Full Press Release Details
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Capitalized terms used but not defined in this Exhibit 99.1 have the meanings ascribed to them in the Current Report on Form
8-K (the Form 8-K ) filed with the Securities and Exchange Commission (the SEC ) on June 23, 2021 and, if not defined in the Form 8-K, the final prospectus and definitive proxy statement (the proxy statement/prospectus ) filed with the SEC on May 28, 2021.
The following unaudited pro forma condensed combined financial information is provided to aid you in your analysis of the financial aspects of the recently
completed Business Combination, the PIPE Investment and the transactions contemplated by the HEC Forward Purchase Agreement.
The following unaudited pro
forma condensed combined balance sheet as of March 31, 2021 combines the historical unaudited condensed consolidated balance sheet of HEC as of March 31, 2021 with the historical unaudited condensed consolidated balance sheet of Old
Talkspace as of March 31, 2021, giving effect to the Business Combination, the PIPE Investment with an aggregate commitment amount of $300.0 million and the transactions contemplated by the HEC Forward Purchase Agreement, as if they had
been consummated as of that date.
The following unaudited pro forma condensed combined statement of operations for the three months ended March 31,
2021 and for the year ended December 31, 2020 combine the historical condensed consolidated statement of operations of HEC and the historical consolidated statement of operations of Old Talkspace for such periods on a pro forma basis as if the
Business Combination, the PIPE Investment and the transactions contemplated by the HEC Forward Purchase Agreement had been consummated on January 1, 2020, the beginning of the earliest period presented.
The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give pro forma effect to events
that are: (i) directly attributable to the Business Combination, the PIPE Investment and the transactions contemplated by the HEC Forward Purchase Agreement, (ii) factually supportable, and (iii) with respect to the statements of
operations, expected to have a continuing impact on the results of operations of the combined company.
The unaudited pro forma condensed combined
financial statements have been developed from and should be read in conjunction with:
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2021
(in thousands, except share and per share data)
| As of March 31, 2021 | Actual Redemptions into Cash | |||||||||||||||||||
| (A) HEC | (B) Old Talkspace | Pro-Forma Adjustments | Pro-Forma Combined | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 377 | $ | 9,772 | $ | 124,944 | (6a | ) | $ | 263,652 | ||||||||||
| (22,100 | ) | (6b | ) | |||||||||||||||||
| 300,000 | (6c | ) | ||||||||||||||||||
| (199,341 | ) | (6l | ) | |||||||||||||||||
| 50,000 | (6f | ) | ||||||||||||||||||
| Accounts receivable | 7,580 | 7,580 | ||||||||||||||||||
| Other current assets | 151 | 2,766 | 2,917 | |||||||||||||||||
| Total Current assets | 528 | 20,118 | 253,503 | 274,149 | ||||||||||||||||
| Property and equipment, net | 472 | 472 | ||||||||||||||||||
| Deferred issuance cost | 3,440 | (3,440 | ) | (6b | ) | |||||||||||||||
| Intangible assets, net | 4,755 | 4,755 | ||||||||||||||||||
| Goodwill | 6,134 | 6,134 | ||||||||||||||||||
| Cash and marketable securities held in trust account | 414,276 | (124,944 | ) | (6a | ) | |||||||||||||||
| (14,490 | ) | (6d | ) | |||||||||||||||||
| (15,030 | ) | (6e | ) | |||||||||||||||||
| (259,812 | ) | (6j | ) | |||||||||||||||||
| Total assets | $ | 414,804 | $ | 34,919 | $ | (164,213 | ) | $ | 285,510 | |||||||||||
| Liabilities, Convertible Preferred Stock, and Stockholders Equity (Deficit) | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Accounts payable | $ | $ | 16,830 | $ | $ | 16,830 | ||||||||||||||
| Deferred revenues | 8,050 | 8,050 | ||||||||||||||||||
| Income taxes payable | 10 | 10 | ||||||||||||||||||
| Accrued expenses and other current liabilities | 1,592 | 7,958 | (609 | ) | (6h | ) | 8,941 | |||||||||||||
| Total current liabilities | 1,602 | 32,838 | (609 | ) | 33,831 | |||||||||||||||
| FPA liability | 1,650 | (1,650 | ) | (6f | ) | |||||||||||||||
| Warrant liability | 45,126 | (30,015 | ) | (6m | ) | 15,111 | ||||||||||||||
| Deferred underwriting fee payable | 14,490 | (14,490 | ) | (6d | ) | |||||||||||||||
| Total liabilities | $ | 62,868 | $ | 32,838 | $ | (46,764 | ) | $ | 48,942 | |||||||||||
| Old Talkspace convertible preferred stock (Series Seed, Seed-1, Seed-2, A, B, C and D) of 0.001 par value Authorized: 84,389,164 shares at March 31, 2021; Issued and outstanding: 83,395,815 shares at March 31, 2021 | 111,282 | (111,282 | ) | (6g | ) | |||||||||||||||
| HEC s Class A common stock subject to possible redemption, 34,693,585 shares at $10.00 per share redemption value | 346,936 | (346,936 | ) | (6j | ) |
| As of March 31, 2021 | Actual Redemptions into Cash | |||||||||||||||||||
| (A) HEC | (B) Old Talkspace | Pro-Forma Adjustments | Pro-Forma Combined | |||||||||||||||||
| Stockholders equity (deficit): | ||||||||||||||||||||
| Old Talkspace common stock of 0.001 par value Authorized: 114,092,838 shares at March 31, 2021; Issued and outstanding: 12,430,874 shares at March 31, 2021 | $ | 12 | (12 | ) | (6k | ) | ||||||||||||||
| HEC Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | ||||||||||||||||||||
| HEC s Class A common stock, $0.0001 par value; 380,000,000 shares authorized; 6,706,415 shares issued and outstanding (excluding 34,693,585 shares subject to possible redemption) | 1 | (1 | ) | (6j | ) | |||||||||||||||
| HEC s Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 10,350,000 shares issued and outstanding | 1 | (1 | ) | (6i | ) | |||||||||||||||
| Talkspace, Inc. common stock, $0.0001 | 8 | (6g | ) | 17 | ||||||||||||||||
| 1 | (6i | ) | ||||||||||||||||||
| 3 | (6f | ) | ||||||||||||||||||
| 1 | (6j | ) | ||||||||||||||||||
| 3 | (6c | ) | ||||||||||||||||||
| 1 | (6k | ) | ||||||||||||||||||
| Additional paid-in capital | 21,873 | 12,313 | 111,274 | (6g | ) | 376,472 | ||||||||||||||
| 609 | (6h | ) | ||||||||||||||||||
| 87,124 | (6j | ) | ||||||||||||||||||
| (24,020 | ) | (6b | ) | |||||||||||||||||
| 299,997 | (6c | ) | ||||||||||||||||||
| (199,341 | ) | (6l | ) | |||||||||||||||||
| (15,030 | ) | (6e | ) | |||||||||||||||||
| 51,647 | (6f | ) | ||||||||||||||||||
| 11 | (6k | ) | ||||||||||||||||||
| 30,015 | (6m | ) | ||||||||||||||||||
| Accumulated deficit | (16,875 | ) | (121,526 | ) | (1,520 | ) | (6b | ) | (139,921 | ) | ||||||||||
| Total stockholders equity (deficit) | 5,000 | (109,201 | ) | 340,769 | 236,568 | |||||||||||||||
| Total liabilities, convertible preferred stock and stockholders equity (deficit) | $ | 414,804 | $ | 34,919 | $ | (164,213 | ) | $ | 285,510 |
See accompanying notes to the unaudited pro forma condensed combined financial information.
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Three Months Ended March 31, 2021
(in thousands, except share and per share amounts)
| Three Months Ended March 31, 2021 | Actual Redemptions into Cash | |||||||||||||||||||
| (A) HEC | (B) Old Talkspace | Pro-Forma Adjustments | Pro-Forma Combined | |||||||||||||||||
| Revenues | $ | $ | 27,157 | $ | $ | 27,157 | ||||||||||||||
| Cost of Revenues: | 9,814 | 9,814 | ||||||||||||||||||
| Gross profit | 17,343 | 17,343 | ||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Research and development | 2,964 | 2,964 | ||||||||||||||||||
| Clinical operations | 2,077 | 2,077 | ||||||||||||||||||
| Sales and marketing | 22,251 | 22,251 | ||||||||||||||||||
| General and administrative | 728 | 2,608 | (728 | ) | (7a | ) | 2,608 | |||||||||||||
| Total operating expenses | 728 | 29,900 | (728 | ) | 29,900 | |||||||||||||||
| Operating income (loss) | (728 | ) | (12,557 | ) | 728 | (12,557 | ) | |||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Change in fair value of warrants | 8,467 | (165 | ) | 165 | (7b | ) | 8,467 | |||||||||||||
| Change in fair value of FPA | 2,575 | (2,575 | ) | (7c | ) | |||||||||||||||
| Interest earned on marketable securities held in trust account | 47 | (47 | ) | (7d | ) | |||||||||||||||
| Other financial expenses | (8 | ) | (8 | ) | ||||||||||||||||
| Income (loss) before taxes on income | 10,361 | (12,730 | ) | (1,729 | ) | (4,098 | ) | |||||||||||||
| Taxes on income | 8 | 8 | ||||||||||||||||||
| Net Income (loss) | $ | 10,361 | $ | (12,738 | ) | $ | (1,729 | ) | $ | (4,106 | ) | |||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||
| Comprehensive income (loss) | 10,361 | (12,738 | ) | (1,729 | ) | (4,106 | ) | |||||||||||||
| Basic and diluted net income per share of HEC s Class A common stock | $ | 0.27 | ||||||||||||||||||
| Basic and diluted net loss per common share | $ | (1.05 | ) | |||||||||||||||||
| Net loss per share (1) | $ | (0.02 | ) | |||||||||||||||||
| Weighted average Class A common stock of HEC | 41,400,000 | |||||||||||||||||||
| Weighted average common shares outstanding of Old Talkspace | 12,134,482 | |||||||||||||||||||
| Weighted average shares outstanding on a fully diluted exercise basis | (7e | ) | 167,138,491 |
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Year Ended December 31, 2020
(in thousands, except share and per share amounts)
| For the Period from February 6, 2020 (inception) to December 31, 2020 | Year Ended December 31, 2020 | Actual Redemptions into Cash | ||||||||||||||||||
| (C) HEC (restated) | (D) Old Talkspace | Pro-Forma Adjustments | Pro-Forma Combined | |||||||||||||||||
| Revenues | $ | $ | 76,190 | $ | $ | 76,190 | ||||||||||||||
| Cost of Revenues | 26,353 | 26,353 | ||||||||||||||||||
| Gross profit | 49,837 | 49,837 | ||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Research and development | 9,583 | 9,583 | ||||||||||||||||||
| Clinical operations | 4,332 | 4,332 | ||||||||||||||||||
| Sales and marketing | 47,705 | 47,705 | ||||||||||||||||||
| General and Administrative | 1,776 | 10,199 | (1,776 | ) | (7a | ) | 11,719 | |||||||||||||
| 1,520 | (6b | ) | ||||||||||||||||||
| Total operating expenses | 1,776 | 71,819 | (256 | ) | 73,339 | |||||||||||||||
| Operating loss | (1,776 | ) | (21,982 | ) | 256 | (23,502 | ) | |||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Change in fair value of warrants | (18,896 | ) | (346 | ) | 346 | (7b | ) | (18,896 | ) | |||||||||||
| Change in fair value of FPA | (3,875 | ) | 3,875 | (7c | ) | |||||||||||||||
| Compensation expense in connection with issuance of Private Placement Warrants | (1,234 | ) | (1,234 | ) | ||||||||||||||||
| Initial classification of FPA | (350 | ) | (350 | ) | ||||||||||||||||
| Transaction costs attributable to Warrants | (1,323 | ) | (1,323 | ) | ||||||||||||||||
| Interest earned on marketable securities Held in trust account | 228 | (228 | ) | (7d | ) | |||||||||||||||
| Other financial expenses | (18 | ) | (18 | ) | ||||||||||||||||
| Income (loss) before taxes on income | (27,226 | ) | (22,346 | ) | 4,249 | (45,323 | ) | |||||||||||||
| Taxes on income | 10 | 24 | 34 | |||||||||||||||||
| Net Income (loss) | $ | (27,236 | ) | $ | (22,370 | ) | $ | 4,249 | $ | (45,357 | ) | |||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||
| Comprehensive income (loss) | (27,236 | ) | (22,370 | ) | 4,249 | (45,357 | ) | |||||||||||||
| Basic and diluted net loss per share of HEC s Class A common stock | $ | 0.00 | ||||||||||||||||||
| Basic and diluted net loss per common share | $ | 1.90 | ||||||||||||||||||
| Net loss per share (1) | $ | 0.27 | ||||||||||||||||||
| Weighted average Class A common stock of HEC | 41,400,000 | |||||||||||||||||||
| Weighted average common shares outstanding of Old Talkspace | 11,779,604 | |||||||||||||||||||
| Weighted average shares outstanding on a fully diluted exercise basis | (7e | ) | 167,138,491 |
See accompanying notes to the unaudited pro forma condensed combined financial information.
Notes to Unaudited Pro Forma Condensed Combined Financial Information
1. Description of the Merger
On January 12, 2021,
HEC entered into the Merger Agreement with Old Talkspace, First Merger Sub and Second Merger Sub pursuant to which (i) First Merger Sub merged with and into Old Talkspace, with Old Talkspace being the surviving company in the merger (the
First Merger ) and (ii) immediately following the First Merger and as part of the same overall transaction as the First Merger, Old Talkspace merged with and into Second Merger Sub, with Second Merger Sub surviving the merger as a
wholly owned subsidiary of HEC (the Second Merger ). As a result of the First Merger, HEC owned 100% of the outstanding Old Talkspace common stock as the surviving corporation in the First Merger and each outstanding share of Old
Talkspace common stock and Old Talkspace preferred stock (other than treasury shares or shares owned by HEC, First Merger Sub or Old Talkspace) were cancelled and converted into the right to receive the merger consideration in accordance with the
Merger Agreement. Following the Second Merger, HEC owned 100% of the outstanding interests of Second Merger Sub. Following the Closing, HEC owned, directly or indirectly, all of the outstanding equity interests of the surviving company and the
stockholders of Old Talkspace owned a portion of HEC s Class A common stock. In connection with the Business Combination, HEC changed its name to Talkspace, Inc.
Old Talkspace affected the below steps set forth in the Merger Agreement (referring as Pre-Closing Restructuring
As a result of and upon the Closing , among other things, all shares of Old Talkspace s Common Stock, par value $0.001 per share
(the Old Talkspace Common Stock ), all shares of Old Talkspace s Series Seed Preferred Stock, par value $0.001 per share, Series Seed-1 Preferred Stock, par value $0.001 per share, Series Seed-2 Preferred Stock, par value $0.001 per share, Series A Preferred Stock, par value $0.001 per share, Series B Preferred Stock, par value $0.001 per share, Series C Preferred Stock, par value $0.001 per share
and Series D Preferred Stock, par value $0.001 per share (collectively, the Old Talkspace Preferred Stock and, together with the Old Talkspace Common Stock, the Old Talkspace Capital Stock ) and all vested options exercisable
for Old Talkspace Common Stock ( Old Talkspace Vested Options ) outstanding as of immediately prior to Closing were cancelled or assumed, as applicable, and converted into the right to receive, at the election of the holders thereof, a
number of shares of Talkspace, Inc. s Common Stock, par value $0.0001 per share (the Talkspace common stock ) (or, with respect to holders of Old Talkspace Vested Options, a number of vested options exercisable for Talkspace common
stock Talkspace Vested Options ) or a combination of shares of Talkspace common stock and cash (or, with respect to holders of Old Talkspace Vested Options, a combination of Talkspace Vested Options and cash), in each case, as adjusted
pursuant to the Merger Agreement, which, in the aggregate with the unvested options exercisable for Old Talkspace Common Stock assumed by Talkspace and converted into unvested options exercisable for Talkspace common stock, equaled in the aggregate
approximately $199.3 million in cash and 109,461,534 shares of Talkspace common stock (at a deemed value of $10.00 per share).
Concurrently with the
execution of the Merger Agreement, HEC entered into Subscription Agreements with the PIPE Investors. At Closing, the PIPE Investors collectively subscribed for 30,000,000 shares of HEC common stock for an aggregate purchase price equal to
In addition, in connection with the execution of the Merger Agreement, HEC entered into an amendment to the forward purchase
agreement (as amended, the HEC Forward Purchase Agreement ) with HEC Master Fund LP, a Delaware limited partnership and affiliate of the Sponsor ( HEC Fund ), dated June 8, 2020. At Closing, pursuant to the HEC Forward
Purchase Agreement, HEC Fund purchased 5,000,000 forward purchase units, consisting of one share of HEC s Class A common stock and one-half of one warrant to purchase one share of HEC s
Class A common stock, for $10.00 per unit, or an aggregate amount of $50.0 million.
2. Basis of Presentation
The accompanying unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of SEC Regulation S-X. The unaudited pro forma condensed combined balance sheet as of March 31, 2021 was prepared using the historical audited condensed consolidated balance sheets of HEC and Old Talkspace as of
March 31, 2021 and gives effect to the Business Combination, the PIPE Investment and the transactions contemplated by the HEC Forward Purchase Agreement as if they occurred on March 31, 2021. The unaudited pro forma condensed combined
statement of operations for the three months ended March 31, 2021 combines the historical unaudited condensed consolidated statement of operations of HEC for the three months ended March 31, 2021 and the historical unaudited condensed
consolidated statement of comprehensive loss of Old Talkspace for the three months ended March 31, 2021 and give effect to the Business Combination, the PIPE Investment and the transactions contemplated by the HEC Forward Purchase Agreement as
if they occurred on January 1, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 combines the historical audited condensed statement of operations of HEC for the period from
February 6, 2020 (inception) to December 31, 2020 and the historical audited condensed consolidated statement of comprehensive loss of Old Talkspace for the year ended December 31, 2020 and give effect to the Business Combination, the
PIPE Investment and the transactions contemplated by the HEC Forward Purchase Agreement as if they occurred on January 1, 2020.
The unaudited pro forma condensed combined financial information was derived from and should be read in
conjunction with the following historical financial statements and the accompanying notes, which are included elsewhere in the proxy statement/prospectus:
The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial
results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the
companies always been combined or the future results that the combined company will experience. HEC and Old Talkspace have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to
eliminate activities between the companies.
The unaudited pro forma condensed combined financial information has been prepared using actual redemptions
of 25,968,043 shares of HEC s Class A common stock for an aggregate redemption payment of $259.8 million out of the trust account on the closing date of the Business Combination.
3. Items Not Included in the Unaudited Pro Forma Condensed Combined Financial Statements
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost
savings that may be associated with the Business Combination.
4. Accounting for the Merger
The Business Combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, HEC will be treated as
the acquired company for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of Old Talkspace issuing stock for the net assets of HEC, accompanied by a recapitalization. The net assets of
HEC will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be presented as those of Old Talkspace. See the accounting treatment discussed elsewhere in the proxy
statement/prospectus.
5. Shares of Talkspace Common Stock
Talkspace issued 109,461,534 shares of Talkspace common stock (inclusive of 17,987,755 shares of Talkspace common stock underlying Talkspace options on a cash
exercise basis) in the Business Combination and paid an aggregate of $199.3 million of cash to those holders of Old Talkspace Capital Stock and Old Talkspace Vested Options eligible to make a cash election on a pro rata basis, which was
determined based on the exchange ratio as follows:
| Exchange Ratio | 1.134140 | |||
| Shares of Talkspace common stock issued to holders of Old Talkspace Capital Stock | 91,473,779 | |||
| Shares of Talkspace common stock issued to holders of Old Talkspace options (on a cash exercise basis) outstanding prior to the Closing | 17,987,755 | |||
| Cash consideration paid in respect of Old Talkspace Capital Stock and Old Talkspace Vested Options | $ | 199,341,839.48 |
6. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2021
The unaudited pro forma condensed combined balance sheet as of March 31, 2021 has been prepared to illustrate the effect of the Business Combination and
has been prepared for informational purposes only.
The unaudited pro forma condensed combined balance sheet as of March 31, 2021 includes pro forma
adjustments that are: (i) directly attributable to the Business Combination, the PIPE Investment and the transactions contemplated by the HEC Forward Purchase Agreement, and (ii) factually supportable. HEC and Old Talkspace did not have
any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The pro forma notes and adjustments, included in the unaudited pro forma condensed combined balance sheet as of March 31, 2021, are as follows:
Pro forma adjustments
| Preferred Stock classes | Shares | |||
| Seed Preferred Stock | 3,434,999 | |||
| Seed-1 Preferred Stock | 7,812,248 | |||
| Seed-2 Preferred Stock | 3,311,260 | |||
| Series A Preferred Stock | 16,014,920 | |||
| Series B Preferred Stock | 14,405,065 | |||
| Series C Preferred Stock | 19,761,349 | |||
| Series D Preferred Stock | 18,655,974 | |||
| Total Preferred Stock issued and outstanding | 83,395,815 |
7. Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations for the Three Months Ended March 31, 2021 and the Year Ended
The unaudited pro forma condensed combined statements of operations include pro forma adjustments that are: (i) directly
attributable to the transactions described above, (ii) factually supportable, and (iii) expected to have a continuing impact on the results of the post-combination company, Talkspace. HEC and Old Talkspace did not have any historical
relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies. HEC recognized $562,643 of transaction costs during the three months ended March 31, 2021 and
$1.4 million of transaction costs during the period from February 6, 2020 (inception) through December 31, 2020. Old Talkspace recognized $2.7 million of transaction costs during the three months ended March 31, 2021 and
$0.7 million during the year ended December 31, 2020.