American Well Corp 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officers and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2021. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officers and principal financial officer concluded that, as of December 31, 2021, our disclosure controls and procedures were effective at a reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Under the supervision and with the participation of our management , including our principal executive officers and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 , based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021. We excluded Conversa and SilverCloud from our assessment of internal control over financial reporting as of December 31, 2021, because they were acquired by us in business combinations during 2021. The total assets and total revenues of these entities, which are wholly-owned subsidiaries, that are excluded from our assessment of internal control 73 over financial reporting collectively represent approximately 2% and approximately 3% , respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Foreign Jurisdictions that Prevent Inspections. Not applicable. 74 PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by this Item 10 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 11. Executive Compensation. The information required by this Item 11 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item 12 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item 13 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information required by this Item 14 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. 75 PART IV Item 15. Exhibits, Financial Statement Schedules. (1) Consolidated Financial Statements. For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference. (2) Consolidated Financial Statement Schedules. Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto. (3) Exhibits . The exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10-K. Exhibit Number Description Incorporation by Reference Form File Number Exhibit Number Filing Date 2.1 Agreement and Plan of Merger and Reorganization by and among American Well Corporation, Apollo Subsidiary Corporation, Apollo Subsidiary LLC, Avizia, Inc., dated April 29, 2018 S-1 333-248309 2.1 August 24, 2020 2.2 First Amendment to Agreement and Plan of Merger and Reorganization by and among American Well Corporation, Apollo Subsidiary Corporation, Apollo Subsidiary LLC, Avizia, Inc., dated June 13, 2018 S-1 333-248309 2.2 August 24, 2020 3.1 Amended and Restated Certificate of Incorporation S-1 333-248309 3.1 August 24, 2020 3.2 By-Laws S-1 333-248309 3.2 August 24, 2020 4.1 Form of Common Stock Certificate S-1 333-248309 4.1 August 24, 2020 4.2 Second Amended and Restated Investors’ Rights Agreement, dated October 8, 2010 S-1 333-248309 4.2 August 24, 2020 4.3 Amendment No. 1 to Second Amended and Restated Investors’ Rights Agreement, dated November 1, 2016 S-1 333-248309 4.3 August 24, 2020 4.4 Amendment No. 2 to Second Amended and Restated Investors’ Rights Agreement, dated May 29, 2018 S-1 333-248309 4.4 August 24, 2020 4.5 Amendment No. 3 to Second Amended and Restated Investors’ Rights Agreement, dated September 5, 2019 S-1 333-248309 4.5 August 24, 2020 4.6 Amendment No. 5 and Joinder to Second Amended and Restated Investors’ Rights Agreement, dated September 21, 2020 8-K 001-39515 10.1 September 22, 2020 4.7 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 10-K 001-39515 4.7 March 26, 2021 4.9#† Agreement and Plan of Merger by and among American Well Corporation, SilverCloud Health Holdings, Inc., Shannon Merger Subsidiary Inc, Shannon Merger Sister Subsidiary, LLC, and Fortis Advisors LLC, as the Securityholder Representative Named Herein, dated as of July 28, 2021 S-3ASR 333-260157 4.9 October 8, 2021 76 4.10# † Agreement and Plan of Merger by and among American Well Corporation, Conversa Health, Inc., Copernicus Merger Subsidiary Inc, Copernicus Merger Sister Subsidiary, LLC, and Fortis Advisors LLC, as the Securityholder Representative Named Herein, dated as of July 27, 2021 S-3ASR 333-260157 4.10 October 8, 2021 10.1# 2020 Equity Incentive Plan S-1 333-248309 10.5 August 24, 2020 10.2† Amended and Restated Vendor Agreement, dated December 23, 2014, by and among American Well Corporation and Anthem Inc. S-1 333-248309 10.6 August 24, 2020 10.3† Amendment No. 1 to the Amended and Restated Vendor Agreement, dated September 30, 2015, by and among American Well Corporation and Anthem Inc. S-1 333-248309 10.7 August 24, 2020 10.4† Amendment No. 2 to the Amended and Restated Vendor Agreement, dated December 5, 2016, by and among American Well Corporation, Health Management Corporation dba LiveHealth Online and Anthem Inc. S-1 333-248309 10.8 August 24, 2020 10.5† Amendment No. 3 to the Amended and Restated Vendor Agreement, dated October 31, 2017, by and among American Well Corporation and Health Management Corporation dba LiveHealth Online S-1 333-248309 10.9 August 24, 2020 10.6† Amendment No. 4 to the Amended and Restated Vendor Agreement, dated February 2018, by and among American Well Corporation and Health Management Corporation dba LiveHealth Online S-1 333-248309 10.10 August 24, 2020 10.7 Joint Venture Formation and Limited Liability Company Investment Agreement National Telehealth Network, LLC, dated December 20, 2012, between SellCore, Inc. and American Well Corporation S-1 333-248309 10.11 August 24, 2020 10.8 Amendment No. 1 to the Joint Venture Formation and Limited Liability Company Investment Agreement National Telehealth Network, LLC, dated January 1, 2016, between SellCore, Inc. and American Well Corporation S-1 333-248309 10.12 August 24, 2020 10.9† Provider Agreement, dated February 25, 2013, by and among Anthem Insurance Companies, Inc. and Online Care Network, P.C. S-1 333-248309 10.13 August 24, 2020 10.10† Amendment to Provider Agreement, dated December 21, 2018, by and among Anthem Insurance Companies, Inc. and Online Care Group P.C. S-1 333-248309 10.14 August 24, 2020 10.11 Provider Agreement, dated February 25, 2013, by and among Blue Cross of California and Online Care Network, P.C. S-1 333-248309 10.15 August 24, 2020 10.12† Amendment to Provider Agreement, dated December 21, 2018, by and among Blue Cross of California and Online Care Group P.C. S-1 333-248309 10.16 August 24, 2020 10.13 Transfer Agreement, dated January 1, 2019, by and among Anthem Insurance Companies, Inc. and American Well Corporation S-1 333-248309 10.17 August 24, 2020 10.14† Amendment No.5 to the Amended and Restated Vendor Agreement, dated December 31, 2018, by and among American Well Corporation and health Management Corporation dba LiveHealth Online S-1 333-248309 10.18 August 24, 2020 77 10.15 Form of Indemnification Agreement S-1 333-248309 10.19 August 24, 2020 10.16# Employment Agreement between American Well Corporation and Ido Schoenberg, dated June 18, 2020 S-1 333-248309 10.20 August 24, 2020 10.17# Employment Agreement between American Well Corporation and Roy Schoenberg, dated June 18, 2020 S-1 333-248309 10.21 August 24, 2020 10.18# Offer Letter for Keith W. Anderson, dated August 8, 2018 S-1 333-248309 10.22 August 24, 2020 10.19# 2020 Employee Stock Purchase Plan S-1 333-248309 10.23 August 24, 2020 10.20# Restricted Stock Unit Agreement between American Well Corporation and Ido Schoenberg, dated June 18, 2020 S-1 333-248309 10.24 August 24, 2020 10.21# Restricted Stock Unit Agreement between American Well Corporation and Roy Schoenberg, dated June 18, 2020 S-1 333-248309 10.25 August 24, 2020 10.22† Business Support Agreement, dated February 25, 2013, by and among National Telehealth Network, LLC and Online Care Network P.C. and, as to certain sections, Peter Antall, M.D . S-1 333-248309 10.26 August 24, 2020 10.23 Amendment No. 6 to the Business Support Agreement, dated August 1, 2017, by and among National Telehealth Network, LLC and Online Care Network P.C. S-1 333-248309 10.27 August 24, 2020 10.24† Business Support Subcontractor Services Agreement, dated February 25, 2013, by and among National Telehealth Network, LLC and American Well Corporation S-1 333-248309 10.28 August 24, 2020 10.25 Amendment No. 4 to the Business Support Subcontractor Services Agreement, dated August 1, 2017, by and among National Telehealth Network, LLC and American Well Corporation S-1 333-248309 10.29 August 24, 2020 10.26 Stock Purchase Agreement, dated August 22, 2020, by and among American Well Corporation and Google LLC S-1 333-248309 10.33 August 24, 2020 10.27#§ Employment Agreement between American Well Corporation and Kurt Knight, dated August 26, 2020 S-1 333-248309 10.34 August 24, 2020 10.28#§ Employment Agreement between American Well Corporation and Keith Anderson, dated September 7, 2020 S-1 333-248309 10.35 August 24, 2020 10.29#§ Employment Agreement between American Well Corporation and Phyllis Gotlib, dated January 1, 2018 S-1 333-252047 10.29 January 12, 2021 10.30 Employment Agreement between American Well Corporation and Brendan O’Grady, dated July 19, 2021 8-K 001-39515 10.1 July 23, 2021 10.31 Employment Agreement between American Well Corporation and Robert Shepardson, dated September 15, 2021 8-K 001-39515 10.1 September 21, 2021 10.32 Addendum to Employment Agreement between American Well Corporation and Ido Schoenberg, dated June 29, 2021 10-Q 001-39515 10.39 November 12, 2021 10.33 Amendment No. 6 to Amended and Restated Vendor Agreement, dated July 30, 2021, by and among American Well Corporation and Health Management Corporation dba LiveHealth Online 10-Q 001-39515 10.41 November 12, 2021 78 10.34†* Amendment No. 7 to the Amended and Restated Vendor Agreement, dated October 4, 2021, by and among American Well Corporation and Anthem Inc. 10.36# Non-Employee Director Compensation Policy 10-K 001-39515 10.36 March 26, 2021 10.37# 2020 Employee Stock Purchase Plan Sub-Plan for Israeli Participants 10-K 001-39515 10.37 March 26, 2021 10.38#§ Amended & Restated Employment Agreement between American Well Corporation and Keith Anderson, dated March 24, 2021 10-K 001-39515 10.38 March 26, 2021 10.39#* Sub Plan to the 2020 Equity Incentive Plan Republic of Ireland and the United Kingdom 10.40# Amendment to Amended & Restated Employment Agreement between American Well Corporation and Keith Anderson, dated September 21, 2021 10-Q 001-39515 10.40 November 12, 2021 10.41#* American Well Corporation Sub Plan to the 2020 Employee Stock Purchase Plan Republic of Ireland and the United Kingdom, dated February 8, 2022 21.1* Subsidiaries 23.1* Consent of Independent Registered Public Accounting Firm 31.1* Certification of Principal Executive Officers Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Principal Executive Officers Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded with the Inline XBRL document) 79 * Filed herewith. # Indicates a management contract or compensatory plan † Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(a)(6) and Item 601(b)(10). § Exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be provided on a supplemental basis to the Securities and Exchange Commission upon request. Item 16. Form 10-K Summary. None. 80 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . American Well Corporation Date: February 28, 2022 By: /s/ Ido Schoenberg, MD Ido Schoenberg Co-Chief Executive Officer Date: February 28, 2022 By: /s/ Roy Schoenberg, MD, MPH Roy Schoenberg Co-Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Ido Schoenberg, MD Co-Chief Executive Officer (principal executive officer) February 28, 2022 Ido Schoenberg /s/ Roy Schoenberg, MD, MPH Co-Chief Executive Officer (principal executive officer) February 28, 2022 Roy Schoenberg /s/ Robert Shepardson Chief Financial Officer (principal financial officer) February 28, 2022 Robert Shepardson /s/ Paul McNeice Vice President of Accounting (principal accounting officer) February 28, 2022 Paul McNeice /s/ Deval Patrick Director February 28, 2022 Deval Patrick /s/ Stephen Schlegel Director February 28, 2022 Stephen Schlegel /s/ Dr. Peter Slavin Director February 28, 2022 Dr. Peter Slavin /s/ Derek Ross Director February 28, 2022 Derek Ross /s/ Dr. Toby Cosgrove Director February 28, 2022 Toby Cosgrove /s/ Deborah Jackson Director February 28, 2022 Deborah Jackson 81 Index to consolidated Financial Statements Page(s) Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-6 Consolidated Statements of Operations and Comprehensive Loss F-7 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) F-8 Consolidated Statements of Cash Flows F-9 Notes to Consolidated Financial Statements F-10 F-1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of American Well Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of American Well Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, of convertible preferred stock and stockholders’ equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Conversa Health, Inc. and SilverCloud Health Holdings, Inc. from its assessment of internal control over financial reporting as of December 31, 2021 because they were acquired by the Company in purchase business combinations during 2021. We have also excluded Conversa Health, Inc. and SilverCloud Health Holdings, Inc. from our audit of internal control over financial reporting. Conversa Health, Inc. and SilverCloud Health Holdings, Inc. are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent approximately 2% and approximately 3%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021. F-2 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue Recognition - Platform Subscription and Visits As described in Notes 1, 2 and 3 to the consolidated financial statements, the Company generates revenue primarily from contracts with customers who purchase subscriptions to access the Company’s hosted telehealth platform. Customers can also purchase access to the Company’s co-branded telehealth practice hosted on the Company’s shared services platform. The Company also generates revenue when either the enterprise telehealth platform or the shared services platform is utilized to conduct a medical visit. The Company’s revenue for platform subscription and visits was $224.9 million for the year ended December 31, 2021. The principal considerations for our determination that performing procedures relating to revenue recognition for platform subscription and visits is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to accuracy and occurrence of revenue transactions. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to revenue recognition, including controls over the accuracy and occurrence of revenue transactions. These procedures also included, among others, evaluating the accuracy and occurrence of a sample of revenue transactions by obtaining and inspecting source documents, including sales contracts, project access approvals, medical records and cash receipts from customers, when applicable. Valuation of Customer Relationships and Technology Intangible Assets - SilverCloud Health Holdings, Inc. As described in Notes 1 and 9 to the consolidated financial statements, on August 27, 2021, the Company completed the acquisition of SilverCloud Health Holdings, Inc. The total purchase consideration transferred was $226.2 million. The preliminary purchase price allocation included identifiable assets acquired of a customer relationships intangible asset and a technology intangible asset of $32.4 million and $35 million, respectively. The estimated fair value of the customer relationships intangible asset was determined using the excess earnings method and the estimated fair value of the technology intangible asset was determined using a relief from royalty method. Determining the fair value of assets acquired and liabilities assumed, and the allocation of the purchase price, requires management to use judgment and estimates, with regards to the selection of valuation methodologies. Critical estimates in valuing the customer relationships and technology intangible assets include, but are not limited to, significant assumptions related to estimates of future revenue and cash flows, expected long-term market growth, expected revenue growth rates, future expected operating expenses, earnings before interest, taxes, depreciation and amortization margin, and discount rates. F-3 The principal considerations for our determination that performing procedures relating to the valuation of the customer relationships and technology intangible assets from the acquisition of SilverCloud Health Holdings, Inc. is a critical audit matter are (i) the significant judgment by management when determining the fair values of the customer relationships and technology intangible assets acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to expected revenue growth rates and discount rates for both the customer relationships and technology intangible assets, as well as earnings before interest, taxes , depreciation and amortization margin for the customer relationships intangible asset; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships and technology intangible assets. These procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for determining the fair values of the customer relationships and technology intangible assets acquired; (iii) evaluating the appropriateness of the excess earnings method for the customer relationships intangible asset and the relief from royalty method for the technology intangible asset; (iv) testing the completeness and accuracy of the underlying data used in the excess earnings method and the relief from royalty method; and (v) evaluating the reasonableness of the significant assumptions used by management related to expected revenue growth rates and discount rates for both the customer relationships and technology intangible assets, as well as earnings before interest, taxes, depreciation and amortization margin for the customer relationships intangible asset. Evaluating management’s significant assumptions related to expected revenue growth rates and earnings before interest, taxes, depreciation and amortization margin involved evaluating whether the significant assumptions used by management were reasonable considering (i) the current and past performance of SilverCloud Health Holdings, Inc.; (ii) the consistency with external market and industry data; and (iii) whether the significant assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the excess earnings and relief from royalty methods and (ii) the reasonableness of the significant assumptions related to the discount rates. Valuation of Technology Intangible Asset - Conversa Health, Inc. As described in Notes 1 and 9 to the consolidated financial statements, on August 9, 2021, the Company completed the acquisition of Conversa Health, Inc. The total purchase consideration transferred was $118.6 million. The preliminary purchase price allocation included an identifiable asset acquired of a technology intangible asset of $20.4 million. The estimated fair value of the technology intangible asset was determined using a relief from royalty method. Determining the fair value of assets acquired and liabilities assumed, and the allocation of the purchase price, requires management to use judgment and estimates, with regards to the selection of valuation methodologies. Critical estimates in valuing the technology intangible asset include, but are not limited to, significant assumptions related to estimates of future revenue and cash flows, expected long-term market growth, expected revenue growth rates, future expected operating expenses, earnings before interest, taxes, depreciation and amortization, and discount rates. The principal considerations for our determination that performing procedures relating to the valuation of the technology intangible asset acquired from the acquisition of Conversa Health, Inc. is a critical audit matter are (i) the significant judgment by management when determining the fair value of the technology intangible asset acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to expected revenue growth rates and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the technology intangible asset. These procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for determining the fair value of the technology intangible asset acquired; (iii) evaluating the appropriateness of the relief from royalty method; (iv) testing the completeness and accuracy of the underlying data used in the relief from royalty method; and (v) evaluating the reasonableness of the significant assumptions used by management related to expected revenue growth rates and discount rate. Evaluating management’s significant assumption related to expected revenue growth rates involved evaluating whether the significant assumption used by management was reasonable considering (i) the current and past performance of Conversa Health, Inc.; (ii) the consistency with external market and industry data; and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and F-4 knowledge were used to assist in evaluating (i) the appropriateness of the relief from royalty method and (ii) the reasonableness of the significant assumption related to the discount rate. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 28, 2022 We have served as the Company’s auditor since 2016. F-5 AMERICAN WELL CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) As of December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 746,416 $ 941,616 Investments — 99,963 Restricted cash — 1,095 Accounts receivable ($ 2,054 and $ 12,053 , from related parties and net of allowances of $ 1,809 and $ 1,556 , respectively) 51,375 45,296 Inventories 7,530 9,128 Deferred contract acquisition costs 1,697 2,134 Prepaid expenses and other current assets 20,278 14,055 Total current assets 827,296 1,113,287 Restricted cash 795 — Property and equipment, net 2,235 3,836 Goodwill 442,761 193,877 Intangibles assets, net 152,409 55,528 Operating lease right-of-use asset 16,422 6,609 Deferred contract acquisition costs, net of current portion 2,028 1,327 Other assets 1,722 1,430 Investment in minority owned joint venture 168 752 Total assets $ 1,445,836 $ 1,376,646 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 12,156 $ 5,797 Accrued expenses and other current liabilities 58,711 42,135 Operating lease liability, current 1,918 6,357 Deferred revenue ($ 1,860 and $ 14,421 from related parties, respectively) 68,841 66,693 Total current liabilities 141,626 120,982 Other long-term liabilities 5,136 64 Contingent consideration liabilities, net of current portion 16,450 — Operating lease liability, net of current portion 14,694 1,296 Deferred revenue, net of current portion ($ 22 and $ 486 from related parties, respectively) 7,055 8,107 Total liabilities 184,961 130,449 Commitments and contingencies (Note 16) Stockholders’ equity: Preferred stock, $ 0.01 par value; 100,000,000 shares authorized, no shares issued or outstanding as of December 31, 2021 and as of December 31, 2020 — — Common stock, $ 0.01 par value; 1,000,000,000 Class A shares authorized, 229,402,453 and 201,488,097 shares issued, and 229,402,453 and 200,751,168 shares outstanding, respectively; 100,000,000 Class B shares authorized, 26,913,579 and 30,427,128 shares issued, and 26,913,579 and 29,297,382 shares outstanding, respectively; 200,000,000 Class C shares authorized 5,555,555 issued and outstanding as of December 31, 2021 and December 31, 2020 2,620 2,357 Treasury stock, no shares and 1,866,675 shares as of December 31, 2021 and December 31, 2020, respectively — ( 37,568 ) Additional paid-in capital 2,054,275 1,841,405 Accumulated other comprehensive income (loss) ( 6,353 ) 297 Accumulated deficit ( 811,284 ) ( 582,359 ) Total American Well Corporation stockholders’ equity 1,239,258 1,224,132 Non-controlling interest 21,617 22,065 Total stockholders’ equity 1,260,875 1,246,197 Total liabilities and stockholders’ equity $ 1,445,836 $ 1,376,646 The accompanying notes are an integral part of these consolidated financial statements. F-6 AMERICAN WELL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share amounts) Years Ended December 31, 2021 2020 2019 Revenue ($ 12,045 , $ 60,839 and $ 36,411 from related parties, respectively) $ 252,789 $ 245,265 $ 148,857 Costs and operating expenses: Costs of revenue, excluding depreciation and amortization of intangible assets 148,474 156,790 79,976 Research and development 106,594 84,412 53,941 Sales and marketing 66,154 55,095 47,672 General and administrative 94,624 166,246 54,211 Depreciation and amortization expense 16,089 10,153 7,761 Total costs and operating expenses 431,935 472,696 243,561 Loss from operations ( 179,146 ) ( 227,431 ) ( 94,704 ) Interest income and other income (expense), net 120 1,632 5,535 Loss before benefit (expense) from income taxes and loss from equity method investment ( 179,026 ) ( 225,799 ) ( 89,169 ) Benefit (expense) from income taxes 5,376 ( 639 ) 803 Loss from equity method investment ( 3,132 ) ( 2,188 ) — Net loss ( 176,782 ) ( 228,626 ) ( 88,366 ) Net loss attributable to non-controlling interest ( 448 ) ( 4,194 ) ( 1,176 ) Net loss attributable to American Well Corporation $ ( 176,334 ) $ ( 224,432 ) $ ( 87,190 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 0.69 ) $ ( 2.27 ) $ ( 2.12 ) Weighted-average common shares outstanding, basic and diluted 254,068,942 99,044,312 41,138,798 Net loss $ ( 176,782 ) $ ( 228,626 ) $ ( 88,366 ) Other comprehensive income (loss), net of tax: Unrealized loss on available-for-sale investments ( 85 ) ( 365 ) ( 874 ) Foreign currency translation ( 6,565 ) 412 ( 227 ) Comprehensive loss ( 183,432 ) ( 228,579 ) ( 89,467 ) Less: Comprehensive loss attributable to non-controlling interest ( 448 ) ( 4,194 ) ( 1,176 ) Comprehensive loss attributable to American Well Corporation $ ( 182,984 ) $ ( 224,385 ) $ ( 88,291 ) The accompanying notes are an integral part of these consolidated financial statements. F-7 AMERICAN WELL CORPORATION CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (In thousands, except share amounts) Convertible Preferred Stock Common Stock Treasury Additional Paid-In Accumulated Other Comprehensive Accumulated American Well Corporation Stockholders’ Noncontrolling Total Stockholders’ Equity Shares Amount Shares Amount Stock Capital Income (Loss) Deficit Equity (Deficit) Interest (Deficit) Balances as of December 31, 2018 12,927,549 $ 575,713 41,393,622 $ 414 $ — $ 37,127 $ 1,351 $ ( 270,737 ) $ ( 231,845 ) $ 27,435 $ ( 204,410 ) Issuance of Series C convertible preferred stock, net of issuance costs of $ 1,318 628,719 45,836 — — — — — — — — — Issuance of Series C convertible preferred stock in connection with Aligned acquisition 456,667 34,250 — — — — — — — — — Exercise of common stock options — — 651,120 7 — 1,027 — — 1,034 — 1,034 Vesting of restricted stock units — — 293,937 2 — — — — 2 — 2 Stock-based compensation expense — — — — — 12,135 — — 12,135 — 12,135 Treasury stock — — ( 35,834 ) — ( 158 ) — — — ( 158 ) — ( 158 ) Currency translation adjustment — — — — — — ( 227 ) — ( 227 ) — ( 227 ) Unrealized loss on available-for-sale securities, net of tax — — — — — — ( 874 ) — ( 874 ) — ( 874 ) Net loss — — — — — — — ( 87,190 ) ( 87,190 ) ( 1,176 ) ( 88,366 ) Balances as of December 31, 2019 14,012,935 $ 655,799 42,302,845 $ 423 $ ( 158 ) $ 50,289 $ 250 $ ( 357,927 ) $ ( 307,123 ) $ 26,259 $ ( 280,864 ) Issuance of Series C convertible preferred stock, net of issuance costs of $ 1,011 1,512,750 146,014 — — — — — — — — — Treasury stock — — ( 61,600 ) — ( 163 ) — — — ( 163 ) — ( 163 ) Retirement of treasury stock — — — — 158 ( 158 ) — — — — — Exercise of common stock options — — 2,296,899 23 — 5,889 — — 5,912 — 5,912 Vesting of restricted stock units — — 5,008,080 50 — ( 50 ) — — — — — Shares withheld related to net share settlement — — ( 1,805,073 ) ( 18 ) ( 37,405 ) 18 — — ( 37,405 ) — ( 37,405 ) Conversion of Series A, Series B, and Series C convertible preferred stock ( 15,525,685 ) ( 801,813 ) 136,625,900 1,366 — 800,447 — — 801,813 — 801,813 Issuance of common stock in connection with initial public offering, net of offering costs and underwriting discounts of $ 54,242 — — 45,681,499 457 — 767,568 — — 768,025 — 768,025 Issuance of common stock in connection with Google Private Placement, net of issuance costs of $ 900 — — 5,555,555 56 — 99,044 — — 99,100 — 99,100 Stock-based compensation expense — — — — — 118,358 — — 118,358 — 118,358 Currency translation adjustment — — — — — — 412 — 412 — 412 Unrealized loss on available-for-sale securities, net of tax — — — — — — ( 365 ) — ( 365 ) — ( 365 ) Net loss — — — — — — — ( 224,432 ) ( 224,432 ) ( 4,194 ) ( 228,626 ) Balances as of December 31, 2020 — $ — 235,604,105 $ 2,357 $ ( 37,568 ) $ 1,841,405 $ 297 $ ( 582,359 ) $ 1,224,132 $ 22,065 $ 1,246,197 Exercise of common stock options — — 6,695,258 66 — 20,814 — — 20,880 — 20,880 Vesting of restricted stock units — — 7,394,144 75 — ( 75 ) — — — — — Retirement of treasury stock purchased in 2020 — — — — 37,568 ( 15 ) — ( 37,553 ) — — — Shares withheld related to net share settlement and retired treasury stock in 2021 — — ( 798,933 ) ( 8 ) — 8 — ( 15,038 ) ( 15,038 ) — ( 15,038 ) Issuance of stock under employee stock purchase plan — — 178,021 2 — 1,597 — — 1,599 — 1,599 Issuance of common stock in acquisitions — — 12,798,992 128 — 143,979 — — 144,107 — 144,107 Stock-based compensation expense — — — — — 43,809 — — 43,809 — 43,809 Capital contributed by selling shareholders of acquired businesses — — — — — 2,753 — — 2,753 — 2,753 Unrealized loss on available-for-sale securities, net of tax — — — — — — ( 85 ) — ( 85 ) — ( 85 ) Currency translation adjustment — — — — — — ( 6,565 ) — ( 6,565 ) — ( 6,565 ) Net loss — — — — — — — ( 176,334 ) ( 176,334 ) ( 448 ) ( 176,782 ) Balances as of December 31, 2021 — $ — 261,871,587 $ 2,620 $ — $ 2,054,275 $ ( 6,353 ) $ ( 811,284 ) $ 1,239,258 $ 21,617 $ 1,260,875 The accompanying notes are an integral part of these consolidated financial statements. F-8 AMERICAN WELL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except share and per share amounts) Years Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net loss $ ( 176,782 ) $ ( 228,626 ) $ ( 88,366 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 16,089 10,153 7,761 Provisions for credit losses 714 1,646 717 Amortization of deferred contract acquisition costs 1,971 1,410 1,062 Amortization of deferred contract fulfillment costs 737 852 707 Noncash compensation costs incurred by selling shareholders 2,753 — — Stock-based compensation expense 43,809 118,358 12,135 Loss on equity method investment 3,132 2,188 — Deferred income taxes ( 6,245 ) — ( 1,388 ) Changes in operating assets and liabilities, net of acquisition: Accounts receivable ( 512 ) ( 14,212 ) 803 Inventories 1,598 ( 6,024 ) ( 592 ) Deferred contract acquisition costs ( 2,235 ) ( 2,102 ) ( 1,217 ) Prepaid expenses and other current assets ( 5,775 ) ( 5,990 ) ( 2,698 ) Other assets 117 122 ( 977 ) Accounts payable 5,546 ( 707 ) 1,158 Accrued expenses and other current liabilities ( 380 ) 12,887 5,851 Other long-term liabilities ( 16,705 ) ( 245 ) ( 699 ) Deferred revenue ( 9,369 ) ( 2,174 ) ( 16,149 ) Net cash used in operating activities ( 141,537 ) ( 112,464 ) ( 81,892 ) Cash flows from investing activities: Purchases of property and equipment ( 559 ) ( 3,318 ) ( 1,338 ) Investment in less than majority owned joint venture ( 2,548 ) ( 2,940 ) — Purchases of investments — ( 159,608 ) ( 78,946 ) Proceeds from sales and maturities of investments 100,000 99,109 246,033 Acquisitions of business, net of cash acquired ( 156,526 ) — ( 45,750 ) Net cash (used in) provided by investing activities ( 59,633 ) ( 66,757 ) 119,999 Cash flows from financing activities: Proceeds from issuance of Series C convertible preferred stock, net of issuance costs — 146,014 45,761 Proceeds from exercise of common stock options 20,806 5,932 1,036 Proceeds from employee stock purchase plan 1,599 — — Payments for the purchase of treasury stock ( 15,038 ) ( 37,568 ) ( 158 ) Proceeds from issuance of common stock in initial public offering, net of underwriting costs and commissions — 772,931 — Proceeds from the issuance of common stock to Google, net of issuance costs — 99,100 — Payment of deferred offering costs ( 1,613 ) ( 3,293 ) — Net cash provided by financing activities 5,754 983,116 46,639 Effect of exchange rates changes on cash, cash equivalents, and restricted cash ( 84 ) — — Net (decrease) increase in cash, cash equivalents, and restricted cash ( 195,500 ) 803,895 84,746 Cash, cash equivalents, and restricted cash at beginning of period 942,711 138,816 54,070 Cash, cash equivalents, and restricted cash at end of period $ 747,211 $ 942,711 $ 138,816 Cash, cash equivalents, and restricted cash at end of period: Cash and cash equivalents 746,416 941,616 137,673 Restricted cash 795 1,095 1,143 Total cash, cash equivalents, and restricted cash at end of period $ 747,211 $ 942,711 $ 138,816 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 1,587 $ 713 $ 193 Supplemental disclosure of non-cash investing and financing activities: Series C preferred stock issued in connection with Aligned acquisition $ — $ — $ 34,250 Issuance of common stock in acquisitions $ 144,107 $ — $ — Unsettled issuance of Series C preferred stock $ — $ — $ 75 Receivable related to exercise of common stock options $ 74 $ — $ — Common stock issuance costs in accrued expenses $ — $ 1,613 $ — The accompanying notes are an integral part of these consolidated financial statements. F-9 AMERICAN WELL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share amounts) 1. Organization and Description of Business Description of Business American Well Corporation (the “Company”) was incorporated under the laws of the State of Delaware in June 2006. The Company is headquartered in Boston, Massachusetts. The Company is a leading enterprise software company that enables the digital distribution and delivery of care for healthcare’s key stakeholders. The Company’s scalable technology is deployed at the enterprise level of clients, embeds into existing offerings and workflows, spans the continuum of care and enables the delivery of this care across a wide variety of clinical, retail, school and home settings. The Company is subject to a number of risks similar to other companies of a similar size in the high technology industry, including, but not limited to, uncertainty of progress in developing technologies, new technological innovations, dependence on key personnel, protection of proprietary technology, uncertainty of market acceptance of telehealth and the need for additional financing. Acquisitions On August 9, 2021 and August 27, 2021 , the Company completed the acquisitions of Conversa Health, Inc. (“Conversa”) and SilverCloud Health Holdings, Inc. (“SilverCloud”), respectively (together, the “August 2021 Acquisitions”). Conversa is a leader in automated virtual healthcare. SilverCloud is a leading digital mental health platform . See Note 9 “Business Combinations”. Initial Public Offering On September 21, 2020, the Company closed on its initial public offering (the “IPO”) in which the Company issued and sold 45,681,499 shares of Class A common stock, including the exercise of an underwriter option to purchase additional shares, at an issuance price of $ 18.00 per share. The Company received net proceeds of $ 767,568 after deducting underwriting discounts and commissions of $ 49,336 as well as other offering costs of $ 4,906 . Upon the closing of the IPO, the Company’s then-outstanding convertible preferred stock converted into an aggregate of 136,625,900 shares of Class A common stock. Google Private Placement On August 22, 2020, the Company entered into a strategic partnership and stock purchase agreement with Google LLC, where the Company agreed to issue Google $ 100,000 of Class C common stock, with the price per share to be equal to the purchase price in the IPO. Concurrently with the IPO, the Company consummated the private placement offering to Google and issued Google 5,555,555 shares of Class C common stock for $ 99,100 after deducting offering costs of $ 900 . Stock Split On August 28, 2020 the Company effected an 8.8-for-1.0 stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s then outstanding convertible preferred stock (see Note 15). The corresponding number of shares and exercise prices related to stock options and RSUs were also adjusted. The impact of the stock split has been applied retrospectively to all periods presented. Liquidity and Capital Resources The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. Through December 31, 2021, the Company has primarily funded its operations with proceeds from the initial public offering, the sales of convertible preferred stock and revenue from customers who purchase access to the Company’s Platform. On September 21, 2020 the Company closed on the IPO raising $ 822,267 in gross proceeds. On September 21, 2020 the Company closed on a private placement with Google raising $ 100,000 in gross proceeds. Since inception, the Company has incurred recurring losses. As of December 31, 2021, the Company had an accumulated deficit of $ 811,284 . The Company expects to continue to generate operating losses for the foreseeable future. F-10 The Company expects that its cash, cash equivalents and investments will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months. 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of American Well Corporation, its wholly-owned subsidiaries, those of professional corporations, which represent variable interest entities in which American Well has an interest and is the primary beneficiary (“PC”) (see Note 4) and National Telehealth Network (“NTN”), an entity in which American Well controls fifty percent or more of the voting shares (see Note 5). Intercompany accounts and transactions have been eliminated in consolidation. For consolidated entities where American Well owns or is exposed to less than 100 % of the economics, the net income (loss) attributable to noncontrolling interests is recorded in the consolidated statements of operations and comprehensive loss equal to the percentage of the economic or ownership interest retained in each entity by the respective non-controlling party. The noncontrolling interests are presented as a separate component of stockholders’ deficit in the consolidated balance sheets. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, the estimated customer relationship period that is used in the amortization of deferred contract acquisition costs, the valuation of assets and liabilities acquired in business combinations, the useful lives of intangible assets and the valuation of common stock. The Company bases its estimates on historical experience, known trends, and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions. Due to the COVID-19 global pandemic, the global economy and financial markets have been disrupted and there is a significant amount of uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and has not experienced any significant impact to its estimates and assumptions as a result of the COVID-19 pandemic. On an ongoing basis, the Company will continue to closely monitor the COVID-19 impact on its estimates and assumptions. Foreign Currency The Company’s reporting currency is the U.S. dollar. The Company determines the functional currency of each subsidiary based on the currency of the primary economic environment in which each subsidiary operates. Items included in the financial statements of such subsidiaries are measured using that functional currency. Foreign currency denominated monetary assets and liabilities are remeasured into U.S. dollars at current exchange rates and foreign currency denominated nonmonetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. Gains or losses from foreign currency remeasurement and settlements are included in interest income and other income (expense), net in the consolidated statements of operations and comprehensive loss. During the year ended December 31, 2021, the Company’s gains (losses) from foreign currency remeasurement and settlement were $ 445 . During the years ended December 31, 2020 and 2019, the Company’s gains or losses from foreign currency remeasurement and settlements were insignificant. Segment Information The Company’s chief operating decision makers (CODMs), its two Chief Executive Officers, review financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company operates and manages its business as one reportable and operating segment. In addition, substantially all of the Company’s revenue and long-lived assets are attributable to operations in the United States for all periods presented. F-11 Variable Interest Entities The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex and involve judgment. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively. Concentrations of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, investments and accounts receivable. The Company invests its excess cash with large financial institutions that the Company believes are of high credit quality. Cash and cash equivalents are invested in highly rated money market funds. At times the Company’s cash balances with individual banking institutions are in excess of federally insured limits. The Company’s investments are invested in U.S. government agency bonds. The Company has not experienced any losses on its deposits of cash, cash equivalents or investments. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company performs ongoing assessments and credit evaluations of its customers to assess the collectability of the accounts based on a number of factors, including past transaction experience, age of the accounts receivable, review of the invoicing terms of the contracts, and recent communication with customers. The Company has not experienced significant credit losses from its accounts receivable. As of December 31, 2021 and 2020, one customer accounted for 19 % and 19 % of outstanding accounts receivable, respectively. For the years ended December 31, 2021, 2020 and 2019, sales to one related party customer represented 25 %, 22 % and 23 % of the Company’s total revenue, respectively. Cash Equivalents The Company considers all highly liquid investments purchased with maturities of three months or less at the date of purchase to be cash equivalents. Restricted Cash As of December 31, 2021 and 2020, the Company maintained letters of credit totaling $ 795 and $ 1,095 , respectively, for the benefit of the landlord of its leased property and performance surety bonds. The Company has classified $ 0 and $ 1,095 as current as of December 31, 2021 and 2020, respectively, and $ 795 and $ 0 as non-current on its consolidated balance sheet as of December 31, 2021 and 2020, respectively. Investments The Company’s investments are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in total stockholders’ equity (deficit). The Company has classified its available-for-sale investments as current assets on the consolidated balance sheet as these investments generally consist of highly marketable securities that are identified to be available to meet near-term cash requirements. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of interest income and other income (expense), net in the consolidated statements of operations and comprehensive loss. The Company periodically evaluates its investments for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its F-12 original cost, the Company’s ability and intent to retain investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment through a charge to the consolidated statement of operations and other comprehensive income (loss). No such adjustments were necessary during the periods presented. As of December 31, 2021 and 2020, there were no investments that had been in a continuous loss position for more than 12 months. Accounts Receivable, Net Accounts receivable primarily consist of amounts billed currently due from customers. Accounts receivable are presented net of an allowance for credit losses, which is an estimate of amounts that may not be collectible. In determining the amount of the allowance at each reporting date, the Company makes judgments about general economic conditions, historical write-off experience and any specific risks identified in customer collection matters, including the aging of unpaid accounts receivable and changes in customer financial conditions. Account balances are written off after all means of collection are exhausted and the potential for non-recovery is determined to be probable. Adjustments to the allowance for credit losses are recorded as general and administrative expenses in the consolidated statements of operations and comprehensive loss. Inventories The Company values all of its inventories, which consist primarily of raw material hardware components, at the lower of cost or net realizable value on a first-in, first-out basis (“FIFO”). Write-offs of potentially slow moving or damaged inventory are recorded through specific identification of obsolete or damaged material. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are recognized using the straight-line method over the useful life of the assets. Computer equipment is depreciated over three to four years . Computer software, furniture and fixtures and office equipment are depreciated over three years . Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset. Repairs and maintenance costs are expensed as incurred. When assets are sold or retired, the cost and related accumulated depreciation or amortization are removed from the accounts, with any resulting gain or loss recorded in the consolidated statements of operations and comprehensive loss. Business Combinations The Company accounts for business combinations using the acquisition method of accounting. Application of this method of accounting requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at fair value as of the acquisition date and (ii) the excess of the purchase price over the net fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill. Transaction costs related to business combinations are expensed as incurred in general and administrative expense in the consolidated statement of operations and comprehensive loss. Determining the fair value of assets acquired and liabilities assumed, and the allocation of the purchase price requires management to use judgment and estimates with regards to the selection of valuation methodologies, especially with respect to intangible assets. Critical estimates in valuing certain identifiable assets include, but are not limited to, significant assumptions related to estimates of future revenue and cash flows, expected long-term market growth, expected revenue growth rates, future expected operating expenses, earnings before interest, taxes, depreciation and amortization margin, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could last up to one year after the transaction date, all adjustments are recorded in the consolidated statements of operations and comprehensive loss. F-13 Goodwill The Company recognizes the excess of the purchase price over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized but is tested for impairment annually on November 30 or more frequently if events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. The Company’s goodwill impairment tests are performed at the enterprise level given the Company’s single reporting unit. The fair value of the reporting unit is estimated using quoted market prices in active markets of the Company’s stock. Declines in market capitalization are assessed to determine whether they would indicate a triggering event. As part of the Step 1 analysis the Company considers assumptions such as control premium, market data and expected future cash flows, as needed. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied the fair value. The Company’s annual goodwill impairment test resulted in no impairment charges in any of the periods in the consolidated financial statements. Intangible Assets Intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods deemed appropriate for the type of intangible asset acquired and reported net of accumulated amortization, separately from goodwill. Finite-lived intangible assets, which primarily consist of customer relationships, contractor relationships, technology and trade name, are stated at historical cost and amortized over the assets’ estimated useful lives. Impairment of Long-Lived Assets Long-lived assets consist primarily of property and equipment and intangible assets. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets, among others. When testing for asset impairment, the Company groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than the asset’s carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value. To date, the Company has no t recorded any impairment losses on long-lived assets. No events or changes in circumstances existed to require an impairment assessment during the years ended December 31, 2021 and 2020. Investment in Minority Owned Joint Venture The Company and Cleveland Clinic partnered to form a joint venture, under the name CCAW, JV LLC, to provide broad access to comprehensive and high acuity care services via telehealth. The Company does not have a controlling financial interest in CCAW, JV LLC, but it does have the ability to exercise significant influence over the operating and financial policies of CCAW, JV LLC. Therefore, the Company accounts for its investment in CCAW, JV LLC using the equity method of accounting. The joint venture is considered a variable interest entity under ASC 810-10, but the Company is not the primary beneficiary as it does not have the power to direct the activities of the joint venture that most significantly impact its performance. The Company’s evaluation of ability to impact performance is based on Cleveland Clinic’s managing directors and Cleveland Clinic’s ability to appoint and remove the chairperson who has the ability to cast the tie breaking vote on the most significant activities. During the year ended December 31, 2020, the Company contributed $ 2,940 as its initial investment for a 49 % interest in CCAW, JV LLC. The agreement also requires aggregate total capital contributions by the Company up to an additional $ 11,800 in two phases, which is yet to be defined. In February 2021 the Company made a capital contribution of $ 2,548 related to a portion of the phase one capital commitment. For the year ended December 31, 2021 and 2020, the Company recognized a loss of $ 3,132 and $ 2,188 as its proportionate share of the joint ventures results of operations, respectively. Accordingly, the carrying value of the equity method investment as of December 31, 2021 and 2020 was $ 168 and $ 752 , respectively. F-14 Advertising Costs Advertising costs are expensed as incurred and are included in sales and marketing expense in the consolidated statement of operations and comprehensive loss. For the years ended December 31, 2021, 2020 and 2019, the Company’s advertising expenses were $ 5,604 , $ 3,860 and $ 6,107 , respectively. Research and Development Costs Research and development costs are expensed as incurred. Research and development expenses include payroll, employee benefits and other expenses associated with product development. Internal-Use Software The Company evaluates development costs incurred in connection with its internal-use software for capitalization. Qualifying costs incurred to develop internal-use software are capitalized when (i) the preliminary project stage is completed, (ii) management has authorized further funding for the completion of the project and (iii) it is probable that the project will be completed and performed as intended. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Capitalized internal-use software development costs are amortized using the straight-line method over an estimated useful life of three years . Such amortization expense for internal-use software is classified as cost of revenues in the consolidated statements of operations and comprehensive loss. Capitalized internal-use software costs were not material to the Company’s consolidated financial statements during the years ended December 31, 2021 and 2020. Stock-Based Compensation The Company measures all stock options and other stock-based awards granted to employees and directors based on the fair value on the date of the grant and recognizes compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company issues stock options and restricted stock units (“RSU’s”) to employees with only service-based vesting conditions and records the expense for these awards using the straight-line method. Stock option awards and restricted stock units issued to the co-CEOs prior to the IPO or as a result of the IPO (“IPO RSUs”) were expensed when granted as the requisite future service of the awards is not substantive for accounting purposes. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award’s recipient’s payroll costs are classified. The Company recognizes compensation expense for only the portion of awards that are expected to vest. In developing a forfeiture rate estimate, the Company has considered its historical experience to estimate pre-vesting forfeitures for service-based awards. The impact of a forfeiture rate adjustment will be recognized in full in the period of adjustment, and if the actual forfeiture rate is materially different from the Company’s estimate, the Company may be required to record adjustments to stock-based compensation expense in future periods. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The restricted stock units issued to the co-CEOs as a result of the IPO had the fair value estimated using a binomial lattice approach. The Company historically had been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Deferred Contract Acquisition Costs The Company capitalizes sales commissions and certain parts of the Company bonus that are incremental to the acquisition of customer contracts. These costs are recorded as deferred contract acquisition costs on the consolidated balance sheets. The Company determines whether costs should be deferred based on its sales compensation plans if the commissions are in fact incremental and would not have occurred absent the customer contract. F-15 Sales commissions are paid upon the initial acquisition of a contract and are amortized over an estimated period of benefit of five years. Amortization is recognized on a straight-line basis commensurate with the pattern of revenue recognition. The Company determined the period of benefit for commissions paid for the acquisition of initial contracts by taking into consideration the commitment term of the customer contract, the nature of the Company’s technology development life cycle, and an estimated customer relationship period. Amortization of deferred contract acquisition costs is included in sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss. The Company reviews these deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred contract acquisition costs. There were no impairment losses recorded during the periods presented. Deferred Contract Fulfillment Costs The Company capitalizes costs to fulfill contracts with customers in “Prepaid expenses and other current assets” and “Other assets” on its consolidated balance sheet. The Company amortizes these costs to cost of revenue in the consolidated statement of operations and comprehensive loss consistent with the revenue recognition of the performance obligations in the associated contracts. The Company assesses these costs for impairment at the end of each reporting period. There were no impairment losses recorded during the periods presented. Comprehensive Loss Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income, and to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. The potential for recovery of deferred tax assets is evaluated by considering taxable income in carryback years, existing taxable temporary differences, prudent and feasible tax planning strategies and estimating the future taxable profits. The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 % likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. Net Loss per Share The Company follows the two-class method when computing net loss per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income or loss available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income or losses for the period had been distributed. Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss attributable to common stockholders is computed by adjusting net losses attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares. F-16 The Company’s convertible preferred stock contractually entitles the holders of such shares to participate in dividends, but contractually does not require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued, as their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the years ended December 31, 2021, 2020 and 2019. Revenue Recognition Platform subscription The Company generates revenue primarily from contracts with customers who purchase subscriptions to access the Company’s hosted telehealth platform which includes access to the Company’s affiliated medical group. The Company’s customers do not have the right to take possession of the Company’s software operating its telehealth platform at any time. Instead, customers are granted access to the Company’s platform over the contractual period. Access to the platform, including the stand ready obligation to provide access to the affiliated medical group, represents a series of distinct services as the Company continually provides access to and fulfills its obligation to the customer over the contract term. The typical contract term is three years. Most of the Company’s contracts are non-cancelable over the contractual term. Customers typically have the right to terminate their contracts for cause if the Company fails to perform in accordance with the contractual terms. For customers who purchase access to the enterprise telehealth platform (the “Amwell Platform”), the Company hosts a dedicated instance of the Amwell Platform, white-labeled under the customer’s own name, branding, and with customized workflows and operating choices. The implementation services for the Amwell Platform are not distinct within the context of the contract because the Company’s promise to perform the implementation services are not separately identifiable from the access to the Amwell Platform. The implementation services, which customize the customer’s Amwell Platform, are integral to the customer’s ability to derive its intended benefit from the Amwell Platform. The development and implementation services generally span several months and cannot be performed by another entity. Therefore, access to the Amwell Platform and the implementation services are bundled together and represent a single performance obligation. The fixed consideration related to the single performance obligation is generally recognized on a straight-line basis over the contract term beginning on the date access to the Amwell Platform is provided. The Company uses a time-elapsed method to measure progress because the Company transfers control evenly over the contractual period. Customers can also purchase access to the Company’s co-branded telehealth practice hosted on the Company’s shared services platform (the “Amwell Practice”). The implementation services for the Amwell Practice do not significantly modify or customize the Amwell Practice, typically occur over a few days, and can be performed by other entities. Therefore, access to the Amwell Practice and the implementation services are separate outputs promised by the Company and represent two distinct performance obligations. Customers may be billed prior to the related goods or services being transferred to the customer. In determining the transaction price, the Company adjusts the promised amount of consideration for a significant financing component if the timing of payments agreed to by the parties in the contract provide the customer a significant benefit of financing. The Company has applied the practical expedient and recognizes the promised amount of consideration without adjusting for the effects of a significant financing component if the Company expects, at contract inception, that the period between the transfer of goods or services to the customer when the customer pays for that good or service will be one year or less. As of December 31, 2021, the effect of the financing component is not significant and does not materially change the amount of revenue that would be recognized under a contract. The total fixed consideration is allocated to each distinct performance obligation based on standalone selling price (“SSP”) which reflects the amount that the Company charges for each performance obligation if it was sold separately in a standalone sale. The fixed consideration to access the Amwell Practice is recognized on a straight-line basis over the contract term beginning on the date access to the Amwell Practice is provided. A time-elapsed method is used to measure progress because the Company transfers control evenly over the contractual period. The fixed consideration related to the implementation services is recognized as the services are performed. F-17 In addition to the fixed consideration received from the Amwell Platform and Amwell Practice, the Company can also receive variable consideration based on the number of members serviced (that is, a stated fee per member per month). The Company allocates the per member per month variable consideration to the month that the fee is earned, correlating with the amount of services it is providing, which is consistent with the allocation objective of the series guidance. Revenue recognized from the per member per month variable consideration does not represent a significant portion of total revenue for the years ended December 31, 2021 , 2020 and 2019 . Some contracts with customers contain a renewal option which allows the customer to continue access to the Amwell Platform for a stated price after the initial contractual term has ended. These renewal options are evaluated on a case-by-case basis but generally do not provide a material right as they are priced at or above the price for the same service that the Company offers to similar customers and, as such, would not result in a separate performance obligation. Visits The Company also generates revenue when either the Amwell Platform or the Amwell Practice is utilized to conduct a medical visit. In the event of a visit, the fee that is earned upon completion of the visit is allocated to the specific day of performance, as the visit fee meets the criteria to allocate variable consideration to a distinct service within a series of distinct services that comprise the single performance obligation. Therefore, visit fees are recognized when the visits are completed, and the Company has delivered on its stand-ready obligation to provide access to the medical professional. In addition, customers can visit with the Company’s affiliated medical group without purchasing access to an Amwell Platform or Amwell Practice. These direct-to-consumer telehealth visits are available through the Company’s website where customers can conduct a visit with the Company’s affiliated medical group for a fixed fee. The Company’s affiliated medical group is responsible for fulfilling the promise to the customer to perform the medical visit. The Company has discretion in establishing the price for the visit, is responsible for the resolution of any customer issues, and is exposed to credit risk for the receivable due from the customer. Therefore, the Company recognizes the visit fee on a gross basis upon completion of the visit. Other Other revenue primarily represents professional services associated with the Amwell Platform. After implementation of Amwell Platform has been completed, some customers purchase other professional services, which are designed to help customers enhance their ability to use Amwell Platform. For the majority of arrangements, the Company prices these professional services on a time and material basis, has standalone selling price for these services, and recognizes revenue as services are performed. Other revenue also includes sale of hardware products, such as the Company’s telehealth carts and kiosks. Revenue from the sale of hardware products to customers is recognized upon the transfer of control, which occurs upon shipment of the product. Deferred Revenue Deferred revenue includes amounts collected or billed in excess of revenue recognized. Deferred revenue is recognized as revenue as the related performance obligations are satisfied. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as a current liability and the remaining portion is recorded as a noncurrent liability on the consolidated balance sheet. Leases The Company determines at the inception of a contract if such arrangement is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company classifies leases at the lease commencement date as operating or finance leases and records a right-of-use asset and a lease liability on the consolidated balance sheet for all leases with an initial lease term of greater than 12 months. Leases with an initial term of 12 months or less are not recorded on the balance sheet, but payments are recognized as expense on a straight-line basis over the lease term. The Company’s contracts may contain both lease and non-lease components. Non-lease components may include maintenance, utilities, and other operating costs. The Company combines the lease and non-lease components of fixed costs in its lease arrangements as a single lease component. Variable costs, such as utilities or maintenance costs, are not included F-18 in the measurement of right-of-use assets and lease liabilities, but rather are expensed when the event determining the amount of variable consideration to be paid occurs. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected lease term. The Company determines the present value of future lease payments by using its estimated secured incremental borrowing rate for that lease term as the interest rate implicit in the lease is not readily determinable. The Company estimates its secured incremental borrowing rate for each lease based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. Certain of the Company’s leases include options to extend or terminate the lease. The amounts determined for the Company’s right-of-use assets and lease liabilities generally do not assume that renewal options or early-termination provisions, if any, are exercised, unless it is reasonably certain that the Company will exercise such options. Recently Issued and Adopted Accounting Pronouncements In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the existing disclosure requirements for fair value measurements in Topic 820. The new disclosure requirements include disclosure related to changes in unrealized gains or losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of each reporting period and the explicit requirement to disclose the range and weighted-average of significant unobservable inputs used for Level 3 fair value measurements. The other provisions of ASU 2018-13 include eliminated and modified disclosure requirements. The guidance was adopted effective January 1, 2020 and did not have a material impact on the consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use-software. The guidance was adopted effective January 1, 2020 and did not have a material impact on the consolidated financial statements and disclosures. In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions and clarifying and amending existing guidance. The guidance was adopted effective January 1, 2021 and did not have a material impact on the consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. The guidance was adopted effective July 1, 2021 and impacted the accounting of acquired deferred revenue for the Conversa and SilverCloud acquisitions that occurred in August 2021. In January 2017, the FASB issued ASU No. 2017-04, Goodwill Simplifications (Topic 350) (“ASU 2017-04”), which simplifies the test for goodwill impairment. The new guidance eliminates Step 2 from the goodwill impairment test as currently prescribed in GAAP. This ASU is the result of the FASB project focused on simplifications to accounting for goodwill. The new guidance was effective and adopted in 2020 with no impact on the financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses , which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. The Company adopted ASU 2016-13 and the related clarifications in 2021. The adoption did not have a material effect on the Company’s consolidated financial statements. F-19 3. Revenue and Deferred Revenue Revenue The following table presents the Company’s revenues disaggregated by revenue source: Years Ended December 31, 2021 2020 2019 Platform subscription $ 108,254 $ 98,361 $ 83,705 Visits 116,617 117,181 40,701 Other 27,918 29,723 24,451 Total Revenue $ 252,789 $ 245,265 $ 148,857 Contract Balances The Company has rights to consideration for services completed but not billed at the reporting date. Unbilled receivables are classified as receivables when the Company has the right to invoice the customer. The amount of unbilled receivables as of December 31, 2021 and 2020 is $ 5,697 and $ 3,376 and has been included within accounts receivable and as of December 31, 2021 $ 781 has been included within other assets on the consolidated balance sheet. Contract liabilities consist of deferred revenue and include billings in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. For the years ended December 31, 2021, 2020 and 2019, the Company recognized revenue of $ 56,473 , $ 53,601 , and $ 59,006 , respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. The Company receives payments from customers based upon contractual billing schedules. The Company typically invoices its customers annually in advance for their annual software access fee. The Company records accounts receivable when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically net 30 days. Deferred Revenue Significant changes in the Company’s deferred revenue balance for the years ended December 31, 2021, 2020 and 2019: Years Ended December 31, 2021 2020 2019 Total deferred revenue, beginning of the period $ 74,800 $ 77,386 $ 93,299 Additions 123,717 109,542 85,167 Recognized ( 122,621 ) ( 112,128 ) ( 101,080 ) Total deferred revenue, end of the period $ 75,896 $ 74,800 $ 77,386 Current deferred revenue 68,841 66,693 66,490 Non-current deferred revenue 7,055 8,107 10,896 Total $ 75,896 $ 74,800 $ 77,386 Transaction Price Allocated to Remaining Performance Obligations As of December 31, 2021 and 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 219,893 and $ 192,238 , respectively. The substantial majority of the unsatisfied performance obligations will be satisfied over the next three years . As it pertains to the December 31, 2021 amount, the Company expects to recognize 46 % of the transaction price in the year ending December 31, 2022 in its consolidated statement of operations and comprehensive loss with the remainder recognized thereafter. F-20 4. Variable Interest Entities The Company provides services pursuant to contracts with PCs which in turn contracts with physicians to provide telehealth medical services. The PC’s collectively represent the Company’s affiliated medical group. The PCs were designed and structured to comply with the relevant laws and regulations governing professional medical practice, which generally prohibits the practice of medicine by lay persons or entities. To satisfy these regulatory requirements, all of the issued and outstanding equity interests of the PCs are owned by a licensed medical professional nominated by the Company (the “Nominee Shareholder”). Upon formation of the PCs, and initial issuance of equity interests, the Nominee Shareholder contributes a nominal amount of capital in exchange for their interest in the PC. The Company then executes with each PC a Business Support Agreement (“BSA”), which provide for various administrative and management services to be provided by the Company to the PC, and a Stock Transfer Agreement (“STA”), which provide for transition of ownership of the PCs. The Company provides all of the necessary capital for the operations of the PCs through loans to the PCs. The Company also has exclusive responsibility for the provision of all nonmedical services including contracting with customers who access the PCs for a medical visit, handling all financial transactions and day-to-day operations of each PC, overseeing the establishment of telehealth policies and protocol, and making recommendations to the PC in establishing the guidelines for the employment and compensation of the physicians and other employees of the PCs. In addition, the STA provides that the Company’s Board of Directors has the power and authority to change the Nominee Shareholder at any time for any reason, and designate a new Nominee Shareholder who will purchase the equity interests from the predecessor Nominee Shareholder for the same nominal amount, effectively limiting the Nominee Shareholder’s rights to returns of the PC. The Nominee Shareholders, notwithstanding their legal form of ownership of equity interests in the PC, have no substantive profit-sharing rights in the PCs. Based upon the provisions of these agreements, the Company determined that the PCs are variable interest entities due to its equity holder having insufficient capital at risk, and the Company has a variable interest in the PCs. The Company consolidated the PCs under the VIE model since the Company has the power to direct activities that most significantly impact the PCs economic performance and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the PCs. Furthermore, as a direct result of nominal initial equity contributions by the Nominee Shareholder, the financial support the Company provides to the PCs (e.g. loans) and the provisions of the STA, the interests held by noncontrolling interest holders lack economic substance and do not provide them with the ability to participate in the residual profits or losses generated by the PCs. Therefore, all income and expenses recognized by the PCs are allocated to the Company’s stockholders. The aggregate carrying value of total assets and total liabilities included on the consolidated balance sheets for the PCs after elimination of intercompany transactions were $ 29,770 and $ 1,485 , respectively, as of December 31, 2021 and $ 22,682 and $ 1,998 , respectively as of December 31, 2020. Total revenue included on the consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was $ 72,125 , $ 78,396 and $ 23,450 for the years ended December 31, 2021, 2020 and 2019, respectively. Net loss included on the consolidated statements of operations and comprehensive was not material for the years ended December 31, 2021, 2020 and 2019. 5. National Telehealth Network In 2012, the Company and an affiliate of Anthem, Inc. formed NTN to expand the availability and adoption of telemedicine. The Company did not have a controlling financial interest in NTN, but it had the ability to exercise significance influence over the operating and financial policies of NTN. Therefore, the Company accounted for its investment in NTN using the equity method of accounting through December 31, 2015. On January 1, 2016, the Company made an additional investment in NTN, which increased its ownership percentage above 50 %. The Company also obtained the right to elect the Chairman of NTN who has the ability to cast the tie-breaking vote in all decisions. Therefore, on January 1, 2016, the Company obtained control over NTN and has the power to direct the activities that most significantly impact NTN’s economic performance. This step-acquisition was accounted for as a business combination and the results of the operations of NTN from January 1, 2016, have been included in the Company’s consolidated financial statements. However, because the Company owns less than 100 % of NTN, the Company recognizes net income (loss) attributable to non-controlling interest in the consolidated statements of operations and comprehensive loss equal to the percentage of the ownership interest retained in NTN by the respective non-controlling party. F-21 The proportionate share of the loss attributed to the non-controlling interest amounted to $ 448 , $ 4,194 and $ 1,176 for the years ended December 31, 2021, 2020 and 2019, respectively. The carrying value of the non-controlling interest was $ 21,617 , $ 22,065 and 26,259 as of December 31, 2021, 2020 and 2019. 6. Fair Value Measurements Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1—Quoted prices in active markets for identical assets or liabilities. • Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The following tables presents the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value: December 31, 2021 Level 1 Level 2 Level 3 Total Money market funds $ 671,107 $ — $ — $ 671,107 Investments — — — — Total financial assets: Contingent consideration — — 16,450 16,450 Total financial liabilities: $ 671,107 $ — $ 16,450 $ 687,557 December 31, 2020 Level 1 Level 2 Level 3 Total Money market funds $ 892,934 $ — $ — $ 892,934 Investments — 99,963 — 99,963 $ 892,934 $ 99,963 $ — $ 992,897 As of December 31, 2021 and 2020, the Company’s cash equivalents were invested in money market funds and were valued based on Level 1 inputs. As of December 31, 2020, the Company’s investments consisted of U.S. government agency bonds and were valued based on Level 2 inputs. In determining the fair value of its U.S. government agency bonds, the Company relied on quoted prices for similar securities in active markets or other inputs that are observable or can be corroborated by observable market data. During the years ended December 31, 2021 and 2020, there were no transfers between Level 1, Level 2 and Level 3. The Company has classified its net liability for contingent earnout considerations relating to the August 2021 Acquisitions within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which included the Monte Carlo method that uses key assumptions to model future revenue and costs of goods sold projections. A description of the August 2021 Acquisitions is included within Note 9. The income approach method involves calculating the earnout payment based on the forecasted revenue and the revenue discount rate of 3.1 % and 1.3 % for SilverCloud and Conversa, respectively, The contingent earnout payments for each acquisition are based on the achievement of certain revenue and integration thresholds. During the year ended December 31, 2021 the fair value of the contingent earnout consideration decreased by $ 13,740 due to shifts in the timeline of revenue forecasts. During the fourth quarter of 2021, the contingent earnout consideration for the integration milestone was achieved and it was determined the earnout of $ 15,000 was payable to the Conversa shareholders as of December 31, 2021. F-22 Year Ended December 31, 2021 Beginning Balance as of January 1 $ — Initial estimate of fair value related to SilverCloud contingent consideration 29,360 Initial estimate of fair value related to Conversa contingent consideration 15,230 Accretion of contingent consideration 600 Fair value adjustment ( 13,740 ) Earned amount due to shareholders ( 15,000 ) Ending Balance $ 16,450 7. Investments As of December 31, 2021 and 2020, the fair value of the Company’s investments by type of security was as follows: December 31, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Assets: U.S government securities $ — $ — $ — $ — $ — $ — $ — $ — December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Assets: U.S government securities $ 99,854 $ 109 $ — $ 99,963 99,854 109 — 99,963 8. Allowance for Credit Losses Changes in the allowance for credit losses were as follows: Years Ended December 31, 2021 2020 2019 Allowance for credit losses, beginning of the period $ 1,556 $ 686 $ 396 Provisions 714 1,646 717 Write-offs ( 461 ) ( 776 ) ( 427 ) Allowance for credit losses, end of the period $ 1,809 $ 1,556 $ 686 9. Business Combinations Aligned Telehealth, Inc. In November 2019, the Company acquired all the issued and outstanding shares of Aligned Telehealth, Inc. (“Aligned”). This acquisition will combine Aligned’s customer base with the Amwell Platform to increase the number of hospitals and health plans utilizing telehealth. The aggregate consideration paid was $ 82,948 , which consists of (i) 456,667 shares of the Company’s Series C convertible preferred stock valued at $ 34,250 ; (ii) $ 48,688 of cash and (iii) contingent consideration of $ 10 . The Company was obligated to pay an earn-out up to $ 70,000 contingent upon Aligned achieving certain revenue and margin thresholds for the year ended December 31, 2020. The Company estimated the fair value of the contingent consideration as of the acquisition date. The contingent consideration was subject to remeasurement at each reporting date until December 31, 2020. The earn-out was no t achieved as of December 31, 2020, with the remeasurement adjustment of $ 10 was recorded in the consolidated statements of operations and comprehensive loss. The acquisition was a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $ 1,494 and recognized as general and administrative expense in its consolidated statements of operations and comprehensive loss during the year ended December 31, 2019. The results of F-23 operations of Aligned have been included in the Company’s consolidated statements of operations from the acquisition date. Actual revenue and losses of Aligned since the acquisition date as well as pro forma combined results of operations for the Aligned acquisition have not been presented because the effect of the acquisition was not material to the Company’s consolidated financial results for the periods presented. The fair value of the contingent consideration was reduced to $ 0 during the year ended December 31, 2020. The final allocation of the purchase consideration of $ 82,948 is as follows: Aligned Cash $ 2,938 Accounts receivable 3,612 Identifiable intangible assets 14,100 Other assets 179 Total assets acquired 20,829 Current liabilities ( 3,102 ) Deferred tax liability ( 1,388 ) Total liabilities assumed ( 4,490 ) Goodwill 66,609 Total purchase consideration $ 82,948 The following are the identifiable intangible assets acquired and their respective weighted average useful lives, as determined based on final valuations: Aligned Weighted Average Life (Years) Customer relationships $ 13,800 7.0 Trade name 300 7.0 Total $ 14,100 Customer-relationship intangible assets were valued using the multi-period, excess-earnings method, a method that values the intangible asset using the present value of the after-tax cash flows attributable to the intangible asset only. Key assumptions used in developing the valuation included the estimated annual net cash flows (including forecasted revenue, gross margin, and expenses) and the discount rate that appropriately reflects the risk inherent in each future cash flow stream, all of which were estimated by management. Goodwill represents the excess of the purchase consideration over the estimated acquisition date fair value of the net tangible and intangible assets acquired and liabilities assumed. Goodwill is primarily attributable to expected post-acquisition cross-selling opportunities from integrating Aligned’s customer relationships with the Amwell Platform. SilverCloud and Conversa On August 27, 2021 , the Company completed the acquisition of SilverCloud through a merger in which SilverCloud became a wholly-owned subsidiary of the Company. The cash consideration paid was $ 105,195 net of cash acquired of $ 12,239 . The stock consideration was comprised of 8.1 million shares of the Company’s Class A common stock valued at $ 85,571 , and escrow share consideration of $ 6,376 . SilverCloud is a leading digital mental health platform. The Company is obligated to pay an earn-out of up to $ 40,000 contingent upon SilverCloud achieving certain revenue thresholds for the year ending December 31, 2022. The Company estimated the fair value of the contingent consideration as of the acquisition date to be $ 29,360 . The contingent consideration is subject to remeasurement at each reporting date until December 31, 2022, with the remeasurement adjustment reported in the consolidated statement of operations and comprehensive loss. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $ 4,854 which included transaction costs from financial and legal advisors and other transaction related fees, as well as $ 717 of noncash compensation costs, and were recognized as incurred in the Company’s consolidated statement of operations and comprehensive loss in general and administrative expenses. The noncash compensation costs related to the SilverCloud acquisition are for additional noncash compensation costs incurred by F-24 the selling SilverCloud shareholders for certain employees that have continued employment after the transaction date and through the earn-out period, and will be a reoccurring cost until the payout of earn-out in 2023 . On August 9, 2021 , the Company completed the acquisition of Conversa through a merger in which Conversa became a wholly-owned subsidiary of the Company. The cash consideration paid was $ 51,331 net of cash acquired of $ 9,735 . The stock consideration was comprised of 4.7 million shares of the Company’s Class A common stock valued at $ 52,160 . Conversa is a leader in automated virtual healthcare. The Company is obligated to pay an earn-out of up to $ 30,000 contingent upon Conversa achieving certain integration thresholds in the first quarter of 2022, and certain revenue thresholds for the year ending December 31, 2022. The Company estimated the fair value of the contingent consideration as of the acquisition date to be $ 15,230 . The contingent consideration is subject to remeasurement at each reporting date until December 31, 2022, with the remeasurement adjustment reported in the consolidated statement of operations and comprehensive loss. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $ 2,435 which included transaction costs from financial and legal advisors and other transaction related fees and were recognized as incurred in the Company’s consolidated statement of operations and comprehensive loss in general and administrative expenses. The August 2021 Acquisitions were accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. The results of the August 2021 Acquisitions were integrated within the consolidated financial statements commencing on the aforementioned acquisition dates. Actual revenue and losses of the August 2021 Acquisitions since the acquisition date as well as pro forma combined results of operations for the August 2021 Acquisition have not been presented because the effect of the August 2021 Acquisitions were not material to the Company’s consolidated financial results for the periods presented. The following table summarizes the preliminary fair value estimates of the assets acquired and liabilities assumed for the SilverCloud and Conversa acquisitions at the respective acquisition dates. The Company, with the assistance of a third-party valuation expert, estimated the preliminary fair value of the acquired tangible and intangible assets with significant estimates such as revenue projections. In the fourth quarter of 2021, the Company recorded a $ 2,825 increase and a $ 1,268 decrease to goodwill related to the assessment of the tax attributes of the business combinations for SilverCloud and Conversa, respectively. In addition, the Company recorded a $ 9 and $ 66 decrease to goodwill with the finalization of the net working capital adjustment for SilverCloud and Conversa, respectively. The allocation of the consideration transferred to the assets acquired and the liabilities assumed for the August 2021 Acquisitions remains preliminary and therefore can be revised as a result of additional information obtained due to completing the final assessment of the tax attributes of the business combinations. Additional adjustments may be recorded within the measurement period, which will not exceed one year from the acquisition date. Identifiable assets acquired and liabilities assumed (in thousands): SilverCloud Conversa Health Purchase consideration: Cash consideration, net of cash acquired $ 105,195 $ 51,331 Stock consideration 85,571 52,160 Contingent consideration 29,360 15,230 Escrow share consideration 6,376 Working capital adjustment ( 300 ) ( 127 ) Total consideration transferred $ 226,202 $ 118,594 Allocation of Consideration transferred: Accounts receivable $ 2,630 $ 3,651 Identifiable intangible assets 78,146 34,700 Other assets 491 4,604 Total assets acquired 81,267 42,955 Current liabilities 2,155 8,463 Deferred revenue 5,813 4,655 Other long-term liabilities 11,557 115 Total liabilities assumed 19,525 13,233 Goodwill $ 164,460 $ 88,872 $ 226,202 $ 118,594 F-25 The amount allocated to goodwill reflects the benefits the Company expects to realize from post-acquisition cross selling opportunities from integrating customer relationships and from the growth of the respective acquisitions’ operations. The following are the identifiable intangible assets acquired in the August 2021 Acquisitions and their respective weighted average useful lives, as determined based on initial valuations. The estimated fair value of the Technology and Tradename was determined using a relief from royalty method and the estimated fair value of the Customer relationships was determined using the excess earnings method: SilverCloud Weighted Average Life (Years) Conversa Health Weighted Average Life (Years) Technology $ 34,996 5.0 $ 20,400 5.0 Tradename 10,800 7.0 4,200 5.0 Customer relationships 32,350 10.0 10,100 10.0 Total $ 78,146 $ 34,700 10. Deferred Contract Acquisition and Contract Fulfillment Costs The following table represents a rollforward of the Company’s deferred contract acquisition costs: December 31, 2021 2020 Beginning balance as of January 1 $ 3,461 $ 2,769 Additions to deferred contract acquisition costs 2,235 2,102 Amortization of deferred contract acquisition costs ( 1,971 ) ( 1,410 ) Ending balance $ 3,725 $ 3,461 Deferred contract acquisition costs, current $ 1,697 $ 2,134 Deferred contract acquisition costs, noncurrent 2,028 1,327 Total $ 3,725 $ 3,461 Amortization expense related to deferred contract acquisition costs for the years ended December 31, 2021, 2020 and 2019 was $ 1,971 , $ 1,410 and $ 1,062 , respectively. The following table represents a rollforward of the Company’s deferred contract fulfillment costs: December 31, 2021 2020 Beginning balance as of January 1 $ 1,861 $ 2,086 Additions to deferred contract fulfillment costs 266 627 Amortization of deferred contract fulfillment costs ( 737 ) ( 852 ) Ending balance $ 1,390 $ 1,861 Deferred contract fulfillment costs, current $ 736 $ 624 Deferred contract fulfillment costs, noncurrent 654 1,237 Total $ 1,390 $ 1,861 Amortization expense related to deferred contract fulfillment costs for the years ended December 31, 2021, 2020 and 2019 was $ 737 , $ 852 and $ 707 , respectively. F-26 11. Property and Equipment, Net Property and equipment, net consisted of the following: As of December 31, 2021 2020 Furniture and fixtures $ 231 $ 930 Computer and office equipment 7,965 7,638 Computer software 5,086 4,847 Leasehold improvements 692 2,162 13,974 15,577 Less: Accumulated depreciation and amortization ( 11,739 ) ( 11,741 ) Property and equipment, net $ 2,235 $ 3,836 Depreciation and amortization expense related to property and equipment was $ 2,160 , $ 2,146 and $ 1,769 for the years ended December 31, 2021, 2020 and 2019, respectively. During the year ended December 31, 2021 the Company disposed of fully depreciated assets with a gross value of $ 1,851 . 12. Goodwill and Intangible Assets Goodwill consisted of the following as of: December 31, 2021 2020 Beginning Balance as of January 1 $ 193,877 $ 193,877 Goodwill acquired 253,332 Currency translation adjustments ( 4,448 ) — Ending Balance $ 442,761 $ 193,877 Identified intangible assets consisted of the following as of: Gross Amount Accumulated Amortization Carrying Value Weighted Average Remaining Life December 31, 2021 Customer relationships $ 81,053 $ ( 16,842 ) $ 64,211 8.2 Contractor relationships 535 ( 247 ) 288 7.0 Trade name 14,435 ( 706 ) 13,729 5.8 Technology 90,464 ( 16,283 ) 74,181 5.0 $ 186,487 $ ( 34,078 ) $ 152,409 Gross Amount Accumulated Amortization Carrying Value Weighted Average Remaining Life December 31, 2020 Customer relationships $ 38,782 $ ( 11,380 ) $ 27,402 7.0 Contractor relationships 535 ( 206 ) 329 8.0 Trade name 300 ( 300 ) — — Technology 37,063 ( 9,266 ) 27,797 7.5 $ 76,680 $ ( 21,152 ) $ 55,528 Amortization expense related to intangible assets for the years ended December 31, 2021, 2020 and 2019 was $ 13,929 , $ 8,007 and $ 5,992 , respectively. Included in amortization expense for the year ended December 31, 2020 was $ 255 related to the write off of the remaining Trade name for Aligned. F-27 Estimated future amortization expense of the identified intangible assets as of December 31, 2021, is as follows: 2022 $ 25,039 2023 25,039 2024 25,055 2025 25,039 2026 20,617 Thereafter 31,620 152,409 13. Accrued Expenses Accrued expenses consist of the following: As of December 31, 2021 2020 Employee compensation and benefits $ 21,572 $ 20,521 Professional services 8,766 6,832 Earned contingent consideration 15,000 — Provider services 5,473 4,632 Other 7,900 10,150 Total $ 58,711 $ 42,135 14. Line of Credit In January 2011, the Company entered into a credit agreement (the “Line of Credit”) with a financial institution that provides for maximum borrowings in one or more advances of an amount up to $ 5,000 . Borrowings under the Line of Credit accrue interest at the London Interbank Offered Rate plus 1.25 %. Borrowings are repayable immediately upon demand by the financial institution. In November 2017, the Line of Credit was amended to increase the maximum borrowings to $ 7,000 . As of December 31, 2020, the Company had no outstanding borrowings under the Line of Credit. The Line of Credit arrangement expired during the year ended December 31, 2021. 15. Stockholders’ Equity Convertible Preferred Stock The authorized, issued and outstanding shares, liquidation preference, and carrying value of the Company’s convertible preferred stock as of December 31, 2019 were as follows: Shares Authorized Shares Issued Shares Outstanding Liquidation Preference Carrying Value Series A 3,200,000 3,178,650 3,130,077 51,741 28,889 Series B 833,334 787,725 787,725 37,060 23,632 Series C 13,711,111 10,095,133 10,095,133 519,648 603,278 17,744,445 14,061,508 14,012,935 608,449 655,799 In the year ended December 31, 2019, the Company issued and sold 628,719 shares of Series C preferred stock at a price of $ 75 per share for gross proceeds of $ 47,154 . The Company incurred $ 1,318 of issuance costs in connection with the issuance of the Series C preferred stock. Additionally, the Company issued 456,667 shares of Series C preferred stock at a price of $ 75 per share in connection with the acquisition of Aligned (see Note 9). In February 2020, the Company issued and sold 170,000 shares of Series C preferred stock at a price of $ 75 per share for gross proceeds of $ 12,750 . The Company incurred $ 261 of issuance costs in connection with the issuance of the Series C preferred stock F-28 In May 2020, the Company issued and sold 1,342,750 shares of Series C preferred stock at a price of $ 100 per share for gross proceeds of $ 134,275 . The Company incurred $ 750 of issuance costs in connection with the issuance of the Series C preferred stock. In conjunction with the Company’s IPO in September 2020, all shares of convertible preferred stock then outstanding, totaling 15,525,685 shares (pre-split), were automatically converted into an equivalent number of shares of Class A common stock on an 8.8-to-1.0 basis pursuant to a stock split and their carrying value, totaling $ 801,813 was reclassified into stockholders’ equity on the consolidated balance sheet. In connection with the IPO, the Company filed an Amended and Restated Certificate of Incorporation which authorizes the issuance of 100,000,000 shares of undesignated preferred stock, par value of $ 0.01 per share, with rights and preferences, including voting rights, designated from time to time by the board of directors. Prior to the conversion of the convertible preferred stock in September 2020, the stockholders of convertible preferred stock had the following rights and preferences: Voting Rights The holders of Preferred Stock are entitled to the number of votes equal to the number of shares of common stock into which such shares of Preferred Stock could convert on the record date for the determination of stockholders entitled to vote. In addition, the holders of the Preferred Stock, voting as a single class, and on an as converted to common stock basis, are entitled to elect one director of the Company. The holders of Preferred Stock, voting as a single class, and on an as converted to common stock basis, and the holders of common stock, voting as a separate class, are entitled to elect three directors of the Company. The holders of the common stock, voting as a separate class, are entitled to elect the remaining directors of the Company. Dividends The holders of the Preferred Stock are entitled to receive noncumulative dividends when, as and if declared by the board of directors. In addition, the holders of shares of Preferred Stock are entitled to participate pro rata on an as-converted-basis on any dividends paid to the holders of common stock. The holders of the Series B preferred stock and Series C preferred stock, collectively (the “Senior Preferred Stock”) are entitled to participate pro rata (calculated as if such Senior Preferred stock and Series A preferred stock had converted to common stock) on any dividends paid to the holders of Series A preferred stock. No dividends have been declared through December 31, 2020. Liquidation In the event of a liquidation, voluntary or involuntary, dissolution or winding up of the Company or Deemed Liquidation Event (as defined below), the holders of the Senior Preferred Stock will be entitled to receive, on a pari passu basis, (i) an amount per share equal to the applicable Original Issue Price plus (ii) any dividends declared but unpaid plus (iii) a non-compounding five percent per annum dividend on the Original Issue Price for each share of Senior Preferred Stock from the date of original issuance. In the event that proceeds are not sufficient to permit payment in full to the holders of the Senior Preferred Stock, the proceeds will be ratably distributed among the holders of the Senior Preferred Stock. After payments have been made in full to the holders of Senior Preferred Stock, then, to the extent available, the remaining assets of the Company available for distribution to its stockholders will be distributed among the holders of Series A preferred stock. The holders of the Series A preferred stock will be entitled to receive (i) an amount per share equal to the applicable Original Issue Price plus (ii) any dividends declared but unpaid plus (iii) a non-compounding five percent per annum dividend on the Original Issue Price for each share of Series A preferred stock from the date of original issuance. In the event that proceeds are not sufficient to permit payment in full to the holders of the Series A preferred stock, the proceeds will be ratably distributed among the holders of the Series A preferred stock. After payments have been made in full to the holders of the Senior Preferred Stock and Series A preferred stock, then to the extent available, the holders of common stock are entitled to share ratably in the remaining assets of the Company. Unless the holders of a majority of the Preferred Stock, voting together as a single class, on an as-converted to common stock basis, elect otherwise, a Deemed Liquidation Event includes a merger or consolidation (other than one in which stockholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring F-29 corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company. Conversion Each share of Preferred Stock is convertible, at the option of the holder, at any time, or will automatically be converted into shares of common stock at the applicable conversion ratio then in effect (i) upon closing of a qualifying IPO at a price per share to the public of at least $ 6.82 , subject to appropriate adjustments (described below), and with aggregate gross proceeds of at least $ 25,000 or (ii) upon the vote or written consent of the holders of a majority of the outstanding shares of Preferred Stock, voting together as a single class and on an as-converted to common stock basis. The conversion ratio of each series of preferred stock is determined by dividing the Original Issuance Price of each series by the applicable Conversion Price of each series. The Original Issue Price per share is $ 10.00 for Series A preferred stock, $ 30.00 for Series B preferred stock and $ 45.00 for Series C preferred stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock. The Conversion Price is $ 1.14 for Series A, $ 3.41 for Series B and $ 5.11 for Series C preferred stock. The Conversion Price is subject to appropriate adjustment in the event of any deemed issuance of additional shares, stock dividend, stock split, combination or other similar recapitalization and other adjustments as set forth in the Company’s certificate of incorporation, as amended and restated. Each outstanding share of Preferred Stock was convertible into common stock on a 8.8-for-one basis. Undesignated Preferred Stock In connection with our IPO in September 2020, we filed an Amended and Restated Certificate of Incorporation which authorizes the issuance of 100,000,000 shares of undesignated preferred stock, par value of $ 0.01 per share, with rights and preferences, including voting rights, designated from time to time by our board of directors. No shares of preferred stock were issued or outstanding as of December 31, 2021. Common Stock In September 2020, upon completion of the IPO, the Company sold 45,681,499 shares of Class A common stock at an offering price of $ 18.00 per share, including 4,459,277 shares of Class A common stock pursuant to the exercise in full of the underwriters' option to purchase additional shares. The Company received net proceeds of $ 767,568 , after deducting underwriting discounts and commissions of $ 49,336 and offering costs of approximately $ 4,906 . In September 2020, the Company sold 5,555,555 shares of Class C common stock in connection with the stock purchase agreement with Google, LLC for net proceeds of $ 99,100 , after deducting offering costs of $ 900 . Concurrently with the IPO, the Company used $ 24,157 of the proceeds from the IPO to repurchase 1,340,354 shares of Class A and Class B common stock from certain executive officers and other employees, to permit such executive officers and other employees to pay taxes owed in connection with the vesting of equity awards, including the repayment of third party loans incurred to finance the payment of such taxes. In connection with the IPO, the Company filed an Amended and Restated Certificate of Incorporation which authorizes capital stock of 1,000,000,000 shares of Class A common stock, par value $ 0.01 per share, 100,000,000 shares of Class B common stock, par value $ 0.01 per share, and 200,000,000 shares of Class C common stock, par value $ 0.01 per share. Except for the rights noted below, each Class A, Class B and Class C common stock have the same rights, are equal in all respects and are treated by us as one class of shares. Each share of Class A and Class C common stock is entitled to one vote per share on all matters presented for a vote, except that Class C common stock does not have the right to vote for elections of directors. Subject to certain conditions, Class B common stock is collectively entitled to a number of votes equal to the product of (x) 1.0408163 and (y) the total number of votes that would be cast at such time by the holders of the Class A and Class C common stock and any other preferred stock entitled to vote under the certificate of incorporation at such time (resulting in the Class B common stock collectively holding 51% of the total outstanding voting power) , and each share of Class B common stock will be entitled to a number of votes equal to the total number of votes held by all Class B common stock divided by the total number of then outstanding shares of Class B common stock. Shares of Class B and Class C common stock will be converted into shares of Class A common stock on a one-for-one basis upon the occurrence of certain events. Shares of Class B common stock will automatically convert on the first business day (i) after the date on which the outstanding shares of Class B common stock constitutes less than 5% of the aggregate number of shares of common stock F-30 then outstanding, (ii) after the date on which neither founder is serving as an executive officer or (iii) following seven years after the date the amended and restate certificate of incorporation becomes effective, provided that, such period may, to the extent permitted by law and applicable stock exchange rules, be extended for three years upon the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of Class A common stock entitled to vote thereon, voting separately as a class. Shares of Class C common stock will be convertible at the option of the holder upon determination that a Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) filing is not necessary prior to the holder’s conversion of such shares or, if required, upon expiration or termination of the HSR waiting period. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend right of the preferred stockholders. No dividends have been declared through December 31, 2021. In August 2021, the Company issued 4.7 million and 8.1 million shares of Class A common stock at a fair value of $ 11.20 and $ 10.51 per share in connection with the acquisitions of Conversa and SilverCloud, respectively (see Note 9). In the year ended December 31, 2021 4,079,035 shares of Class B common stock were converted to Class A common stock. As of December 31, 2021 the par value of the Class A, Class B and Class C shares was $ 2,294 , $ 270 and $ 56 , respectively. Shares Authorized Shares Issued Shares Outstanding Class A 1,000,000,000 229,402,453 229,402,453 Class B 100,000,000 26,913,579 26,913,579 Class C 200,000,000 5,555,555 5,555,555 1,300,000,000 261,871,587 261,871,587 As of December 31, 2021and 2020, the Company had reserved 61,989,749 and 61,392,747 shares of common stock for the exercise of outstanding stock options, the vesting of restricted stock units and the number of shares remaining available for future grant, respectively. Stock Plans and Stock Options The Company maintains the 2006 Employee, Director and Consultant Stock Plan as amended and restated (the “2006 Plan”) and 2020 Equity Incentive Plan (the “2020 Plan” together, the “Plans”) under which it has granted incentive stock options, non-qualified stock options, and restricted stock units to employees, officers, and directors of the Company. In connection with the adoption of the 2020 Plan, the then-remaining shares of common stock reserved for grant or issuance under the 2006 Plan became available for issuance under the 2020 Plan, and no further grants will be made under the 2006 Plan. The 2020 Plan is administered by the board of directors with respect to awards to non-employee directors and by the compensation committee, with respect to other participants, are collectively, referred to as the plan administrator. The exercise prices, vesting and other restrictions are determined at the discretion of the plan administrator. Options issued under the Plans are exercisable for periods not to exceed ten years, and vest and contain such other terms and conditions as specified in the applicable award document. Options to buy common stock are issued under the Plans, with exercise prices equal to the closing price of shares of the Company’s common stock on the New York Stock Exchange on the date of award. Stock options granted under the Plan typically vest over four years and expire ten years after the grant date. The Company had 31,470,984 shares available for grant as of December 31, 2021. F-31 Activity under the Plans is as follows: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding as of January 1, 2021 23,167,514 $ 4.37 6.2 $ 487,758 Granted — $ — Forfeited ( 578,503 ) $ 5.82 Expired — $ — Exercised ( 6,695,256 ) $ 3.21 Outstanding as of December 31, 2021 15,893,755 $ 4.81 5.9 $ 23,876 Vested and expected to vest as of December 31, 2021 15,395,398 $ 4.61 5.8 $ 23,752 Options exercisable as of December 31, 2021 13,407,882 $ 4.38 5.5 $ 23,120 The aggregate intrinsic value of stock options exercised during the years ended December 31, 2021, 2020 and 2019, was $ 106,407 , $ 31,194 and $ 2,433 , respectively. The aggregate intrinsic value of common stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The weighted-average grant date fair value of common stock options granted during the years ended December 31, 2021, 2020 and 2019, was $ 0 , $ 4.17 and $ 2.81 , respectively. The Company received cash proceeds from the exercise of common stock options of $ 20,806 , $ 5,932 and $ 1,036 during the years ended December 31, 2021, 2020 and 2019, respectively. The weighted average of assumptions that the Company used to determine the fair value of the common stock options granted to employees and directors were as follows: Years Ended December 31, 2021 2020 2019 Risk-free interest rate N/A 1.09 % 2.17 % Expected term (in years) N/A 6.1 6.0 Expected volatility N/A 52 % 50 % Expected dividend yield N/A 0 % 0 % Executive Equity Awards Each CEO has received restricted stock units, equaling up to 1.5 % of the Company’s fully-diluted outstanding capital stock as a result of the IPO (“IPO RSUs”), 50 % of the IPO RSUs (representing 0.75 % of the Company’s fully diluted outstanding capital stock immediately prior to the IPO or 3,230,750 shares of Class A common stock) were granted on the closing date of the IPO based on the closing price per share on the IPO closing date, and 50 % (representing up to 0.75 % of the Company’s fully diluted outstanding capital stock immediately prior to the IPO or 3,230,750 shares of Class A common stock) was granted on the 180-day anniversary of the IPO, based on a specific range of the price per share of the Company’s publicly traded common stock prior March 16, 2021, and will vest over a three-year period, with one-third vesting on the first anniversary of the IPO’s closing date and the remaining vesting in equal quarterly installments thereafter. As the issuance of the second 50% tranche is based upon events that are probable the expense related to both tranches of the IPO RSUs was recognized in the three months ended September 30, 2020. The grant-date fair value of each of the awards issued on the IPO closing date and to be issued on the 180-day anniversary of the IPO were estimated using a binomial lattice approach. The main inputs to valuing the IPO RSUs include the fair value of Class A common stock ($ 9.96 post-split), expected volatility ( 60 %) and the expected date of the IPO (September 30, 2020). The Company recognized a total of $ 23,644 in stock-based compensation expense, which included both tranches of the IPO RSUs for each CEO, on the date of the IPO as the requisite future service of the awards is not substantive for accounting purposes. F-32 Restricted Stock Units The following table summarizes the unvested restricted stock unit activity for the year ended December 31, 2021: Shares Weighted Average Grant Date Fair Value Unvested as of January 1, 2021 11,014,450 $ 14.43 Granted 9,011,024 16.93 Vested ( 7,394,144 ) 9.34 Forfeited ( 912,517 ) 13.62 Unvested as of December 31, 2021 11,718,813 $ 19.63 The total grant date fair value of RSU’s granted for the years ended December 31, 2021, 2020 and 2019 was $ 152,550 , $ 195,655 and $ 15,135 , respectively. The aggregate intrinsic value of restricted stock units vested for the years ended December 31, 2021, 2020 and 2019 was $ 90,726 , $ 73,836 and $ 1,693 , respectively. 2020 Employee Stock Purchase Plan In July and August 2020, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2020 Employee Stock Purchase Plan (“ESPP”). A total of 3,084,218 shares of Class A common stock were reserved for issuance under the ESPP. The ESPP became effective March 1, 2021. Rights granted under the ESPP will be issued only with respect to shares of Class A common stock. The purchase price of the shares will not be less than 85 % of the fair market value of Class A common stock on the lower of the purchase date, which will be the final trading day of the purchase period, or the enrollment date, which will be the first trading day of the offering period. During the year ended December 31, 2021, the Company issued 178,021 shares under the ESPP. As of December 31, 2021 2,906,197 shares remained available for issuance. Stock-Based Compensation Stock-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows: Years Ended December 31, 2021 2020 2019 Cost of revenues $ 1,655 $ 1,087 $ 536 Research and development 7,613 4,793 1,477 Selling and marketing 7,666 4,147 2,418 General and administrative 26,875 108,331 7,704 Total $ 43,809 $ 118,358 $ 12,135 As of December 31, 2021, total unrecognized compensation cost related to the unvested common stock-based awards was $ 80,121 , which is expected to be recognized over a weighted-average period of 2.9 years. F-33 16. Leases The Company’s primary lease represents the lease for its corporate headquarters in Boston, Massachusetts. The Company modified the corporate headquarter lease during the third quarter of 2021. Rent expense for the year ended December 31, 2021 was $ 5,870 . The carrying value of the Company’s right-of-use assets are substantially concentrated in real estate as the Company primarily leases office space. The Company’s policy is not to record leases with an original lease term of one year or less on the consolidated balance sheets. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. The Company does not have any lease contracts with the option to purchase as of December 31, 2021. Years Ended December 31, 2021 2020 2019 The components of lease cost under ASC 842 were as follows: Operating lease cost $ 5,617 $ 6,632 $ 6,649 Short-term lease cost — — — Variable lease cost — — — Total lease cost $ 5,617 $ 6,632 $ 6,649 Years Ended December 31, 2021 2020 2019 Supplemental cash flow information: Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases $ 6,352 $ 7,006 $ 6,480 Non-cash lease activity: Right-of-use lease assets obtained in exchange for new operating lease liability: Operating leases $ 15,506 $ 417 $ 355 As of December 31, 2021 2020 Supplemental balance sheet information related to leases is as follows: Operating leases Operating lease right-of-use assets $ 16,422 $ 6,609 Total operating right-of-use lease assets $ 16,422 $ 6,609 Operating lease liabilities, current 1,918 6,357 Operating lease liabilities, net of current portion 14,694 1,296 Total operating lease liabilities $ 16,612 $ 7,653 Weighted-average remaining lease term (in years) 5.0 years 1.3 years Weighted-average discount rate 1.1 % 2.9 % As of December 31, 2021, minimum future lease payments for these operating leases were as follows: Years ending December 31, 2022 $ 2,100 2023 3,683 2024 3,416 2025 3,484 2026 3,554 Thereafter 893 Total lease payments $ 17,130 Less imputed interest ( 518 ) Total present value of lease liabilities $ 16,612 F-34 Indemnification The Company’s arrangements generally include certain provisions for indemnifying customers against third-party claims asserting infringement of certain intellectual property rights in the ordinary course of business. The Company also regularly indemnifies customers against third-party claims that the company’s products or services breach applicable law or regulation or from claims resulting from a breach of the business associate agreement in place with the customer. In addition, the Company indemnifies its officers, directors and certain key employees while they are serving in good faith in their capacities. Through December 31, 2021, there have been no claims under any indemnification provisions. Litigation From time to time, and in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. On September 14, 2020, the Company received a letter from Teladoc Health, Inc. alleging that certain of the Company’s cart products and associated peripherals infringe upon their patents. On October 12, 2020, Teladoc Health, Inc filed a claim against the Company related to these allegations. The Company believes that these claims lack merit and intends to defend against them vigorously. As of December 31, 2021 and 2020, the Company did no t have any pending claims, charges or litigation that it expects would have a material adverse effect on its consolidated financial position, results of operations or cash flows. 17. Income Taxes During the years ended December 31, 2021, 2020 and 2019 the Company recorded an income tax (benefit) expense of $( 5,376 ), $ 639 and $( 803 ), respectively. The December 31, 2021 income tax benefit is primarily due to a partial release of valuation allowance in the U.S resulting from the deferred tax liabilities established as part of the August 2021 Acquisitions consummated during the year (see Note 9). The December 31, 2020 income tax provision primarily represents amounts related to foreign taxes related to equity awards issued in the fourth quarter. The December 31, 2019 income tax benefit primarily represents the release of a portion of the Company’s deferred tax asset valuation allowance in connection with the acquisition of Aligned (see Note 9) offset by foreign and state taxes. For the years ended December 31, 2021, 2020 and 2019, the Company’s loss before income taxes is primarily generated in the United States as the pre-tax loss from the Company’s foreign subsidiaries is not significant. The components of our current and deferred portions of the provision for income taxes are presented in the table below: Years Ended December 31, 2021 2020 2019 Current income tax provision (benefit): Federal $ — $ — $ — State 41 97 34 Foreign 828 448 285 Total Current $ 869 $ 545 $ 319 Deferred income tax provision (benefit): Federal $ ( 5,730 ) $ 103 $ ( 821 ) State 1 21 ( 252 ) Foreign ( 516 ) ( 30 ) ( 49 ) Total Deferred $ ( 6,245 ) $ 94 $ ( 1,122 ) Total provision (benefit) for income taxes $ ( 5,376 ) $ 639 $ ( 803 ) The following reconciles the differences between income taxes computed at the federal statutory rate and the provision for income taxes: Years Ended December 31, 2021 2020 2019 Federal statutory income tax rate 21.0 % 21.0 % 21.0 % State taxes, net of federal benefit 4.5 2.0 3.0 Valuation allowance ( 24.5 ) ( 13.3 ) ( 21.3 ) Stock-based compensation 1.9 ( 9.5 ) ( 1.1 ) Other 0.1 ( 0.5 ) ( 0.7 ) Effective income tax rate 3.0 % ( 0.3 %) 0.9 % F-35 Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows: As of December 31, 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 179,555 $ 116,965 Research and development credit carryforwards 1,676 2,081 Deferred revenue 2,863 4,848 Deferred compensation 7,176 7,142 Startup costs 84 171 Leasing obligation 4,115 1,937 Other 904 1,030 Total deferred tax assets 196,373 134,174 Total valuation allowance ( 164,391 ) ( 118,795 ) Total net deferred tax assets 31,982 15,379 Joint venture investment basis difference ( 1,453 ) ( 1,706 ) Intangibles ( 30,265 ) ( 10,563 ) Right-of-use assets ( 4,068 ) ( 1,669 ) Other ( 1,131 ) ( 1,374 ) Total deferred tax assets (liabilities) ( 36,917 ) ( 15,312 ) Net deferred tax liabilities $ ( 4,935 ) $ 67 The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company's history of cumulative net losses incurred in the U.S. since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the net domestic deferred tax assets as of December 31, 2021, 2020 and 2019. Management reevaluates the positive and negative evidence at each reporting period. Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2021, 2020 and 2019 related primarily to the increase in net operating loss carryforwards in 2021, 2020 and 2019 and were as follows: Years Ended December 31, 2021 2020 2019 Valuation allowance as of beginning of the year $ 118,795 $ 88,499 $ 69,433 Increases recorded to income tax provision 51,348 30,296 20,454 Decreases recorded as a benefit to income tax provision ( 5,752 ) — ( 1,388 ) Valuation allowance as of end of year $ 164,391 $ 118,795 $ 88,499 As of December 31, 2021, the Company has federal net operating loss carryforwards of approximately $ 703,416 , which begin to expire in 2026 . The Company’s federal net operating losses generated for the years ended after December 31, 2017, which amounted to a total of $ 472,047 , can be carried forward indefinitely. The Company has tax effected state net operating losses of approximately $ 30,050 , which began to expire in 2022 . In addition, the Company has federal and state and research and development tax credit carryforwards of $ 1,602 and $ 200 , which begin to expire in 2027 and 2027 , respectively. Utilization of the Company's net operating loss ("NOL") carryforwards and research and development ("R&D") credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 ("Section 382") as well as similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change as defined by Section 382 results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 % over a three-year period. Since its formation, the Company has raised capital through the issuance of capital stock on several occasions. These financings, combined with the purchasing shareholders' subsequent disposition of those shares, could result in a change of control as defined by Section 382. The Company conducted an analysis under Section 382 to determine if historical changes in ownership through December 31, 2021 would F-36 limit or otherwise restrict its ability to utilize its NOL and R&D credit carryforwards. As a result of this analysis, the Company does not believe there are any significant limitations on its ability to utilize these carryforwards generated through December 31, 2021 . However, changes in ownership occurring after December 31, 2021 , could affect the limitation in future years, and any limitation may result in expiration of a portion of the NOL or R&D credit carryforwards before utilization. The Company does no t have unrecognized tax benefits related to uncertain tax positions. The Company recognizes both accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has not recorded any interest and penalties on any unrecognized tax benefits since its inception. The tax years 2006 through 2021 remain open to examination by major taxing jurisdictions to which the Company is subject, which is primarily in the United States (U.S.), as carryforward attributes generated in prior years may still be adjusted upon examination by the Internal Revenue Service (IRS) or state tax authorities if they have or will be used in a future period. The Company files income tax returns in the U.S. federal and various state jurisdictions. There are currently no federal or state audits in progress by the IRS or any other jurisdictions for any tax years. 18. Related-Party Transactions Teva Pharmaceuticals, Industries Ltd Teva Pharmaceuticals, Industries Ltd (“Teva”) was determined to be a related party because a member of the Company’s board of directors was the President and CFO of Teva Pharmaceuticals’ North America Commercial through June 2021. In addition, Teva was a non-significant shareholder of the Company during the year. As of December 31, 2020, short-term and long-term deferred revenue from this customer was not material. As of December 31, 2020, there were no amounts due from Teva. Prior to the board member’s departure from the board of directors in June 2021, the Company recognized an immaterial amount of revenue from contracts with this customer. During the years ended, December 31, 2020 and 2019, the Company recognized an immaterial amount of revenue from contracts with this customer. Philips Holding USA, Inc. Philips Holding USA, Inc. (“Philips”) was determined to be a related party because a member of the Company’s board of directors was the Business Leader of Philips Population Health Management through June 2021. In addition, Philips is a non-significant shareholder of the Company. As of September 30, 2021 it was determined Philips was no longer a related party. As of December 31, 2020, the Company held short-term and long-term deferred revenue of $ 1,458 from contracts with this customer. As of December 31, 2020 amounts due from Philips were $ 763 . Prior to the board member’s departure from Philips in June 2021, the Company recognized revenue of $ 1,658 , from contracts with this customer. During the years ended December 31, 2020 and 2019, the Company recognized revenue of $ 2,441 , $ 1,021 , respectively, from contracts with this customer. Anthem Inc. Anthem Inc. (“Anthem”) was determined to be a related party because a member of the Company’s board of directors served as the Vice President of Anthem through February 2021. In addition, Anthem is a non-significant shareholder of the Company. As of March 31, 2021, it was determined Anthem was no longer a related party. As of December 31, 2020, the Company held short-term and long-term deferred revenue of $ 11,347 from contracts with this customer. As of December 31, 2020, amounts due from Anthem were $ 8,391 . Prior to the board member’s departure from Anthem in February 2021, the Company recognized revenue of $ 7,218 from contracts with this customer. During the years ended December 31, 2020 and 2019, the Company recognized revenue of $ 55,180 and $ 34,095 , respectively, from contracts with this customer. Cleveland Clinic Cleveland Clinic is a related party because a member of the Company’s board of directors is an executive advisor to Cleveland Clinic. As of December 31, 2021 and 2020, the Company held short-term and long-term deferred revenue of $ 456 and $ 606 , respectively from contracts with this customer. As of December 31, 2021 and 2020, amounts due from Cleveland Clinic were $ 441 and $ 1,020 . F-37 During the years ended December 31, 2021, 2020 and 2019, the Company recognized revenue of $ 1,301 , $ 1,357 , and $ 1,262 , respectively, from contracts with this customer. CCAW, JV LLC CCAW, JV LLC is a related party because it is a joint venture formed between the Company and Cleveland Clinic for which the Company has a less than majority owned interest in. During the year ended December 31, 2020 the Company made an initial investment in CCAW, JV LLC of $ 2,940 for its less than 50 % interest in the joint venture. During the year ended December 31, 2021 the Company made a capital contributed of $ 2,548 , related to a portion of the phase one capital commitment. During the year ended December 31, 2021 and 2020 the Company recognized revenue of $ 1,841 and $ 1,825 from contracts with this customer. As of December 31, 2021 and 2020, the Company held short and long term deferred revenue of $ 1,426 and $ 1,496 from contracts with this customer. As of December 31, 2021 amounts due from CCAW, JV LLC were $ 1,613 and as of December 31, 2020, amounts due from CCAW, JV LLC were not material. Loans to Officer During 2020, the Company entered into secured promissory notes with the Chief Financial Officer and other executive officers in the amount of $ 16,441 . These loans were to fund the taxes associated with the restricted stock units and were collateralized by all of the capital stock of the Company that the employee owned or would own in the future and the employees’ personal assets. These loans are recorded within prepaids and other current assets in the Company’s consolidated balance sheet. All outstanding loans with officers were repaid in August 2020 prior to the Company’s IPO. 19. Employee Benefit Plan The Company has established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretax basis, subject to legal limitations. Company contributions to the plan may be made at the discretion of the Company’s board of directors. The Company contributed a total of $ 2,698 , $ 2,165 and $ 1,966 to the plan for the years ended December 31, 2021, 2020 and 2019, respectively. 20. Net Loss per Share Basic and diluted net loss per share attributable to common stockholders was calculated as follows: Years Ended December 31, 2021 2020 2019 Numerator: Net loss $ ( 176,782 ) $ ( 228,626 ) $ ( 88,366 ) Net loss attributable to non-controlling interest ( 448 ) ( 4,194 ) ( 1,176 ) Net loss attributable to American Well Corporation $ ( 176,334 ) $ ( 224,432 ) $ ( 87,190 ) Denominator: Weighted-average common shares outstanding, basic and diluted 254,068,942 99,044,312 41,138,798 Net loss per share attributable to common stockholders, basic and diluted $ ( 0.69 ) $ ( 2.27 ) $ ( 2.12 ) F-38 The Company’s potential dilutive securities, which include stock options, convertible preferred stock and unvested restricted stock units, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares equivalents presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: Years Ended December 31, 2021 2020 2019 Convertible preferred stock (as converted to common stock) — — 123,313,703 Unvested restricted stock units 7,472,787 5,399,622 2,322,408 Options to purchase shares of common stock 15,893,755 23,167,514 24,917,003 23,366,542 28,567,136 150,553,114 F-39