TALKSPACE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

Unless the context otherwise requires, all references in this section as to “talkspace,” the “Company,” “we,” “us” or “our” refer to the business of
Talkspace, Inc. and its subsidiaries.

The following discussion and analysis of our financial condition and results of
operations should be read together with the financial statements and the related
notes contained in this Quarterly Report and the financial statements and
related notes contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2021. This discussion contains forward-looking
statements that reflect our plans, estimates, and beliefs that involve risks and
uncertainties. As a result of many factors, such as those discussed in Part I,
Item 1A, "Risk Factors" of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2021 and "Forward-Looking Statements" sections
and elsewhere in this Quarterly Report, our actual results may differ materially
from those anticipated in these forward-looking statements.

Overview

Talkspace is a healthcare company offering convenient and affordable access to a
fully-credentialed network of highly qualified providers. We are a leading
virtual behavioral health company and, since Talkspace's founding in 2012, we
have connected millions of patients, who we refer to as our members, with
licensed mental health providers across a wide and growing spectrum of care
through virtual counseling, psychotherapy and psychiatry. We created a
purpose-built platform to address the vast, unmet and growing demand for mental
health services of our members, serving our business-to-business ("B2B")
channel, comprised of large health plans and employee assistance programs
("health plan clients") such as Aetna, Cigna, Premera and Optum and large
enterprise clients such as Google and Expedia (collectively, our "clients"), who
offer their employees and insured members access to our platform while their
employer is under an active contract with Talkspace, or at in-network
reimbursement rates, where applicable, and our business-to-consumer ("B2C")
channel, comprised of individual consumers who subscribe directly to our
platform,

As of September 30, 2022, we had over 68,100 active members through our B2B and
B2C channels, including approximately 86 million B2B eligible lives and
approximately 17,900 B2C active members. For the three and nine months ended
September 30, 2022, our clinicians completed 111,400 and 298,000 B2B sessions,
respectively, related to members covered under our health plan clients, as
compared to 71,300 and 192,100 completed B2B sessions for the three and nine
months ended September 30, 2021, respectively. Please refer to the "Key Business
Metrics" section below for a description of active members and B2B eligible
lives.

The behavioral health market has traditionally been underserved for a number of
reasons, including as a result of inadequate access, a limited universe of
qualified providers, high cost and social stigma. We believe virtual is the
ideal modality for mental health treatment because it removes or reduces these
burdens associated with traditional face-to-face mental health services by
improving convenience through 24/7 access to our platform, providing more
accessible entry level price points, and reducing associated stigmas by
promoting transparency, increasing ease of access and preserving privacy. Our
platform connects consumers in need, including many of whom have never had an
opportunity to benefit from high-quality behavioral healthcare, with experienced
providers across all 50 U.S. states.

Through our psychotherapy offerings, our licensed therapists and counselors
treat mental health conditions in over 21 specializations, such as depression,
anxiety, trauma and other human challenges. Through our psychiatry offerings,
our board-certified psychiatrists and prescription-eligible nurse practitioners
treat a higher acuity patient demographic, including those who may have
pharmacological needs. Talkspace providers treat a full range of mental health
conditions treated by "traditional" providers, including schizophrenia-spectrum
disorders, bipolar disorders and depression, including through prescription
medication and management from psychiatrists, up and until the point that the
provider, in their discretion, feels it prudent to refer the member to a
face-to-face psychiatrist to address potential needs for "controlled substances"
under the federal Controlled Substances Act, which generally prohibits the
prescribing and dispensing of controlled substances via telehealth without
performing an in-person examination.

While optimizing consumers' access to care, we believe our platform also
provides benefits to providers through expanded reach, steady access to member
leads, reduced administrative burdens, more efficient time utilization and
data-driven insights. These features, together with continuous training and
professional growth opportunities we offer, empower providers to deliver what we
believe will enable an enhanced care journey, higher member lifetime engagement,
meaningful outcomes and greater margins when compared to face-to-face treatment.
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operating segments

We operate our business in a single segment and as one reporting unit, which is how our chief operating decision maker (who is our interim chief executive officer) reviews financial performance and allocates resources.

Key business metrics

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. We believe the following metrics are useful in evaluating our business:

                                                               Nine Months Ended
Unaudited                                                        September 

30,

(in thousands except number of health plan and
enterprise clients or otherwise indicated)                   2022           

2021

Number of B2B eligible lives at period end (in
millions)                                                         86.1      

56.6

Number of completed B2B sessions                                 298.0      

192.1

Number of health plan clients at period end                         17      

11

Number of enterprise clients at period end                         215      

139

Number of B2C active members at period end                        17.9      

28.0



B2B Eligible Lives: We consider B2B lives "eligible" if such persons are
eligible to receive treatment on the Talkspace platform, in the case of our
enterprise clients, while their employer is under an active contract with
Talkspace, or, in the case of health plan clients, at an agreed upon
reimbursement rate through insurance under an employee assistance program or
other network behavioral health paid benefit program. There may be instances
where a person may be covered through multiple solutions, typically through
behavioral health plans and employee assistance programs. In these instances,
the person is counted each time they are covered in the B2B eligible lives
calculation, which may cause this amount to reflect a higher number of members
than we actually serve.

Active Members: We consider members "active" (i) in the case of our B2C members,
commencing on the date such member initiates contact with a provider on our
platform until the term of their monthly, quarterly or bi-annual subscription
plan expires, unless terminated early, and (ii) in the case of our B2B members,
if such members have engaged on our platform during the preceding 25 days, such
as sending a text, video or audio message to, or participating in a video call
with, a provider, completing a satisfaction or progress report survey or signing
up for our platform. While a growth in active members typically highlights
strong engagement with our members, not all active members are associated with
revenue in that particular period.

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with GAAP, we
believe adjusted EBITDA, a non-GAAP measure, is useful in evaluating our
operating performance. Adjusted EBITDA is a key performance measure that our
management uses to assess our operating performance. Because adjusted EBITDA
facilitates internal comparisons of our historical operating performance on a
more consistent basis, we use this measure for business planning purposes and in
evaluating acquisition opportunities. We also use adjusted EBITDA to evaluate
our ongoing operations and for internal planning and forecasting purposes. We
believe that this non-GAAP financial measure, when taken together with the
corresponding GAAP financial measures, provides meaningful supplemental
information regarding our performance by excluding certain items that may not be
indicative of our business, results of operations or outlook. We believe that
the use of adjusted EBITDA is helpful to our investors as it is a metric used by
management in assessing the health of our business and our operating
performance. However, non-GAAP financial information is presented for
supplemental informational purposes only, has limitations as an analytical tool
and should not be considered in isolation or as a substitute for financial
information presented in accordance with GAAP.

Some of the limitations of adjusted EBITDA include (i) adjusted EBITDA does not
properly reflect capital commitments to be paid in the future and (ii) although
depreciation and amortization are non-cash charges, the underlying assets may
need to be replaced and adjusted EBITDA does not reflect these capital
expenditures. Our adjusted EBITDA may not be comparable to similarly titled
measures of other companies because they may not calculate adjusted EBITDA in
the same manner as we calculate the measure, limiting its usefulness as a
comparative measure. In addition, some of our competitors may use other measures
to evaluate their performance. In evaluating adjusted EBITDA, you should be
aware that in the future we will incur expenses similar to the adjustments
described herein. Our presentation of adjusted EBITDA should not be construed as
an inference that our future results will be unaffected by these expenses or any
unusual or non-recurring items. Adjusted EBITDA should not be considered as an
alternative to loss before income taxes, net loss, loss per share, or any other
performance measures derived in accordance with U.S. GAAP. When evaluating our
performance, you should consider adjusted EBITDA alongside other financial
performance measures, including our net loss and other GAAP results.
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A reconciliation is provided below for adjusted EBITDA to net (loss) income, the
most directly comparable financial measure stated in accordance with GAAP.
Investors are encouraged to review our GAAP financial measure and the
reconciliation of our non-GAAP financial measure to its most directly comparable
GAAP financial measure, and not to rely on any single financial measure to
evaluate our business.

We calculate adjusted EBITDA as net (loss) income adjusted to exclude (i)
interest and other expenses (income), net, (ii) tax benefit and expense, (iii)
depreciation and amortization, (iv) stock-based compensation expense and (v)
certain non-recurring expenses, where applicable.

The following table presents a reconciliation of adjusted EBITDA from the most
comparable GAAP measure, net (loss) income for the three and nine months ended
September 30, 2022 and 2021:

                                  Three Months Ended           Nine Months Ended
Unaudited                            September 30,               September 30,
(in thousands)                    2022          2021          2022          2021
Net (loss) income               $ (17,983 )   $   1,505     $ (61,365 )   $ (41,674 )
Add:
Depreciation and amortization         309           503         1,006         1,458
Financial (income), net (1)        (1,885 )     (26,743 )        (889 )     (23,700 )
Taxes on income                        17            11           127            29
Stock-based compensation            3,179         3,875         9,386        20,584
Non-recurring expenses (2)            900             -           900             -
Adjusted EBITDA                 $ (15,463 )   $ (20,849 )   $ (50,835 )   $ (43,303 )


(1) For the three and nine months ended September 30, 2022, financial income,
net, primarily consisted of $1.6 million and $0.4 million, respectively, in
gains resulting from the revaluation of warrant liabilities. For the three
months ended September 30, 2021, financial income, net primarily consisted of
$26.9 million in gains resulting from the revaluation of warrant liabilities.
For the nine months ended September 30, 2021, financial income, net primarily
consisted of $28.3 million in gains resulting from the revaluation of warrant
liabilities, partially offset by $4.2 million in warrant issuance costs in
connection with the Closing of the Business Combination.

(2) For the three and nine months ended September 30, 2022non-recurring expenses consisted of $0.6 million in legal fees and $0.3 million in general and administrative expenses.

Components of Results of Operations

revenue

We contract with health plans and other enterprises to provide services to
individuals who are qualified to receive access to the Company's services
through the Company's commercial arrangements. We generate revenues from
payments from members and claims paid by their respective insurance companies
and annually contracted platform access fees paid to us by our enterprise
clients for the delivery of therapy services to their members or employees. We
recognize revenues from services provided to insured members at a point in time,
as virtual therapy session is rendered. We recognize contracted revenue from our
enterprise clients from the commencement of their contracted term through the
annual period based primarily on a per-member-per month model. Revenue is
recognized in an amount that reflects the consideration that is expected in
exchange for the service provided. Contracts with our enterprise clients are for
one or more years with the ability to provide 60 days advance notice prior to
termination at each year mark during the term. On occasion and depending on the
client, we allow a 60 or 90 day intra-year termination notice but only after the
client has completed the first year of service.


We also generates revenues from the sale of monthly, quarterly, bi-annual and
annual membership subscriptions to our therapy platform as well as supplementary
a la carte offerings. We provide these services directly to individuals through
a subscription plan. We recognize B2C member subscription revenues ratably over
the subscription period, beginning when therapy services commence. B2C members
may cancel at any time and will receive a pro-rata refund for the subscription
price.

Revenue growth is generated from increasing our eligible covered lives through
contracting with enterprise clients and health plans, and increasing membership
subscriptions.
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cost of revenue

Cost of revenues is comprised of therapist payments and hosting costs. Cost of
revenues is largely driven by the size of our provider network that is required
to service the growth of our health plan and enterprise clients, in addition to
the growth of our customer base.

We designed our business model and our provider network to be scalable and to
leverage a hybrid model of both employee providers and independently contracted
providers to support multiple growth scenarios. The compensation paid to our
independently contracted providers is variable, and the amount paid to a
provider is generally based on the amount of time committed by such provider to
our members. In addition, our network supervisors have broad authority to
approve the payment of incentive bonuses to providers with certain licenses
during periods of higher demand for providers with such licenses. For our
employee providers, they receive a fixed-salary and discretionary bonuses, where
applicable.

While we expect to make increased investments to support accelerated growth and
the required investment to scale our provider network, we also expect increased
efficiencies and economies of scale. Our cost of revenues as a percentage of
revenues is expected to fluctuate from period to period depending on the
interplay of these factors.

operating expenses

Operating expenses consist of research and development, clinical operations, sales and marketing, and general and administrative expenses.

Research and Development Expenses

Research and development expenses include personnel and related expenses for
software development and engineering, information technology infrastructure,
security and privacy compliance and product development (inclusive of
stock-based compensation for our research and development employees),
third-party services and contractors related to research and development,
information technology, software-related costs, and cost savings related to the
application of research grant proceeds.

Clinical Operations Expenses

Clinical operations expenses are associated with the management of our provider
network of therapists. Such costs are comprised of costs related to recruiting,
onboarding, credentialing, training and ongoing quality assurance activities
(inclusive of stock-based compensation for our clinical operations employees),
costs of third-party services and contractors related to recruiting and training
and software-related costs.

Sales and Marketing Expenses

Sales expenses consist primarily of employee-related expenses, including
salaries, benefits, commissions, travel and stock-based compensation costs for
our employees engaged in sales and account management. We expect our sales
expenses to increase as we continue to invest in the expansion of our health
plan and enterprise business.

Marketing expenses consist primarily of advertising and marketing expenses for
consumer acquisition and engagement, as well as personnel costs, including
salaries, benefits, bonuses, stock-based compensation expense for marketing
employees, third-party services and contractors. Marketing expenses also include
third-party software subscription services, third-party independent research,
participation in trade shows, brand messaging and costs of communications
materials that are produced for our clients to generate greater awareness and
utilization of our platform among our health plan and enterprise clients.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs,
including salaries, benefits, bonuses and stock-based compensation expense for
our executive, finance, accounting, legal and human resources functions, as well
as professional fees, occupancy costs, and other general overhead costs. We
expect to incur additional general and administrative expenses in compliance,
legal, investor relations, director's and officer's insurance, and professional
services related to our compliance and reporting obligations as a public
company, however we expect further incremental increases to be minimal.

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Financial income, net

Financial income, net includes the impact from (i) non-cash changes in the fair
value of our warrant liabilities, (ii) issuance costs related to our warrants,
(iii) interest earned on cash equivalents deposited in our bank accounts and
(iv) other financial expenses in connection with bank charges.

Taxes on income

Our taxes on income consists primarily of foreign income taxes related to income
generated by our subsidiary organized under the laws of Israel. If we expand the
scale of our international business activities, any changes in the U.S. and
foreign taxation of such activities may increase our overall provision for
income taxes in the future.

We have a full valuation allowance for our U.S. deferred tax assets, including
federal and state NOLs. We expect to maintain this valuation allowance until it
becomes more likely than not that the benefit of our federal and state deferred
tax assets will be realized through expected future taxable income in the United
States.

Results of Operations

The following table presents the results of operations for the three and nine
months ended September 30, 2022 and 2021 and the dollar and percentage change
between the respective periods:


                             Three Months Ended                                            Nine Months Ended
                                September 30,                    Variance                    September 30,                    Variance
Unaudited                  2022              2021              $            %            2022              2021             $            %
(in thousands, except
percentages, share and
per share data)
Revenues               $      29,332     $      26,359     $   2,973        

11.3 $89,326 $84,499 $4,827 5.7 Cost of revenues

              14,737            12,187         2,550        20.9            45,163           33,698        11,465        34.0
Gross profit                  14,595            14,172           423         3.0            44,163           50,801        (6,638 )     (13.1 )
Operating expenses:
Research and
development, net               6,182             4,278         1,904        44.5            16,793           12,023         4,770        39.7
Clinical operations            2,222             1,896           326        17.2             6,314            5,886           428         7.3
Sales and marketing           18,375            26,431        (8,056 )     (30.5 )          58,714           75,125       (16,411 )     (21.8 )
General and
administrative                 7,667             6,794           873        12.8            24,469           23,112         1,357         5.9
Total operating
expenses                      34,446            39,399        (4,953 )     

(12.6 ) 106.290 116.146 (9.856 ) (8.5 ) Operating (loss)

             (19,851 )         (25,227 )       5,376        21.3           (62,127 )        (65,345 )       3,218         4.9
Financial income,
net                            1,885            26,743       (24,858 )     (93.0 )             889           23,700       (22,811 )     (96.2 )
(Loss) income before
taxes on income              (17,966 )           1,516       (19,482 )         *           (61,238 )        (41,645 )     (19,593 )     (47.0 )
Taxes on income                   17                11             6        54.5               127               29            98       337.9

Net (loss) income $(17,983) $1,505 $ (19,488 )

   *     $     (61,365 )   $    (41,674 )   $ (19,691 )     (47.3 )
Net (loss) income per
share:
Basic                  $       (0.11 )   $        0.01     $   (0.12 )         *     $       (0.39 )   $      (0.64 )   $    0.25        39.1
Diluted                $       (0.11 )   $        0.01     $   (0.12 )         *     $       (0.39 )   $      (0.64 )   $    0.25        39.1
Weighted average
number of common
shares:
Basic                    158,330,684       152,267,870                                 156,056,900       64,638,182
Diluted                  158,330,684       165,179,012                                 156,056,900       64,638,182


* Percentage not meaningful.


Revenues. Revenues increased by $3.0 million, or 11.3% to $29.3 million for the
three months ended September 30, 2022 from $26.4 million for the three months
ended September 30, 2021. The increase was principally due to a 117.3% growth in
B2B revenue driven by an increase in covered lives from health plan clients and
new enterprise clients, and a higher number of completed B2B sessions, partially
offset by revenue reserves on receivables from our existing health plan clients
and a 32.7% decrease in B2C revenue. Revenue, net of reserves, from our health
plan clients increased by $6.3 million, or 196.9%, to $9.5 million for the three
months ended September 30, 2022 from $3.2 million for the three months ended
September 30, 2021. The Company recorded an increase in revenue reserves of $0.9
million related to receivables from its health plan clients during the three
months ended September 30, 2022. Enterprise client contracts increased by 76
clients, or 54.7%, to 215 clients as of September 30, 2022 from 139 clients as
of September 30, 2021. This increase in the number of enterprise clients
increased revenue by $2.8 million, or 62.2% to $7.3 million for the three months
ended September 30, 2022 from $4.5 million for the three months ended September
30, 2021. B2C member subscriptions revenue decreased by $6.1 million, or 32.7%,
to $12.5 million for the three months ended September 30, 2022 from $18.6
million for the three months ended September 30, 2021 due to the Company's
intentional and strategic decision to reduce marketing spend.

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Revenues increased by $4.8 million, or 5.7% to $89.3 million for the nine months
ended September 30, 2022, from $84.5 million for the nine months ended September
30, 2021. The increase was principally due to a 72.2% growth in B2B revenue
driven by an increase in covered lives from health plan clients and new
enterprise clients, and a higher number of completed B2B sessions, partially
offset by higher revenue reserves on receivables from our existing health plan
clients and a 24.2% decrease in B2C revenue. Revenue, net of reserves, from our
health plan clients increased by $10.9 million, or 74.7% to $25.5 million for
the nine months ended September 30, 2022 from $14.6 million for the nine months
ended September 30, 2021. During the nine months ended September 30, 2022, the
Company recorded an increase in revenue reserves of $1.9 million related to
receivables from its health plan clients. Enterprise client contracts increased
by 76 clients, or 54.7%, to 215 clients as of September 30, 2022 from 139
clients as of September 30, 2021. This increase in the number of enterprise
clients increased revenue by $8.0 million, or 69.0% to $19.6 million for the
nine months ended September 30, 2022 from $11.6 million for the nine months
ended September 30, 2021. B2C member subscriptions revenue decreased by $14.1
million, or 24.2% to $44.2 million for the nine months ended September 30, 2022
from $58.3 million for the nine months ended September 30, 2021 due to the
Company's intentional and strategic decision to reduce marketing spend.

Costs of revenues. Cost of revenues increased by $2.6 million, or 20.9%, to
$14.7 million for the three months ended September 30, 2022 from $12.2 million
for the three months ended September 30, 2021, primarily due to costs associated
with higher therapist compensation expense.

Cost of revenues increased by $11.5 millionor 34.0%, to $45.2 million for the nine months ended September 30, 2022 from $33.7 million for the nine months ended September 30, 2021primarily due to costs associated with higher therapist compensation expense.

Gross profit. Gross profit increased by $0.4 million, or 3.0%, to $14.6 million
for the three months ended September 30, 2022 from $14.2 million for the three
months ended September 30, 2021, primarily due to higher revenues. Gross margin
was 49.8% for the three months ended September 30, 2022, compared to 53.8%
during the three months ended September 30, 2021. The decrease in gross margin
was due primarily to a revenue shift to our B2B business, which generally
realize lower margins, and higher therapist compensation expense during the
three months ended September 30, 2022.

Gross profit decreased by $6.6 million, or 13.1%, to $44.2 million for the nine
months ended September 30, 2022 from $50.8 million for the nine months ended
September 30, 2021. Gross margin was 49.4% for the nine months ended September
30, 2022, compared to 60.1% during the nine months ended September 30, 2021. The
decrease in gross margin was due primarily to a revenue shift to our B2B
business and higher therapist compensation expense during the nine months ended
September 30, 2022.

Research and development expenses. Research and development expenses increased
by approximately $1.9 million, or 44.5% to $6.2 million for the three months
ended September 30, 2022 from $4.3 million for the three months ended September
30, 2021. This was primarily due to an increase in employee-related costs,
inclusive of non-cash stock compensation expense.

Research and development expenses increased by approximately $4.8 million, or
39.7%, to $16.8 million for the nine months ended September 30, 2022 from $12.0
million for the nine months ended September 30, 2021. This was primarily due to
an increase in employee-related costs, inclusive of non-cash stock compensation
expense.

Clinical operations expenses. Clinical operations expenses increased by $0.3
million, or 17.2% to $2.2 million for the three months ended September 30, 2022
from $1.9 million for the three months ended September 30, 2021. This was
primarily due to an increase in employee-related costs, inclusive of non-cash
stock compensation expense.

Clinical operations expenses increased by $0.4 millionor 7.3% to $6.3 million
for the nine months ended September 30, 2022 from $5.9 million for the nine months ended September 30, 2021. This was primarily due to an increase in research tools and subscription expenses, partially offset by a decrease in employee-related costs, including non-cash stock compensation expense.

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Sales and marketing expenses. Sales and marketing expenses decreased by $8.1
million, or 30.5%, to $18.4 million for the three months ended September 30,
2022 from $26.4 million for the three months ended September 30, 2021. The
decrease in sales and marketing expenses primarily consisted of a decrease in
direct marketing and promotional costs for our B2C business.

Sales and marketing expenses decreased by $16.4 million, or 21.8%, to $58.7
million for the nine months ended September 30, 2022 from $75.1 million for the
nine months ended September 30, 2021. The decrease in sales and marketing
expenses primarily consisted of a decrease in direct marketing and promotional
costs for our B2C business.

General and administrative expenses. General and administrative expenses
increased by $0.9 million, or 12.8%, to $7.7 million for the three months ended
September 30, 2022 from $6.8 million for the three months ended September 30,
2021. This was driven primarily by an increase in professional fees, insurance
costs, and employee-related costs, inclusive of non-cash stock compensation
expense.

General and administrative expenses increased by $1.4 million, or 5.9%, to $24.5
million for the nine months ended September 30, 2022 from $23.1 million for the
nine months ended September 30, 2021. This was driven primarily by an increase
in professional fees and insurance costs partially offset by a decrease in
employee-related costs, inclusive of non-cash stock compensation expense.

Financial income, net. Financial income, nothing $1.9 million for the three months ended September 30, 2022compared to financial income, net of $26.7 million for the three months ended September 30, 2021. For the three months ended September 30, 2022 and 2021, financial income, net was primarily driven by non-cash gains resulting from the revaluation of warrant liabilities.

Financial income, net was $0.9 million for the nine months ended September 30,
2022, compared to financial income, net of $23.7 million for the nine months
ended September 30, 2021. For the nine months ended September 30, 2022,
financial income, net, primarily consisted of $0.4 million in non-cash gains
resulting from the revaluation of warrant liabilities. For the nine months ended
September 30, 2021, the change in financial income, net was primarily driven by
non-cash gains resulting from the revaluation of warrant liabilities, partially
offset by $4.2 million in warrant issuance costs related to the closing of the
Business Combination.

Liquidity and Capital Resources

As of September 30, 2022, we had $152.6 million of cash and cash equivalents
($198.3 million as of December 31, 2021), which we use to finance our
operations. We had no debt as of September 30, 2022 or December 31, 2021. We
expect to generate operating losses for the foreseeable future.

Our primary cash needs are to fund operating activities and invest in technology
development. Our future capital requirements will depend on many factors
including our growth rate, contract renewal activity, the timing and extent of
investments to support product development efforts, our expansion of sales and
marketing activities, the introduction of new and enhanced service offerings,
and the continuing market acceptance of virtual behavioral services.
Additionally, we may in the future enter into arrangements to acquire or invest
in complementary businesses, services and technologies.

We currently anticipate to be able to fund our cash needs for at least the
foreseeable future using available cash and cash equivalent balances as of
September 30, 2022. However, in the future we may require additional capital to
respond to technological advancements, competitive dynamics or technologies,
customer demands, business opportunities, challenges, acquisitions or unforeseen
circumstances and we may determine to engage in equity or debt financings or
enter into credit facilities for other reasons. We may not be able to timely
secure additional debt or equity financing on favorable terms, or at all. If we
raise additional funds through the issuance of equity or convertible debt or
other equity-linked securities, our existing stockholders could experience
significant dilution. Any debt financing obtained by us in the future could
involve 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.

If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

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Cash Flows from Operating, Investing and Financing Activities

The following table presents the summary condensed consolidated cash flow information for the periods presented:

Cash Flows

                                                          Nine Months Ended
Unaudited                                                   September 30,
(in thousands)                                           2022          2021
Net cash used in operating activities                  $ (46,856 )   $ (41,109 )
Net cash used in investing activities                       (254 )        (622 )
Net cash provided by financing activities                  1,493       

251,348

Net (decrease) increase in cash and cash equivalents $(45,617) $209,617



Operating Activities

Net cash used in operating activities was $46.9 million and $41.1 million for
the nine months ended September 30, 2022 and 2021, respectively. The increase in
net cash used in operating activities was driven primarily by the negative
impact of the higher net loss and the unfavorable timing on collections of
receivables during the current-year period offset by non-cash add back of stock
based compensation, decrease in current assets and increase in account payables
due to favorable timing of payments. The higher net loss for the nine months
ended September 30, 2022 was driven primarily by an increase in cost of revenues
and research and development expenses partially offset by a decrease in sales
and marketing expenses.

Investing Activities

Net cash used in investing activities was $0.3 million for the nine months ended
September 30, 2022, compared to $0.6 million for the nine months ended September
30, 2021. The change was driven primarily by a decrease in the purchases of
computer equipment and software during the nine months ended September 30, 2022
compared to the nine months ended September 30, 2021.

Financing Activities

Net cash provided by financing activities was $1.5 million and $251.3 million
for the nine months ended September 30, 2022 and 2021, respectively. The
decrease was primarily driven by $251.3 million of proceeds, net of payment of
transaction costs, received in the Business Combination during the nine months
ended September 31, 2021.

Contractual Obligations, Commitments and Contingencies

As of September 30, 2022we did not have any short-term or long-term debt, capital lease obligations, long-term operating lease obligations, or significant long-term liabilities.

Our commercial contract arrangements generally include certain provisions for
indemnifying clients against liabilities if there is a breach of a client's data
or if our service infringes a third party's intellectual property rights. To
date, we have not incurred any material costs as a result of such
indemnifications.

We have also agreed to indemnify our officers and directors for costs associated
with any fees, expenses, judgments, fines and settlement amounts incurred by any
of these persons in any action or proceeding to which any of those persons is,
or is threatened to be, made a party by reason of the person's service as a
director or officer, including any action by us, arising out of that person's
services as our director or officer or that person's services provided to any
other company or enterprise at our request. We maintain director and officer
liability insurance coverage that would generally enable us to recover a portion
of any future amounts paid. We may also be subject to indemnification
obligations by law with respect to the actions of our employees under certain
circumstances and in certain jurisdictions.

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Off Balance Sheet Arrangements

We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any activities that expose us to any liability that is not reflected in our condensed consolidated financial statements.

Critical Accounting Policies and Estimates

The Company's condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. Reference is also made to the Company's consolidated financial
statements and notes thereto found in its Annual Report on Form 10-K for the
year ended December 31, 2021.

The Company's accounting policies are essential to understanding and
interpreting the financial results reported on the condensed consolidated
financial statements. The significant accounting policies used in the
preparation of the Company's audited consolidated financial statements are
summarized in Note 2 to those financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2021. Certain of those
policies are considered to be particularly important to the presentation of the
Company's financial results because they require management to make difficult,
complex or subjective judgments, often as a result of matters that are
inherently uncertain.

During the nine months ended September 30, 2022, there were no material changes
to matters discussed under the heading "Critical Accounting Policies and
Estimates" in Part II, Item 7 of the Company's Annual Report on Form 10-K for
the year ended December 31, 2021.

Recent Accounting Pronouncements

Information regarding recent accounting developments and their impact on our results can be found in “Part I, Item 1. Financial Statements – Note 2 – Significant Accounting Policies” of this Quarterly Report.

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