Public Warrants			1,725
Shares issuable upon conversion of the 2023 Private Placement Series A Warrants			3,000
Shares issuable upon conversion of the 2023 Private Placement Series B Warrants			3,000

Shares issuable upon conversion of 2021 Private Warrants			57
Shares issuable upon conversion of 2021 PIPE Warrants			30
Shares available for future grant under 2021 EIP			171
Shares available for future grant under 2023 IEIP			400
Total			15,377

(In thousands)			Number of Shares
Restricted stock units outstanding			1,912
Stock options outstanding			54
Shares issuable upon conversion of 2025 Notes			3,857
Shares issuable upon conversion of 2026 Notes			1,080
Shares issuable upon conversion of 2021 Public Warrants			1,725
Shares issuable upon conversion of 2021 Private Warrants			57
Shares issuable upon conversion of 2021 PIPE Warrants			29
Shares issuable upon conversion of the 2023 Private Placement Series A Warrants			3,000
Shares issuable upon conversion of the 2023 Private Placement Series B Warrants			3,000
Shares issuable upon conversion of the 2023 Private Placement Pre-Funded Warrants			701
Shares available for future grant under 2021 EIP			840
			16,255

2015 Cloudbreak Incentive Plan

~~The~~On ~~following~~June ~~table~~19, ~~summarizes~~2015, ~~stock~~Cloudbreak ~~option~~created ~~activity~~the ~~under~~2015 Unit Incentive Plan (the “Cloudbreak Plan”), ~~(recorded~~which onhad a ~~post~~maximum aggregate number of 2,200,000 common units. Cloudbreak measures the cost of employee services received in exchange for an award of equity instruments based on the grant-~~reverse~~date ~~split~~fair ~~basis):~~value of the award. The cost is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period.

	Number of Shares	Weighted Average Exercise Price Per Share
Outstanding as of December 31, 2022	138	$	50.76
Options exercised	—	$	—
Outstanding as of March 31, 2023	138	$	50.76
Options forfeited or expired	(84)	$	53.00
Outstanding as of June 30, 2023	54	$	47.35
Options forfeited or expired	—	$	—
Outstanding as of September 30, 2023	54	$	47.35

Upon completion of the Business Combinations, UpHealth assumed 1,576,670 options with a fair value of $99.0 million, which were included in purchase consideration, and 134,943 unvested options with a fair value of $0.6 million, which were subject to continued vesting and will be recorded as stock-based compensation prospectively; and Cloudbreak ceased granting awards under the Cloudbreak Plan.

On March 15, 2024, we completed the Sale of Cloudbreak to Forest Buyer, and in accordance with the Cloudbreak Plan, the 48,035 unvested outstanding options as of such date were immediately vested and will expire on September 15, 2024 if unexercised.

2021 Equity Incentive Plan

On June 4, 2021, the GigCapital2 stockholders considered and approved the 2021 Equity Incentive Plan (“2021 EIP”). The ~~following~~2021 ~~table~~EIP ~~summarizes~~was ~~our~~previously ~~RSU~~approved, ~~activity~~subject to stockholder approval, by the Board of Directors of GigCapital2 on February 7, 2021. The 2021 EIP became effective immediately upon the closing of the Business Combinations. The number of shares of common stock reserved for issuance under the 2021 EIP will automatically increase on January 1 of each year, beginning on January 1, 2022 and each anniversary thereof during the effectiveness of the 2021 EIP, by an amount equal to the lesser of (~~recorded~~i) five percent (5%) of the total number of shares of our common stock outstanding on asuch ~~post-reverse~~date, ~~split~~and ~~basis~~(ii): such lesser number of shares as may be determined by our Board of Directors. On January 1, 2024, the number of shares of common stock reserved for issuance under the 2021 EIP was automatically increased by 933,557 shares.

	Number of Shares	Weighted Average Grant Date Fair Value Per Share
Outstanding as of December 31, 2022	878	$	6.61
RSUs granted	663	$	2.03
RSUs vested and released	(82)	$	16.09
RSUs forfeited	(118)	$	7.10
Outstanding as of March 31, 2023	1,341	$	3.91
RSUs granted	1,000	$	1.56
RSUs vested and released	(277)	$	5.67
RSUs forfeited	(42)	$	1.95
Outstanding as of June 30, 2023	2,022	$	2.55
RSUs granted	—	$	—
RSUs vested and released	(45)	$	8.68
RSUs forfeited	(425)	$	1.83
Outstanding as of September 30, 2023	1,552	$	2.56

In conjunction with the approval of the 2021 EIP, our Board of Directors also adopted a form of Restricted Stock Units Agreement (the “RSU Agreement”) and a form of Stock Option Agreement (the “Stock Option Agreement”) that we will generally use for grants under our 2021 EIP. The RSU Agreement provides that RSUs will vest over a fixed period and be paid as shares of common stock, and that the unvested RSUs will expire upon certain terminations of the grantees’ employment or other service relationship with us. The Stock Option Agreement provides that stock options will vest over a fixed period, and that the unvested options will expire upon certain terminations of the grantees’ employment or other service relationship with us.

We had 171,422 and 1,315,646 shares available for grant as of March 31, 2024 and December 31, 2023, respectively.

T a b l e o f C o n t e n t s

The following table summarizes our RSU activity under the 2021 EIP:


(In thousands, except per share amounts)	Number of RSUs	Weighted Average Grant Date Fair Value Per Share
Outstanding as of December 31, 2023	522	$	3.10
RSUs granted	820	$	0.31
RSUs vested and issued	(204)	$	3.15
RSUs forfeited	(42)	$	18.03
Outstanding as of March 31, 2024	1,096	$	1.04

During the three months ended March 31, 2024, 181,638 RSUs were accelerated under the 2021 EIP in connection with the Sale of Cloudbreak, as discussed in Note 1, Organization and Business.

As of March 31, 2024, there was $0.9 million of unrecognized stock-based compensation expense related to RSUs, expected to be recognized over a weighted-average period of 1.28 years.

The following table summarizes our stock options granted during the three months ended March 31, 2024 :


(In thousands, except per share amounts)	Number of Options	Weighted Average Grant Date Fair Value Per Share
Outstanding as of December 31, 2023	—	$	—
Options granted	1,300	$	0.41
Outstanding as of March 31, 2024	1,300	$	0.41

For the options granted during the three months ended March 31, 2024, the fair value of stock options granted to employees was estimated using the Black-Scholes option-pricing model and with the following weighted average assumptions presented below:


	March 31, 2024
Expected term (years)	5	to	5.5
Expected volatility	110.0			%
Expected dividend yield	—			%
Risk-free interest rate	4.2			%

As of March 31, 2024, there was $0.6 million of unrecognized stock-based compensation expense related to stock options, expected to be recognized over a weighted-average period of 2.93 years.

2023 Inducement Equity Incentive Plan

On May 1, 2023, for purposes of facilitating grants of equity awards to individuals as an inducement to the commencement of employment with us, our Board of Directors approved and adopted each of the UpHealth, Inc. Inducement Equity Incentive Plan (the “2023 IEIP”) providing for the issuance of an aggregate of up to 600,000 shares of UpHealth common stock pursuant to awards granted thereunder, and a form of Inducement RSU Agreement and Notice of Grant (the “Inducement RSU Agreement”) that we will generally use for grants under the 2023 IEIP. The Inducement RSU Agreement provides that RSUs will vest over a fixed period and be paid as shares of common stock, and that the unvested RSUs will expire upon certain terminations of the grantees’ employment or other service relationship with us. The 2023 IEIP does not provide for an automatic increase in the number of shares of common stock reserved for issuance pursuant to awards granted under the 2023 IEIP.

We had 200,000 shares outstanding at weighted average grant date fair value of $1.24 as of both March 31, 2024 and December 31, 2023. We had 400,000 shares available for grant under the 2023 IEIP as of both March 31, 2024 and December 31, 2023.

As of March 31, 2024, there was $0.1 million of unrecognized stock-based compensation expense related to RSUs, expected to be recognized over a weighted-average period of 2.14 years.

Stock-based Compensation

During the three months ended March 31, 2024 and 2023, we recorded stock-based compensation expense totaling $0.9 million and $1.0 million, respectively, all of which was attributed to our general and administrative function. In addition, we recorded $0.3 million related to the acceleration of equity awards in connection with the Sale of Cloudbreak, which is included in gain on sale of business in the unaudited condensed consolidated statements of operations.

T a b l e o f C o n t e n t s

10. Income Taxes

As discussed in Note 1, Organization and Business, we deconsolidated UpHealth Holdings and its subsidiaries as of September 30, 2023; accordingly, the financial results of UpHealth Holdings and its subsidiaries for the three month ended March 31, 2023 are included in our unaudited condensed consolidated financial statements and the financial position of UpHealth Holdings as of March 31, 2024 and December 31, 2023 and the financial results of UpHealth Holdings and its subsidiaries for the three months ended March 31, 2024 are not included in our unaudited condensed consolidated financial statements.

Also, as discussed in Note 3 Discontinued Operations, on November 16, 2023 we agreed to sell 100% of the equity interest in Cloudbreak to Forest Buyer, LLC. The Sale closed on March 15, 2024. Accordingly, we have presented the financial position of Cloudbreak as of December 31, 2023 as held for sale and the results of operations of Cloudbreak for the period from January 1, 2024 to March 15, 2024 and for the three months ended March 31, 2023, as well as the gain on Sale of Cloudbreak, as discontinued operations in the accompanying unaudited condensed consolidated financial statements. For the three months ended March 31, 2024, the net income from discontinued operations is net of $19.9 million of income tax expense, which consists of $1.2 million of tax expense related to the operations of Cloudbreak prior to the Sale, and $18.7 million of tax expense from the Sale of Cloudbreak.

The income tax expense from continuing operations was $4.5 million and zero in the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, $4.5 million of tax expense was recorded related to the recognition of prior period liabilities for uncertain tax positions that were previously recognized in accordance with ASC 740 as contra-balances in the deferred tax asset account because the Company had net operating loss carryforwards against which these uncertain tax positions could be settled. Since the deferred tax assets had a full valuation allowance against them, there was no net impact to income tax expense when the liabilities for uncertain tax positions were reported in the prior year. In the current year, the gain on Sale of Cloudbreak will cause the net operating losses to be utilized and the liability for uncertain tax positions is now recognized as a liability on our balance sheet.

We evaluate our deferred tax assets periodically to determine if valuation allowances are required. Ultimately, the realization of deferred tax assets is dependent upon generation of future taxable income during those periods in which temporary differences become deductible and/or tax attributes can be utilized. To this end, we consider the level of historical taxable income, the scheduled reversal of deferred tax liabilities, tax-planning strategies, and projected future taxable income. Based on these above considerations, and consistent with our conclusion as of December 31, 2023, we continue to believe it is more likely than not that a portion of the benefit from the deferred tax assets will not be realized, and as such have recorded a valuation allowance of $42.8 million against our deferred tax assets as of March 31, 2024. The net change in the valuation allowance for the three months ended March 31, 2024 was a reduction of $6.0 million.

The total amount of liabilities for uncertain tax positions as of March 31, 2024 and December 31, 2023 was $4.5 million.

The Internal Revenue Service (“IRS”) audited the 2008 and 2009 tax returns for Thrasys, a business that was since made a part of our Integrated Care Management segment, for the proper year of inclusion in income of an approximately $15 million payment on the license of certain intellectual property rights. Thrasys originally included the $15 million payment in income on its 2010 S Corporation tax return, matching the year of inclusion for financial accounting purposes. The corporate level tax was paid to California and the business passed the gain through to its shareholders. The IRS has asserted that Thrasys owes an entity-level tax of approximately $5 million for 2008, or in the alternative, the business owes C Corporation tax of approximately $5 million for 2009 as a built-in gain. In addition, Thrasys could be assessed additional California franchise tax of approximately $1.3 million; and if additional income taxes are imposed, interest will be charged at approximately 4% to 10% per year, compounded annually, resulting in potential interest of approximate $4 million. The IRS has not asked that penalties be imposed.

The matter is currently pending before the U.S. Tax Court, Docket 11565-15. There are related tax cases for some of the former shareholders of Thrasys for additional income taxes due if the gain is shifted to 2009 without triggering the entity-level tax on the business as an S corporation. On December 4, 2018, the IRS filed a motion for summary judgment; however, Thrasys prevailed, and the motion was denied by the U.S. Tax court. In January 2020, Thrasys filed a motion for summary judgment arguing that either the gain was properly reported in 2010 and all taxes have been paid or in the alternative it should have been taxable in 2009 with no built-in gains tax. In both cases, there would be no additional income tax due for 2008 or 2009 to be paid by the business. The IRS filed an objection to the business’ motion. On March 3, 2021, the U.S. Tax Court, without consideration of the merits of the case, issued a very brief court order dismissing Thrasys’ motion. Had the motion been granted, the need for a trial would have been obviated.

When we acquired Thrasys in November 2020, all of the former shareholders of the business agreed to indemnify us for any losses as a result of this dispute with the IRS.

Thrasys filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code commencing a Chapter 11 case in the Bankruptcy Court on October 20, 2023. As a result, the automatic stay imposed by section 362(a) of the Bankruptcy Code became immediately effective, and, on October 30, 2023, the U.S. Tax Court entered an order staying all proceedings in the case. On November 17, 2023, the IRS filed before the Bankruptcy Court an amended proof of claim asserting a priority claim under section 507(a)(8) of the Bankruptcy Code in the amount of $17,282,914.83 (the “IRS Proof of Claim”) based on both of the IRS’s alternative positions. On March 14, 2024, the Thrasys filed a motion in the Bankruptcy Court to estimate the IRS Proof of Claim pursuant to sections 502(c) and 105 (a) of the Bankruptcy Code, or, alternatively pursuant to section 505 of the Bankruptcy Code, and believe that it should be substantially reduced to an amount between $0 to approximately $166,835. The Debtors withdrew without prejudice the estimation motion with respect to the IRS Proof of Claim. On April 23, 2024, the Debtors filed an objection to the IRS Proof of Claim, seeking to disallow the IRS Proof of Claim in its entirety or reduce it to approximately $161,000. The ultimate outcome of this matter is unknown at this time.

T a b l e o f C o n t e n t s

On March 21, 2024, the California Franchise Tax Board (the “FTB”) filed before the Bankruptcy Court a proof of claim arising out of the same facts described above against Thrasys asserting a claim of $6,983,089.81, with $6,226,194.94 of the claim allegedly entitled to priority under section 507(a)(8) of the Bankruptcy Code (the “FTB Proof of Claim”). According to the FTB Proof of Claim, the basis of the asserted liability is the FTB's “understanding that [Thrasys] and the IRS are in the process of resolving disputes concerning tax years 2008, 2009, and 2010.” The FTB states that the claim was submitted to “protect its interests” and that it “will amend the claim when issues are resolved between the IRS and” Thrasys. While Thrasys disputes any such liability, the ultimate outcome of this matter is unknown at this time.

Thrasys is a subsidiary of UpHealth Holdings, which we deconsolidated as of September 30, 2023 (as discussed in Note 1, Organization and Business).

11. Income (Loss) Per Share

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


	Three Months Ended March 31,
(In thousands, except per share data)	2024		2023
Numerator:
Net loss from continuing operations	$	(11,879)	$	(13,733)
Net income from discontinued operations, net of tax	37,300		6,098
Net income (loss)	25,421		(7,635)
Less: net income attributable to noncontrolling interests	—		448
Net income (loss) attributable to UpHealth, Inc.	$	25,421	$	(8,083)
Denominator:
Weighted average shares outstanding - basic and diluted	18,699		15,730
Net income (loss) per share - basic and diluted
Continuing operations	$	(0.64)	$	(0.87)
Discontinued operations, net of tax	$	1.99	$	0.39
Attributable to UpHealth, Inc.	$	1.36	$	(0.51)

The calculation of income (loss) per share excluded the following because the effect would be anti-dilutive:


	Three Months Ended March 31,
(In thousands, except per share data)	2024	2023
2021 Public, Private and PIPE Warrants at a $115.00 per share conversion price	1,812	1,812
2023 Private Placement Series A and B Warrants at a $2.04 per share conversion price	6,000	6,000
Stock options	1,348	138
Restricted stock units	1,296	1,342
2025 Notes at a $17.50 per share conversion price(1)	3,270	3,857
2026 Notes at a $106.50 per share conversion price	1,080	1,080

(1) Subject to the occurrence of certain corporate events.

12. Segment Reporting

Our business was organized into three operating business segments and one non-operating business segment:

•Services—consisting of Behavioral and Pharmacy businesses;

•Virtual Care Infrastructure—consisting of Telehealth business;

•Integrated Care Management—consisting of SaaS business; and

•Corporate—consisting of parent company.

As discussed in Note 1, Organization and Business, as of March 16, 2024, UpHealth no longer offers Virtual Care Infrastructure or Integrated Care Management platforms and has repositioned its business efforts to continue growth in its Services division as a leading provider of a full continuum of behavioral health services. TTC, UpHealth’s remaining operating company, provides behavioral healthcare treatment services by utilizing psychiatrists, physicians, advanced nurse practitioners, physician assistants, psychologists, licensed therapists, and clinical social workers in a full continuum of care from inpatient to outpatient levels of care. However, until UpHealth Holdings emerges from bankruptcy pursuant to a restructuring plan, the operations of UpHealth Holdings and its subsidiaries, including TTC, will remain deconsolidated from the rest of UpHealth. As a result, subsequent to the Sale of Cloudbreak on March 15, 2024, the financial position, results of operations, and

OnTable ~~May 1, 2023, our Board~~ of ~~Directors approved up to 700,000 shares to be issued under a 2023 Inducement Equity Incentive Plan, the “2023 IEIP”. The following table summarizes our RSU activity under the 2023 IEIP:~~Contents

	Number of Shares	Weighted Average Grant Date Fair Value Per Share
Outstanding as of December 31, 2022	—	$	—
RSUs granted	200	$	1.24
Outstanding as of June 30, 2023	200	$	1.24
RSUs granted	160	$	1.01
Outstanding as of September 30, 2023	360	$	1.14

cash flows of UpHealth will solely consist of the operations of UpHealth, which comprises a fourth non-operating business segment, Corporate, consisting solely of the operating expenses of UpHealth as the parent company of TTC.

~~Subsequent~~In tothe ~~September 30~~Corporate segment, ~~2023~~we perform executive, ~~545~~administrative,~~889~~ ~~RSUs~~finance, ~~were~~human ~~canceled~~resources, ~~under~~legal, ~~the~~and ~~2021~~information ~~EIP~~technology ~~and~~services ~~160~~for UpHealth,~~000~~ ~~RSUs~~Inc. ~~were~~and ~~canceled~~for ~~under~~its ~~the~~subsidiaries, ~~2023~~managed ~~IEIP~~in ~~due~~a tocorporate ~~the~~shared ~~elimination~~services ofenvironment. 20Since ~~positions~~they atare ~~UpHealth,~~not ~~Inc.~~the ~~and~~responsibility ~~295,625~~of ~~RSUs~~segment ~~were~~operating ~~accelerated~~management, inthey ~~connection~~are ~~with~~not allocated to the ~~departure~~operating ofsegments ~~our~~and ~~former~~instead ~~Chief~~reported ~~Executive~~within ~~Officer~~Corporate.

11The reportable segments were consistent with how management viewed our services and products and the financial information reviewed by the chief operating decision makers. ~~Income~~We ~~Taxes~~managed our businesses as components of an enterprise for which separate information is available and is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and assess performance.

AsWe ~~discussed~~evaluate inperformance ~~Note~~based 1.on ~~Organization~~several ~~and Business~~factors, ~~we deconsolidated UpHealth Holdings as~~ of ~~September~~which 30Revenues, ~~2023;~~Gross ~~accordingly,~~Profit ~~the financial position of UpHealth Holdings as of December 31, 2022~~ and ~~financial~~Total ~~results~~Assets ofby ~~UpHealth~~service ~~Holdings in the three~~ and ~~nine months ended September 30~~product, ~~2023~~ are ~~included in our unaudited condensed consolidated financial statements and~~ the ~~financial~~primary ~~position of UpHealth Holdings as of September 30, 2023 is not included in our unaudited condensed consolidated~~ financial statements. The filing of a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as discussed in Note 1. Organization and Business, occurred on September 19, 2023. Management concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material. measures:

The income tax benefit (expense) was zero and $13.2 million in the three months ended September 30, 2023 and 2022, respectively. The income tax benefit (expense) was $(0.9) million and $17.7 million in the nine months ended September 30, 2023 and 2022, respectively.

Consistent with our conclusion as of December 31, 2022, we continue to believe that it is not more likely than not that the deferred tax assets will be realized and we therefore maintained a full valuation allowance against the deferred tax assets as of September 30, 2023. However, we expect to suffer income tax expense due to U.S. tax rules related to the utilization of net operating loss carryforwards. In the nine months ended September 30, 2023, we recorded discrete tax items totaling $0.6 million related to the sale of Innovations Group.

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

The matter is currently pending before the U.S. Tax Court, Docket 11565-15. There are related tax cases for some of the former shareholders of the business for additional income taxes due if the gain is shifted to 2009. On December 4, 2018, the IRS filed a motion for summary judgment; however, the business prevailed, and the motion was denied. In January 2020, the business filed a motion for summary judgment arguing that either the gain was properly reported in 2010 and all taxes have been paid or in the alternative it should have been taxable in 2009 with no built-in gains tax. In both cases, there would be no additional income tax due for 2008 or 2009. The IRS filed an objection to the business’ motion. On March 3, 2021, the U.S. Tax Court, without consideration of the merits of the case, issued a very brief court order dismissing the business’ motion. Had the motion been granted, the need for a trial would have been obviated. The business filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware on October 20, 2023. As a result, the

automatic stay imposed by section 362(a)(8) of the Bankruptcy Code became immediately effective, and, on October 30, 2023, the U.S. Tax Court entered an order staying all proceedings in the case. In addition, when we acquired the business in November 2020, all of the former shareholders of the business agreed to indemnify us for any losses as a result of this dispute with the IRS. This business is a subsidiary of UpHealth Holdings, which we deconsolidated as of September 30, 2023 (as discussed in Note 1. Organization and Business).

12. Earnings (Loss) Per Share

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

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	2023		2022		2023		2022
Numerator:
Net income (loss) attributable to UpHealth, Inc.	$	(20,605)	$	(165,762)	$	(47,815)	$	(195,645)
Denominator:
Weighted average shares outstanding	18,428		14,842		17,459		14,588
Diluted effect of stock options	—		—		—		—
Diluted effect of RSUs	—		—		—		—
Weighted average shares outstanding assuming dilution	18,428		14,842		17,459		14,588
Net income (loss) per share attributable to UpHealth, Inc.:
Basic	$	(1.12)	$	(11.17)	$	(2.74)	$	(13.41)
Diluted	$	(1.12)	$	(11.17)	$	(2.74)	$	(13.41)

The calculation of basic and dilutive earnings per share included the following:

	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands, except per share data)	2023	2022	2023	2022
Pre-funded warrants with an exercise price of $0.0001(1)	701	—	701	—

(1) The pre-funded warrants are included in the calculation of basic and dilutive earnings per share, as the shares are issuable for little consideration.

The calculation of basic and dilutive earnings per share excluded the following because the effect would be anti-dilutive:

	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands, except per share data)	2023	2022	2023	2022
2021 Public, Private and PIPE Warrants at a $115.00 per share conversion price	1,812	1,812	1,812	1,812
2023 Private Placement Series A and B Warrants at a $2.04 per share conversion price	6,000	—	6,000	—
Stock options	54	142	54	142
Restricted stock units	1,912	1,007	1,912	1,007
2025 Notes at a $17.50 per share conversion price(2)	3,857	3,857	3,857	3,857
2026 Notes at a $106.50 per share conversion price	1,080	1,080	1,080	1,080
Forward share purchase agreement	—	—	—	170

(2) Subject to the occurrence of certain corporate events.

13. Related Party Transactions

See Note 8. Debt, for related party debt.

See Note 16. Commitments and Contingencies, for leases with related parties.

We make guaranteed payments to related parties. Guaranteed payments aggregated $5 thousand and $1.3 million in the three months ended September 30, 2023 and 2022, respectively, and $0.6 million and $3.8 million in the nine months ended September 30, 2023 and 2022, respectively. These amounts are presented in costs of revenues in our unaudited condensed consolidated statements of operations. We had unpaid guaranteed payments of $1 thousand and $0.5 million as of September 30, 2023 and December 31, 2022, respectively, which is included in accrued expenses in our unaudited condensed consolidated balance sheets.

Due to related parties consisted of $2.5 million and $0.2 million as of September 30, 2023 and December 31, 2022, respectively. Due from related parties consisted zero and $14 thousand as of September 30, 2023 and December 31, 2022.

14. Segment Reporting

Our business is organized into three operating business segments and one non-operating business segment:

•Virtual Care Infrastructure—consisting of U.S. Telehealth and International Telehealth businesses(3);

•Services—consisting of Behavioral and Pharmacy businesses(1)(2);

•Integrated Care Management—consisting of SaaS business(1); and

•Corporate—consisting of holding company.

(1) As discussed in Note 1. Organization and Business, we deconsolidated UpHealth Holdings as of September 30, 2023; accordingly, the financial position of UpHealth Holdings as of December 31, 2022 and financial results of UpHealth Holdings in the three and nine months ended September 30, 2023 are included in our unaudited condensed consolidated financial statements and the financial position of UpHealth Holdings as of September 30, 2023 is not included in our unaudited condensed consolidated financial statements. The filing of a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as discussed in Note 1. Organization and Business, occurred on September 19, 2023. Management concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material.

(2) As discussed in Note 3. Significant Transactions, we completed the sale of Innovations Group, which comprised our Pharmacy business, on May 11, 2023. In addition, we substantially completed the wind down of a company within our Behavioral business in our Services segment in the three months ended June 30, 2023.

(3) As discussed in Note 1. Organization and Business, we deconsolidated Glocal as of July 1, 2022; accordingly, the financial results of Glocal in the six months ended June 30, 2022 are included in our unaudited condensed consolidated financial statements, and the financial position of Glocal as of September 30, 2023 and December 31, 2022 and the financial results of Glocal in the three months ended September 30, 2022 and the three and nine months ended September 30, 2023 are not included in our unaudited condensed consolidated financial statements.

We evaluate performance based on several factors, of which revenues, gross profit, and total assets are the primary financial measures:

Revenues by segment consisted of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
In thousands	~~2023~~2024		~~2022~~2023		~~2023~~		~~2022~~
Virtual Care Infrastructure	$	18,506	$	14,978	$	52,802	$	47,423
Services	$	—	$	20,814
Services	10,908		19,893		47,225		56,653
Integrated Care Management	—		3,873
Integrated Care Management	3,267		3,795		12,622		14,230
Total revenues	$	—	$	24,687
Total revenues	$	32,681	$	38,666	$	112,649	$	118,306

Gross profit by segment consisted of the following:


	Three Months Ended March 31,
In thousands	2024		2023
Services	$	—	$	9,911
Integrated Care Management	—		2,580
Total gross profit	$	—	$	12,491

	Three Months Ended September 30,				Nine Months Ended September 30,
In thousands	2023		2022		2023		2022
Virtual Care Infrastructure	$	10,789	$	7,186	$	29,444	$	21,090
Services	5,593		6,986		23,232		19,465
Integrated Care Management	1,241		2,854		7,599		11,385
Total gross profit	$	17,623	$	17,026	$	60,275	$	51,940

Total long-lived assets by segment consisted of the following:

Total assets by segment consisted of the following:


In thousands	March 31, 2024		December 31, 2023
Corporate	$	878	$	1,074
Total long-lived assets	$	878	$	1,074

In thousands	September 30, 2023		December 31, 2022
Virtual Care Infrastructure	$	134,877	$	140,776
Services	—		124,980
Integrated Care Management	—		44,776
Corporate	100,267		29,272
Total assets	$	235,144	$	339,804

13. Leases

~~All~~As ~~long-lived~~discussed ~~assets~~in ~~were~~Note ~~located~~1, inOrganization ~~the~~and ~~U.S.~~Business, we deconsolidated UpHealth Holdings and its subsidiaries as of September 30, 2023; accordingly, the financial results of UpHealth Holdings and its subsidiaries for the three month ended March 31, 2023 are included in our unaudited condensed consolidated financial statements and the financial position of UpHealth Holdings as of March 31, 2024 and December 31, ~~2022~~2023 and the financial results of UpHealth Holdings and its subsidiaries for the three months ended March 31, 2024 are not included in our unaudited condensed consolidated financial statements.

AsWe ~~discussed~~lease inreal ~~Note~~estate 1.for ~~Organization~~our ~~and~~offices ~~Business, we deconsolidated UpHealth Holdings~~ as ofwell ~~September 30, 2023; accordingly, the financial position of UpHealth Holdings~~ as ofcertain ~~December~~equipment ~~31,~~under ~~2022~~operating ~~and~~leases ~~financial~~with ~~results~~varying ofexpiration ~~UpHealth~~dates ~~Holdings~~through in2027. ~~the~~Leases ~~three~~are ~~and~~categorized ~~nine~~at ~~months~~their ~~ended~~commencement ~~September 30~~date, ~~2023~~which ~~are~~is ~~included~~the indate ~~our~~we ~~unaudited~~take ~~condensed~~possession ~~consolidated~~or ~~financial~~control ~~statements~~of ~~and~~ the ~~financial~~underlying ~~position~~asset. ofGenerally, ~~UpHealth~~the ~~Holdings~~term as of ~~September~~real ~~30,~~estate ~~2023~~leases isranges ~~not~~from ~~included~~1 into ~~our~~5 ~~unaudited~~years ~~condensed~~at ~~consolidated~~inception ~~financial statements. The filing~~ of athe ~~voluntary~~contract ~~petition~~and ~~for relief under Chapter 11 of~~ the ~~U.S.~~term ~~Bankruptcy~~for ~~Code,~~equipment asleases ~~discussed~~ranges infrom ~~Note~~ 1. ~~Organization~~to ~~and~~3 ~~Business,~~years ~~occurred~~at ~~on September 19, 2023. Management concluded that it would use~~ the ~~September~~inception ~~30,~~of ~~2023 date for deconsolidation, as~~ the ~~last 12 days in the month were determined to not be material~~contract.

AsThe ~~also~~components ~~discussed in Note 1. Organization and Business, we deconsolidated Glocal as~~ of ~~July~~lease 1,expense ~~2022;~~consisted ~~accordingly, the financial results~~ of ~~Glocal in~~ the ~~six~~following ~~months~~for ~~ended June 30, 2022 are included in our unaudited condensed consolidated financial statements, and~~ the ~~financial position of Glocal as of September 30, 2023 and December 31, 2022 and the financial results of Glocal in the~~ three months ended ~~September~~March 3031, ~~2022~~2024 and ~~the three and nine months ended September 30,~~ 2023 ~~are not included in our unaudited condensed consolidated financial statements.~~:

~~The components of lease expense consisted of the following during the three and nine months ended September 30, 2023:~~32

	Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
In thousands	Third Party		Related Party		Total		Third Party		Related Party		Total
Finance lease costs:
Amortization of right-of-use assets	$	814	$	—	$	814	$	2,546	$	—	$	2,546
Interest on lease liabilities	75		—		75		244		—		244
Operating lease costs	487		98		585		1,796		294		2,090
Short-term lease costs	40		—		40		106		67		173
Variable lease costs	144		—		144		597		—		597
Sublease income	(111)		—		(111)		(353)		—		(353)
Total lease costs	$	1,449	$	98	$	1,547	$	4,936	$	361	$	5,297

T a b l e o f C o n t e n t s

Lease-related assets and liabilities recorded on the unaudited condensed consolidated balance sheet are as follows:


	March 31, 2024						March 31, 2023
In thousands	Third Party		Related Party		Total		Third Party		Related Party		Total
Operating lease cost	42		—		42		520		98		$	618
Short-term lease cost	—		—		—		17		67		$	84
Variable lease cost	—		—		—		15		—		$	15
Sublease income	—		—		—		(2)		—		$	(2)
Total lease cost	$	42	$	—	$	42	$	550	$	165	$	715

35Lease-related assets and liabilities recorded on the unaudited condensed consolidated balance sheets are as follows:

	September 30, 2023		December 31, 2022
	March 31, 2024		December 31, 2023
In thousands	Third Party		Third Party		~~Related Party~~		~~Total~~
Assets
Finance lease right-of-use assets (included in property and equipment, net)	$	4,696	$	5,916	$	—	$	5,916
Operating lease right-of-use assets	344		370
Operating lease right-of-use assets	1,653		5,819		1,394		7,213
Total leased assets	$	344	$	370
Total leased assets	$	6,349	$	11,735	$	1,394	$	13,129
Liabilities
Liabilities
Operating lease liabilities:
Lease liabilities, current:
Lease liabilities, current	188		183
Finance lease liabilities	$	3,044	$	3,023	$	—	$	3,023
Lease liabilities, noncurrent	560		610
Operating lease liabilities	620		2,130		322		2,452
Total leased liabilities	$	748	$	793
Lease liabilities, current	$	3,664	$	5,153	$	322	$	5,475
Lease liabilities, noncurrent:
Finance lease liabilities	$	1,821	$	2,976	$	—	$	2,976
Operating lease liabilities	1,476		4,672		1,093		5,765
Lease liabilities, noncurrent	3,297		7,648		1,093		8,741
Total leased liabilities	$	6,961	$	12,801	$	1,415	$	14,216

Accumulated amortization related to the finance lease assets was $9.2 million and $3.9 million as of September 30, 2023 and December 31, 2022, respectively.

Other information consisted of the following:

	September 30, 2023						December 31, 2022
	March 31, 2024						March 31, 2023
In thousands	Third Party		Related Party		Total		Third Party		Related Party		Total
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases	$	~~552~~45	$	95—	$	~~647~~45	$	~~3,632~~317	$	~~371~~95	$	~~4,003~~412
Operating cash flows from finance leases	$	73	$	—	$	73	$	310	$	—	$	310
Financing cash flows from finance leases	$	2,510	$	—	$	2,510	$	3,106	$	—	$	3,106
Right-of-use assets obtained in exchange for new lease liabilities:
Finance leases	$	706	$	—	$	706	$	4,110	$	—	$	4,110
Operating leases	$	—	$	—	$	—	$	10,843	$	1,706	$	12,549

The following table summarizes our lease term and discount rate assumptions as of ~~September~~March 3031, ~~2023~~2024:

September 30, 2023

March 31, 2024

Third Party

Related Party

Total

Weighted-average remaining lease term (years):

Finance leases

1.78

Operating leases

3.42

N/A

3.42

Operating leases

3.19

Weighted-average discount rate:

Operating leases

9.1

N/A

9.1

Finance leases

7.2%

Operating leases

6.9%

36Undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year, as of March 31, 2024, have been reconciled to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, 2024 as follows:

Undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating and finance leases with terms of more than one year, as of September 30, 2023, have been reconciled to the total operating and finance lease liabilities recognized on the unaudited condensed consolidated balance sheets as of September 30, 2023 as follows:


	March 31, 2024
	Operating Leases
In thousands	Third Party
Remaining 2024	$	182
2025	250
2026	257
2027	175
Total lease payments	864
Less: interest	116
Present value of lease liabilities	$	748

	September 30, 2023
	Finance Leases		Operating Leases
In thousands	Third Party		Third Party
Remaining 2023	$	878	$	187
2024	2,896		732
2025	1,202		705
2026	206		594
2027	—		100
Thereafter	—		—
Total lease payments	5,182		2,318
Less: Interest	317		222
Present value of lease liabilities	$	4,865	$	2,096

InTable ~~the nine months ended September 30, 2023, we recorded an impairment charge~~ of $0.4 million in our Integrated Care Management segment in connection with the write-down of an office lease which is included in impairment of goodwill, intangible assets, and other long-lived assets in our unaudited condensed consolidated statements of operations.Contents

~~Prior~~14. Commitments ~~to the adoption of ASU 2016-02, Leases, the following was disclosed in our Quarterly Report on Form 10-Q in the three~~ and ~~nine months ended September 30, 2022:~~Contingencies

Total rent expense under related party and third-party agreements consisted of the following:

In thousands	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Related party	$	202	$	602
Third-party	1,125		3,101
Sublease income	(146)		(392)
Total rent expense, net of sublease income	$	1,181	$	3,311

In the nine months ended September 30, 2022, we recorded additional lease abandonment expense totaling $0.1 million related to a termination fee we paid to exit an office which is included in impairment of goodwill, intangible assets, and other long-lived assets in our unaudited condensed consolidated statements of operations.

16. Commitments and Contingencies

Commitments

Operating leases

See Note ~~15.~~13, Leases, for commitments related to our operating leases.

Contingencies

From time to time, we may be subjected to claims or lawsuits which arise in the ordinary course of business, including the previously disclosed tax matter ~~(see~~and ~~Note~~matters 11described below. See Note 10, Income Taxes, for further information~~) and matters described below~~. Estimates for resolution of legal and other contingencies are accrued when losses are probable and reasonably estimable in accordance with ASC 450, Contingencies. Except as set forth below, in the opinion of management, after consulting with legal counsel, none of these other claims are currently expected to have a material adverse effect on our ~~condensed~~ consolidated results of operations, financial position or cash flows.

Advisory Services Agreement Dispute

As discussed in Note 1, Organization and Business, since 2021, UpHealth Holdings has been a party to a legal action in the state court in New York entitled Needham & Company LLC (“Needham”) v. UpHealth Holdings, Inc. and UpHealth Services, Inc. (the “Needham Action”), which arose out of UpHealth Services’ engagement of Needham to provide placement and other financial advisory services. On September 14, 2023, the court in New York issued a Decision and Order granting summary judgment in favor of Needham and denying UpHealth Holdings’ and UpHealth Services’ motion for summary judgment. The court in New York entered that Decision and Order on its docket on September 15, 2023. The Decision and Order concluded that Needham is entitled to a fee in the amount of $31.3 million, plus interest. On September 18, 2023, the court in New York signed a judgment against UpHealth Holdings and UpHealth Services in the amount of $31.3 million, plus prejudgment interest of $6.5 million, for a total judgment of $37.8 million, plus post-judgment interest of 9% per year. Notwithstanding the filing of the voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and the automatic stay pursuant to section 362(a) of the Bankruptcy Code, the Clerk of Court of the court in New York entered the judgment in favor of Needham on the court’s docket on September 27, 2023. On November 13, 2023, UpHealth Holdings entered into a stipulation with Needham in the Bankruptcy Court providing that, to the extent it applies, the automatic stay pursuant to section 362(a) of the Bankruptcy Code shall be deemed modified for the sole and limited purpose of authorizing UpHealth Holdings and UpHealth Services to appeal the New York court’s judgment (and for Needham to be able to participate in the appeal). The Bankruptcy Court entered an order approving this stipulation on November 30, 2023. On December 6, 2023, UpHealth Holdings and UpHealth Services, Inc. appealed the judgment entered in New York state court to the New York Supreme Court’s Appellate Division, First Department. On May 9, 2024, the Appellate Division issued an order affirming the judgment in full.

As ~~discussed in Note 1. Organization and Business, since 2021, UpHealth Holdings has been~~ a ~~party~~result ~~to the Needham Action in the state court in New York entitled Needham & Company LLC v. UpHealth Holdings, Inc. and UpHealth Services, Inc., which arose out~~ of ~~UpHealth Services, Inc.’s engagement of Needham to provide placement and other financial advisory services. On September 14, 2023,~~ the ~~trial in New York issued a Decision and Order granting~~ summary judgment ~~in favor of Needham and denying UpHealth Holdings’ and UpHealth Services~~, ~~Inc.’s motion for summary judgment. That court~~ in ~~New~~the ~~York~~three ~~entered~~months ~~that~~ended ~~Decision on its docket on~~ September 1530, 2023~~. The~~, ~~Decision~~we ~~and~~recorded ~~Order~~additional ~~concluded~~expense ~~that Needham is entitled to fees in the amount~~ of $3129.38 million, ~~plus~~which ~~interest. On~~was ~~September~~included 18in acquisition, ~~2023~~integration, ~~the court in New York signed a judgment against UpHealth Holdings~~ and ~~UpHealth~~transformation ~~Services,~~costs ~~Inc.~~ in ~~the~~our ~~amount~~unaudited ofcondensed ~~$31.3 million,~~consolidated ~~plus~~statements ~~prejudgment interest~~ of ~~$6.5 million~~operations, ~~for~~which aincreased our total ~~judgment~~liability ofto $37.8 million, ~~plus~~as ~~post-judgment interest~~ of 9%September ~~per~~30, ~~year~~2023. ~~Notwithstanding~~As ~~the~~discussed ~~filing of the voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code~~ in ~~the~~Note ~~Bankruptcy Court~~1, Organization and ~~the~~Business, ~~automatic~~we ~~stay~~deconsolidated ~~pursuant~~UpHealth toHoldings ~~section~~and ~~362(a)~~its ofsubsidiaries ~~the~~as ~~U.S. Bankruptcy Code, the Clerk~~ of ~~Court entered that judgment on the docket on~~ September 2730, 2023.; ~~On November 13~~accordingly, ~~2023, UpHealth Holdings entered into a stipulation with Needham in~~ the ~~Bankruptcy~~financial ~~Court~~position ~~providing that, to the extent it applies, the automatic stay pursuant to section 362(a)~~ of ~~the Bankruptcy Code shall be deemed modified for the sole and limited purpose of authorizing~~ UpHealth Holdings ~~and~~subsequent ~~UpHealth Services, Inc.~~ to ~~appeal~~September ~~the~~30, ~~New~~2023 ~~York~~is ~~court’s~~not ~~judgment~~included ~~(and for Needham to be able to participate~~ in ~~the~~our ~~appeal). We~~unaudited ~~are~~condensed ~~awaiting~~consolidated ~~the~~financial ~~Bankruptcy Court’s entry of an order approving the stipulation~~statements. ~~When it does so, we will appeal the judgment in the Needham Action.~~

Included in accrued expenses in our unaudited condensed consolidated balance sheet of December 31, 2022 was a liability totaling $8.0 million related to this matter. As a result of the summary judgment, in the three and nine months ended September 30, 2023, we recorded additional expense of $29.8 million, which was included in acquisition, integration, and transformation costs in our unaudited condensed consolidated statements of operations, which increased our total liability to $37.8 million as of September 30, 2023. As discussed in Note 1. Organization and Business, we deconsolidated UpHealth Holdings as of September 30, 2023; accordingly, the financial position of UpHealth Holdings as of September 30, 2023 is not included in our unaudited condensed consolidated financial statements.

Indemnification

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

1715. Subsequent Events

Management has determined that no material events or transactions have occurred subsequent to the unaudited condensed consolidated balance sheet date, other than those events noted below, that require disclosure in ~~our~~the unaudited condensed consolidated financial statements.

As discussed in Note 1., Organization and Business, onand ~~November~~Note 1614, ~~2023,~~Commitments weand ~~agreed to sell 100% of the outstanding equity interests of Cloudbreak~~Contingencies, ~~our~~on ~~wholly~~May ~~owned subsidiary~~9, ~~to Forest Buyer~~2024, ~~LLC, a Delaware limited liability company and an affiliate of GTCR, pursuant to~~ the ~~Purchase~~New ~~Agreement.~~York WeSupreme ~~will~~Court’s ~~utilize~~Appellate ~~the~~Division ~~proceeds~~issued ~~from~~an ~~the~~order ~~Sale~~affirming ~~for payment~~ in full ~~or in part of~~ the ~~2026~~New ~~Notes~~York ~~and~~trial ~~2025~~court’s ~~Notes, as well as other expenses related to the Transactions~~$37.8 million ~~The Closing is expected in the first half of 2024, subject to obtaining customary regulatory and stockholder approval~~judgment.

InAs ~~connection~~discussed ~~and~~in ~~concurrently~~Note ~~with the entry into the Purchase Agreement~~1, ~~we,~~Organization ~~Cloudbreak~~ and ~~Forest Buyer entered into Transaction Support Agreement~~Business, ~~with~~on ~~the~~May ~~Consenting Senior Secured Noteholders~~20, ~~which are the holders of at least 69% of the 2025 Notes~~2024, ~~and~~UpHealth ~~the~~Holdings ~~Consenting~~has ~~Unsecured~~determined ~~Noteholders,~~that ~~which are~~ the ~~holders~~sale of atUpHealth ~~least~~Holdings’ ~~88%~~equity ofinterest ~~the~~in ~~2026~~TTC ~~Notes,~~may ~~pursuant~~be toappropriate ~~which the parties have agreed, among other things,~~ to ~~support~~maximize ~~the~~value ~~Purchase Agreement and the Transactions and~~ to ~~enter into and effect~~ the ~~Escrow~~UpHealth ~~Agreements,~~Holdings’ ~~the~~estate ~~Supplemental~~because ~~Indentures~~a insale ~~connection~~of ~~with~~ the ~~Fundamental~~equity ~~Change~~interests ~~Repurchase Offer to be made by us and each other Definitive Document (as defined~~ in ~~the~~TTC ~~Transaction~~may ~~Support~~provide ~~Agreement),~~funding innecessary ~~each~~for ~~case,~~UpHealth ~~subject~~Holdings to ~~the~~consummate ~~terms~~a ~~and~~Chapter ~~conditions~~11 ~~set~~plan ~~forth~~and insuccessfully ~~the~~exit ~~Transaction~~its ~~Support~~Chapter ~~Agreement~~11 case.

~~Motion~~As ~~Seeking~~discussed ~~Approval~~in ofNote ~~Thrasys~~1, ~~Transition~~Organization ~~Agreements~~and Business, and ~~Related~~Note ~~Matters~~7, Debt, the funds in the Notes Escrow Account have been released on June 3, 2024, and have been used to satisfy in full, plus accrued interest, the 2026 Notes and to repurchase approximately $19.7 million of the 2025

Thrasys, a Debtor in the Chapter 11 cases, operates an integrated care management business, which provides customers with highly customized digital products through its SyntraNetTM technology platform and applications. Because each of Thrasys’s customers have different source code configurations, the business does not have an easily scalable code base and the process of winning and onboarding new customers takes approximately 12 to 18 months. For years, Thrasys operated at almost break-even cash flow, with the majority of revenues coming from license fees paid up-front annually. Towards the end of 2022, Thrasys began to experience diminishing liquidity, and it became clear that its liquidity issues would not be easily resolved. The customized nature of the Thrasys’s business led to discussions with its customers regarding potential solutions. Following substantial negotiations with the customers of Thrasys and in consultation with its advisors, Thrasys has entered into three transition agreements with its customers, (i) Local Initiative Health Authority for Los Angeles County, a local public entity operating and doing business as L.A. Care Health Plan, (ii) EmpiRx Health LLC, a Delaware corporation and (iii) the County of Alameda, California, USA (each, a “Transition Agreement”), which provide for, among other things, the grant to each customer of a perpetual, non-exclusive license of the applicable source code 34

38Table of Contents

~~and~~Notes, ~~related~~plus ~~SyntraNetTM~~accrued ~~platform~~interest, ~~and~~following ~~the~~which ~~provision~~approximately ~~by Thrasys of certain transition services during the transition term provided under the applicable Transition Agreement~~$37.3 million ~~Pursuant~~in toaggregate ~~the~~principal ~~applicable~~amount ~~Transition Agreement, each~~ of ~~Thrasys’s~~2025 ~~customers~~Notes ~~will~~remain ~~obtain its own source code and highly trained employees~~outstanding, ~~and~~excluding ~~there~~$0.2 million ~~is no obligation on Thrasys (or any other~~ of ~~the~~unamortized ~~Debtors)~~debt toissuance ~~maintain~~costs, orwhich ~~repair~~will orconstitute ~~update~~ the ~~code~~entirety ~~following~~of ~~the~~our ~~transition~~outstanding ~~period under the Transition Agreements~~debt.

As a result of the transactions contemplated by the Transition Agreements, Thrasys will receive $3.8 million in cash from its customers. Pursuant to the Transition Agreements, Thrasys’s employees, with a few exceptions, will receive employment offers from Thrasys’s customers, provided that certain payments to be received by such employees are contingent upon their execution and delivery of a general release of claims in favor of the Debtors. As a condition to the willingness of such customers to enter into the Transition Agreements, the Transition Agreements also contemplate the assumption and assignment of associated contracts to the customers, which, in addition to the hiring of Thrasys’s existing employees, will result in substantial reduction of administrative expenses in respect of Thrasys. Except as otherwise provided in the Transition Agreements, Thrasys will continue to own all intellectual property, subject to such non-exclusive licenses. Upon the consummation of the transactions contemplated by the Transition Agreements, if approved by the Bankruptcy Court, Thrasys will no longer operate and will therefore have no use for the executory contracts previously utilized, the assumption and assignment of which is contemplated by the Transition Agreements. 35

~~The~~Table ~~Transition Agreements shall only become effective on the date that the Bankruptcy Court enters an order approving the Transition Agreements. Upon termination~~ of the Transition Agreements, (a) all fees and other amounts owed to Thrasys prior to such termination shall be immediately due and payable by the applicable customer and (b) in the case of a termination by Thrasys due to a material breach by the applicable customer of certain restrictions in respect of the SyntraNetTM source code, including with respect to the sale, transfer or assignment thereof and certain uses of open source software, or in the case of a material breach by such customer of its confidentiality obligations with respect to SyntraNetTM source code, such customer’s rights with respect to SyntraNetTM (including its license, use and ownership thereof, and modifications and enhancements thereto), shall terminate and such customer shall be obligated to return or destroy such source code, at Thrasys’s option, within 10 days of the effective date of termination. The Transition Agreements also provide for a mutual release of claims by the parties. Contents

On November 16, 2023, the Debtors filed motion with the Bankruptcy Court seeking entry of an order (i) authorizing and approving the Debtors, including Thrasys, to enter into and perform under certain Transition Agreements (as defined below) with the customers of Thrasys, (ii) authorizing and approving the assumption and assignment of certain executory contracts related to the transactions contemplated thereby and (iii) granting related relief. The motion was presented to the Bankruptcy Court at a “second day hearing” held on November 17, 2023. We expect the Bankruptcy Court will enter its decision on the motion at a hearing currently scheduled on December 1, 2023.

In addition, on November 17, 2023, a motion to pay retention bonuses to Thrasys employees involved in the transition of the Integrated Care Management segment through year end was approved by the Bankruptcy Court.

Subsequent to September 30, 2023, 545,889 RSUs were canceled under the 2021 EIP and 160,000 RSUs were canceled under the 2023 IEIP due to the elimination of 20 positions at UpHealth, Inc. and 295,625 RSUs were accelerated in connection with the departure of our former Chief Executive Officer.

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

Unless otherwise indicated or the context otherwise requires, references in this report (this “Quarterly Report”) to “we,” “our,” “us,” “UpHealth” or the “Company” and other similar terms refer to UpHealth, Inc. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek,” “may,” “might,” “plan,” “possible,” “potential,” “should, “would” and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the “Risk Factors” section in Part II, Item 1A. of this Quarterly Report, the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023 filed with the SEC on ~~March~~April 315, ~~2023~~2024 (our “Annual Report”) and in any more recent filings with the SEC. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

~~UpHealth,~~Deconsolidation ~~Inc.~~of ~~Business Overview~~ Glocal

InAs ~~2022,~~discussed ~~after~~in ~~undergoing~~Note a1, ~~process~~Organization ~~launched~~and Business, in the ~~second~~Notes ~~half of 2021 designed~~ to ~~help~~Condensed usConsolidated ~~determine~~Financial ~~how~~Statements ~~to tie the various components~~ of ~~the~~this ~~businesses~~Quarterly ~~brought together between November 2020 and June 2021~~Report, weas ~~turned~~a toresult ~~transforming~~of ~~our~~ongoing ~~business~~control ~~strategy~~issues toand ~~create~~legal aproceedings ~~company~~with ~~that~~Glocal, ~~can~~UpHealth ~~profitably~~deconsolidated ~~fulfill~~Glocal ~~our~~in ~~mission~~July ~~as an integrated whole~~2022. ByAccordingly, ~~considering~~Glocal ~~our~~is ~~previous~~excluded ~~financial~~from ~~performance,~~the weVirtual ~~determined~~Care ~~that~~Infrastructure itsegment ~~was~~operating ~~necessary~~results for usthe tothree ~~pivot~~months ~~and~~ended toMarch ~~focus~~31, on2024 ~~fewer~~and ~~investments for growth~~2023. As ~~a result~~such, wethe ~~sought~~information toset ~~establish~~forth abelow ~~company~~excludes ~~that~~the ~~will~~results ~~deliver~~of ~~high-quality~~operations, ~~predictable revenue streams~~liquidity, ~~conserve~~and ~~cash~~capital ~~and~~resources ~~readjust~~of ~~our~~Glocal ~~operating~~in ~~expenses,~~the ~~and~~Virtual ~~improve~~Care ~~operational~~Infrastructure ~~excellence~~segment. ~~This~~As ~~led~~of usMarch 31, to2024, ~~make~~ the ~~following~~operations ~~decisions~~of ~~with~~Glocal ~~regard~~remain todeconsolidated ~~our~~from ~~reporting~~the ~~segments:~~rest of UpHealth.

~~•As~~Sale ~~a result~~ of ~~the~~Innovations previously disclosed ongoing control issues and legal proceedings with Glocal, we deconsolidated Glocal in July 2022. These issues and disputes are described in our Current Reports on Form 8-K filed with the SEC on October 3, 2022 and November 14, 2022, and in our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2022 filed with the SEC on December 29, 2022, as well as in Part II, Item 1, Legal Proceedings, of this Quarterly Report. Accordingly, the financial results of Glocal in the six months ended June 30, 2022 are included in the discussion of our financial results for the Virtual Care Infrastructure segment, but the financial results of Glocal in the three months ended September 30, 2022 and the three and nine months ended September 30, 2023 are excluded in the discussion. As of September 30, 2023, the operations of Glocal remain deconsolidated from the rest of UpHealth as we continue to pursue all legal recourse against the founders of that business.Group

~~•At~~As discussed in Note 1, Organization and Business, in the ~~start~~Notes to Condensed Consolidated Financial Statements of this Quarterly Report, on February 26, 2023, weUpHealth ~~made~~Holdings agreed to sell 100% of the ~~decision~~outstanding capital stock of Innovations Group to ~~integrate~~Belmar ~~BHS~~MidCo, ~~into~~Inc., ~~our~~a ~~legacy~~Delaware ~~TTC~~corporation ~~operations~~(“Belmar”) and ~~wind-down~~a ~~our~~wholly ~~provider~~owned ~~practice~~subsidiary inof ~~Missouri~~Belmar Holdings, ~~which~~Inc., ~~was~~a ~~substantially~~Delaware ~~completed~~corporation inand ~~the~~a ~~three~~portfolio ~~months~~company ~~ended~~of ~~June~~Webster 30Capital IV, L.P., a Delaware limited partnership, pursuant to a stock purchase agreement dated February 26, 2023, by and among UpHealth, UpHealth Holdings, Innovations Group, and Belmar. The ~~financial~~sale closed on May 11, 2023. Accordingly, the information set forth below excludes the results of ~~BHS~~operations, liquidity, and capital resources of Innovations Group in the ~~three~~Services ~~and~~segment ~~nine~~for the three months ended ~~September~~March 3031, ~~2023~~2024, and ~~2022~~includes ~~are~~the ~~included~~results inof ~~the~~operations, ~~discussion~~liquidity, ofand ~~our~~capital ~~financial~~resources ~~results~~of ~~for~~Innovations Group in the Services segment for the three months ended March 31, 2023.

~~•On~~Chapter ~~February~~11 ~~26,~~Cases ~~2023, UpHealth Holdings agreed to sell 100%~~ of the outstanding capital stock of Innovations Group to Belmar MidCo, Inc., a Delaware corporation (“Belmar”) and a wholly owned subsidiary of Belmar Holdings, Inc., a Delaware corporation, a portfolio company of Webster Capital IV, L.P., a Delaware limited partnership, pursuant to a stock purchase agreement, dated February 26, 2023, by and among UpHealth, ~~UpHealth~~ Holdings, ~~Innovations Group~~Thrasys, and Belmar. The sale closed on May 11, 2023 for gross proceeds of $56.0 million, subject to working capital, closing debt, and other adjustments. Accordingly, the financial results of Innovations Group for the period from January 1, 2023 through May 10, 2023, and the three and nine months ended September 30, 2022 are included in the discussion of our financial results for the Services segment.BHS

~~During~~As discussed in Note 1, Organization and ~~subsequent~~Business, toin the ~~three~~Notes ~~months~~to ~~ended~~Condensed Consolidated Financial Statements of this Quarterly Report, following an adverse legal judgement, on September 3019, 2023, UpHealth Holdings filed a voluntary petition for relief under Chapter 11 of the ~~following~~Bankruptcy ~~events~~Code ~~occurred~~in the Bankruptcy Court. In addition, ~~which~~on ~~further~~October ~~impacted~~20, ~~our~~2023, ~~business~~two of UpHealth Holdings’ wholly-owned subsidiaries, Thrasys and ~~reporting~~BHS, ~~segments:~~and each of the subsidiaries of Thrasys and BHS (such subsidiaries, collectively with UpHealth Holdings, Thrasys and BHS, being referred to individually herein and collectively as the “Debtors”), filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. See Item 1, Legal Proceedings, of Part II of this Quarterly Report for additional information.

~~•Since~~Deconsolidation ~~2021,~~of UpHealth Holdings ~~has been a party to a legal action in the state court in New York entitled Needham & Company LLC (“Needham”) v. UpHealth Holdings, Inc.~~ and ~~UpHealth Services, Inc. (the “Needham Action”), which arose out of UpHealth Services,~~ Subsidiaries

40As discussed in Note 1, Organization and Business, in the Notes to Condensed Consolidated Financial Statements of this Quarterly Report, as a result of the bankruptcy proceedings described above and the designation of UpHealth Holdings, Thrasys, BHS and the subsidiaries of Thrasys and BHS, as “debtors-in-possession,” effective September 30, 2023, UpHealth deconsolidated UpHealth Holdings and its subsidiaries. Accordingly, the information set forth below excludes the results of operations, liquidity, and capital resources of both TTC and BHS in the Services segment for the three months ended March 31, 2024, and includes the results of operations, liquidity, and capital resources of both TTC and BHS from the Services segment for the three months ended March 31, 2023. Similarly, the information set forth below excludes the results of operations, liquidity, and capital resources of Thrasys in the Integrated Care Management segment for three months ended March 31, 2024, and includes the results of operations, liquidity, and capital resources of Thrasys from the Integrated Care

Inc.’s engagement of Needham to provide placement and other financial advisory services. On September 14, 2023, the trial court in New York issued a Decision and Order granting summary judgment in favor of Needham and denying UpHealth Holdings’ and UpHealth Services, Inc.’s motion for summary judgment. The court in New York entered that Decision and Order on its docket on September 15, 2023. The Decision and Order concluded that Needham is entitled to fees in the amount of $31.3 million, plus interest. On September 18, 2023, the court in New York signed a judgment against UpHealth Holdings and UpHealth Services, Inc. in the sum of $31.3 million, plus prejudgment interest of $6.5 million, for a total judgment of $37.8 million, plus post-judgment interest of 9% per year. Notwithstanding the filing of a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) as discussed below, and the automatic stay pursuant to section 362(a) of the U.S. Bankruptcy Code, the Clerk of Court of the court in New York entered that judgment on the court’s docket on September 27, 2023. On November 13, 2023, UpHealth Holdings entered into a stipulation with Needham in the Bankruptcy Court Delaware providing that, to the extent it applies, the automatic stay pursuant to section 362(a) of the Bankruptcy Code shall be deemed modified for the sole and limited purpose of authorizing UpHealth Holdings and UpHealth Services, Inc. to appeal the trial court judgment (and for Needham to be able to participate in the appeal). We are awaiting the Bankruptcy Court’s entry of an order approving the stipulation. When it does so, we will appeal the judgment in the Needham Action. As a result of the summary judgment, in the three and nine months ended September 30, 2023, we recorded additional expense of $29.8 million, which was included in acquisition, integration, and transformation costs in our unaudited condensed consolidated statements of operations.36

~~•As~~Table ~~a result~~ of the bankruptcy proceedings described above and the designation of UpHealth Holdings, Thrasys, BHS and the subsidiaries of Thrasys and BHS, as “debtors-in-possession,” we determined that a reconsideration event occurred on September 19, 2023, which required us to reassess whether UpHealth Holdings was a Variable Interest Entity (“VIE”) and whether we continued to have a controlling financial interest in UpHealth Holdings. Based on this assessment, we concluded that UpHealth Holdings was a VIE, and furthermore, that we no longer had the ability to direct any activities of UpHealth Holdings and no longer have a controlling financial interest. As a result, effective September 30, 2023, we deconsolidated UpHealth Holdings and recorded a $59.1 million gain on deconsolidation of equity investment in our unaudited condensed consolidated statements of operations, measured as the difference between the fair value of UpHealth Holdings of $75.6 million and the carrying amount of UpHealth Holdings’ assets and liabilities as of September 30, 2023. Management concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material. The fair value of UpHealth Holdings, which is included in equity investment in our unaudited condensed consolidated balance sheets, was determined based upon generally accepted valuation approaches, including the income and market approaches. Accordingly, the financial results of UpHealth Holdings in the three and nine months ended September 30, 2023 and 2022 are included in the discussion of our financial results in the Services and Integrated Care Management segments. Contents

~~•Following~~Management ~~the~~segment ~~Decision~~for ~~and Order in~~ the ~~Needham~~three ~~Action,~~months onended ~~September~~March 1931, 2023~~, UpHealth Holdings filed a voluntary petition for relief under Chapter 11 of the U~~.S. ~~Bankruptcy~~As ~~Code in the Bankruptcy Court. In addition, on October 20, 2023, two~~ of ~~UpHealth Holdings’ wholly-owned subsidiaries~~March 31, ~~Thrasys~~2024, ~~Inc. (“Thrasys”) and Behavioral Health Services, LLC (“BHS”), and each of~~ the ~~subsidiaries~~operations of ~~Thrasys and BHS (such subsidiaries, collectively with~~ UpHealth Holdings, ~~Thrasys~~ and ~~BHS,~~its ~~being~~subsidiaries ~~referred~~remain todeconsolidated ~~individually~~from ~~herein and collectively as~~ the ~~“Debtors”),~~rest ~~filed voluntary petitions for relief under Chapter 11~~ of ~~the U.S. Bankruptcy Code in the Bankruptcy Court. The Chapter 11 cases of the Debtors are being jointly administered under the caption In re~~ UpHealth ~~Holdings, Inc~~., Case No. 23-11476 (U.S. Bankr. D. Del.), for procedural purposes only. Following the commencement of their Chapter 11 cases, the Debtors have filed a number of ordinary “first-” and “second-day” motions to continue ordinary course operations and allow for a smooth transition into Chapter 11. On October 24, November 1 and November 17, 2023, the U.S. Bankruptcy Court approved all of the “first-” and “second-day” motions, including but not limited to confirming the worldwide automatic injunction of all litigation and creditor action against the Debtors, allowing the use of cash and the continued use of the Debtors’ cash management system, allowing payment to employees and independent contractors and setting a deadline for creditors to file proofs of claim. Accordingly, the Debtors continue to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the U.S. Bankruptcy Code and orders of the Bankruptcy Court.

~~•The~~Thrasys ~~filing~~entered into three transition agreements, dated as of November 15, November 16 and November 17, 2023, respectively, with its customers, (i) Local Initiative Health Authority for Los Angeles County, a local public entity operating and doing business as L.A. Care Health Plan; (ii) EmpiRx Health LLC, a Delaware corporation; and (iii) the ~~Chapter~~County 11of ~~case~~Alameda, byCalifornia, ~~UpHealth~~USA ~~Holdings~~(each, ~~constitutes~~a an“Transition ~~event~~Agreement”), providing for, among other things, the grant to each customer of ~~default~~a ~~that~~perpetual, ~~accelerated~~non-exclusive ~~our~~license ~~obligations~~of the applicable source code and related SyntraNetTM platform and the provision by Thrasys of certain transition services during the transition term provided under the ~~following~~applicable ~~debt~~Transition ~~instruments:~~Agreement, with the consummation of the transactions contemplated by each Transition Agreement subject to the entry by the Bankruptcy Court of an order authorizing and approving the Transition Agreements, which order was subsequently entered by the Bankruptcy Court.

~~▪Indenture~~Accordingly, ~~dated~~on ~~June~~December 928, ~~2021~~2023, byThrasys ~~and~~consummated ~~between~~the ~~UpHealth~~closing ~~and~~of ~~Wilmington~~the ~~Trust,~~transactions ~~National~~contemplated ~~Association,~~by athe ~~national~~Transition ~~banking~~Agreements. ~~association~~Following (the ~~“Indenture Trustee”)~~closing, inThrasys ~~its~~no ~~capacity~~longer ashas ~~trustee~~any ~~thereunder (the “Unsecured Notes Indenture”), governing UpHealth’s 6~~operations.~~25%~~ ~~Convertible~~Except ~~Senior~~as ~~Notes~~otherwise ~~due~~provided ~~2026~~in (the ~~“2026~~Transition ~~Notes”~~Agreements, ~~and~~Thrasys ~~all~~will ~~beneficial~~continue ~~holders~~to ~~thereof,~~own ~~the~~all ~~“2026~~intellectual ~~Noteholders”) which~~property, subject to the ~~event~~non-exclusive oflicenses ~~default~~granted ~~triggered~~pursuant byto the ~~Chapter~~Transition ~~11 case, mature on June 15, 2026~~Agreements.

~~▪Indenture,~~Sale ~~dated as~~ of August 18, 2022, by and between UpHealth and the Indenture Trustee, in its capacity as trustee and as collateral agent thereunder (the “Senior Secured Notes Indenture” and together with the Unsecured Notes Indenture, the “Indentures”), governing UpHealth’s Variable Rate Convertible Senior Secured Notes due 2025 (the “2025 Notes” and all beneficial holders thereof, the “2025 Noteholders”) which, subject to the event of default triggered by the Chapter 11 case, mature on December 15, 2025.Cloudbreak

41As discussed in Note 1, Organization and Business, in the Notes to Condensed Consolidated Financial Statements of this Quarterly Report, on November 16, 2023, we agreed to sell 100% of the outstanding equity interests of Cloudbreak, our wholly owned subsidiary, to Forest Buyer, LLC, a Delaware limited liability company and an affiliate of GTCR, pursuant to the Purchase Agreement. We will utilize the proceeds from the Sale for payment in full or in part of the 2026 Notes and 2025 Notes, as well as other expenses related to the Transactions. The Sale closed on March 15, 2024. Accordingly, we have presented the results of operations of Cloudbreak, which was included in the Virtual Care Infrastructure segment, as discontinued operations for the period from January 1, 2024 to March 14, 2024 and for the three months ended March 31, 2023.

~~The~~Pursuant ~~Indentures~~to ~~provide~~the ~~that~~terms ~~upon~~of the ~~filing~~Membership Interests Purchase Agreement, the “Cash Consideration” for the Sale was an amount equal to $180.0 million, with adjustments for debt as of immediately prior to the ~~Chapter~~Closing 11and ~~case~~the Estimated Cash Consideration. All of the Estimated Cash Consideration was delivered by Forest Buyer to the Escrow Agent and deposited into three segregated escrow accounts established pursuant the Escrow Agreement, dated March 15, 2024, entered into in accordance with the ~~principal~~terms of the Membership Interests Purchase Agreement by the Company, Forest Buyer and ~~interest~~the ~~due~~Escrow ~~thereunder~~Agent, ~~shall~~as befollows: ~~immediately~~(i) the Working Capital Escrow Amount of $3 million was deposited into the Working Capital Escrow Account to satisfy any adjustment to the Cash Consideration; (ii) the Tax Escrow Amount of $27 million was deposited into the Tax Escrow Account to enable the Company to pay any and all taxes that become due and payable. Asby the Company as a result of ~~such~~the ~~acceleration~~Transactions; and (iii) the remaining portion of ~~tour~~the ~~debt~~Estimated ~~obligations~~Cash inConsideration, ~~respect~~or Notes Escrow Amount, equal to approximately $139 million, was deposited into the Notes Escrow Account, the purpose of which is to fund the ~~2025~~Fundamental Change Repurchase Offers. The funds in the Notes Escrow Account have been released on June 3, 2024, and have been used to satisfy in full, plus accrued interest, the 2026 Notes and to repurchase approximately $19.7 million of the 2025 Notes, weplus ~~believe~~accrued ~~there~~interest, isfollowing ~~substantial~~which ~~doubt~~approximately ~~about~~$37.3 million in aggregate principal amount of 2025 Notes remain outstanding, excluding $0.2 million of unamortized debt issuance costs, which will constitute the entirety of our ~~ability~~debt, noncurrent. Funds in the Tax Escrow Account will be used to ~~continue~~satisfy asour 2024 tax liability in respect of the Transactions and any funds not required for this purpose will be used to repurchase additional 2025 Notes. Funds in the Working Capital escrow will be used to satisfy any of our obligations resulting from a ~~going~~difference ~~concern,~~between Cloudbreak’s targeted and actual working capital as ~~described~~of inthe Closing, and any funds not used for this ~~Quarterly~~purpose ~~Report~~will be used to repurchase additional 2025 Notes.

~~•On~~Following ~~November~~the 16Closing, ~~2023,~~in weconnection ~~agreed~~with toa ~~sell~~customary ~~100%~~adjustment ofto the ~~outstanding~~Cash ~~equity~~Consideration, ~~interests~~which ofadjustment ~~Cloudbreak~~is expected, ~~our~~in ~~wholly~~the ~~owned~~absence ~~subsidiary~~of any disagreement, to ~~Forest~~be ~~Buyer~~determined within 120 days following the Closing Date, ~~LLC~~to the extent that the Cash Consideration exceeds the Estimated Cash Consideration, a ~~Delaware~~payment ~~limited~~shall ~~liability~~be ~~company~~made ~~(“Forest~~for ~~Buyer”)~~the purpose of repurchasing the 2026 Notes and/or anthe ~~affiliate~~2025 Notes of ~~GTCR~~an ~~LLC,~~amount aequal ~~leading~~to ~~private~~the ~~equity~~amount ~~firm~~by which the Cash Consideration exceeds the Estimated Cash Consideration (~~“GTCR”),~~up ~~pursuant~~to an excess equal to athe ~~membership~~amount ~~interests~~of ~~purchase~~the ~~agreement,~~Working ~~dated~~Capital ~~November~~Escrow ~~16,~~Amount). ~~2023~~To the extent that following such customary adjustment to the Cash Consideration, bythe ~~and~~Estimated ~~among~~Cash Consideration is greater than the ~~Company~~Cash Consideration, ~~Cloudbreak~~Forest Buyer and the Company shall cause the Escrow Agent to make payment to Forest Buyer (or its designees) of an amount equal to the ~~“Purchase~~lesser ~~Agreement”~~of (i). Wethe ~~will~~amount ~~utilize~~by which the ~~proceeds~~Estimated ~~from~~Cash Consideration exceeds the ~~sale~~Cash ~~for~~Consideration, ~~payment~~and in(ii) ~~full~~the orWorking inCapital ~~part~~Escrow ofAmount held in the ~~Company’s~~Working ~~2026~~Capital ~~Notes~~Escrow ~~and~~Account, ~~2025~~including ~~Notes~~any dividends, asinterest, ~~well~~distributions asand other ~~expenses~~income ~~related~~received toin ~~the~~respect ~~transaction.~~thereof, ~~The~~less ~~sale~~any oflosses ~~Cloudbreak~~on ~~and~~investment ~~the~~thereof, ~~other~~less ~~transactions~~distributions ~~contemplated~~thereof byin accordance with the Membership Interests Purchase Agreement ~~are~~and ~~expected~~the toEscrow ~~close~~Agreement (the “Working Capital Escrow Funds”), in each case, from the ~~first~~Working ~~half~~Capital ofEscrow ~~2024~~Account, ~~subject~~and after any such payments are made to ~~obtaining~~Forest ~~customary~~Buyer, ~~regulatory~~the remaining Working Capital Escrow Funds (if any) shall be used for the repurchase of 2026 Notes and/or ~~stockholder~~2025 ~~approval~~Notes.

~~•In~~Proposed ~~connection~~Sale ~~and concurrently with the entry into the Purchase Agreement, the Company, Cloudbreak and Buyer entered into a transaction support agreement, dated as~~ of November 16, 2023 (the “Transaction Support Agreement”), with certain beneficial holders of the 2025 Notes (being the holders of at least 69% of the 2025 Notes, the “Consenting Senior Secured Noteholders”) and certain beneficial holders of the 2026 Notes (being the holders of at least 88% of the 2026 Notes, the “Consenting Unsecured Noteholders”, and together with the Consenting Senior Secured Noteholders, the “Consenting Noteholders”), pursuant to which the parties have agreed, among other things, to support the Purchase Agreement and the Transactions and to enter into and effect certain Escrow Agreements, Supplemental Indentures in connection with the Fundamental Change Repurchase Offer to be made by the Company and each other Definitive Document (as defined in the Transaction Support Agreement), in each case, subject to the terms and conditions set forth in the Transaction Support Agreement. The Supplemental Indenture to the Senior Secured Notes Indenture will, among other things, (a) provide for the waiver, with respect to the Company and Cloudbreak, of the specified events of default under the Senior Secured Notes Indenture resulting from the commencement of the Chapter 11 cases and (b) rescind, with respect to us and Cloudbreak, the acceleration of the 2025 Notes resulting from the occurrence of the foregoing events of default. The Supplemental Indenture to the Unsecured Notes Indenture will, among other things, provide for the waiver, with respect to the Company and Cloudbreak, of the specified events of default under the Unsecured Notes Indenture resulting from the acceleration of the 2025 Notes resulting from the occurrence of the event of default of the Senior Secured Notes Indenture and the commencement of the Chapter 11 cases.TTC

~~•Thrasys~~Through ongoing discussions with its key economic stakeholders, including the Consultation Parties, UpHealth Holdings has ~~also~~determined ~~filed~~that ~~motions~~the sale of UpHealth Holdings’ equity interest in TTC may be appropriate to ~~effectuate~~maximize value to the UpHealth Holdings’ estate because a ~~transition~~sale of the ~~Integrated~~equity ~~Care~~interests ~~Management~~in ~~segment~~TTC may provide funding necessary for UpHealth Holdings to consummate a Chapter 11 plan and successfully exit its ~~customers~~Chapter 11 case. InUpHealth ~~addition,~~Holdings anticipates that it will pursue a motion before the Bankruptcy Court to ~~pay~~approve ~~retention~~procedures ~~bonuses~~applicable to ~~Thrasys~~the ~~employees~~sale ~~involved~~of its equity interests in TTC, and eventually, authorize the ~~transition~~sale of ~~the~~such ~~Integrated~~equity ~~Care~~interests ~~Management~~free ~~segment~~and ~~through~~clear ~~year~~of ~~end~~all ~~was~~liens, ~~approved~~claims, byencumbrances ~~the~~and Uother interests.S. ~~Bankruptcy~~In ~~Court~~addition, onUpHealth ~~November~~Holdings ~~17,~~anticipates ~~2023.~~that it will pursue confirmation of a liquidating plan (including

For the three and nine months ended September 30, 2023, we operated in three business segments: (a) Virtual Care Infrastructure, which consists of our U.S. Telehealth business; (b) Services, which consists of our Behavioral business, and (c) Integrated Care Management, which uses the SyntraNetTM technology platform. Due to the deconsolidation of UpHealth Holdings as of September 30, 2023, our future operations will consist of only one segment, Virtual Care Infrastructure, until such time as the Sale of Cloudbreak is completed and/or we are able to reconsolidate UpHealth Holdings.37

~~Virtual~~Table ~~Care~~of ~~Infrastructure Segment~~Contents

seeking approval of a related disclosure statement) alongside of the sale process, which UpHealth Holdings is hopeful will provide payment in full to creditors at UpHealth Holdings and, potentially, a dividend to the Company.

In furtherance of the anticipated sales process, UpHealth Holdings, after consulting with the Consultation Parties, has selected Stout as an investment banker to assist in a marketing and sale process to identify a party ready, willing and able to consummate a transaction. As of this time, UpHealth Holdings has not marketed the equity interests in TTC for sale, and it would not expect to do so until after the Bankruptcy Court has granted a motion approving procedures applicable to the sale of its equity interests in TTC and related relief, and authorizing procedures applicable to the sale of its equity interests in TTC and related relief. Furthermore, UpHealth Holdings anticipates submitting an application to the Bankruptcy Court to employ Stout to provide financial and investment banking services in connection with a sale of UpHealth Holdings’ equity interests in TTC. Stout would not be expected to provide any services to UpHealth Holdings unless Stout’s retention is approved by the Bankruptcy Court.

UpHealth’s Prospective Business Overview

As a result of the events detailed above, subsequent to the Sale of Cloudbreak on March 15, 2024 and as of March 16, 2024, UpHealth no longer offers Virtual Care Infrastructure or Integrated Care Management platforms and because the operations of UpHealth Holdings and its subsidiaries, including TTC, will remain deconsolidated from the rest of UpHealth until UpHealth Holdings emerges from bankruptcy pursuant to a restructuring plan, the financial position, results of operations, and cash flows of UpHealth will solely consist of the operations of UpHealth, which comprises a fourth non-operating business segment, Corporate, consisting solely of the operating expenses of UpHealth as the parent company of TTC. Furthermore, although UpHealth has repositioned its business efforts to focus on its Services division as a leading provider of a full continuum of behavioral health services through TTC, UpHealth’s remaining operating company, as discussed in Note 1, Organization and Business, in the Notes to Condensed Consolidated Financial Statements of this Quarterly Report, UpHealth Holdings has determined that the sale of UpHealth Holdings’ equity interest in TTC may be appropriate to maximize value to the UpHealth Holdings’ estate because a sale of the equity interests in TTC may provide funding necessary for UpHealth Holdings to consummate a Chapter 11 plan and successfully exit its Chapter 11 case. Should a sale of TTC be completed, we would no longer have ongoing operations that generate cash flow. Also, if UpHealth Holdings successfully exits its Chapter 11 case, there may be little to no residual value remaining at UpHealth Holdings. As a result, we believe there is substantial doubt about our ability to continue as a going concern.

Services Segment

Overview

~~The~~Our ~~Virtual~~Services ~~Care~~platform ~~Infrastructure~~provided ~~segment~~behavioral ~~consists~~health ofand ~~the~~pharmacy ~~U.S.~~services ~~Telehealth~~in ~~business~~the United States, awhich ~~technology~~were ~~and~~critically ~~technology-enabled~~important ~~services~~to ~~business~~managing ~~that~~whole ~~connects~~person ~~healthcare~~care ~~systems~~and ~~with~~its ~~platforms,~~associated ~~analytics,~~costs. ~~and~~Our ~~services~~comprehensive ~~that~~behavioral ~~make~~health ~~clinical~~capabilities provided evidence-based and ~~administrative~~tech-enabled ~~processes~~behavioral ~~simpler~~health and ~~more~~substance ~~efficient.~~abuse ~~Hospital~~services ~~systems,~~via ~~physicians,~~onsite care delivery and ~~patients~~telehealth. ~~depend~~Our onServices usplatform worked to ~~help~~deliver ~~them~~an ~~improve~~increasing ~~performance~~volume of services, ~~reduce~~including ~~costs~~telehealth ~~and~~services, ~~advance~~to ~~care~~existing ~~quality~~customers, ~~through~~as ~~technology-enabled~~well ~~services~~as ~~built~~clients ~~directly~~belonging ~~into~~to ~~clinical~~the ~~workflows~~Integrated Care Management and Virtual Care Infrastructure platforms.

~~The~~Our ~~U.S.~~behavioral ~~Telehealth~~health business isprovided acomprehensive ~~provider~~patient-centered ofcare, ~~unified~~addressing ~~telehealth~~the ~~solutions~~physical, mental, and ~~digital~~social ~~health~~well-being ~~tools~~of ~~aimed~~our atclients. ~~increasing~~We ~~access~~engaged topeople ~~healthcare~~in ~~and~~the ~~resolving~~most ~~health~~appropriate ~~disparities across the~~ care ~~continuum.~~settings, ~~Through~~including ~~our~~clinical ~~MarttiTM platform~~sites, ~~which~~out-patient ~~serves~~and asvirtual. ~~the~~Our ~~digital~~behavioral ~~front~~health ~~door~~business todelivered ~~in-hospital~~behavioral ~~care,~~health ~~the~~services; ~~U.S.~~helped ~~Telehealth~~patients ~~business~~and ~~provides~~providers ~~digital~~navigate ~~health~~and ~~infrastructure~~address ~~enabling~~complex, ~~its~~chronic ~~partners~~behavioral tohealth ~~implement~~needs; ~~unique,~~offered ~~private~~post-~~label~~acute ~~telehealth~~care ~~strategies~~planning ~~customized~~services; toand ~~their~~served ~~specific~~consumers ~~needs~~ and ~~markets,~~care ~~with~~providers ~~language~~through ~~access~~advanced, ~~built~~on-~~in.~~demand ~~The~~digital ~~MarttiTM~~health ~~platform~~technologies, ~~has~~such ~~one~~as oftelehealth. ~~the~~Our ~~largest~~behavioral ~~installed~~health ~~user~~business ~~bases~~worked indirectly ~~the~~with ~~nation~~consumers, ~~performing~~care ~~more~~delivery ~~than~~systems, ~~300~~providers,~~000~~ ~~encounters~~payors, ~~per~~and ~~month~~public-sector onentities ~~over~~to ~~40,000~~provide ~~video~~high ~~endpoints~~quality, ataccessible ~~over~~and ~~2,800~~equitable ~~healthcare~~care ~~venues~~with inimproved ~~over~~health ~~250~~outcomes ~~languages~~and ~~across~~reduced ~~the~~total ~~United~~cost ~~States~~of care.

InOur ~~2022,~~behavioral ~~the~~health ~~U.S. Telehealth~~ business ~~expanded~~sold its ~~operations~~services byprimarily ~~leveraging~~through its ~~existing~~direct ~~platform~~sales ~~to include other telemedicine use cases such as telestroke~~force, ~~teleneurology,~~ and ~~telepsychiatry.~~strategic Wecollaborations ~~also~~in ~~launched~~two akey ~~home~~areas: ~~health~~payors ~~virtual~~including ~~visit~~health ~~platform~~plans, ~~enabling~~third-party ~~healthcare~~administrators; ~~system~~and ~~partners~~public toentities ~~see~~including ~~their~~the ~~patients~~U.S. ~~remotely~~Departments onof ~~any~~Veterans ~~device,~~Affairs atand ~~any~~other ~~time~~federal, ~~anywhere the patient may be~~state, and inlocal ~~any~~health ~~language~~care ~~they may speak~~agencies.

~~The~~We ~~U.S.~~also ~~Telehealth’s~~had ~~products~~a ~~and~~pharmacy ~~services~~business, ~~are~~Innovations ~~sold~~Group, ~~primarily~~which ~~through~~was asold ~~direct~~on ~~sales~~May ~~force~~11, 2023. ~~The~~Innovations ~~U.S.~~Group ~~Telehealth’s~~was ~~products~~powered ~~are~~by ~~also~~MedQuest ~~supported~~Pharmacy, a full-service retail and ~~distributed~~compounding ~~through~~pharmacy anlicensed ~~array~~in ofall ~~alliances~~50 U.S. states and ~~business~~the ~~partnerships~~District ~~with~~of ~~other~~Columbia ~~technology~~that ~~vendors,~~dispensed ~~who~~prescribed ~~integrate~~medications ~~and~~shipped ~~interface~~directly ~~our~~to patients.

42As a result of the sale of Innovations Group and the deconsolidation of UpHealth Holdings and its subsidiaries as described above, the Services segment had no operations during the three months ended March 31, 2024.

products with their applications. The U.S. Telehealth’s business offers an expanding suite of telehealth use cases, which are delivered under multi-year contracts that include fixed minimums with upside attributable to usage-based fees. Our client base includes hospitals and health systems, federally qualified healthcare clinics (“FQHCs”), urgent care centers, stand-alone clinics, and medical practices.

As discussed in Note 1. Organization and Business, in the Notes to Condensed Consolidated Financial Statements of this Quarterly Report, we deconsolidated Glocal, which comprised the International Telehealth business, on July 1, 2022. Accordingly, the financial results of Glocal in the six months ended June 30, 2022 are included in our unaudited condensed consolidated financial statements, and the financial results of Glocal in the three months ended September 30, 2022 and three and nine months ended September 30, 2023 are not included in our unaudited condensed consolidated financial statements.

On November 16, 2023, we agreed to sell 100% of the outstanding equity interests of Cloudbreak, our wholly owned subsidiary, to Forest Buyer, pursuant to the Purchase Agreement, dated November 16, 2023, by and among the Company, Cloudbreak and Forest Buyer. We will utilize the proceeds from the sale for payment in full or in part of the Company’s 2026 Notes and 2025 Notes, as well as other expenses related to the transaction. The sale of Cloudbreak and the other transactions contemplated by the Purchase Agreement are expected to close in the first half of 2024, subject to obtaining customary regulatory and stockholder approval.

Components of Results of Operations

Revenues

Services. Services revenues from ~~the~~our ~~U.S.~~behavioral ~~Telehealth~~health business ~~are~~were generated primarily ~~from~~through ~~the~~services ~~sale~~provided ofto ~~subscription-based~~clients ~~fixed~~in ~~monthly~~both ~~minute~~inpatient and ~~variable~~outpatient ~~rate~~treatment ~~per unit of service medical language interpretation services~~settings. ~~Ancillary~~Our ~~revenues~~behavioral ~~are~~health ~~also~~business ~~generated~~billed ~~from~~third-party ~~the~~payors ~~rental~~weekly offor ~~Martti™ devices and from~~ the ~~provision of information technology~~ services ~~that~~provided ~~include~~in ~~connectivity and ongoing support of~~ the ~~Martti™~~prior ~~software platform~~week. ~~Generally~~Client-related revenues, ~~medical~~such ~~language~~as ~~interpretation~~inpatient and ~~information~~outpatient ~~technology~~programs, ~~services~~were ~~are~~generally ~~invoiced~~recognized ~~monthly.~~over ~~Fixed~~time ~~monthly~~as ~~minute~~the ~~medical~~performance ~~language~~obligation ~~interpretation~~was ~~subscription~~satisfied ~~and~~at ~~information technology services fees are invoiced in advance in~~ the ~~period~~estimated ~~preceding~~net ~~the~~realizable ~~service.~~value ~~Variable~~amount ~~rate~~from ~~per~~clients, ~~unit~~third-party ~~medical~~payors, ~~language interpretation~~ and ~~information~~others ~~technology~~for services ~~fees (including overage fees related to minutes used by the customer in excess of the fixed monthly minute subscription) are invoiced monthly in arrears~~provided. ~~Martti™~~Client ~~device leases are invoiced monthly in advance in the period preceding the usage. Invoiced amounts are typically due within 30 days of the invoice date.~~

In the nine months ended September 30, 2022, services revenues also included revenues from the International Telehealth business, which were generated primarily from operating hospitals and clinics, including pharmacy and medicine sales, and transaction fees per telemedicine consultation.38

~~Products.~~Table ~~Products revenues consist~~ of the sale of Martti™ devices to its customers. Sale of Martti™ devices are generally invoiced at contract execution (50%) and upon the delivery of the devices to the customer (50%). Invoiced amounts are typically due within 30 days of the invoice date. Contents

Inservice ~~the~~revenues ~~nine~~were ~~months~~recorded ~~ended~~at ~~September~~established ~~30,~~billing ~~2022~~rates, ~~products~~less ~~revenues~~adjustments ~~also~~to ~~included~~estimate ~~revenues~~net ~~from~~realizable value. Provisions for estimated third party payor reimbursements were provided in the ~~International~~period ~~Telehealth~~related ~~business,~~services ~~which~~were rendered and adjusted in future periods when actual reimbursements were ~~generated~~received. ~~primarily~~A ~~from~~significant ~~the~~or ~~sale~~sustained ofdecrease ~~HelloLyf~~in CXreimbursement ~~digital~~rates ~~dispensaries~~could ~~and~~have ~~the~~had ~~construction~~a ofmaterial ~~HelloLyf~~adverse HXeffect ~~digital~~on ~~hospitals~~operating results.

Our behavioral health business also provided diagnostic laboratory testing services for its clients, which were recognized over time as the performance obligation was satisfied at the estimated net realizable value amount from clients, third-party payors, and others for services provided. Diagnostic laboratory service revenues were recorded at established billing rates, less adjustments to estimate net realizable value. Provisions for estimated third party payor reimbursements were provided in the period related services were rendered and adjusted in future periods when actual reimbursements were received.

Services revenues from our behavioral health business were also generated by providing psychiatric and mental health services and billing services. Although the underlying tasks varied by service and by patient, medical professionals performed inquiries, obtained vital statistics, performed certain lab tests, administered therapy, and provided any additional goods and services as necessary depending on the information obtained. In addition, services revenues were generated from CME educational courses.

Products. Products revenues through our pharmacy business were generated primarily from the sale of prescription medications directly to patients, as well as through the sale of supplemental products to providers. The majority of the customer revenues were billed and collected before the medications and products were shipped from the facility. The pharmacy business generated approximately 60% of its revenue from sales of compounded medications and approximately 40% of its revenue from sales of manufactured medications and supplements.

Products revenues were also generated by providing retail pharmacy services at our behavioral health business.

Costs of Revenues

Costs of revenues from our behavioral health business consisted primarily ~~consist~~of provider compensation expenses, the cost of ~~costs~~pharmaceutical ~~related~~medications sold to ~~supporting~~patients, ~~and~~the ~~hosting~~cost of operating the ~~product~~facilities, ~~offerings~~professional/medical fees, and ~~delivering~~an ~~services~~allocation of facilities, information technology, and ~~include~~depreciation ~~the~~costs. ~~cost~~Provider ofcompensation ~~maintaining~~expenses ~~data~~included ~~centers~~consulting payments to healthcare providers, ~~customer~~including ~~support~~medical ~~team~~doctors in psychiatry, psychologists, nurse practitioners, and ~~professional~~clinical ~~services~~social ~~staff,~~workers. inOur ~~addition~~behavioral tohealth ~~third~~business had adopted an incentive-~~party~~based ~~service~~compensation plan with provider ~~costs~~agreements ~~such~~that ascompensated ~~data~~the ~~center~~providers ~~and~~based ~~networking~~upon ~~expenses,~~a ~~amortization~~percentage of ~~capitalized~~revenue ~~software~~generated ~~development~~and ~~costs,~~ultimately ~~the~~collected ~~cost~~for ofservices provided. Our behavioral health business primarily purchased ~~equipment~~pharmaceutical ~~inventory~~medications ~~sold~~through toa ~~customers,~~large ~~and~~industry andistributor ~~allocation~~with ofmany ~~facilities~~suppliers, ~~information~~but ~~technology,~~also ~~and~~purchased ~~depreciation~~some ~~costs.~~directly from other suppliers.

InCosts ~~the~~of ~~nine~~revenues ~~months~~at ~~ended~~the ~~September~~pharmacy ~~30,~~business ~~2022,~~primarily consisted of costs of ~~revenues~~raw ~~also~~ingredients ~~included~~and ~~costs~~materials to compound various drugs and supplements, the cost of ~~revenues~~manufactured product purchased directly from the ~~International~~distributors ~~Telehealth~~for ~~business~~resale, ~~which~~the ~~primarily~~cost ~~consisted~~ of ~~costs~~fulfillment ofand ~~building~~shipping services and ~~operating~~an ~~hospitals~~allocation of facilities, ~~including~~information technology, and depreciation costs. ~~for~~The ~~the~~pharmacy ~~purchase~~business ofpurchased ~~medicines,~~these ~~professional/doctor~~items ~~fees,~~through ~~the~~a ~~cost~~large toindustry ~~build~~distributor ~~HelloLyf~~with CXmany ~~digital~~suppliers ~~dispensaries~~and also sourced products and ~~HelloLyf~~supplies HXdirectly ~~digital~~with ~~hospitals,~~manufacturers. ~~and~~The anpharmacy ~~allocation~~business was also able to leverage the size of ~~information~~its ~~technology~~operations to purchase larger quantities of certain ingredients and ~~depreciation~~materials ~~costs~~at lower prices.

Operating Expenses

Sales and Marketing (“S&M”) Expenses. S&M expenses ~~consist~~consisted of cost related to compensation and benefits, ~~costs related to~~ advertising, and marketing programs, ~~and~~ events, fees paid to third party marketing firms, and an allocation of facilities, information technology, and depreciation ~~costs~~cost.

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

43Depreciation and Amortization Expenses. Depreciation expense related to the depreciation of computer equipment, purchased software, furniture and fixtures, office equipment, and leasehold improvements, net of amounts allocated to costs of revenues. Amortization expense related to the amortization of intangible assets from the acquisitions of TTC, BHS, and Innovations Group.

Depreciation and Amortization Expenses. Depreciation expense relates to the depreciation of computer equipment, purchased software, furniture and fixtures, and office equipment, net of amounts allocated to costs of revenues. Amortization expense relates to the amortization of intangible assets from the acquisitions of the Virtual Care Infrastructure ~~businesses.~~Segment

Services Segment

Overview

~~The~~As ~~Services~~discussed ~~segment~~above, ~~consists~~as of ~~the~~March ~~Behavioral~~16, ~~business~~2024, ~~which~~we ~~provides~~no ~~behavioral~~longer ~~health~~have ~~services~~a inVirtual ~~the~~Care ~~United~~Infrastructure ~~States and is critically important to managing whole person care and its associated costs. The Services~~ segment ~~also~~that ~~included the Pharmacy business until~~ we ~~sold Innovations Group, a compounding pharmacy business, on May 11, 2023~~operate.

Our ~~Behavioral~~Virtual ~~business~~Care isInfrastructure ~~powered~~segment bywas ~~our~~a ~~UpHealth~~technology ~~BehavioralTM~~and ~~platform,~~technology-enabled ~~which~~services ~~provides~~business ~~evidence-based~~that ~~and~~connected ~~tech-enabled~~healthcare ~~behavioral~~systems ~~health~~with ~~and~~platforms, ~~substance~~analytics ~~abuse~~and services ~~via~~that ~~onsite~~made ~~care~~clinical ~~delivery~~ and ~~telehealth.~~administrative ~~Our~~processes ~~UpHealth~~simpler ~~BehavioralTM~~and ~~platform~~more isefficient. ~~working~~Hospital tosystems, ~~deliver~~physicians, anand ~~increasing~~patients ~~volume~~depended ofon ~~services,~~the ~~including~~Virtual ~~telehealth~~Care ~~services,~~Infrastructure business to ~~existing~~help ~~customers,~~them asimprove ~~well~~performance, asreduce ~~clients~~costs ~~belonging~~and toadvance ~~the~~care ~~Integrated~~quality ~~Care~~through ~~Management~~technology-enabled ~~and~~services ~~Virtual~~built ~~Care~~directly ~~Infrastructure~~into ~~platforms.~~clinical workflows.

~~UpHealth~~Powered ~~BehavioralTM~~by ~~provides comprehensive patient-centered care~~Martti™, ~~addressing~~ the ~~physical,~~Virtual ~~mental,~~Care ~~and~~Infrastructure ~~social~~business ~~well-being~~was ofa ~~our~~provider ~~clients.~~of Weunified ~~engage~~telehealth ~~people~~solutions ~~in the most appropriate care settings, including clinical sites, out-patient~~ and ~~virtual.~~digital ~~UpHealth~~health ~~BehavioralTM~~tools ~~delivers~~aimed ~~behavioral~~at ~~health~~increasing ~~services;~~access ~~helps~~to ~~patients~~healthcare and ~~providers~~resolving ~~navigate and address complex, chronic behavioral~~ health ~~needs;~~disparities ~~offers~~across ~~post-acute~~the care ~~planning services; and serves consumers and care providers through advanced, on-demand digital health technologies, such as telehealth~~continuum. ~~UpHealth~~The ~~BehavioralTM~~Virtual ~~works~~Care ~~directly~~Infrastructure ~~with~~business ~~consumers,~~had ~~care~~one ~~delivery systems, providers, payors, and public-sector entities to provide high quality, accessible and equitable care with improved health outcomes and reduced total cost~~ of ~~care.~~

UpHealth BehavioralTM sells its products primarily through its direct sales force, and strategic collaborations in two key areas: payors including health plans, third-party administrators; and public entities including the U.S. Departments of Veterans Affairs and other federal, state, and local health care agencies.39

~~The~~Table ~~Pharmacy business consisted~~ of Innovations Group and was powered by MedQuest Pharmacy, a full-service retail and compounding pharmacy licensed in all 50 U.S. states and the District of Columbia that dispensed prescribed medications shipped directly to patients. It was capable of serving as a retail or national fulfillment center. Other services and products were also available, such as lab and testing services, nutritional supplements, and education and training for medical practitioners. On February 26, 2023, UpHealth Holdings agreed to sell 100% of the outstanding capital stock of Innovations Group. The sale closed on May 11, 2023. Accordingly, the financial results of Innovations Group for the period from January 1, 2023 through May 10, 2023, and the three and nine months ended September 30, 2022 are included in the discussion of our financial results for the Services segment.Contents

Asthe ~~discussed~~largest ininstalled ~~Note~~user 1.bases ~~Organization and Business,~~ in the ~~Notes~~nation, toperforming ~~Condensed~~more ~~Consolidated~~than ~~Financial Statements of this Quarterly Report~~300,000 weencounters ~~deconsolidated~~per ~~UpHealth~~month ~~Holdings~~on asover ~~of September 30~~40,000 ~~2023.~~video ~~Accordingly,~~endpoints ~~the~~at ~~financial~~over ~~results of the Behavioral business in the three and nine months ended September 30~~2,800 ~~2023~~healthcare ~~and~~venues ~~2022 are included~~ in ~~our~~over ~~unaudited~~250 ~~condensed~~languages ~~consolidated~~across ~~financial~~the ~~statements~~United States. ~~The~~Through ~~filing~~its ofintegrated atelehealth ~~voluntary~~and ~~petition~~language ~~for~~access ~~relief~~services, ~~under~~the ~~Chapter~~platform 11served ofas the ~~U.S.~~digital ~~Bankruptcy~~front ~~Code,~~door asto ~~discussed~~ in-hospital ~~Note 1~~care. ~~Organization~~The ~~and~~MarttiTM ~~Business,~~platform ~~occurred~~provided ondigital ~~September~~health ~~19,~~infrastructure ~~2023.~~enabling ~~Management~~its ~~concluded~~partners ~~that~~to itimplement ~~would use the September 30~~unique, ~~2023~~private-label ~~date~~telehealth ~~for~~strategies ~~deconsolidation,~~customized asto ~~the~~their ~~last~~specific 12needs ~~days~~and inmarkets, ~~the~~with ~~month~~language ~~were~~access ~~determined to not be material~~built-in.

Components of Results of Operations

Revenues

Services. Services revenues were generated primarily from the ~~Behavioral~~sale ~~business~~of ~~are~~subscription-based ~~generated~~fixed ~~primarily~~monthly ~~through~~minute ~~services~~and ~~provided~~variable torate ~~clients~~per inunit ~~both~~of ~~inpatient~~service ~~and~~medical ~~outpatient~~language ~~treatment~~interpretation ~~settings~~services. ~~Third-party~~Our ~~payors~~Telehealth ~~are~~product ~~billed~~line ~~weekly~~also ~~for~~recorded ancillary revenues from the rental of Martti™ devices and from the provision of information technology services ~~provided~~that ininclude connectivity and ongoing support of the ~~prior~~Martti™ ~~week~~software platform. ~~Client-related revenues~~Generally, ~~such~~Telehealth’s asmedical ~~inpatient~~language interpretation and ~~outpatient~~information ~~programs,~~technology ~~are~~services ~~generally~~were ~~recognized~~invoiced ~~over~~monthly. ~~time~~Fixed asmonthly ~~the~~minute ~~performance~~medical ~~obligation~~language isinterpretation ~~satisfied~~subscription atand information technology services fees were invoiced in advance in the ~~estimated~~period ~~net~~preceding ~~realizable~~the ~~value~~service. ~~amount~~Variable ~~from~~rate ~~clients,~~per ~~third-party~~unit ~~payors,~~medical language interpretation and ~~others~~information ~~for~~technology services ~~provided.~~fees ~~The~~(including ~~majority~~overage offees ~~payments~~related ~~are~~to ~~received~~minutes ~~from~~used ~~commercial~~by ~~payors~~the atcustomer ~~out-~~in excess of~~-network~~ ~~rates.~~the ~~Client~~fixed ~~service~~monthly ~~revenues~~minute ~~are~~subscription) ~~recorded~~were atinvoiced ~~established~~monthly ~~billing~~in ~~rates,~~arrears. ~~less~~Martti™ ~~adjustments~~device toleases ~~estimate~~were ~~net~~invoiced ~~realizable~~monthly ~~value~~in advance in the period preceding the usage. ~~Provisions~~Invoiced ~~for~~amounts ~~estimated~~were ~~third~~typically ~~party~~due ~~payor~~within ~~reimbursements~~30 ~~are~~days ~~provided~~of inthe invoice date. For the period ~~related~~from ~~services~~January ~~are~~1, ~~rendered~~2022 ~~and~~through ~~adjusted~~June in30, ~~future~~2022, ~~periods~~services ~~when~~revenues ~~actual~~also ~~reimbursements~~included ~~are~~revenues ~~received.~~from AGlocal, ~~significant~~which orwere ~~sustained~~generated ~~decrease~~primarily infrom ~~reimbursement~~operating ~~rates~~hospitals ~~could~~and ~~have~~clinics, aincluding ~~material~~pharmacy ~~adverse~~and ~~effect~~medicine onsales, ~~operating~~and ~~results~~transaction fees per telemedicine consultation.

~~Diagnostic~~Products. ~~laboratory~~Products ~~testing~~revenues ~~service~~consisted ~~revenues~~of ~~are~~the ~~recognized~~sale ~~over~~of ~~time~~Martti™ asdevices ~~the~~to ~~performance~~its ~~obligation~~customers. isSale ~~satisfied~~of Martti™ devices were generally invoiced at contract execution (50%) and upon the ~~estimated~~delivery ~~net~~of ~~realizable~~the ~~value~~devices ~~amount~~to the customer (50%). Invoiced amounts were typically due within 30 days of the invoice date. For the period from ~~clients~~January 1, ~~third-party~~2022 ~~payors~~through June 30, ~~and~~2022, ~~others~~products ~~for~~revenues ~~services~~also ~~provided.~~included ~~Diagnostic~~revenues ~~laboratory~~from ~~service~~Glocal, ~~revenues~~which ~~are~~were ~~recorded~~generated atprimarily from the sale of HelloLyf CX digital dispensaries and the construction of HelloLyf HX digital hospitals.

established billing rates, less adjustments to estimate net realizable value. Provisions for estimated third party payor reimbursements are provided in the period related services are rendered and adjusted in future periods when actual reimbursements are received.

Services revenues are also generated by providing psychiatric and mental health services and billing services. Although the underlying tasks will vary by service and by patient, medical professionals perform inquiries, obtain vital statistics, perform certain lab tests, administer therapy, and provide any additional goods and services as necessary depending on the information obtained. In addition, services revenues are generated from CME educational courses.

Products. For the period from January 1, 2023 through May 10, 2023, and the three and nine months ended September 30, 2022, products revenues through our Pharmacy business were generated primarily from the sale of prescription medications directly to patients, as well as through the sale of supplemental products to providers. The majority of the customer revenues were billed and collected before the medications and products are shipped from the facility. The Pharmacy business generated approximately 60% of its revenue from sales of compounded medications and approximately 40% of its revenue from sales of manufactured medications and supplements. Products revenues are also generated by providing retail pharmacy services in the Behavioral business.

Costs of Revenues

~~Services.~~ Costs of revenues ~~consist~~ primarily consisted of ~~provider~~costs ~~compensation~~related ~~expenses,~~to ~~the~~supporting ~~cost~~and ofhosting ~~pharmaceutical~~Telehealth’s ~~medications~~product ~~sold~~offerings toand ~~patients~~delivering services, and included the cost of ~~operating~~maintaining ~~the~~Telehealth’s ~~facilities~~data centers, ~~professional/medical~~customer ~~fees~~support team, and anTelehealth’s ~~allocation~~professional ofservices ~~facilities~~staff, ~~information~~in ~~technology,~~addition ~~and~~to ~~depreciation~~third-party service provider costs. ~~Provider~~such ~~compensation~~as data center and networking expenses, ~~include~~amortization ~~consulting~~of ~~payments~~capitalized tosoftware ~~healthcare~~development ~~providers~~costs, ~~including~~the ~~medical~~cost ~~doctors~~of inpurchased ~~psychiatry~~equipment inventory sold to customers, ~~psychologists~~and an allocation of facilities, ~~nurse~~information ~~practitioners~~technology, and ~~clinical~~depreciation ~~social~~costs. ~~workers~~For the period from March 26, ~~based~~2021 onthrough anJune ~~incentive-based~~30, ~~compensation~~2022, ~~plan~~costs ~~with~~of ~~provider~~revenues ~~agreements~~also ~~that~~included ~~compensate~~costs ~~the~~of ~~providers~~revenues ~~based~~from ~~upon~~Glocal, awhich ~~percentage~~primarily consisted of ~~revenue~~costs ~~generated~~of building and ~~ultimately~~operating ~~collected~~hospitals, including costs for ~~services~~the ~~provided.~~purchase ~~Pharmaceutical~~of ~~medications~~medicines, ~~are~~professional/doctor ~~primarily~~fees, ~~purchased~~the ~~through~~cost ato ~~large~~build ~~industry~~HelloLyf ~~distributor~~CX ~~with~~digital ~~many~~dispensaries ~~suppliers~~and HelloLyf HX digital hospitals, ~~but~~and ~~also~~an ~~purchases~~allocation ~~some~~of ~~directly~~information ~~from~~technology ~~other~~and ~~suppliers~~depreciation costs.

Products. For the period from January 1, 2023 through May 10, 2023, and the three and nine months ended September 30, 2022, costs of revenues at the Pharmacy business primarily consisted of costs of raw ingredients and materials to compound various drugs and supplements, the cost of manufactured product purchased directly from the distributors for resale, the cost of fulfillment and shipping services and an allocation of facilities, information technology, and depreciation costs. The Pharmacy business purchased these items through a large industry distributor with many suppliers and also sources products and supplies directly with manufacturers. The Pharmacy business was also able to leverage the size of its operations to purchase larger quantities of certain ingredients and materials at lower prices.

Operating Expenses

Sales and Marketing Expenses. S&M expenses ~~consist~~consisted of ~~cost related to~~ compensation and benefits, ~~advertising~~costs ~~and~~related to advertising, marketing programs, and events, ~~fees paid to third party marketing firms,~~ and an allocation of facilities, information technology, and depreciation ~~cost~~costs.

General and Administrative Expenses. G&A expenses ~~include~~consisted of compensation and benefits expense, and other administrative costs, related to its executive, finance, human resources, legal, facilities, and information technology teams, net of allocations to costs of revenues and S&M ~~expenses~~.

Depreciation and Amortization Expenses. Depreciation expense ~~relates~~related to the depreciation of computer equipment, purchased software, furniture and fixtures, and office equipment, ~~and leasehold improvements,~~ net of amounts allocated to costs of revenues. Amortization expense ~~relates~~related to the amortization of intangible assets from the acquisitions of ~~the~~Cloudbreak ~~Services~~and ~~businesses~~Glocal.

Integrated Care Management Segment

Overview

~~Integrated~~As ~~Care~~discussed ~~Management is a healthcare technology business that serves organizations that pay for healthcare~~above, ~~including~~as ~~health~~of ~~plans~~December ~~and state~~28, ~~federal and municipal agencies that ensure the people they sponsor receive high-quality care~~2023, ~~administered~~we ~~and~~no ~~delivered~~longer ~~efficiently~~have ~~and~~an ~~effectively,~~Integrated ~~all~~Care ~~while~~Management ~~driving~~segment ~~health equity so~~ that ~~every~~we ~~individual, family, and community has access to the care they need~~operate.

~~The~~ Integrated Care Management ~~business~~was isour ~~powered~~healthcare bytechnology ~~the~~business ~~SyntraNetTM~~that ~~technology~~served ~~platform~~organizations ~~and~~that ~~applications.~~pay ~~SyntraNetTM~~for ishealthcare, aincluding ~~configurable~~health ~~integrated~~plans ~~health~~and ~~management~~state, ~~platform~~federal ~~that~~and ~~enables~~municipal ~~clinical~~agencies ~~and~~that ~~community-based~~ensure ~~care~~the ~~teams~~people tothey ~~share~~sponsor ~~information,~~receive ~~coordinate~~high-quality care, ~~manage~~administered ~~utilization,~~ and ~~improve~~delivered ~~health~~efficiently ~~outcomes~~ and ~~costs~~effectively, ~~for~~all ~~individuals~~while ~~and~~driving ~~populations~~health –equity ~~especially~~so ~~individuals~~that ~~with~~every ~~complex medical~~individual, ~~behavioral health~~family, and ~~social~~community ~~needs~~has access to the care they need.

“Integrated care” is the collaboration among health professionals to provide complete treatment to patients and improve overall well-being. The Integrated Care Management business was powered by the SyntraNetTM ~~creates~~technology ~~virtual~~platform ~~“care~~and ~~communities”~~applications, –which ~~logical~~under ~~networks~~the ofTransition ~~organizations~~Agreements, ~~care~~we ~~managers~~have ~~and~~provided ~~service~~non-exclusive ~~providers~~licenses –of ~~that~~the ~~function~~applicable assource ancode to our three customers on this business. SyntraNetTM was a configurable integrated health management platform that enabled clinical and community-based care ~~team~~teams to ~~deploy~~share ~~programs~~information, tocoordinate care, manage utilization, and improve health, ~~quality,~~outcomes ~~performance~~and costs for individuals and populations—especially individuals with complex medical, ~~efficiency~~behavioral health, and ~~costs~~social needs.

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~~Core~~Table ~~features~~ of ~~the platform include the ability to:~~Contents

SyntraNetTM created virtual “care communities” – logical networks of organizations, care managers and service providers – that functioned as an integrated care team to deploy programs to improve health, quality, performance, efficiency, and costs.

Core features of the platform included the ability to:

• Create virtual, cross-sector care communities;

• Integrate and organize information from a wide range of health and social health data sources;

• Gain insight into health, risks, and opportunities with advanced analytics;

• Qualify and enroll groups into programs;

• Coordinate care teams across the continuum of care; and

• Analyze and report on various measures of success.

~~SyntraNetTM~~Our ~~provides~~Integrated Care Management platform provided health plans and provider groups the ability to manage health with new value-based models of care. Our clients ~~include~~included the largest public health plan in the United States, entities that are part of the nation’s most comprehensive “whole person care” initiatives, and one of the fastest growing value-based pharmacy benefit managers.

~~Products~~Our ~~are~~Integrated Care Management business sold its products primarily through aits direct sales force, strategic collaborations and external producers in two key areas: payors including health plans and third-party administrators and public entities including state and local health care agencies. ~~Revenues~~Prior ~~are~~to the entry into the Transition Agreements, revenue was derived from license fees, recurring subscription fees, and professional services for implementation.

As discussed in Note 1, Organization and Business, in the Notes to Condensed Consolidated Financial Statements of this Quarterly Report, we deconsolidated UpHealth Holdings as of September 30, 2023. Accordingly, the financial results of the Integrated Care Management business in the three and nine months ended September 30, 2023 and 2022, are included in our unaudited condensed consolidated financial statements. The filing of a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as discussed in Note 1, Organization and Business, occurred on September 19, 2023. Management concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material.

Components of Results of Operations

Revenues

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

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

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

Services. The majority of Integrated Care Management’s contracts to provide professional services ~~are~~were priced on a time and materials basis, whereby revenues ~~are~~were recognized as the services are rendered. In some cases, ~~professional~~Integrated ~~services~~Care ~~contracts~~Management ~~are~~ entered into professional services contracts where professional services fees ~~are~~were defined for specific milestones, whereby revenues ~~are~~were recognized upon achievement of the milestones.

Costs of Revenues

Costs of revenues ~~include~~for Integrated Care Management included: costs related to hosting SyntraNetTM in a HIPAA-compliant cloud environment; costs of third-party product licenses embedded with SyntraNetTM; costs of a core professional services team; and an allocation of facilities, information technology, and depreciation costs. Added compliance requirements for security infrastructure isadded ~~likely to add some~~ additional costs for hosting services. In ~~addition,~~Integrated ~~costs~~Care ~~will~~Management ~~increase~~also added costs for third-party licenses that ~~will~~were be added as the scope and footprint of the technology platform ~~expands~~expanded.

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

AsThird-Party ~~the~~Product ~~capabilities~~Licenses. ofSyntraNetTM ~~cloud~~embeded ~~service~~certain ~~providers~~third-party ~~continues~~technology components to ~~grow,~~support ~~and~~some ~~costs~~of ~~become~~its ~~increasingly~~technology ~~competitive,~~capabilities. weThere ~~will~~were ~~continue~~multiple tovendors ~~evaluate~~for ~~offerings~~these incomponents, ~~the~~and ~~marketplace~~Integrated toCare ~~determine~~Management ~~the~~was ~~optimum~~not ~~mix~~dependent ofon ~~security,~~any ~~reliability,~~specific ~~scalability, and performance to meet customer needs~~vendor.

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~~Hosting~~Table ~~infrastructure costs are related to the number and size~~ of environments deployed for customers and also on the service level agreements (“SLAs”) negotiated with customers. As the average size of customers continues to grow, hosting infrastructure costs are expected to grow as a percentage of revenue.Contents

~~Third-Party~~Professional ~~Product~~Services ~~Licenses~~Team. ~~SyntraNetTM~~Our ~~embeds~~Integrated ~~certain~~Care ~~third~~Management’s professional services team worked closely with the product team and was best understood as an “A-~~party~~team” ~~technology~~created ~~components~~to lead showcase implementations. The goal was to ~~support~~keep ~~some~~the ofprofessional ~~its~~services ~~technology~~team ~~capabilities.~~small ~~There~~in ~~are~~order ~~multiple~~to ~~vendors~~focus ~~for~~it ~~these~~on ~~components,~~deploying ~~and~~reference wecustomers ~~are~~and ~~not~~facilitating ~~dependent~~the on-boarding ~~any~~and ~~specific~~coaching ~~vendor~~of systems integration partners.

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

Operating Expenses

Sales and Marketing Expenses. S&M expenses ~~include~~included an internal sales and marketing team and contracts with business development consultants to generate and qualify leads, and included an allocation of facilities, information technology, and depreciation costs.

Research and Development (“R&D”) Expenses. Integrated Care Management invested in R&D. The core R&D team ~~consists~~consisted of a small team of very experienced software developers. R&D expenses also ~~includes~~included an allocation of facilities, information technology, and depreciation costs.

General and Administrative Expenses. G&A expenses ~~include~~included compensation and benefits expense, and other administrative costs, related to ~~its~~Integrated Care Management's executive, finance, human resources, legal, facilities, and information technology teams, net of allocations to costs of revenues, S&M expenses, and R&D expenses.

Depreciation and Amortization Expenses. Depreciation expense ~~relates~~related to the depreciation of computer equipment, purchased software, furniture and fixtures, and office equipment, net of amounts allocated to costs of revenues. Amortization expense ~~relates~~related to the amortization of intangible assets from the acquisition of ~~the Integrated Care Management business~~Thrasys.

~~UpHealth, Inc. Consolidated Results of Operations~~42

T a b l e o f C o n t e n t s

UPHEALTH, INC. RESULTS OF OPERATIONS

Operating Results

As ~~discussed~~certain inbusinesses ~~Note~~have 1.been ~~Organization~~sold ~~and~~or ~~Business~~deconsolidated, ~~in the Notes to Condensed Consolidated Financial Statements of this Quarterly Report, we deconsolidated UpHealth Holdings~~ as ofdescribed ~~September 30~~above, ~~2023; accordingly,~~ the ~~financial~~numbers ~~results~~presented ofbelow ~~UpHealth Holdings in the three and nine months ended September 30, 2023 and 2022~~ are ~~included~~not indirectly ~~the~~comparable ~~discussion~~between ~~of our financial results in the Services and Integrated Care Management segments~~periods. The filing of a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, as discussed in Note 1. Organization and Business, occurred on September 19, 2023. Management concluded that it would use the September 30, 2023 date for deconsolidation, as the last 12 days in the month were determined to not be material.

AsThe ~~also~~following ~~discussed~~table insets ~~Note~~forth ~~1. Organization and Business, in~~ the ~~Notes~~consolidated ~~to Condensed Consolidated Financial Statements of this Quarterly Report, we deconsolidated Glocal as of July 1, 2022; accordingly, the financial~~ results of ~~Glocal~~operations ~~in the six months ended June 30, 2022 are included in the discussion~~ of our financial results in the Virtual Care Management segment, and the financial results of Glocal in the three months ended September 30, 2022 and the three and nine months ended September 30, 2023 are not included in the discussion our financial results in the Virtual Care Management segment.UpHealth:

As discussed in Note 3. Significant Transactions, in the Notes to Condensed Consolidated Financial Statements of this Quarterly Report, we completed the sale of Innovations Group, which comprised our Pharmacy operations, on May 11, 2023. Accordingly, the financial results of Innovations Group for the period from January 1, 2023 through May 10, 2023 and the three and nine months ended September 30, 2022 are included in the discussion of our financial results for the Services segment.


Consolidated results of operations data	Three Months Ended March 31,
( in thousands)	2024		2023		$ Change		% Change
Revenues:
Services	$	—	$	13,613	$	(13,613)	(100)	%
Licenses and subscriptions	—		1,936		(1,936)		(100)	%
Products	—		9,138		(9,138)		(100)	%
Total revenues	—		24,687		(24,687)		(100)	%
Costs of revenues:
Services	—		6,518		(6,518)		(100)	%
License and subscriptions	—		319		(319)		(100)	%
Products	—		5,359		(5,359)		(100)	%
Total costs of revenues	—		12,196		(12,196)		(100)	%
Gross profit	—		12,491		(12,491)		(100)	%
Operating expenses:
Sales and marketing	91		2,527		(2,436)		(96)	%
Research and development	21		1,043		(1,022)		(98)	%
General and administrative	3,992		10,553		(6,561)		(62)	%
Depreciation and amortization	170		525		(355)		(68)	%
Stock-based compensation	920		981		(61)		(6)	%
Goodwill, intangible asset, and other long-lived asset impairments	—		495		(495)		(100)	%
Acquisition, integration, and transformation costs	176		3,400		(3,224)		(95)	%
Total operating expenses	5,370		19,524		(14,154)		(72)	%
Loss from operations	(5,370)		(7,033)		1,663		24	%
Other expense:
Interest expense	(5,529)		(6,758)		1,229		18	%
Other income, net, including interest income	3,539		58		3,481		(6,002)	%
Total other expense	(1,990)		(6,700)		4,710		70	%
Loss before income tax expense	(7,360)		(13,733)		6,373		46	%
Income tax expense	(4,519)		—

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