The following discussion and analysis of our financial condition and results of
our operations should be read together with our consolidated financial
statements, including the related notes thereto, included elsewhere in this
report. The following discussion contains forward-looking statements based upon
current expectations that involve risks and uncertainties. Our actual results
may differ materially from those anticipated in these forward-looking statements
as a result of various factors, including those set forth under "Risk Factors"
and "Cautionary Note Regarding Forward-Looking Statements" included elsewhere in
this report.



Prior to October 30, 2020, we were known as Healthcare Merger Corp. On October
30, 2020, we completed the Merger Transaction with Legacy SOC Telemed and, for
accounting purposes, Healthcare Merger Corp. was deemed to be the acquired
entity. Unless the context otherwise requires, references in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" to
"we", "our", "us", the "Company" or "SOC Telemed" is intended to mean the
business and operations of SOC Telemed, Inc. and its consolidated subsidiaries
as they currently exist.



Overview



We are the leading provider of acute care telemedicine services and technology
to U.S. hospitals and healthcare systems, based on number of customers. We
provide technology-enabled clinical solutions, which include acute
teleNeurology, telePsychiatry, teleCritical Care (ICU), telePulmonology,
teleCardiology and other specialties. We support time-sensitive specialty care
when patients are vulnerable and may not otherwise have access. Our solution was
developed to support complex workflows in the acute care setting by integrating
our cloud-based software platform, Telemed IQ, with a panel of consult
coordination experts and a network of clinical specialists to create a seamless,
acute care telemedicine solution.



We derive a substantial portion of our revenues from consultation fees generated
under contracts with facilities that access our Telemed IQ software platform and
clinical provider network. In general, our contracts are non-cancellable and
typically have an initial one-to-three-year term, with an automatic renewal
provision. They provide for a predetermined number of consultations for a fixed
monthly fee and consultations in excess of the monthly allotment generate
additional consultation fees, which we characterize as variable fee revenue.
Revenues are driven primarily by the number of facilities, the consultations
from our facilities, the number of services contracted for by a facility, the
contractually negotiated prices of our services, and the negotiated pricing that
is specific to that particular facility.



Our revenues were $94.4 million and $58.0 million for the years ended December
31, 2021 and 2020, respectively, representing a period-over-period increase of
63%, including an incremental $29.3 million of revenues from the Acquisition. We
experienced higher core consultation volume during the year ended December 31,
2021, as compared to the year ended December 31, 2020, due to the Acquisition
and the impact of the COVID-19 pandemic on the utilization of our core services.
In recent periods, we have seen an improvement in our utilization rates for
these services. We incurred net losses of $50.5 million and $49.8 million for
the years ended December 31, 2021 and December 31, 2020, respectively. This
increase was primarily due to our investments in growth, transaction costs
associated with the Acquisition, and costs related to transitioning to becoming
a public company.



Recent Developments


Acquired by patient square capital



On February 2, 2022, we entered into the Transaction Agreement to be acquired by
affiliates of investment funds advised Patient Square Capital, a dedicated
health care investment firm, in an all-cash transaction that values SOC Telemed
at approximately $364 million, including net debt. Subject to the terms,
conditions and certain exceptions set forth in the Transaction Agreement, SOC
Telemed stockholders will receive $3.00 per share in cash, without any interest
and subject to applicable withholding taxes, upon completion of the Transaction.
The Transaction is expected to be completed in the second quarter of 2022,
subject to the satisfaction or waiver of customary closing conditions, including
the adoption and approval of the Transaction Agreement by SOC Telemed
stockholders. See Note 27, Subsequent Events, in our consolidated financial
statements included elsewhere in this report for further information.



Because the Transaction is not yet complete, and except as otherwise
specifically stated, the descriptions and disclosures presented elsewhere in
this report, including those that present forward-looking information as that
term is defined elsewhere herein, assume the continuation of SOC Telemed as a
public company. If the Transaction is consummated, our actions and results may
be different than those anticipated by such forward-looking statements contained
in this report, and such differences may be material.



                                       44





COVID-19 Update



The COVID-19 pandemic had an impact on the utilization levels of our core
services when it was declared a global pandemic in March 2020, and, as a result,
our financial condition and year-to-date results of operations have been
negatively impacted. Immediately following the declaration of COVID-19 as a
global pandemic, the utilization levels of our core services decreased by
approximately 40% in the aggregate. We have seen improvement in the utilization
rates of these solutions in recent periods and have nearly returned to normal
utilization levels in the third quarter of 2021.



The future impact of the COVID-19 pandemic on our operational and financial
performance will depend on certain developments, including the duration and
spread of the pandemic and the emergence of new variants of COVID-19, the impact
on our customers and our sales cycles, the impact on our marketing efforts, and
the effect on our suppliers, all of which are uncertain and cannot be predicted.
Public and private sector policies and initiatives to reduce the transmission of
COVID-19 and disruptions to our and our customers' operations and the operations
of our third-party suppliers, along with any related global slowdown in economic
activity, may result in decreased revenues and increased costs, and we expect
such impacts on our revenues and costs to continue through the duration of the
pandemic. Further, the economic effects of COVID-19 have financially constrained
some of our prospective and existing customers' healthcare spending, offset by
the increasing awareness that telemedicine can be a more cost-efficient model
for hospitals and health systems to provide access to critical, clinical
specialists and mitigate business disruption by assuring continuity of access to
those providers. We have taken measures in response to the COVID-19 pandemic,
including temporarily closing our offices and implementing a work-from-home
policy for our workforce; suspending employee travel and in-person meetings;
modifying our clinician provisioning protocols; and adjusting our supply chain
and equipment levels. We may take further actions that alter our business
operations as may be required by federal, state or local authorities or that we
determine are in the best interests of our employees, customers, and
stockholders. The net impact of these dynamics may negatively impact our ability
to acquire new customers, complete implementations, and renew contracts with or
sell additional solutions to our existing customers. The extent to which the
COVID-19 pandemic may materially impact our financial condition, liquidity or
results of operations is uncertain. It is possible that the COVID-19 pandemic,
the measures taken by the U.S. government, as well as state and local
governments in response to the pandemic, and the resulting economic impact may
materially and adversely affect our results of operations, cash flows and
financial positions as well as our customers.



We believe our business is well-positioned to benefit from the trends that are
accelerating digital transformation of the health care industry as a result of
the COVID-19 pandemic. The COVID-19 pandemic has had a significant impact on the
telemedicine market by increasing utilization, awareness and acceptance among
patients and providers. In the current environment, telemedicine has been
promoted at the highest levels of government as a key tool for on-going
healthcare delivery while access to healthcare facilities remains limited due to
constraints in healthcare facilities' resources and general patient fear of
traditional in-person visits. Moreover, with clinicians quarantined or otherwise
relegated to their homes due to safety issues, telemedicine has provided a
solution for remote providers to continue to care for patients and for hospitals
to access additional specialists to augment remaining staff. During the COVID-19
pandemic, the U.S. Congress and the CMS have significantly reduced regulatory
and reimbursement barriers for telemedicine. As a result, telemedicine spending
increased starting in 2020, and we expect this trend to continue after the
public health emergency. In addition to Medicare and Medicaid, many states have
issued executive orders or permanent legislation removing or reducing the
regulatory and reimbursement barriers for telemedicine.



Key Factors Affecting SOC Telemed Performance



The following factors have been important to our business and we expect them to
impact our business, results of operations and financial condition in future
periods:



Attracting new facilities


Sustaining our growth requires continued adoption of our clinical solutions and
platform by new and existing facilities. We will continue to invest in building
brand awareness as we further penetrate our addressable markets. Our revenue
growth rate and long-term profitability are affected by our ability to increase
our number of facilities because we derive a substantial portion of our revenues
from fixed and variable consultation fees. Our financial performance will depend
on our ability to attract, retain and cross-sell additional solutions to
facilities under favorable contractual terms. We believe that increasing our
facilities is an integral objective that will provide us with the ability to
continually innovate our services and support initiatives that will enhance
experiences and lead to increasing or maintaining our existing recurring revenue
streams.


Increase in the number of consultations on the SOC Telemedicine Platform

Our revenues are generated from consultations performed on our platform. We also
realize variable revenue from facilities in connection with the completion of
consultations that are in excess of their contracted number of monthly
consultations. Accordingly, our consultation fee revenue generally increases as
the number of visits increase. Consultation fee revenue is driven primarily by
the number of consultations and facility utilization of our network of providers
and the contractually negotiated prices of our services. Our success in driving
increased utilization within the facilities under contract depends in part on
the expansion of service lines with existing customers and the effectiveness of
our customer success organization which we deploy on-site and through targeted
engagement programs. We believe that increasing our current facility utilization
rate is a key objective in order for our customers to realize tangible clinical
and financial benefits from our solutions.



                                       45




Continuous investment in growth



We plan to continue investing in our business, including our internally
developed Telemed IQ software platform, so we can capitalize on our market
opportunity and increasing awareness of the clinical and financial value that
can be realized with telemedicine. We expect to continue to make focused
investments in marketing to drive brand awareness, increase the number of
opportunities and expand our digital footprint. We also intend to continue to
invest in our customer success function to target expansion of our business and
to attract new facilities. Although we expect these activities will increase our
net losses in the near term, we believe that these investments will contribute
to our long-term growth and positively impact our business and results of
operations.



Key Performance Measures



We review several key performance measures, discussed below, to evaluate
business and results, measure performance, identify trends, formulate plans and
make strategic decisions. We believe that the presentation of such metrics is
useful to its investors because they are used to measure and model the
performance of companies such as ours, with recurring revenue streams.



Number of facilities


We believe that the number of facilities using our platform are indicators of
future revenue growth and our progress on our path to long-term profitability
because we derive a substantial portion of our revenues from consultation fees
under contracts with facilities that provide access to our professional provider
network and platform. A facility represents a distinct physical location of a
medical care site. The Acquisition of Access Physicians contributed 190
facilities as of December 31, 2021.



                   As of
               December 31,
              2021       2020
Facilities     1,112       831




Bookings


We believe that new bookings are an indicator of future revenue growth and
provide investors with useful information on period-to-period performance as
evaluated by management and as a comparison to our past financial performance.
Prior to the Acquisition, we defined bookings as the minimum contractual value
for the initial 12 months of a contract as of the contract execution date, which
amount included the minimum fixed consultation revenue, upfront implementation
fees and technology and support fees, but excluded estimates of variable revenue
for utilization in excess of the contracted amounts of consultations. Following
the Acquisition, we changed our definition of bookings to reflect the annual
recurring revenue from new contracts signed during a given period, which we
believe more closely represents the annual revenues expected from those new
agreements and creates a single definition for bookings between SOC Telemed and
Access Physicians. As now defined, bookings represent the estimated annual
recognized revenue for the initial 12 months of a contract as of the contract
execution date. The minimum fixed consultation revenue, estimated variable fee
revenue, 12 months of amortized upfront implementation fees, and technology and
support fees are included in bookings. The minimum fixed consultation fee,
variable fee revenue, as well as the technology and support fees are invoiced
and recognized as revenues on a monthly basis. The upfront implementation fees
are invoiced upon contract signing and accounted for as deferred revenues and
amortized over our average customer relationship period. Bookings for the year
ended December 31, 2021, are inclusive of activity from Access Physicians for
the full period. Bookings attributable to Access Physicians prior to the closing
date of the Acquisition were $5.1 million.



                   Year Ended
                  December 31,
               2021             2020
             (dollars in thousands)
Bookings   $     31,825       $ 12,161




                                       46





Number of implementations


An implementation is the process by which we enable a new service offering at a
facility. We determine a new service offering has been enabled when facilities
are fully able to access our platform, which typically involves designing the
solution, credentialing and privileging physicians, testing and installing
telemedicine technologies, and training facility staff. Implementations result
in new customers utilizing our services or delivery of new services to existing
customers and are an indicator of revenue growth. Implementations for the year
ended December 31, 2021, are inclusive of activity from Access Physicians for
the full period. Implementations attributable to Access Physicians prior to the
closing date of the Acquisition were 38.



                     Year Ended
                    December 31,
                   2021       2020
Implementations       390       260




Number of consultations



Because our consultation fee revenue generally increases as the number of visits
increase, we believe the number of consultations provides investors with useful
information on period-to-period performance as evaluated by management and as a
comparison to our past financial performance. We define core consultations as
consultations utilizing our 11 core services. Telemed IQ / other consultations
are defined as consultations performed by other physician networks utilizing our
technology platform, Telemed IQ. We experienced increased core consultation
volume and Telemed IQ / other consultation volume for the year ended December
31, 2021, as compared to the year ended December 31, 2020, due to the impact of
the COVID-19 pandemic on the utilization of our core services during 2020. Core
consultations for the year ended December 31, 2021, include 109,723 core
consultations attributable to Access Physicians since the closing date of the
Acquisition.



                                         Year Ended
                                        December 31,
                                     2021          2020
Core consultations                   254,814       129,606

Telemed IQ / other consultations 254,002 171,218 Total consultations

                  508,816       300,824




Components of operating results


Revenues



We enter into contracts with hospitals or hospital systems, physician practice
groups, and other users. Under the contracts, the customers pay a fixed monthly
fee for access to our Telemed IQ software platform and our clinical provider
network. The fixed monthly fee provides for a predetermined number of monthly
consultations. Should the number of consultations exceed the contracted amount,
the customer also pays a variable consultation fee for the additional
utilization. Under certain contracts, we receive payments from patients,
third-party payers and others for services rendered. The third-party payers pay
us based on contracted rates or the entities' billed charges. To facilitate the
delivery of the consultation services, facilities use telemedicine equipment,
which is either provided and installed by us or procured by the customer from
external vendors. Customers of Access Physicians are sold a telemedicine cart
with a computer and camera in order to properly facilitate meetings between
patients, on-site health professionals, and remote physicians. We also provide
the facilities with user training as well as technology and support services,
which include monitoring and maintenance of our telemedicine equipment and
access to our reporting portal. Prior to the start of a contract, customers make
upfront non-refundable payments when contracting for implementation services.



Revenue is primarily determined by the number of installs, the number of services contracted by installs, the usage of our services and the contractually negotiated prices of our services.

The Company recognizes revenue using a five-step model:


  1) Identify the contract(s) with a customer;




  2) Identify the performance obligation(s) in the contract;




  3) Determine the transaction price;



    4)  Allocate the transaction price to the performance obligations in the
        contract; and




  5) Recognize revenue when (or as) it satisfies a performance obligation.




                                       47





Revenues are recognized when we satisfy our performance obligation to provide
telemedicine consultation services as requested. These consultations covered by
the fixed monthly fee, consultations that incur a variable fee, services
rendered to be paid by patients and third-party payers, use of telemedicine
equipment, training, maintenance, and support are substantially the same and
have the same pattern of transfer. Therefore, we have determined these represent
a series of distinct services provided over a period of time in a single
performance obligation. Access Physicians sells telemedicine carts to its
customers and satisfaction of this performance obligation occurs upon delivery
to the customer when control of the telemedicine cart is transferred. Revenues
from telemedicine cart sales is recognized at a point in time, upon delivery. We
have assurance-type warranties that do not result in separate performance
obligations. Upfront nonrefundable fees do not result in the transfer of
promised goods or services to the customer; therefore, we defer this revenue and
recognize it over the average customer life of 48 months. Deferred revenue
consists of the unamortized balance of nonrefundable upfront fees and
maintenance fees, which are classified as current and non-current based on when
we expect to recognize revenue.



See “- Critical Accounting Policies and Estimates – Revenue Recognition” for a more detailed discussion of our revenue recognition policy.


Cost of Revenues



Cost of revenues primarily consists of fees paid to our physicians, costs
incurred in connection with licensing our physicians, equipment leasing,
maintenance and depreciation, amortization of capitalized software development
costs (internal-use software), and costs related to medical malpractice
insurance. Cost of revenues is driven primarily by the number of consultations
completed in each period. Our business and operational models are designed to be
highly scalable and leverage variable costs to support revenue-generating
activities. We will continue to invest additional resources in our platform,
providers, and clinical resources to expand the capability of our platform and
ensure that customers are realizing the full benefit of our offerings. The level
and timing of investment in these areas could affect our cost of revenues in the
future.


Gross profit and gross margin



Our gross profit is our total revenues minus our total cost of revenues, and our
gross margin is our gross profit expressed as a percentage of our total
revenues. Our gross margin has been and will continue to be affected by a number
of factors, most significantly the fees we charge and the number of
consultations we complete.



Selling, general and administrative expenses



Our selling, general and administrative expenses consist of sales and marketing,
research and development, operations, and general and administrative expenses.
Personnel costs are the most significant component of selling, general and
administrative expenses and consist of salaries, benefits, bonuses, stock-based
compensation expense, and payroll taxes. Selling, general and administrative
expenses also include overhead costs for facilities, professional fees, and
shared IT related expenses, including depreciation expense.



Sales and Marketing



Sales and marketing expenses consist primarily of personnel and related expenses
for our sales, customer success, and marketing staff, including costs of
communications materials that are produced to generate greater awareness and
utilization among our facilities. Marketing costs also include third-party
independent research, trade shows and brand messages, public relations costs and
stock-based compensation for our sales and marketing employees. Our sales and
marketing expenses exclude any allocation of occupancy expense and depreciation
and amortization.


Research and development



Research and development, or R&D expense, consists primarily of engineering,
product development, support and other costs associated with products and
technologies that are in development. These expenses include employee
compensation, including stock-based compensation. We expect R&D expenses as a
percentage of revenues to vary over time depending on the level and timing of
our new product development efforts, as well as the development of our clinical
solutions and other related activities.



Operations


Operating expenses primarily include personnel costs and related expenses for our physician licensing, accreditation and privilege functions, project management, implementation, consultation coordination center, revenue cycle management and clinical supply.


General and Administrative


General and administrative expenses include personnel and related expenses of,
and professional fees incurred by, our executive, finance, legal, information
technology infrastructure, and human resources departments. They also include
stock-based compensation, all facilities costs including utilities,
communications and facilities maintenance, and professional fees (including
legal, tax, and accounting). Additionally, during 2020, we incurred significant
integration, acquisition, transaction and executive severance costs in
connection with the Merger Transaction, including incremental expenses such as
advisory, legal, accounting, valuation, and other professional or consulting
fees, as well as other related incremental executive severance costs. During
2021, we have incurred significant integration, acquisition, severance and
transaction costs in connection with the Acquisition and restructuring.



                                       48




Depreciation and amortization

Amortization mainly includes the amortization of fixed assets, the amortization of capitalized software development costs (software for internal use) and the amortization of intangible assets related to acquisitions.

Changes in fair value of contingent consideration

Changes in fair value of contingent consideration consist of changes in the fair
value of contingent consideration associated with the Acquisition of Access
Physicians in March 2021. See Note 4, Business Combinations, to our consolidated
financial statements included elsewhere in this report for further information.



Gain on liabilities related to the issuance of contingent shares



Gain on contingent shares issuance liabilities consists of the change in the
fair value of (1) 1,875,000 shares of our Class A common stock held by HCMC's
sponsor and subsequently distributed to its permitted transferees which were
modified and became subject to forfeiture in connection with the closing of the
Merger Transaction, and (2) 350,000 private placement warrants granted to HCMC's
sponsor and subsequently distributed to its permitted transferees as part of the
Merger Transaction. The contingent shares issuance liabilities are revalued at
their fair value every reporting period. See Note 6, Fair Value of Financial
Instruments, and Note 17, Contingent Shares Issuance Liabilities, to our
consolidated financial statements included elsewhere in this report for further
information.


Gain on callable option liabilities



Gain on puttable option liabilities consists of changes in the fair value of
puttable option liabilities. These puttable options are no longer outstanding as
they were exercised as part of the Merger Transaction on October 30, 2020.

Interest Expense


Interest expense consists primarily of interest incurred on our outstanding
indebtedness and non-cash interest related to the amortization of debt discount
and issuance costs associated with our Term Loan Facility and the Subordinated
Note.



Results of Operations


Comparison of the years ended December 31, 2021 and 2020

The following table presents data from our Consolidated Statements of Income for the years ended December 31, 2021 and 2020:


                                                          Year Ended
                                                         December 31,
                                                      2021          2020
                                                        (in thousands)
Consolidated Statement of Operations data:
Revenues                                            $  94,442     $  57,995
Cost of revenues                                       64,091        38,542
Operating expenses
Selling, general and administrative                    86,606        61,280
Changes in fair value of contingent consideration      (3,265 )           -
Total costs and expenses                              147,432        99,822
Loss from operations                                  (52,990 )     (41,827 )

Gain on contingent share issuance liabilities 11,325 4,237 Gain on puttable option liabilities

                         -             1
Interest expense                                       (6,800 )     (12,152 )
Interest expense - Related party                       (2,229 )         (75
)
Loss before income taxes                              (50,694 )     (49,816 )
Income tax benefit (expense)                              152           (31 )
Net loss                                            $ (50,542 )   $ (49,847 )




                                       49





Revenues



                Year Ended
               December 31,
             2021         2020        Change       % Change
                        (dollars in thousands)
Revenues   $ 94,442     $ 57,995     $ 36,447             63 %




Revenues increased primarily due to the Acquisition, which contributed $29.3
million in incremental revenue. The increase was also due to an increase in
fixed fees of $5.0 million attributable to new implementations and facilities
and an increase in variable fee revenue of $2.1 million driven by an increase in
core consultation volume.


Revenue Cost and Gross Margin


                        Year Ended
                       December 31,
                     2021         2020        Change       % Change
                                (dollars in thousands)
Cost of revenues   $ 64,091     $ 38,542     $ 25,549             66 %
Gross margin             32 %         34 %




Cost of revenues increased primarily due to the Acquisition, which contributed
$19.1 million in incremental costs. The increase was also driven by an increase
of $5.0 million in physician fees due to an increase in our scheduled hours over
the same period due to the recovery of demand for services and an increase of
$1.4 million in equipment, licensing, and medical malpractice costs.



The decline in gross margin is mainly attributable to an increase in basic consulting volume during the year ended December 31, 2021due to increased demand for our services, which required us to increase our scheduled hours, resulting in increased physician fees.

Selling, general and administrative expenses


                                                      Years Ended
                                                     December 31,
                                                  2021          2020         Change        % Change
                                                               (dollars in thousands)
Selling, general and administrative expenses:
Sales and marketing                             $   8,861         7,446     $   1,415             19 %
Research and development                            2,894         1,376         1,518            110 %
Operations                                         10,328         9,032         1,296             14 %
General and administrative                         64,523        43,426        21,097             49 %
 Total                                          $  86,606     $  61,280     $  25,326             41 %



Sales and marketing expenses increased due to investments in our go-to-market strategy and additional headcount for our sales and marketing teams.

Research and development spending has increased as we continue to invest in product development.

Operating expenses increased due to salaries, benefits and stock-based compensation associated with the increased headcount of our operations team, including revenue cycle management, certification , licenses and privileged personnel.



General and administrative expenses increased primarily due to $15.3 million
attributable to the Acquisition and $5.2 million in integration, acquisition,
transaction and executive severance costs in connection with the Merger
Transaction, the Acquisition and the restructuring, and other costs associated
with operating as a publicly traded company, offset by a $3.2 million decrease
in stock-based compensation.



                                       50




The following table reflects the share of total selling, general and administrative expenses related to stock-based compensation, depreciation and amortization and integration costs for the year ended December 31, 2021compared to the year ended December 31, 2020:


                                                     Year Ended                                                Year Ended
                                                    December 31,                                              December 31,
                                                        2021                                                      2020
                                                                                                              Depreciation
                                Stock-Based        Depreciation and       Integration       Stock-Based            and           Integration
                                Compensation         Amortization          Costs (1)        Compensation      Amortization        Costs (1)
                                                                           (dollars in thousands)
Sales and marketing            $          255     $                      $                 $           41     $           -     $           -
Research and development                  661                                                         143                 -                 -
Operations                                612                                                         114                 -                 -
General and administrative             13,226                  4,231            12,499             17,611             1,593             7,304
Total                          $       14,754     $            4,231     $      12,499     $       17,909     $       1,593     $       7,304



 (1) Represents integration, acquisition, transaction and severance costs.

Changes in fair value of contingent consideration


                                                  Year Ended
                                                 December 31,
                                              2021           2020         Change         % Change
                                                            (dollars in thousands)
Changes in fair value of contingent
consideration                              $    3,265     $        -     $   3,265                *




 * Percentage not meaningful



Changes in the fair value of contingent consideration increased due to the revaluation of the fair value of contingent consideration recognized as part of the acquisition.


Loss from Operations



                            Year Ended
                           December 31,
                         2021         2020        Change       % Change
                                    (dollars in thousands)
Loss from operations   $ 52,990     $ 41,827     $ 11,163             27 %




* Percentage not meaningful




Loss from operations increased due to an increase in selling, general and
administrative expenses primarily due to integration, transaction and executive
severance costs in connection with the Acquisition and the restructuring, and
costs associated with operating as a publicly traded company.



Gain on liabilities related to the issuance of contingent shares


                                                 Year Ended
                                                December 31,
                                             2021          2020         Change        % Change
                                                          (dollars in thousands)
Gain on contingent shares issuance
liabilities                                $  11,325     $   4,237     $   7,088            167 %



The gain on contingent share issuance liabilities increased due to the sharper decline in our share price during the year ended December 31, 2021 compared to the period of October 30, 2020 for December 31, 2020.


                                       51




Gain on callable option liabilities


                                         Year Ended
                                        December 31,
                                      2021        2020      Change      % Change
                                                (dollars in thousands)

Gain on puttable options liability $ – $1 $ (1 )

    *




* Percentage not meaningful




Gain on puttable option liabilities decreased to $0 for the year ended December
31, 2021, because the puttable options ceased to be outstanding upon their
exercise in connection with the closing of the Merger Transaction in the fourth
quarter of 2020.



Interest Expense



                        Year Ended
                       December 31,
                    2021         2020        Change      % Change
                               (dollars in thousands)
Interest expense   $ 9,029     $ 12,227     $ (3,198 )         (26 )%




Interest expense decreased primarily due to a prepayment premium and
acceleration of the amortization of discount fees in connection with the payoff
of existing debt at the closing of the Merger Transaction in the fourth quarter
of 2020.



Income Tax Benefit (Expense)



                                  Year Ended
                                 December 31,
                                2021       2020       Change      % Change
                                          (dollars in thousands)
Income tax benefit (expense)   $   152     $ (31 )   $    183             *




* Percentage not meaningful



Income tax expense decreased due to the release of a valuation allowance upon recognition of a deferred tax liability in connection with the acquisition.


Net Loss



                Year Ended
               December 31,
             2021         2020        Change      % Change
                        (dollars in thousands)
Net loss   $ 50,542     $ 49,847     $    695             1 %



Net loss increased due to the increase in operating loss described above, a gain on liabilities related to the issuance of contingent shares and a decrease in interest expense.


                                       52




Certain Non-GAAP Financial Measures



We believe that, in addition to our financial results determined in accordance
with U.S. generally accepted accounting principles ("GAAP"), adjusted gross
profit, adjusted gross margin, and adjusted EBITDA, all of which are non-GAAP
financial measures, are useful in evaluating our business, results of
operations, and financial condition.



                                Year Ended
                               December 31,
                            2021            2020
                          (dollars in thousands)
Adjusted gross profit   $     35,501      $  23,429
Adjusted gross margin             38 %           40 %
Adjusted EBITDA         $    (19,444 )    $ (11,111 )



However, our use of the terms adjusted gross profit, adjusted gross margin and
adjusted EBITDA may vary from that of others in our industry. Adjusted gross
profit, adjusted gross margin and adjusted EBITDA should not be considered as an
alternative to gross profit, net loss, net loss per share or any other
performance measures derived in accordance with GAAP as measures of performance.
Adjusted gross profit, adjusted gross margin and adjusted EBITDA have important
limitations as analytical tools and you should not consider them in isolation or
as a substitute for analysis of our results as reported under GAAP. Some of
these limitations include:



    ?   Adjusted EBITDA does not reflect the significant interest expense on our
        debt;




    ?   although depreciation and amortization are non-cash charges, the assets
        being depreciated and amortized will often have to be replaced in the
        future, and adjusted EBITDA does not reflect any expenditures for such
        replacements; and



? other companies in our industry can calculate these financial measures

differently than us, which limits their usefulness as comparative measures.




We compensate for these limitations by using these non-GAAP financial measures
along with other comparative tools, together with GAAP measurements, to assist
in the evaluation of operating performance. Such GAAP measurements include gross
profit, net loss, net loss per share and other performance measures. In
evaluating these financial measures, you should be aware that in the future we
may incur expenses similar to those eliminated in the presentation of our
non-GAAP financial measures. Our presentation of non-GAAP financial measures
should not be construed as an inference that our future results will be
unaffected by unusual or nonrecurring items. When evaluating our performance,
you should consider these non-GAAP financial measures alongside other financial
performance measures, including the most directly comparable GAAP measures set
forth in the reconciliation tables below and our other GAAP results.



Adjusted gross profit and adjusted gross margin



Adjusted gross profit and adjusted gross margin are non-GAAP financial measures
that our management uses to assess our overall performance. We define adjusted
gross profit as GAAP gross profit, plus depreciation and amortization (including
internal-use software), equipment leasing costs and stock-based compensation.
Our practice of procuring equipment through lease financing ceased in the second
quarter of 2017. We define adjusted gross margin as our adjusted gross profit
divided by our revenues. We believe adjusted gross profit and adjusted gross
margin provide our management and investors consistency and comparability with
our past financial performance and facilitate period-to-period comparisons of
operations, as these metrics eliminate the effects of depreciation and
amortization and equipment lease costs. The following table presents a
reconciliation of adjusted gross profit from the most comparable GAAP measure,
gross profit, for the periods presented:



                                                 Year Ended
                                                December 31,
                                             2021          2020         Change        % Change
                                                          (dollars in thousands)
Revenues                                   $  94,442     $  57,995     $  36,447             63 %
Cost of revenues                              64,091        38,542        25,549             66 %
Gross profit                                  30,351        19,453        10,898             56 %
Add:
Depreciation and amortization                  5,082         3,910         1,172             30 %
Equipment leasing costs                            8            66           (58 )          (88 )%
Stock-based compensation(1)                       60             -            60              *
Adjusted gross profit                      $  35,501     $  23,429        12,072             52 %
Adjusted gross margin (as a percentage
of revenues)                                      38 %          40 %



* Percentage not significant

(1) Equity compensation relates to physician participation in our ESPP.



                                       53




Adjusted gross margin increased primarily due to increased demand for basic consultations and acquisition during the same period.



Adjusted gross margin decreased in 2021 as the increase in core consultation
volume in the year ended December 31, 2021 due to increased demand for our
services required us to increase the number of our scheduled hours resulting in
increased physicians fees.



Adjusted EBTIDA


We believe that adjusted EBITDA enhances an investor's understanding of our
financial performance as it is useful in assessing our operating performance
from period-to-period by excluding certain items that we believe are not
representative of our core business. Adjusted EBITDA consists of net loss before
interest, taxes, depreciation and amortization (including internal-use
software), write off of property and equipment, net, stock-based compensation,
gain on puttable option liabilities, gain on contingent shares issuance
liabilities, gain on change in fair value of contingent consideration, and
integration, acquisition, transaction and executive severance costs. We believe
adjusted EBITDA is useful in evaluating our operating performance compared to
that of other companies in our industry as this metric generally eliminates the
effects of certain items that may vary from company to company for reasons
unrelated to overall operating performance. The following table reconciles
net
loss to adjusted EBITDA:



                                                 Year Ended
                                                December 31,
                                             2021          2020         Change        % Change
                                                          (dollars in thousands)
Net loss                                   $ (50,542 )   $ (49,847 )   $    (695 )            1 %
Add:
Interest expense                               9,029        12,227        (3,198 )          (26 )%
Income tax (benefit) expense                    (152 )          31          (183 )            *
Depreciation and amortization                  9,313         5,503         3,810             69 %
Write off of property and equipment, net         185             -           185              *
Stock-based compensation                      14,814        17,909        (3,095 )          (17 )%
Gain on contingent shares issuance
liabilities                                  (11,325 )      (4,237 )      (7,088 )          167 %
Gain on puttable option liabilities                -            (1 )           1              *
Gain on change in fair value of
contingent consideration                      (3,265 )           -        (3,265 )            *
Integration, acquisition, transaction,
and executive severance costs                 12,499         7,304         5,195             71 %
Adjusted EBITDA                            $ (19,444 )   $ (11,111 )   $  (8,333 )           75 %




 * Percentage not meaningful



Adjusted EBITDA decreased primarily due to an increase in selling, general, and
administrative expenses from the Acquisition and due to operating as a public
company, offset by an increase in gross profit due to increased demand for
our
services.


Cash and capital resources



As of December 31, 2021, our principal source of liquidity was cash and cash
equivalents of $38.9 million. We believe that our cash and cash equivalents as
of December 31, 2021 will be sufficient to meet our capital requirements and
fund our operations for at least the next 12 months. We expect our principal
sources of liquidity will continue to be our cash and cash equivalents and any
additional capital we may obtain through additional equity or debt financings.
Our future capital requirements will depend on many factors, including
investments in growth and technology. We may in the future enter into
arrangements to acquire or invest in complementary businesses, services, and
technologies which may require us to seek additional equity or debt financing.



On February 2, 2022, we entered into the Transaction Agreement to be acquired by
affiliates of investment funds advised Patient Square Capital in an all-cash
transaction. We have agreed to various covenants and agreements in the
Transaction Agreement, including, among others, covenants to conduct our
business in all material respects in the ordinary course during the period
between the date of the Transaction Agreement and the completion of the
Transaction. In addition, without the consent of Spark Parent, we will not
engage in certain types of transactions or take certain actions outside of the
ordinary course during such period, including incurring additional debt or
issuing any equity securities outside of certain limited exceptions. If the
Transaction Agreement is terminated in certain circumstances, including by us in
order to enter into a superior proposal or by Spark Parent because the Board
withdraws its recommendation in favor of the Transaction, we would be required
to pay Spark Parent a termination fee of $11.5 million. We do not believe these
restrictions will prevent us from meeting our debt obligations, ongoing costs of
operations, working capital needs or capital expenditure requirements. See Note
27, Subsequent Events, in our consolidated financial statements included
elsewhere in this report for further information.



                                       54





Indebtedness



Term Loan Facility



On March 26, 2021, we entered into the Term Loan Agreement with SLR Investment,
as collateral agent on behalf of the individual lenders, providing for a Term
Loan Facility of up to $125.0 million. Under the Term Loan Facility, $85.0
million was immediately available and borrowed on March 26, 2021, in two
tranches consisting of $75.0 million ("Term A1 Loan") and $10.0 million ("Term
A2 Loan" and, together with the Term A1 Loan, the "Term A Loans") to finance a
portion of the closing cash consideration for the Acquisition. An additional $15
million will be made available subject to the terms and conditions of the Term
Loan Agreement in two tranches as follows: (i) a $2.5 million ($12.5 million if
the Term A2 Loan is earlier prepaid) to be drawn by June 20, 2022 ("Term B
Loan"), subject to no event of default as defined in the Term Loan Agreement and
the Company achieving the net revenue milestone of at least $55.0 million on a
trailing six-month basis by June 20, 2022; and (ii) a $12.5 million to be drawn
by December 20, 2022 ("Term C Loan"), subject to no event of default as defined
in the Term Loan Agreement and the Company achieving the net revenue milestone
of at least $65.0 million on a trailing six-month basis by December 20, 2022.
The Term Loan Facility also provides for an uncommitted term loan in the
principal amount of up to $25.0 million ("Term D Loan" and, collectively with
the Term A Loans, the Term B Loan and the Term C Loan, the "Term Loans"), which
availability is subject to the sole and absolute discretionary approval of the
lenders and the satisfaction of certain terms and conditions in the Term Loan
Agreement.



Borrowings under the Term Loan Facility bear interest at a rate per annum equal
to 7.47% plus the greater of (a) 0.13% and (b) LIBOR (the "Applicable Rate"),
payable monthly in arrears beginning on May 1, 2021. Until May 1, 2024, the
Company will pay only interest monthly. However, the Term Loan Agreement has an
interest-only extension clause which offers the Company the option to extend the
interest-only period for six months until November 1, 2024, after having
achieved two conditions: (i) a minimum of six months of positive EBITDA prior to
January 31, 2024; and (ii) being in compliance with the net revenue financial
covenant described below. In either case, the maturity date for each Term Loan
is April 1, 2026.


The Term Loan Agreement includes two financial covenants requiring (i) the
maintenance of a minimum liquidity level of at least $5.0 million at all times;
and (ii) minimum net revenues measured quarterly on a trailing twelve-month
basis of at least $81.8 million on March 31, 2022, $88.2 million on June 30,
2022, $94.5 million on September 30, 2022, $100.9 million on December 31, 2022,
and thereafter 60% of projected net revenues in accordance with an annual plan
to be submitted to the lenders commencing on March 31, 2023. The Term Loan
Agreement also contains customary affirmative and negative covenants which, in
certain circumstances, would limit the Company's ability to engage in mergers or
acquisitions and dispose of any of its subsidiaries.



The term loan facility is guaranteed by all of the Company’s wholly-owned subsidiaries, including the entities acquired in connection with the Acquisition, subject to customary exceptions. The term loan facility is secured by first ranking security interests in substantially all of the Company’s assets, subject to permitted liens and other customary exceptions.

On June 4, 2021, we used a portion of the proceeds from our public offering that
was completed in June 2021 to make a payment of $10.5 million to repay the Term
A2 Loan, including related prepayment premiums and accrued interest.



On November 10, 2021, we entered into an amendment to the Term Loan Agreement,
pursuant to which the net revenue milestone for the Term B Loan was reduced from
$55.0 million to $51.5 million on a trailing six-month basis, which made the
tranche immediately available to be drawn. In connection with the amendment, we
borrowed the full $12.5 million of the Term B Loan on November 10, 2021.



From December 31, 2021the outstanding principal balance of these term loans was $87.5 million.

See Note 12, Debt, in our consolidated financial statements included elsewhere in this report for more information.


Subordinated Note


On March 26, 2021, the Company issued the Subordinated Note in an aggregate
principal amount of $13.5 million in favor of SOC Holdings LLC, an affiliate of
Warburg Pincus, for proceeds at closing of $11.5 million, which proceeds were
used to finance a portion of the closing cash consideration for the Acquisition.
The unpaid balance of the Subordinated Note accrues interest at an escalating
rate per annum initially equal to 7.47% plus the Applicable Rate under the Term
Loan Facility, increasing to 10.87% plus the Applicable Rate on September 30,
2021, and then an additional 2.00% each year thereafter, and will be added to
the principal amount of the Subordinated Note on a monthly basis. The maturity
date of the Subordinated Note is the earliest to occur of September 28, 2026,
and the occurrence of a change of control. The Subordinated Note is fully
subordinated to the Term Loan Facility and may only be repaid in accordance with
the terms of the Term Loan Agreement. The Subordinated Note further provides
that we are obligated to repay a portion of the principal amount outstanding
under the Term Loan Facility and the balance of the Subordinated Note from the
proceeds of any offering by us of our equity securities. On June 4, 2021, we
used a portion of the proceeds from our public offering that was completed in
June 2021 to make a payment of $13.7 million to repay the balance of the
Subordinated Note.



See Note 12, Debt, in our consolidated financial statements included elsewhere in this report for more information.


                                       55





Cash Flows



The following table shows a summary of our cash flows for the periods presented:



                                               Year Ended
                                              December 31,
                                           2021          2020
                                             (in thousands)
Net cash (used in) provided by:
Operating activities                     $ (40,075 )   $ (22,576 )
Investing activities                       (94,078 )      (6,530 )
Financing activities                       134,259        63,319

Net increase in cash, cash equivalents $106 $34,213



Operating Activities


Net cash used in operating activities for the year ended December 31, 2021, was
$40.1 million, consisting primarily of a net loss of $50.5 million and an
increase in working capital of $3.3 million, offset by non-cash charges of $13.7
million. The changes in working capital were primarily due to an increase in
accounts receivable and a decrease in prepaid expenses and other current assets
due to timing of payments. The non-cash charges primarily consisted of
depreciation, amortization, stock-based compensation expense, provision for
accounts receivable allowances, and non-cash interest expense, changes in fair
value of contingent consideration and gain on contingent share issuance
liabilities.



Net cash used in operating activities for the year ended December 31, 2020, was
$22.6 million, consisting primarily of a net loss of $49.8 million offset by
changes in working capital of $2.8 million and non-cash charges of $24.4
million. The changes in working capital was primarily due to a decrease in
accounts receivable and increase in accounts payable and accrued liabilities due
to timing of payments. The non-cash charges primarily consisted of depreciation,
amortization, stock-based compensation expense, provision for accounts
receivable allowances, and non-cash interest expense.



Investing Activities


Net cash used in investing activities in the year ended December 31, 2021, was
$94.1 million, consisting of $89.8 million in net cash paid in connection with
the Acquisition, $3.3 million in capitalized software development costs, and
$1.0 million in purchases of property and equipment.



Net cash used in investing activities in the year ended December 31, 2020, was
$6.5 million, consisting of $4.3 million capitalized software development costs
and $2.2 million in purchases of property and equipment.



Financing Activities



Net cash provided by financing activities in the year ended December 31, 2021,
was $134.3 million, consisting primarily of $106.9 million of net proceeds from
borrowings under the Term Loan Facility and proceeds from the Subordinated Note
issued in connection with the Acquisition and $51.5 million of net proceeds from
the issuance of Class A common stock in the public offering that was completed
in June 2021, offset by $24.5 million in partial repayment of borrowings under
the Term Loan Facility and Subordinated Note.



Net cash provided by financing activities in the year ended December 31, 2020,
was $63.3 million, consisting primarily of net proceeds from our Merger
Transaction of $209.8 million and $10.9 million in net proceeds from the
issuance of our Series J preferred stock. This was partially offset by repayment
of the long-term debt principal of $88.3 million and liquidation of Series H, I
and J preferred stocks by $63.2 million.



Significant Accounting Policies and Estimates

Management's discussion and analysis of our financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with GAAP. The preparation of our financial statements requires us to
make estimates and assumptions for the reported amounts of assets, liabilities,
revenue, expenses and related disclosures. Our estimates are based on our
historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions and any such differences may
be material.



                                       56




While our significant accounting policies are more fully described in Note 2,
Summary of Significant Accounting Policies, to our consolidated financial
statements included elsewhere in this report, we believe the following
discussion addresses our most critical accounting policies, which are those that
are most important to our financial condition and results of operations and
require our most difficult, subjective and complex judgments.



Revenue Recognition


Our revenues are generated from service contracts with customer hospitals,
physician practice groups, or other users. Revenues are recognized when we
satisfy our performance obligation to provide telemedicine consultation services
as requested. These consultations covered by the fixed monthly fee,
consultations that incur a variable fee, services rendered to be paid by
patients and third-party payers, use of telemedicine equipment, training,
maintenance, and support are substantially the same and have the same pattern of
transfer. Therefore, we have determined these represent a series of distinct
services provided over a period of time in a single performance obligation.
Payments received from third-party payers are generally less than billed
charges. We monitor our revenue and receivables from third-party payers and
record an estimated contractual allowance to properly account for the
differences between billed and reimbursed amounts. Revenue from third-party
payers is presented net of an estimated provision for contractual adjustments.
Upfront nonrefundable fees do not result in the transfer of promised goods or
services to the customer; therefore, we defer this revenue and recognize it over
the average customer life of 48 months. Deferred revenue consists of the
unamortized balance of nonrefundable upfront fees and maintenance fees, which
are classified as current and non-current based on when we expect to recognize
revenue.



Business Combinations



We apply the acquisition method of accounting for business acquisitions. The
results of operations of the businesses acquired by us are included as of the
respective acquisition date. We allocate the fair value of purchase
consideration to the assets acquired and liabilities assumed, based on their
estimated fair values. The excess of the fair value of purchase consideration
over the value of these identifiable assets and liabilities is recorded as
goodwill. When determining the fair value of assets acquired and liabilities
assumed, management makes significant estimates and assumptions, especially with
respect to the fair value of acquired intangible assets. We may adjust the
preliminary purchase price allocation, as necessary, for up to one year after
the acquisition closing date if we obtain more information regarding asset
valuations and liabilities assumed. Acquisition-related expenses are recognized
separately from the business combination and are expensed as incurred.



Stock-Based Compensation



We maintain an equity incentive plan to provide long-term incentives for
employees, consultants and members of our board of directors. The plan allows
for the issuance of non-statutory and incentive stock options to employees and
non-statutory stock options to consultants and directors.



We recognize compensation costs related to stock options granted to employees
based on the estimated fair value of the awards on the date of grant. We
estimate the grant date fair value, and the resulting stock-based compensation
expense, using the Black-Scholes option pricing model. The grant date fair value
of stock-based awards is expensed on a straight-line basis over the period
during which the employee is required to provide service in exchange for the
award, which is typically the vesting period. We estimate forfeitures based
on
historical experience.



Prior to the Merger Transaction, Legacy SOC Telemed estimated the fair value of
stock-based awards using the Black-Scholes option-pricing model, which required
the input of highly subjective assumptions. Our assumptions were as follows:



Fair value - Because the common stock of Legacy SOC Telemed was not publicly
traded prior to the Merger Transaction, we had to estimate the fair value of the
common stock. The board of directors considered numerous objective and
subjective factors to determine the fair value of the common stock at each
meeting in which awards were approved.



                                       57





Expected volatility - Because the common stock of Legacy SOC Telemed was not
publicly traded prior to the Merger Transaction, the expected volatility was
derived from the average historical volatilities of publicly traded companies
within our industry that we considered to be comparable to our business over a
period approximately equal to the expected term for employees' options and the
remaining contractual life for nonemployees' options. In evaluating similarity,
we considered factors such as stage of development, risk profile, enterprise
value and position within the life sciences industry. Subsequent to the Merger
Transaction, we do not have sufficient history of our publicly traded stock;
therefore, we continue to estimate volatility using this methodology.



Expected term - We determined and continue to determine the expected term based
on the average period the stock options are expected to remain outstanding using
the simplified method, generally calculated as the midpoint of the stock
options' vesting term and contractual expiration period, as we do not have
sufficient historical information to develop reasonable expectations about
future exercise patterns and post-vesting employment termination behavior.



Risk-free rate - The risk-free interest rate was and continues to be based on
the U.S. Treasury yield in effect at the time of the grant for zero-coupon U.S.
Treasury notes with remaining terms similar to the expected term of the options.



Expected dividend yield - We utilized and continue to utilize a dividend yield
of zero, as we do not currently issue dividends, nor do we expect to do so
in
the future.



The following assumptions were used to calculate the fair value of stock options
granted to employees:



                                       Year Ended
                                      December 31,
                              2021 (1)         2020 (2)
Expected dividend                     -                0.0 %
Weighted average volatility           -               80.0 %
Expected term                         -        1 - 5 years
Risk-free interest rate               -       0.15% - 0.40 %



(1) No new grants were issued during the financial year December 31, 2021.

(2) No new grants were issued during the year December 31, 2020. these

    assumptions relate to option modifications in 2020.




We valued all outstanding performance stock units ("PSUs") applying an approach
that incorporated a Monte Carlo simulation, which involved random iterations
that took different future price paths over each one of the components of the
PSUs based on the appropriate probability distributions (which are based on
commonly applied Black Scholes inputs). The fair value was determined by taking
the average of the grant date fair values under each Monte Carlo simulation
trial.



The fair value of each grant made during the year ended December 31, 2021, was
estimated on the grant date using the Monte Carlo simulation with the following
assumptions:



                               Year Ended December 31,
                                  2021             2020(1)
Current stock price        $      1.39 - 7.52             -
Expected volatility                 55% - 75%             -
Expected term (in years)              3 - 3.5             -
Risk-free interest rate         0.24% - 0.91%             -





(1) No PSUs were issued during the year ended December 31, 2020.



                                       58




Liabilities related to the issuance of contingent shares and liabilities related to puttable options



We recognize derivatives as either an asset or liability measured at fair value
in accordance with ASC 815, Derivatives and Hedging. The puttable options were
our derivative financial instruments and were recorded in the consolidated
balance sheets at fair value. We do not enter into derivative transactions for
speculative or trading purposes. Contingent shares issuance liabilities reflect
our liability to provide a variable number of shares to HCMC's sponsor and its
permitted transferees if certain publicly traded stock prices are met at various
points in time. The liability was recorded at fair value at the date of the
Merger Transaction and is revalued at each reporting period using a Monte Carlo
simulation that factors in the current price of our Class A common stock, the
estimated likelihood of a change in control, and the vesting criteria of the
award.


Impairment of Good will and long-term assets

Goodwill represents the excess of the purchase price over the fair value of the
net tangible and intangible assets acquired in a business combination. Goodwill
is not amortized but is tested for impairment annually on December 31 or more
frequently if events or changes in circumstances indicate that the asset may be
impaired. An impairment charge is recognized for the excess of the carrying
value of goodwill over its implied fair value. We compare the estimated fair
value of a reporting unit to its book value, including goodwill. If the fair
value exceeds book value, goodwill is considered not to be impaired and no
additional steps are necessary. However, if the book value of a reporting unit
exceeds its fair value, an impairment loss will be recognized in an amount equal
to that excess, limited to the total amount of goodwill allocated to that
reporting unit. Our annual goodwill impairment test resulted in no impairment
charges in any of the periods presented in the consolidated financial
statements.



Intangible assets resulted from business acquisitions and include hospital
contract relationships, non-compete agreements, and trade names. Hospital
contract relationships are amortized over a period of 6 to 17 years, non-compete
agreements are amortized over a period of 4 to 5 years, and trade names are
amortized over a period of 2 to 5 years. All intangible assets are amortized
using the straight-line method.



Long-lived assets (property and equipment and capitalized software costs) used
in operations are reviewed for impairment whenever events or changes in
circumstances indicate that carrying amounts may not be recoverable. Upon
indication of possible impairment of long-lived assets held for use, we evaluate
the recoverability of such assets by measuring the carrying amount of the
long-lived asset group against the related estimated undiscounted future cash
flows of the long-lived asset group. For long-lived assets to be held and used,
we recognize an impairment loss only if its carrying amount is not recoverable
through its undiscounted cash flows and measures the impairment loss based on
the difference between the carrying amount and fair value. There were no
impairment losses through December 31, 2021.



Recently Adopted Accounting Pronouncements



See the sections titled "Summary of Significant Accounting Policies - Recently
Issued Accounting Pronouncements - Accounting pronouncements issued but not yet
adopted" in Note 2 to our consolidated financial statements included elsewhere
in this report for more information.



Emerging Growth Company


Pursuant to the JOBS Act, an emerging growth company is provided the option to
adopt new or revised accounting standards that may be issued by FASB or the SEC
either (i) within the same periods as those otherwise applicable to non-emerging
growth companies or (ii) within the same time periods as private companies.
Following the completion of the Merger Transaction, we intend to take advantage
of the exemption for complying with new or revised accounting standards within
the same time periods as private companies. Accordingly, the information
contained herein may be different than the information you receive from other
public companies.



We also intend to take advantage of some of the reduced regulatory and reporting
requirements of emerging growth companies pursuant to the JOBS Act so long as we
qualify as an emerging growth company, including, but not limited to, not being
required to comply with the auditor attestation requirements of Section 404(b)
of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive
compensation, and exemptions from the requirements of holding non-binding
advisory votes on executive compensation and golden parachute payments.

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