S-4 1 d106823ds4.htm S-4 S-4
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As filed with the Securities and Exchange Commission on February 8, 2021.

Registration Statement No. 333-          

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

GigCapital2, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   6770   83-3838045
(Jurisdiction of Incorporation
or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

1731 Embarcadero Rd., Suite 200

Palo Alto, CA 94303

Telephone: (650) 276-7040

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Dr. Raluca Dinu

Chief Executive Officer and President

GigCapital2, Inc.

1731 Embarcadero Rd., Suite 200

Palo Alto, CA 94303

Telephone: (650) 276-7040

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Jeffrey C. Selman, Esq.

Ben Griebe, Esq.

John Maselli, Esq.

DLA Piper LLP (US)

555 Mission Street, Suite 2400

San Francisco, CA 94105

Tel: (415) 615-6095

 

Kate Bechen, Esq.

Husch Blackwell LLP

511 North Broadway, Suite 1100

Milwaukee, Wisconsin 53202

Tel: (414) 273-2100

 

David Ni, Esq.

Joshua DuClos, Esq.

Sidley Austin LLP

787 Seventh Avenue

New York, New York 10019

Tel: (212) 839-5300

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective and on completion of the business combination described in the enclosed proxy statement/prospectus.

If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

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

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.  ☒

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

  Amount
to be
Registered(1)
  Proposed
Maximum
Offering Price
per Share
  Proposed
Maximum
Aggregate
Offering Price(2)
  Amount of
Registration Fee(3)

Common stock, par value $0.0001 per share

  110,000,000   N/A   $1,119,250,000   $122,110.18

 

 

(1)

Based on the maximum number of shares of common stock, par value $0.0001 per share (“Common Stock”), of the registrant (“GigCapital2”) to be issued in connection with the Business Combinations. This number is based on the sum of (a) the 99,000,000 shares of Common Stock issuable on the consummation of the UpHealth Business Combination as described herein and (b) the 11,000,000 shares of Common Stock issuable on the consummation of the Cloudbreak Business Combination as described herein.

(2)

Pursuant to Rules 457(c) and 457(f)(1) promulgated under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is an amount equal to $1,119,250,000, calculated as the product of (i) 110,000,000 shares of Common Stock, the estimated maximum number of shares of Common Stock that may be issued in the Business Combinations and (ii) $10.175, the average of the high and low trading prices of Common Stock on February 5, 2021 (within five business days prior to the date of this registration statement).

(3)

Calculated pursuant to Rule 457 of the Securities Act by calculating the product of (i) the proposed maximum aggregate offering price and (ii) 0.0001091.

 

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary proxy statement/prospectus is not complete and may be changed. These securities described herein may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission is declared effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED FEBRUARY 8, 2021

PROXY STATEMENT FOR

SPECIAL MEETING OF

GIGCAPITAL2, INC.

PROSPECTUS FOR 110,000,000 SHARES OF COMMON STOCK

OF

GIGCAPITAL2, INC.

WHICH WILL BE RENAMED “UPHEALTH, INC.” IN CONNECTION WITH

THE BUSINESS COMBINATIONS DESCRIBED HEREIN

The board of directors of GigCapital2, Inc., a Delaware corporation (“GigCapital2”), has unanimously approved (i) the merger of UpHealth Merger Sub, Inc. (“UpHealth Merger Sub”), a Delaware corporation, and UpHealth Holdings, Inc. (“UpHealth”), a Delaware corporation (the “UpHealth Business Combination”), with UpHealth surviving the UpHealth Business Combination as a wholly-owned subsidiary of GigCapital2, pursuant to the terms of the UpHealth Business Combination Agreement, dated as of November 20, 2020, by and among GigCapital2, UpHealth Merger Sub and UpHealth, attached to this proxy statement/prospectus as Annex A (the “UpHealth Business Combination Agreement”), as more fully described elsewhere in this proxy statement/prospectus; and (ii) the other transactions contemplated by the UpHealth Business Agreement and documents related thereto. Additionally, the board of directors of GigCapital2, Inc. has unanimously approved (i) the merger of Cloudbreak Health Merger Sub, LLC (“Cloudbreak Merger Sub”), a Delaware limited liability company, and Cloudbreak Health, LLC (“Cloudbreak”), a Delaware limited liability company (the “Cloudbreak Business Combination” and, together with the UpHealth Business Combination, the “Business Combinations”), with Cloudbreak surviving the Cloudbreak Business Combination as a wholly-owned subsidiary of GigCapital2, pursuant to the terms of the Cloudbreak Business Combination Agreement, dated as of November 20, 2020, by and among GigCapital2, Cloudbreak Merger Sub and Cloudbreak, attached to this proxy statement/prospectus as Annex B (the “Cloudbreak Business Combination Agreement” and, together with the UpHealth Business Combination Agreement, the “Business Combination Agreements”), as more fully described elsewhere in this proxy statement/prospectus; and (ii) the other transactions contemplated by the Cloudbreak Business Agreement and documents related thereto

In connection with the Business Combinations, GigCapital 2 will change its name to “UpHealth, Inc.”

At the effective time of the UpHealth Business Combination, among other things, each share of UpHealth Common Stock will be canceled GigCapital2 (the “GigCapital2 Common Stock”) equal to the Exchange Ratio (as defined in the UpHealth Business Combination Agreement). The Exchange Ratio will be equal to the Aggregate Merger Consideration (as defined in the UpHealth Business Combination Agreement) divided by the sum of the aggregate number of shares of UpHealth Common Stock issued and outstanding immediately prior to the effective time of the UpHealth Business Combination.

At the effective time of the Cloudbreak Business Combination, among other things, (i) each Common Unit (as defined in the Cloudbreak Business Combination Agreement) (and the membership interests represented thereby) issued and outstanding immediately prior to the Closing shall be converted into the right to receive a number of shares of GigCapital2 Common Stock equal to the Common Unit Exchange Ratio (together with any Business Combination Share Adjustment, as defined below, to which each Common Unit is entitled, the “Common Unit Merger Consideration”); (ii) each Series A Preferred Unit (as defined in the Cloudbreak Business Combination Agreement) (and the membership interests represented thereby) issued and outstanding immediately prior to the Closing shall be converted into the right to receive a number of shares of GigCapital2 Common Stock equal to the Preferred Unit Exchange Ratio (in addition to any Business Combination Share Adjustment to which each Series A Preferred Unit is entitled); and (iii) each Option (as defined in the Cloudbreak Business Combination Agreement) that is outstanding and unexercised immediately prior to the Closing, whether vested or unvested, shall be assumed by GigCapital2 and converted into an option to purchase a number of shares of GigCapital2 Common Stock in an amount set forth on the Allocation Schedule (as defined in the Cloudbreak Business Combination Agreement), which amount shall be equal to the product of (i) the number of Common Units subject to such Option, multiplied by (ii) the Common Unit Exchange Ratio (as defined in the Cloudbreak Business Combination Agreement) (each such converted option, an “Exchanged Option”); provided, however, that any fractional share resulting from such multiplication shall be rounded up to the nearest whole share, and the Company shall pay to such Continuing Employee (as defined in the Cloudbreak Business Combination Agreement) a cash amount in respect of such fractional share on the next full payroll cycle following Closing.

The “Closing” means the closing of the transactions contemplated by the Business Combination Agreements.

The GigCapital2 Common Stock, units, warrants and rights are currently listed on NYSE under the symbols “GIX,” “GIX.U,” “GIX.WS” and “GIX.RT,” respectively. Upon Closing, we intend to apply to list the shares issued as consideration in the Business Combinations on the NYSE under the symbol “UPH.” Thereafter, our units (each comprised of one share of GigCapital2 Common Stock, one right to receive one-twentieth of one share of Common Stock and one warrant to purchase one share of GigCapital2 Common Stock), will cease to trade as an individual security and, instead, will be separated into their constituent securities, and the GigCapital2 Common Stock and warrants will trade under the symbols “UPH” and “UPH.WS,” respectively. It is a condition of the consummation of the Business Combinations described above that GigCapital2 receives confirmation from the NYSE that the securities have been conditionally approved for listing on the NYSE, but there can be no assurance such listing conditions will be met or that GigCapital2 will obtain such confirmation from the NYSE. If such listing conditions are not met or if such confirmation is not obtained, the Business Combinations described above will not be consummated unless the NYSE condition set forth in the Business Combination Agreements are waived by the applicable parties.

This proxy statement/prospectus provides shareholders of GigCapital2 with detailed information about the proposed business combination and other matters to be considered at the special meeting of GigCapital2. We encourage you to read this entire document, including the Annexes and other documents referred to herein, carefully and in their entirety. You should also carefully consider the risk factors described in the section entitled “Risk Factors” beginning on page 57 of this proxy statement/prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

This proxy statement/prospectus is dated                 , 2021, and is first being mailed to GigCapital2’s shareholders on or about                 , 2021.


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GigCapital2, Inc.

1731 Embarcadero Road, Suite 200

Palo Alto, CA 94303

 

 

Dear GigCapital2, Inc. Stockholder:

We cordially invite you to attend a special meeting (the “Special Meeting”) of the stockholders of GigCapital2, Inc., a Delaware corporation (“we,” “us,” “our” or the “Company”), which will be held on                 , 2021 at [10:00] [a][p].m., local time, via live webcast at http://[●]. In light of ongoing developments related to coronavirus (COVID-19), after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend and vote at the Special Meeting online by visiting https://[●] and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the proxy statement/prospectus. Please note that you will only be able to access the Special Meeting by means of remote communication.

On November 20, 2020, the Company, UpHealth Merger Sub, Inc. (“UpHealth Merger Sub”), and UpHealth Holdings, Inc., a Delaware corporation (“UpHealth”), entered into a business combination agreement (as subsequently amended on January 29, 2021 and as it may be further amended from time to time, the “UpHealth Business Combination Agreement”). If the UpHealth Business Combination Agreement is adopted by UpHealth stockholders, and the UpHealth Business Combination Agreement is approved by Company stockholders at the Special Meeting, UpHealth Merger Sub will merge with and into UpHealth, with UpHealth surviving the merger. Upon the consummation of the transactions contemplated by the UpHealth Business Combination Agreement (the “UpHealth Business Combination”), the Company will change its name to UpHealth, Inc.

On November 20, 2020, the Company, Cloudbreak Health Merger Sub, LLC, a Delaware limited liability company (“Cloudbreak Merger Sub”), Cloudbreak Health, LLC, a Delaware limited liability company (“Cloudbreak”), solely with respect to Section 7.15 thereof, Dr. Chirinjeev Kathuria and Dr. Mariya Pylypiv (collectively, the “UpHealth Significant Stockholders”) and UpHealth, and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative, agent and attorney-in-fact of the Cloudbreak members, entered into a business combination agreement (and as it may be further amended from time to time, the “Cloudbreak Business Combination Agreement” and, together with the UpHealth Business Combination Agreement, the “Business Combination Agreements”). If the Cloudbreak Business Combination Agreement is adopted by Cloudbreak members, and the Cloudbreak Business Combination Agreement is approved by Company stockholders at the Special Meeting, Cloudbreak Merger Sub will merge with and into Cloudbreak, with Cloudbreak surviving the merger (the “Cloudbreak Business Combination” and, together with the UpHealth Business Combination, the “Business Combinations”). As described in this proxy statement/prospectus, the Companys stockholders are being asked to consider and vote upon, among other things, the Business Combinations and the other proposals set forth herein.

Subject to the terms and conditions contained in the UpHealth Business Combination Agreement, at the effective time of the UpHealth Business Combination, each share of UpHealth Common Stock will be canceled and converted into the right to receive a number of shares of common stock, par value $0.0001 per share, of GigCapital2 (the “GigCapital2 Common Stock”) equal to the Exchange Ratio (as defined in the UpHealth Business Combination Agreement). The Exchange Ratio will be equal to the Aggregate Merger Consideration (as defined in the UpHealth Business Combination Agreement) divided by the sum of the aggregate number of shares of UpHealth Common Stock issued and outstanding immediately prior to the effective time of the


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UpHealth Business Combination. Such Aggregate Merger Consideration shall not exceed 99,000,000 shares of GigCapital2 Common Stock, subject to certain adjustments, less the Thrasys Incentive Amount (as defined below). UpHealth and Innovations Group, Inc., a Utah corporation (“Innovations Group”) previously entered into merger agreements for UpHealth to acquire Innovations Group. UpHealth also has previously entered into a share purchase agreement providing for the purchase of 99% or more of the equity interests of Glocal Healthcare Systems Private Limited, a company incorporated under the laws of India (“Glocal”), and UpHealth as of the date of entry into the UpHealth Business Combination Agreement owns approximately 43% of the equity interests of Glocal. The Aggregate Merger Consideration shall be reduced by approximately (a) 14,142,857 shares of GigCapital2 Common Stock, if upon the Closing (as defined below), UpHealth has not completed its acquisition of Innovations Group, and (b) 99,000 shares of GigCapital2 Common Stock for each 1.0% interest of Glocal that is below 90% and that is not yet acquired by UpHealth upon the Closing. Adjustments to the Aggregate Merger Consideration will further be made to the extent that the indebtedness at the closing of the UpHealth Business Combination of UpHealth and the Company Subsidiaries (as defined in the UpHealth Business Combination Agreement) less the cash and cash equivalents of UpHealth and the Company Subsidiaries as of immediately before such time is greater than $33,850,000 (excluding any Acquisition Promissory Notes). The Acquisition Promissory Notes are promissory notes previously issued by UpHealth for its acquisitions of Thrasys, Inc., a California corporation (“Thrasys”), Behavioral Health Services, LLC, a Missouri limited liability company (“Behavioral Health Services”), TTC Healthcare, Inc., a Delaware corporation (“TTC Healthcare”) and the interests in Glocal, or to be issued by UpHealth for its acquisition of Innovations Group, with a maximum aggregate principal amount of $86,200,000, of which $33,500,000 is due and payable on the date that is one business day after the Closing; provided, that such amount shall be reduced by $30,000,000, if upon the Closing, UpHealth has not completed its acquisition of Innovations Group. Two individuals who are officers of UpHealth, and were shareholders of Thrasys prior to its merger with UpHealth, will following the Closing, if he or she is a service provider to GigCapital2, UpHealth or any of the Company Subsidiaries as of the date of grant, be awarded restricted stock units of GigCapital2 (the “Thrasys Incentive Amount”). The Thrasys Incentive Amount that shall be eligible to be granted shall be (a) 32.016% multiplied by (b) 15.143% multiplied by (c) the Adjusted Aggregate Merger/Incentive Amount (as defined in the UpHealth Business Combination Agreement). The Adjusted Aggregate Merger/Incentive Amount shall be (a) $990,000,000, subject to certain adjustments, divided by (b) $10.00. In the event that either individual ceases to be a service provider to GigCapital2, UpHealth or any of the Company Subsidiaries as of the date of grant, the portion of the Thrasys Incentive Amount allocated to such individual will not be reallocated to the other individual. Such restricted stock units shall vest into shares of GigCapital2 Common Stock at the earlier of (i) the date that is one year after the Closing, (ii) the date on which the last sale price of GigCapital2 Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 90 days after the closing of the UpHealth Business Combination, or (iii) the date on which GigCapital2 completes a liquidation, merger, stock exchange or other similar transaction that results in all of the GigCapital2’s stockholders having the right to exchange their shares of GigCapital2 Common Stock for cash, securities or other property. If either of these individuals ceases to be a service provider to GigCapital2, UpHealth or any of the Company Subsidiaries prior to any vesting date, the unvested portion of the restricted stock units shall be cancelled and surrendered to GigCapital2.

Subject to the terms and conditions contained in the Cloudbreak Business Combination Agreement, at the effective time of the Cloudbreak Business Combination: (i) each Common Unit (as defined in the Cloudbreak Business Combination Agreement) (and the membership interests represented thereby) issued and outstanding immediately prior to the Closing shall be converted into the right to receive a number of shares of GigCapital2 Common Stock equal to the Common Unit Exchange Ratio (together with any Business Combination Share Adjustment, as defined below, to which each Common Unit is entitled, the “Common Unit Merger Consideration”); (ii) each Series A Preferred Unit (as defined in the Cloudbreak Business Combination Agreement) (and the membership interests represented thereby) issued and outstanding immediately prior to the Closing shall be converted into the right to receive a number of shares of GigCapital2 Common Stock equal to the Preferred Unit Exchange Ratio (in addition to any Business Combination Share Adjustment to which each Series A Preferred Unit is entitled); and (iii) each Option (as defined in the Cloudbreak Business Combination Agreement) that is outstanding and unexercised immediately prior to the Closing, whether vested or unvested, shall be assumed by GigCapital2 and converted into an option to purchase a number of shares of GigCapital2


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Common Stock in an amount set forth on the Allocation Schedule (as defined in the Cloudbreak Business Combination Agreement), which amount shall be equal to the product of (i) the number of Common Units subject to such Option, multiplied by (ii) the Common Unit Exchange Ratio (as defined in the Cloudbreak Business Combination Agreement) (each such converted option, an “Exchanged Option”); provided, however, that any fractional share resulting from such multiplication shall be rounded up to the nearest whole share, and the Company shall pay to such Continuing Employee (as defined in the Cloudbreak Business Combination Agreement) a cash amount in respect of such fractional share on the next full payroll cycle following Closing. Each holder of Exchanged Options shall also be entitled to any Business Combination Share Adjustment (as defined in the Cloudbreak Business Combination Agreement) made pursuant to the Cloudbreak Business Combination Agreement. Except as specifically agreed to otherwise or provided in the Cloudbreak Business Combination Agreement, following the Closing, each Exchanged Option shall continue to be governed by the same vesting and exercisability terms and otherwise substantially similar terms and conditions as were applicable to the corresponding former Option immediately prior to the Closing. Additionally, immediately prior to the Closing, each Common Warrant (as defined in the Cloudbreak Business Combination Agreement) shall convert into Common Units in accordance with their terms. The aggregate number of shares of GigCapital2 Common Stock issuable at the Closing, and upon the exercise of all Exchanged Options on a net exercise basis, shall equal 11,000,000 shares of GigCapital2 Common Stock. Furthermore, in connection with the Closing, (i) GigCapital2 has agreed to repay or cause to be repaid on behalf of Cloudbreak certain debt obligations of Cloudbreak of approximately $28,500,000 and (ii) the Significant UpHealth Stockholders have agreed to subject 5,500,000 of their shares of GigCapital2 Common Stock (as adjusted for stock splits, combinations, reorganizations and the like) that they would receive upon the Closing as part of the UpHealth Business Combination to potential forfeiture and transfer (such transfer, the “Business Combination Share Adjustment”) to the Cloudbreak members in connection with a Valuation Shortfall on the 540th day from the date of the Closing (or if such day is not a business day, the following business day) (the “Measurement Date”) as provided in the Cloudbreak Business Combination Agreement. A Valuation Shortfall shall occur if the dollar volume-weighted average price for the GigCapital2 Common Stock on the New York Stock Exchange during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) or if not available on Bloomberg, as reported by Morningstar (the “VWAP”) for the ten trading days preceding the Measurement Date (the “Reference VWAP”) is less than $13.64, and the amount of such Valuation Shortfall is the difference between $13.64 minus the Reference VWAP. In the event that a Valuation Shortfall occurs, the amount of shares of GigCapital2 Common Stock that the Significant UpHealth Stockholders shall forfeit to the Cloudbreak members will be the lesser of (i) the Adjustment Amount and (ii) 5,500,000 (or, if the Adjustment Amount equals 5,500,000, the Adjustment Amount). The Adjustment Amount means the quotient (rounded up to the nearest whole number) of (A) the Aggregate Valuation Shortfall, divided by (B) the Reference VWAP. The Aggregate Valuation Shortfall means the product of (A) the amount of the Valuation Shortfall, multiplied by (B) 11,000,000.

Upon the Closing, (i) the former UpHealth equity holders are expected to hold, in the aggregate, approximately 73% of the issued and outstanding shares of GigCapital2 Common Stock of the Company (“New UpHealth”) and (ii) the former Cloudbreak equity holders are expected to hold, in the aggregate, approximately 7% of the issued and outstanding shares of GigCapital2 Common Stock of New UpHealth.

On January 20, 2021, the Company entered into subscription agreements, each dated as of January 20, 2021 (the “PIPE Subscription Agreements”), with certain investors (collectively, the “PIPE Investors”), pursuant to which, among other things, the Company agreed to issue and sell to the PIPE Investors, in private placements to close immediately prior to the Closing, an aggregate of 3,000,000 shares of GigCapital2 Common Stock at $10.00 per share, for an aggregate purchase price of $30,000,000.

Also on January 20, 2021, the Company entered into subscription agreements, each dated as of January 20, 2021 (the “Convertible Note Subscription Agreements”), with certain investors (collectively, the “Convertible Note Investors”), pursuant to which, among other things, the Company agreed to issue and sell to the Convertible Note Investors, in private placements to close immediately prior to Closing, convertible notes due in 2026 (“Convertible Notes”) for an aggregate purchase price of $255,000,000. The Convertible Notes are convertible into 22,173,913 shares of GigCapital2 Common Stock at a conversion price of $11.50.


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The Company and UpHealth cannot complete the UpHealth Business Combination unless the Company’s stockholders approve the UpHealth Business Combination, including the issuance of Common Stock to UpHealth equity holders as merger consideration and the issuance of shares of Common Stock to the PIPE Investors and the Convertible Notes to the Convertible Note Investors, and certain of the other proposals contained herein. The Company is sending you this proxy statement/prospectus to ask you to vote in favor of the UpHealth Business Combination Proposal, as described below, and the other matters described in this proxy statement/prospectus.

The Company and Cloudbreak cannot complete the Cloudbreak Business Combination unless the Company’s stockholders approve the UpHealth Business Combination and the Cloudbreak Business Combination, including the issuance of GigCapital2 Common Stock to Cloudbreak equity holders as merger consideration and the issuance of shares of GigCapital2 Common Stock to the PIPE Investors and the Convertible Notes to the Convertible Note Investors, and certain of the other proposals contained herein. The Company is sending you this proxy statement/prospectus to ask you to vote in favor of the Cloudbreak Business Combination Proposal, as described below, and the other matters described in this proxy statement/prospectus.

At the Special Meeting, Company stockholders will be asked to consider and vote upon (i) a proposal (the “UpHealth Business Combination Proposal” or “Proposal No. 1”) to adopt the UpHealth Business Combination Agreement (as subsequently amended and as it may be further amended), a copy of which is attached to the accompanying proxy statement as Annex A, and approve the transactions contemplated thereby, including the UpHealth Business Combination and (ii) a proposal (the “Cloudbreak Business Combination Proposal” or “Proposal No. 2”) to adopt the Cloudbreak Business Combination Agreement, a copy of which is attached to the accompanying proxy statement as Annex B, and approve the transactions contemplated thereby, including the Cloudbreak Business Combination. In addition, you are being asked to consider and vote upon a proposal to approve, for purposes of complying with applicable New York Stock Exchange (the “NYSE”) listing rules, the issuance of more than 20% of the Company’s outstanding GigCapital2 Common Stock in connection with the Business Combinations, the PIPE Subscription Agreements and the Convertible Note Subscription Agreements, including up to 110,000,000 shares of GigCapital2 Common Stock to the UpHealth and Cloudbreak equity holders, 3,000,000 shares of GigCapital2 Common Stock to the PIPE Investors and 22,173,913 shares of GigCapital2 Common Stock upon conversion of the Convertible Notes (the “NYSE Stock Issuance Proposal” or “Proposal No. 3”); a proposal to approve and adopt amendments to the Company’s current amended and restated certificate of incorporation, as amended, to: (A) provide for the classification of our board of directors (our “Board”) into three classes of directors with staggered terms of office and to make certain related changes (“Proposal No. 4”); and (B) provide for certain additional changes, including but not limited to changing the post-combination company’s corporate name from (x) “GigCapital2, Inc.” to “UpHealth, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company (“Proposal 5A”) and (y) to authorize the adoption of Delaware as the exclusive forum for certain stockholder litigation (“Proposal 5B,” which together with Proposal No. 4 and Proposal 5A are collectively referred to as the “Charter Amendment Proposals”); a proposal to approve the GigCapital2, Inc. 2021 Equity Incentive Plan (such plan, the “Incentive Plan” and, such proposal, the “Incentive Plan Proposal” or “Proposal No. 6”); a proposal to consider and vote upon a proposal to elect, effective at Closing Date, nine directors to serve staggered terms on our Board until the 2022, 2023 and 2024 annual meetings of stockholders, respectively, and until their respective successors are duly elected and qualified (the “Election of Directors Proposal” or “Proposal No. 7”); and a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal (the “Adjournment Proposal” or “Proposal No. 8”).

Each of these proposals is more fully described in the accompanying proxy statement/prospectus, which each stockholder is encouraged to read carefully.


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The GigCapital2 Common Stock, units, warrants and rights are currently listed on NYSE under the symbols “GIX,” “GIX.U,” “GIX.WS” and “GIX.RT,” respectively. Upon Closing, we intend to apply to list the shares issued as consideration in the Business Combinations on the NYSE under the symbol “UPH.” Thereafter, our units (each comprised of one share of GigCapital2 Common Stock, one right to receive one-twentieth of one share of Common Stock and one warrant to purchase one share of GigCapital2 Common Stock), will cease to trade as an individual security and, instead, will be separated into their constituent securities, and the GigCapital2 Common Stock and warrants will trade under the symbols “UPH” and “UPH.WS,” respectively.

Pursuant to our current amended and restated certificate of incorporation, we are providing our stockholders that hold shares of Common Stock that were included in the units issued in our initial public offering (“IPO”) (“public stockholders” and such shares, “public shares”), with the opportunity to redeem, upon the Closing, public shares then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in our trust account (the “Trust Account”) that holds the proceeds (including interest, which shall be net of taxes paid and taxes payable and amounts previously redeemed) of our IPO and such additional amounts as we may deposit into such trust account in connection with extensions of time for us to consummate the Business Combinations. The per-share amount we will distribute to public stockholders that properly redeem their shares will not be reduced by transaction expenses incurred by the Company, UpHealth and Cloudbreak in connection with the Business Combinations. For illustrative purposes, based on the fair value of marketable securities held in our Trust Account of approximately $168,000,000 as of January 31, 2021, the estimated per share redemption price would have been approximately $10.10 on such date. Public stockholders may elect to redeem their shares even if they vote for the Business Combinations. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13d-3 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the public shares. We have no specified maximum redemption threshold under our certificate of incorporation, other than the aforementioned 15% threshold. Each redemption of shares of Common Stock by our public stockholders will reduce the amount in our Trust Account, which held marketable securities with a fair value of approximately $168,000,000 as of January 31, 2021.

The Cloudbreak Business Combination Agreement provides that Cloudbreak may terminate the Cloudbreak Business Combination Agreement if the funds in the Trust Account are less than an aggregate amount of $125,000,000. Furthermore, under the terms of the Convertible Note Subscription Agreements, a condition to the closing of the transactions contemplated by those agreements is that at least $50,000,000 remains in the Trust Account after giving effect to any redemptions. In addition, in no event will we redeem shares of our Common Stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (so that we are not subject to the Securities and Exchange Commission’s (the “SEC”) “penny stock” rules). Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combinations. Unless otherwise specified, the information in the accompanying proxy/prospectus statement assumes that none of our public stockholders exercise their redemption rights with respect to their shares of Common Stock.

Our initial stockholders prior to the IPO, including GigAcquisitions2, LLC (the “Sponsor”), one of our underwriters in our IPO, EarlyBirdCapital, Inc. (“EarlyBird”), and certain affiliates and employees of EarlyBird (the “EarlyBird Group”) and an affiliate of another of our underwriters in our IPO, Northland Gig 2 Investment LLC, a Delaware limited liability company (“Northland Investment” and, together with the Sponsor, the EarlyBird Group and Northland Investment, the “Founders”) and the underwriter that is affiliated with Northland Investment, Northland Securities, Inc. (“Northland”) (such Founders and Northland, our “Initial Stockholders”) have agreed to vote their shares of Common Stock in favor of the Business Combinations. Currently, our Initial Stockholders own 4,995,000 shares of our Common Stock (the Founder Shares), including those that are a constituent security to a Private Placement Unit (as defined below), or 23% of our issued and outstanding shares of Common Stock, including all of the Founder Shares (as defined below). The Founder Shares are subject to transfer restrictions. The Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Our Initial Stockholders have agreed to vote any shares of Common Stock owned by them in favor of the Business Combinations.


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We are providing you with the accompanying proxy statement/prospectus and accompanying proxy card in connection with the solicitation of proxies to be voted at the Special Meeting and at any adjournments or postponements of the Special Meeting. Information about the Special Meeting, the Business Combinations and other related business to be considered by the Company’s stockholders at the Special Meeting is included in this proxy statement/prospectus. Whether or not you plan to attend the Special Meeting, we urge you to read this proxy statement/prospectus, including the Annexes and the accompanying financials statements of the Company, UpHealth, Cloudbreak, Thrasys, Glocal, TTC Healthcare, Innovations Group and Behavioral Health Services carefully and in their entirety. In particular, we urge you to read carefully the section entitled Risk Factors” beginning on page 57 of the accompanying proxy statement/prospectus.

After careful consideration, our Board has approved the Business Combination Agreements and the transactions contemplated therein, and recommends that our stockholders vote “FOR” adoption of the Business Combination Agreements and approval of the transactions contemplated thereby, including the Business Combinations, and “FOR” all other proposals presented to our stockholders in the accompanying proxy statement/prospectus. When you consider the Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combinations that may conflict with your interests as a stockholder. Please see the section entitled “Proposal No. 1Approval of the UpHealth Business CombinationInterests of Certain Persons in the Business Combination” and “Proposal No. 2Approval of the Cloudbreak Business CombinationInterests of Certain Persons in the Business Combination” for additional information.

Approval of each of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Incentive Plan Proposal, the Election of Directors Proposal and the Adjournment Proposal require the affirmative vote of a majority of the votes cast at the Special Meeting. Approval of the Charter Amendment Proposals require the affirmative vote of a majority of the outstanding shares of GigCapital2 Common Stock.

Your vote is very important. Whether or not you plan to attend the Special Meeting, please vote as soon as possible by following the instructions in this proxy statement/prospectus to make sure that your shares are represented at the Special Meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting. Even if you have voted by proxy, you may still vote during the Special Meeting by visiting https://[] with your 12-digit control number assigned by Continental Stock Transfer & Trust Company included on your proxy card or obtained from them via email. The transactions contemplated by the UpHealth Business Combination Agreement will be consummated only if the UpHealth Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal and the Election of Directors Proposal are approved at the Special Meeting. The transactions contemplated by the Cloudbreak Business Combination Agreement will be consummated only if the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal and the Election of Directors Proposal are approved at the Special Meeting. The proposals in this proxy statement/prospectus (other than the Adjournment Proposal) are conditioned on the approval of the UpHealth Business Combination Proposal.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of the proposals presented at the Special Meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Special Meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting. If you are a stockholder of record and you attend the Special Meeting and wish to vote in person, you may withdraw your proxy and vote in person.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND THAT THE COMPANY REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO THE COMPANY’S TRANSFER AGENT AT LEAST TWO


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BUSINESS DAYS PRIOR TO THE VOTE AT SUCH MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATIONS ARE NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.

On behalf of our Board, I would like to thank you for your support of GigCapital2, Inc. and look forward to a successful completion of the Business Combinations.

Sincerely,

 

 

LOGO

Dr. Avi S. Katz

Executive Chairman and Secretary

                             , 2021

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATIONS OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

This proxy/prospectus statement is dated                             , 2021, and is expected to be first mailed to Company stockholders on or about                             , 2021.


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LOGO

UpHealth: One of the Only Profitable, Global Digital Health Platforms, Serving the Healthcare Enterprise 6 Million Lives 200,000+ Monthly Encounters 50Licenses Pharmacy 14,000+ Countries 10 Video Endpoints US Largest Public Health Plan Healthcare 1,800+ Venues One UpHealth *Assumes the completion of the business combinations of Innovations Group Inc., Glocal Healthcare Systems Private Limited and Cloudbreak Health, LLC with UpHealth Holdings, Inc. and GigCapital2, Inc.


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NOTICE OF SPECIAL MEETING OF

STOCKHOLDERS OF GIGCAPITAL2, INC.

TO BE HELD                  , 2021

To the Stockholders of GigCapital2, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting (the “Special Meeting”) of the stockholders of GigCapital2, Inc., a Delaware corporation (“we,” “us,” “our” or the “Company”), will be held on                 , 2021 at [10:00] [a][p].m., local time, via live webcast at http://[●]. In light of ongoing developments related to coronavirus (COVID-19), after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend and vote at the Special Meeting online by visiting https://[●] and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the proxy statement/prospectus. Please note that you will only be able to access the Special Meeting by means of remote communication. You are cordially invited to attend the Special Meeting to conduct the following items of business which you will be asked to consider and vote on:

 

1.

Proposal No. 1—The UpHealth Business Combination Proposal—To approve and adopt the UpHealth Business Combination Agreement, dated as of November 20, 2020 (as subsequently amended on January 29, 2021 and as it may be further amended from time to time, the “UpHealth Business Combination Agreement”) by and among the Company, its wholly owned subsidiary, UpHealth Merger Sub, Inc. (“UpHealth Merger Sub”), and UpHealth Holdings, Inc. (“UpHealth”), a copy of which is attached to this proxy statement/prospectus as Annex A, and approve the transactions contemplated thereby (the “UpHealth Business Combination”), including the merger of UpHealth Merger Sub with and into UpHealth, with UpHealth surviving the merger, and the issuance of Common Stock to UpHealth equity holders as merger consideration;

 

2.

Proposal No. 2—The Cloudbreak Business Combination Proposal—To approve and adopt the Cloudbreak Business Combination Agreement, dated as of November 20, 2020 (as it may be amended and/or restated from time to time, the “Cloudbreak Business Combination Agreement” and, together with the UpHealth Business Combination Agreement, the “Business Combination Agreements”) by and among the Company, its wholly owned subsidiary, Cloudbreak Merger Sub, LLC (“Cloudbreak Merger Sub”), and Cloudbreak Health, LLC (“Cloudbreak”), a copy of which is attached to this proxy statement/prospectus as Annex B, and approve the transactions contemplated thereby (the “Cloudbreak Business Combination” and, together with the UpHealth Business Combination, the “Business Combinations”), including the merger of Cloudbreak Merger Sub with and into Cloudbreak, with Cloudbreak surviving the merger, and the issuance of Common Stock to Cloudbreak equity holders as merger consideration;

 

3.

Proposal No. 3The NYSE Stock Issuance Proposal—To approve, for purposes of complying with applicable listing rules of the New York Stock Exchange (the “NYSE”), the issuance of more than 20% of the Company’s outstanding GigCapital2 Common Stock (as defined below) in connection with the Business Combinations, and the transactions contemplated by the PIPE Subscription Agreements and the Convertible Note Subscription Agreements (each as defined below) including up to 110,000,000 shares of GigCapital2 Common Stock to the UpHealth and Cloudbreak equity holders, 3,000,000 shares of GigCapital2 Common Stock to the PIPE Investor and 22,173,913 shares of our GigCapital2 Common Stock upon conversion of the Convertible Notes (as defined below);

 

4.

Proposal No. 4Classification of the Board of Directors Proposal—To provide for the classification of our board of directors (our “Board”) into three classes of directors with staggered terms of office and to make certain related changes;

 

5.

Proposal No. 5A—Approval of Additional Amendments to Current Certificate of Incorporation in Connection with the Business Combinations Proposal—To approve certain additional changes, including but not limited to changing the post-combination company’s corporate name from “GigCapital2, Inc.” to


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  “UpHealth, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company;

 

6.

Proposal No. 5B—Authorization of Exclusive Forum ProvisionTo authorize the adoption of Delaware as the exclusive forum for certain stockholder litigation;

 

7.

Proposal No. 6The Incentive Plan Proposal—To approve the Incentive Plan, including the authorization of the initial share reserve under the Incentive Plan;

 

8.

Proposal No. 7—The Election of Directors Proposal—To elect, effective at Closing, nine directors to serve staggered terms on our board of directors until the 2022, 2023 and 2024 annual meetings of stockholders, respectively, and until their respective successors are duly elected and qualified; and

 

9.

Proposal No. 8Adjournment Proposal—To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal.

The above matters are more fully described in the accompanying proxy statement/prospectus, which also includes, as Annex A, Annex B and Annex C, copies of the Business Combination Agreements and a copy of the Second Amended and Restated Certificate of Incorporation. We urge you to read carefully the accompanying proxy statement/prospectus in its entirety, including the Annexes and accompanying financial statements of the Company, UpHealth, Cloudbreak, Thrasys, Glocal, TTC Healthcare, Innovations Group and Behavioral Health Services.

The record date for the Special Meeting is                             , 2021. Only stockholders of record at the close of business on that date may vote at the Special Meeting or any adjournment thereof. A complete list of our stockholders of record entitled to vote at the Special Meeting will be available for ten days before the Special Meeting at our principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the Special Meeting and electronically during the Special Meeting at https://[●].

Pursuant to our certificate of incorporation, we are providing our stockholders that hold shares of GigCapital2 Common Stock that were included in the units issued in our initial public offering (“IPO”) (“public stockholders” and such shares, “public shares”), with the opportunity to redeem, upon the Closing, public shares then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing of the transactions contemplated by the Business Combination Agreements (the “Closing”)) in our trust account (the “Trust Account”) that holds the proceeds (including interest, which shall be net of taxes paid and taxes payable and amounts previously redeemed) of our IPO and such additional amounts as we may deposit into such trust account in connection with extensions of time for us to consummate the Business Combinations. The per-share amount we will distribute to public stockholders that properly redeem their shares will not be reduced by transaction expenses incurred by the Company, UpHealth and Cloudbreak in connection with the Business Combinations. For illustrative purposes, based on the fair value of marketable securities held in our Trust Account of approximately $168,000,000 as of January 31, 2021, the estimated per share redemption price would have been approximately $10.10 on such date. Public stockholders may elect to redeem their shares even if they vote for the Business Combinations. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13d-3 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the public shares. We have no specified maximum redemption threshold under our certificate of incorporation, other than the aforementioned 15% threshold. Each redemption of shares of GigCapital2 Common Stock by our public stockholders will reduce the amount in our Trust Account, which held marketable securities with a fair value of approximately $168,000,000 as of January 31, 2021.

The Cloudbreak Business Combination Agreement provides that Cloudbreak may terminate the Cloudbreak Business Combination Agreement if the funds in the Trust Account are less than an aggregate amount of


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$125,000,000. Furthermore, under the terms of the Convertible Note Subscription Agreements, a condition to the closing of the transactions contemplated by those agreements is that at least $50,000,000 remains in the Trust Account after giving effect to any redemptions. In addition, in no event will we redeem shares of GigCapital2 Common Stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules). Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combinations. Unless otherwise specified, the information in the accompanying proxy statement/prospectus assumes that none of our public stockholders exercise their redemption rights with respect to their shares of GigCapital2 Common Stock.

Our initial stockholders prior to the IPO, including the Sponsor, one of our underwriters in our IPO, EarlyBirdCapital, Inc. (“EarlyBird”), and certain affiliates and employees of EarlyBird (the “EarlyBird Group”) and an affiliate of another of our underwriters in our IPO, Northland Gig 2 Investment LLC, a Delaware limited liability company (“Northland Investment” and, together with the Sponsor, the EarlyBird Group and Northland Investment, the “Founders”) and the underwriter that is affiliated with Northland Investment, Northland Securities, Inc. (“Northland”) (such Founders and Northland, our “Initial Stockholders”) have agreed to vote their shares of Common Stock in favor of the Business Combinations. Currently, our Initial Stockholders own 4,995,000 shares of our Common Stock (the Founder Shares), including those that are a constituent security to a private placement unit (as defined below), or 23% of our issued and outstanding shares of Common Stock, including all of the Founder Shares (as defined below). The Founder Shares are subject to transfer restrictions. The Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Our Initial Stockholders have agreed to vote any shares of Common Stock owned by them in favor of the Business Combinations.

On January 20, 2021, the Company entered into subscription agreements, each dated as of January 20, 2021 (the “PIPE Subscription Agreements”), with certain investors (collectively, the “PIPE Investors”), pursuant to which, among other things, the Company agreed to issue and sell to the PIPE Investors, in private placements to close immediately prior to the Closing, an aggregate of 3,000,000 shares of GigCapital2 Common Stock at $10.00 per share, for an aggregate purchase price of $30,000,000.

Also on January 20, 2021, the Company entered into subscription agreements, each dated as of January 20, 2021 (the “Convertible Note Subscription Agreements”), with certain investors (collectively, the “Convertible Note Investors”), pursuant to which, among other things, the Company agreed to issue and sell to the Convertible Note Investors, in private placements to close immediately prior to Closing, convertible notes due in 2026 (“Convertible Notes”) for an aggregate purchase price of $255,000,000. The Convertible Notes are convertible into 22,173,913 shares of Common Stock at a conversion price of $11.50.

A majority of the voting power of all outstanding shares of capital stock of the Company entitled to vote must be present via the virtual meeting platform or by proxy to constitute a quorum for the transaction of business at the Special Meeting. Approval of each of the Business Combination Proposals, the NYSE Stock Issuance Proposal, the Incentive Plan Proposal, the Election of Directors Proposal and the Adjournment Proposal require the affirmative vote of a majority of the votes cast at the Special Meeting. Approval of the Charter Amendment Proposals require the affirmative vote of a majority of the outstanding shares of GigCapital2 Common Stock. The Board unanimously recommends that you vote FOR each of these proposals.

By Order of the Board of Directors

 

 

LOGO

Dr. Avi S. Katz

Executive Chairman and Secretary

Palo Alto, California

                             , 2021


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TABLE OF CONTENTS

 

SUMMARY TERM SHEET

     1  

FREQUENTLY USED TERMS

     6  

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

     10  

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

     30  

SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

     48  

SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF UPHEALTH

     49  

SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF CLOUDBREAK

     50  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     51  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     55  

RISK FACTORS

     57  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     123  

COMPARATIVE SHARE INFORMATION

     148  

SPECIAL MEETING OF COMPANY STOCKHOLDERS

     151  

PROPOSAL NO. 1—APPROVAL OF THE UPHEALTH BUSINESS COMBINATION

     160  

PROPOSAL NO. 2—APPROVAL OF THE CLOUDBREAK BUSINESS COMBINATION

     204  

PROPOSAL NO. 3—THE NYSE STOCK ISSUANCE PROPOSAL

     236  

PROPOSAL NO. 4—CLASSIFICATION OF THE BOARD OF DIRECTORS PROPOSAL

     238  

PROPOSAL NO. 5A—APPROVAL OF CERTAIN GOVERNANCE PROVISIONS IN THE SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION IN CONNECTION WITH THE BUSINESS COMBINATIONS PROPOSAL

     241  

PROPOSAL NO. 5B—AUTHORIZATION OF EXCLUSIVE FORUM PROVISION PROPOSAL

     253  

PROPOSAL NO. 6—THE INCENTIVE PLAN PROPOSAL

     256  

PROPOSAL NO. 7—THE ELECTION OF DIRECTORS PROPOSAL

     266  

PROPOSAL NO. 8—THE ADJOURNMENT PROPOSAL

     267  

INFORMATION ABOUT THE COMPANY PRIOR TO THE BUSINESS COMBINATION

     268  

THE COMPANY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     284  

EXECUTIVE COMPENSATION

     291  

INFORMATION ABOUT NEW UPHEALTH

     295  

INFORMATION ABOUT CLOUDBREAK

     328  

UPHEALTH’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     329  

THRASYS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     331  

GLOCAL’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     349  


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TTC HEALTHCARE’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     365  

INNOVATIONS GROUP’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     380  

BEHAVIORAL HEALTH SERVICES’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     391  

CLOUDBREAK’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     403  

MANAGEMENT AFTER THE BUSINESS COMBINATIONS

     423  

DESCRIPTION OF SECURITIES

     435  

BENEFICIAL OWNERSHIP OF SECURITIES

     445  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     446  

PRICE RANGE OF SECURITIES AND DIVIDENDS

     451  

ACCOUNTING TREATMENT

     453  

LEGAL MATTERS

     453  

EXPERTS

     453  

APPRAISAL RIGHTS

     454  

HOUSEHOLDING INFORMATION

     455  

TRANSFER AGENT AND REGISTRAR

     456  

SUBMISSION OF STOCKHOLDER PROPOSALS

     457  

WHERE YOU CAN FIND MORE INFORMATION

     458  

INDEX TO CONSOLIDATED FINANCIAL INFORMATION

     F-1  

ANNEX A—UPHEALTH BUSINESS COMBINATION AGREEMENT

     A-1  

ANNEX B—CLOUDBREAK BUSINESS COMBINATION AGREEMENT

     B-1  

ANNEX C—FORM OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

     C-1  

ANNEX D—STOCKHOLDER SUPPORT AGREEMENT

     D-1  

ANNEX E—MEMBER SUPPORT AGREEMENT

     E-1  

ANNEX F—SPONSOR SUPPORT AGREEMENT

     F-1  

ANNEX G—FORM OF UPHEALTH REGISTRATION RIGHTS AND LOCK-UP AGREEMENT

     G-1  

ANNEX H—FORM OF CLOUDBREAK REGISTRATION RIGHTS AND LOCK-UP AGREEMENT

     H-1  

ANNEX I—FORM OF PIPE SUBSCRIPTION AGREEMENT

     I-1  

ANNEX J—FORM OF CONVERTIBLE NOTE SUBSCRIPTION AGREEMENT

     J-1  

ANNEX K—GIGCAPITAL2, INC. 2021 EQUITY INCENTIVE PLAN

     K-1  


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SUMMARY TERM SHEET

This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals for Stockholders” and “Summary of the Proxy Statement/Prospectus,” summarizes certain information contained in this proxy statement/prospectus, but does not contain all of the information that is important to you. You should read carefully this entire proxy statement/prospectus, including the attached Annexes, for a more complete understanding of the matters to be considered at the Special Meeting. In addition, for definitions used commonly throughout this proxy statement/prospectus, including this summary term sheet, please see the section entitled “Frequently Used Terms.”

 

   

The Company is a Private-to-Public Equity (PPE) company, also known as a blank check company or special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

 

   

In connection with the Company’s IPO, we issued 15,000,000 units at a price of $10.00 per unit resulting in total gross proceeds of $150,000,000. Each unit consisted of one share of Common Stock, one warrant to purchase one share of Common Stock and one right to receive one-twentieth of one share of Common Stock.

 

   

There are currently 21,665,119 shares of Common Stock, par value $0.0001 per share, issued and outstanding, including 16,670,119 shares of Common Stock originally sold as units as part of the IPO, 4,995,000 Founder Shares of Common Stock that were either initially issued or purchased as part of Private Placement Units (as defined below) or Private Underwriter Shares (as defined below) prior to our IPO by our Initial Stockholders (of which 687,500 shares are Private Placement Shares (as defined below) or Private Underwriter Shares). There are currently no shares of preferred stock issued and outstanding.

 

   

In addition, we have 17,817,500 public warrants to purchase Common Stock (originally sold as part of the public units issued in our IPO) outstanding along with 567,500 Private Placement Warrants issued to our Initial Stockholders as part of the Private Placement Units. Each warrant entitles its holder to purchase one share of our Common Stock at an exercise price of $11.50 per whole share, to be exercised only for a whole number of shares of our Common Stock. The warrants will become exercisable at the later to occur of                     , 2021 or 30 days after the completion of the Business Combinations, and they expire five years after the completion of the Business Combinations, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. Once the warrants become exercisable, the Company may redeem the outstanding public warrants at a price of $0.01 per warrant, if the last reported sales price of the Company’s Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period ending on the third trading day prior to the date on which we give notice of such redemption and provided certain other conditions are met.

 

   

For more information regarding our Common Stock, warrants and rights, please see the section entitled “Description of Securities.”

No additional consideration will be required to be paid by a holder of rights in order to receive its additional shares upon consummation of the Business Combinations, as the consideration related thereto has been included in the unit purchase price paid for by investors in our IPO. The shares issuable upon exchange of the rights will be freely tradable (except to the extent held by affiliates of ours). We will not issue fractional shares upon conversion of the rights.

 

   

UpHealth is a global digital health company intent on creating a single, integrated platform of best-in-class technologies and services essential to personalized, affordable and effective care globally. Its mission is to reshape care delivery and enable healthier communities through a simplified digital front door that connects evidence-based care, coordinated workflows and health services. UpHealth will offer patient-centric digital health technologies and tech-enabled services to integrate care and improve performance across four markets of the healthcare industry: integrated care management, digital

 

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pharmacy, global telehealth and behavioral health. Cloudbreak is a leading unified telemedicine and video medical interpretation solutions provider. Cloudbreak’s platform offers tele-interpretation (video and audio medical interpreting), telepsychiatry, telestroke, tele-urology, and other specialities, all with integrated language services for Limited English Proficient and Deaf/Hard-of-Hearing patients. For more information about UpHealth and Cloudbreak, please see the sections entitled “Information about New UpHealth,” “Cloudbreaks Business,” “UpHealths Managements Discussion and Analysis of Financial Condition and Results of Operations,” “Cloudbreaks Managements Discussion and Analysis of Financial Condition and Results of Operations,” Management’s Discussion and Analysis of the companies acquired or to be acquired by UpHealth and “Management after the Business Combinations.”

 

   

Subject to the terms of the UpHealth Business Combination Agreement and customary adjustments, at the effective time of the UpHealth Business Combination, each share of UpHealth capital stock issued and outstanding immediately prior to the effective time of the UpHealth Business Combination (other than shares owned by UpHealth as treasury stock or dissenting shares) will convert into a number of shares of Company Common Stock set forth in the UpHealth Business Combination Agreement (the “UpHealth merger consideration”), which aggregate amount, together with all payments made with respect to all vested UpHealth equity awards (including any equity awards that become vested prior to or in connection with the occurrence of the UpHealth Business Combination), shall not exceed 99,000,000 shares of Company Common Stock.

 

   

Subject to the terms of the Cloudbreak Business Combination Agreement and customary adjustments, at the effective time of the Cloudbreak Business Combination, each share of UpHealth capital stock issued and outstanding immediately prior to the effective time of the Cloudbreak Business Combination (other than shares owned by Cloudbreak as treasury stock or dissenting shares) will convert into a number of shares of Company Common Stock set forth in the Cloudbreak Business Combination Agreement (the “Cloudbreak merger consideration”), which aggregate amount, together with all payments made with respect to all vested Cloudbreak equity awards (including any equity awards that become vested prior to or in connection with the occurrence of the Cloudbreak Business Combination), shall not exceed 11,000,000 shares of Company Common Stock.

 

   

The PIPE Investors (as defined below) have agreed to purchase 3,000,000 shares of Common Stock in the aggregate, for $30,000,000 of gross proceeds. On January 20, 2021, the Company entered into the PIPE Subscription Agreements (as defined below) with the PIPE Investors, pursuant to which, among other things, the Company agreed to issue and sell to the PIPE Investor, in a private placement to close immediately prior to the Closing, an aggregate of 3,000,000 shares of Common Stock at $10.00 per share, for an aggregate purchase price of $30,000,000.

 

   

The Convertible Note Investors (as defined below) have agreed to purchase Convertible Notes pursuant to the Convertible Note Subscription Agreements (as defined below) with the Convertible Notes Investors, pursuant to which, among other things, the Company agreed to issue and sell to the Convertible Note Investors, in private placements to close immediately prior to the Closing, the Convertible Notes (as defined below) for an aggregate purchase price of $255,000,000. The Convertible Notes are convertible into 22,173,913 shares of Common Stock at a conversion price of $11.50.

 

   

It is anticipated that, upon completion of the Business Combinations: (i) the Company’s public stockholders (other than the PIPE Investors and the Convertible Note Investors) will retain an ownership interest of approximately 13.6% in the post-combination company; (ii) the PIPE Investors will own approximately 2.32% of the post-combination company (such that public stockholders, including the PIPE Investors, will own approximately 15.92% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor) will own approximately 3.90% of the post-combination company; (iv) the former UpHealth equity holders will own approximately 73.06% of the post-combination company, assuming $86,200,000 of cash is used to repurchase UpHealth shares and (v) the former Cloudbreak equity holders will own approximately 7.12% of the post-combination

 

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company, assuming no cash is used to repurchase Cloudbreak units. Upon the effective time, each outstanding and unsettled restricted stock unit in respect of shares of UpHealth Common Stock and Units Cloudbreak, options to purchase UpHealth Common Stock and Cloudbreak units and unvested restricted shares of UpHealth and Cloudbreak units will be rolled over into restricted stock units, options, or restricted shares, respectively, of Common Stock in accordance with the terms of the Business Combination Agreements.

 

   

The ownership percentage with respect to the post-combination company following the Business Combinations does not take into account (i) warrants to purchase Common Stock that will remain outstanding immediately following the Business Combinations (ii) conversion of the Convertible Notes into shares of Common Stock or (iii) the issuance of any shares upon completion of the Business Combinations under the Incentive Plan, a copy of which is attached to this proxy statement/prospectus as Annex K. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement/ProspectusImpact of the Business Combinations on the Companys Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information Proposal No. 6The Incentive Plan Proposal.”

 

   

Our management and Board considered various factors in determining whether to approve the Business Combination Agreements and the Business Combinations. For more information about our decision-making process, see the section entitled “Proposal No. 1Approval of the UpHealth Business CombinationThe Companys Board of Directors Reasons for the Approval of the UpHealth Business Combination” and “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Companys Board of Directors Reasons for the Approval of the Cloudbreak Business Combination.”

 

   

Pursuant to our amended and restated certificate of incorporation in connection with the Business Combinations, holders of public shares may elect to have their public shares redeemed for cash at the applicable redemption price per share calculated in accordance with our certificate of incorporation. As of January 31, 2021, this would have amounted to approximately $10.10 per share. If a holder exercises its redemption rights, then such holder will be exchanging its shares of our Common Stock for cash and will no longer own shares of the post-combination company and will not participate in the future growth of the post-combination company, if any. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent at least two business days prior to the Special Meeting. Please see the section entitled “Special Meeting of Company Stockholders—Redemption Rights.

 

   

In addition to voting on the proposals to adopt the Business Combination Agreements and approve the transactions contemplated thereunder, including the Business Combinations, at the Special Meeting, the stockholders of the Company will be asked to vote on:

 

   

Proposal No. 3The NYSE Stock Issuance Proposal—To approve, for purposes of complying with applicable listing rules of the NYSE, the issuance of more than 20% of the Company’s outstanding Common Stock in connection with the Business Combinations, and the transactions contemplated by the PIPE Subscription Agreements and the Convertible Note Subscription Agreements, including up to 110,000,000 shares of Common Stock to the UpHealth and Cloudbreak equity holders, 3,000,000 shares of Common Stock to the PIPE Investors and 22,173,913 shares of our Common Stock upon conversion of the Convertible Notes (as defined below);

 

   

Proposal No. 4Classification of the Board of Directors Proposal—To adopt the classification of our board of directors into three classes of directors with staggered terms of office and to make certain related changes;

 

   

Proposal No. 5AApproval of Additional Amendments to Current Certificate of Incorporation in Connection with the Business Combinations Proposal - To approve certain additional changes, including but not limited to changing the post-combination company’s corporate name from

 

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“GigCapital2, Inc.” to “UpHealth, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company;

 

   

Proposal No. 5BAuthorization of Exclusive Forum Provision —To authorize the adoption of Delaware as the exclusive forum for certain stockholder litigation;

 

   

Proposal No. 6The Incentive Plan Proposal—To approve the Incentive Plan, including the authorization of the initial share reserve under the Incentive Plan;

 

   

Proposal No. 7—Election of Directors Proposal—To consider and vote upon a proposal to elect, effective at Closing, nine directors to serve staggered terms on our board of directors until the 2022, 2023 and 2024 annual meetings of stockholders, respectively, and until their respective successors are duly elected and qualified; and

 

   

Proposal No. 8Adjournment Proposal—To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the UpHealth Business Combination Proposal, Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the UpHealth Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal.

 

   

Please see the sections entitled “Proposal No. 1Approval of the UpHealth Business Combination,Proposal No. 2Approval of the Cloudbreak Business Combination, Proposal No. 3The NYSE Stock Issuance Proposal, Proposal No. 4Classification of the Board of Directors Proposal, Proposal No. 5AApproval of Certain Governance Provisions in the Second Amended and Restated Certificate of Incorporation in Connection with the Business Combinations, “Proposal No. 5B—Authorization of Exclusive Forum Provision,” Proposal No. 6The Incentive Plan Proposal, Proposal No. 7—the Election of Directors Proposal, and Proposal No. 8The Adjournment Proposal.” Proposals in this proxy statement/prospectus (other than the Adjournment Proposal) are conditioned on the approval of the UpHealth Business Combination Proposal.

 

   

Each of the Business Combination Agreements may be terminated at any time prior to the consummation of the Business Combinations, as applicable, upon agreement of the parties thereto, or by the Company, UpHealth or Cloudbreak, as applicable, in specified circumstances. For more information about the termination rights under the Business Combination Agreements, please see the section entitled “Proposal No. 1Approval of the UpHealth Business CombinationThe UpHealth Business Combination AgreementTermination” and “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination AgreementTermination.”

 

   

The proposed Business Combinations involve numerous risks. For more information about these risks, please see the section entitled “Risk Factors.”

 

   

In considering the recommendation of our Board to vote in favor of the Business Combinations, stockholders should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combinations that are different from, or in addition to, those of other stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combinations, and in recommending to stockholders that they approve the Business Combinations. Stockholders should take these interests into account in deciding whether to approve the Business Combinations. These interests include, among other things:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the Business Combinations;

 

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the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combinations;

 

   

the fact that Dr. Avi Katz, Dr. Raluca Dinu and Neil Miotto will remain as board members of the post-combination company and each shall be entitled to receive compensation for serving on the board of directors of the post-combination company; and

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us if an initial business combination is not consummated by the applicable deadline. Prior to GigCapital2’s initial public offering, our Founders purchased an aggregate of 4,307,500 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.0058 per share (as compared to the $10.00 per share price being used to determine the number of shares of Common Stock being issued to the UpHealth and Cloudbreak equity holders in the Business Combinations or at which the PIPE Investors have agreed to purchase Common Stock), with the Sponsor purchasing 4,018,987 Founder Shares, Northland Investment purchasing 173,108 Founder Shares and the EarlyBird Group purchasing 115,405 Founder Shares. Additionally, the Founders purchased from GigCapital2 an aggregate of 567,500 Private Placement Units at a price of $10.00 per unit simultaneously with the consummation of GigCapital2’s initial public offering for an aggregate purchase price of $5,675,000, with the Sponsor purchasing 481,250 Private Placement Units, Northland Investment purchasing 56,350 Private Placement Units and the EarlyBird Group purchasing 29,900 Private Placement Units. In addition, Northland concurrently purchased 120,000 Private Underwriter Shares at a price of $10.00 per share. Certain of GigCapital2’s directors and executive officers, including Dr. Avi Katz, Dr. Raluca Dinu, Neil Miotto, John Mikulsky and Gil Frostig, also have a direct or indirect economic interest in the 481,250 Private Placement Units and in the 4,018,987 Founder Shares owned by the Sponsor. The 4,018,987 Founder Shares owned by the Sponsor would have had an aggregate market value of $                 based upon the closing price of $                 per public share on the NYSE on                         , 2021, the most recent practicable date prior to the date of this proxy statement/prospectus. The 481,250 private placement units held by the Sponsor would have had an aggregate market value of $                 based upon the closing price of $                     per public unit on the NYSE on                     , 2021, the most recent practicable date prior to the date of this proxy statement/prospectus.

 

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FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “GigCapital2” refer to GigCapital2, Inc., a Delaware corporation, and the term “post-combination company” refers to the Company following the consummation of the Business Combinations.

In this proxy statement/prospectus:

Second Amended and Restated Certificate of Incorporation” means the proposed Second Amended and Restated Certificate of Incorporation of the Company, a form of which is attached hereto as Annex C, which will become the post-combination company’s certificate of incorporation upon the approval of the Charter Amendment Proposals, assuming the consummation of the Business Combinations.

applicable deadline” means March 10, 2021 (or such later date if we amend our current amended and restated certificate of incorporation again to further extend the time that we have to consummate a business combination).

Board” or “Board of Directors” means the board of directors of the Company.

Business Combinations” means the transactions contemplated by the Business Combination Agreements, including (i) the merger of UpHealth Merger Sub with and into UpHealth, with UpHealth continuing as the surviving company and (ii) the merger of Cloudbreak Merger Sub with and into Cloudbreak, with Cloudbreak continuing as the surviving company.

Business Combination Agreements” means (i) that certain UpHealth Business Combination Agreement, dated as of November 20, 2020 (as subsequently amended and as it may be further amended from time to time), by and among Company, UpHealth Merger Sub and UpHealth and (ii) that certain Cloudbreak Business Combination Agreement, dated as of November 20, 2020, by and among Company, Cloudbreak Merger Sub and Cloudbreak.

Bylaws” means our Bylaws, dated as of May 9, 2019.

Closing” means the closing of the transactions contemplated by the Business Combination Agreements.

Closing Date” means the date on which the Closing occurs.

Convertible Note Investment” means the private placement pursuant to which the Convertible Note Investors have subscribed for the Convertible Notes for an aggregate purchase price of $255,000,000.

Convertible Note Investors” means certain institutional investors that will invest in the Convertible Note Investment.

Convertible Note Shares” means the 22,173,913 shares of Common Stock to be issued upon conversion of the Convertible Notes, in accordance with the terms and subject to the conditions of the Convertible Note Subscription Agreements and the Indenture.

Convertible Note Subscription Agreements” means, collectively, those certain subscription agreements entered into on January 20, 2021, between the Company and certain investors, pursuant to which such Convertible Note Investors have agreed to purchase an aggregate of $255,000,000 in the Convertible Note Investment, and substantially in the form attached hereto as Annex J.

Convertible Notes” means the 6.25% Convertible Senior Notes due 2026 and that are convertible into Convertible Note Shares at a conversion price of $11.50 per share.

Cloudbreak” means Cloudbreak Health, LLC, a Delaware limited liability company and its subsidiaries.

 

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Cloudbreak Business Combination Agreement” means that certain Business Combination Agreement, dated as of November 20, 2020, by and among the Company, Cloudbreak Merger Sub, Cloudbreak, UpHealth, Chirinjeev Kathuria, Mariya Pylypiv and Shareholder Representative Services LLC.

Cloudbreak equity holder” means each holder of Cloudbreak Units or a vested equity award.

Cloudbreak Maximum Share Consideration” means the aggregate maximum amount of merger consideration that the Company has agreed to pay Cloudbreak equity holders, consisting of 11,000,000 shares of Company Common Stock, including shares issuable in respect of vested equity awards of Cloudbreak.

Cloudbreak Merger Sub” means Cloudbreak Merger Sub, LLC.

Cloudbreak Units” means, collectively, the Common Units of Cloudbreak and the Series A Preferred Units of Cloudbreak.

Cloudbreak Registration Rights and Lock-Up Agreement” means that certain Registration Rights and Lock-Up Agreement by and among the Company and certain of the Cloudbreak equity holders to be entered into at the Closing.

Code” means the Internal Revenue Code of 1986, as amended.

Common Stock” means the shares of Common Stock of the Company, par value $0.0001 per share.

Common Stock Consideration” means the Common Stock to be issued to UpHealth equity holders and the Cloudbreak equity holders at the Closing pursuant to the terms of the Business Combination Agreements.

Company” means GigCapital2, Inc., a Delaware corporation.

DGCL” means the General Corporation Law of the State of Delaware.

DLA” means DLA Piper LLP (US), counsel to the Company.

EarlyBird” means EarlyBirdCapital, Inc., the representative of the underwriters in our IPO.

EBITDA” means earnings before interest, tax, depreciation and amortization.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Extension Amendment” means the amendment to our existing certificate of incorporation to extend the date by which the Company must consummate a Business Combination (the “Extension”) from December 10, 2020 to March 10, 2021 and which was approved at our annual meeting of stockholders on December 8, 2020.

Founders” means the Sponsor, the EarlyBird Group and Northland Investment.

GAAP” means Generally Accepted Accounting Principles.

HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Husch Plan” means the GigCapital2, Inc. 2021 Equity Incentive Plan.

Indenture” means the indenture to be entered into in connection with the Closing between New UpHealth and Wilmington Trust, National Association, a national banking association, (the “Indenture Trustee”) in its capacity as trustee thereunder, in substantially the form attached as an exhibit to the Convertible Note Subscription Agreements.

 

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Initial Stockholders” means the Founders and Northland.

Investment Company Act” means the Investment Company Act of 1940, as amended.

IPO” means the Company’s initial public offering, consummated on June 10, 2019, through the sale of 15,000,000 public units at $11.50 per public unit.

MacKenzie” means MacKenzie Partners, Inc., proxy solicitor to the Company.

New UpHealth” means GigCapital2 immediately following the consummation of the Business Combinations and approval of the proposed Second Amended and Restated Certificate of Incorporation.

New UpHealth Board” means New UpHealth’s board of directors following the consummation of the Business Combinations and the election of directors pursuant to Proposal No. 7 — The Election of Directors Proposal.

New UpHealth Common Stock” means, following the consummation of the Business Combinations and approval of the proposed Second Amended and Restated Certificate of Incorporation, New UpHealth Common Stock, par value $0.0001 per share, as authorized under the proposed Second Amended and Restated Certificate of Incorporation.

NYSE” means the New York Stock Exchange.

Offering Shares” mean shares of Common Stock included as part of the public units sold in the IPO.

PIPE Investment” means the private placement pursuant to which the PIPE Investor has subscribed for 3,000,000 shares of Common Stock at $10.00 per share, for an aggregate purchase price of $30,000,000.

PIPE Investors” means certain institutional investors, including one of its underwriters from its initial public offering which also served as the placement agent for the PIPE, Oppenheimer & Co. Inc., that will invest in the PIPE Investment.

PIPE Shares” means the 3,000,000 shares of Common Stock to be issued in the PIPE Investment.

PIPE Subscription Agreements” means, collectively, those certain subscription agreements entered into on January 20, 2021, between the Company and certain investors, pursuant to which the PIPE Investors have agreed to purchase an aggregate of 3,000,000 shares of Common Stock in the PIPE Investment, and substantially in the form attached hereto as Annex I.

Private Placement Shares” mean the shares of our Common Stock included in the Private Placement Units issued to our Founders in a private placement that closed prior to the IPO.

Private Placement Units” mean the units, consisting of one share of Company Common Stock, one warrant to purchase one share of Company Common Stock, and one right to receive one-twentieth of one share of Company Common Stock, issued to our Founders in a private placement that closed prior to the IPO.

Private Placement Warrants” means the warrants included in the Private Placement Units issued to our Founders in a private placement that closed prior to the IPO, each of which is exercisable for one share of Common Stock, in accordance with its terms.

Private Underwriter Shares” means the shares of our Common Stock issued to Northland in a private placement that closed prior to the IPO.

public rights” means the rights included in the public units issued in our IPO.

public shares” means shares of Common Stock included in the public units issued in our IPO.

 

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public stockholders” means holders of public shares, including our Initial Stockholders to the extent our Initial Stockholders hold public shares, provided, that our Initial Stockholders will be considered “public stockholders” only with respect to any public shares held by them.

public units” means one unit, consisting of one public share of Company Common Stock, one warrant to purchase one share of Company Common Stock, and one right to receive one-twentieth of one share of Company Common Stock, issued in our IPO.

public warrants” means the warrants included in the public units issued in the IPO, each of which is exercisable for one share of Common Stock, in accordance with its terms.

Related Agreements” means the UpHealth Registration Rights and Lock-Up Agreement and the Cloudbreak Registration Rights and Lock-Up Agreement.

rights” means the right to receive one-twentieth of one share of Common Stock.

SEC” means the United States Securities and Exchange Commission.

Securities Act” means the Securities Act of 1933, as amended.

Sidley” means Sidley Austin LLP, counsel to Cloudbreak.

Special Meeting” means the special meeting of the stockholders of the Company that is the subject of this proxy statement/prospectus.

Sponsor” means GigAcquisitions2, LLC, a Delaware limited liability company.

Thrasys Incentive Amount” means the aggregate amount of restricted stock units of GigCapital2 to be awarded to two individuals who are officers of UpHealth, and were shareholders of Thrasys prior to its merger with UpHealth, which will following the Closing, if he or she is a service provider to GigCapital2, UpHealth or any of the Company Subsidiaries as of the date of grant.

Transfer Agent” means Continental Stock Transfer & Trust Company.

Trust Account” means the trust account of the Company that holds the proceeds from the Company’s IPO and a portion of the proceeds from the sale of the Private Placement Warrants.

Trustee” means Continental Stock Transfer & Trust Company.

units” means the public units and the Private Placement Units.

UpHealth” means UpHealth Holdings, Inc., a Delaware corporate and its subsidiaries.

UpHealth Business Combination Agreement” means that certain Business Combination Agreement, dated as of November 20, 2020 (as subsequently amended and as it may be further amended from time to time), by and among Company, UpHealth Merger Sub and UpHealth.

UpHealth Common Stock” means the common stock of UpHealth.

UpHealth equity holder” means each holder of UpHealth capital stock or a vested equity award.

UpHealth Maximum Share Consideration” means the aggregate maximum amount of merger consideration that the Company has agreed to pay UpHealth equity holders, consisting of 99,000,000 shares of Company Common Stock, including shares issuable in respect of vested equity awards of UpHealth.

UpHealth Merger Sub” means UpHealth Merger Sub, Inc.

UpHealth Registration Rights and Lock-Up Agreement” means that certain Registration Rights and Lock-Up Agreement to be entered into at the Closing between the Company and certain UpHealth equity holders.

U.S. GAAP” means accounting principles generally accepted in the United States of America.

warrants means the Private Placement Warrants and the public warrants.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the proposals to be presented at the Special Meeting, including with respect to the proposed Business Combinations. The following questions and answers do not include all the information that is important to our stockholders. We urge stockholders to read carefully this entire proxy statement/prospectus, including the Annexes and the other documents referred to herein, to fully understand the proposed Business Combinations and the voting procedures for the Special Meeting, which will be held on                 , 2021 at [10:00] [a][p].m., local time, via webcast [at https://[]].

Q: Why am I receiving this proxy statement/prospectus?

A: You are being asked to consider and vote upon a proposal to adopt the Business Combination Agreements and approve the Business Combinations and transactions contemplated thereby, among other proposals. We have entered into the UpHealth Business Combination Agreement, pursuant to which the Company’s wholly owned subsidiary, UpHealth Merger Sub, will merge with and into UpHealth, with UpHealth surviving the merger. We have also entered into the Cloudbreak Business Combination Agreement, pursuant to which the Company’s wholly owned subsidiary, Cloudbreak Merger Sub, will merge with and into Cloudbreak, with Cloudbreak surviving the merger. Subject to the terms of the Business Combination Agreements and customary adjustments, at the effective time of the Business Combinations, each share of UpHealth and Cloudbreak, as applicable, capital stock issued and outstanding immediately prior to the effective time of the Business Combinations (other than shares owned by each of UpHealth and Cloudbreak as treasury stock or dissenting shares) will convert into a number of shares of Company Common Stock set forth in the Business Combination Agreements. A copy of the Business Combination Agreements are attached to this proxy statement/prospectus as Annexes A and B, as applicable.

In addition to the Business Combinations, there are related matters that we are asking you to approve. This proxy statement/prospectus and its Annexes contain important information about the proposed Business Combinations and the other matters to be acted upon at the Special Meeting. You should read this proxy statement/prospectus and its Annexes carefully and in their entirety.

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement/prospectus and its Annexes.

Q: When and where is the Special Meeting?

A: The Special Meeting will be held on                 , 2021 at [10:00] [a][p].m., local time, via webcast [at http://[●]]. In light of ongoing developments related to coronavirus (COVID-19), after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend the virtual Special Meeting online, vote, view the list of stockholders entitled to vote at the special meeting and submit questions during the Special Meeting by visiting http://[●] and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the proxy statement/prospectus. Because the special meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person.

 

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Q: How can I attend and vote at the Special Meeting?

A: Any stockholder wishing to attend the virtual meeting should register for the meeting by                 , 2021. To register for the Special Meeting, please follow these instructions as applicable to the nature of your ownership of our Common Stock:

 

   

If your shares are registered in your name with Continental Stock Transfer & Trust Company and you wish to attend the Special Meeting, go to https://[●], enter the 12-digit control number included on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.

 

   

Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) who wish to attend the Special Meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five (5) business days prior to the meeting date in order to ensure access.

Q: What are the specific proposals on which I am being asked to vote at the Special Meeting?

A: You are being asked to approve the following proposals:

1.     Proposal No. 1The UpHealth Business Combination Proposal—To approve and adopt the UpHealth Business Combination Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A, and approve the transactions contemplated thereby, including the merger of UpHealth Merger Sub with and into UpHealth, with UpHealth surviving the merger, and the issuance of Common Stock to UpHealth equity holders as merger consideration;

2.    Proposal No. 2The Cloudbreak Business Combination Proposal—To approve and adopt the Cloudbreak Business Combination Agreement, a copy of which is attached to this proxy statement/prospectus as Annex B, and approve the transactions contemplated thereby, including the merger of Cloudbreak Merger Sub with and into Cloudbreak, with Cloudbreak surviving the merger, and the issuance of Common Stock to Cloudbreak equity holders as merger consideration;

3.    Proposal No. 3The NYSE Stock Issuance Proposal—To approve, for purposes of complying with applicable listing rules of the NYSE, the issuance of more than 20% of the Company’s outstanding Common Stock in connection with the Business Combinations, and the transactions contemplated by the PIPE Subscription Agreements and the Convertible Note Subscription Agreements, including up to 110,000,000 shares of Common Stock to UpHealth and Cloudbreak equity holders, 3,000,000 shares of Common Stock to the PIPE Investor and 22,173,913 shares of our Common Stock upon conversion of the Convertible Notes;

4.    Proposal No. 4—Classification of the Board of Directors Proposal—To adopt the classification of our board of directors into three classes of directors with staggered terms of office and to make certain related changes;

5.    Proposal No. 5AApproval of Additional Amendments to Current Certificate of Incorporation in Connection with the Business Combinations Proposal - To approve certain additional changes, including but not limited to changing the post-combination company’s corporate name from “GigCapital2, Inc.” to

 

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“UpHealth, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company;

6.    Proposal No. 5B—Authorization of Exclusive Forum Provision Proposal—To authorize the adoption of Delaware as the exclusive forum for certain stockholder litigation;

7.    Proposal No. 6The Incentive Plan Proposal—To approve the Incentive Plan, including the authorization of the initial share reserve under the Incentive Plan;

8.    Proposal No. 7—Election of Directors Proposal - To elect the directors comprising the board of directors of New UpHealth; and

9.    Proposal No. 8Adjournment Proposal—To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the UpHealth Business Combination Proposal, Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the UpHealth Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal.

Q: Are the proposals conditioned on one another?

A: Yes. The proposals in this proxy statement/prospectus (other than the Adjournment Proposal) are conditioned on the approval of the UpHealth Business Combination Proposal. Therefore, approval of the Cloudbreak Business Combination Proposal, NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal and the Election of Directors Proposal are conditioned upon stockholders’ approval of the UpHealth Business Combination Proposal. Moreover, the transactions contemplated by the Cloudbreak Business Combination Agreement will be consummated only if the UpHealth Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal and the Election of Directors Proposal are approved at the Special Meeting.

It is important for you to note that in the event that the UpHealth Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal do not receive the requisite vote for approval, we will not consummate the UpHealth Business Combination. It is also important for you to note that in the event that the Cloudbreak Business Combination Proposal does not receive the requisite vote for approval, we will not consummate the Cloudbreak Business Combination. If we do not consummate the Business Combinations and fail to complete an initial business combination by the applicable deadline, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to the public stockholders.

Our current deadline under our current amended and restated certificate of incorporation to consummate the Business Combinations is March 10, 2021. However, on February 2, 2021, we filed a preliminary proxy statement to request that our stockholders approve a three month extension to June 10, 2021. The UpHealth Business Combination Agreement may be terminated and the UpHealth Business Combination may be abandoned by GigCapital2 or UpHealth, if the effective time of the UpHealth Business Combination has not occurred prior to March 31, 2021, provided, however, that if the SEC requires audited financial statements of UpHealth or any UpHealth Subsidiary for the year ended December 31, 2020 as a condition to the effectiveness of this Registration Statement, such date can be extended to a date subsequent to the availability of such financial statements and that is mutually agreed to by GigCapital2 and UpHealth. Similarly, the Cloudbreak Business Combination Agreement may be terminated and the Cloudbreak Business Combination may be abandoned if the effective time of the Cloudbreak Business Combination has not occurred prior to March 31, 2021, provided, however, that if the SEC requires audited financial statements of Cloudbreak for the year ended December 31, 2020 as a condition to the effectiveness of this Registration Statement, such date can be extended to May 14, 2021.

 

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Q: Why are we providing stockholders with the opportunity to vote on the Business Combinations?

A: Under our current amended and restated certificate of incorporation, we must provide all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of our initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, we have elected to provide our stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote, rather than a tender offer. Therefore, we are seeking to obtain the approval of our stockholders of each of the UpHealth Business Combination Proposal and the Cloudbreak Business Combination Proposal in order to allow our public stockholders to effectuate redemptions of their public shares in connection with the Closing. The adoption of the Business Combination Agreements is required under Delaware law and the approval of the Business Combinations are required under our current amended and restated certificate of incorporation. In addition, such approval is also a condition to the Closing under each of the UpHealth Business Combination Agreement and the Cloudbreak Business Combination Agreement.

Q: What revenues and profits/losses has UpHealth generated in the last two years?

A: For the year ended December 31, 2019 and the nine months ended September 30, 2020, UpHealth had pro forma combined revenue of approximately $88,980,000 and operating income of approximately $5,825,000, and pro forma combined revenue of approximately $66,275,000 and operating income of approximately $1,418,000, respectively. For additional information, please see the sections entitled “Selected Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Information.

Q: What revenues and profits/losses has Cloudbreak generated in the last two years?

A: For the years ended December 31, 2018 and 2019, Cloudbreak had revenue of $30,595,285 and net income of $(7,182,002), and revenue of $30,129,805 and net income of $(9,754,940), respectively. For additional information, please see the section entitled “Cloudbreaks Managements Discussion and Analysis of Financial Condition and Results of Operationsand Cloudbreak’s financial statements attached to this proxy statement/prospectus.

Q: How will UpHealth be acquired in the UpHealth Business Combination?

A: Pursuant to the UpHealth Business Combination Agreement, UpHealth will become a wholly-owned subsidiary of the Company as a result of the Company’s wholly-owned subsidiary, UpHealth Merger Sub, merging with and into UpHealth, with UpHealth surviving the merger.

Q: How will Cloudbreak be acquired in the Cloudbreak Business Combination?

A: Pursuant to the Cloudbreak Business Combination Agreement, Cloudbreak will become a wholly-owned subsidiary of the Company as a result of the Company’s wholly owned subsidiary, Cloudbreak Merger Sub, merging with and into Cloudbreak, with Cloudbreak surviving the merger.

Q: Following the Business Combinations, will our securities continue to trade on a stock exchange?

A: Yes. We intend to apply to continue the listing of our Common Stock and warrants on the NYSE under the symbols “UPH” and “UPH.WS”, respectively, upon the Closing. Our units will automatically separate into the component securities upon consummation of the Business Combinations and, as a result, will no longer trade as a separate security.

 

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Q: How has the announcement of the Business Combinations affected the trading price of our Common Stock?

A: On November 23, 2020, the trading date immediately prior to the public announcement of the Business Combinations, our Common Stock, public warrants, public units and public rights closed at $10.09, $0.45, $10.21 and $0.23, respectively. On                 , 2021, the trading date immediately prior to the date of this proxy statement/prospectus, our Common Stock, public warrants, public units and public rights closed at $                , $                , $                 and $                , respectively.

Q: How will the Business Combinations impact the shares of the Company outstanding after the Business Combinations?

A: After the Business Combinations and the consummation of the transactions contemplated thereby, the amount of Common Stock outstanding will increase by approximately 595% to approximately 128,942,357 shares of Common Stock (assuming that no shares of Common Stock are redeemed). Additional shares of Common Stock may be issuable in the future as a result of the issuance of additional shares that are not currently outstanding, including the issuance of shares of Common Stock upon exercise or settlement of the public warrants, Private Placement Warrants, options and RSUs issued in connection with the Business Combinations after the Business Combinations. The issuance and sale of such shares in the public market could adversely impact the market price of our Common Stock, even if our business is doing well.

Q: Are the Business Combinations the first step in a going private transaction?

A: No. We do not intend for the Business Combinations to be the first step in a “going private” transaction. One of the primary purposes of the Business Combinations are to provide a platform for each of UpHealth and Cloudbreak to access the U.S. public markets.

Q: Did the Company’s board of directors obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combinations?

A: No. The Company’s board of directors did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combinations. Accordingly, investors will be relying solely on the judgment of the Company’s board of directors in valuing each of UpHealth and Cloudbreak and assuming the risk that the Company’s board may not have properly valued the businesses. However, the Company’s officers and directors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and have substantial experience with mergers and acquisitions. Furthermore, in analyzing the Business Combinations, the Company’s board of directors conducted significant due diligence on each of UpHealth and Cloudbreak. Based on the foregoing, the Company’s board of directors concluded that its members’ collective experience and backgrounds, together with the experience and sector expertise of the Company’s advisors, enabled it to make the necessary analyses and determinations regarding the Business Combinations, including that the Business Combinations were fair from a financial perspective to its stockholders and that collectively UpHealth’s and Cloudbreak’s fair market value was at least 80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on interest earned on the trust account) at the time of the agreement to enter into the Business Combinations. There can be no assurance, however, that the Company’s board of directors was correct in its assessment of the Business Combinations.

Q: Will the management and board of directors of UpHealth and Cloudbreak change in the Business Combinations?

A: We anticipate that all of the executive officers of UpHealth and Cloudbreak will remain with the post-combination company. Upon completion of the Business Combinations, Dr. Katz will continue as the

 

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co-chairman of the board of the directors of the post-combination company; our current directors will resign from our Board (other than Dr. Katz, Dr. Raluca Dinu and Neil Miotto). The board of directors of the post-combination company will be comprised of Dr. Katz, Dr. Raluca Dinu, Dr. Chirinjeev Kathuria, Neil Miotto and Dr. Mariya Pylypiv and four additional independent directors (under NYSE rules) to be designated by a majority of Dr. Avi S. Katz, Dr. Raluca Dinu, Dr. Chirinjeev Kathuria and Dr. Mariya Pylypiv.

Q: What equity stake will current stockholders of the Company, the UpHealth equity holders and the Cloudbreak equity holders hold in the post-combination company after the Closing?

A: It is anticipated that, upon completion of the Business Combinations, assuming no redemptions: (i) the Company’s public stockholders will retain an ownership interest of approximately 13.6% in the post-combination company (not including shares beneficially owned by our Sponsor); (ii) the PIPE Investors will own approximately 2.32% of the post-combination company (such that public stockholders, including the PIPE Investors, will own approximately 15.92% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor) will own approximately 3.90% of the post-combination company; (iv) the former UpHealth equity holders will own approximately 73.06% of the post-combination company, assuming $86,200,000 of cash is used to repurchase UpHealth shares and (v) the former Cloudbreak equity holders will own approximately 7.12% of the post-combination company, assuming no cash is used to repurchase Cloudbreak Units.

The ownership percentage with respect to the post-combination company following the Business Combinations does not take into account (i) warrants to purchase Common Stock that will remain outstanding immediately following the Business Combinations or (ii) conversion of the Convertible Notes into shares of Common Stock or (iii) the issuance of any shares upon completion of the Business Combinations under the Incentive Plan, a copy of which is attached to this proxy statement/prospectus as Annex K. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement/ProspectusImpact of the Business Combinations on the Companys Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information and Proposal No. 6The Incentive Plan Proposal.

Q: Will we obtain new financing in connection with the Business Combinations?

A: Yes. The PIPE Investors have agreed to purchase 3,000,000 shares of Common Stock in the aggregate, for $30,000,000 of gross proceeds, pursuant to the PIPE Subscription Agreements. The PIPE Subscription Agreements are contingent upon, among other things, stockholder approval of the Business Combination Proposals and the Closing. For additional information, please see the sections entitled “Proposal No. 1Approval of the UpHealth Business CombinationThe UpHealth Business Combination Agreement” and “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination Agreement.”

Additionally, the Convertible Note Investors have agreed to purchase an aggregate of $255,000,000 of gross proceeds, pursuant to the Convertible Note Subscription Agreements. The Convertible Note Subscription Agreements are contingent upon, among other things, stockholder approval of the Business Combination Proposals and the Closing. For additional information, please see the sections entitled “Proposal No. 1Approval of the UpHealth Business CombinationThe UpHealth Business Combination Agreement” and “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination Agreement.”

Q: What conditions must be satisfied to complete the Business Combinations?

A: There are a number of closing conditions in the Business Combination Agreements, including the approval by the stockholders of the Company of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the

 

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Incentive Plan Proposal and the Election of Directors Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combinations, please see the sections entitled “Proposal No. 1Approval of the UpHealth Business CombinationThe UpHealth Business Combination Agreement” and “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination Agreement

Q: Are there any arrangements to help ensure that the Company will have sufficient funds, together with the proceeds in its Trust Account, to fund the aggregate purchase price?

A: Unless waived by each of UpHealth and Cloudbreak, as applicable, the Business Combination Agreements provide that UpHealth’s and Cloudbreak’s obligations to consummate the Business Combinations are conditioned on the funds in the Trust Account being no less than an aggregate amount of $150,000,000. The PIPE Investors have agreed to purchase approximately 3,000,000 shares of Common Stock at $10.00 per share for gross proceeds to the Company of approximately $30,000,000 pursuant to PIPE Subscription Agreements entered into on January 20, 2021. Additionally, the Convertible Note Investors have agreed to purchase an aggregate amount of gross proceeds of $255,000,000 pursuant to the Convertible Note Subscription Agreements entered into on January 20, 2021. Each of the PIPE Investment and the Convertible Note Investment is contingent upon, among other things, stockholder approval of the Business Combination Proposals and the Closing. In addition, the Convertible Note Investment is also contingent upon there being, in addition to the aggregate amount of $150,000,000 in total funding available from any source, at least $50,000,000 of such funding from funds remaining in the Trust Account on the Closing after taking into account redemptions by the Company’s public stockholders (if any).

The Company will use the funds in the Trust Account to: (i) pay Company stockholders who properly exercise their redemption rights; and, provided that there are funds remaining after this payment, (ii) pay certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by the Company and other parties to the Business Combination Agreements in connection with the transactions contemplated by the Business Combination Agreements, including the Business Combinations, and pursuant to the terms of the Business Combination Agreements.

Q: Why is the Company proposing the NYSE Stock Issuance Proposal?

A: We are proposing the NYSE Stock Issuance Proposal in order to comply with NYSE Listing Rule 312.03, which requires stockholder approval of certain transactions that result in the issuance of 20% or more of the outstanding voting power or shares of Common Stock outstanding before the issuance of stock or securities.

In connection with the Business Combinations, we expect to issue up to 110,000,000 shares of Common Stock in the Business Combinations, subject to certain adjustments and less the Thrasys Incentive Amount and the amounts into which the Exchanged Options are exchanged. Because we may issue 20% or more of our outstanding Common Stock when considering together the Common Stock Consideration, we are required to obtain stockholder approval of such issuance pursuant to NYSE Listing Rule 312.03(c). For more information, please see the section entitled “Proposal No. 3The NYSE Stock Issuance Proposal.”

Q: Why is the Company proposing the Charter Amendment Proposals?

A: The Second Amended and Restated Certificate of Incorporation that we are asking our stockholders to adopt in connection with the Business Combinations (the “Charter Amendment Proposals”) provides for certain amendments to our current amended and restated certificate of incorporation. Pursuant to Delaware law and the Business Combination Agreements, we are required to submit the Charter Amendment Proposals to the Company’s stockholders for adoption. For additional information please see the sections entitled “Proposal No. 4Classification of the Board of Directors Proposal” “Proposal No. 5A—Approval of Additional Amendments to Current Amended and Restated Certificate of Incorporation in Connection with the Business Combinations and “Proposal 5B—Authorization of Exclusive Forum Provision Proposal.

 

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Q: Why is the Company proposing the Incentive Plan Proposal?

A: The purpose of the Incentive Plan Proposal is to further align the interests of the eligible participants with those of stockholders by providing long-term incentive compensation opportunities tied to the performance of the Company. Please see the section entitled “Proposal No. 6The Incentive Plan Proposal” for additional information.

Q: Why is the Company proposing the Election of Directors Proposal?

A: The purpose of the Election of Directors Proposal is to elect the directors comprising the board of directors of New UpHealth after the Closing Date of the Business Combinations. For more information about the election of the individuals nominated to serve as directors of New UpHealth, please see the section entitled “Proposal No. 7—Election of Directors Proposal.”

Q: Why is the Company proposing the Adjournment Proposal?

A: We are proposing the Adjournment Proposal to allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal, but no other proposal if the UpHealth Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal and the Election of Directors Proposal are approved. Please see the section entitled “Proposal No. 8The Adjournment Proposal” for additional information.

Q: What happens if you sell your shares of Common Stock before the Special Meeting?

A: The record date for the Special Meeting is earlier than the date of the Special Meeting. If you transfer your shares of Common Stock after the record date, but before the Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Special Meeting. However, you will not be able to seek redemption of your shares of Common Stock because you will no longer be able to deliver them two business days prior to the Special Meeting. If you transfer your shares of Common Stock prior to the record date, you will have no right to vote those shares at the Special Meeting or redeem those shares for a pro rata portion of the proceeds held in our Trust Account.

Q: What constitutes a quorum at the Special Meeting?

A: A majority of the voting power of all outstanding shares of the capital stock of the Company entitled to vote must be present in person or by proxy (which would include presence at the virtual Special Meeting) to constitute a quorum for the transaction of business at the Special Meeting. Abstentions will be counted as present for the purpose of determining a quorum. Our Initial Stockholders, who currently own approximately 23% of our issued and outstanding shares of Common Stock, will count towards this quorum. In the absence of a quorum, the chairman of the Special Meeting has power to adjourn the Special Meeting. As of the record date for the Special Meeting,                  shares of our Common Stock would be required to achieve a quorum.

Q: What vote is required to approve the proposals presented at the Special Meeting?

A:    

Proposal 1The UpHealth Business Combination Proposal: The approval of the UpHealth Business Combination Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, a Company

 

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stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the UpHealth Business Combination Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the UpHealth Business Combination Proposal. Our Initial Stockholders have agreed to vote their shares of Common Stock “FOR” the UpHealth Business Combination Proposal.

Proposal 2The Cloudbreak Business Combination Proposal: The approval of the Cloudbreak Business Combination Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the Cloudbreak Business Combination Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Cloudbreak Business Combination Proposal. Our Initial Stockholders have agreed to vote their shares of Common Stock “FOR” the Cloudbreak Business Combination Proposal.

Proposal 3The NYSE Stock Issuance Proposal: The approval of the NYSE Stock Issuance Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention and broker non-vote, will have no effect on the NYSE Stock Issuance Proposal. For purposes of NYSE rules, however, abstentions are treated as “votes cast” and will be counted as votes AGAINST this proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.

Proposal 4Classification of the Board of Directors Proposal: The approval of the classification of our board of directors into three classes of directors with staggered terms of office and to make certain related changes requires the affirmative vote of the holders of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have the same effect as a vote “AGAINST” such Proposal No. 4.

Proposal 5AApproval of Additional Amendments to Current Amended and Restated Certificate of Incorporation in Connection with the Business Combinations Proposal: The approval of certain additional changes, including but not limited to changing the post-combination company’s corporate name from “GigCapital2, Inc.” to “UpHealth, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company, requires the affirmative vote of the holders of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have the same effect as a vote “AGAINST” such Proposal No. 5A.

Proposal No. 5B—Authorization of Exclusive Forum Provision Proposal—To authorize the adoption of Delaware as the exclusive forum for certain stockholder litigation requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have the same effect as a vote “AGAINST” such Proposal No. 5B.

Proposal 6The Incentive Plan Proposal: The approval of the Incentive Plan Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote by proxy, as well as an abstention and broker non-vote, will have no effect on the Incentive Plan Proposal. For purposes of NYSE rules, however, abstentions are treated as “votes cast” and will be counted as votes AGAINST this proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.

 

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Proposal No. 7—Election of Directors Proposal: The approval of the Election of Directors Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote by proxy, as well as an abstention and broker non-vote, will have no effect on the Election of Directors Proposal. For purposes of NYSE rules, however, abstentions are treated as “votes cast” and will be counted as votes AGAINST this proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.

Proposal 8The Adjournment Proposal: The approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Adjournment Proposal.

Q: What happens if the UpHealth Business Combination Proposal is not approved?

A: If the UpHealth Business Combination Proposal is not approved and we do not consummate a business combination by March 10, 2021 (or June 10, 2021 if the extension we are seeking is approved by our stockholders), we will be required to dissolve and liquidate our Trust Account, unless we amend our certificate of incorporation again to further extend the time that we have to consummate a business combination.

Q: What happens if the Cloudbreak Business Combination Proposal is not approved?

A: If the Cloudbreak Business Combination Proposal is not approved and we do not consummate a business combination by March 10, 2021 (or June 10, 2021 if the extension we are seeking is approved by our stockholders), we will be required to dissolve and liquidate our Trust Account, unless we amend our certificate of incorporation again to further extend the time that we have to consummate a business combination.

Q: May the Company, the Founders or the Company’s directors or officers or their affiliates purchase shares in connection with the Business Combination?

A: In connection with the stockholder vote to approve the proposed Business Combinations, our Sponsor, directors or officers or their respective affiliates may privately negotiate transactions to purchase shares from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per-share pro rata portion of the Trust Account. None of our directors or officers or their respective affiliates will make any such purchases when they are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such selling stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights, and could include a contractual provision that directs such selling stockholder to vote such shares in a manner directed by the purchaser. In the event that our Sponsor, directors or officers or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are below or in excess of the per share pro rata portion of the Trust Account.

Q: How many votes do you have at the Special Meeting?

A: Each stockholder is entitled to one vote on each proposal presented at the Special Meeting for each share of Common Stock held of record by such stockholder as of                 , 2021, the record date for the Special Meeting. As of the close of business on the record date, there were                  outstanding shares of our Common Stock.

 

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Q: How will our Initial Stockholders, directors and officers vote?

A: Prior to our IPO, we entered into agreements with our Initial Stockholders, pursuant to which each Initial Stockholder agreed to vote any shares of Common Stock owned by them in favor of the UpHealth Business Combination Proposal and the Cloudbreak Business Combination Proposal. Currently, our Initial Stockholders own 23% of our issued and outstanding shares of Common Stock, and will be able to vote all such shares at the Special Meeting.

Q: How do I vote?

A: If you were a stockholder of record on                 , 2021, you may vote by granting a proxy. Specifically, you may vote:

 

   

By Mail—You may vote by mail by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. Votes submitted by mail must be received by                 [a][p].m. Eastern time on                 , 2021.

 

   

You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity.

 

   

We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting.

 

   

If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted.

 

   

Voting at the Special Meeting—We will be hosting the Special Meeting via live webcast. If you attend the Special Meeting, you may submit your vote at the Special Meeting online at http://[●], in which case any votes that you previously submitted will be superseded by the vote that you cast at the Special Meeting.

If you hold your shares in street name, you must submit voting instructions to your broker, bank or other nominee. In most instances, you will be able to do this over the Internet, by telephone or by mail. Please refer to information from your bank, broker, or other nominee on how to submit voting instructions.

Q: What will happen if I abstain from voting or fail to vote at the Special Meeting?

A: At the Special Meeting, we will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, a failure to vote or an abstention will have no effect on the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, and the Adjournment Proposal. However, an abstention or failure to vote will have the same effect as a vote “AGAINST” the Charter Amendment Proposals. In addition, for purposes of the NYSE Stock Issuance Proposal, the Incentive Plan Proposal and the Election of Directors Proposal, the NYSE considers an abstention vote as a “vote cast”, and therefore, an abstention will have the same effect as a vote AGAINST such proposals, while a failure to vote will have no effect on these two proposals.

Q: What will happen if I sign and return my proxy card without indicating how I wish to vote?

A: Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders. The proxyholders may use their discretion to vote on any other matters which properly come before the Special Meeting.

 

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Q: If I am not going to attend the Special Meeting, should I return my proxy card instead?

A: Yes. Whether you plan to attend the Special Meeting or not, please read the enclosed proxy statement/prospectus carefully. If you are a stockholder of record of our Common Stock as of the close of business on the record date, you can vote by proxy by mail by following the instructions provided in the enclosed proxy card. Please note that if you are a beneficial owner of our Common Stock, you may vote by submitting voting instructions to your broker, bank or nominee, or otherwise by following instructions provided by your broker, bank or nominee. Telephone and internet voting may be available to beneficial owners. Please refer to the vote instruction form provided by your broker, bank or nominee.

Q: What is the difference between a stockholder of record and a “street name” holder?

A: If your shares are registered directly in your name with the Company’s transfer agent, Continental Stock Transfer & Trust Company, you are considered the stockholder of record with respect to those shares, and access to proxy materials is being provided directly to you. If your shares are held in a stock brokerage account or by a bank or other nominee, then you are considered the beneficial owner of those shares, which are considered to be held in “street name.” Access to proxy materials is being provided to you by your broker, bank or other nominee who is considered the stockholder of record with respect to those shares.

Q: If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

A: No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-routine matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. We believe the proposals presented to the stockholders at this Special Meeting will be considered non-routine and, therefore, your broker, bank, or nominee cannot vote your shares without your instruction on any of the proposals presented at the Special Meeting. If you do not submit voting instructions, your broker, bank, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank, or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the Special Meeting. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

Q: How will a broker non-vote impact the results of each proposal?

A: Broker non-votes will count as a vote “AGAINST” the Charter Amendment Proposals but will not have any effect on the outcome of any other Proposals.

Q: May I change my vote after I have returned my signed proxy card or voting instruction form?

A: Yes. If you are a holder of record of our Common Stock as of the close of business on the record date, whether you vote by mail or in person, you can change or revoke your proxy before it is voted at the Special Meeting by:

 

   

delivering a signed written notice of revocation to our Secretary at GigCapital2, Inc., 1731 Embarcadero Rd., Suite 200, Palo Alto, California 94303, bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

   

signing and delivering a new proxy, relating to the same shares and bearing a later date; or

 

   

attending the Special Meeting and voting, although attendance at the special meeting will not, by itself, revoke a proxy.

 

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If you are a beneficial owner of our Common Stock as of the close of business on the record date, you must follow the instructions of your broker, bank or other nominee to revoke or change your voting instructions.

Q: What should I do if I receive more than one set of voting materials?

A: You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

Q: What interests do our Founders and our current officers and directors have in the Business Combination?

A: Our Founders and certain members of our Board and officers have interests in the Business Combinations that are different from or in addition to (and which may conflict with) your interests. You should take these interests into account in deciding whether to approve the Business Combinations. These interests include but are not limited to:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the Business Combinations;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combinations;

 

   

the fact that Dr. Avi Katz, Dr. Raluca Dinu and Neil Miotto will remain as board members of the post-combination company and each shall be entitled to receive compensation for serving on the board of directors of the post-combination company; and

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us if an initial business combination is not consummated by the applicable deadline. Prior to GigCapital2’s initial public offering, our Founders purchased an aggregate of 4,307,500 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.0058 per share (as compared to the $10.00 per share price being used to determine the number of shares of Common Stock being issued to the UpHealth and Cloudbreak equity holders in the Business Combinations or at which the PIPE Investors have agreed to purchase Common Stock), with the Sponsor purchasing 4,018,987 Founder Shares, Northland Investment purchasing 173,108 Founder Shares and the EarlyBird Group purchasing 115,405 Founder Shares. Additionally, the Founders purchased from GigCapital2 an aggregate of 567,500 Private Placement Units at a price of $10.00 per unit simultaneously with the consummation of GigCapital2’s initial public offering for an aggregate purchase price of $5,675,000, with the Sponsor purchasing 481,250 Private Placement Units, Northland Investment purchasing 56,350 Private Placement Units

 

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and the EarlyBird Group purchasing 29,900 Private Placement Units. In addition, Northland concurrently purchased 120,000 Private Underwriter Shares at a price of $10.00 per share. Certain of GigCapital2’s directors and executive officers, including Dr. Avi Katz, Dr. Raluca Dinu, Neil Miotto, John Mikulsky and Gil Frostig, also have a direct or indirect economic interest in the 481,250 Private Placement Units and in the 4,018,987 Founder Shares owned by the Sponsor. The 4,018,987 Founder Shares owned by the Sponsor would have had an aggregate market value of $         based upon the closing price of $         per public share on the NYSE on                     , 2021, the most recent practicable date prior to the date of this proxy statement/prospectus. The 481,250 private placement units held by the Sponsor would have had an aggregate market value of $         based upon the closing price of $         per public unit on the NYSE on                     , 2021, the most recent practicable date prior to the date of this proxy statement/prospectus.

These interests may influence our directors in making their recommendation that you vote in favor of the approval of the Business Combinations. See the sections entitled “Proposal No. 1—Approval of the UpHealth Business Combination—Interests of Certain Persons in the Business Combination”, “Proposal No. 2—Approval of the Cloudbreak Business Combination—Interests of Certain Persons in the Business Combination” and “Information about the Company Prior to the Business Combinations—Conflicts of Interest” for a complete description of such interests.

Q: What happens if you vote against the UpHealth Business Combination Proposal?

A: If you vote against the UpHealth Business Combination Proposal but the UpHealth Business Combination Proposal still obtains the affirmative vote of a majority of the votes cast by holders of our Common Stock represented in person or by proxy and entitled to vote at the Special Meeting, then the UpHealth Business Combination Proposal will be approved and, assuming the approval of the NYSE Stock Issuance Proposal and the Charter Amendment Proposals and the satisfaction or waiver of the other conditions to closing, the UpHealth Business Combination will be consummated in accordance with the terms of the UpHealth Business Combination Agreement.

If you vote against the UpHealth Business Combination Proposal and the UpHealth Business Combination Proposal does not obtain the affirmative vote of a majority of the votes cast by holders of our of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting, then the UpHealth Business Combination Proposal will fail and we will not consummate the UpHealth Business Combination. If we do not consummate the UpHealth Business Combination, we may continue to try to complete a business combination with a different target business until the applicable deadline. If we fail to complete an initial business combination by the applicable deadline, then we will be required to dissolve and liquidate the Trust Account by returning the then-remaining funds in such account to our public stockholders.

 

Q: What happens if you vote against the Cloudbreak Business Combination Proposal?

A: If you vote against the Cloudbreak Business Combination Proposal but the Cloudbreak Business Combination Proposal still obtains the affirmative vote of a majority of the votes cast by holders of our Common Stock represented in person or by proxy and entitled to vote at the Special Meeting, then the Cloudbreak Business Combination Proposal will be approved and, assuming the approval of the UpHealth Business Combination Proposal, NYSE Stock Issuance Proposal and the Charter Amendment Proposals and the satisfaction or waiver of the other conditions to closing, the Cloudbreak Business Combination will be consummated in accordance with the terms of the Cloudbreak Business Combination Agreement.

If you vote against the Cloudbreak Business Combination Proposal and the Cloudbreak Business Combination Proposal does not obtain the affirmative vote of a majority of the votes cast by holders of our of

 

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Common Stock represented in person or by proxy and entitled to vote at the Special Meeting, then the Cloudbreak Business Combination Proposal will fail and we will not consummate the Cloudbreak Business Combination. If we do not consummate the Cloudbreak Business Combination, we may continue to try to complete a the UpHealth Business Combination or a business combination with a different target business until the applicable deadline. If we fail to complete an initial business combination by the applicable deadline, then we will be required to dissolve and liquidate the Trust Account by returning the then-remaining funds in such account to our public stockholders.

Q: Do you have Redemption Rights?

A: Pursuant to our amended and restated certificate of incorporation, we are providing our public stockholders with the opportunity to redeem, upon the Closing, shares of Common Stock for cash equal to the pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the Trust Account that holds the proceeds of our IPO (including interest not previously released to the Company to pay franchise and income taxes ), subject to certain limitations. For illustrative purposes, based on the balance of the Trust Account of $168,000,000 as of January 31, 2021, the estimated per share redemption price would have been approximately $10.10. Public stockholders may elect to redeem their shares even if they vote for the Business Combinations. Any request to redeem public shares, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing. If we receive valid redemption requests from holders of public shares prior to the redemption deadline, we may, at our sole discretion, following the redemption deadline and until the date of Closing, seek and permit withdrawals by one or more of such holders of their redemption requests. We may select which holders to seek such withdrawals of redemption requests from based on any factors we may deem relevant, and the purpose of seeking such withdrawals may be to increase the funds held in the Trust Account, including where we otherwise would not satisfy the closing condition to have cash or cash equivalents from any source that equal or exceed $150,000,000.

Our Initial Stockholders have agreed to waive their redemption rights with respect to such shares, which will be excluded from the pro rata calculation used to determine the per-share redemption price. Each redemption of shares of Common Stock by our public stockholders will reduce the amount in the Trust Account. The Business Combination Agreements provide that each of UpHealth’s and Cloudbreak’s obligation to consummate the Business Combinations is conditioned on the funds in the Trust Account being no less than an aggregate amount of $150,000,000. This condition to closing in the Business Combination Agreements is for the sole benefit of the parties thereto and may be waived by each of UpHealth and Cloudbreak, as applicable. If, as a result of redemptions of Common Stock by our public stockholders, this condition is not met (or waived), then each of UpHealth and Cloudbreak may elect not to consummate the Business Combinations, as applicable. Furthermore, under the terms of the Convertible Note Subscription Agreements, a condition to the closing of the transactions contemplated by those agreements is that at least $50,000,000 of the $150,000,000 is from the Trust Account. In addition, in no event will we redeem shares of our Common Stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules). Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combinations. Unless otherwise specified, the information in the accompanying proxy statement/prospectus assumes that none of our public stockholders exercise their redemption rights with respect to their shares of Common Stock by the applicable deadline.

Q: If you are a Company public warrant holder, can you exercise Redemption Rights with respect to your public warrants?

A: No. The holders of our public warrants have no Redemption Rights with respect to such public warrants.

Q: If you are a Company rights holder, can you exercise Redemption Rights with respect to your rights?

A: No. The holders of our rights have no Redemption Rights with respect to such rights.

 

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Q: Can the Initial Stockholders redeem their Founder Shares in connection with consummation of the Business Combinations?

A: No. Our Initial Stockholders, officers and directors have agreed to waive their redemption rights with respect to their shares of Common Stock in connection with the consummation of the Business Combinations. Our Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combinations.

Q: Is there a limit on the number of shares you may redeem?

A: We have no specified maximum redemption threshold under our current amended and restated certificate of incorporation. Each redemption of shares of Common Stock by our public stockholders will reduce the amount in the Trust Account. The Business Combination Agreements provide that each of UpHealth’s and Cloudbreak’s obligation to consummate their respective Business Combination is conditioned on the amount of cash or cash equivalents that we have from any source being no less than an aggregate amount of $150,000,000. This condition to closing in each Business Combination Agreement is for the sole benefit of the parties thereto and may be waived by UpHealth and Cloudbreak, as applicable. If, as a result of redemptions of Common Stock by our public stockholders, this condition is not met (or waived), then each of UpHealth and Cloudbreak may elect not to consummate their respective Business Combination. Furthermore, under the terms of the Convertible Note Subscription Agreements, a condition to the closing of the transactions contemplated by those agreements is that at least $50,000,000 of the $150,000,000 is from the Trust Account. In addition, in no event will we redeem shares of our Common Stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules).

Q: Is there a limit on the total number of shares that may be redeemed?

A: Yes. Our amended and restated certificate of incorporation provides that we may not redeem our public shares in an amount that would result in the Company’s failure to have net tangible assets in excess of $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the Business Combination Agreements. Other than this limitation, our current amended and restated certificate of incorporation does not provide a specified maximum redemption threshold. In addition, the Business Combination Agreements provide that the obligation of each of UpHealth and Cloudbreak to consummate their Business Combinations is conditioned on the amount of cash or cash equivalents that we have from any source being equal to or in excess of $150,000,000. Furthermore, under the terms of the Convertible Note Subscription Agreements, a condition to the closing of the transactions contemplated by those agreements is that at least $50,000,000 of the $150,000,000 is from the Trust Account. In the event the aggregate cash consideration we would be required to pay for all shares of Common Stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Business Combination Agreements and the Convertible Note Subscription Agreements exceed the aggregate amount of cash available to us, we may not complete the Business Combinations or redeem any shares, all shares of Common Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.

Based on the amount of approximately $168,000,000 in our Trust Account as of January 31, 2021, 11,719,623 shares of Common Stock may be redeemed and still enable us to have sufficient cash to satisfy the cash closing conditions in the Business Combination Agreements and the Convertible Note Subscription Agreements. We refer to this as the maximum redemption scenario.

Q: Will how you vote affect your ability to exercise Redemption Rights?

A: No. You may exercise your redemption rights whether you vote your shares of Common Stock for or against, or whether you abstain from voting on the UpHealth Business Combination Proposal, the Cloudbreak

 

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Business Combination Proposal or any other proposal described by this proxy statement/prospectus. As a result, the Business Combination Agreements can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares in a company with a potentially less-liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of NYSE.

Q: How do you exercise your Redemption Rights?

A: In order to exercise your redemption rights, you must (i)(a) hold public shares or (b) hold public shares through units and elect to separate your units into the underlying public shares, public rights and public warrants prior to exercising your redemption rights with respect to the public shares; and (ii) prior to 5:00 p.m. Eastern time on                     , 2021 (two business days before the Special Meeting) (a) submit a written request to the Transfer Agent that the Company redeem your public shares for cash and (b) deliver your public shares to the Transfer Agent, physically or electronically through Depository Trust Company (“DTC”). Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing. The Transfer Agent’s address is as follows:

Continental Stock Transfer & Trust Company

1 State Street—30th Floor

New York, New York 10004

Attention: Mark Zimkind

E-mail: mzimkind@continentalstock.com

You must also affirmatively certify in your request to Continental Stock Transfer & Trust Company for redemption if you “ARE” or “ARE NOT’ acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) with any other stockholder with respect to shares of Common Stock. Notwithstanding the foregoing, a holder of public shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) will be restricted from seeking Redemption Rights with respect to more than 15% of the public shares, which we refer to as the “15% threshold.” Accordingly, all public shares in excess of the 15% threshold beneficially owned by a public stockholder or “group” (as defined in Section 13d-3 of the Exchange Act) will not be redeemed for cash.

Stockholders seeking to exercise their Redemption Rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, we do not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

Stockholders seeking to exercise their Redemption Rights, whether they are record holders or hold their shares in “street name”, are required to either tender their certificates to our Transfer Agent prior to the date that is two business days prior to the Special Meeting, or to deliver their shares to the Transfer Agent electronically using DTC Deposit/Withdrawal At Custodian (“DWAC”) system, at such stockholder’s option. The requirement for physical or electronic delivery prior to the Special Meeting ensures that a redeeming stockholders election to redeem is irrevocable once the Business Combinations are approved.

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge a tendering broker a fee and it is in the broker’s discretion whether or not to pass this cost on to the redeeming stockholder. However, this fee would be incurred regardless of whether or not we require stockholders seeking to exercise Redemption Rights to tender their shares, as the need to deliver shares is a requirement to exercising Redemption Rights, regardless of the timing of when such delivery must be effectuated.

 

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Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests (and submitting shares to the Transfer Agent) and thereafter, with our consent, until the vote is taken with respect to the Business Combinations. If you delivered your shares for redemption to our Transfer Agent and decide within the required timeframe not to exercise your Redemption Rights, you may request that our Transfer Agent return the shares (physically or electronically). You may make such request by contacting our Transfer Agent at the address listed under the question “Who can help answer my questions?” below.

Q: What are the U.S. federal income tax consequences of exercising your Redemption Rights?

A: The U.S. federal income tax consequences of the redemption depend on particular facts and circumstances. Please see the section entitled “Proposal No. 1Approval of the UpHealth Business Combination—Certain U.S. Federal Income Tax Considerations.” We urge you to consult your tax advisors regarding the tax consequences of exercising your redemption rights.

Q: Do you have appraisal rights if you object to the Business Combinations?

A: No. Appraisal rights are not available to holders of our Common Stock in connection with the Business Combinations.

Q: What happens to the funds held in the Trust Account upon consummation of the Business Combinations?

A: The funds held in the Trust Account will be used to: (i) pay Company stockholders who properly exercise their redemption rights; and, provided that there are funds remaining after this payment, (ii) pay certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by the Company and other parties to the Business Combination Agreements in connection with the transactions contemplated by the Business Combination Agreements, including the Business Combinations, and pursuant to the terms of the Business Combination Agreements.

Q: What happens if the Business Combinations are not consummated?

A: There are certain circumstances under which the Business Combination Agreements may be terminated. Please see the section entitled “Proposal No. 1Approval of the UpHealth Business CombinationThe UpHealth Business Combination Agreement” and “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination Agreement” for information regarding the parties’ specific termination rights.

If we do not consummate either Business Combination, we may continue to try to complete a business combination with a different target business until the applicable deadline. If we fail to complete an initial business combination by the applicable deadline, then we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem our public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest not previously released to the Company to pay its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish our public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the IPO. Please see the section entitled “Risk FactorsRisks Related to the Company and the Business Combinations.”

 

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Holders of our Founder Shares have waived any right to any liquidation distribution with respect to such shares and the underwriters of our IPO agreed to waive their rights to the business combination marketing fee held in the Trust Account in the event we do not complete our initial business combination within the required period. In addition, if we fail to complete a business combination by the applicable deadline, there will be no redemption rights or liquidating distributions with respect to our outstanding warrants, which will expire worthless.

Q: When are the Business Combinations expected to be completed?

A: The closing of the Business Combinations are expected to take place on or prior to the third business day following the satisfaction or waiver of the conditions described below in the subsection entitled “Proposal No. 1Approval of the UpHealth Business CombinationThe UpHealth Business Combination AgreementConditions to Closing of the Business Combination” and “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination AgreementConditions to Closing of the Cloudbreak Business Combination.” The closing is expected to occur in the first quarter of 2021. The Business Combination Agreements may be terminated by the Company, UpHealth or Cloudbreak, as applicable if the Closing has not occurred by March 31, 2021, or in certain circumstances, May 14, 2021.

For a description of the conditions to the completion of the Business Combinations, see the section entitled “Proposal No. 1Approval of the UpHealth Business CombinationThe UpHealth Business Combination AgreementConditions to Closing of the Business Combination” and “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination AgreementConditions to Closing of the Cloudbreak Business Combination.”

Q: What do you need to do now?

A: You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the Annexes, and to consider how the Business Combinations will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

Q: Who can vote at the special meeting?

A: Only holders of record of the Company’s Common Stock, including those shares held as a constituent part of our units, at the close of business on     , 2021 are entitled to have their vote counted at the special meeting and any adjournments or postponements thereof. On this record date,                  shares of Common Stock were outstanding and entitled to vote.

Stockholder of Record: Shares Registered in Your Name. If on the record date your shares or units were registered directly in your name with the Company’s transfer agent, Continental Stock Transfer & Trust Company, then you are a stockholder of record. As a stockholder of record, you may vote in person at the special meeting or vote by proxy. Whether or not you plan to attend the special meeting in person, the Company urges you to fill out and return the enclosed proxy card to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank. If on the record date your shares or units were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the special meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the special meeting unless you request and obtain a valid proxy from your broker or other agent.

 

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Q: Who will solicit and pay the cost of soliciting proxies for the Special Meeting?

A: We will pay the cost of soliciting proxies for the Special Meeting. We have engaged MacKenzie to assist in the solicitation of proxies for the Special Meeting. We have agreed to pay MacKenzie a fee of $9,000, plus disbursements, and will reimburse MacKenzie for its reasonable out-of-pocket expenses and indemnify MacKenzie and its affiliates against certain claims, liabilities, losses, damages and expenses. We will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of our Common Stock for their expenses in forwarding soliciting materials to beneficial owners of our Common Stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Q: Who can help answer my questions?

A: If you have questions about the proposals or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card you should contact:

c/o GigCapital2, Inc.

1731 Embarcadero Road, Suite 200

Palo Alto, CA 94303

Attention: Secretary

Telephone: (650) 276-7040

You may also contact our proxy solicitor at:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

Telephone: (212) 929-5500 (Call Collect)

or

Call Toll-Free: (800) 322-2885

E-mail: proxy@mackenziepartners.com

To obtain timely delivery, our stockholders must request the materials no later than five business days prior to the Special Meeting.

You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”

If you intend to seek redemption of your public shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to our Transfer Agent prior to the Special Meeting in accordance with the procedures detailed under the question “How do I exercise my Redemption Rights?” If you have questions regarding the certification of your position or delivery of your stock, please contact our Transfer Agent:

Continental Stock Transfer & Trust Company

1 State Street-30th Floor

New York, New York 10004

Attention: Mark Zimkind

E-mail: mzimkind@continentalstock.com

 

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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

This summary highlights selected information contained in this proxy statement/prospectus and does not contain all of the information that may be important to you. You should carefully read this entire proxy statement/prospectus, including the Annexes and accompanying financial statements of the Company, UpHealth and Cloudbreak, to fully understand the proposed Business Combinations (as described below) before voting on the proposals to be considered at the Special Meeting (as described below). Please see the section entitled “Where You Can Find More Information” beginning on page 458 of this proxy statement/prospectus.

Unless otherwise specified, all share calculations assume: (i) no exercise of redemption rights by the Company’s public stockholders; and (ii) no inclusion of any shares of Common Stock issuable upon the exercise of the Company’s warrants or any shares to be issued pursuant to the Incentive Plan at or following the Closing.

Parties to the Business Combination

The Company

The Company is a Private-to-Public Equity (PPE) company, also known as a blank check company or a special purpose acquisition company, incorporated on March 6, 2019, as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

The public units began trading on the NYSE under the symbol “GIX.U” on June 5, 2019. On June 26, 2019, the Company announced that the holders of the Company’s units may elect to separately trade the securities underlying such units. On July 1, 2019, the shares, warrants and rights began trading on the NYSE under the symbols “GIX”, “GIX.WS” and “GIX.RT” respectively. We intend to apply to continue the listing of our publicly-traded Common Stock and warrants on NYSE under the symbols “UPH” and “UPH.WS” respectively, upon the Closing.

The mailing address of the Company’s principal executive office is c/o GigCapital2, Inc., 1731 Embarcadero Rd., Suite 200, Palo Alto, California 94303.

UpHealth Merger Sub

UpHealth Merger Sub, a Delaware corporation, is a wholly-owned subsidiary of the Company, formed by the Company in November 2020, to consummate the UpHealth Business Combination. In the UpHealth Business Combination, UpHealth Merger Sub will merge with and into UpHealth, with UpHealth continuing as the surviving corporation.

The mailing address of UpHealth Merger Sub’s principal executive office is 1731 Embarcadero Rd., Suite 200, Palo Alto, California 94303.

Cloudbreak Merger Sub

Cloudbreak Merger Sub, a Delaware limited liability company, is a wholly-owned subsidiary of the Company, formed by the Company in November 2020, to consummate the Cloudbreak Business Combination. In the Cloudbreak Business Combination, Cloudbreak Merger Sub will merge with and into Cloudbreak, with Cloudbreak continuing as the surviving corporation.

The mailing address of Cloudbreak Merger Sub’s principal executive office is 1731 Embarcadero Rd., Suite 200, Palo Alto, California 94303.



 

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UpHealth

UpHealth is a global digital health company intent on creating a single, integrated platform of best-in-class technologies and services essential to personalized, affordable and effective care globally. Its mission is to reshape care delivery and enable healthier communities through a simplified digital front door that connects evidence-based care, coordinated workflows and health services. UpHealth will offer patient-centric digital health technologies and tech-enabled services to integrate care and improve performance across four markets of the healthcare industry; Integrated care management, digital pharmacy, global telehealth and behavioral health.

For more information about UpHealth, please see the sections entitled “Information About New UpHealth,” “UpHealths Managements Discussion and Analysis of Financial Condition and Results of Operations” the Management’s Discussion and Analysis for each of the companies acquired or to be acquired by UpHealth and “Management After the Business Combinations.”

Cloudbreak

Cloudbreak Health, LLC, a Delaware limited liability company, is a leading unified telemedicine and video medical interpretation solutions provider. Cloudbreak’s platform offers tele-interpretation (video and audio medical interpreting), telepsychiatry, telestroke, tele-urology, and other specialities, all with integrated language services for Limited English Proficient and Deaf/Hard-of-Hearing patients. For more information about Cloudbreak, please see the sections entitled “Information About Cloudbreak,” “Cloudbreaks Managements Discussion and Analysis of Financial Condition and Results of Operations” and “Management After the Business Combinations.”

Emerging Growth Company

The Company is an “emerging growth company,” as defined under the JOBS Act. As an emerging growth company, the Company is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. These include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and the requirement to obtain stockholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Pivotal has elected to take advantage of such extended transition period.

The Company will remain an emerging growth company until the earlier of (i) December 31, 2024 (the last day of the fiscal year following the fifth anniversary of the consummation of the Company’s initial public offering), (ii) the last day of the fiscal year in which the Company has total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal year in which the Company is deemed to be a “large accelerated filer,” as defined in the Exchange Act, and (iv) the date on which the Company has issued more than $1.0 billion in nonconvertible debt during the prior three-year period.

The UpHealth Business Combination Proposal and Cloudbreak Business Combination Proposal

On November 20, 2020, the Company and UpHealth Merger Sub entered into the UpHealth Business Combination Agreement (as subsequently amended and as it may be further amended from time to time) with UpHealth. If the UpHealth Business Combination Agreement is adopted by UpHealth stockholders and the UpHealth Business Combination Agreement is approved by Company stockholders at the Special Meeting,



 

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UpHealth Merger Sub will merge with and into UpHealth, with UpHealth surviving the merger. For more information about the transactions contemplated by the UpHealth Business Combination Agreement, please see the section entitled “Proposal No. 1Approval of the UpHealth Business Combination.” A copy of the UpHealth Business Combination Agreement is attached to this proxy statement/prospectus as Annex A.

On November 20, 2020, the Company and Cloudbreak Merger Sub entered into the Cloudbreak Business Combination Agreement with Cloudbreak. If the Cloudbreak Business Combination Agreement is adopted by Cloudbreak members and the Cloudbreak Business Combination Agreement is approved by Company stockholders at the Special Meeting, Cloudbreak Merger Sub will merge with and into Cloudbreak, with Cloudbreak surviving the merger. For more information about the transactions contemplated by the Cloudbreak Business Combination Agreement, please see the section entitled “Proposal No. 2Approval of the Cloudbreak Business Combination.” A copy of the Cloudbreak Business Combination Agreement is attached to this proxy statement/prospectus as Annex B.

UpHealth Business Combination Consideration to the UpHealth stockholders

Subject to the terms of the UpHealth Business Combination Agreement and customary adjustments, at the effective time of the UpHealth Business Combination, each share of UpHealth capital stock issued and outstanding immediately prior to the effective time of the UpHealth Business Combination (other than shares owned by UpHealth as treasury stock or dissenting shares) will the UpHealth merger consideration, which aggregate amount, together with all payments made with respect to all vested UpHealth equity awards, shall not exceed 99,000,000 shares of Company Common Stock, including shares issuable in respect of vested equity awards of UpHealth. Upon the effective time, each outstanding and unsettled restricted stock unit in respect of shares of UpHealth capital stock, option to purchase UpHealth capital stock and unvested restricted share of UpHealth capital stock will be rolled over into restricted stock units, options, or restricted shares, respectively, of Company Common Stock in accordance with the terms of the UpHealth Business Combination Agreement.

Cloudbreak Business Combination Consideration to the Cloudbreak members

Subject to the terms of the Cloudbreak Business Combination Agreement and customary adjustments, at the effective time of the Cloudbreak Business Combination, each share of Cloudbreak capital stock issued and outstanding immediately prior to the effective time of the Cloudbreak Business Combination (other than shares owned by Cloudbreak as treasury stock or dissenting shares) will convert into a number of shares of Company Common Stock set forth in the Cloudbreak Business Combination Agreement (the “Cloudbreak merger consideration”), which aggregate amount, together with all payments made with respect to all vested Cloudbreak equity awards, shall not exceed 11,000,000 shares of Company Common Stock, including shares issuable in respect of vested equity awards of Cloudbreak. Upon the effective time, each outstanding and unsettled restricted stock unit in respect of shares of Cloudbreak capital stock, option to purchase Cloudbreak capital stock and unvested restricted share of Cloudbreak capital stock will be rolled over into restricted stock units, options, or restricted shares, respectively, of Company Common Stock in accordance with the terms of the Cloudbreak Business Combination Agreement.

Related Agreements

This section describes the material provisions of the Related Agreements, but does not purport to describe all of the terms thereof. The following summary is qualified in its entirety by reference to the complete text of each of the Related Agreements. The PIPE Subscription Agreement is attached hereto as Annex I. The Convertible Note Subscription Agreement is attached hereto as Annex J. Stockholders and other interested parties are urged to read such Related Agreements in their entirety prior to voting on the proposals presented at the Special Meeting.



 

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Stockholder Support Agreement

Contemporaneously with the execution of the UpHealth Business Combination Agreement, on November 20, 2020, GigCapital2 entered into a stockholder support agreement with certain of the stockholders of UpHealth (the “Stockholder Support Agreement”) pursuant to which such UpHealth stockholders agreed to vote all of their shares of UpHealth Common Stock in favor of the approval and adoption of the business combination and the UpHealth Business Combination Agreement. Additionally, such UpHealth stockholders agreed not to (a) sell, assign, transfer (including by operation of law), pledge, dispose of, permit to exist any material lien with respect to or otherwise encumber any of their shares of UpHealth Common Stock (or enter into any arrangement with respect thereto), subject to certain exceptions, or (b) deposit any of their shares of UpHealth Common Stock into a voting trust or enter into any voting arrangement that is inconsistent with the Stockholder Support Agreement.

Member Support Agreement

Contemporaneously with the execution of the Cloudbreak Business Combination Agreement, on November 20, 2020, GigCapital2 entered into a member support agreement with certain of the members of Cloudbreak (the “Member Support Agreement”) pursuant to which such Cloudbreak members agreed to vote all of their Cloudbreak Units in favor of the approval and adoption of the Cloudbreak Business Combination and the Cloudbreak Business Combination Agreement and against any action, agreement or transaction or proposal that would result in a breach of any action, agreement or transaction or proposal that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Cloudbreak under the Cloudbreak Business Combination Agreement or that would reasonably be expected to result in the failure of the Cloudbreak Business Combination. Additionally, such Cloudbreak members agreed not to (i) sell, assign, transfer (including by operation of law), pledge, dispose of, permit to exist any material lien with respect to or otherwise encumber any of their Cloudbreak Units (or enter into any arrangement with respect thereto), subject to certain exceptions, (ii) deposit any of their Cloudbreak Units into a voting trust or enter into any voting agreement or arrangement that is inconsistent with the Member Support Agreement, or (iii) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect acquisition or sale, assignment, transfer (including by operation of law) or other disposition of any Units, subject to certain exceptions.

UpHealth Registration Rights and Lock-Up Agreement

In connection with the closing of the UpHealth Business Combination, we will enter into a Registration Rights and Lock-Up Agreement (the “UpHealth Registration Rights and Lock-Up Agreement”). Pursuant to the terms of the UpHealth Registration Rights and Lock-Up Agreement, subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the UpHealth holders may demand at any time or from time to time, that GigCapital2 file a registration statement on Form S-1 or Form S-3 to register certain shares of GigCapital2 Common Stock held by such holders or to conduct an underwritten offering. The UpHealth Registration Rights and Lock-Up Agreement will also provide the UpHealth Holders with “piggy-back” registration rights, subject to certain requirements and customary conditions.

The UpHealth Registration Rights and Lock-Up Agreement further provides that, subject to certain exceptions, each of the UpHealth Holders shall not transfer any shares of GigCapital2 Common Stock beneficially owned or owned of record by such UpHealth holders until the earlier of (i) six months or one year (as applicable) after the date of the closing of the UpHealth Business Combination or (ii) the date on which, subsequent to the UpHealth Business Combination, the last sale price of the GigCapital2 Common Stock (a) equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least 90 days after the UpHealth Business Combination, or (b) the date following the completion of the UpHealth



 

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Business Combination on which GigCapital2 completes a liquidation, merger, stock exchange or other similar transaction that results in all of the GigCapital2’s stockholders having the right to exchange their shares of GigCapital2 Common Stock for cash, securities or other property; provided that in the sole discretion of the majority of the independent members of the GigCapital2 Board, such lock-up period may end earlier than as provided therein upon written notice to the UpHealth holders.

For more information about the UpHealth Registration Rights and Lock-Up Agreement, see the section entitled Proposal No. 1—Approval of the UpHealth Business Combination—Related Agreements—UpHealth Registration Rights and Lock-Up Agreement.

Cloudbreak Registration Rights and Lock-Up Agreement

In connection with the closing of the Cloudbreak Business Combination, we will enter into a Registration Rights and Lock-Up Agreement (the “Cloudbreak Registration Rights and Lock-Up Agreement”). Pursuant to the terms of the Cloudbreak Registration Rights and Lock-Up Agreement, GigCapital2 will be obligated to file a registration statement to register the resale of certain shares of GigCapital2 Common Stock held by the Cloudbreak holders. In addition, pursuant to the terms of the Cloudbreak Registration Rights and Lock-Up Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the Cloudbreak holders may demand at any time or from time to time, that GigCapital2 conduct an underwritten offering with respect to certain shares of GigCapital2 Common Stock held by such Cloudbreak holders. The Cloudbreak Registration Rights and Lock-Up Agreement will also provide the Cloudbreak Holders with “piggy-back” registration rights, subject to certain requirements and customary conditions.

The Cloudbreak Registration Rights and Lock-Up Agreement further provides that, subject to certain exceptions, each of the Cloudbreak holders shall not transfer any shares of GigCapital2 Common Stock beneficially owned or owned of record by such Cloudbreak holders until the earlier of (i) six months or one year (as applicable) after the date of the closing of the Cloudbreak Business Combination or (ii) the date on which, subsequent to the Cloudbreak Business Combination, the last sale price of the GigCapital2 Common Stock (a) equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least 90 days after the Cloudbreak Combination, or (b) the date following the completion of the Cloudbreak Business Combination on which GigCapital2 completes a liquidation, merger, stock exchange or other similar transaction that results in all of the GigCapital2’s stockholders having the right to exchange their shares of GigCapital2 Common Stock for cash, securities or other property; provided that in the sole discretion of the majority of the independent members of the GigCapital2 Board, such lock-up period may end earlier than as provided therein upon written notice to the Cloudbreak holders.

For more information about the Cloudbreak Registration Rights and Lock-Up Agreement, see the section entitled Proposal No. 2—Approval of the Cloudbreak Business Combination—Related Agreements—Cloudbreak Registration Rights and Lock-Up Agreement.

PIPE Subscription Agreements

On January 20, 2021, the Company entered into the PIPE Subscription Agreements with the PIPE Investors, pursuant to which, among other things, the Company agreed to issue and sell to the PIPE Investors, in private placements to close immediately prior to the Closing, an aggregate of 3,000,000 shares of Company Common Stock at $10.00 per share, for an aggregate purchase price of $30,000,000. The obligations of the parties to consummate the PIPE Investment are conditioned upon, among other things, all conditions precedent to the closing of the transactions contemplated by the Convertible Note Subscription Agreements having been satisfied or waived, and the closing of the transaction contemplated by the PIPE Subscription Agreements occurring



 

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concurrently with the closing of the transactions contemplated by the Convertible Note Subscription Agreements. The PIPE Investment will be consummated concurrently with the Closing.

For more information about the PIPE Subscription Agreements, see the section entitled “Proposal No. 1—Approval of the UpHealth Business Combination—Related Agreements—PIPE Subscription Agreements” and “Proposal No. 2—Approval of the Cloudbreak Business Combination—Related Agreements—PIPE Subscription Agreements.

Convertible Note Subscription Agreements

On January 20, 2021, the Company entered into the Convertible Note Subscription Agreements with the Convertible Note Investors, pursuant to which, among other things, the Company agreed to issue and sell to the Convertible Note Investors, in private placements to close immediately prior to Closing, the Convertible Notes for an aggregate purchase price of $255,000,000. The Convertible Notes are convertible into 822,173,913 shares of Common Stock at a conversion price of $11.50. The obligations to consummate the Convertible Note Investment are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the Business Combination Agreements. The Convertible Note Investment will be consummated substantially concurrently with the Closing.

For more information about the Convertible Note Subscription Agreements, see the section entitled “Proposal No. 1—Approval of the UpHealth Business Combination—Related Agreements—Convertible Note Subscription Agreements and Indenture” and “Proposal No. 2—Approval of the Cloudbreak Business Combination—Related Agreements—Convertible Note Subscription Agreements and Indenture.

Incentive Plan

Our Board approved the Incentive Plan on February 7, 2021, subject to stockholder approval of the Incentive Plan at the Special Meeting. The purpose of the Incentive Plan is to promote our long-term success of the Company and the creation of stockholder value by encouraging service providers to focus on critical long-range corporate objectives, encouraging the attraction and retention of service providers with exceptional qualifications and linking service providers directly to stockholder interests through increased stock ownership. These incentives are provided through the grant of stock options, including incentive stock options, and nonqualified stock options, stock appreciation rights, restricted stock, and restricted stock units. For more information about the Incentive Plan, please see the section entitled “Proposal No. 6The Incentive Plan ProposalSummary of the Incentive Plan.”

Board of New UpHealth following the Business Combinations

Upon the Closing Date, we anticipate that the New UpHealth Board will consist of nine members, reclassified into three separate classes, with each class serving a three-year term; except with respect to the election of directors at the special meeting pursuant to Proposal No. 7—The Election of Directors Proposal, the Class I directors will be elected to an initial one-year term (and three-year terms subsequently), the Class II directors will be elected to an initial two-year term (and three-year terms subsequently) and the Class III directors will be elected to an initial three-year term (and three-year terms subsequently).

Upon the Closing Date, we expect that the New UpHealth Board will be comprised of Dr. Avi Katz, Dr. Raluca Dinu, Dr. Chirinjeev Kathuria, Neil Miotto and Dr. Mariya Pylypiv and four additional independent directors (under NYSE rules) to be designated by a majority of Dr. Avi S. Katz, Dr. Raluca Dinu, Dr. Chirinjeev Kathuria and Dr. Mariya Pylypiv.



 

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Our Board has nominated the following individuals for election at our special meeting pursuant to Proposal No. 7—The Election of Directors Proposal:

 

   

Class I Directors: Messrs. Miotto,                 ,                 ;

 

   

Class II Directors: Drs. Dinu and Pylypiv, and                 ; and

 

   

Class III Directors: Drs. Katz and Kathuria and                 .

For additional details, see the sections of this proxy statement/prospectus entitled “Proposal No. 7—The Election of Directors Proposal” and “Management After the Business Combinations.”

Redemption Rights

Pursuant to our current amended and restated certificate of incorporation, holders of public shares may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combinations, including interest not previously released to the Company to pay its franchise and income taxes, by (ii) the total number of then-outstanding public shares; provided that the Company will not redeem any shares of Common Stock issued in the IPO to the extent that such redemption would result in the Company’s failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) in excess of $5,000,001. As of January 31, 2021, the estimated per share redemption price would have been approximately $10.10.

If a holder exercises its redemption rights, then such holder will be exchanging its shares of our Common Stock for cash and will no longer own shares of the post-combination company. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent in accordance with the procedures described herein. Please see the section entitled “Special Meeting of Company StockholdersRedemption Rights” for the procedures to be followed if you wish to redeem your shares for cash. Any request for redemption may be withdrawn until the deadline for submitting redemption requests and thereafter, with our consent, until the Closing.

Impact of the Business Combinations on the Company’s Public Float

It is anticipated that, upon completion of the Business Combinations, assuming no redemptions: (i) the Company’s public stockholders will retain an ownership interest of approximately 13.6% in the post-combination company (not including shares beneficially owned by our Sponsor); (ii) the PIPE Investors will own approximately 2.32% of the post-combination company (such that public stockholders, including the PIPE Investors, will own approximately 15.92% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor) will own approximately 3.9% of the post-combination company; (iv) the former UpHealth equity holders will own approximately 73.06% of the post-combination company, assuming $86,200,000 of cash is used to repurchase UpHealth shares and (v) the former Cloudbreak equity holders will own approximately 7.12% of the post-combination company, assuming no cash is used to repurchase Cloudbreak units. The ownership percentage with respect to the post-combination company following the Business Combinations does not take into account (i) warrants to purchase Common Stock that will remain outstanding immediately following the Business Combinations and (ii) the issuance of any shares upon completion of the Business Combinations under the Incentive Plan, a copy of which is attached to this proxy statement/prospectus as Annex K. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement/ProspectusImpact of the Business Combinations on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information,” “Proposal No. 6The Incentive Plan Proposal.”



 

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The following table illustrates varying ownership levels in the Company, assuming no redemptions by the Company’s public stockholders and the maximum redemptions by the Company’s stockholders:

 

     No
Redemptions
    11,719,623
shares of
common
stock
redeemed
 

The Company’s public stockholders

     13.6     4.96

Pipe Investors

     2.32     2.56

Initial Stockholders

     3.9     4.28

The former UpHealth equity holders(1)

     73.06     80.36

The former Cloudbreak equity holders(2)

     7.12     7.84

Total

     100     100
  

 

 

   

 

 

 

 

(1)

Assumes $86,200,000 of cash is used to repurchase UpHealth shares.

(2)

Assumes no cash is used to repurchase Cloudbreak Units.

Please see “Unaudited Pro Forma Condensed Combined Financial Information” on page 123.

The Charter Amendment Proposals

Upon the Closing, our amended and restated certificate of incorporation will be amended promptly to reflect the Charter Amendment Proposals to:

 

   

provide for the classification of our board of directors into three classes of directors with staggered terms of office and to make certain related changes (Proposal No. 4); and

 

   

provide for certain additional changes, including but not limited to changing the post-combination company’s corporate name from “GigCapital2, Inc.” to “UpHealth, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company (Proposal No. 5A); and

 

   

provide for the adoption of Delaware as the exclusive forum for certain stockholder litigation (Proposal No. 4).

Please see the sections entitled “Proposal No. 4—Classification of the Board of Directors Proposal,” “Proposal No. 5A—Approval of Additional Amendments to Current Amended and Restated Certificate of Incorporation in Connection with the Business Combinations Proposal” and “Proposal No. 5B—Authorization of Exclusive Forum Provision Proposal” for more information.

Other Proposals

In addition, the stockholders of the Company will be asked to vote on:

 

   

a proposal to approve, for purposes of complying with applicable NYSE Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock pursuant to the Business Combinations (Proposal No. 3);

 

   

a proposal to approve and adopt the Incentive Plan, a copy of which is attached to this proxy statement/prospectus as Annex K, including the authorization of the initial share reserve under the Incentive Plan (Proposal No. 6);

 

   

a proposal to elect the directors comprising the board of directors of New UpHealth following the closing of the Business Combinations (Proposal No. 7); and



 

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a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal or the Election of Directors Proposal (Proposal No. 8).

Please see the section entitled “Proposal No. 3The NYSE Stock Issuance Proposal,” “Proposal No. 5A—Approval of Certain Governance Provisions in the Second Amended and Restated Certificate of Incorporation in Connection with the Business Combinations Proposal,” “Proposal 5B—Authorization of Exclusive forum Provision Proposal,” “Proposal No. 6The Incentive Plan Proposal,” “Proposal No. 7—Election of Directors Proposal” and “Proposal No. 8The Adjournment Proposal” for more information.

Date, Time and Place of Special Meeting

The Special Meeting will be held on                     , 2021 at [10:00] [a][p].m., local time, [at the offices of the Company located at 1731 Embarcadero Rd., Suite 200, Palo Alto, California 94303, or at such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals][at https://[●], or at such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals. The Special Meeting will be conducted exclusively via live webcast and so stockholders will not be able to attend the meeting in person. Stockholders may attend the special meeting online and vote at the Special Meeting by visiting https://[●] and entering your 12-digit control number, which is either included on the proxy card you received or obtained through Continental Stock Transfer & Trust Company].

Registering for the Special Meeting

Any stockholder wishing to attend the virtual meeting should register for the meeting by                     , 2021 at https://[●]. To register for the Special Meeting, please follow these instructions as applicable to the nature of your ownership of our Common Stock:

 

   

If your shares are registered in your name with Continental Stock Transfer & Trust Company and you wish to attend the online-only Special Meeting, go to https://[●], enter the 12-digit control number included on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.

 

   

Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) who wish to attend the virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five (5) business days prior to the meeting date in order to ensure access.

Voting Power and Record Date

Only Company stockholders of record at the close of business on                     , 2021, the record date for the Special Meeting, will be entitled to vote at the Special Meeting. You are entitled to one vote for each share of Common Stock that you owned as of the close of business on the record date. If your shares are held in “street



 

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name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were                  shares of Common Stock outstanding and entitled to vote, of which                  are public shares and 4,995,000 are Founder Shares held by our Initial Stockholders.

Accounting Treatment

The Business Combinations will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, the Company will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combinations will be treated as the equivalent of UpHealth issuing stock for the net assets of the Company, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded.

Appraisal Rights

Appraisal rights are not available to our stockholders or to members of Cloudbreak in connection with the Business Combinations.

Pursuant to Section 262 of the DGCL, UpHealth stockholders who comply with the applicable requirements of Section 262 of the DGCL and do not otherwise fail to perfect, waive withdraw or lose the right to appraisal under Delaware law have the right to seek appraisal of the fair value of their shares of UpHealth Capital Stock, as determined by the Court of Chancery, if the UpHealth Merger is completed. The “fair value” of such shares of UpHealth Capital Stock as determine by the Court of Chancery may be more or less than, or the same as, the value of the consideration that such stockholder would otherwise be entitled to receive under the UpHealth Business Combination Agreement. UpHealth stockholders who do not vote in favor of the UpHealth Merger nor consent in writing to it and who wish to preserve their appraisal rights must so advise UpHealth by submitting a demand for appraisal within the period prescribed by Section 262 of the DGCL after receiving a notice from UpHealth or the Company that appraisal rights are available to them, and must otherwise precisely follow the procedures prescribed by Section 262 of the DGCL. Failure to follow any of the statutory procedures set forth in Section 262 of the DGCL will result in the loss or waiver of appraisal rights under Delaware law. In view of the complexity of Section 262 of the DGCL, UpHealth stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors. Any shares of UpHealth Capital Stock that are outstanding immediately prior to the Effective Time and that are held by stockholders of the Company who shall have neither voted in favor of the UpHealth Merger nor consented thereto in writing and who shall have demanded properly in writing appraisal for such UpHealth Capital Stock in accordance with Section 262 of the DGCL and otherwise complied with all of the provisions of the DGCL relevant to the exercise and perfection of dissenters’ rights are referred to as “Dissenting Shares.”

Please see the sections entitled “Special Meeting of Company Stockholders—Appraisal Rights”, “Proposal No. 1—Approval of the UpHealth Business Combination—Appraisal Rights”, “Proposal No. 2—Approval of the Cloudbreak Business Combination—Appraisal Rights” and “Appraisal Rights.”

Proxy Solicitation

Proxies may be solicited by mail. The Company has engaged MacKenzie to assist in the solicitation of proxies.

If a stockholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the Special Meeting. A stockholder may also change its vote by submitting a later-dated proxy, as described in the section entitled “Special Meeting of Company Stockholders—Revoking Your Proxy.”



 

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Interests of Certain Persons in the Business Combination

In considering the recommendation of our Board to vote in favor of the Business Combinations, stockholders should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combinations that are different from, or in addition to, those of other stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combinations, and in recommending to stockholders that they approve the Business Combinations. Stockholders should take these interests into account in deciding whether to approve the Business Combinations.

These interests include, among other things:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the Business Combinations;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combinations;

 

   

the fact that Dr. Avi Katz, Dr. Raluca Dinu and Neil Miotto will remain as board members of the post-combination company and each shall be entitled to receive compensation for serving on the board of directors of the post-combination company; and

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us if an initial business combination is not consummated by the applicable deadline. Prior to GigCapital2’s initial public offering, our Founders purchased an aggregate of 4,307,500 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.0058 per share (as compared to the $10.00 per share price being used to determine the number of shares of Common Stock being issued to the UpHealth and Cloudbreak equity holders in the Business Combinations or at which the PIPE Investors have agreed to purchase Common Stock), with the Sponsor purchasing 4,018,987 Founder Shares, Northland Investment purchasing 173,108 Founder Shares and the EarlyBird Group purchasing 115,405 Founder Shares. Additionally, the Founders purchased from GigCapital2 an aggregate of 567,500 Private Placement Units at a price of $10.00 per unit simultaneously with the consummation of GigCapital2’s initial public offering for an aggregate purchase price of $5,675,000, with the Sponsor purchasing 481,250 Private Placement Units, Northland Investment purchasing 56,350 Private Placement Units and the EarlyBird Group purchasing 29,900 Private Placement Units. In addition, Northland concurrently purchased 120,000 Private Underwriter Shares at a price of $10.00 per share. Certain of GigCapital2’s directors and executive officers, including Dr. Avi Katz, Dr. Raluca Dinu, Neil Miotto, John Mikulsky and Gil Frostig, also have a direct or indirect economic interest in the 481,250 Private Placement Units and in the 4,018,987 Founder Shares owned by the Sponsor. The 4,018,987 Founder Shares owned by the Sponsor would have had an aggregate market value of $         based upon the



 

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closing price of $         per public share on the NYSE on         , 2021, the most recent practicable date prior to the date of this proxy statement/prospectus. The 481,250 private placement units held by the Sponsor would have had an aggregate market value of $         based upon the closing price of $         per public unit on the NYSE on                     , 2021, the most recent practicable date prior to the date of this proxy statement/prospectus.

Reasons for the Approval of the Business Combinations

In approving the Business Combination Agreements and the Business Combinations and recommending that the Company’s stockholders approve the Business Combination Agreements and the Business Combinations, the Board considered the following positive factors, although not weighted or in any order of significance:

 

   

Consideration of the following general criteria and guidelines that we stated in the prospectus for our IPO that we believe would believe would be important in evaluating prospective target businesses, although we indicated that we may enter into a business combination with a target business that does not meet these criteria and guidelines:

 

   

Target TMT companies that are at the forefront of high technology and are enabling the future evolution of intelligent systems and solutions.

 

   

Focus on TMT companies positioned to benefit from a public listing and greater access to capital.

 

   

Emphasis on companies that can benefit from a public listing and greater access to capital.

 

   

Businesses with a catalyst for significantly improved financial performance.

 

   

Market-leading participant with experienced and motivated management teams that may benefit from enhanced leadership and governance.

 

   

Middle-market businesses.

 

   

Prioritize entities with a well-performing management team and exceptional leadership talent that wishes to continue to drive the company to growth, and is coachable and eager to extend their knowledge and savvy through an interactive, and hands-on and supportive board of directors.

 

   

The following additional factors:

 

   

Large Addressable Market.

 

   

Growth Prospects.

 

   

Experienced and Proven Management Team.

 

   

Lock-Up.

 

   

Due Diligence.

 

   

Other Alternatives.

 

   

Negotiated Transaction.

The criteria and situations described above were not intended to be exhaustive and we indicated our evaluation of any particular initial business combination might reflect other considerations, factors and criteria deemed relevant by our management in effecting the relevant transaction, consistent with our business objective and strategy.

For more information about our decision-making process, please see the section entitled “Proposal No. 1Approval of the UpHealth Business CombinationThe Companys Board of Directors Reasons for the



 

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Approval of the Business Combination” and “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Companys Board of Directors Reasons for the Approval of the Cloudbreak Business Combination.”

Conditions to Closing of the Business Combinations

Conditions to Each Party’s Obligations

The respective obligations of the Company, UpHealth and Cloudbreak to complete the UpHealth Business Combination and Cloudbreak Business Combination, as applicable, are subject to the satisfaction of the following conditions:

 

   

the applicable waiting period(s) under the HSR Act and, if required, any other applicable antitrust law in respect of the transactions contemplated by the Business Combination Agreements, as applicable, must have expired or been terminated;

 

   

there must not be in effect any governmental order, statute, rule or regulation enjoining or prohibiting the consummation of the transactions contemplated by the Business Combination Agreements, as applicable;

 

   

the approval by the Company stockholders of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal and the Election of Directors Proposal shall have been obtained;

 

   

the Company Common Stock to be issued in connection with the Business Combinations (including the Company Common Stock to be issued pursuant to payment of the earnout consideration) must have been approved for listing on the NYSE, subject only to official notice of issuance thereof;

 

   

the approval of the Business Combination Agreements and the transactions contemplated by the Business Combination Agreements by the requisite vote of the UpHealth stockholders and Cloudbreak members, as applicable, as more fully described in “Proposal No. 1—Approval of the UpHealth Business CombinationThe UpHealth Business Combination AgreementConditions to Closing of the UpHealth Business Combination Agreement” on page 168 and “Proposal No. 2—Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination AgreementConditions to Closing of the Cloudbreak Business Combination Agreement” on page 213;

 

   

certain specified consents, approvals and authorizations shall have been obtained from and made with all Governmental Authorities; and

 

   

the Company shall have at least $5,000,001 of net tangible assets following the exercise of redemption rights in accordance with the Company’s organizational documents.

Conditions to the Company’s and UpHealth Merger Sub’s Obligations pursuant to the UpHealth Business Combination Agreement

The obligation of the Company and UpHealth Merger Sub to complete the UpHealth Business Combination is also subject to the satisfaction, or waiver by the Company, of the following conditions:

 

   

the accuracy of the representations and warranties of UpHealth as of the date of the UpHealth Business Combination Agreement and as of the Closing, subject to certain materiality and material adverse effect thresholds, as more fully described in “Proposal No. 1Approval of the UpHealth Business CombinationThe UpHealth Business Combination AgreementConditions to Closing of the UpHealth Business Combination Agreement” on page 168;



 

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each of the covenants of UpHealth to be performed or complied with as of or prior to the Closing must have been performed or complied with in all material respects;

 

   

no material adverse effect must have occurred since the date of the UpHealth Business Combination Agreement that is continuing;

 

   

UpHealth must have delivered a certificate signed by an officer of UpHealth certifying that the three preceding conditions have been satisfied;

 

   

the transactions contemplated by the PIPE Subscription Agreements must be consummated concurrently with the Closing;

 

   

the transactions contemplated by the Convertible Note Subscription Agreements must be consummated concurrently with the Closing;

 

   

other than certain specified individuals, all members of the board of directors of UpHealth and the Company Subsidiaries must have resigned;

 

   

the Stockholder Support Agreement shall be in full force and effect, and no Key Company Stockholder (as defined in the UpHealth Business Combination Agreement) shall have attempted to repudiate or disclaim any of its or his obligations thereunder;

 

   

all parties to the Registration Rights and Lock-Up Agreement (as defined in the UpHealth Business Combination Agreement) other than the Company shall have delivered, or cause to be delivered, to the Company copies of the Registration Rights and Lock-Up Agreement duly executed by all such parties;

 

   

UpHealth shall deliver to the Company a properly executed certification that shares of Common Stock of UpHealth are not “U.S. real property interests” in accordance with the Treasury Regulations under Sections 897 and 1445 of the Code, together with a notice to the IRS (which shall be filed by the Company with the IRS following the Closing) in accordance with the provisions of Section 1.897-2(h)(2) of the Treasury Regulations;

 

   

UpHealth shall have delivered to the Company the PCAOB Financial Statements and the Non-PCAOB Financial Statements (each as defined in the UpHealth Business Combination Agreement);

 

   

all closing conditions in the Cloudbreak Business Combination Agreement shall have been satisfied and the transactions contemplated thereunder have occurred prior to, or will occur substantially contemporaneously with, the Closing (as defined in the UpHealth Business Combination Agreement);

 

   

UpHealth shall have consummated its acquisitions of at least an additional 50% of the outstanding equity interests of Glocal and either of (a) TTC Healthcare, or (b) Innovations Group; and

 

   

the Company shall have received a written opinion from DLA Piper LLP (US) (or another law firm or accounting firm reasonably satisfactory to the Company), issued to the Company and in form and substance reasonably acceptable to the Company, to the effect that on the basis of facts, representations and assumptions set forth or referred to in such opinion, the UpHealth Business Combination, taken together with the Cloudbreak Business Combination and other related transactions, should qualify as an exchange described in Section 351 of the Code.

Conditions to UpHealth’s Obligations

The obligation of UpHealth to complete the merger is also subject to the satisfaction, or waiver by UpHealth, of the following conditions:

 

   

the accuracy of the representations and warranties of the Company as of the date of the UpHealth Business Combination Agreement and as of the Closing, subject to certain materiality and material



 

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adverse effect thresholds, as more fully described in “Proposal No. 1Approval of the UpHealth Business CombinationThe UpHealth Business Combination AgreementConditions to Closing of the UpHealth Business Combination Agreement” on page 168;

 

   

each of the covenants of the Company to be performed or complied with as of or prior to the Closing must have been performed or complied with in all material respects;

 

   

the Company must have delivered a certificate signed by an officer of the Company, dated as of the Closing, certifying that, to the knowledge and belief of such officer, the two preceding conditions have been fulfilled;

 

   

a supplemental listing shall have been filed with the New York Stock Exchange as of the Closing Date to list the shares constituting the Aggregate Merger Consideration (as defined in the UpHealth Business Combination Agreement);

 

   

the Company shall have an aggregate amount of cash and cash equivalents available from any sources of not less than $150,000,000; and

 

   

UpHealth shall have received a written opinion from Husch Blackwell LLP (or another law firm or accounting firm reasonably satisfactory to the Company), issued to UpHealth and in form and substance reasonably acceptable to UpHealth, to the effect that on the basis of facts, representations and assumptions set forth or referred to in such opinion, the UpHealth Business Combination, taken together with the Cloudbreak Business Combination and other related transactions, should qualify as an exchange described in Section 351 of the Code.

Conditions to the Company’s Obligations pursuant to the Cloudbreak Business Combination Agreement

The obligation of the Company to complete the Cloudbreak Business Combination is also subject to the satisfaction, or waiver by the Company, of the following conditions:

 

   

the accuracy of the representations and warranties of Cloudbreak as of the date of the Cloudbreak Business Combination Agreement and as of the Closing, subject to certain materiality and material adverse effect thresholds, as more fully described in “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination AgreementConditions to Closing of the Cloudbreak Business Combination Agreement” on page 213;

 

   

each of the covenants of Cloudbreak to be performed or complied with as of or prior to the Closing must have been performed or complied with in all material respects;

 

   

no material adverse effect must have occurred since the date of the Cloudbreak Business Combination Agreement that is continuing;

 

   

Cloudbreak must have delivered a certificate signed by an officer of Cloudbreak certifying that the three preceding conditions have been satisfied;

 

   

certain specified individuals must have executed written resignations effective as of the date of the Closing;

 

   

Cloudbreak must have provided evidence reasonably satisfactory to the Company that a valid exemption from the registration requirement under the Securities Act is available for the delivery of the shares of Company Common Stock to the Cloudbreak equity holders pursuant to the Cloudbreak Business Combination Agreement;

 

   

Cloudbreak must have provided evidence reasonably satisfactory to the Company that each holder of Cloudbreak capital stock that is a party to the IRA (as defined in the UpHealth Business Combination Agreement) is bound by a customary “lockup” restricting the transfer, sale and conveyance of the



 

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shares of Company Common Stock to be issued in connection with the Cloudbreak Business Combination Agreement for a period of six months following the Closing, all in a form reasonably acceptable to the Company; and

 

   

all closing conditions in the UpHealth Business Combination and the UpHealth Subsidiary Acquisition Agreements shall have been satisfied and the UpHealth Business Combination and consummation of the UpHealth Subsidiary Acquisition Agreements shall have occurred no earlier than three business days prior to, or will occur contemporaneously with, the closing of the Cloudbreak Business Combination.

Conditions to Cloudbreak’s Obligations

The obligation of Cloudbreak to complete the merger is also subject to the satisfaction, or waiver by Cloudbreak, of the following conditions:

 

   

the accuracy of the representations and warranties of the Company as of the date of the Cloudbreak Business Combination Agreement and as of the Closing, subject to certain materiality and material adverse effect thresholds, as more fully described in “Proposal No. 2Approval of the Cloudbreak Business CombinationThe Cloudbreak Business Combination AgreementConditions to Closing of the Cloudbreak Business Combination Agreement” on page 213;

 

   

each of the covenants of the Company to be performed or complied with as of or prior to the Closing must have been performed or complied with in all material respects;

 

   

no material adverse effect for both UpHealth and GigCapital2 must have occurred since the date of the Cloudbreak Business Combination Agreement;

 

   

a supplemental listing shall have been filed with the NYSE as of the Closing Date to list the shares constituting the Cloudbreak Business Combination Shares;

 

   

the Company must have delivered a certificate signed by an officer of the Company, dated as of the Closing, certifying that, to the knowledge and belief of such officer, the two preceding conditions have been fulfilled;

 

   

the existing certificate of incorporation of the Company must be amended and restated to reflect the form attached to this proxy statement/prospectus as Exhibit C;

 

   

Cloudbreak must have received a written opinion from a third party law firm or accounting firm that the Cloudbreak Business Combination and other related transactions should qualify as an exchange in Section 351(a) of the Code;

 

   

the Cloudbreak Escrow Agreement must be in full force and effect;

 

   

the Registration Rights and Lock-Up Agreement must have been executed and delivered by all parties thereto;

 

   

GigCapital2 must have delivered to Cloudbreak evidence that, immediately after the Closing (and for the avoidance of doubt, without deducting or taking into account any liabilities, expenses or other deductions, including the Company Redemption Amount (as defined in the Cloudbreak Business Combination Agreement), any transaction expenses of Cloudbreak or the Company or any other payable or deductions that is expected to occur at or after the Closing), the amount of cash or cash equivalents that we have from any source will be no less than an aggregate amount of $150,000,000; and

 

   

all closing conditions in the UpHealth Business Combination and the UpHealth Subsidiary Acquisition Agreements shall have been satisfied and the UpHealth Business Combination and consummation of



 

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the UpHealth Subsidiary Acquisition Agreements shall have occurred no earlier than three business days prior to, or will occur contemporaneously with, the closing of the Cloudbreak Business Combination.

Regulatory Matters

Under the HSR Act and the rules that have been promulgated thereunder by the U.S. Federal Trade Commission (“FTC”), certain transactions may not be consummated unless information has been furnished to the Antitrust Division of the Department of Justice (“Antitrust Division”) and the FTC and certain waiting period requirements have been satisfied. The Business Combinations are subject to these requirements and may not be completed until the expiration of a 30-day waiting period following the filing of the required Notification and Report Forms with the Antitrust Division and the FTC or until early termination is granted. If the FTC or the Antitrust Division makes a request for additional information or documentary material related to the Business Combinations (a “Second Request”), the waiting period with respect to the Business Combinations will be extended for an additional period of 30 calendar days, which will begin on the date on which the Company, UpHealth and Cloudbreak each certify compliance with the Second Request. Complying with a Second Request can take a significant period of time. On                 , 2021, the Company, UpHealth and Cloudbreak filed the required forms under the HSR Act with the Antitrust Division and the FTC. The 30-day waiting period with respect to the Business Combinations, which cannot expire on a Saturday, Sunday or a U.S. federal holiday, is expected to expire at 11:59 p.m. Eastern time on                 , 2021 unless the FTC and the Antitrust Division earlier terminate the waiting period or issue a Second Request.

At any time before or after consummation of the Business Combinations, notwithstanding any termination of the waiting period under the HSR Act, the applicable competition authorities could take such action under applicable antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combinations. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Business Combinations on antitrust grounds, and, if such a challenge is made, we cannot assure you as to its result. None of the Company, UpHealth or Cloudbreak is aware of any material regulatory approvals or actions that are required for completion of the Business Combinations other than the expiration or early termination of the waiting period under the HSR Act. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.

Quorum and Required Vote for Proposals for the Special Meeting

A quorum of Company stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the Company’s Common Stock outstanding and entitled to vote at the Special Meeting is represented in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum.

The approval of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Incentive Plan Proposal, the Election of Directors Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. The approval of the Charter Amendment Proposals require the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting.

A failure to vote or an abstention will have no effect on the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal and the Adjournment Proposal. However, an abstention or failure to



 

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vote will have the same effect as a vote “AGAINST” the Charter Amendment Proposals. In addition, for purposes of the NYSE Stock Issuance Proposal, the Incentive Plan Proposal and the Election of Directors Proposal, the NYSE considers an abstention vote as a “vote cast”, and therefore, an abstention will have the same effect as a vote AGAINST such proposals, while a failure to vote will have no effect on these two proposals.

The proposals in this proxy statement/prospectus (other than the Adjournment Proposal) are conditioned on the approval of the UpHealth Business Combination Proposal and the NYSE Stock Issuance Proposal.

It is important for you to note that in the event that the UpHealth Business Combination Proposal, the NYSE Stock Issuance Proposal or the Charter Amendment Proposals do not receive the requisite vote for approval, we will not consummate the Business Combinations. If we do not consummate the Business Combinations and fail to complete an initial business combination by the applicable deadline, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to our public stockholders.

Recommendation to Company Stockholders

Our Board believes that each of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal, the NYSE Stock Issuance Proposal, the Charter Amendment Proposals, the Incentive Plan Proposal, the Election of Directors Proposal and the Adjournment Proposal to be presented at the Special Meeting is in the best interests of the Company and our stockholders and recommends that its stockholders vote “FOR” each of the proposals.

When you consider the recommendation of our Board in favor of approval of the UpHealth Business Combination Proposal and the Cloudbreak Business Combination Proposal, you should keep in mind that our Sponsor and certain members of our Board and officers have interests in the Business Combinations that are different from or in addition to (or which may conflict with) your interests as a stockholder. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the Special Meeting, including the UpHealth Business Combination Proposal and the Cloudbreak Business Combination Proposal. Please see “Special Meeting of Company StockholdersRecommendation to Company Stockholders.”

Risk Factors

In evaluating the Business Combinations and the proposals to be considered and voted on at the Special Meeting, you should carefully review and consider the risk factors set forth under the section entitled “Risk Factors” beginning on page 57 of this proxy statement/prospectus. The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of the Company, UpHealth and Cloudbreak to complete the Business Combinations, as applicable, and (ii) the business, cash flows, financial condition and results of operations of UpHealth and Cloudbreak, as applicable, prior to the consummation of the Business Combinations, as applicable, and the post-combination company following consummation of the Business Combinations.



 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

The following table contains summary historical financial data of the Company as of and for the nine month period ended September 30, 2020 and as of September 30, 2019 and for the period from March 6, 2019 (the date of inception) through September 30, 2019. Results from interim periods are not necessarily indicative of results that may be expected for the entire year. The information below is only a summary and should be read in conjunction with the sections entitled “The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information About the Company Prior to the Business Combination” and in our financial statements, and the notes and schedules related thereto, which are included elsewhere in this proxy statement/prospectus.

 

     As of
September 30,
2020
    As of September 30,
2019
    As of December 31,
2019
 
($ in thousand)                   

Balance Sheet Data:

      

Working capital

   $ 545     $ 1,665     $ 1,400  

Cash and cash equivalents

   $ 387     $ 2,036     $ 1,577  

Cash and marketable securities held in Trust Account

   $ 174,284     $ 173,580     $ 173,995  

Total assets

   $ 174,860     $ 175,887     $ 175,768  

Total liabilities

   $ 31     $ 588     $ 340  

Common stock subject to possible redemption

   $ 169,829     $ 170,298     $ 170,428  

Stockholders’ equity

   $ 5,000     $ 5,000     $ 5,000  
     For the Nine
Months
Ended As of
September 30,
2020
    Period from March 6,
2019 (Date of
Inception) through
September 30, 2019
    Period from March 6,
2019 (Date of
Inception) through
December 31, 2019
 
($ in thousand, except share and per share amounts)                   

Statements of Operations Data:

      

Revenue

   $ —       $ —       $ —    

Operating Expenses

   $ 1,347     $ 577     $ 953  

Interest income

   $ 1,017     $ 1,152     $ 1,873  

Net income (loss)

   $ (599   $ 231     $ 360  

Net loss attributable to common stockholders

   $ (1,170   $ (388   $ (646

Basic and diluted net loss per share

   $ (0.22   $ (0.08   $ (0.13

Weighted-average shares outstanding excluding shares subject to possible redemption—basic and diluted

     5,218,968       4,675,325       4,836,966  

 

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF UPHEALTH

The following table contains summary historical financial data for UpHealth as of and for the nine month period ended September 30, 2020. Results from interim periods are not necessarily indicative of results that may be expected for the entire year. The information below is only a summary and should be read in conjunction with the sections entitled “UpHealth’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our financial statements, and the notes and schedules related thereto, which are included elsewhere in this proxy statement/prospectus.

 

     As of
September 30, 2020
 
($ in thousand)       

Balance Sheet Data:

  

Working capital

   $ (1,483

Cash and cash equivalents

   $ —  

Total assets

   $ —  

Total liabilities

   $ 1,483  

Common stock

   $ —  

Stockholders’ equity

   $ (1,483

 

     Period
from January 1,
2020 through
September 30, 2020
 
($ in thousand, except shares and per share amounts)       

Statements of Operations Data:

  

Revenue

   $ —  

Operating expenses

   $ (1,483

Net loss

   $ (1,483

Basic and diluted net loss per share

   $ (0.15

Weighted average shares outstanding—basic and diluted

     10,000,000  

 

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF CLOUDBREAK

The following tables show selected historical financial information of Cloudbreak Health, LLC for the periods and as of the dates indicated. This information was derived from the unaudited condensed interim financial statements for the nine months ended September 30, 2020 and September 30, 2019, and the audited financial statements of Cloudbreak Health, LLC for the years ended December 31, 2019 and December 31, 2018. The information below is only a summary and should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Cloudbreak” as well as Cloudbreak’ historical financial statements and the notes and schedules related thereto, included elsewhere in this proxy statement/prospectus. Results from interim periods are not necessarily indicative of results that may be expected for the entire year.

 

     Nine Months Ended
September 30,
    Year Ended December 31,  
     2020     2019     2019     2018  
     (Unaudited)     (Unaudited)              
($ in thousand, except share and per share amounts)                         

Statements of Operations Data:

        

Revenue

   $ 20,264     $ 24,747     $ 30,130     $ 30,595  

Cost of revenue

     10,576       14,443       16,869       16,996  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross loss

     9,688       10,304       13,261       13,599  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Research and development

     —         —         —         —    

Selling, general, and administrative

     13,812       14,469       18,657       18,613  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     13,812       14,469       18,657       18,613  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (4,123     (4,165     (5,396     (5,013

Other expenses

        

Inducement expenses

     —         —         —         —    

Interest expenses

     5,279       3,544       4,778       2,059  

Loss (gain) from change in fair value of warrants liabilities

     —         (80     (80     248  

Other expense, net

     (309     (262     (340     (138
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expenses

     4,970       3,203       4,358       2,169  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (9,093   $ (7,368   $ (9,755   $ (7,182
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share

   $ (1.81   $ (1.46   $ (1.94   $ (1.43
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding — basic and diluted

     5,034,700       5,034,700       5,034,700       5,034,700  

 

     As of
September 30, 2020
    As of
December 31, 2019
    As of
December 31, 2018
 
     (Unaudited)              
($ in thousand)                   

Balance Sheet Data:

      

Working capital

   $ (9,234   $ (1,955   $ (563

Cash and cash equivalents

   $ 1,917     $ 290     $ 863  

Total assets

   $ 23,622     $ 21,480     $ 21,528  

Total liabilities

   $ 54,469     $ 43,063     $ 32,247  

Redeemable convertible preferred stock

   $ 15,000     $ 15,000     $ 15,000  

Shareholders’ deficit

   $ (45,847   $ (36,583   $ (25,720

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(in thousands except share and per share amounts)

On November 23, 2020, GigCapital2, Inc. announced the pending merger of a series of integrated merger transactions.

On November 23, 2020, GigCapital2 announced that it executed the UpHealth Business Combination Agreement.

Also, on November 23, 2020, GigCapital2 also announced that it executed the Cloudbreak Business Combination Agreement.

UpHealth has previously or contemporaneously entered into separate merger agreements with respect to the acquisitions by UpHealth of Behavioral Health Services, Innovations Group, Thrasys, TTC Healthcare, and a share purchase agreement providing for the purchase of 99% or more of the equity interests of Glocal. All of these entities have been acquired or are probable of being acquired under US GAAP and are therefore included in the pro forma financial statements contained herein.

The UpHealth Business Combination Agreement

Pursuant to the terms of the UpHealth Business Combination Agreement, GigCapital2 will acquire UpHealth through the statutory merger of UpHealth Merger Sub with and into UpHealth, with UpHealth surviving the merger as a wholly owned subsidiary of GigCapital2. At the effective time of the UpHealth Business Combination, each share of UpHealth Common Stock will be canceled and converted into the right to receive a number of shares of GigCapital2 Common Stock equal to the Exchange Ratio. The Exchange Ratio will be equal to the Aggregate Merger Consideration divided by the sum of the aggregate number of shares of UpHealth Common Stock issued and outstanding immediately prior to the effective time of the UpHealth Business Combination. The Aggregate Merger Consideration shall not exceed 99,000,000 shares of GigCapital2 Common Stock, subject to certain adjustments, less the Thrasys Incentive Amount. UpHealth and Innovations Group previously entered into a merger agreement for UpHealth to acquire Innovations Group. UpHealth also has previously entered into a share purchase agreement providing for the purchase of 99% or more of the equity interests of Glocal. The Aggregate Merger Consideration may be reduced by certain shares and debt assumption thresholds if the Innovations Group and Glocal acquisitions are not complete.

The Cloudbreak Business Combination

Pursuant to the terms of the Cloudbreak Business Combination Agreement (and any terms used in this paragraph that are not otherwise defined are as defined in the Cloudbreak Business Combination Agreement), GigCapital2 will acquire Cloudbreak through the statutory merger of Cloudbreak Merger Sub with and into Cloudbreak, with Cloudbreak surviving the merger as a wholly owned subsidiary of GigCapital2. At the effective time of the Cloudbreak Business Combination: (i) each Cloudbreak Unit (and the membership interests represented thereby) issued and outstanding immediately prior to the Closing shall be converted into the right to receive a number of shares of GigCapital2 Common Stock equal to the Common Unit Exchange Ratio (together with any Business Combination Share Adjustment to which each Common Unit is entitled, the “Common Unit Merger Consideration”); (ii) each Series A Preferred Unit (and the membership interests represented thereby) issued and outstanding immediately prior to the Closing shall be converted into the right to receive a number of shares of GigCapital2 Common Stock equal to the Preferred Unit Exchange Ratio (in addition to any Business Combination Share Adjustment to which each Series A Preferred Unit is entitled); and (iii) each option that is outstanding and unexercised immediately prior to the Closing, whether vested or unvested, shall be assumed by GigCapital2 and converted into an option to purchase a number of shares of GigCapital2 Common Stock in an amount set forth on the Allocation Schedule, which amount shall be equal to the product of (a) the number of Cloudbreak Units subject to such option, multiplied by (b) the Common Unit Exchange Ratio (each such converted option, an “Exchanged Option”). Each holder of Exchanged Options shall also be entitled to any Business Combination Share Adjustment made pursuant to the Cloudbreak Business Combination Agreement.

 

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Additionally, immediately prior to the Closing, each common warrant shall convert into Common Units in accordance with their terms. The aggregate number of shares of GigCapital2 Common Stock issuable at the closing of the Cloudbreak Business Combination, and upon the exercise of all Exchanged Options on a net exercise basis, shall equal 11,000,000 shares of GigCapital2 Common Stock.

Pro Forma Condensed Combined Financial Statements

The unaudited pro forma condensed combined financial statements have been prepared using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), with the Company treated as the legal acquirer. Under ASC 805, one of the UpHealth merger entities, Thrasys, was determined to be the ultimate accounting acquirer for the UpHealth mergers. The following tables set forth an unaudited pro forma condensed combined balance sheet as of September 30, 2020, and unaudited proforma condensed combined statements of operations for the nine months ended September 30, 2020 and for the twelve months ended December 31, 2019 (as adjusted for conforming presentation periods for Glocal, a March 31 year-end). The unaudited pro forma condensed combined balance sheet as of September 30, 2020 gives effect to the Business Combination as if it had occurred on that date. The pro forma balance sheet data is derived from the unaudited historical financial statements of GigCapital2 and the unaudited historical financial statements of the merger entities as of September 30, 2020. The unaudited pro forma condensed combined statements of operations for the twelve months ended December 31, 2019 and for the nine months ended September 30, 2020 have been prepared to illustrate the effects of the Business Combination, as if it had occurred on January 1, 2019 and January 1, 2020, respectively. The pro forma condensed combined statement of comprehensive income (loss) operations data is derived from the audited financial statements of GigCapital2 for the year ended December 31, 2019, the unaudited financial statements of GigCapital2 for the nine months ended September 30, 2020, the audited financial statements of each of the UpHealth and Cloudbreak merger entities for the years ended December 31, 2019, and the unaudited financial statements of the UpHealth and Cloudbreak merger entities for the nine months ended September 30, 2020.

The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give effect to events that are (i) directly attributable to the Business Combination, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined company. The unaudited pro forma condensed combined statements of operations reflect non-recurring transaction charges directly related to the Business Combination that the combined company has incurred in furtherance of consummation of the Business Combination, as well as transaction costs incurred, but not yet recorded, subsequent to September 30, 2020. Further, the tax rate used for these unaudited pro forma condensed combined financial statements is an estimated effective tax rate, which will likely vary from the actual effective rate in periods subsequent to the completion of the Business Combination.

The unaudited pro forma condensed combined financial statements have been prepared for informational purposes only and are not necessarily indicative of what the combined company’s condensed consolidated financial position or results of operations actually would have been had the Business Combination been consummated prior to September 30, 2020, nor are they necessarily indicative of future results of operations. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the combined company. The fair value of each of the merger entities’ identifiable tangible and intangible assets acquired and liabilities assumed are based on preliminary estimates and are subject to adjustment as, and if, more information is obtained within twelve months of the consummation of the Business Combination. As of the date of filing of this Form S-4 to which the following unaudited pro forma condensed combined financial statements are attached, the Company has not completed the detailed valuation work necessary to finalize the required estimated fair values of the merger entities’ assets acquired and liabilities assumed and related allocation of purchase price. The purchase price allocation and related depreciation and amortization included in the unaudited pro forma condensed combined financial statements are preliminary and have been made solely for purposes of preparing these unaudited pro forma condensed combined financial statements. Management anticipates that the values assigned to the assets acquired and liabilities assumed will be finalized during the one-year measurement period following the date of completion of the Business Combination. Differences between these preliminary estimates and the final acquisition accounting may occur and these

 

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differences could have a material impact on the unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position. In addition, certain reclassifications have been made to the merger entities’ historical financial statements to conform to the presentation used in the Company’s historical financial statements. Such reclassifications had no effect on the merger entities’ previously reported financial position or results of operations.

The unaudited pro forma condensed combined financial statements do not include any adjustments for the anticipated benefits from cost savings or synergies of GigCapital2 and the merger entities’ operating as a combined company or for liabilities resulting from integration planning, as management is in the process of making these assessments. However, liabilities ultimately may be recorded for additional costs in subsequent periods related to all merger entity companies, including severance, relocation or retention costs related to employees of the merger entities, as well as other costs associated with integrating and/or restructuring the companies. The ultimate recognition of such costs and liabilities would affect amounts in the unaudited pro forma condensed combined financial statements, and such costs and liabilities could be material.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the:

 

   

accompanying notes to the unaudited pro forma condensed combined financial statements;

 

   

audited historical financial statements of the Company as of December 31, 2019 and for the period from March 6, 2019 (date of inception) through December 31, 2019;

 

   

unaudited historical financial statements of the Company as of and for the nine months ended September 30, 2020 and included in GigCapital2’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2020 • audited historical consolidated financial statements of the merger entities as of and for the year ended December 31, 2019 (twelve months ended March 31, 2020 for Glocal); and

 

   

unaudited historical consolidated financial statements of the merger entities as of and for the nine months ended September 30, 2020.

The unaudited pro forma condensed combined financial statements have been prepared using two different levels of assumed redemptions of Common Stock:

 

   

Assuming No Redemption: This scenario assumes that no additional shares of Common Stock are redeemed; and

 

   

Assuming Maximum Redemption: This scenario assumes that 11,452,523 shares of Common Stock are redeemed for an aggregate payment of approximately $116,000,000 (based on the estimated per share redemption price of approximately $10.10 per share based on the fair value of marketable securities held in the Trust Account as of January 31, 2021 of approximately $168,000,000) from the Trust Account. The Business Combination Agreements provide that each of UpHealth’s and Cloudbreak’s obligation to consummate the Business Combinations, as applicable, is conditioned on the funds in the Trust Account being no less than an aggregate amount of $150,000,000. Furthermore, under the terms of the Convertible Note Subscription Agreements, a condition to the closing of the transactions contemplated by those agreements is that at least $50,000,000 of the $150,000,000 is from the Trust Account. This scenario therefore gives effect to $50,000,000 being retained in the Trust Account. This results in public share redemptions of 11,452,523 shares for aggregate redemption payments of $116,000,000.

 

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    Historical     UpHealth, Inc. Equivalent
Pro Forma Per Share Data
    Combined Pro Forma  
Selected Unaudited Pro Forma
Condensed Combined Statement of
Operations – Nine Months ended
September 30, 2020
  GigCapital2,
Inc and
subsidiaries
    UpHealth
Holdings,
Inc. and
subsidiaries
    Scenario 1
(Assuming No
Additional
Redemptions
into Cash)
    Scenario 2
(Assuming
Maximum
Redemptions
into Cash)
    Scenario 1
(Assuming No
Additional
Redemptions
into Cash)
    Scenario 2
(Assuming
Maximum
Redemptions
into Cash)
 

Book value per Share (4)

  $ 8.79     $ 41.22     $ 54.69     $ 49.27     $ 4.97     $ 4.48  

Net loss available to common stockholders

  $ (9,952   $ 3,464     $ —       $ —       $ (69,917   $ (69,917

Net loss per share available to common stockholders – basic and diluted (4)

  $ (0.61   $ 0.38     $ (5.68   $ (6.20   $ (0.52   $ (0.56

Cash dividends per share (3)

  $ —       $ —       $ —       $ —         NA       NA  

Weighted average shares outstanding – basic and diluted

    16,218,968       9,000,000           135,512,863       124,060,340  

Selected Unaudited Pro Forma Condensed Combined Statement of Operations – 12-month period ended December 31, 2019 and Period from March 6, 2019 (Date of Inception) through December 31, 2019(2)

           

Book value per share (4)

    N/A(1)       N/A(1)       N/A(1)       N/A(1)       N/A(1)       N/A(1)  

Net loss available to common stockholders

  $ (11,026   $ 4,800         $ (48,031   $ (48,031

Net loss per share available to common stockholders – basic and diluted (4)

    (0.70     0.53     $ (3.91   $ (4.28     (0.36     (0.39

Cash dividends per share (3)

  $ —       $ —       $ —       $ —         NA       NA  

Weighted average shares outstanding – basic and diluted

    15,836,966       9,000,000           135,029,122       123,516,697  

 

(1)

Pro forma balance sheet as of December 31, 2020 is not required and as such, no such calculation included in this table.

(2)

For the GigCapital2, Inc. and Subsitiaries the 12 months period is the 12 months ended December 31, 2019 for Cloudbreak and the period from March 6, 2019 (Date of Inception) through December 31, 2019 for GigCapital2. For UpHealth Holdings, Inc. and subsitiaries the 12 months is the 12-month period ended December 31, 2019.

(3)

No dividends have been paid by the Company or UpHealth Holdings, Inc.

(4)

The equivalent pro forma basic per share data for UpHealth Holdings, Inc. are derived by multiplying the expected exchange ratio (11.00) in the Business Combination by the unaudited pro forma combined per share data. pro forma combined per share data.

 

Calculation of Exchange Ratio

   Scenario 1      Scenario 2  

UpHealth Holdings, Inc. Shares outstanding

     9,000,000        9,000,000  

GigCapital2, Inc. Shares to receive

     99,000,000        99,000,000  
  

 

 

    

 

 

 

Per Share Exchange Ratio

     11.00        11.00  
  

 

 

    

 

 

 

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains forward-looking statements. Forward-looking statements provide the Company’s current expectations or forecasts of future events. Forward-looking statements include statements about the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this proxy statement/prospectus include, but are not limited to, statements about the:

 

   

benefits from the Business Combinations;

 

   

ability to complete an initial business combination, including the Business Combinations;

 

   

future financial performance following the Business Combinations;

 

   

success in retaining or recruiting, or changes required in, our officers, key employees or directors following an initial business combination;

 

   

officers and directors allocating their time to other businesses and potentially having conflicts of interest with the Company’s business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;

 

   

public securities’ potential liquidity and trading;

 

   

use of proceeds not held in the Trust Account or available to the Company from interest income on the Trust Account balance; and

 

   

impact from the outcome of any known and unknown litigation.

Forward-looking statements in this proxy statement/prospectus include, but are not limited to, statements about UpHealth’s, Cloudbreak’s or the post-combination company’s:

 

   

future financial performance, including financial projections and business metrics and any underlying assumptions thereunder;

 

   

future business or product expansion, including estimated revenues and losses, projected costs, prospects and plans;

 

   

trends in the healthcare industry;

 

   

ability to scale in a cost-effective manner;

 

   

ability to obtain and maintain intellectual property protection;

 

   

future capital requirements and sources and uses of cash; and

 

   

impact of competition and developments and projections relating to competitors and industry.

These forward-looking statements are based on information available as of the date of this proxy statement/prospectus, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

In addition, statements that the Company, UpHealth or Cloudbreak “believes” and similar statements reflect such parties’ beliefs and opinions on the relevant subject. These statements are based upon information available

 

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to such party as of the date of this proxy statement/prospectus, and while such party believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that either the Company, UpHealth or Cloudbreak has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should not place undue reliance on these forward-looking statements in deciding how to grant your proxy or instruct how your vote should be cast or vote your shares on the proposals set forth in this proxy statement/prospectus. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Business Combination Agreements;

 

   

the outcome of any legal proceedings that may be instituted against the Company, UpHealth, Cloudbreak or others following announcement of the Business Combinations and the transactions contemplated in the Business Combination Agreements;

 

   

the inability to complete the transactions contemplated by the Business Combination Agreements due to the failure to obtain approval of the equity holders of the Company, UpHealth or Cloudbreak or other conditions to closing in the Business Combination Agreements;

 

   

the ability to obtain or maintain the listing of New UpHealth Common Stock on the NYSE following the Business Combinations;

 

   

the risk that the proposed transaction disrupts current plans and operations as a result of the announcement and consummation of the Business Combinations;

 

   

the ability to recognize the anticipated benefits of the Business Combinations, which may be affected by, among other things, the ability of the Company to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees;

 

   

costs related to the proposed Business Combinations;

 

   

changes in applicable laws or regulations;

 

   

the effect of the COVID-19 pandemic on New UpHealth’s business;

 

   

the ability of New UpHealth to execute its business model, including market acceptance of its planned products and services and achieving sufficient production volumes at acceptable quality levels and prices;

 

   

New UpHealth’s ability to raise capital;

 

   

the possibility that the Company, UpHealth or Cloudbreak may be adversely impacted by other economic, business, and/or competitive factors;

 

   

future exchange and interest rates; and

 

   

other risks and uncertainties indicated in this proxy statement/prospectus, including those under “Risk Factors” in this proxy statement/prospectus, and other filings that have been made or will be made with the SEC by the Company.

 

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RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this proxy statement/prospectus, including the financial statements and notes to the financial statements included herein, in evaluating the Business Combinations and the proposals to be voted on at the Special Meeting. The following risk factors that apply to the business and operations of New UpHealth will also apply to the business and operations of the post-combination company following the completion of the Business Combinations. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combinations, and may harm the business, cash flows, financial condition and results of operations of the post-combination company. These risk factors are not exhaustive and investors are encouraged to perform their own investigation with respect to the business, financial condition and prospects of New UpHealth and the post-combination company. You should carefully consider the following risk factors in addition to the other information included in this proxy statement/prospectus, including matters addressed in the section entitled Cautionary Note Regarding Forward-Looking Statements. New UpHealth may face additional risks and uncertainties that are not presently known to it, or that UpHealth or Cloudbreak, as applicable, currently deems immaterial, which may also impair New UpHealths business or financial condition. The following discussion should be read in conjunction with the consolidated financial statements and notes to the financial statements included herein. Additional risks, beyond those summarized below may apply to our activities or operations as currently conducted or as we may conduct them in the future or in the markets in which we operate or may in the future operate. Consistent with the foregoing, we are exposed to a variety of risks, including risks associated with:

 

   

Our limited operating history as a combined company makes it difficult to evaluate our current business and future prospects;

 

   

The impact of health epidemics, including the COVID-19 pandemic, on our business, financial condition, growth and the actions we may take in response thereto;

 

   

The high degree of uncertainty of the level of demand for and market utilization of our solutions;

 

   

Substantial regulation and the potential for unfavorable changes to, or failure by us to comply with, these regulations, which could substantially harm our business and operating results;

 

   

The risk that the proposed acquisition of Innovations Group and the remaining equity interests in Glocal may not be completed;

 

   

Our dependency upon third-party service providers for certain technologies;

 

   

Increases in costs, disruption of supply or shortage of materials, which could harm our business;

 

   

Developments and projections relating to our competitors and industry;

 

   

The unavailability, reduction or elimination of government and economic incentives, which could have a material adverse effect on our business, prospects, financial condition and operating results;

 

   

Our management team’s limited experience managing a public company;

 

   

The possibility of our need to defend ourselves against fines, penalties and injunctions if we are determined to be promoting products for unapproved uses;

 

   

Concentration of ownership among our existing executive officers, directors and their respective affiliates, which may prevent new investors from influencing significant corporate decisions;

 

   

The lack of assurance that the combined company’s Common Stock will be approved for listing on NYSE or that the combined company will be able to comply with the continued listing standards of NYSE;

 

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If the benefits of the Business Combinations do not meet the expectations of investors or securities analysts, the potential for the market price of the Company’s securities or, following the Closing, the post-combination company’s securities, may decline;

 

   

The risk that the proposed Business Combinations disrupt current plans and operations of our business as a result of the announcement and consummation of the transactions described herein; and

 

   

Following the consummation of the Business Combinations, the post-combination company’s significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.

Risks Relating to New UpHealth

The risk factors referenced below relate to New UpHealth, assuming the completion of the acquisition of Innovations Group and purchase of the remaining equity interests of Glocal, and after the consummation the Business Combinations. See “Information about New UpHealth.” Unless otherwise indicated or the context otherwise requires, references in this section to “we,” “our,” “us” and other similar terms refer to New UpHealth.

Risks Relating to New UpHealth’s Business and Industry

Our limited operating history as a combined company and evolving business make it difficult to evaluate our current business and future prospects and increases the risk of your investment.

Our limited operating history and rapidly evolving business make it difficult to evaluate our current business, future prospects and plan for growth. UpHealth began offering products and services as a combined entity late in 2020. See “Information about New UpHealth.” New UpHealth will offer products and services as a combined entity following the consummation of the Business Combinations. We will continue to encounter significant risks and uncertainties frequently experienced by growing companies in rapidly changing and heavily regulated industries, such as attracting new customers, users and healthcare providers to our platform; retaining customers and encouraging them to utilize new offerings that we make available; competition from other companies; hiring, integrating, training and retaining skilled personnel; verifying the identity of customers, users and credentials of providers serving our customers; developing new solutions; determining prices for our solutions; unforeseen expenses; challenges in forecasting accuracy; and new or adverse regulatory developments affecting the use of digital health, pharmaceutical products, diagnostics, technology platforms or other aspects of the healthcare industry. Additional risks include our ability to effectively manage growth and process, and to store, protect, and use personal data in compliance with governmental regulations, contractual obligations and other legal obligations related to privacy and security. Further, because we depend, in part, on market acceptance of our newer and future services, it is difficult to evaluate trends that may affect our business and whether our expansion will be profitable. If we have difficulty launching new solutions, our reputation may be harmed and our business, financial condition and results of operations may be adversely affected. If our assumptions regarding these and other similar risks and uncertainties that relate to our business, which we use to plan our business, are incorrect or change as we gain more experience operating our platform or expand into the treatment of new conditions, or if we do not address these challenges successfully, our operating and financial results could differ materially from our expectations and our business could suffer.

It remains unclear how the ongoing coronavirus (COVID-19) pandemic may impact our business, financial condition, results of operations and growth.

In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious outbreak, which has continued to spread, and the related adverse public health developments, including orders to shelter-in-place, travel restrictions and mandated business closures, have adversely affected workforces, organizations, customers, economies and financial markets globally, leading to an economic downturn and

 

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increased market volatility. The duration and severity of this pandemic is unknown and the extent of the business disruption and financial impact depend on factors beyond our knowledge and control making it difficult for us to accurately predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations or financial condition at this time, but such effects may be material.

Continued shelter-in-place, quarantine, hospital requisitions, or related measures to combat the spread of COVID-19, as well as the perceived need by individuals to continue such practices to avoid infection, among other factors, could harm our results of operations and revenue, business and financial condition. These measures and practices have resulted in temporary closures of some of our offices, the offices and practices of our customers, and may also result in delays in entry into new markets and expansion in existing markets. In addition, customers who utilize our services or products in connection with in-office healthcare procedures, as well as our businesses that provide in-office healthcare procedures, may experience a loss in revenue associated with such measures and practices, potentially negatively impacting their ability or willingness to pay us. In addition, due to the shelter-in-place orders across the globe, several of our businesses have implemented work-from-home policies for many employees which may impact productivity and disrupt our business operations. Generally, we have seen our businesses rebound from an initial negative impact at the start of the pandemic. However, given the unpredictable nature of the COVID-19 pandemic, we may in the future experience additional negative impacts on our operations, revenues, expenses, collectability of accounts receivables and other money owed, capital expenditures, liquidity and overall financial condition by disrupting or delaying delivery of materials and products in the supply chain for our offices, causing staffing shortages, or increasing capital expenditures due to the need to buy incremental hardware.

Healthcare organizations around the world have faced and will continue to face, substantial challenges in treating patients with COVID-19, such as the diversion of hospital staff and resources from ordinary functions to the treatment of patients with COVID-19, supply, resource and capital shortages and overburdening of staff and resource capacity. In the United States, governmental authorities have also recommended, and in certain cases required, that elective, specialty and other procedures and appointments, including certain primary care services, be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and personnel capacity toward the treatment of patients with COVID-19. These measures may divert patients away from our businesses that provide products and services direct to consumers and from procedures in healthcare facilities that utilize our products and services, which could harm our results of operations and revenue.

Our continued access to sources of liquidity also depend on multiple factors, including global economic conditions, the condition of global financial markets, the availability of sufficient amounts of financing and our operating performance. There is no guarantee that debt or equity financing will be available in the future to fund our obligations, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding.

The COVID-19 pandemic has increased interest in and customer use of digital health solutions. We cannot guarantee that this increased interest or usage will continue after the pandemic has subsided.

Due to COVID-19, digital health has seen a steep increase in use across the healthcare industry, in part due to governmental waivers of statutory and regulatory restrictions that have historically limited how digital health may be used in delivering care in certain jurisdictions. We do not know if this relaxation of regulatory barriers resulting from COVID-19 will remain or for how long. There is renewed focus on digital health and the expanded use of digital health services and related technology among legislatures and regulators due to COVID-19, which could result in regulatory changes inconsistent with, or that place additional restrictions on, our current business model or operations in certain jurisdictions. If customer adoption of digital health generally, or our platform in particular, materially decreases as COVID-19 restrictions are lifted, or if COVID-19 results in regulatory changes that limit our current activities, our industry, business and results of operations will be adversely affected.

 

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The level of demand for and market utilization of our solutions are subject to a high degree of uncertainty.

With respect to our digital health services, the market for digital health services and related technology is in the early stages of development and characterized by rapid change and volatility. As digital health specialty consultation workflows and related business drivers continue to evolve, the level of demand for and market utilization of our digital health services and platform remain subject to a high degree of uncertainty. Our success will depend to a substantial extent on the willingness of our customers to use, and to increase the frequency and extent of their utilization of, our products and services and our ability to demonstrate the value of digital health to employers, health plans, government agencies and other purchasers of healthcare for beneficiaries in our key digital health markets. If healthcare provider and payer organizations and government agencies and health ministries do not recognize or acknowledge the benefits of our digital health services or software platform or if we are unable to reduce healthcare costs or generate positive health outcomes, then the market for our solutions might not further develop, or it might develop more slowly than we expect. Similarly, negative publicity regarding patient confidentiality and privacy in the context of technology-enabled healthcare or concerns about our solutions or the digital health market as a whole could limit market acceptance of our solutions. If our customers do not perceive the benefits of our solutions, then our market may not develop at all, or it may develop more slowly than we expect. Achieving and maintaining market acceptance of our solutions could be negatively affected by many factors, including:

 

   

the popularity, pricing and timing of digital health consultation services being launched and distributed by us and our competitors;

 

   

general economic conditions, particularly economic conditions adversely affecting discretionary and reimbursable healthcare spending;

 

   

federal and state policy initiatives impacting the need for and pricing of digital health services;

 

   

changes in customer needs and preferences;

 

   

the development of specialty care practice standards or industry norms applicable to digital health consultation services;

 

   

the availability of other forms of medical and digital health assistance;

 

   

lack of additional evidence or peer-reviewed publication of clinical evidence supporting the safety, ease-of-use, cost-savings or other perceived benefits of our solutions over competitive products or other currently available methodologies;

 

   

perceived risks associated with the use of our solutions or similar products or technologies generally; and

 

   

critical reviews and public tastes and preferences, all of which change rapidly and cannot be predicted.

In addition, our solutions may be perceived by our customers or potential customers to be more complicated or less effective than traditional approaches, and they may be unwilling to change their current healthcare practices. Healthcare providers are often slow to change their medical treatment practices for a variety of reasons, including perceived liability risks arising from the use of new products and services and the uncertainty of third-party reimbursement. Accordingly, healthcare providers may not recommend our solutions until there is sufficient evidence to convince them to alter their current approach. Any of these factors could adversely affect the demand for and market utilization of our solutions, which would have a material adverse effect on our business, financial condition and results of operations.

Our business could be adversely affected by legal challenges to our business model or by actions restricting our ability to provide the full range of our products and services in certain jurisdictions.

Our ability to conduct digital health services, medical services and pharmacy services in a particular jurisdiction is directly dependent upon the applicable laws governing remote healthcare, the practice of medicine,

 

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pharmacy licensure requirements and healthcare delivery in general in such location, which are subject to changing political, regulatory and other influences. With respect to digital health consult services, in the past, state medical boards have established rules or interpreted existing rules in a manner that has limited or restricted the ability to conduct business in accordance with a model utilized in other states or countries. Such actions could result in litigation and the suspension or modification of digital health consult operations in certain states or countries. The extent to which a jurisdiction considers particular actions or relationships to constitute practicing medicine is subject to change and to evolving interpretations by medical boards, state attorneys general and other regulatory or administrative bodies (both domestic and international), among others with broad discretion. Accordingly, we must monitor our compliance with laws in every jurisdiction in which we operate, on an ongoing basis, and we cannot provide assurance that our activities and arrangements, if challenged, will be found to be in compliance with such laws. Additionally, it is possible that the laws and rules governing the practice of medicine, including remote healthcare or pharmacy, in one or more jurisdictions may change in a manner that is detrimental to our business. If a successful legal challenge or an adverse change in the relevant laws were to occur, and we were unable to adapt our business model accordingly, our operations in the affected jurisdictions would be disrupted, which could have a material adverse effect on our business, financial condition and results of operations.

In order to support the growth of our business, we may need to seek capital through new equity or debt financings, and such sources of additional capital may not be available to us on acceptable terms or at all.

The prior operations of our subsidiary companies consumed substantial amounts of cash since their respective inceptions. We intend to continue to make significant investments to support our business growth, respond to business challenges or opportunities, develop new applications and services, enhance our existing solutions and services, enhance our operating infrastructure and potentially acquire complementary businesses and technologies. For the years ended December 31, 2019, and 2018, for all acquired or to be acquired subsidiaries, aggregate net cash provided by (used in) operating activities was $9.4 million and $10.4 million, respectively.

Our future capital requirements may be significantly different from our current estimates and will depend on many factors, including our growth rate, both organically and through acquisitions, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new or enhanced services and the continuing market acceptance of digital health. Accordingly, we may need to engage in additional equity or debt financings or collaborative arrangements to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Common Stock. Any debt financing secured by us in the future could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, during times of economic instability, including as a result of the COVID-19 pandemic, it has been difficult for many companies to obtain financing in the public markets or to obtain debt financing, and we may not be able to obtain additional financing on commercially reasonable terms, if at all. If we are unable to obtain adequate financing on terms satisfactory to us, it could have a material adverse effect on our business, financial condition and results of operations.

There is a high degree of uncertainty regarding the implementation and impact of the CARES Act and future stimulus legislation, if any. There can be no assurance as to the total amount and types of assistance we will receive or that we will be able to benefit from provisions intended to increase access resources and ease regulatory burdens for healthcare providers.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was signed into law on March 27, 2020, provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments. The legislation, as amended, provides for $175 billion in relief funds to hospitals and other healthcare providers on the front lines of

 

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the coronavirus response to support healthcare related expenses or lost revenue attributable to COVID-19 and to ensure uninsured Americans can get testing and treatment for COVID-19. As a result, our providers have received payments form the Provider Relief Fund (“PRF”) of $228,794 in 2020.

Payments from the PRF are intended to compensate healthcare providers for lost revenues and incremental healthcare related expenses attributable to coronavirus incurred in response to the COVID-19 pandemic. The Department of Health and Human Services (“HHS”) has stated that PRF payments are not loans and will not need to be repaid. However, as a condition to the receipt of funds, we and any other providers must agree to detailed sets of terms and conditions. HHS has indicated that the terms and conditions may be subject to ongoing changes and reporting. Additionally, HHS has issued a Post-Payment Notice of Reporting Requirements (“Reporting Requirements”) that outlines the process under which providers will report their use of payments from the PRF. To the extent HHS modifies the Reporting Requirements and terms and conditions, it may affect our ability to comply and may require the return of funds. In accordance with the terms and conditions, however, we believe that we have utilized these funds to prevent, prepare for, and respond to coronavirus, and the PRF funds have reimbursed us only for healthcare related expenses and lost revenues attributable to coronavirus.

Certain of our subsidiaries received economic stimulus under the CARES Act. If such funding is not forgiven and is required to be repaid pursuant to the terms of the CARES Act or related guidance, our business, results of operations, and financial condition may be materially and adversely affected.

Section 1102 of the CARES Act established the Paycheck Protection Program, or PPP, which provided additional funding for small businesses, as defined by the Small Business Administration (“SBA”), to keep workers employed during the COVID-19 pandemic. In April 2020, Thrasys, TTC Healthcare, BHS, and Innovations Group applied for and received PPP funding from various banks in the aggregate amount of $4,653,500. Proceeds can only be used for specified covered purposes including payroll, mortgage interest, rent and utilities in accordance with the CARES Act. Each of the PPP loans has a two-year term and bears interest at a rate of 1.0% per annum. To the extent proceeds are used for these covered purposes, some or all of the related principal balances may be forgiven. Each of the subsidiaries spent their respective proceeds on covered purposes. On October 2, 2020, the SBA issued a Procedural Notice with respect to PPP loans and changes of ownership. If required, each of the subsidiaries that borrowed PPP loans has or is in the process of notifying the PPP lenders of the contemplated change of ownership transaction and has provided the PPP lenders with a copy of the proposed agreements or other documents that would effectuate the proposed transaction. Each subsidiary that borrowed PPP loans has or is in the process of completing their forgiveness applications reflecting their respective use of all of their PPP loan proceeds and submitting the forgiveness applications, together with any supporting documentation, to the PPP lender; and taking other required actions.

We cannot provide assurance that the original principal and interest amounts under the respective PPP loans will be forgiven. If it is determined that any of the subsidiaries that borrowed PPP loans were ineligible to receive their respective PPP loan or determined that any of the subsidiaries that borrowed PPP loans did not comply with requirements after receiving their respective PPP loan, they may be required to repay their respective PPP loan in its entirety and/or be subject to additional penalties (potentially including civil and criminal fines and penalties) and adverse publicity, which could have a material adverse effect on our business, results of operations, and financial condition. Additionally, the SBA may audit any PPP loan, as appropriate. Should any of the subsidiaries that borrowed PPP loans be audited or reviewed by federal or state regulatory authorities, such audit or review could result in the diversion of management’s time and attention, generation of negative publicity, the incurrence of additional legal and reputational costs, and potential exposure to civil and criminal liability. Any of these events could have a material adverse effect on our business, results of operations, and financial condition.

The acquisition of Innovations Group is subject to customary closing conditions as well as other uncertainties and there can be no assurances as to whether and when this acquisition may be completed.

There can be no assurance that the proposed acquisition of Innovations Group will occur. Completion of the acquisition is subject to certain customary closing conditions, including third-party approvals. Satisfaction of the

 

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closing conditions may delay the completion of the acquisitions, and if certain closing conditions are not satisfied prior to the closing date, as applicable, the parties will not be obligated to complete the acquisition. If the UpHealth Business Combination is not completed by June 30, 2021, Innovations Group can terminate the agreement.

We have incurred significant legal, accounting and financial advisory fees that are payable by us whether or not the acquisition is completed, and our management has devoted considerable time and effort in connection with the pending acquisition. In addition, the trading price of our Common Stock could be adversely affected to the extent that the current price reflects an assumption that the acquisition will be completed. Additionally, there may be changes to our strategy in the event that the acquisition does not close, as our capacity to provide pharmacy services will be limited. Any of these events could cause us to incur significant charges. For these and other reasons, failure to complete the Innovations Group acquisition could materially adversely affect our business, operating results, or financial condition.

The acquisition of Glocal is subject to a multi-step process, of which only one step has been completed. There can be no guarantee that the remaining steps will be completed in a timely manner, if at all.

The acquisition of Glocal was structured to occur in four steps. The first step concluded on November 20, 2020 when UpHealth acquired approximately 43.46% of the outstanding equity of Glocal. The second step is expected to enable UpHealth to acquire additional shares of Glocal such that it will hold, in the aggregate, 90% or more of the outstanding equity of Glocal, in a manner as permitted under the laws of the Republic of India. The parties have agreed that UpHealth shall make an investment into Glocal of a minimum amount of $3,000,000, prior to undertaking the second step. The second step also requires the receipt of certain third-party consents. The second step is expected to be completed prior to the closing of the Business Combinations, or the Closing, but will require additional financing to be obtained by UpHealth. The third step will transfer additional Glocal shares to New UpHealth and the parties have agreed that the third step will occur post-Closing after New UpHealth has sufficient cash and cash equivalents in its accounts to pay the selling shareholders of Glocal. The fourth step is anticipated to occur post-Closing and New UpHealth, as the majority shareholder, will, in conjunction with the remaining Glocal shareholders, take steps to increase its ownership in Glocal through issuance of additional shares, acquisition of remaining shares and/or through any other manner acceptable to New UpHealth and permitted under India law.

While we believe the risk of failing to complete the second step is minimal, if we do not gain majority ownership, we would have limited control over the business operations of Glocal and may not be able to integrate Glocal into our operational and growth strategies. In addition, our investment in Glocal would be shown as a minority investment on our financial statements. Failure to complete the second step could have a material adverse impact on our business, results of operations or financial condition. In addition, failure to complete the second step will result in a decrease in the consideration paid to UpHealth stockholders in the UpHealth Business Combination and would require GigCapital2 to waive a closing condition related to the same.

We also believe there is minimal risk in our ability to complete the third and fourth steps. However, if these steps are not completed, there would be minority owners of Glocal who hold less than 10% of the outstanding equity. The minority owners would have access to books and records, and liquidation or dividend rights with respect to the shares they own but will have minimal impact on UpHealth’s ability to control and manage Glocal. If the UpHealth Business Combination is not completed in time to enable the additional acquisition steps envisioned by the Glocal SPA to be completed by March 15, 2021, and the parties are unable to agree to an extension, the Glocal Share Purchase Agreement will automatically terminate and the Glocal shareholders may elect to reverse the sale to UpHealth.

 

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We may enter into collaborations, joint ventures, strategic alliances or partnerships with third parties that may not result in the development of commercially viable solutions or the generation of significant future revenues.

In the ordinary course of our business, we may enter into collaborations, joint ventures, strategic alliances, partnerships or other arrangements to develop products and to pursue new markets. Proposing, negotiating and implementing collaborations, joint ventures, strategic alliances or partnerships may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We may not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products. Additionally, we may not own, or may jointly own with a third party, the intellectual property rights in products and other works developed under our collaborations, joint ventures, strategic alliances or partnerships.

Additionally, we may not be in a position to exercise sole decision-making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise with any future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. In addition, we may have limited control over the amount and timing of resources that any future collaborators devote to our or their future products. Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

We operate in highly competitive markets and face competition from large, well-established healthcare providers and more traditional retailers and pharmaceutical providers with significant resources, and, as a result, we may not be able to compete effectively. If we are unable to compete effectively, we will not be able to establish our products and services in the marketplace, and as a result, our business may not be profitable.

The markets for digital and traditional healthcare are intensely competitive, subject to rapid change and significantly affected by new product and technological introductions and other market activities of industry participants. We compete directly not only with other established digital health consult providers, epharmacy, behavioral health and integrated care management systems solutions, but also traditional healthcare providers, companies providing EHR/HIE (electronic health record / health information exchange) services, and pharmacies. Our current competitors include traditional healthcare providers, healthcare providers expanding into the digital health consult market, incumbent digital health consult providers, traditional pharmacies, mail-order and digital pharmacies and specialized software and solution providers that offer similar solutions. Our competitors include enterprise-focused companies that may enter the direct-to-consumer healthcare industry, as well as direct-to-consumer healthcare providers. The surge in interest in digital health, and in particular the relaxation of HIPAA privacy and security requirements, has also attracted new competition from providers who utilize consumer-grade video conferencing platforms. Many of our current and potential competitors may have greater name and brand recognition, longer operating histories and significantly greater resources than we do and may be able to offer products and services similar to those offered on our platform at more attractive prices than we can. We expect competition to intensify in the future as existing competitors and new entrants introduce new digital health services and software platforms or other technology to U.S. healthcare providers, particularly

 

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hospitals and healthcare systems. Further, our current or potential competitors may be acquired by third parties with greater available resources, which has recently occurred in our industry. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements and may have the ability to initiate or withstand substantial price competition. In addition, our competitors have established, and may in the future establish, cooperative relationships with vendors of complementary products, technologies or services to increase the availability of their solutions in the marketplace.

New competitors or alliances may emerge that have greater market share, a larger customer base, more widely adopted proprietary technologies, greater marketing expertise and greater financial resources, which could put us at a competitive disadvantage. Our competitors could also be better positioned to serve certain segments of our current or future markets, which could create additional price pressure. In light of these factors, even if our offerings are more effective than those of our competitors, current or potential customers may accept competitive solutions in lieu of purchasing from us.

To the extent our solutions are perceived by customers and potential customers to be discretionary or otherwise non-essential, our revenues may be disproportionately affected by delays or reductions in general information technology and digital health spending. Moreover, competitors may respond to market conditions by lowering prices and attempting to lure away our customers and/or our customers may develop their own in-house solutions. In addition, the increased pace of consolidation in the healthcare industry may result in reduced overall spending on our solutions.

Our ability to compete effectively depends on our ability to distinguish our company and our offerings from our competitors and their products, and includes factors such as:

 

   

accessibility, ease of use and convenience;

 

   

price and affordability;

 

   

personalization;

 

   

brand recognition;

 

   

long-term outcomes;

 

   

breadth and efficacy of offerings;

 

   

market penetration;

 

   

marketing resources and effectiveness;

 

   

partnerships and alliances;

 

   

relationships with providers, suppliers and partners; and

 

   

regulatory compliance recourses.

If we are unable to successfully compete with existing and potential new competitors, we will not be able to establish our products and services in the marketplace, and as a result, our business may not be profitable. Further, our business, financial condition and results of operations will be adversely affected.

We depend on our senior management team, and the loss of one or more of our executive officers or key employees could adversely affect our business.

Our success depends largely upon the continued services of our key executive officers. Currently these executive officers are at-will employees and therefore they may terminate employment with us at any time with no advance notice. We also rely on our leadership team in the areas of research and development, marketing,

 

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services and general and administrative functions. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. The replacement of one or more of our executive officers or other key employees would likely involve significant time and costs and may significantly delay or prevent the achievement of our business objectives, and our business would be adversely affected if we fail to adequately plan for succession of our executives and senior management. We currently do not have succession plans in place and we have employment arrangements with only a limited number of key executives. These do not guarantee that the services of these or suitable successor executives will continue to be available to us. Further, our failure to retain and motivate our current personnel could have a material adverse effect on our business, financial condition and results of operations.

We are dependent on our ability to recruit, retain and develop a large, highly skilled and diverse workforce. We must evolve our culture in order to successfully grow our business.

To continue to execute our growth strategy, we must attract and retain highly skilled personnel. Competition is intense for qualified professionals. We may not be successful in continuing to attract and retain qualified personnel. Our subsidiary companies have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled personnel with appropriate qualifications. The pool of qualified personnel with experience working in the healthcare market is limited overall. In addition, many of the companies with which we compete for experienced personnel have greater resources than us.

Our products and services and our operations require a large number of employees all over the world. Our success is dependent on our ability to evolve our culture, align our talent with our business needs, engage our employees and inspire our employees to be open to change, to innovate and to maintain customer-focus when delivering our services. As we expand internationally, we face the challenge of recruiting, integrating, educating, managing, retaining and developing a more culturally diverse workforce

In addition, in making employment decisions, particularly in high-technology industries, job candidates often consider the value of the stock options or other equity-based awards they are to receive in connection with their employment. Volatility in the price of our stock may, therefore, adversely affect our ability to attract or retain highly skilled personnel. Further, the requirement to expense stock options and other equity-based compensation may discourage us from granting the size or type of stock option or equity awards that job candidates require to join our company. Failure to attract new personnel could have a material adverse effect on our business, financial condition and results of operations.

Our success depends, in part, on our continued ability to maintain customer access to a network of qualified healthcare providers, which include medical doctors, physician assistants and nurse practitioners. Failure to maintain such a network could have a material adverse effect on our business, financial condition and results of operations.

Our success depends, in part, on our continued ability to maintain customer access to a network of qualified healthcare providers, which include medical doctors, physician assistants and nurse practitioners. If we are unable to recruit and retain licensed physicians and other qualified providers to perform services on our platform, or develop and maintain relationships with affiliated professional entities, which we do not own, it could have a material adverse effect on our business and ability to grow and could adversely affect our results of operations. In any particular market, providers could demand higher payments or take other actions that could result in higher medical costs, less attractive service for our customers or difficulty meeting regulatory requirements. Our ability to develop and maintain satisfactory relationships with providers also may be negatively impacted by other factors not associated with us, such as pressures on healthcare providers, consolidation activity among hospitals, physician groups and other healthcare providers, changes in the patterns of delivery and payment for healthcare services and any perceived liability risks associated with the use of digital health. The failure to maintain or to secure new cost-effective arrangements that engage the providers on our platform may result in a loss of, or

 

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inability to grow, our customer base, higher costs, less attractive service for our customers and/or difficulty in meeting regulatory requirements, any of which could have a material adverse effect on our business, financial condition and results of operations.

If we fail to cost-effectively develop widespread brand awareness, our business may suffer.

We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread adoption of our products and services and attracting new customers. Our brand promotion activities may not generate customer awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in doing so, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts or to achieve the widespread brand awareness that is critical for broad customer adoption.

The emergence of new technologies may render our digital health technologies and tech-enable services obsolete or require us to expend significant resources in order to remain competitive.

The global healthcare industry is massive, with a number of large market participants with conflicting agendas, and it is subject to significant government regulation and is currently undergoing significant change. Changes in our industry, for example, such as the emergence of new technologies as more competitors enter our market, could result in our digital health solutions being less desirable or relevant.

If healthcare benefits trends shift or entirely new technologies are developed that replace existing solutions, our existing or future solutions could be rendered obsolete and our business could be adversely affected. In addition, we may experience difficulties with industry standards, design or marketing that could delay or prevent our development, introduction or implementation of new applications and enhancements.

Rapid technological change in our industry presents us with significant risks and challenges.

The global digital health market is characterized by rapid technological change, changing consumer requirements, short product lifecycles and evolving industry standards. Our success will depend on our ability to enhance our products and services with next-generation technologies and to develop or to acquire and market new services to access new consumer populations. There is no guarantee that we will possess the resources, either financial or personnel, for the research, design and development of new applications or services, or that we will be able to utilize these resources successfully and avoid technological or market obsolescence. Further, there can be no assurance that technological advances by one or more of our competitors or future competitors will not result in our present or future applications and services becoming uncompetitive or obsolete.

Natural or man-made disasters and other similar events may significantly disrupt our business and negatively impact our business, financial condition and results of operations.

Our offices may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, power outages, fires, floods, nuclear disasters and acts of terrorism or other criminal activities, which may render it difficult or impossible for us to operate our business for some period of time. Any disruptions in our operations related to the repair or replacement of our offices, could negatively impact our business and results of operations and harm our reputation. Although we maintain insurance policies covering damage to property we rent, such insurance may not be sufficient to compensate for losses that may occur. Any such losses or damages could have a material adverse effect on our business, financial condition and results of operations. In addition, our customers’ facilities may be harmed or rendered inoperable by such natural or man-made disasters, which may cause disruptions, difficulties or material adverse effects on our business.

 

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Our business, results of operations and financial condition may fluctuate on a quarterly and annual basis, which may result in a decline in our stock price if such fluctuations result in a failure to meet any projections that we may provide or the expectations of securities analysts or investors.

The operating results of our six subsidiary company businesses have in the past varied, and our operating results in the future could vary, significantly from quarter-to-quarter and year-to-year. We may fail to match past performance, our projections or the expectations of securities analysts because of a variety of factors, many of which are outside of our control. As a result, we may not be able to accurately forecast our operating results and growth rate. Any of these events could cause the market price of our Common Stock to fluctuate. Factors that may contribute to the variability of our operating results include:

 

   

the addition or loss of large customers, including through acquisitions or consolidations of such customers;

 

   

seasonal and other variations in the timing of our sales and implementation cycles, especially in the case of our large customers;

 

   

travel restrictions, shelter in place orders and other social distancing measures implemented to combat the COVID-19 pandemic, and their respective impact on economic, industry and market conditions, customer spending budgets and our ability to conduct business;

 

   

the timing of recognition of revenue, including possible delays in the recognition of revenue due to unpredictable implementation timelines;

 

   

the timing and success of introductions of new products and services by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, hospital and healthcare system customers or strategic partners;

 

   

the amount of operating expenses and timing related to the maintenance and expansion of our business, operations and infrastructure;

 

   

our ability to effectively manage the size and composition of our proprietary network of healthcare professionals relative to the level of demand for services from our customers;

 

   

customer renewal rates and the timing and terms of such renewals;

 

   

technical difficulties or interruptions in our services;

 

   

breaches of information security or privacy;

 

   

our ability to hire and retain qualified personnel;

 

   

changes in the structure of healthcare provider and payment systems;

 

   

changes in the legislative or regulatory environment, including with respect to healthcare, privacy or data protection, or enforcement by government regulators, including fines, orders or consent decrees;

 

   

the cost and potential outcomes of ongoing or future regulatory investigations or examinations, or of future litigation;

 

   

political, economic and social instability, including terrorist activities and health epidemics (including the COVID-19 pandemic), and any disruption these events may cause to the global economy; and

 

   

changes in business or macroeconomic conditions.

The impact of one or more of the foregoing and other factors may cause our operating results to vary significantly. As such, we believe that quarter-to-quarter and year-to-year comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance.

 

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Developments affecting spending by the healthcare industry could adversely affect our business.

The U.S. healthcare industry has changed significantly in recent years, and we expect that significant changes will continue to occur. General reductions in expenditures by healthcare industry participants could result from, among other things:

 

   

government regulations or private initiatives that affect the manner in which healthcare providers interact with patients, payors or other healthcare industry participants, including changes in pricing or means of delivery of healthcare products and services;

 

   

consolidation of healthcare industry participants;

 

   

federal amendments to, lack of enforcement or development of applicable regulations for, or repeal of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (as amended, the “ACA”);

 

   

reductions in government funding for healthcare; and

 

   

adverse changes in business or economic conditions affecting healthcare payors, providers or other healthcare industry participants.

Any of these changes in healthcare spending could adversely affect our revenue. Even if general expenditures by industry participants remain the same or increase, developments in the healthcare industry may result in reduced spending in some or all of the specific market segments that we serve now or in the future. However, the timing and impact of developments in the healthcare industry are difficult to predict. We cannot assure you that the demand for our products and services will continue to exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in the healthcare industry.

Economic uncertainties or prolonged downturns in the general economy, or political changes, could disproportionately affect the demand for our solutions and adversely affect our results of operations.

Current or future economic uncertainties or prolonged downturns, including those caused by the ongoing COVID-19 pandemic, could adversely affect our business and results of operations. Negative conditions in the general economy in the United States, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, political deadlock, natural catastrophes, pandemics, social unrest, warfare and terrorist attacks, could cause a decrease in funds available to our customers and potential customers and negatively affect the growth rate of our business.

These economic conditions may make it difficult for our customers and us to forecast and plan future budgetary decisions or business activities accurately, and they could cause our customers to reevaluate their decisions to purchase our solutions, which could delay and lengthen our sales cycles or result in cancellations of planned purchases. Furthermore, during challenging economic times or as a result of political changes, our customers may tighten their budgets and face constraints in gaining timely access to sufficient funding or other credit, which could result in an impairment of their ability to make timely payments to us. In turn, we may be required to increase our allowance for doubtful accounts, which would adversely affect our financial results.

We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within the healthcare industry, or the effect of political changes. If the economic conditions of the general economy or the healthcare industry do not improve, or worsen from present levels, our business, financial condition and results of operations could be adversely affected.

 

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We depend upon third-party service providers for certain technologies. If these third-party providers fail to fulfill their contractual obligations, fail to maintain or support those technologies or choose to discontinue their services, our business and operations could be disrupted, we may be exposed to third party liabilities and our results of operations may be adversely affected.

We depend upon third-party service providers for important functions of our solutions. Software, network applications and data, as well as the core video and audio system integral to our business, are hosted on third-party sites. These facilities may be vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures, COVID-19 pandemic-related business disruptions and similar events. The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions in our ability to provide our services. The facilities also could be subject to break-ins, computer viruses, sabotage, intentional acts of vandalism and other misconduct. Redundancies and backup systems are in place to prevent operational disruptions and data loss, but if these technologies fail or are of poor quality, our business, reputation and results of operations could be materially adversely affected. Failures or disruption in the delivery of digital health services could result in customer dissatisfaction, disrupt our operations and materially adversely affect operating results. Additionally, we have significantly less control over the technologies third parties provide to us than if we maintained and operated them ourselves. In some cases, functions necessary to some of our solutions may be performed by these third-party technologies. If we need to find an alternative source for performing these functions, we may have to expend significant money, resources and time to develop the alternative, and if this development is not accomplished in a timely manner and without significant disruption to our business, we may be unable to fulfill our obligations to customers. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies and information services or our own systems could negatively impact our relationships with customers and adversely affect our business and could expose us to third-party liabilities.

Our management team has limited experience managing a public company, and we expect to incur significant costs as a result of operating as a public company.

Following the Business Combinations, we will be a publicly traded company and our management team has limited experience managing a publicly traded company. Our management team may not successfully or effectively manage the transition of the predecessor businesses to a public company following the Business Combinations, which will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience interacting with public company investors and securities analysts and complying with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of our business. These new obligations and constituents require significant attention from our management team and could divert their attention away from the day-to-day management of our business, which could harm our business, results of operations and financial condition. We will also need to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.

We expect the rules and regulations applicable to us as a public company to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business, including our subsidiaries. For example, our status as a public company makes it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the level of coverage that we believe is appropriate for a public company. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

 

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Additionally, there continues to be public interest and increased legislative pressure related to environmental, social and governance, or ESG, activities of public companies. For example, there is a growing number of states requiring organizations to report their board composition as well or mandating gender diversity and representation from underrepresented communities, including New York and California. We risk negative stockholder reaction, including from proxy advisory services, as well as damage to our brand and reputation, if we do not act responsibly in a number of key areas, including diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency and considering ESG and human capital factors in our operations.

We have recently acquired or are in the process of acquiring a total of six subsidiaries in conjunction with or through this business combination, or we may acquire other companies or technologies, which could divert our management’s attention, result in dilution to our stockholders and otherwise disrupt our operations, and we may have difficulty successfully integrating any such acquisitions or realizing the anticipated benefits of them, any of which could have an adverse effect on our business, financial condition and results of operations.

Our subsidiary companies have in the past sought, and we in the future may seek, to acquire or invest in businesses, applications and services or technologies that we believe could complement or expand our solutions, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.

In addition, both with respect to the recent or pending acquisitions of our subsidiaries and additional businesses we may choose to acquire, we may not be able to successfully integrate the acquired personnel, operations and technologies successfully, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including, but not limited to:

 

   

management’s lack of experience in acquiring and integrating business;

 

   

inability to integrate or benefit from acquired technologies or services in a profitable manner;

 

   

unanticipated costs or liabilities, including legal liabilities, associated with the acquisition;

 

   

entry into new markets and locations in which we have little operating experience or experience with government rules, regulations and restrictions;

 

   

difficulty integrating the accounting systems, operations and personnel of the acquired business;

 

   

difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;

 

   

difficulty converting the customers of the acquired business onto our platform and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company;

 

   

diversion of management’s attention from other business concerns;

 

   

adverse effects to our existing business relationships with business partners and customers as a result of the acquisition;

 

   

the potential loss of key employees or contractors;

 

   

use of resources that are needed in other parts of our business; and

 

   

use of substantial portions of our available cash to consummate the acquisition.

In addition, a significant portion of the purchase price of businesses we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if

 

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our acquisitions do not yield expected returns, we may be required to take charges to our results of operations based on this impairment assessment process, which could adversely affect our results of operations.

Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. In addition, if an acquired business fails to meet our expectations, our business, financial condition and results of operations may suffer.

If we are unable to grow, or if we fail to manage future growth effectively, our revenues may not increase and we may be unable to implement our business strategy.

Our future success depends upon our ability to grow, and if we are unable to manage our growth effectively, we may incur unexpected expenses and be unable to meet our customers’ requirements, all of which could materially adversely affect our business, financial condition and results of operations. A key aspect to managing our growth is our ability to scale our capabilities, including in response to unexpected shifts in demand for digital health, such as during the COVID-19 pandemic. To manage our current and anticipated future growth effectively, we must continue to maintain and enhance our IT infrastructure and our financial and accounting systems and controls. We must also attract, train and retain a significant number of qualified healthcare providers, sales and marketing personnel, customer support personnel, professional services personnel, software engineers, technical personnel and management personnel. The availability of such personnel, particularly healthcare providers and software engineers, may be constrained.

Our growth also depends on the acceptance of our solutions as a suitable supplement to traditional healthcare delivery systems and on our ability to overcome operational challenges. Our business model and solutions could lose their viability as a supplement to traditional healthcare delivery systems due to customer dissatisfaction or new alternative solutions. If we are unable to address the needs of our customers, or our customers are dissatisfied with the quality of our solutions, our customers may not renew their contracts, seek to cancel or terminate their relationship with us or renew on less favorable terms, any of which could cause our annual net dollar retention rate to decrease.

Our future growth will also depend, in part, on our ability to grow our revenue from existing customers, to complete sales to potential future customers, to expand our customer base, to develop new products and services and to expand internationally. We can provide no assurances that we will be successful in executing on these growth strategies or that, even if our key metrics would indicate future growth, we will continue to grow our revenue or to generate net income. Our ability to execute on our existing sales pipeline, create additional sales pipelines and expand our customer base depends on, among other things, the attractiveness of our services relative to those offered by our competitors, our ability to demonstrate the value of our existing and future services and our ability to attract and retain a sufficient number of qualified sales and marketing leadership and support personnel. In addition, our existing customers may be slower to adopt our services than we currently anticipate, which could adversely affect our results of operations and growth prospects.

We need to continue to improve our internal systems, processes and controls to effectively manage our operations and growth. We may not be able to successfully implement and scale improvements to our systems and processes in a timely or efficient manner or in a manner that does not negatively affect our operating results. For example, our systems and processes may not prevent or detect all errors, omissions or fraud, including any fraudulent activities conducted or facilitated by our employees or the providers. We may experience difficulties in managing improvements to our systems, processes and controls or in connection with third-party software, which could impair our ability to offer our platform to our customers in a timely manner, causing us to lose customers or increase our technical support costs.

As we continue to grow, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our profitability and our ability to retain and recruit qualified personnel

 

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who are essential for our future success. If we do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, satisfy client requirements or maintain high-quality solutions. Additionally, we may not be able to expand and upgrade our systems and infrastructure to accommodate future growth.

Failure to effectively manage our growth could also lead us to over-invest or under-invest in development and operations, result in weaknesses in our infrastructure, systems or controls, give rise to operational mistakes, financial losses, loss of productivity or business opportunities and result in loss of employees and reduced productivity of remaining employees. Our growth is expected to require significant marketing and sales investments as well as focused capital expenditures and may divert financial resources from other projects such as the development of new products and services. If we are unable to effectively manage our growth, our expenses may increase more than expected, our revenues may not increase or may grow more slowly than expected and we may be unable to implement our business strategy. The quality of our services may also suffer, which could negatively affect our reputation and harm our ability to attract and retain customers.

Current or future litigation against us could be costly and time-consuming to defend.

We are subject, and in the future may become subject from time to time, to legal proceedings and claims that arise in the ordinary course of business. Litigation may result in substantial costs, settlement and judgments and may divert management’s attention and resources, which may substantially harm our business, financial condition and results of operations. Insurance may not cover such claims, provide sufficient payments to cover all of the costs to resolve one or more such claims and continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby leading analysts or potential investors to reduce their expectations of our performance, which could reduce the market price of our Common Stock.

We could experience losses or liability not covered by insurance.

Our business exposes us to risks that are inherent in the provision of digital health and remote, virtual healthcare. If customers or individuals assert liability claims against us, any ensuing litigation, regardless of outcome, could result in a substantial cost to us, divert management’s attention from operations, and decrease market acceptance of our products and services. We attempt to limit our liability to customers by contract; however, the limitations of liability set forth in the contracts may not be enforceable or may not otherwise protect us from liability for damages. Additionally, we may be subject to claims that are not explicitly covered by contract. We also maintain general liability coverage; however, this coverage may not continue to be available on acceptable terms, may not be available in sufficient amounts to cover one or more large claims against us, and may include larger self-insured retentions or exclusions for certain products. In addition, the insurer might disclaim coverage as to any future claim. A successful claim not fully covered by our insurance could have a material adverse impact on our liquidity, financial condition and results of operations.

We may become subject to professional liability claims, which could cause us to incur significant expenses, may require us to pay significant damages if not covered by insurance, and could adversely affect our business, financial condition and results of operations.

Our business entails the risk of professional liability claims against us and our affiliated professional entities. We and our affiliated professional entities have in the past and may in the future be subject to professional liability claims and, if these claims are successful, substantial damage awards. Although we maintain insurance covering medical malpractice claims in amounts that we believe are appropriate in light of the risks attendant to our business, we cannot predict the outcomes of medical malpractice cases and the effect that any claims of this nature, regardless of their ultimate outcome, could have on our business or reputation or on our ability to attract and retain customers. Professional liability insurance is expensive and insurance premiums may increase significantly in the future, particularly as we expand our services. As a result, adequate professional liability insurance may not be available to our providers or to us in the future at acceptable costs or at all.

 

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Any claims made against us that are not fully covered by insurance could be costly to defend against, result in substantial damage awards against us and divert the attention of our management and our providers from our operations, which could have a material adverse effect on our business, financial condition and results of operations. In addition, any claims may adversely affect our business or reputation.

We will qualify as an emerging growth company as defined under the JOBS Act as well as a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

Following the consummation of the Business Combinations, we will qualify an “emerging growth company” within the meaning of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our Common Stock that is held by non-affiliates exceeds $700,000,000 as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of GigCapital2, Inc.’s initial public offering. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have not elected to opt out of such extended transition period and, therefore, we may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. This may make comparison of our financial statements with another public company which is not an emerging growth company or is an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.

Additionally, we will qualify as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our Common Stock held by non-affiliates exceeds $250,000,000 as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100,000,000 during such completed fiscal year and the market value of our Common Stock held by non-affiliates exceeds $700,000,000 as of the end of that year’s second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

 

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If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a publicly traded company following the consummation of the Business Combinations, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of NYSE. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting, which includes hiring additional accounting and financial personnel to implement such processes and controls. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses in our controls. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.

Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of internal control over financial reporting that we will eventually be required to include in its periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Common Stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on NYSE. Our predecessor companies were not required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and were therefore not required to make a formal assessment of the effectiveness of control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our annual report on Form 10-K for the year ended December 31, 2021. Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act or a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have an adverse effect on our business and results of operations and could cause a decline in the price of our Common Stock.

Changes in financial accounting standards may adversely affect our reported results of operations.

A change in accounting standards or practices, in particular with respect to revenue recognition, could adversely affect our operating results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements

 

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have occurred and may occur in the future. For example, in May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended, which supersedes nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States of America. Although the new standard permits early adoption, as a private company, Topic 606 will be effective for UpHealth for annual periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. Accordingly, we will adopt Topic 606 for our annual reporting period beginning January 1, 2020, and interim reporting periods within the annual reporting period beginning January 1, 2021. We currently anticipate adopting the standard using the modified retrospective approach. We are in the process of evaluating the impact of the adoption of this new revenue standard on our consolidated financial statements. These and other changes to existing rules or the questioning of current practices may adversely affect our operating results. In addition, any difficulties in implementing this new revenue standard could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

Healthcare provider licensing and credentialing, a cost of providing professional services, can negatively impact our margins as we may incur increased expenses to utilize appropriately licensed and credentialed healthcare providers for consult demands, especially when expanding to new jurisdictions and new hospital customers.

A healthcare provider’s ability to perform digital health consults is dictated by where the healthcare provider is licensed to practice and with whom the healthcare provider is privileged to provide services. Governmental licensure and healthcare provider credentialing requirements take time to procure, often necessitating months of lead-time before a healthcare provider is able to practice in a particular jurisdiction or take consults for a particular hospital facility. Our ability to manage and anticipate healthcare provider need and prioritize licensing and credentialing could impact profit margins and expense management. As consult demands increase in areas where only a limited number of healthcare providers hold necessary licenses and credentials, those healthcare providers with appropriate licensing and credentialing to meet customer demands may assume additional overtime shifts or otherwise demand increased fees, thereby increasing our costs. Further, obtaining a license to practice medicine in a particular jurisdiction is at the discretion of the local state medical board or applicable international licensing body, and, as such, timing to achieve licensure in certain jurisdictions may be outside our ability to accomplish within expected time frames.

The estimates and assumptions on which our financial projections are based may prove to be inaccurate, which may cause our actual results to materially differ from such projections, and which may adversely affect our future profitability, cash flows and market price of our Common Stock.

UpHealth’s financial projections included in this proxy statement/ prospectus are dependent on certain estimates and assumptions related to, among other things, growth assumptions that are inherently subject to significant uncertainties and contingencies, as well as, among other things, matters related specifically to the recent operational performance and anticipated development of our business, and are subject to significant economic, competitive, industry and other uncertainties, and may not be achieved in full, at all, or within projected timeframes. The financial projections also reflect numerous assumptions with respect to general business, economic, market, regulatory and financial conditions and various other factors, all of which are difficult to predict and many of which are beyond our control. Furthermore, the financial projections do not take into account any circumstances or event occurring after the date they were prepared. The financial projections were not prepared with a view to public disclosure or complying with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for the preparation and presentation of prospective financial information. UpHealth’s independent auditor has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the financial projections and, accordingly, does not express an opinion or any other form of assurance with respect thereto. The financial projections were based on historical experience and on various other estimates and assumptions that our management believed to be reasonable under the circumstances and at the time they were made. There will be

 

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differences between actual and projected financial results, and actual results may be materially greater or materially less than those contained in the financial projections, especially in light of the increased difficulty in making such estimates and assumptions as a result of the COVID-19 pandemic. Any material variation between our financial projections and our actual results may adversely affect our future profitability, cash flows and market price of our Common Stock.

Our executive officers, directors, principal stockholders and their affiliates will have the ability to exercise significant influence over our company and all matters submitted to stockholders for approval.

Following the Closing, we expect our executive officers, directors and principal stockholders, together with their affiliates and related persons, to beneficially own shares of Common Stock representing a significant percentage of our capital stock. As a result, if these stockholders were to choose to act together, they would be able to influence our management and affairs and the outcome of matters submitted to our stockholders for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire. In addition, this concentration of ownership might adversely affect the market price of our Common Stock by:

 

   

delaying, deferring or preventing a change of control of us;

 

   

impeding a merger, consolidation, takeover or other business combination involving us; or

 

   

discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be the sole source of gain for our stockholders.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, under the Glocal Loan Agreement (See “Certain Relationships and Related Party Transactions.”), we are currently restricted from paying cash dividends, and we expect these restrictions to continue in the future. In addition, the terms of any future debt agreements may continue to preclude us from paying dividends. As a result, capital appreciation, if any, of our Common Stock will be the sole source of gain for our stockholders for the foreseeable future.

Risks Related to Government Regulation

Evolving government regulations may require increased costs or adversely affect our results of operations.

In a regulatory climate that is uncertain, our operations may be subject to scrutiny or reinterpretation under various laws and regulations. Healthcare is a highly regulated industry and subject to laws and regulations at the federal, state, and local level as well as evolving industry standards. Telehealth and other remote care delivery models, in particular, have experienced and will continue to experience frequently changing regulations that may differ substantially from jurisdiction to jurisdiction, including state by state. Compliance with current and future laws and regulations will likely require significant initial monetary and recurring expenses and could potentially require us to change our practices upon short notice, adding to the potential costs of compliance. These additional monetary expenditures may increase future overhead, which could have a material adverse effect on our results of operations.

We have identified what we believe are the areas of government regulation that, if changed, would be costly to us. These include: rules governing the practice of medicine by physicians; rules governing the practice of pharmacy; licensure standards for doctors, pharmacists and behavioral health professionals; laws limiting the corporate practice of medicine; fee-splitting, healthcare fraud and abuse laws; third party payor coverage and reimbursement rules; cybersecurity and privacy laws; laws and rules relating to the distinction between

 

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independent contractors and employees; prescribing of controlled substances via a remote encounter; fraud and abuse laws addressing financial relationships between healthcare entities and physicians or other referral sources; commercial and governmental payor billing; anti-kickback laws; provisions of free healthcare by the government; and tax and other laws. There could be laws and regulations applicable to our business that we have not identified or that, if changed, may be costly to us, and we cannot predict all the ways in which implementation of such laws and regulations may affect us.

In the jurisdictions in which we operate, we believe we are in compliance with all applicable laws, but, these laws and regulations are extremely complex and, in many cases, still evolving. If our operations are found to violate any of the foreign, federal, state or local laws and regulations which govern our activities, we may be subject to litigation, government enforcement actions, and applicable penalties associated with the violation, potentially including civil and criminal penalties, damages, fines, exclusion from participation in certain payor programs or curtailment of our operations. Compliance obligations under these various laws are oftentimes detailed and onerous, further contributing to the risk that we could be found to be out of compliance with particular requirements. The risk of being found in violation of these laws and regulations is further increased by the fact that in many cases, these laws have not been fully interpreted by the regulatory authorities or the courts, particularly with respect to new and emerging technologies and remote delivery of services, and may therefore be open to a variety of interpretations. In the event that we must remedy any compliance violations, we may be required to modify our services and products in a manner that undermines our solution’s attractiveness to our clients or providers or experts, we may become subject to fines or other penalties or, if we determine that the requirements to operate in compliance in such jurisdictions are overly burdensome, we may elect to terminate our operations in such places. In each case, our revenue may decline, and our business, financial condition and results of operations could be materially adversely affected.

The outbreak of the SARS-CoV-2 virus and the COVID-19 disease that it causes has evolved into a global pandemic. It is difficult to predict what impact the continued prevalence of COVID-19 will have on our business and resulting operations. At the same time, the U.S. federal and state governments have relaxed certain laws and regulations to combat the spread of the novel coronavirus, including removal of restrictions on the delivery and payment for remote healthcare services and the expansion of FDA’s enforcement discretion with respect to certain off-label uses of products that may benefit COVID-19 response and prevention efforts. These changes in the law are occurring quickly, are subject to varying interpretations, and are temporary in nature. We are closely following these changes and we are adapting our operations to quickly respond to the needs of our patients and our partners. We may interpret these changes differently than an applicable government regulator and may be subject to audits in the future. To the extent that any of our interpretations are found to be incorrect, we could be subject to enforcement action or overpayment liability. We may also need to quickly revert to past operations in the event that flexibilities resulting from the pandemic are removed and standard requirements are re-imposed. We are unable to predict the extent to which this pandemic will impact our business and operating results, including new information that may emerge concerning the virus and the actions to contain it or to treat COVID-19, among others.

Other legal, regulatory and commercial policy influences are subjecting our industry to significant changes, and we cannot predict whether new regulations or policies will emerge from U.S. federal or state governments, foreign governments, or third-party payors. Government and commercial payors may, in the future, consider healthcare policies and proposals intended to curb rising healthcare costs, including those that could significantly affect reimbursement for healthcare services. Future significant changes in the healthcare systems in the United States or elsewhere could also have a negative impact on the demand for our current and future services.

Additionally, the introduction of new services may require us to comply with additional, yet undetermined, laws and regulations. Compliance may require obtaining appropriate licenses or certificates, increasing our security measures and expending additional resources to monitor developments in applicable rules to ensure compliance. The failure to adequately comply with these future laws and regulations may delay or possibly prevent some of our products or services from being offered to customers, which could have a material adverse effect on our business, financial condition and results of operations.

 

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The healthcare industry is highly regulated and is subject to changing political, legislative, regulatory and other influences. Existing and new laws and regulations affecting the healthcare industry could create unexpected liabilities for us, cause us to incur additional costs and restrict our operations. Many healthcare laws are complex, and their application to specific products and services may not be clear. In particular, many existing healthcare laws and regulations, when enacted, did not anticipate the services that we provide. However, these laws and regulations may nonetheless be applied to our business. Our failure to accurately anticipate the application of these laws and regulations, or other failure to comply, could create liability for us, result in adverse publicity and materially affect our business, financial condition and results of operations.

In the U.S., we conduct business in a heavily regulated industry and if we fail to comply with these laws and government regulations, we could incur substantial penalties or be required to make significant changes to our operations or experience enforcement actions or adverse publicity, which could have a material adverse effect on our business, financial condition and results of operations.

The U.S. healthcare industry is heavily regulated and closely scrutinized by federal, state and local governments. Comprehensive statutes and regulations govern the manner in which we provide and bill for services and collect reimbursement from governmental programs and private payers, our contractual relationships with our providers, vendors and customers, our marketing activities and other aspects of our operations. Of particular importance are:

 

   

the federal physician self-referral law, commonly referred to as the Stark Law, that, subject to limited exceptions, prohibits physicians from referring Medicare patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with the entity, and prohibits the entity from billing Medicare for such designated health services;

 

   

the federal Anti-Kickback Statute, which is an intent-based federal criminal statute that prohibits the knowing and willful offer, payment, provision, solicitation or receipt of any remuneration, directly or indirectly, in cash or in kind, for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act;

 

   

the criminal healthcare fraud provisions of the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which we collectively refer to as HIPAA, and related rules that prohibit knowingly and willfully executing or attempting to execute a scheme or artifice to defraud any healthcare benefit program or to obtain by means of false, or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

 

   

the federal False Claims Act that imposes civil liability, including through qui tam and civil whistleblower actions, against individuals or entities that knowingly present, or cause to be presented, false or fraudulent claims for payment to the federal government or knowingly making, or causing to be made, a false statement or record material to the payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government;

 

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the federal criminal statute on false statements relating to health care matters, which prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious, or fraudulent statements or representations in connection with the delivery of or payment for health care benefits, items or services;

 

   

The Civil Monetary Penalties Law authorizes the imposition of civil monetary penalties, assessments and exclusion against an individual or entity based on a variety of prohibited conduct, including, but not limited to:

 

   

presenting, or causing to be presented, claims for payment to Medicare, Medicaid or other third-party payors that the individual or entity knows or should know are for an item or service that was not provided as claimed or is false or fraudulent;

 

   

offering remuneration to a Medicare or Medicaid beneficiary that the individual or entity knows or should know is likely to influence the beneficiary to order or receive health care items or services from a particular provider or supplier;

 

   

employing or contracting with an entity or individual excluded from participation in the federal health care programs;

 

   

violating the federal Anti-Kickback Statute;

 

   

making, using or causing to be made or used a false record or statement material to a false or fraudulent claim for payment for items and services furnished under a federal health care program;

 

   

making, using or causing to be made any false statement, omission or misrepresentation of a material fact in any application, bid or contract to participate or enroll as a provider of services or a supplier under a federal health care program; and

 

   

failing to timely report and return an overpayment owed to the federal government.

 

   

Substantial civil monetary penalties may be imposed under the federal Civil Monetary Penalties Law and may vary depending on the underlying violation. In addition, an assessment of not more than three times the total amount claimed for each item or service may also apply and a violator may be subject to exclusion from federal and state health care programs;

 

   

the federal Eliminating Kickbacks in Recovery Act of 2018 (EKRA), included as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act (the “SUPPORT Act”), was signed into law on Oct. 24, 2018. The EKRA provisions, similar to the federal Anti-Kickback Statute, makes it a felony for certain entities (including substance abuse treatment centers, clinical treatment facilities and clinical laboratories) to engage in remunerative arrangements that induce or reward individuals or entities for the referral of patients to such facilities, unless an exception applies. EKRA applies regardless of payor source, including for services reimbursed exclusively through commercial insurance or self-paying patients. Violations of EKRA can lead to fines of not more than $200,000 and imprisonment of not more than 10 years, or both, for each occurrence” 18 U.S.C. 220(a);

 

   

reassignment of payment rules that prohibit certain types of billing and collection practices in connection with claims payable by the Medicare or Medicaid programs;

 

   

similar state law provisions pertaining to anti-kickback, self-referral, fee-splitting, patient inducement and false claims issues, some of which may apply to items or services reimbursed by any payer, including patients and commercial insurers;

 

   

state laws that prohibit general business corporations, such as us, from practicing medicine, controlling physicians’ medical decisions or engaging in some practices such as splitting fees with physicians;

 

   

laws that regulate debt collection practices as applied to our debt collection practices;

 

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a provision of the Social Security Act that imposes criminal penalties on healthcare providers who fail to disclose or refund known overpayments;

 

   

federal and state laws that prohibit providers from billing and receiving payment from Medicare and Medicaid for services unless the services are medically necessary, adequately and accurately documented and billed using codes that accurately reflect the type and level of services rendered;

 

   

federal and state laws and policies related to healthcare providers, licensure, certification, accreditation and related to the Medicare and Medicaid programs enrollment; and

 

   

federal and state laws and policies related to the practice of pharmacy, pharmacy licensure, and the prescribing and dispensing of pharmaceuticals and controlled substances.

In addition, the healthcare industry is required to comply with additional extensive and complex laws and regulations at the federal, state and local government levels relating to, among other things:

 

   

licensure of health providers, certification of organizations and enrollment with government reimbursement programs;

 

   

necessity and adequacy of medical care;

 

   

relationships with physicians and other referral sources and referral recipients;

 

   

billing and coding for services;

 

   

properly handling overpayments;

 

   

quality of medical equipment and services;

 

   

qualifications of medical and support personnel;

 

   

confidentiality, maintenance, data breach, identity theft and security issues associated with health-related and personal information and medical records; and

 

   

communications with patients and consumers.

Because of the breadth of these laws and the narrowness of certain statutory and regulatory exceptions and safe harbors that may be available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Complying with these laws may prove costly. Failure to comply with these laws and other laws can result in civil and criminal penalties such as fines, damages, overpayment, recoupment, imprisonment, loss of enrollment status and exclusion from participation in federal healthcare programs, including Medicare and Medicaid. The risk of us being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are sometimes open to a variety of interpretations. Our failure to accurately anticipate the application of these laws and regulations to our business or any other failure to comply with regulatory requirements could create liability for us and negatively affect our business. Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and result in adverse publicity.

To enforce compliance with the federal laws, the U.S. Department of Justice and the U.S. Department of Health and Human Services Office of Inspector General, or OIG, have recently increased their scrutiny of healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Telemedicine providers, in particular, have been subject to increased scrutiny by federal and state regulators and have resulted in significant enforcement actions. Dealing with investigations can be time- and resource-intensive and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. In addition, because of the potential for large monetary exposure under the federal False Claims Act, which provides for treble damages and penalties of $11,665 to $23,331 per false claim or statement for penalties assessed after June 19, 2020, and

 

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with respect to violations occurring after November 2, 2015, healthcare providers often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages that may be awarded in litigation proceedings. Such settlements often contain additional compliance and reporting requirements as part of a consent decree, settlement agreement or corporate integrity agreement. Notably, the government has been using its newly created authority under EKRA to pursue criminal enforcement actions against substance abuse treatment facilities for certain financial arrangements that were not subject to the federal Anti-Kickback Statute due to the absence of federal healthcare program reimbursement for services rendered by such facilities. EKRA’s statutory exceptions do not strictly mirror the safe harbors available under the federal Anti-Kickback Statute and in many instances, relationships that would otherwise comply with the federal Anti-Kickback Statute would nevertheless violate EKRA. EKRA grants authority to the U.S. Attorney General to promulgate additional exceptions, in consultation with the Secretary of HHS; however, the Attorney General has not yet done so. Notably, the OIG (the agency with authority to promulgate regulatory safe harbors under the federal Anti-Kickback Statute) does not have any authority over EKRA and the Attorney General does not have any particular expertise with healthcare fraud and abuse laws. Given this inexperience, there may be a substantial delay before any additional exceptions to EKRA are implemented. In the meantime, the U.S. Department of Justice is actively pursuing enforcement actions under EKRA. There is much uncertainty in how EKRA will be interpreted and applied and also, whether additional exceptions will be adopted in the future.

While we make every effort to comply with all applicable laws, we cannot rule out the possibility that the government or other third parties could interpret these laws differently and challenge our practices under one or more of these laws. The likelihood of allegations of non-compliance is increased by the fact that under certain federal and state laws applicable to our business, individuals, known as relators, may bring an action on behalf of the government alleging violations of such laws, and potentially be awarded a share of any damages or penalties ultimately awarded to the applicable government body.

The laws, regulations and standards governing the provision of healthcare services across the world including India and the U.S. may change significantly in the future. We cannot assure you that any new or changed healthcare laws, regulations or standards will not materially adversely affect our business. Further, we cannot assure you that a review of our business by judicial, law enforcement, regulatory or accreditation authorities will not result in a determination that could adversely affect our operations.

The healthcare industry in India is subject to laws, rules and regulations in the regions where we conduct our business or in which we intend to expand our operations.

Given our digital health centers are situated at multiple locations, we are subject to various and extensive local law, rules and regulations relating, among other things, to the setting up and operation of private medical care establishments. Health and safety laws and regulations in India are becoming increasingly stringent in the recent years, and it is possible that they will become significantly more stringent in the future. We may incur substantial costs in order to comply with current or future laws, rules and regulations. These current or future laws, rules and regulations may also impede our operations. Any non-compliance with the applicable laws, rules and regulations may subject us to regulatory action, including penalties and other civil or criminal proceedings, which may materially and adversely affect our business, prospects and reputation.

Our international operations pose certain risks to our business that may be different from risks associated with our domestic operations.

Our international business is subject to risks resulting from differing legal and regulatory requirements, political, social and economic conditions and unforeseeable developments in a variety of jurisdictions. We have one primary office globally and customers across more than nine countries worldwide. Our international operations are subject to particular risks in addition to those faced by our domestic operations, including:

 

   

uncertain legal and regulatory requirements applicable to digital health, technology services and solutions and prescription medication;

 

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multiple, conflicting and changing laws and regulations such as tax laws, privacy and data protection laws and regulations, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

 

   

our inability to replicate our domestic business structure consistently outside of the United States, especially as it relates to our contractual arrangement with affiliated professional entities;

 

   

the need to localize and adapt our solutions for specific countries, including translation into foreign languages and associated expenses;

 

   

potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights than U.S. laws or that may not be adequately enforced;

 

   

requirements of foreign laws and other governmental controls, including compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, healthcare, tax, privacy and data protection laws and regulations;

 

   

data privacy laws that require that client data be stored and processed in a designated territory;

 

   

new and different sources of competition and laws and business practices favoring local competitors;

 

   

local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited from engaging in by the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”) and other anti-corruption laws and regulations;

 

   

changes to economic sanctions laws and regulations;

 

   

central bank and other restrictions on our ability to repatriate cash from international subsidiaries;

 

   

adverse tax consequences;

 

   

fluctuations in currency exchange rates, economic instability and inflationary conditions, which could make our solutions more expensive or increase our costs of doing business in certain countries;

 

   

limitations on future growth or inability to maintain current levels of revenues from international sales if we do not invest sufficiently in our international operations;

 

   

different pricing environments, longer sales cycles and longer accounts receivable payment cycles and collections issues;

 

   

difficulties in staffing, managing and operating our international operations, including difficulties related to administering our stock plans in some foreign countries and increased financial accounting and reporting burdens and complexities;

 

   

difficulties in coordinating the activities of our geographically dispersed and culturally diverse operations;

 

   

natural disasters, political and economic instability, including wars, terrorism, social or political unrest, including civil unrest, protests, and other public demonstrations, outbreaks of disease, pandemics or epidemics, boycotts, curtailment of trade, and other market restrictions; and

 

   

regulatory and compliance risks that relate to maintaining accurate information and control over activities subject to regulation under the FCPA, and comparable laws and regulations in other countries.

Our overall success in international markets depends, in part, on our ability to anticipate and effectively manage these risks and there can be no assurance that we will be able to do so without incurring unexpected costs. If we are not able to manage the risks related to our international operations, our business, financial condition and results of operations may be materially adversely affected.

 

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Our failure to comply with the anti-corruption, trade compliance and economic sanctions laws and regulations of the United States and applicable international jurisdictions could materially adversely affect our reputation and results of operations.

We must comply with anti-corruption laws and regulations imposed by governments around the world with jurisdiction over our operations, which may include the FCPA and the U.K. Bribery Act 2010 (the “Bribery Act”), as well as the laws of the countries where we do business. These laws and regulations apply to companies, individual directors, officers, employees and agents, and may restrict our operations, trade practices, investment decisions and partnering activities. Where they apply, the FCPA and the Bribery Act prohibit us and our officers, directors, employees and business partners acting on our behalf, including joint venture partners and agents, from corruptly offering, promising, authorizing or providing anything of value to public officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The Bribery Act also prohibits non-governmental “commercial” bribery and accepting bribes. As part of our business, we may deal with governments and state-owned business enterprises, the employees and representatives of which may be considered public officials for purposes of the FCPA and the Bribery Act.

We also are subject to the jurisdiction of various governments and regulatory agencies around the world, which may bring our personnel and agents into contact with public officials responsible for issuing or renewing permits, licenses or approvals or for enforcing other governmental regulations. In addition, some of the international locations in which we will operate lack a developed legal system and have elevated levels of corruption. Our business also must be conducted in compliance with applicable export controls and trade and economic sanctions laws and regulations, including those of the U.S. government, the governments of other countries in which we will operate or conduct business and various multilateral organizations. Such laws and regulations include, without limitation, those administered and enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council and other relevant sanctions authorities. Our provision of services to persons located outside the United States may be subject to certain regulatory prohibitions, restrictions or other requirements, including certain licensing or reporting requirements. Our provision of services outside of the United States also exposes us to the risk of violating, or being accused of violating, anti-corruption, exports controls and trade compliance and economic sanctions laws and regulations. Our failure to successfully comply with these laws and regulations may expose us to reputational harm as well as significant sanctions, including criminal fines, imprisonment, civil penalties, disgorgement of profits, injunctions and suspension or debarment from government contracts, as well as other remedial measures. Investigations of alleged violations can be expensive and disruptive. Though we have implemented formal training and monitoring programs, we cannot assure compliance by our employees or representatives for which we may be held responsible, and any such violation could materially adversely affect our reputation, business, financial condition and results of operations.

As we expand our international operations, we will increasingly face political, legal and compliance, operational, regulatory, economic and other risks that we do not face or are more significant than in our domestic operations. Our exposure to these risks is expected to increase.

As we expand our international operations, we will increasingly face political, legal and compliance, operational, regulatory, economic and other risks that we do not face or that are more significant than in our domestic operations. These risks vary widely by country and include varying regional and geopolitical business conditions and demands, government intervention and censorship, discriminatory regulation, nationalization or expropriation of assets and pricing constraints. Our international products and services need to meet country-specific customer preferences as well as country-specific legal requirements, including those related to licensing, digital health, privacy, data storage, location, protection and security. Our ability to conduct digital health services internationally is subject to the applicable laws governing remote healthcare and the practice of medicine in such location, and the interpretation of these laws is evolving and vary significantly from country to county and are enforced by governmental, judicial and regulatory authorities with broad discretion. We believe we are in compliance with all applicable laws and regulations. We cannot, however, be certain that our

 

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interpretation of such laws and regulations is correct in how we structure our operations, our arrangements with physicians, services agreements and customer arrangements

Our international operations increase our exposure to, and require us to devote significant management resources to implement controls and systems to comply with the privacy and data protection laws of non-U.S. jurisdictions and the anti-bribery, anti-corruption and anti-money laundering laws of the United States (including the FCPA) and the United Kingdom (including the Bribery Act) and similar laws in other jurisdictions. Implementing our compliance policies, internal controls and other systems upon our expansion into new countries and geographies may require the investment of considerable management time and financial and other resources over a number of years before any significant revenues or profits are generated. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or employees, restrictions or outright prohibitions on the conduct of our business and significant brand and reputational harm. We must regularly reassess the size, capability and location of our global infrastructure and make appropriate changes, and must have effective change management processes and internal controls in place to address changes in our business and operations. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties, and the failure to do so could have a material adverse effect on our business, operating results, financial position, brand, reputation and/or long-term growth.

Our international operations require us to overcome logistical and other challenges based on differing languages, cultures, legal and regulatory schemes and time zones. Our international operations encounter labor laws, customs and employee relationships that can be difficult, less flexible than in our domestic operations and expensive to modify or terminate. In some countries we are required to, or choose to, operate with local business partners, which requires us to manage our partner relationships and may reduce our operational flexibility and ability to quickly respond to business challenges.

Our business is subject to changes in medication pricing and is significantly impacted by pricing structures negotiated by industry participants.

Our platform aggregates and analyzes pricing data from a number of different sources. The discounted prices that we present through our platform are based in large part upon pricing structures negotiated by industry participants. We do not control the pricing strategies of pharmaceutical manufacturers, wholesalers, and pharmacy benefit managers (“PBMs”), each of which is motivated by independent considerations and drivers that are outside our control and has the ability to set or significantly impact market prices for different prescription medications. While we have contractual and non-contractual relationships with certain industry participants, such as PBMs and pharmaceutical manufacturers, these and other industry participants often negotiate complex and multi-party pricing structures, and we have no control over these participants and the policies and strategies that they implement in negotiating these pricing structures.

Pharmaceutical manufacturers generally direct medication pricing by setting medication list prices and offering rebates and discounts for their medications. List prices are impacted by, among other things, market considerations such as the number of competitor medications and availability of alternative treatment options. Wholesalers can impact medication pricing by purchasing medications in bulk from pharmaceutical manufacturers and then reselling such medications to pharmacies. PBMs generally impact medication pricing through their bargaining power, negotiated rebates with pharmaceutical manufacturers and contracts with different pharmacy providers and health insurance companies. PBMs work with pharmacies to determine the negotiated rate that will be paid at the pharmacy by consumers. Medication pricing is also impacted by health insurance companies and the extent to which a health insurance plan provides for, among other things, covered medications, preferred tiers for different medications and high or low deductibles.

Changes in the fee and pricing structures among industry participants, whether due to regulatory requirements, competitive pressures or otherwise, that reduce or adversely impact fees generated by PBMs would have an adverse effect on our ability to generate revenue and business. Due in part to existing pricing structures,

 

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we generate a small portion of our revenue through contracts with pharmaceutical manufacturers and other intermediaries. Changes in the roles of industry participants and in general pricing structures, as well as price competition among industry participants, could have an adverse impact on our business. For example, integration of PBMs and pharmacy providers could result in pricing structures whereby such entities would have greater pricing power and flexibility or industry players could implement direct-to-consumer initiatives that could significantly alter existing pricing structures, either of which would have an adverse impact on our ability to present competitive and low prices to consumers and, as a result, the value of our platform for consumers and our results of operations.

If reimbursement rates paid by third-party payers are reduced, if third-party payers otherwise restrain our ability to obtain or provide services to patients, or if governments introduce free healthcare provisions or create the provision of significantly different paradigms of delivery service, our business could be negatively impacted.

Private third-party payers pay for the services that we provide through our behavioral digital health consult and on-site division. If any commercial third-party payers reduce their reimbursement rates or elect not to cover some or all of our services, our business may be harmed. Third-party payers are also entering into sole source contracts with some healthcare providers, which could effectively limit our pool of potential customers.

Private third-party payers often use plan structures, such as narrow networks or tiered networks, to encourage or require customers to use in-network providers. In-network providers typically provide services through private third-party payers for a negotiated lower rate or other less favorable terms. Private third-party payers generally attempt to limit use of out-of-network providers by requiring customers to pay higher copayment and/or deductible amounts for out-of-network care. Additionally, private third-party payers have become increasingly aggressive in attempting to minimize the use of out-of-network providers by disregarding the assignment of payment from customers to out-of-network providers (i.e., sending payments directly to customers instead of to out-of-network providers), capping out-of-network benefits payable to customers, waiving out-of-pocket payment amounts and initiating litigation against out-of-network providers for interference with contractual relationships, insurance fraud and violation of state licensing and consumer protection laws. If we become out of network for insurers, our behavioral health business could be harmed and our behavioral health patient service revenue could be reduced because customers could stop using our services.

If reimbursement rates paid by federal or state healthcare programs are reduced or if government payers otherwise restrain our ability to obtain or provide services to customers, our business, financial condition and results of operation could be harmed.

A portion of our revenue comes from government healthcare programs, principally Medicare and Tricare. Payments from federal and state government programs are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations, requirements for utilization review and federal and state funding restrictions, each of which could increase or decrease program payments, as well as affect the cost of providing service to patients. We are unable to predict the effect of recent and future policy changes on our operations. In addition, the uncertainty and fiscal pressures placed upon federal and state governments as a result of, among other things, deterioration in general economic conditions and the funding requirements from the federal healthcare reform legislation, may affect the availability of taxpayer funds for Medicare and Medicaid programs. Changes in government healthcare programs may reduce the reimbursement we receive and could adversely impact our business and results of operations.

As federal healthcare expenditures continue to increase, and state governments continue to face budgetary shortfalls, federal and state governments have made, and continue to make, significant changes in the Medicare and Medicaid programs. These changes include reductions in reimbursement levels and new or modified requirements related to Medicaid waivers. Some of these changes have decreased, or could decrease, the amount of money we receive for our services relating to these programs. In some cases, private third-party payers rely on

 

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all or portions of Medicare payment systems to determine payment rates. Changes to government healthcare programs that reduce payments under these programs may negatively impact payments from private third-party payers.

Our pharmacy and behavioral digital health businesses subject us to additional regulations; if we fail to comply, we could suffer penalties or be required to make significant changes to our operations.

Our pharmacy business is subject to extensive federal, state and local regulation. Pharmacies, pharmacists and pharmacy technicians are subject to a variety of federal and state statutes and regulations governing various aspects of the pharmacy business, including the distribution of drugs; operation of mail order pharmacies; licensure of facilities and professionals, including pharmacists, technicians and other healthcare professionals; packaging, storing, distributing, shipping and tracking of pharmaceuticals; repackaging of drug products; labeling, medication guides, and other consumer disclosures; interactions with prescribing professionals; compounding of prescription medications; counseling of patients; prescription transfers; advertisement of prescription products and pharmacy services; security; controlled substance inventory control and recordkeeping; and reporting to the U.S. Drug Enforcement Agency, the Food and Drug Administration (“FDA”), state boards of pharmacy, the U.S. Consumer Product Safety Commission and other state enforcement or regulatory agencies. Many states have laws and regulations requiring out-of-state mail-order pharmacies to register with that state’s board of pharmacy. In addition, the FDA inspects facilities in connection with procedures to effect recalls of prescription drugs. The Federal Trade Commission also has requirements for mail-order sellers of goods. The U.S. Postal Service (the “USPS”) has statutory authority to restrict the transmission of drugs and medicines through the mail to a degree that may have an adverse effect on our mail-order operations. The USPS historically has exercised this statutory authority only with respect to controlled substances. If the USPS restricts our ability to deliver drugs through the mail, alternative means of delivery are available to us. However, alternative means of delivery could be significantly more expensive. The U.S. Department of Transportation has regulatory authority to impose restrictions on drugs inserted into the stream of commerce. These regulations generally do not apply to the USPS and its operations. Any failure or perceived failure by us to comply with any applicable federal, state and local laws and regulations could have a material adverse effect on our business, financial condition and results of operations and may expose us to civil and criminal penalties.

We may be subject to fines, penalties and injunctions if we are determined to be promoting the use of products for unapproved uses.

Certain of the products available through our platform require approval by the FDA and are subject to the limitations placed by the FDA on the approved uses in the product prescribing information. Some of these products are prescribed by providers on the platform for “off-label” uses (i.e., for a use other than that specifically authorized by the FDA for the medication in question). While providers are legally permitted to prescribe medications for off-label uses, and although we believe our product promotion is conducted in material compliance with the FDA and other regulations, if the FDA determines that our product promotion constitutes promotion of an unapproved use of an approved product or of an unapproved product, the FDA could request that we modify our product promotion or subject us to regulatory and/or legal enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider the product promotion to constitute promotion of an unapproved use of an approved product or of an unapproved product, which could result in significant fines or penalties under other statutes, such as laws prohibiting false claims for reimbursement.

 

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If we fail to comply with federal and state laws and policies governing claim submissions to government healthcare programs or commercial insurance programs, we may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs and contractual claims by commercial insurers.

We prepare and submit claims for professional services and certain of these claims are governed by federal and state laws with potential civil and criminal penalties for non-compliance. The HIPAA security, privacy and transaction standards also have a potentially significant effect on our integrated care management services, because such services must be structured and provided in a way that supports our customers’ HIPAA compliance obligations. Errors by us or our systems with respect to entry, formatting, preparation or transmission of claim information may be determined or alleged to be in violation of these laws and regulations. If our integrated care management services fail to comply with these laws and regulations, we may be subjected to federal or state government investigations and possible penalties may be imposed upon us, false claims actions may have to be defended, private payers may file claims against us and we may be excluded from Medicare, Medicaid or other government-funded healthcare programs. Further, our customers may seek contractual remedies and indemnification. Any investigation or proceeding related to these topics, even if unwarranted or without merit, could adversely affect demand for our services, could force us to expend significant capital, research and development and other resources to address the failure, and may have a material adverse effect on our business, results of operations and financial condition.

If we fail to comply with Medicare and Medicaid regulatory, guidance or policy requirements, we may be subjected to reduced reimbursement, overpayment demands or loss of eligibility to participate in these programs.

The Medicare and Medicaid programs are highly regulated, and unique requirements governing the reimbursement of professional services delivered using digital health are evolving and complicated. In addition, changes in government healthcare programs may reduce the reimbursement we receive and could adversely affect our business and results of operations. In particular, there is uncertainty regarding whether temporary waivers of certain Medicare conditions of participation and payment for many virtual care services and temporary expansions of the types of Medicare-covered services that can be provided remotely will continue or be made permanent. If we fail to comply with applicable reimbursement laws and regulations, reimbursement under these programs and participation in these programs could be adversely affected. Federal or state governments may also impose other sanctions on us for failure to comply with the applicable reimbursement regulations, including but not limited to recovering an overpayment. Failure to comply with these or future laws and regulations could limit our ability to provide digital health services to our customers.

Recent and frequent state legislative and regulatory changes specific to digital health consults may present us with additional requirements and state compliance costs, with potential operational impacts in certain jurisdictions.

In recent years, various government agencies, both domestic and international, have adopted an abundance of new legislation and regulations specific to digital health. In some cases, this legislation and regulation, typically targeting “direct-to-consumer” digital health consult and pharmacy service offerings rather than specialty consultative services, such as our acute digital health solutions, incorporates informed consent, modality, medical record and other requirements. Thus, where new legislation and regulations apply to our digital health solutions, we may incur costs to monitor, evaluate and modify operational processes for compliance. All such activities increase our costs and could, in certain circumstances, impact our ability to make available digital health services in a particular state.

 

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Privacy, Cybersecurity, Technology and Intellectual Property

Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business.

Our proprietary technology platform provides customers and patients with the ability to, among other things, register for our services, request a visit (either scheduled or on demand) and communicate and interact with providers, and allows our providers to, among other things, chart patient notes, maintain medical records and conduct visits (via video, phone or the internet). Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties. We may encounter technical obstacles, and it is possible that we may discover additional problems that prevent our proprietary software from operating properly. We are currently implementing software with respect to a number of new applications and services. If our solutions do not function reliably or fail to achieve member, partner or customer expectations in terms of performance, we may lose or fail to grow customer usage, partners and customers could assert liability claims against us, and partners and customers may attempt to cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain health network partners and enterprise customers.

Our business is subject to complex and evolving foreign laws and regulations regarding privacy, data protection and other matters relating to information collection.

There are numerous foreign laws, regulations and directives regarding privacy and the collection, storage, transmission, use, processing, disclosure and protection of personally identifiable information (“PII”) and other personal or customer data, the scope of which is continually evolving and subject to differing interpretations. We must comply with such laws, regulations and directives and we may be subject to significant consequences, including penalties and fines, for our failure to comply. For example, as of May 25, 2018, the General Data Protection Regulation (the “GDPR”) replaced the Data Protection Directive with respect to the processing of personal data in the European Economic Area (the “EEA”). The GDPR imposes several stringent requirements for controllers and processors of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention and secondary use of information, increased requirements pertaining to health data and pseudonymized (i.e., key-coded) data and additional obligations when we contract with third-party processors in connection with the processing of personal data. The GDPR provides that EU member states may make their own further laws and regulations limiting the processing of genetic, biometric or health data, which could limit our ability to use and share personal data or could cause our costs to increase and could harm our business and financial condition. Failure to comply with the requirements of the GDPR and the applicable national data protection laws of the EU member states may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties. To comply with the data protection rules imposed by the GDPR we may be required to put in place additional mechanisms ensuring compliance. In addition, privacy laws are developing quickly in other jurisdictions where we operate, which impose similar accountability, transparency and security obligations. This may be onerous and adversely affect our business, financial condition, results of operations and prospects.

In addition, recent legal developments in Europe have created complexity and compliance uncertainty regarding certain transfers of information from the EEA to the United States. On July 16, 2020, the Court of Justice of the European Union issued its ruling in the case of the Irish Data Protection Commissioner v. Facebook Ireland and Maximillian Schrems (Case c-311/18). The ruling invalidated reliance on the EU-US Privacy Shield as a lawful means to transfer personal data from the EEA to the United States, while also affirming the EU Standard Contractual Clauses (“SCCs”) as a valid data transfer solution. The Court also held that data exporters and importers may need to employ supplementary measures when using SCCs depending on the nature of the transfer and the laws of the recipient country. After the ruling, the European Data Protection Board issued draft recommendations on the use of supplementary measures. Shortly thereafter, the European Commission issued new draft SCCs. We are analyzing these developments and their impact on our operations. If

 

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we are unable to transfer PII between and among countries and regions in which we operate, it could affect the manner in which we provide our services or could adversely affect our financial results. Furthermore, any failure, or perceived failure, by us to comply with or make effective modifications to our policies, or to comply with any federal, state or international privacy, data-retention or data-protection-related laws, regulations, orders or industry self-regulatory principles could result in proceedings or actions against us by governmental entities or others, a loss of customer confidence, damage to our brand and reputation, and a loss of customers, any of which could have an adverse effect on our business. In addition, various federal, state and foreign legislative or regulatory bodies may enact new or additional laws and regulations concerning privacy, data-retention and data-protection issues, including laws or regulations mandating disclosure to domestic or international law enforcement bodies, which could adversely impact our business, our brand or our reputation with customers. For example, some countries have adopted laws mandating that PII regarding customers in their country be maintained solely in their country. Having to maintain local data centers and redesign product, service and business operations to limit PII processing to within individual countries could increase our operating costs significantly.

Like the U.S., India also does not have country level regulations and authorities to control data transfer and management. The most prominent provisions are contained in the Information Technology Act, 2000, that was amended by the Information Technology Amendment Act, 2008. In particular, Section 43A, which addresses ‘reasonable security practices and procedures’ is complemented by the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (“Personal Data Protection Rules”). The Personal Data Protection Rules prescribe directions for the collection, disclosure, transfer and protection of sensitive personal data by a company or any person acting on behalf of a company. Further, the Personal Data Protection Rules require every such company to provide a stipulated privacy policy, which is to be published on its website, for dealing with personal information, including sensitive personal data and ensuring security of all personal data collected by it.

The India Supreme Court, in a judgment delivered on August 24, 2017, held that the right to privacy is a fundamental right, following which, the GoI set up a Committee of Experts to examine issues around, and draft a legislation on data-protection in India. The committee submitted its final report and a draft Personal Data Protection Bill to the Ministry of Electronics and Information Technology. The draft of the Personal Data Protection Bill, 2019 (“Data Protection Bill”) has been introduced before the Lok Sabha on December 11, 2019, which is currently being referred to a joint parliamentary committee by the Parliament. The Data Protection Bill proposes a legal framework governing the processing of personal data, where such data has been collected, disclosed, shared or otherwise processed within India, as well as any processing of personal data by the State, Indian companies, Indian citizens or any person or body of persons incorporated or created under India law. The Data Protection Bill defines personal data and sensitive personal data, prescribes rules for collecting, storing and processing of such data and creates rights and obligations of data-subjects and processors.

Our use and disclosure of personally identifiable information, including health information, is subject to federal and state privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm and, in turn, a material adverse effect on our customer base and revenue.

Numerous state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability and integrity of PII, including protected health information (“PHI”). These laws and regulations include HIPAA. HIPAA establishes a set of basic national privacy and security standards for the protection of PHI, by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services, which includes us.

HIPAA requires healthcare providers like us to develop and maintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical and technical safeguards to

 

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protect such information. HIPAA also implemented the use of standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including activities associated with the billing and collection of healthcare claims.

HIPAA imposes mandatory penalties for certain violations. Penalties for violations of HIPAA and its implementing regulations start at $119 per violation and are not to exceed $59,522 per violation, subject to a cap of $178,000,000 for violations of the same standard in a single calendar year. However, a single breach incident can result in violations of multiple standards. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts are able to award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

In addition, HIPAA mandates that the Secretary of Health and Human Services, or HHS, conduct periodic compliance audits of HIPAA covered entities or business associates for compliance with the HIPAA Privacy and Security Standards. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator.

HIPAA further requires that patients be notified of any unauthorized acquisition, access, use or disclosure of their unsecured PHI that compromises the privacy or security of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals. HIPAA specifies that such notifications must be made “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach.” If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public web site. Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually.

New health information standards, whether implemented pursuant to HIPAA, congressional action or otherwise, could have a significant effect on the manner in which we must handle healthcare related data, and the cost of complying with standards could be significant. If we do not comply with existing or new laws and regulations related to PHI, we could be subject to criminal or civil sanctions.

In addition to HIPAA, certain of our operations may be subject to the regulations governing the protection patient records created by federally assisted programs for the treatment of substance use disorder (“SUD”) under 42 CFR Part 2 (the “Part 2 Rule”), implemented by the Substance Abuse and Mental Health Services Administration (“SAMHSA”). The Part 2 Rule requires additional confidentiality obligations related to SUD treatment records and generally speaking, restricts the disclosure of SUD treatment records without patient consent, other than as statutorily authorized in the context of a bona fide medical emergency, or for the purpose of scientific research, audit, or program evaluation, or based on an appropriate court order. On July 15, 2020, SAMHSA issued a final rule on the protection of SUD treatment records under the Part 2 Rule that aims to reduce delays and burdens in care coordination by more closely aligning Part 2 with the HIPAA Privacy Rule, while maintaining certain privacy protections specific to Part 2. This final rule was effective August 14, 2020. Nevertheless, we must ensure that SUD treatment records covered under Part 2 are afforded the additional legal protections mandated by Part 2.

Numerous other federal and state laws protect the confidentiality, privacy, availability, integrity and security of PII, including PHI. These laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and our customers and potentially exposing us to additional expense, adverse publicity and liability. For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to alleged privacy and data security violations and certain states have adopted

 

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privacy and security standards that a more restrictive than HIPAA and that apply to PII in addition to PHI. For instance, the California Consumer Privacy Act, or CCPA, which came into effect January 1, 2020, was recently amended and expanded by the California Privacy Rights Act (CPRA) passed on November 3, 2020. Most of the CPRA’s substantive provisions will not take effect until January 1, 2023, however, the CPRA’s expansion of the “Right to Know” impacts personal information collected on or after January 1, 2022. Companies must still comply with the CCPA during the ramp up period before CPRA goes into effect. The CCPA and CPRA, among other things, create new data privacy obligations for covered companies and provide new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also created a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. It remains unclear what, if any, additional modifications will be made to the CPRA by the California legislature or how it will be interpreted.

In addition to the laws discussed above, we may see more stringent state and federal privacy legislation in 2021 and beyond, as the increased cyber-attacks during the pandemic have once again put a spotlight on data privacy and security in the U.S. and other jurisdictions. We cannot predict where new legislation might arise, the scope of such legislation, or the potential impact to our business and operations. This myriad of data privacy and security laws and regulations and the evolving regulatory landscape create complex compliance issues for us and our clients and potentially expose us to additional expense, adverse publicity and liability.

Because of the extreme sensitivity of the PII we store and transmit, the security features of our technology platform are very important. If our security measures, some of which are managed by third parties, are breached or fail, unauthorized persons may be able to obtain access to sensitive client and customer data, including HIPAA-regulated PHI. As a result, our reputation could be severely damaged, adversely affecting customer and member confidence. Customers may curtail their use of, or stop using, our services or our customer base could decrease, which would cause our business to suffer. In addition, we could face litigation, damages for contract breach, penalties and regulatory actions for violation of HIPAA and other applicable laws or regulations and significant costs for remediation, notification to individuals and for measures to prevent future occurrences. Any potential security breach could also result in increased costs associated with liability for stolen assets or information, repairing system damage that may have been caused by such breaches, incentives offered to customers or other business partners in an effort to maintain our business relationships after a breach and implementing measures to prevent future occurrences, including organizational changes, deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants. While we maintain insurance covering certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage sufficient to compensate for all liability and in any event, insurance coverage would not address the reputational damage that could result from a security incident.

We outsource important aspects of the storage and transmission of client and patient information, and thus rely on third parties to manage functions that have material cybersecurity risks. We attempt to address these risks by requiring outsourcing subcontractors who handle client and customer information to sign business associate agreements contractually requiring those subcontractors to adequately safeguard PHI and PII to the same extent that applies to us and in some cases by requiring such outsourcing subcontractors to undergo third-party security assessments. In addition, we periodically hire third-party security experts to assess and test our security posture. However, we cannot assure you that these contractual measures and other safeguards will adequately protect us from the risks associated with the storage and transmission of customers’ proprietary and protected health information.

We also publish statements to our customers that describe how we handle and protect PHI and PII. If federal or state regulatory authorities or private litigants consider any portion of these statements to be untrue, we may be subject to claims of deceptive practices, which could lead to significant liabilities and consequences, including, without limitation, costs of responding to investigations, defending against litigation, settling claims and complying with regulatory or court orders.

 

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We also send short message service, or SMS, text messages to potential end users who are eligible to use our service through certain customers and partners. While we obtain consent from or on behalf of these individuals to send text messages, federal or state regulatory authorities or private litigants may claim that the notices and disclosures we provide, or form of consents we obtain or our SMS texting practices, are not adequate. These SMS texting campaigns are potential sources of risk for class action lawsuits and liability for our company. Numerous class-action suits under federal and state laws have been filed in the past year against companies who conduct SMS texting programs, with many resulting in multi-million-dollar settlements to the plaintiffs. Any future such litigation against us could be costly and time-consuming to defend.

We rely on data center providers, Internet infrastructure, bandwidth providers, third-party computer hardware and software, other third parties and our own systems for providing services to our customers, and any failure or interruption in the services provided by these third parties or our own systems could expose us to litigation and negatively impact our relationships with customers, adversely affecting our brand and our business.

We serve all of our customers leveraging a multi-cloud architecture using four vendors: Armor Defense; AWS, Microsoft Azure, and Google. This architecture provides redundancy, cost savings, and reduces our reliance on one single vendor. The actual instances are geographically diverse to insulate our applications from local failures, and have an additional layer of redundancy provided by company managed data centers. While we control and have access to our servers, we do not control the operation of these facilities. The cloud vendors and the owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if one of our cloud vendors or data center operators is acquired, we may be required to transfer our servers and other infrastructure to a new vendor or a new data center facility, and we may incur significant costs and possible service interruption in connection with doing so. Problems faced by our cloud vendors or third-party data center locations with the telecommunications network providers with whom we or they contract or with the systems by which our telecommunications providers allocate capacity among their customers, including us, could adversely affect the experience of our customers. Our cloud vendors or third-party data center operators could decide to close their facilities without adequate notice. In addition, any financial difficulties, such as bankruptcy faced by our cloud vendors or third-party data centers operators or any of the service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict.

Additionally, if our cloud or data centers vendors are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business. For example, a rapid expansion of our business could affect the service levels at our cloud vendors or data centers or cause such cloud systems or data centers and systems to fail. Any changes in third-party service levels at our cloud vendors or data centers or any disruptions or other performance problems with our products and services could adversely affect our reputation and may damage our customers’ stored files or result in lengthy interruptions in our services. Interruptions in our services may reduce our revenue, cause us to issue refunds to customers for prepaid and unused subscriptions, subject us to potential liability or adversely affect customer renewal rates.

We also rely on computer hardware purchased or leased and software licensed from third parties in order to offer our services, including software from Google, , Microsoft, Apple, Audiocodes, Atlassian, Perforce, PMease and Redhat Corporation, and routers and network equipment from Cisco, Dell, Lenovo and Hewlett-Packard Company. These licenses are generally commercially available on varying terms. However, it is possible that this hardware and software may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use any of this hardware or software could result in delays in the provisioning of our services until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated. These licenses are generally commercially available on varying terms. However, it is possible that this hardware and software may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use any of this hardware or software could result in delays in the provisioning of our services until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated.

 

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Our ability to deliver our internet-based and mobile-application based services depends on the development and maintenance of the infrastructure of the internet by third parties. This includes maintenance of a reliable network backbone with the necessary speed, data capacity, bandwidth capacity and security. Our services are designed to operate without interruption. However, we may experience future interruptions and delays in services and availability from time to time. In the event of a catastrophic event with respect to one or more of our systems or those of our service providers, we may experience an extended period of system unavailability, which could negatively impact our relationship with customers, providers, partners, and suppliers.

We exercise limited control over third-party vendors, which increases our vulnerability to problems with technology and information services they provide. Interruptions in our network access and services may in connection with third-party technology and information services reduce our revenue, cause us to issue refunds to customers for prepaid and unused subscription services, subject us to potential liability or adversely affect client renewal rates. Although we maintain a security and privacy damages insurance policy, the coverage under our policies may not be adequate to compensate us for all losses that may occur related to the services provided by our third-party vendors. In addition, we may not be able to continue to obtain adequate insurance coverage at an acceptable cost, if at all.

If our security measures fail or are breached and unauthorized access to a customer’s data is obtained, our services may be perceived as insecure, we may incur significant liabilities, our reputation may be harmed and we could lose sales and customers.

Our services involve the storage and transmission of customers’ proprietary information, sensitive or confidential data, including valuable intellectual property and personal information of employees, customers and others, as well as the protected health information, or PHI, of our customers. Because of the extreme sensitivity of the information we store and transmit, the security features of our computer, network and communications systems infrastructure are critical to the success of our business. A breach or failure of our security measures, or the security of our data storage vendors, could result from a variety of circumstances and events, including third-party action, employee negligence or error, malfeasance, computer viruses, cyber-attacks by computer hackers, failures during the process of upgrading or replacing software and databases, power outages, hardware failures, telecommunication failures, user errors or catastrophic events. Information security risks have generally increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks. As cyber threats continue to evolve, we may be required to expend additional resources to further enhance our information security measures and/or to investigate and remediate any information security vulnerabilities. If our or our vendors’ security measures fail or are breached, it could result in unauthorized persons accessing sensitive client data (including PHI), a loss of or damage to our data or an inability to access data sources or process data or provide our services to our customers. Such failures or breaches of our security measures, or our inability to effectively resolve such failures or breaches in a timely manner, could severely damage our reputation, adversely affect customer or investor confidence in us, and reduce the demand for our services from existing and potential customers. In addition, we could face litigation, damages for contract breach, monetary penalties or regulatory actions for violation of applicable laws or regulations and incur significant costs for remedial measures to prevent future occurrences and mitigate past violations. Although we maintain insurance covering certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage sufficient to compensate for all liability and in any event, insurance coverage would not address the reputational damage that could result from a security incident.

We may experience cybersecurity and other breach incidents that remain undetected for an extended period. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched, we may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of our security occurs, or if we are unable to effectively resolve such breaches in a timely manner, the market perception of the effectiveness of our security measures could be harmed and we could lose sales, customers, which could have a material adverse effect on our business, operations, and financial results.

 

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We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights.

In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. Companies in the Internet and technology industries are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights, and our competitors and other third parties may hold patents or have pending patent applications, which could be related to our business. These risks have been amplified by the increase in third parties, which we refer to as non-practicing entities, whose sole primary business is to assert such claims. Regardless of the merits of any intellectual property litigation, we may be required to expend significant management time and financial resources on the defense of such claims, and any adverse outcome of any such claim or the above referenced review could have a material adverse effect on our business, financial condition or results of operations. We expect that we may receive in the future notices that claim we or our customers using our products have misappropriated or misused other parties’ intellectual property rights, particularly as the number of competitors in our market grows and the functionality of applications amongst competitors overlaps. Any future litigation, whether or not successful, could be extremely costly to defend, divert our management’s time, attention and resources, damage our reputation and brand and substantially harm our business.

In addition, in most instances, we have agreed to indemnify our customers against certain third-party claims, which may include claims that our products infringe the intellectual property rights of such third parties. Our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of our indemnification obligations to them. The results of any intellectual property litigation to which we may become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:

 

   

cease offering or using technologies that incorporate the challenged intellectual property;

 

   

make substantial payments for legal fees, settlement payments or other costs or damages;

 

   

obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology; or

 

   

redesign technology to avoid infringement.

If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us or any obligation to indemnify our customers for such claims, such payments or costs could have a material adverse effect on our business, financial condition and results of operations.

We are currently party to, and may enter into future, in-bound intellectual property license agreements. We may not be able to fully protect the intellectual property rights licensed to us or maintain those licenses. Our licensors may retain the right to prosecute and defend the intellectual property rights licensed to us, in which case we would depend on the ability of our licensors to obtain, maintain and enforce intellectual property protection for the licensed intellectual property. These licensors may determine not to pursue litigation against other companies or may pursue such litigation less aggressively than we would. In addition, such licenses may only provide us with non-exclusive rights, which could allow other third parties, including our competitors, to utilize the licensed intellectual property rights. Further, our in-bound license agreements may impose various diligence, commercialization, royalty or other obligations on us. Our licensors may allege that we have breached our license agreement with them, and accordingly seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects.

Any failure to protect our intellectual property rights could impair our ability to protect our technology and our brand.

Our success depends in part on our ability to enforce our intellectual property and other proprietary rights. We rely upon a combination of patent, trademark, copyright, and trade secret laws, as well as license and access

 

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agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. Glocal currently has a pending patent application in India and plans to file for additional patents in the near future. In addition, we attempt to protect our intellectual property and proprietary information by requiring our employees, consultants and certain of our contractors to execute confidentiality and assignment of inventions agreements. These laws, procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties may gain access to our proprietary information, develop and market solutions similar to ours or use trademarks similar to ours, each of which could materially harm our business. Unauthorized parties may also attempt to copy or obtain and use our technology to develop applications with the same functionality as our products, and policing unauthorized use of our technology and intellectual property rights is difficult and may not be effective. The failure to adequately protect our intellectual property and other proprietary rights could have a material adverse effect on our business, financial condition and results of operations.

Tax

Certain U.S. state tax authorities may assert that we have a state nexus and seek to impose state and local income taxes, which could adversely affect our results of operations.

We are currently operate in all fifty states. There is a risk that certain state tax authorities where we do not currently file a state income tax return could assert that we are liable for state and local income taxes based upon income or gross receipts allocable to such states. States are becoming increasingly aggressive in asserting a nexus for state income tax purposes. We could be subject to state and local taxation, including penalties and interest attributable to prior periods, if a state tax authority successfully asserts that our activities give rise to a nexus. Such tax assessments, penalties and interest may adversely affect our results of operations.

Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use or similar taxes for digital health services, which could adversely affect our results of operations.

We do not collect sales and use and similar taxes in any states for digital health services based on our belief that our services are not subject to such taxes in any state. Sales and use and similar tax laws and rates vary greatly from state to state. Additionally, we do not collect value-added tax or similar taxes in certain foreign jurisdictions based on our belief that our services are not subject to such taxes. Certain states or foreign jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest with respect to past services, and we may be required to collect such taxes for services in the future. Such tax assessments, penalties and interest or future requirements may adversely affect our results of operations.

 

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Risks Related to the Company and the Business Combinations

The Company has no operating history and is subject to a mandatory liquidation and subsequent dissolution requirement. If the Company is unable to consummate a business combination, including the Business Combinations, its public stockholders may be forced to wait until after March 10, 2021 (or such later date as may arise if we amend our certificate of incorporation again to further extend the time that we have to consummate a business combination) before receiving distributions from the Trust Account.

The Company is a development stage blank check company, and as it has no operating history and is subject to a mandatory liquidation and subsequent dissolution requirement. The Company has until March 10, 2021 to complete a business combination, unless we amend our certificate of incorporation again to further extend the time that we have to consummate a business combination. On February 2, 2021, we filed a preliminary proxy statement to request that our stockholders extend such deadline to June 10, 2021. The Company has no obligation to return funds to investors prior to such date unless (i) it consummates a business combination prior thereto or (ii) it seeks to amend its current amended and restated certificate of corporation prior to consummation of a business combination, and only then in cases where investors have sought to convert or sell their shares to the Company. Only after the expiration of this full time period will public security holders be entitled to distributions from the Trust Account if the Company is unable to complete a business combination. Accordingly, investors’ funds may be unavailable to them until after such date and to liquidate their investment, public security holders may be forced to sell their public shares, rights or warrants, potentially at a loss. In addition, if the Company fails to complete an initial business combination by March 10, 2021 (or such later date as may arise if we amend our certificate of incorporation again to further extend the time that we have to consummate a business combination), there will be no Redemption Rights or liquidating distributions with respect to the rights and warrants, which will expire worthless, unless the Company amends its certificate of incorporation to extend its life and certain other agreements it has entered into.

We have no operating or financial history and our results of operations and those of the post-combination company may differ significantly from the unaudited pro forma financial data included in this proxy statement/prospectus.

We are a blank check company and we have no operating history and no revenues. This proxy statement/prospectus includes unaudited pro forma condensed combined financial statements for the post-combination company. The unaudited pro forma condensed combined statement of operations of the post-combination company combines the historical audited results of operations of the Company for the year ended December 31, 2019 and the unaudited results of the Company for the three and nine months ended September 30, 2020, with the historical audited results of operations of UpHealth and Cloudbreak for the year ended December 31, 2019, the unaudited results of UpHealth for the three and nine months ended September 30, 2020 and the unaudited results of Cloudbreak for the three and nine months ended September 30, 2020, respectively, and gives pro forma effect to the Business Combinations as if it had been consummated on January 1, 2019. The unaudited pro forma condensed combined balance sheet of the post-combination company combines the historical balance sheets of the Company as of September 30, 2020, of UpHealth as of September 30, 2020 and of Cloudbreak as of September 30, 2020 and gives pro forma effect to the Business Combinations as if it had been consummated on September 30, 2020.

The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the Business Combinations and the acquisitions of UpHealth and Cloudbreak been consummated on the dates indicated above, or the future consolidated results of operations or financial position of the post-combination company. Accordingly, the post-combination company’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in this document. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

 

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Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

We will be subject to income taxes in the United States and other jurisdictions, and our tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

   

changes in the valuation of our deferred tax assets and liabilities;

 

   

expected timing and amount of the release of any tax valuation allowances;

 

   

tax effects of stock-based compensation;

 

   

costs related to intercompany restructurings;

 

   

changes in tax laws, regulations or interpretations thereof; or

 

   

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

In addition, we may be subject to audits of our income, sales and other transaction taxes by taxing authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify), and our warrants will expire worthless.

If we are unable to complete an initial business combination by the applicable deadline, our public stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third-party brings a claim against us that our Sponsor is unable to indemnify (as described herein)) and our warrants will expire worthless.

Following the consummation of the Business Combinations, our only significant asset will be our ownership interest in New UpHealth and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock or satisfy our other financial obligations.

Following the consummation of the Business Combinations, we will have no direct operations and no significant assets other than our ownership of UpHealth and Cloudbreak. The UpHealth equity holders, the Cloudbreak equity holders, the directors and officers of UpHealth and the directors and officers of Cloudbreak and their respective affiliates will become stockholders of the post-combination company at that time. We will depend on UpHealth and Cloudbreak for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company and to pay any dividends with respect to our Common Stock. The financial condition and operating requirements of UpHealth and Cloudbreak may limit our ability to obtain cash from UpHealth or Cloudbreak. The earnings from, or other available assets of, UpHealth or Cloudbreak may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock or satisfy our other financial obligations.

The ability of UpHealth or Cloudbreak to make distributions, loans and other payments to us for the purposes described above and for any other purpose may be limited by credit agreements to which UpHealth or Cloudbreak is party from time to time, including existing loans and security agreements described in “TTC Healthcare’s Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and “Cloudbreak’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and will be subject to the negative covenants set forth therein. Any loans or other extensions of credit to us from UpHealth or Cloudbreak will be permitted only to the extent there is an applicable exception to the investment

 

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covenants under these credit agreements. Similarly, any dividends, distributions or similar payments to us from UpHealth or Cloudbreak will be permitted only to the extent there is an applicable exception to the dividends and distributions covenants under these credit agreements.

Because we have no current plans to pay cash dividends on shares of Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your shares of Common Stock for a price greater than that which you paid for it.

We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of the Company’s Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in the Company’s Common Stock unless you sell your Common Stock for a price greater than that which you paid for it.

There can be no assurance that New UpHealth Common Stock will be approved for listing on the NYSE or that New UpHealth will be able to comply with the continued listing standards of NYSE.

In connection with the closing of the Business Combinations, we intend to list New UpHealth’s Common Stock and warrants on the NYSE under the symbols “UPH” and “UPH.WS,” respectively. New UpHealth’s continued eligibility for listing may depend on the number of the Company’s shares that are redeemed. If, after the Business Combinations, the NYSE delists New UpHealth’s shares from trading on its exchange for failure to meet the listing standards, New UpHealth and its stockholders could face significant material adverse consequences including:

 

   

a limited availability of market quotations for New UpHealth’s securities;

 

   

a determination that New UpHealth Common Stock is a “penny stock” which will require brokers trading in New UpHealth Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of New UpHealth Common Stock;

 

   

a limited amount of analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

The Company’s independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about its ability to continue as a “going concern.”

As of January 31, 2021, the Company had $168,000,000 million in cash held in trust. As of September 30, 2020, the Company had a working capital of $545,000. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans, including the Business Combination Agreements. The Company cannot assure you that its plans to raise capital or to consummate an initial business combination, including the Business Combination Agreements, will be successful. These factors, among others, raise substantial doubt about its ability to continue as a going concern. The financial statements contained elsewhere in this proxy statement/prospectus do not include any adjustments that might result from its inability to consummate the Business Combinations or its inability to continue as a going concern.

 

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Subsequent to the consummation of the Business Combinations, the post-combination company may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.

Although the Company has conducted due diligence on UpHealth and Cloudbreak, the Company cannot assure you that this diligence revealed all material issues that may be present in UpHealth’s or Cloudbreak’s business, as applicable, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the Company’s, UpHealth’s and Cloudbreak’s control will not later arise. As a result, the post-combination company may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if the Company’s due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with the Company’s preliminary risk analysis. Even though these charges may be non-cash items and may not have an immediate impact on the post-combination company’s liquidity, the fact that the post-combination company reports charges of this nature could contribute to negative market perceptions about it or its securities. In addition, charges of this nature may cause the post-combination company to be unable to obtain future financing on favorable terms or at all.

Following the consummation of the Business Combinations, New UpHealth will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.

Following the consummation of the Business Combinations, New UpHealth will face increased legal, accounting, administrative and other costs and expenses as a public company that UpHealth and Cloudbreak do not incur as private companies. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, Public Company Accounting Oversight Board (the “PCAOB”) and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements will require New UpHealth to carry out activities neither UpHealth nor Cloudbreak has not done previously. For example, New UpHealth will create new board committees and adopt new internal controls and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), New UpHealth could incur additional costs rectifying those issues, and the existence of those issues could adversely affect New UpHealth’s reputation or investor perceptions of it. It may also be more expensive to obtain director and officer liability insurance. Risks associated with New UpHealth’s status as a public company may make it more difficult to attract and retain qualified persons to serve on the New UpHealth Board or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require New UpHealth to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

The Initial Stockholders have agreed to vote in favor of the Business Combinations, regardless of how the Company’s public stockholders vote.

Unlike some other blank check companies in which the initial stockholders agree to vote their Founder shares in accordance with the majority of the votes cast by the public stockholders in connection with an initial business combination, the Initial Stockholders have agreed (i) to vote their shares in favor of any proposed business combination, including the Business Combinations, (ii) not to convert their shares in connection with a

 

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stockholder vote to approve a proposed initial business combination, and (iii) not to sell any such shares to the Company in a tender offer in connection with any proposed business combination. Our Initial Stockholders have agreed to vote their shares in favor of each of the UpHealth Business Combination Proposal and the Cloudbreak Business Combination Proposal. As a result, we would need only 5,837,560, or approximately 35%, of the 16,670,119 public shares, to be voted in favor of the Business Combination Agreements in order to have the Business Combinations approved. Accordingly, it is more likely that the necessary stockholder approval will be received than would be the case if the Initial Stockholders agreed to vote their Founder Shares and Private Placement Shares in accordance with the majority of the votes cast by the Company’s public stockholders.

The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus may not be indicative of what the Company’s actual financial position or results of operations would have been.

The unaudited pro forma condensed combined financial information in this proxy statement/prospectus is presented solely for illustrative purposes only and is not necessarily indicative of what the Company’s actual financial position or results of operations would have been had the Business Combinations completed on the dates indicated. See the section titled “Unaudited Pro Forma Condensed Combined Financial Information” for more information.

If third parties bring claims against the Company, the proceeds held in trust could be reduced and the per-share redemption price received by stockholders may be less than $10.00 per share.

The Company’s placing of funds in trust may not protect those funds from third party claims against the Company. Although the Company has sought to have all vendors and service providers the Company engages and prospective target businesses the Company negotiated with execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of the Company’s public stockholders, they may not execute such agreements. Furthermore, even if such entities execute such agreements with the Company, they may seek recourse against the Trust Account. A court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of the Company’s public stockholders. If the Company is unable to complete a business combination and distribute the proceeds held in trust to the Company’s public stockholders, the Sponsor has agreed (subject to certain exceptions described elsewhere in this proxy statement/prospectus) that it will be liable to ensure that the proceeds in the Trust Account are not reduced below $10.00 per share by the claims of target businesses or claims of vendors or other entities that are owed money by the Company for services rendered or contracted for or products sold to the Company. However, it may not be able to meet such obligation. Therefore, the per-share distribution from the Trust Account may be less than $10.00, plus interest, due to such claims.

Additionally, if the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against the Company’s which is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in the Company’s bankruptcy estate and subject to the claims of third parties with priority over the claims of the Company’s stockholders. To the extent any bankruptcy claims deplete the Trust Account, the Company may not be able to return to the Company’s public stockholders at least $10.00. The Sponsor may not have sufficient funds to satisfy its indemnity obligations, as its only assets are securities of the Company. The Company has not asked the Sponsor to reserve for such indemnification obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for the Company’s initial business combination, including the Business Combinations, and redemptions could be reduced to less than $10.00 per public share.

 

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Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.

In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share and (ii) the actual amount per share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.

If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our Board may be exposed to claims of punitive damages.

If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors.

The Company’s stockholders may be held liable for claims by third parties against the Company to the extent of distributions received by them.

The Company’s certificate of incorporation provides that it will continue in existence only until March 10, 2021, unless we amend our certificate of incorporation again to further extend the time that we have to consummate a business combination. If the Company has not completed a business combination by such date, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including any interest earned on the funds held in the Trust Account net of interest that may be used by the Company to pay its franchise and income taxes payable and up to $100,000 for dissolution expenses, divided by the number

 

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of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and our Board, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

If the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against the Company which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by the Company’s stockholders. Furthermore, because GigCapital2 intends to distribute the proceeds held in the public shares to the Company’s public stockholders promptly after expiration of the time the Company has to complete an initial business combination, this may be viewed or interpreted as giving preference to the Company’s public stockholders over any potential creditors with respect to access to or distributions from the Company’s assets. Furthermore, our Board may be viewed as having breached their fiduciary duties to the Company’s creditors and/or may have acted in bad faith, and thereby exposing itself and the Company to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors. The Company cannot assure you that claims will not be brought against it for these reasons.

Neither the Company nor its stockholders will have the protection of any indemnification, escrow, price adjustment or other provisions that allow for a post-closing adjustment to be made to the total aggregate closing consideration in the event that any of the representations and warranties made by UpHealth or Cloudbreak in the Business Combinations, as applicable, ultimately proves to be inaccurate or incorrect.

The representations and warranties made by UpHealth, Cloudbreak and the Company to each other in the Business Combination Agreements will not survive the consummation of the Business Combinations. As a result, the Company and its stockholders will not have the protection of any indemnification, escrow, price adjustment or other provisions that allow for a post-closing adjustment to be made to the total merger consideration if any representation or warranty made by UpHealth in the UpHealth Business Combination Agreement and Cloudbreak in the Cloudbreak Business Combination Agreement proves to be inaccurate or incorrect. Accordingly, to the extent such representations or warranties are incorrect, the Company would have no indemnification claim with respect thereto and its financial condition or results of operations could be adversely affected.

GigCapital2 may not have sufficient funds to satisfy indemnification claims of its directors and executive officers.

GigCapital2 has agreed to indemnify its officers and directors to the fullest extent permitted by law. However, GigCapital2’s officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the Trust Account and not to seek recourse against the Trust Account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by GigCapital2 only if (i) GigCapital2 has sufficient funds outside of the Trust Account or (ii) GigCapital2 consummates an initial business combination. GigCapital2’s obligation to indemnify its officers and directors may discourage stockholders from bringing a lawsuit against its officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against GigCapital2’s officers and directors, even though such an action, if successful, might otherwise benefit GigCapital2 and its stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent GigCapital2 pays the costs of settlement and damage awards against its officers and directors pursuant to these indemnification provisions.

 

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If the Company does not file and maintain a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants, holders will only be able to exercise such warrants on a “cashless basis.”

If the Company does not file and maintain a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available. As a result, the number of shares of Common Stock that holders will receive upon exercise of the warrants will be fewer than it would have been had such holder exercised its warrant for cash. Further, if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise their warrants for cash if a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants is available. Under the terms of the warrant agreement, the Company has agreed to use its best efforts to meet these conditions and to file and maintain a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants until the expiration of the warrants. However, the Company cannot assure you that it will be able to do so. If the Company is unable to do so, the potential “upside” of the holder’s investment in the Company may be reduced or the warrants may expire worthless.

Even if the Company consummates the Business Combinations, there is no guarantee that the warrants will ever be in the money, and they may expire worthless and the terms of warrants may be amended.

The exercise price for the warrants is $11.50 per share of Common Stock. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

In addition, the Company’s warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and the Company. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any other change. Accordingly, the Company may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment. Although the Company’s ability to amend the terms of the warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares and their respective affiliates and associates have of Common Stock purchasable upon exercise of a warrant.

The exercise price for our public warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the public warrants are more likely to expire worthless.

The exercise price of our public warrants is higher than is typical with many similar blank check companies in the past. Historically, with regard to units offered by blank check companies, the exercise price of a public warrant was generally a fraction of the purchase price of the units in the initial public offering. The exercise price for our public warrants is $11.50 per share, subject to adjustment as provided herein. As a result, the public warrants are less likely to ever be in the money and more likely to expire worthless.

The Company may amend the terms of the rights in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then outstanding rights.

The rights are issued in registered form under a right agreement between Continental Stock Transfer & Trust Company, as rights agent, and the Company. The right agreement provides that the terms of the rights may be amended without the consent of any holder to cure any ambiguity or correct any defective provision. The right agreement requires the approval by the holders of at least 65% of the then outstanding rights in order to make any change that adversely affects the interests of the registered holders.

 

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Warrants will become exercisable for our Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

Our public warrants are exercisable for 17,250,000 shares of Common Stock as part of our IPO at $11.50 per share. The additional shares of our Common Stock issued upon exercise of our warrants will result in dilution to the then existing holders of Common Stock of the Company and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock.

Stockholders may not know immediately after the Special Meeting whether we have satisfied the closing condition that the Trust Account equal or exceed $150,000,000.

If we receive valid redemption requests from holders of public shares prior to the redemption deadline, we may, at our sole discretion, following the redemption deadline and until the Closing Date, seek and permit withdrawals by one or more of such holders of their redemption requests. We may select which holders to seek such withdrawals of redemption requests from based on any factors we may deem relevant, and the purpose of seeking such withdrawals may be to increase the funds held in the trust account, including where we otherwise would not satisfy the closing condition that the amount of cash or cash equivalents that we have from any source equals or exceeds $150,000,000. This process could take a number of days, and there may be a period of time after the special meeting and before the Closing when stockholders do not know whether we have satisfied this closing condition.

The Company has no obligation to net cash settle the rights or warrants.

In no event will the Company have any obligation to net cash settle the rights or warrants. Furthermore, there are no contractual penalties for failure to deliver securities to the holders of the rights or warrants upon consummation of an initial business combination, including the Business Combinations, or exercise of the warrants. Accordingly, the rights and Warrants may expire worthless.

The Company’s ability to successfully effect the Business Combinations and to be successful thereafter will be totally dependent upon the efforts of its key personnel, including each of UpHealth’s and Cloudbreak’s key personnel, all of whom are expected to join the Company following the Business Combinations. While the Company intends to closely scrutinize any individuals it engages after the Business Combinations, it cannot assure you that its assessment of these individuals will prove to be correct.

The Company’s ability to successfully effect the Business Combinations is dependent upon the efforts of key personnel of UpHealth, Cloudbreak and of the Company, including Dr. Avi Katz, the Company’s Executive Chairman Dr. Chirinjeev Kathuria, Executive Chairman of UpHealth, Dr. Mariya Pylypiv, Vice Chairwoman of UpHealth, Ramesh Balakrishnan and Al Gatmaitan, UpHealth’s Co-Chief Executive Officers and Jamey Edwards, Cloudbreak’s Chief Executive Officer. Although the Company expects all of UpHealth’s and Cloudbreak’s key personnel to remain with the post-combination company following the Business Combinations, it is possible that the post-combination company will lose some key personnel, the loss of which could negatively impact the operations and profitability of the post-combination company. While the post-combination company intends to closely scrutinize any individuals it engages after the Business Combinations, it cannot assure you that its assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a public company which could cause the post-combination company to have to expend time and resources helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect its operations.

The Company, UpHealth and Cloudbreak will be subject to business uncertainties and contractual restrictions while the Business Combinations are pending.

Uncertainty about the effect of the Business Combinations on employees and third parties may have an adverse effect on the Company, UpHealth and Cloudbreak. These uncertainties may impair our, UpHealth’s or

 

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Cloudbreak’s ability to retain and motivate key personnel and could cause third parties that deal with any of us or them to defer entering into contracts or making other decisions or seek to change existing business relationships. If key employees depart because of uncertainty about their future roles and the potential complexities of the Business Combination, our, UpHealth’s or Cloudbreak’s business could be harmed.

We may waive one or more of the conditions to the Business Combinations.

We may agree to waive, in whole or in part, one or more of the conditions to our obligations to complete the Business Combinations, to the extent permitted by our current amended and restated certificate of incorporation and bylaws and applicable laws. We may not waive the condition that our stockholders approve the Business Combinations. Please see the section entitled “Proposal No. 1 - Approval of the UpHealth Business Combination - The UpHealth Business Combination Agreement - Conditions to Closing of the Business Combination” and “Proposal No. 2 - Approval of the Cloudbreak Business Combination - The Cloudbreak Business Combination Agreement - Conditions to Closing of the Business Combination” for additional information.

The exercise of discretion by our directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Business Combination Agreements may result in a conflict of interest when determining whether such changes to the terms of the Business Combination Agreements or waivers of conditions are appropriate and in the best interests of our stockholders.

In the period leading up to the Closing, other events may occur that, pursuant to the Business Combination Agreements, would require the Company to agree to further amend the UpHealth Business Combination Agreement and amend the Cloudbreak Business Combination Agreement to consent to certain actions or to waive rights that we are entitled to under those agreements. Such events could arise because of changes in the course of UpHealth’s business, Cloudbreak’s business, a request by UpHealth to undertake actions that would otherwise be prohibited by the terms of the UpHealth Business Combination Agreement, a request by Cloudbreak to undertake actions that would otherwise be prohibited by the terms of the Cloudbreak Business Combination Agreement or the occurrence of other events that would have a material adverse effect on UpHealth’s or Cloudbreak’s business and would entitle the Company to terminate the Business Combination Agreements, as applicable. In any of such circumstances, it would be in the discretion of the Company, acting through the Board, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors described elsewhere in this proxy statement/prospectus may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for the Company and our stockholders and what he or she may believe is best for himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, we do not believe there will be any changes or waivers that our directors and officers would be likely to make after stockholder approval of the Business Combinations has been obtained. While certain changes could be made without further stockholder approval, if there is a change to the terms of the Business Combinations that would have a material impact on the stockholders, we will be required to circulate a new or amended proxy statement or supplement thereto and resolicit the vote of our stockholders with respect to the UpHealth Business Combination Proposal and the Cloudbreak Business Combination Proposal, as applicable.

We, UpHealth and Cloudbreak will incur significant transaction and transition costs in connection with the Business Combinations.

We, UpHealth and Cloudbreak have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combinations and operating as a public company following the consummation of the Business Combinations. We, UpHealth and Cloudbreak may also incur additional costs to retain key employees. All expenses incurred in connection with the Business Combination Agreements and the transactions contemplated thereby (including the Business Combinations), including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs or paid by the Company following the Closing.

 

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The aggregate transaction expenses as a result of the Business Combinations are expected to be approximately $43,000,000. The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the transaction expenses and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the transaction expenses.

Our Sponsor, certain members of our Board and our officers have interests in the Business Combinations that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the UpHealth Business Combination Proposal and the Cloudbreak Business Combination Proposal and approval of the other proposals described in this proxy statement/prospectus.

When considering our Board’s recommendation that our stockholders vote in favor of the approval of the UpHealth Business Combination Proposal and the Cloudbreak Business Combination Proposal, our stockholders should be aware that the directors and officers of the Company have interests in the Business Combinations that may be different from, or in addition to, the interests of our stockholders. These interests include:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the Business Combinations;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combinations;

 

   

the fact that Dr. Avi Katz, Dr. Raluca Dinu and Neil Miotto will remain as board members of the post-combination company and each shall be entitled to receive compensation for serving on the board of directors of the post-combination company; and

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us if an initial business combination is not consummated by the applicable deadline. Prior to GigCapital2’s initial public offering, our Founders purchased an aggregate of 4,307,500 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.0058 per share (as compared to the $10.00 per share price being used to determine the number of shares of Common Stock being issued to the UpHealth and Cloudbreak equity holders in the Business Combinations or at which the PIPE Investors have agreed to purchase Common Stock), with the Sponsor purchasing 4,018,987 Founder Shares, Northland Investment purchasing 173,108 Founder Shares and the EarlyBird Group purchasing 115,405 Founder Shares. Additionally, the Founders purchased from GigCapital2 an aggregate of 567,500 Private Placement Units at a price of $10.00 per unit simultaneously with the consummation of GigCapital2’s initial public offering for an aggregate purchase price of $5,675,000, with the Sponsor purchasing 481,250 Private Placement Units, Northland Investment purchasing 56,350 Private Placement Units and the EarlyBird Group purchasing 29,900 Private Placement Units. In addition, Northland concurrently purchased 120,000 Private Underwriter Shares at a price of $10.00 per share. Certain of GigCapital2’s directors and executive officers, including Dr. Avi Katz, Dr. Raluca Dinu, Neil Miotto, John Mikulsky and Gil Frostig, also have a direct or indirect economic interest in the 481,250 Private Placement Units and in the 4,018,987 Founder Shares owned by the Sponsor. The 4,018,987 Founder

 

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Shares owned by the Sponsor would have had an aggregate market value of $                 based upon the closing price of $                 per public share on the NYSE on                     , 2021, the most recent practicable date prior to the date of this proxy statement/prospectus. The 481,250 private placement units held by the Sponsor would have had an aggregate market value of $                 based upon the closing price of $                 per public unit on the NYSE on                     , 2021, the most recent practicable date prior to the date of this proxy statement/prospectus.

Our Initial Stockholders, including our Sponsor and our independent directors, hold a significant number of shares of our Common Stock. They will lose their entire investment in us if a business combination is not completed.

Our Initial Stockholders hold in the aggregate 4,995,000 Founder Shares, representing 23% of the total shares outstanding as of the date of this proxy statement/prospectus. The Founder Shares will be worthless if we do not complete a business combination by the applicable deadline.

The Founder Shares are identical to the shares of Common Stock included in the public units, except that: (i) the Founder Shares are subject to certain transfer restrictions; (ii) our Initial Stockholders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed: (a) to waive their redemption rights with respect to their shares of Common Stock in connection with the completion of our Business Combinations; (b) waive their redemption rights with respect to their shares of Common Stock in connection with a stockholder vote to approve an amendment to our current amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of the IPO or to provide for redemption in connection with a business combination; and (c) to waive their rights to liquidating distributions from the Trust Account with respect to their Initial Stockholder Shares if we fail to complete our initial business combination by the applicable deadline (although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if we fail to complete our initial business combination by the applicable deadline.

The personal and financial interests of our officers and directors may have influenced their motivation in identifying and selecting each of UpHealth and Cloudbreak, completing a business combination with each of UpHealth and Cloudbreak and may influence their operation of the post-combination company following the Business Combinations. This risk may become more acute as the deadline of the applicable deadline for completing an initial business combination nears.

Our Sponsor, directors or officers or their affiliates may elect to purchase shares or warrants from public stockholders, which may influence a vote on a proposed Business Combinations and the other proposals described in this proxy statement/prospectus and reduce the public “float” of our Common Stock.

Our Sponsor, directors or officers or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our Business Combinations, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, directors, officers or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the Business Combinations and thereby increase the likelihood of obtaining stockholder approval of the Business Combinations or to satisfy closing conditions in the Business Combination Agreements regarding required amounts of cash or cash equivalents that we have from any source equal or exceeds certain thresholds where it appears that such requirements would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters

 

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submitted to the warrant holders for approval in connection with our initial business combination. This may result in the completion of our Business Combinations that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.

In addition, if such purchases are made, the public “float” of our Common Stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on the NYSE or another national securities exchange or reducing the liquidity of the trading market for our Common Stock.

Stockholders of the post-combination company may not be able to enforce judgments entered by United States courts against certain of our officers and directors.

We are incorporated in the State of Delaware. However, following the Business Combinations, some of our directors and executive officers may reside outside of the U.S. As a result, stockholders of the post-combination company may not be able to effect service of process upon those persons within the U.S. or enforce against those persons judgments obtained in U.S. courts.

A market for the Company’s securities may not continue, which would adversely affect the liquidity and price of its securities.

Following the Business Combinations, the price of the post-combination company’s securities may fluctuate significantly due to the market’s reaction to the Business Combinations and general market and economic conditions. An active trading market for the Company’s securities following the Business Combinations may never develop or, if developed, it may not be sustained. In addition, the price of the post-combination company’s securities after the Business Combinations can vary due to general economic conditions and forecasts, the post-combination company’s general business condition and the release of the post-combination company’s financial reports. Additionally, if the post-combination company’s securities are not listed on, or become delisted from, the NYSE for any reason, and are quoted on the OTC Bulletin Board (an inter-dealer automated quotation system for equity securities that is not a national securities exchange) or the post-combination company’s securities are not listed on the NYSE and are quoted on the OTC Bulletin Board, the liquidity and price of the post-combination company’s securities may be more limited than if the post-combination company’s securities were quoted or listed on the NYSE or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

The ability to execute the post-combination company’s strategic plan could be negatively impacted to the extent a significant number of stockholders choose to redeem their shares in connection with the Business Combinations.

Depending upon the aggregate amount of cash consideration the Company would be required to pay for all shares of Common Stock that are validly submitted for redemption, the post-combination company may be required to increase the financial leverage the post-combination company’s business would have to support. This may negatively impact its ability to execute on its own future strategic plan and its financial viability.

If the post-combination company fails to introduce or acquire new products or services that achieve broad market acceptance on a timely basis, or if its products or services are not adopted as expected, the combined company will not be able to compete effectively.

The post-combination company will operate in a highly competitive, quickly changing environment, and the combined company’s future success depends on its ability to develop or acquire, and introduce new products and services that achieve broad market acceptance. The post-combination company’s ability to successfully introduce and market new products is unproven. Because the post-combination company will have a limited operating

 

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history and the market for its products, including newly acquired or developed products, is rapidly evolving, it is difficult to predict the combined company’s operating results, particularly with respect to any new products that it may introduce. The post-combination company’s future success will depend in large part upon its ability to identify demand trends in the market in which it will operate and quickly develop or acquire, and design, manufacture and sell, products and services that satisfy these demands in a cost-effective manner.

In order to differentiate the post-combination company’s products and services from competitors’ products, the post-combination company will need to increase focus and capital investment in research and development, including software development. If any products currently sold by, and services offered by, either UpHealth or Cloudbreak do not continue, or if the post-combination company’s new products or services fail to achieve widespread market acceptance, or if we are unsuccessful in capitalizing on opportunities in the market in which the post-combination company will operate, the post-combination company’s future growth may be slowed and its business, results of operations and financial condition could be materially adversely affected. Successfully predicting demand trends is difficult, and it is very difficult to predict the effect that introducing a new product or service will have on existing product or service sales. It is possible that the post-combination company may not be successful with its new products and services, and as a result the post-combination company’s future growth may be slowed and its business, results of operations and financial condition could be materially adversely affected. Also, the post-combination company’s may not be able to respond effectively to new product or service announcements by competitors by quickly introducing competitive products and services.

In addition, the post-combination company may acquire companies and technologies in the future. In these circumstances, the combined company may not be able to successfully manage integration of the new product and service lines with the combined company’s existing suite of products and services. If the post-combination company is unable to effectively and successfully further develop these new product and service lines, the post-combination company may not be able to increase or maintain sales (as compared to sales of UpHealth or Cloudbreak, as applicable, on a standalone basis), and the post-combination company’s gross margin (as compared to sales of UpHealth or Cloudbreak, as applicable, on a standalone basis) may be adversely affected.

Furthermore, the success of the post-combination company’s new products will depend on several factors, including, but not limited to, market demand costs, timely completion and introduction of these products, prompt resolution of any defects or bugs in these products, the post-combination company’s ability to support these products, differentiation of new products from those of the post-combination company’s competitors, market acceptance of these products, delays and quality issues in releasing new products and services. The occurrence of one or more of the foregoing factors may result in lower quarterly revenue than expected, and the post-combination company may in the future experience product or service introductions that fall short of its projected rates of market adoption.

If the post-combination company’s products and services fail to achieve and sustain sufficient market acceptance, the combined company’s revenue will be adversely affected.

The post-combination company’s success will depend on its ability to develop and market products and services that are recognized and accepted as reliable, enabling and cost-effective. Some potential customers of the combined company may already use products or services similar to what UpHealth and Cloudbreak currently offers and similar to what the post-combination company may offer in the future and may be reluctant to replace those products or services with what UpHealth and Cloudbreak currently offers or which the combined company may offer in the future. Market acceptance of the post-combination company’s products, services and technology will depend on many factors, including the post-combination company’s ability to convince potential customers that the post-combination company’s products, services and technology are an attractive alternative to existing products, services and technology. Prior to adopting the post-combination company’s products, services and technology, some potential customers may need to devote time and effort to testing and validating the post-combination company’s systems. Any failure of the post-combination company’s systems to meet these customer benchmarks could result in potential customers choosing to retain their existing systems or to purchase systems other than the combined company’s.

 

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If the Business Combinations’ benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of the Company’s securities may decline.

If the benefits of the Business Combinations do not meet the expectations of investors or securities analysts, the market price of the Company’s securities prior to the Closing may decline. The market values of the Company’s securities at the time of the Business Combinations may vary significantly from their prices on the date the Business Combinations were executed, the date of this proxy statement/prospectus, or the date on which the Company’s stockholders vote on the Business Combinations.

In addition, following the Business Combinations, fluctuations in the price of the Company’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combinations, there has not been a public market for UpHealth’s or Cloudbreak’s stock and trading in the shares of Company Common Stock has not been active. Accordingly, the valuation ascribed to UpHealth, Cloudbreak and Company Common Stock in the Business Combinations may not be indicative of the price that will prevail in the trading market following the Business Combinations. If an active market for the Company’s securities develops and continues, the trading price of the Company’s securities following the Business Combinations could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond the Company’s control. Any of the factors listed below could have a material adverse effect on your investment in the Company’s securities and the Company’s securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of the Company’s securities may not recover and may experience a further decline.

Factors affecting the trading price of the Company’s securities following the Business Combinations may include:

 

   

actual or anticipated fluctuations in the post-combination company’s quarterly financial results or the quarterly financial results of companies perceived to be similar to the post-combination company;

 

   

changes in the market’s expectations about the post-combination company’s operating results;

 

   

success of competitors;

 

   

the post-combination company’s operating results failing to meet the expectation of securities analysts or investors in a particular period;

 

   

changes in financial estimates and recommendations by securities analysts concerning the post-combination company or the market in general;

 

   

operating and stock price performance of other companies that investors deem comparable to the post-combination company’s;

 

   

the post-combination company’s ability to market new and enhanced services and products on a timely basis;

 

   

changes in laws and regulations affecting the post-combination company’s business;

 

   

commencement of, or involvement in, litigation involving the Company;

 

   

changes in the post-combination company’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of shares of the post-combination company’s securities available for public sale;

 

   

any major change in the board or management;

 

   

sales of substantial amounts of Common Stock by the post-combination company’s directors, executive officers or significant stockholders or the perception that such sales could occur; and

 

   

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

 

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Broad market and industry factors may materially harm the market price of the Company’s securities irrespective of its operating performance. The stock market in general and the NYSE have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of the Company’s securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the Company could depress the Company’s stock price regardless of the Company’s business, prospects, financial condition or results of operations. A decline in the market price of the Company’s securities also could adversely affect the Company’s ability to issue additional securities and the Company’s ability to obtain additional financing in the future.

Following the Business Combinations, if securities or industry analysts do not publish or cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding the Company’s securities adversely, the price and trading volume of the Company’s securities could decline.

The trading market for the post-combination company’s securities will be influenced by the research and reports that industry or securities analysts may publish about the post-combination company, its business, its market, or its competitors. Securities and industry analysts do not currently, and may never, publish research on the post-combination company. If no securities or industry analysts commence coverage of the post-combination company, the post-combination company’s stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the post-combination company, change their recommendation regarding the post-combination company’s stock adversely, or provide more favorable relative recommendations about the post-combination company’s competitors, the price of the post-combination company’s securities would likely decline. If any analyst who may cover the post-combination company were to cease coverage of the post-combination company or fail to regularly publish reports on it, the post-combination company could lose visibility in the financial markets, which could cause its stock price or trading volume to decline.

The future sales of shares by existing stockholders may adversely affect the market price of the Company’s Common Stock.

Sales of a substantial number of shares of the Company’s Common Stock in the public market could occur at any time. If the Company’s stockholders sell, or the market perceives that the Company’s stockholders intend to sell, substantial amounts of the Company’s Common Stock in the public market, the market price of the Company’s Common Stock could decline.

Our public stockholders will experience dilution as a consequence of, among other transactions, the issuance of Common Stock as consideration in the Business Combinations. Having a minority share position may reduce the influence that our current stockholders have on the management of the post-combination company.

The issuance of the Common Stock in the Business Combinations will dilute the equity interest of our existing stockholders and may adversely affect prevailing market prices for our public shares and/or public warrants.

It is anticipated that, upon completion of the Business Combinations, assuming no redemptions: (i) the Company’s public stockholders will retain an ownership interest of approximately 13.6% in the post-combination company (not including shares beneficially owned by our Sponsor); (ii) the PIPE Investors will own approximately 2.32% of the post-combination company (such that public stockholders, including the PIPE Investors, will own approximately 15.92% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor) will own approximately 3.9% of the post-combination company; (iv) the former UpHealth equity holders will own approximately 73.0% of the post-combination company, assuming $86,200,000 of cash is used to repurchase UpHealth shares and (v) the former Cloudbreak equity holders will

 

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own approximately 7.12% of the post-combination company, assuming no cash is used to repurchase Cloudbreak Units. The ownership percentage with respect to the post-combination company following the Business Combinations does not take into account (i) warrants to purchase Common Stock that will remain outstanding immediately following the Business Combinations (ii) conversion of the Convertible Notes into shares of Common Stock or (iii) the issuance of any shares upon completion of the Business Combinations under the Incentive Plan, a copy of which is attached to this proxy statement/prospectus as Annex K. Depending on the number of public shares redeemed, our current stockholders could own a majority of the voting rights in the post-combination company, but would not have effective control over the post-combination company. For more information, please see the sections entitled “Summary of the Proxy Statement/ProspectusImpact of the Business Combinations on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information” and “Proposal No. 6-Approval of the Incentive Plan.”

The NYSE may not list our securities on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

In connection with the Business Combinations, in order to obtain the listing of the post-combination company’s securities on the NYSE, we will be required to demonstrate compliance with the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements. We will seek to have the post-combination company’s securities listed on the NYSE upon consummation of the Business Combinations. We cannot assure you that we will be able to meet all initial listing requirements. Even if the post-combination company’s securities are listed on the NYSE, we may be unable to maintain the listing of its securities in the future.

If we fail to meet the initial listing requirements and the NYSE does not list the post-combination company’s securities on its exchange, neither UpHealth nor Cloudbreak would not be required to consummate the Business Combinations. In the event that either UpHealth or Cloudbreak elected to waive this condition, and the Business Combinations were consummated without the post-combination company’s securities being listed on the NYSE or on another national securities exchange, we could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for our securities;

 

   

reduced liquidity for our securities;

 

   

a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

   

a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If the post-combination company’s securities were not listed on the NYSE, such securities would not qualify as covered securities and we would be subject to regulation in each state in which we offer our securities because states are not preempted from regulating the sale of securities that are not covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state, other than the State of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states.

 

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Resales of the shares of Common Stock included in the stock consideration could depress the market price of our Common Stock.

We will have approximately 128,942,357 shares of Common Stock outstanding immediately following the Business Combinations, and there may be a large number of shares of Common Stock sold in the market following the completion of the Business Combinations or shortly thereafter. The shares held by the Company’s public stockholders are freely tradable. In addition, the Company will be obligated to register the resale of shares of Common Stock issued as merger consideration, which shares will become available for resale following the expiration of any applicable lockup period. We also expect that Rule 144 will become available for the resale of shares of our Common Stock that are not registered for resale once one year has elapsed from the date that we file the Current Report on Form 8-K following the Closing that includes the required Form 10 information that reflects we are no longer a shell company. Such sales of shares of Common Stock or the perception of such sales may depress the market price of our Common Stock.

The post-combination company may redeem the unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.

The post-combination company has the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date the post-combination company sends the notice of redemption to the warrant holders. If and when the warrants become redeemable by the post-combination company, the post-combination company may exercise its redemption right even if the post-combination company is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of the Private Placement Warrants and warrants underlying the units issuable upon conversion of working capital loan will be redeemable by the post-combination company so long as they are held by their initial purchasers or their permitted transferees.

Anti-takeover provisions contained in the proposed Second Amended and Restated Certificate of Incorporation as well as provisions of Delaware law, could impair a takeover attempt.

The proposed Second Amended and Restated Certificate of Incorporation will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. The post-combination company is also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for the post-combination company’s securities. These provisions will include:

 

   

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

   

a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board;

 

   

the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;

 

   

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; and

 

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the requirement that a meeting of stockholders may only be called by members of our Board or the stockholders holding a majority of our shares, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors.

These provisions, alone or together, could delay hostile takeovers and changes in control of New UpHealth or changes in the New UpHealth Board and New UpHealth’s management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the DGCL, which prevents some stockholders holding more than 15% of our outstanding Common Stock from engaging in certain business combinations without approval of the holders of substantially all of New UpHealth Common Stock. Any provision of Amended and Restated Certificate of Incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Common Stock and could also affect the price that some investors are willing to pay for our Common Stock.

The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

We currently qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including: (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of SOX; (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements; and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year: (a) following October 18, 2023, the fifth anniversary of our IPO; (b) in which we have total annual gross revenue of at least $1.07 billion; or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700,000,000 as of the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

We cannot predict if investors will find our Common Stock less attractive because we rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

 

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Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of SOX, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. To comply with the requirements of being a public company, the post-combination company will be required to provide management’s assessment on internal controls commencing with the annual report for fiscal year ended December 31, 2022, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. The standards required for a public company under Section 404 of SOX are significantly more stringent than those required of UpHealth and Cloudbreak as privately-held companies. Further, as an emerging growth company, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which the controls of the post-combination company are documented, designed or operating.

Testing and maintaining these controls can divert our management’s attention from other matters that are important to the operation of our business. If we identify material weaknesses in the internal control over financial reporting of the post-combination company or are unable to comply with the requirements of Section 404 or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.

Activities taken by the Company’s affiliates to purchase, directly or indirectly, public shares will increase the likelihood of approval of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal and the other Proposals and may affect the market price of the Company’s securities.

The Company’s Founders, directors, officers, advisors or their affiliates may purchase shares in privately negotiated transactions either prior to or following the consummation of the Business Combinations. None of the Company’s Founders, directors, officers, advisors or their affiliates will make any such purchases when such parties are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. Although none of the Company’s Founders, directors, officers, advisors or their affiliates currently anticipate paying any premium purchase price for such public shares, in the event such parties do, the payment of a premium may not be in the best interest of those stockholders not receiving any such additional consideration. There is no limit on the number of shares that could be acquired by the Company’s Founders, directors, officers, advisors or their affiliates, or the price such parties may pay.

If such transactions are effected, the consequence could be to cause the Business Combinations to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the UpHealth Business Combination Proposal, the Cloudbreak Business Combination Proposal and other proposals and would likely increase the chances that such Proposals would be approved. If the market does not view the Business Combinations positively, purchases of public shares may have the effect of counteracting the market’s view, which would otherwise be reflected in a decline in the market price of the Company’s securities. In addition, the termination of the support provided by these purchases may materially adversely affect the market price of the Company’s securities.

 

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As of the date of this proxy statement/prospectus, no agreements with respect to the private purchase of public shares by the Company or the persons described above have been entered into with any such investor or holder. The Company will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combinations Proposal or other proposals.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect the Company’s business, investments and results of operations.

The Company is subject to laws, regulations and rules enacted by national, regional and local governments. In particular, the Company is required to comply with certain SEC, NYSE and other legal or regulatory requirements, including the NYSE upon the transfer of its listing. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations and rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on the Company’s business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations and rules, as interpreted and applied, could have a material adverse effect on the Company’s business and results of operations.

We have not registered the shares of Common Stock issuable upon exercise of the public warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise public warrants, thus precluding such investor from being able to exercise its public warrants except on a cashless basis and potentially causing such public warrants to expire worthless.

We have not registered the shares of Common Stock issuable upon exercise of the public warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of Common Stock issuable upon exercise of the warrants and thereafter will use our best efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to the Common Stock issuable upon exercise of the public warrants, until the expiration of the public warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the public warrants are not registered under the Securities Act, we will be required to permit holders to exercise their public warrants on a cashless basis. However, no public warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their public warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if our Common Stock is at the time of any exercise of a public warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their public warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any public warrant, or issue securities or other compensation in exchange for the public warrants in the event that we are unable to register or qualify the shares underlying the public warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the public warrants is not so registered or qualified or exempt from registration or qualification, the holder of such public warrant shall not be entitled to exercise such public warrant and such public warrant may have no value and expire worthless. In such event, holders who acquired their public warrants as part of a purchase of public units

 

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will have paid the full unit purchase price solely for the shares of Common Stock included in the public units. If and when the public warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. We will use our best efforts to register or qualify such shares of Common Stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in the IPO. However, there may be instances in which holders of our public warrants may be unable to exercise s