bbln-20230331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________

FORM 10-Q

_____________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission file number 001-40952

_____________________

BABYLON HOLDINGS LIMITED

(Exact name of registrant as specified in its charter)

_____________________


Bailiwick of Jersey, Channel Islands (State or other jurisdiction of incorporation or organization)						98-1638964 (I.R.S. Employer Identification Number)
2500 Bee Cave Road Building 1 - Suite 400 Austin, TX 78746
(Address of principal executive offices and zip code)
(512) 967-3787
(Registrant's telephone number, including area code)

_____________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A ordinary shares, par value, $0.001056433113 per share

BBLN

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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☒ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes o No

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 pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes ☒ No

As of May 1, 2023, 25,614,074 shares of Class A ordinary shares, par value $0.001056433113 per share, were issued and outstanding.

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		Page
Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of March 31, 202 3 (Unaudited) and December 31, 20 22	4
	Condensed Consolidated Statements of Operations and Other Comprehensive Loss (Unaudited) for the three months ended March 31, 202 3 and 20 22	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the three months ended March 31, 202 3 and 20 22	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 202 3 and 20 22	7
	Notes to the Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46

Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	51

Exhibit Index		51

Signatures		53

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Babylon Holdings Limited

Condensed Consolidated Balance Sheets

(Dollars, in thousands, except share and per share data)


	As of March 31,	As of December 31,
	2023	2022
	(Unaudited)
	$	$
ASSETS
Current assets
Cash and cash equivalents	25,582	43,475
Trade receivables, net	15,404	15,524
Other receivables	14,897	17,502
Prepayments and contract assets	18,404	18,349
Assets held for sale	108,797	125,275
Total current assets	183,084	220,125
Property, plant and equipment, net	12,039	12,658
Operating lease right-of-use assets	12,870	13,327
Total assets	207,993	246,110
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities
Trade payables	5,893	9,600
Other payables	4,046	4,839
Accruals and other liabilities	40,000	30,029
Due to related parties	4,791	4,791
Claims payable	9,280	8,475
Contract liabilities	19,094	18,710
Lease liabilities	5,023	5,102
Liabilities held for sale	70,351	74,717
Premium deficiency reserve	13,103	6,124
Total current liabilities	171,581	162,387
Loans and borrowings, net of current position	295,449	278,028
Contract liabilities, net of current position	42,790	46,160
Lease liabilities, net of current portion	12,983	14,056
Warrant liability	—	711

Earnout liability	252	667
Total liabilities	523,055	502,009
SHAREHOLDERS' EQUITY
Class A ordinary shares,$0.001056433113 par value; 260,000,000 shares authorized at March 31, 2023 and December 31, 2022; 25,584,711 and 24,858,717 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	17	16
Class B ordinary shares, $0.001056433113 par value; 124,000,000 shares authorized at March 31, 2023 and December 31, 2022; zero shares issued and outstanding as of March 31, 2023 and December 31, 2022.	—	—
Additional paid-in capital	581,215	576,585
Accumulated deficit	(900,001)	(836,772)
Accumulated other comprehensive income	3,707	4,272
Total shareholders' equity	(315,062)	(255,899)
Total liabilities and shareholders' equity	207,993	246,110

The accompanying notes form an integral part of the unaudited condensed consolidated financial statements.

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Babylon Holdings Limited

Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(Dollars, in thousands, except share and per share data)

(Unaudited)


	For the Three Months Ended March 31,
	2023	2022
	$	$
Revenue	311,120	266,446
Claims expense	(283,906)	(247,552)
Clinical care delivery expense	(16,416)	(23,927)
Platform & application expenses	(8,594)	(13,748)
Research & development expenses	(4,476)	(17,314)
Sales, general & administrative expenses	(48,393)	(55,649)
Premium deficiency reserve expense	(2,494)	(6,868)

Depreciation and amortization expenses	(1,237)	(3,078)
Loss from operations	(54,396)	(101,690)
Interest expense	(8,819)	(5,982)
Interest income	161	255
Gain on fair value remeasurement	336	78,773
Gain on settlement of warrants	155	—
Exchange loss	(27)	(447)
Loss on sale of subsidiary	(646)	—
Net loss from operations before income taxes	(63,236)	(29,091)
Tax benefit / (provision)	7	(9)
Net loss	(63,229)	(29,100)
Other comprehensive loss
Currency translation differences	(565)	(3,639)
Other comprehensive (loss), net of income tax	(565)	(3,639)
Total comprehensive loss	(63,794)	(32,739)

Net loss per share
Net loss per share, basic and diluted, from operations	(2.53)	(1.71)
Weighted average shares outstanding, basic and diluted	25,025,645	17,038,663

The accompanying notes form an integral part of the unaudited condensed consolidated financial statements.

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Babylon Holdings Limited

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit)

(Dollars, in thousands)

(Unaudited)


	Class A ordinary shares	Class B ordinary shares	Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive income / (loss)	Total shareholders’ equity (deficit)
	$	$	$	$	$	$
Balance at December 31, 2021	13	3	456,748	(615,323)	(2,808)	(161,367)
Net loss	—	—	—	(29,100)	—	(29,100)
Foreign exchange movement	—	—	—	—	(3,639)	(3,639)
Equity issuance costs	—	—	541		—	541
Other	—	—	(345)	—	—	(345)
Equity-settled stock-based payment transactions	—	—	9,174	—	—	9,174
Balance at March 31, 2022	13	3	466,118	(644,423)	(6,447)	(184,736)

Balance at December 31, 2022	16	—	576,585	(836,772)	4,272	(255,899)
Net loss	—	—	—	(63,229)	—	(63,229)
Foreign exchange movement	—	—		—	(565)	(565)
Issuance of shares in bridge financing	1	—	1,804	—	—	1,805
Issuance of shares in warrant exchange	—	—	617	—	—	617
Other	—	—	42	—	—	42
Equity-settled stock-based payment transactions	—	—	2,167	—	—	2,167
Balance at March 31, 2023	17	—	581,215	(900,001)	3,707	(315,062)

The accompanying notes form an integral part of the unaudited condensed consolidated financial statements.

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Babylon Holdings Limited

Condensed Consolidated Statements of Cash Flows

(Dollars, in thousands)

(Unaudited)


	For the Three Months Ended March 31,
	2023	2022
	$	$
Cash flows from operating activities
Net loss	(63,229)	(29,100)
Adjustments to reconcile Net loss to net cash used in operating activities:
Non-cash interest expense, net	8,658	5,727
Stock-based compensation	2,167	9,174
Depreciation and amortization	1,237	3,078
Exchange loss	27	447
Gain on fair value remeasurement	(336)	(78,773)
Premium deficiency reserve expense	2,494	6,868
Gain on settlement of warrants	(155)	—
Loss on sale of subsidiary	646	—
Taxation	—	9

Working capital adjustments
Decrease / (Increase) in trade and other receivables	2,886	(3,648)
(Increase) / Decrease in prepayments and contract assets	(55)	4,029
(Decrease) / Increase in trade, other and claims payables	(3,746)	17,640
Increase / (Decrease) in accruals and other liabilities and due to related parties	1,992	(5,264)
(Decrease) in contract liabilities	(2,011)	(9,941)
Decrease in assets and liabilities held for sale	11,436	—
(Decrease) / Increase in operating lease liabilities	(417)	1,272
Net cash used in operating activities	(38,406)	(78,482)
Cash flows from investing activities
Capital expenditure	(372)	(2,613)


Proceeds from sale of investment in subsidiary	516	—
Net cash provided / (used) in investing activities	144	(2,613)
Cash flows from financing activities
Proceeds from issuance of notes and warrants	22,000	100,000
Payment of debt issuance costs	(3,153)	(4,000)
Payment of equity issuance costs	—	(1,002)
Other financing activities, net	42	(1,538)


Net cash provided by financing activities	18,889	93,460
Net (decrease) / increase in cash and cash equivalents	(19,373)	12,365
Cash and cash equivalents at January 1,	43,475	262,581
Effect of movements in exchange rate on cash held	1,480	32
Cash and cash equivalents at March 31,	25,582	274,978

The accompanying notes form an integral part of the unaudited condensed consolidated financial statements.

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The supplemental disclosure requirements for the Unaudited Condensed Consolidated Statements of Cash Flows are as follows:


	For the Three Months Ended March 31,
	2023	2022
	$	$
Non-cash financing and investing activities:
Shares issued upon settlement of warrants	772	—
Accrued and unpaid interest within Accruals and other liabilities	6,413	3,978
Receivable from sale of investment in subsidiary	250	—
Fair value of warrants issued	—	(3,418)
Equity and debt issuance costs in Accruals and other liabilities	(1,403)	—
Equity issued related to loans and borrowings	(1,804)	—

The accompanying notes form an integral part of the unaudited condensed consolidated financial statements.

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

1. Corporate Information

Babylon Holdings Limited (the “Company,” “Babylon,” “we” or “our”) is incorporated, registered and domiciled in Jersey. Our principal executive offices are located at 2500 Bee Cave Road, Building 1 — Suite 400, Austin, Texas 78746.

Babylon is a digital-first, value-based care healthcare company whose mission is to make high-quality healthcare accessible and affordable for everyone on Earth. Babylon is re-engineering healthcare, shifting the focus from sick care to proactive healthcare, in order to improve the overall patient experience and reduce healthcare costs. This is achieved by leveraging a highly scalable, digital-first platform combined with high quality, virtual clinical operations to provide integrated, personalized healthcare. Babylon works with governments, health providers and insurers across the globe, and supports healthcare facilities from small local practices to large hospitals.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Other Comprehensive Loss, Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) and the Condensed Consolidated Statements of Cash Flows, all of which are unaudited, along with the Notes to the Unaudited Condensed Consolidated Financial Statements, are collectively referred to as the “Unaudited Condensed Consolidated Financial Statements” throughout “Item 1. Financial Statements” in this Quarterly Report on Form 10-Q (this “Form 10-Q”).

The accompanying Unaudited Condensed Consolidated Financial Statements of Babylon Holdings Limited (collectively with its subsidiaries, referred to as the “Company” or the “Group”) for the three months ended March 31, 2023 and 2022, in the opinion of management, have been prepared with all necessary adjustments, including normal recurring adjustments, for the fair presentation of its condensed consolidated financial position, results of operations and cash flows of the Company for the periods presented. However, these financial results over the interim periods presented are not necessarily indicative of the financial results that may be expected for the full fiscal year or any other subsequent periods.

Certain information contained in the Notes to the Unaudited Condensed Consolidated Financial Statements normally included in financial statements prepared in conformity with the Generally Accepted Accounting Principles of the United States (“U.S. GAAP”), have been omitted or condensed pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”). The information contained in this report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023 (the “2022 Form 10-K”), which includes a complete set of footnote disclosures in conformity with U.S. GAAP, including our significant accounting policies.

The Company consolidates certain professional service corporations (“PCs”) that are owned, directly or indirectly, and operated by appropriately licensed physicians. The Company maintains control of these PCs through contractual arrangements, which can include service agreements, financing agreements, equity transfer restriction agreements, and employment agreements, or a combination thereof, which are primarily established during the formation of the PCs. At inception, the contractual framework established between the Group and the PCs provides the Group with the power to direct the relevant activities in the conduct of the PC’s non-clinical administrative and other non-clinical business activities. The physicians employed by the PC are exclusively in control of, and responsible for, all aspects of the practice of medicine for their patients. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and a substantive process and whether the acquired set has the ability to produce outputs.

Variable Interest Entities

The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a VIE. These evaluations are complex, and involve judgment and the use of estimates and assumptions based on available historical information, among other factors. The Company considers itself to control an entity if it is the majority owner of or has voting control over such entity. The Company also assesses control through means other than voting rights (“variable interest entities” or “VIEs”) and determines which business entity is the primary beneficiary of the VIE. The

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

Company consolidates VIEs when it is determined that the Company is the primary beneficiary of the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively (see Note 7).

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business and economic factors, and various other assumptions that the Company believes are necessary to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment evolves. The Company believes that estimates used in the preparation of these Unaudited Condensed Consolidated Financial Statements are reasonable; however, actual results could differ materially from these estimates.

Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in the Consolidated Statement of Operations and Other Comprehensive Loss, and if material, are also disclosed in the Notes to Consolidated Financial Statements. Estimates that involve a significant level of estimation uncertainty and reasonably likely to have a material impact on the Consolidated Financial Statements of the Company include our impairment analyses over the carrying value of long-lived assets (including goodwill and intangible assets), certain assumptions for revenue recognition, the accounting for premium deficiency reserves, incurred but not reported (“IBNR”) amounts within claims expense, and the accounting for business combinations. Other policies that use estimates include the accounting for financial instruments and the accounting for stock-based compensation awards. For more details related to these estimates, refer to their sections within Note 2 in our 2022 Form 10-K.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less from the date of purchase. As of March 31, 2023 and December 31, 2022, the Group had restricted cash of $0.3 million. The Company’s cash and cash equivalents generally consist of restricted cash and short-term investment funds. Cash and cash equivalents are stated at fair value.

Going Concern

The Group incurred a Net loss of $63.2 million and of $29.1 million for the three months ended March 31, 2023, and the three months ended March 31, 2022, respectively. As of March 31, 2023, and December 31, 2022, the Group had a net liability position of $315.1 million and $255.9 million, respectively. As of March 31, 2023, and December 31, 2022 the Group had cash and cash equivalents of $77.7 million and $104.5 million, including $52.1 million, and $61.0 million of cash and cash equivalents included in assets held for sale as of March 31, 2023, and December 31, 2022, respectively. The Group has financed its operations principally through issuances of debt and equity securities and has a strong record of fundraising, including the closing of the Merger and PIPE Transaction (each as defined below) on October 21, 2021 receiving proceeds of $229.3 million, entering into a note subscription agreement for $200.0 million on October 8, 2021 (Note 12), entering an additional unsecured note on March 31, 2022 for $100.0 million (Note 12), and entering into subscription agreements with several investors for a private placement of our Class A ordinary shares for $80.0 million in November 2022. The Group’s ability to continue as a going concern is dependent upon its ability to raise additional capital, which is necessary to fund its working capital requirements and ultimately achieve profitable operations.

Management performed a going concern assessment for a period of twelve months from the date of approval of these Unaudited Condensed Consolidated Financial Statements to assess whether conditions exist that raise substantial doubt regarding the Group’s ability to continue as a going concern. On March 9, 2023, we entered into a committed working capital facility (the “Bridge Facility”) for an aggregate principal amount of up to $34.5 million with certain affiliates of our existing counterparty for our note subscription agreement (Note 12). On May 10, 2023, we entered into the Additional Bridge Facility for a further amount up to $34.5 million (Note 12) on terms substantially similar to the Bridge Facility and

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

the Framework Agreement (Note 19). Please refer to Note 12 and Note 19 of the unaudited condensed consolidated financial statements for further discussion of the Additional Bridge Facility and the Framework Agreement.

While there is no assurance that the Additional Bridge Facility and the Framework Agreement will be implemented in a manner that will provide us with the funding that we need, management believes it remains appropriate to prepare our financial statements on a going concern basis.

However, the above indicates that there are material uncertainties relating to these potential events, including our ability to raise further capital through the successful implementation of the Additional Bridge Facility and the Framework Agreement and other strategic alternatives, and there is substantial doubt about the Group’s ability to continue as a going concern within one year after the date the Unaudited Condensed Consolidated Financial Statements have been issued.

The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

Income Taxes

The Company determines the tax (provision) or benefit in interim periods using an estimate of the Company’s annual effective tax rate applied to the Company’s operating results during the interim period presented, adjusted for the potential tax impact of discrete events or transactions occurring during the period, as applicable.

New Standards and Interpretations Not Yet Adopted

In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value and that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. ASU 2022-03 also requires the disclosure of the fair value, as reflected in the statement of financial condition, of equity securities subject to contractual sale restrictions and the nature and the disclosure of the remaining duration of those restrictions. ASU 2022-03 is effective for the Company beginning on January 1, 2024 and early adoption is permitted for both interim and annual financial statements that have not yet been issued. The ASU is to be applied prospectively, with any adjustments from the adoption recognized in earnings on the date of adoption. We are currently evaluating the impact of ASU 2022-03 on our Unaudited Condensed Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. The new standard is effective for our fiscal year beginning after December 15, 2022. Early adoption is permitted. The standard will not impact acquired contract assets or liabilities from business combinations occurring prior to the effective date of adoption, and the impact in future periods will depend on the contract assets and contract liabilities acquired in future business combinations. As no business combinations were consummated during the periods presented, this new standard has no impact on these Unaudited Condensed Consolidated Financial Statements.

3. Assets Held for Sale

2022 Disposal Group Held for Sale

During the fourth quarter of 2022, the IPA reporting unit was classified as held for sale in the Consolidated Balance Sheet within our 2022 Form 10-K as of December 31, 2022. The reporting unit continues to be classified as held for sale for the reporting period ended March 31, 2023. Management made certain judgements when assessing if this sale qualified for the presentation and disclosure requirements of a discontinued operation as defined under ASC 205, Presentation of Financial Statements, and concluded that the sale is not a strategic shift and therefore is not considered a discontinued operation. The Group continues to explore the sale of the IPA Business in 2023. Accordingly, the assets and liabilities of the IPA Business

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

continued to be classified within the current section of the Unaudited Condensed Consolidated Balance Sheet as of March 31, 2023.

The following presents the major classes of assets and liabilities for the IPA reporting unit held for sale:


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
Cash and cash equivalents	52,131	60,745
Prepayments and contract assets	413	396
Right of use assets - Non-current	1,277	1,319
Trade and other receivables	7,371	9,529
Property, plant and equipment	201	221
Goodwill	32,444	32,444
Other intangible assets	14,960	14,960
Assets held for sale	108,797	119,614

Trade and other payables	10,241	8,493
Accruals and other liabilities	3,071	3,479
Claims payable	45,317	41,650
Lease liabilities - Non-current	1,470	1,374
Premium Deficiency Reserve - Current	10,252	14,736
Liabilities held for sale	70,351	69,732

The IPA Business had the following pre-tax losses for each three months ended March 31:


(in thousands)
IPA Business Net loss from operations before income taxes			$
2023			(7,989)
2022			(443)

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

4. Disposals

2023 Disposal

On March 29, 2023, the Company entered into a Stock Purchase Agreement (“SPA”) with an unrelated third party (the “Buyer”) for the sale of the reporting unit higi SH Holdings, Inc. (“Higi”), which was classified as held for sale in the Company’s Consolidated Balance Sheets as of December 31, 2022 included in our 2022 Form 10-K. As a result of the sale, which closed on March 29, 2023, the entire issued share capital of Higi was transferred to the Buyer for $0.8 million of cash consideration, of which $0.5 million was received on execution of the SPA and $0.3 million is to be paid 90 days after the closing, resulting in the recognition of a Loss on sale of subsidiary of $0.6 million in the Unaudited Condensed Statements of Operations and Other Comprehensive Loss for the three months ended March 31, 2023.

Effect of disposal:


			As of March 29, 2023
(in thousands)			$
Cash and cash equivalents			(158)
Prepayments and contract assets			(996)
Right of use assets - Non-current			(1,466)
Trade and other receivables			(3,461)
Accruals and other liabilities			2,476
Contract liabilities – Current			686
Lease liabilities - Current			190
Lease liabilities - Non-current			1,317
Net assets and liabilities derecognized			(1,412)
Consideration received			766
Loss on disposal			(646)

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

5. Revenue

i)Disaggregation of Revenue

Revenue is primarily derived from the following sources: (1) capitation revenue from value-based care services, (2) patient revenues from the provision of clinical services, and (3) software license fees for the provision of AI services.

The following table presents revenue by sources:


	For the Three Months Ended March 31,
	2023	2022
(in thousands)	$	$
Value-based care	287,465	246,575
Clinical services	17,108	12,115
Software licensing	6,547	7,756
Revenue	311,120	266,446

The following table presents revenue by healthcare services provided under our value-based care arrangements:


	For the Three Months Ended March 31,
	2023	2022
(in thousands)	$	$
Medicaid	118,060	149,045
Medicare	111,277	87,564
Other	58,128	9,966
Value-based care	287,465	246,575

ii)Contract Balances

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
Trade receivables, net (Note 9)	15,404	15,524
Contract assets (Note 9)	8,533	6,112
Contract liabilities (Note 5 iii)	61,884	64,870

iii)Transaction Price Allocated to the Remaining Performance Obligations

The following table includes revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date:


	Remainder of 2023	2024	2025	2026	2027 and beyond	Total
(in thousands)	$	$	$	$	$	$
As of March 31, 2023	14,713	17,731	16,358	7,207	5,874	61,884

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

The table below shows significant changes in contract liabilities:


	For the Three Months Ended March 31, 2023	For the Year Ended December 31, 2022
(in thousands)	$	$
Balance on January 1	64,870	94,182
Amounts billed but not recognized	271	2,696
Revenue recognized	(4,674)	(21,503)
Effect of movement in foreign exchange	1,460	(9,774)
Transferred to liability held for sale	(43)	(731)
Contract liabilities	61,884	64,870

No revenue was recognized from performance obligations satisfied (or partially satisfied) in previous periods.

6. Segment Information

The Company disclosed our accounting policy for segment reporting in our 2022 Form 10-K as of December 31, 2022, including the determination that that the Company has one reportable segment. While there is only one reportable segment, the Company has disclosed the concentrations for major customers and geographical information below.

Major Customers

Below is a summary of customers that met or exceeded 10% of external revenues in each period presented:


	For the Three Months Ended March 31,
	2023			2022
(in thousands)	$	% of revenue		$	% of revenue
Customer 1	161,721	52.0	%	145,043	54.4	%
Customer 2	82,936	26.7	%	61,446	23.1	%

Geographical Information

Revenue from external customers attributed to individual countries is summarized as follows:


	For the Three Months Ended March 31,
	2023	2022
(in thousands)	$	$
U.S.	292,783	250,597
U.K.	12,497	9,435
Rest of World	5,840	6,414
Total	311,120	266,446

Non-current assets attributed to individual countries is summarized as follows:


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
U.K.	20,278	21,055
U.S.	4,470	4,752
Rest of World	161	178
Total	24,909	25,985

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

7. Variable Interest Entities

As discussed in Note 2, the PC entities were established to employ healthcare providers, contract with managed care payors and to deliver healthcare services to patients in the markets that the Company serves. Activities include but are not limited to operational support of the centers, marketing, information technology infrastructure and the sourcing and managing of health plan contracts.

The Company evaluated whether it has a variable interest in the PCs, whether the PCs are VIEs, and whether the Company has a controlling financial interest in the PCs. The following illustrate the assets, liabilities and performance of the PCs during the periods presented:


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
Total assets	128,196	137,675
Total liabilities	231,374	228,283


	For the Three Months Ended March 31, 2023	For the Three Months Ended March 31, 2022
(in thousands)	$	$
Total revenues	130,761	127,138
Operating expenses:
Claims expense	(127,680)	(118,985)
Clinical care delivery expense	(7,932)	(8,912)
Sales, general and administrative expenses	(8,668)	(14,352)
Depreciation and amortization expenses	—	(659)
Premium deficiency reserve income	4,484	14,028

8. Property, Plant and Equipment, net

Property, plant and equipment, net consisted of the following:


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
Computer equipment	2,210	2,195
Fixtures and fittings	9,829	10,463
Total	12,039	12,658

Depreciation expense for the three months ended March 31, 2023 and March 31, 2022 is $1.2 million and $1.7 million, respectively. For the three months ended March 31, 2023, we had additions of $0.4 million, and recognized a foreign currency gain of $0.2 million.

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

9. Trade and Other Receivables, Prepayments and Contract Assets

The components of Trade receivables, net, Other receivables and Prepayments and contract assets reflected in the Unaudited Condensed Consolidated Balance Sheets are disaggregated, as applicable, in the table below:


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
Trade receivables, gross	15,519	17,635
Allowance for doubtful accounts	(115)	(2,111)
Trade receivables, net (Note 5)	15,404	15,524

Other receivables	4,523	7,205
Security deposit	8,510	8,481
VAT receivable	1,864	1,816
Other receivables	14,897	17,502

Prepayments	9,871	12,237
Contract assets	8,533	6,112
Prepayments and contract assets	18,404	18,349

The Group has assessed its current expected credit loss estimate, in line with the requirements of ASC 326 by taking into consideration historical credit loss experience and financial factors specific to the debtors and general economic conditions. As part of this assessment, the Group has performed a recoverability assessment of its outstanding trade and other receivables at the reporting date and concluded that the expected credit loss as of March 31, 2023 and December 31, 2022 is immaterial.

The table below shows significant changes in contract assets for the periods presented:


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
Balance at January 1	6,112	4,484
Revenues recognized but not billed	7,376	4,478
Amounts reclassified to trade receivable	(5,068)	(1,914)
Amounts transferred to assets held for sale	(21)	(936)
Effect of movement in foreign exchange	134	—
Contract assets	8,533	6,112

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

10. Trade and Other Payables, Accruals and Other Liabilities

The components of Trade payables, Other payables and Accruals and other liabilities reflected in the Condensed Consolidated Balance Sheets are disaggregated, as applicable, in the table below:


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
Trade payables	5,893	9,600

Taxation and social security	2,379	4,839
Other	1,667	—
Other payables	4,046	4,839

Accruals	39,299	28,878
Other liabilities	701	1,151
Accruals and other liabilities	40,000	30,029

11. Claims Payable

The following table is a summary of claims activity:


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
Balance at January 1	8,475	24,628
Claims incurred, net	283,906	1,017,003
Claims settled	(279,434)	(991,506)
Claims payable transferred to liabilities held for sale	(3,667)	(41,650)
Claims payable	9,280	8,475

12. Loans and Borrowings

The following table is a summary of the non-current liabilities:


	As of March 31, 2023	As of December 31, 2022
(in thousands)	$	$
Non-current liabilities
Loan notes	338,650	310,466
Unamortized fair value adjustment, discount, and debt issuance costs	(43,201)	(32,438)
Total	295,449	278,028

Bridge Facility

On March 9, 2023, the Company and certain affiliates of, or funds managed and/or advised by, AlbaCore Capital LLP (the “AlbaCore Bridge Notes Subscribers”) entered into a bridge loan notes facility agreement (the “Bridge Facility Agreement”) by and among the Company, as borrower, Babylon Healthcare Inc., Babylon Partners Ltd., and Babylon Inc., as subsidiary guarantors (the “Subsidiary Guarantors”), and Babylon Group Holdings Limited, a limited company organized under the laws of England, as parent guarantor (the “Parent Guarantor” and, together with the Subsidiary Guarantors, the “Guarantors”), pursuant to which the AlbaCore Bridge Notes Subscribers agreed to provide Babylon with secured debt financing in the form of a senior secured term loan notes (“Bridge Notes”) facility (the “Bridge Facility”) for an aggregate principal amount of up to $34.5 million of Bridge Notes. Upon satisfaction of the applicable conditions described in the Bridge Facility Agreement, including the receipt of certain security documents and other transaction documentation, funding under the Bridge Facility was completed in three tranches of Bridge Notes in the aggregate

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

principal amounts of $13.8 million, $11.5 million, and $9.2 million, respectively. On April 17, 2023, Babylon and AlbaCore agreed to a waiver of the conditions for the utilization of tranche three of the Bridge Facility pursuant to the terms of the Tranche Three Waiver (as defined in Note 19). The Bridge Facility was subject to an original issue discount (calculated on the basis of an aggregate principal amount of $30.0 million). Prior to the amendments made pursuant to the Amendment and Restatement Agreement (as defined below), the maturity date of the Bridge Facility was November 4, 2026. The Bridge Facility bears payment-in-kind (“PIK”) interest at a rate of the term Secured Overnight Financing Rate (“SOFR”) plus credit adjustment spread plus a 12% margin. All PIK interest is capitalized and added to the principal of the Bridge Facility on the interest payment date of each month.

On May 10, 2023, the Company, the Guarantors, and the AlbaCore Bridge Notes Subscribers entered into an amendment and restatement agreement (the “Amendment and Restatement Agreement”) pursuant to which the Bridge Facility agreement was amended and restated (as amended and restated, the “Amended Bridge Facility Agreement”) and certain of the noteholders of the Bridge Facility (the “Bridge Noteholders”) agreed to provide further secured debt financing in the form of the Additional Bridge Facility in an aggregate principal amount of up to $34.5 million, to be funded in three additional tranches (such loan notes to be issued thereunder, the “Additional Bridge Notes”). The Additional Bridge Facility is subject to an original issue discount (calculated on the basis of an aggregate principal amount of $30.0 million).

The Additional Bridge Notes will be issued by the Parent Guarantor, are on economic terms substantially similar to the Bridge Notes and will rank pari passu with the Bridge Notes. The issuance of the Additional Bridge Notes is subject to the satisfaction of certain conditions precedent, including the receipt of certain supplemental security agreements and other transaction documentation, and with respect to the third tranche, approvals by Bridge Noteholders.

Each member of the Group which granted security to secure the obligations in respect of the Bridge Notes and the Existing Notes is required to grant supplementary security on substantially the same terms to secure the obligations in respect of the Additional Bridge Notes. The Additional Bridge Notes are guaranteed by the Company and the Guarantors substantially on the same terms as the guarantees granted in respect of the Bridge Notes.

The Amended Bridge Facility Agreement provides that proceeds from the Additional Bridge Facility must be used for working capital purposes and payments of fees, costs and expenses in connection with the Additional Bridge Facility and related transaction documentation. Pursuant to the terms of the Amended Bridge Facility Agreement, the Group is subject to certain additional restrictive covenants in relation to cash management, intra-group lending and certain other transactions, certain permitted exclusions to the restrictive covenants under the Bridge Facility Agreement have been removed or limited, certain events of default have been expanded to cover all members of the Group, certain additional events of default in relation to restrictions on transfer of the Bridge Notes and/or the Additional Bridge Notes have been added to the Bridge Facility Agreement, and the operational milestones in relation to a recapitalization of the Group and/or the sale of the Group, a sale of a strategic minority stake in the Group or a sale of material assets or subsidiaries of the Group have been removed.

The Bridge Notes and the Additional Bridge Notes shall be repayable on demand by written notice delivered by the trustee appointed under the Bridge Facility Agreement (the “Note Trustee”), on a date at least five business days following the date of such written notice, provided that such date may not occur before June 16, 2023 (the delivery of such notice, the “Trigger Event”).

There are both mandatory and voluntary redemption features under the Amended Bridge Facility Agreement. Mandatory redemption is triggered in the event of a change in control of the Company. That includes when a person or group is or becomes the beneficial owner directly or indirectly of more than 50% of the total voting power of the Company. Mandatory redemption is also triggered in the event that the Company or any other member of the Group raises debt or equity financing. In such cases, all of the net financing proceeds will be applied in redemption of the Bridge Notes and the Additional Bridge Notes (together, the “Notes”). Mandatory redemption is also triggered in the event that the Company or any other member of the Group completes a disposal of its assets other than certain excluded disposals including ordinary course trading. In such cases, all of the net disposal proceeds will be applied in redemption of the Notes. Mandatory redemption is also triggered in the event that the Company or any member of the Group receives proceeds under an insurance claim other than certain excluded insurance claims proceeds. In such cases, the amounts received as insurance proceeds will be applied in redemption of the Notes. Voluntary redemption may be made by the Company or the Parent Guarantor to redeem or repurchase the relevant Notes on the last day of an interest period in whole or in part. This voluntary redemption must be an amount that reduces the amount of the relevant Notes by a minimum amount of $1.0

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

million or such lesser amount as agreed by the Note Trustee. Any redemption of the Notes shall be applied pro rata to the face value of the Notes held by each of the noteholders at such time.

Following execution of the Bridge Facility Agreement in March 2023, the AlbaCore Bridge Notes Subscribers had the right to nominate a candidate for appointment by the Company as an independent, non-executive director to the board of directors of the Company. In accordance with this right, the AlbaCore Bridge Notes Subscribers nominated and the Company completed the appointment of Eugene I. Davis to the board of directors effective March 30, 2023. In addition, the Company agreed, pursuant to the Tranche Three Waiver, that the Bridge Noteholders would be entitled to nominate a candidate for appointment by the Company as an independent, non-executive director to the board of directors of the Company and that, following such appointment, the board of the Company shall at all times comprise a maximum of five directors, a majority of which must be independent non-executive directors and two of which must be nominated by the Bridge Noteholders. See Note 19 for further details on the Tranche Three Waiver.

On March 15, 2023, as a condition subsequent to the execution of the Bridge Facility Agreement, the Company entered into subscription agreements with the AlbaCore Bridge Notes Subscribers for the private placement of Class A ordinary shares representing 2.3%, or 534,911 Class A ordinary shares of the Company (excluding earnout shares and employee awards) as at the closing date (the “Private Placement Shares”), as consideration for the agreement by the AlbaCore Bridge Notes Subscribers to provide secured debt financing to the Company pursuant to the Bridge Facility Agreement. The Private Placement Shares were issued on March 27, 2023.

In addition, on March 15, 2023, as a condition subsequent to the execution of the Bridge Facility Agreement, the Company amended and restated the warrant instrument dated November 4, 2021, as previously amended and restated on March 31, 2022 (the “Warrant Instrument”), evidencing the issuance of warrants (the “AlbaCore Warrants”) to subscribe for Class A ordinary shares to the AlbaCore Existing Notes Subscribers (as defined below), such that their subscription entitlement to receive Class A ordinary shares pursuant to the terms of the Warrant Instrument was deemed automatically and irrevocably exercised. The Company issued 105,431 Class A ordinary shares (the “Warrant Shares”) to the AlbaCore Existing Notes Subscribers, pursuant to such deemed exercise of the AlbaCore Warrants, on March 27, 2023.

In addition, the Company agreed to file a registration statement on Form S-3 with the SEC to register resales from time to time of the Private Placement Shares and the Warrant Shares within 10 business days after receiving a written request therefor from the AlbaCore Bridge Notes Subscribers.

AlbaCore Existing Notes

On October 8, 2021, Babylon entered into a note subscription agreement (the “Note Subscription Agreement”) that provided for the issuance of up to $200.0 million in unsecured notes due 2026 (the “Existing Notes”) to affiliates of, or funds managed or controlled by, AlbaCore Capital LLP (the “AlbaCore Existing Notes Subscribers”). On November 4, 2021 (“Note Closing Date”), Babylon issued the full $200.0 million (the “Principal Amount”) of Existing Notes under the Note Subscription Agreement at a discount of 95.5% of the Principal Amount. The Existing Notes bear interest accruing on the Principal Amount (which for these purposes shall include any capitalized interest from time to time) at the following rates: (i) 8.00% per annum for the period commencing from (and including) the Note Closing Date to (but excluding) the date falling two years after the Note Closing Date; (ii) 10.00% per annum for the period commencing from (and including) the date falling two years after the Note Closing Date, to (but excluding) the date falling three years after the Note Closing Date; and (iii) 12.00% per annum for the period commencing from (and including) the date falling three years after the Note Closing Date. The applicable interest rate is subject to a step-up margin of 6.5 basis points per annum if Babylon and its subsidiaries do not achieve a target of adding 100,000 Medicaid lives to value-based care contracts by January 1, 2024. The Existing Notes will mature five years from the Note Closing Date on November 4, 2026.

The terms of the Existing Notes included covenants, which covenants are subject to certain limitations and exceptions, limiting the ability of Babylon and its subsidiaries to, among other things: incur additional debt; pay or declare dividends or distributions on Babylon’s share capital; repay or distribute any additional paid in capital reserve or redeem, repurchase or retire its Class A ordinary shares; incur or allow to remain outstanding guarantees; make certain joint venture investments; enter into operating or capital lease contracts; create liens on Babylon’s or its subsidiaries’ assets; enter into sale and leaseback transactions; pay management and advisory fees outside the ordinary course of business; acquire a company or any shares or securities or a business or undertaking; merge or consolidate with another company; borrow or receive

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

investments from certain shareholders other than through Babylon; and sell, lease, transfer or otherwise dispose of assets. The terms of the Existing Notes also included customary events of default. However, as a condition to the funding of the Bridge Facility, the Company and the AlbaCore Existing Notes Subscribers agreed to certain amendments to the Existing Notes and the deed poll governing the Existing Notes. In addition, the Company and the Parent Guarantor agreed to grant security in favor of the AlbaCore Existing Notes Subscribers (on a junior basis to the AlbaCore Bridge Notes Subscribers), and the Company agreed to pay a consent fee of $1,500,000 to be capitalized into the principal amount of the Existing Notes. These amendments to the Existing Notes aligned certain of the covenants of the Existing Notes to the covenants of the Bridge Facility, including the minimum liquidity covenant, the prohibition on distribution to or dividends to shareholders, the governance undertakings and milestones and provided for the capitalization of accrued interest on the Existing Notes in respect of the interest period ending May 4, 2023 at a rate equal to the interest rate of the Existing Notes plus 2% per year.

The Company and AlbaCore Existing Notes Subscribers are expected to enter into a second supplemental deed poll to amend the relevant terms and conditions of the Existing Notes to align with the amendments made to the Bridge Facility Agreement pursuant to the Amendment and Restatement Agreement.

On the Note Closing Date, Babylon issued AlbaCore Warrants to subscribe for an aggregate of 70,299 Class A ordinary shares to the AlbaCore Existing Notes Subscribers on a pro rata basis by reference to the relevant proportion of the Principal Amount of Existing Notes subscribed for by each AlbaCore Existing Notes Subscribers. As noted above, all AlbaCore Warrants were amended and deemed automatically and irrevocably exercised as of March 15, 2023.

We capitalized debt issuance costs of $3.4 million in connection with the issuance of the Existing Notes. Please refer to Note 15 for further discussion of the Albacore Warrants.

AlbaCore Additional Notes and Warrants

On December 23, 2021, Babylon entered into an additional note subscription agreement (the “Second Note Subscription Agreement”) providing for the issue of not less than $75 million and not more than $100 million additional Existing Notes (the “Additional Notes”) to AlbaCore Partners III Investment Holdings Designated Activity Company, and any new note subscribers that are affiliates of, or funds managed or controlled by, AlbaCore Capital LLP and that adhere to the Second Note Subscription Agreement (the “Second Note Subscribers”).

The closing of the issue of the Additional Notes under the Second Note Subscription Agreement, for the principal amount of $100 million, occurred on March 31, 2022 (the “Second Closing Date”). The terms and conditions of the Additional Notes are the same as the terms of the Existing Notes, with the exception that the Additional Notes were issued at 100% of their principal amount. At Babylon’s election, up to 50.00% of the interest payable in respect of any interest period may be satisfied by the issuance by Babylon of further Existing Notes to be immediately consolidated and form a single series with the outstanding Existing Notes.

On the Second Closing Date, Babylon issued AlbaCore Warrants to subscribe for an aggregate of 35,150 additional Class A ordinary shares (the “Additional AlbaCore Warrants”) to the Second Note Subscribers. Upon an exercise event, the AlbaCore Warrants were exercisable in full and not in part only. The exercise events applicable to the Additional AlbaCore Warrants were the same as the AlbaCore Warrants. As noted above, all AlbaCore Warrants were subsequently amended and deemed automatically and irrevocably exercised as of March 15, 2023.

We capitalized debt issuance costs of $4.0 million in connection with the issuance of the Additional Notes. Please refer to Note 15 for further discussion of the Additional Albacore Warrants.

Under the original terms of the AlbaCore Warrants, upon any exercise event Babylon had a right to elect to satisfy the subscription entitlement in respect of the AlbaCore Warrants by issuing Class A ordinary shares, by making a redemption payment in cash, or by a combination of both (in such proportions as Babylon in its absolute discretion determined). The cash redemption payment per Note Warrant would have been determined by reference to the closing price for the Class A ordinary shares on such date as specified in the Amended and Restated Warrant Instrument in respect of each exercise event, provided that if the closing price was in excess of $375.00 per Class A ordinary share (subject to customary adjustments), the cash redemption payment would have been capped at $375.00 per Note Warrant.

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

Under the terms of the AlbaCore Warrants, upon exercise of the AlbaCore Warrants to issue Class A ordinary shares in satisfaction in whole or in part of the subscription entitlement under the AlbaCore Warrants, Babylon was required to issue one Class A ordinary share credited as fully paid and free from all encumbrances (except as set out in Babylon’s memorandum and articles of association from time to time) per AlbaCore Warrant held, subject to a proportionate downwards adjustment to the number of Class A ordinary shares to be issued per AlbaCore Warrant where the closing price of the Class A ordinary shares on such date as was specified in the Amended and Restated Warrant Instrument in respect of each exercise event was in excess of $375.00 per Class A ordinary share.

Accrued Interest

Interest is payable on the Existing Notes semi-annually on May 4 and November 4 each year. The first and second interest payment was due on the six-month and one-year anniversary of the Note Closing Date on May 4, 2022 and November 4, 2022 respectively. As of May 4, 2022 and November 4, 2022, the interest payable on the Existing Notes was $8.8 million and $12.2 million, respectively. In accordance with the Note Subscription Agreement, Babylon elected to satisfy 50.0% of the interest payable on such dates of $4.4 million and $6.1 million through the issuance of further Existing Notes, which were immediately consolidated and formed into a single series with the outstanding Existing Notes. The remaining $4.4 million and $6.1 million of the interest payable was settled in cash and reflected within the Consolidated Statement of Cash Flows line item for Increase / (Decrease) in accruals and other liabilities and due to related parties in the year-ended December 31, 2022. In accordance with the terms of the Bridge Facility, 100.0% of the interest payable on May 4, 2023 was satisfied through the issuance of further Existing Notes, rather than being paid in cash.

Changes in Loans and Borrowings from Financing Activities


	AlbaCore Notes	Total Loans and Borrowings
















Balance at January 1, 2023	278,028	278,028
Changes from financing cash flows
Proceeds from issuance of notes and warrants	22,000	22,000
Payment of debt issuance costs	(3,153)	(3,153)

Total changes from financing cash flows	18,847	18,847
Other changes

Unpaid debt issuance costs	(1,403)	(1,403)
Amortization of fair value adjustment, discount, and debt issuance costs	1,781	1,781
Fair value of equity issued	(1,804)	(1,804)


Total other changes	(1,426)	(1,426)
Balance at March 31, 2023	295,449	295,449

During the three months ended March 31, 2023 and three months ended March 31, 2022 there was no interest paid on Loans and borrowings. As of March 31, 2023, and December 31, 2022 the unpaid portion of interest on Loans and borrowings, recognized within Accruals and other liabilities, was $10.2 million, and $3.9 million, respectively.

13. Employee Benefits

Equity Incentive Plans

The Company disclosed details of the 2021 Equity Incentive Plan (the “2021 Plan”) pursuant to which new awards can and past awards have been made, and concerning the Company Share Option Plan and Long-Term Incentive Plan pursuant to which past awards have been, but new awards may not be made, in our 2022 Form 10-K as of December 31, 2022. There have been no changes to these plans during the three months ended March 31, 2023. As of March 31, 2023, there are 1,023,938 Class A ordinary shares available for issuance pursuant to future awards under the 2021 Plan.

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

Stock-based Payments

Stock-based compensation expense is recognized using the graded vesting method. Stock-based payments are recognized as expense for restricted stock units (“RSUs”), Restricted Stock Awards (“RSAs”), Performance Stock Units (“PSUs”) and options, net of estimated forfeitures, as follows:


	For the Three Months Ended March 31,
	2023	2022
(in thousands)	$	$
Total stock-based compensation expense	2,167	9,174

Restricted Stock Awards

The following table displays RSA activity and weighted average grant date fair values for the three months ended March 31, 2023:


	RSAs	Weighted average grant date fair value per RSA
Balance at January 1, 2023	570,314	$	19.50
Granted	—	$	—
Vested and issued	(68,048)	$	33.76
Forfeited	(39,952)	$	7.95
Balance at March 31, 2023	462,314	$	21.03
Vested and unissued at March 31, 2023	116,874	$	12.47
Unvested at March 31, 2023	345,440	$	23.93

No RSAs were granted during the three months ended March 31, 2023.

The Company recorded stock-based compensation expense related to RSAs of $1.5 million during the three March 31, 2023. No stock-based compensation expense related to RSAs was recognized during the three months ended March 31, 2022.

As of March 31, 2023, the unrecognized compensation cost related to unvested RSAs is $6.5 million, which is expected to be recognized over a weighted average period of 2.8 years.

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

Restricted Stock Units

The following table displays RSU activity and weighted average grant date fair values for the three months ended March 31, 2023:


	RSUs	Weighted average grant date fair value per RSU1
Balance at January 1, 2023	702,823	$	82.85
Granted	19,400	$	8.46
Vested and issued	(11,812)	$	132.61
Forfeited	(148,867)	$	87.26
Balance at March 31, 2023	561,544	$	77.83
Vested and unissued at March 31, 2023	23,933	$	76.19
Unvested at March 31, 2023	537,611	$	113.73

(1) The calculation of weighted average grant date fair value excludes RSUs issued to Higi employees upon the acquisition of Higi during the period ended March 31, 2023.

The total grant-date fair value of RSUs granted during the three months ended March 31, 2023 and 2022 was $0.2 million and $1.7 million, respectively.

The Company recorded stock-based compensation expense related to RSUs during the three months ended March 31, 2023 and three months ended March 31, 2022 of $0.02 million and $6.9 million, respectively.

As of March 31, 2023, the Company had $28.4 million in unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 2.6 years.

Performance Share Units

The following table displays PSU activity and weighted average fair values for the periods presented:


	PSUs	Weighted average fair value
Balance at January 1, 2023	624,000	$	11.23
Granted	—	$	—
Vested and issued	—	$	—
Forfeited / cancelled during the period	(32,000)	$	8.58
Balance at March 31, 2023	592,000	$	11.73
Vested and unissued at March 31, 2023	—
Unvested at March 31, 2023	592,000	$	11.73

No PSUs were granted during the three months ended March 31, 2023.

The Company recorded stock-based compensation expense related to PSUs of $0.2 million during the three months ended March 31, 2023. No stock-based compensation expense related to PSUs was recognized during the three months ended March 31, 2022.

As of March 31, 2023, the Company had $6.3 million in unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted average period of 2.1 years.

Options

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Babylon Holdings Limited

Notes to the Unaudited Condensed Consolidated Financial Statements

There were no options granted during the three months ended March 31, 2023. The fair value of each employee and non-employee stock option award was estimated on the date of grant for each option using the Black-Scholes option pricing model. The group uses the following key assumptions to determine the grant date fair value of options in the period they were granted as follows:

Fair Value of Underlying Stock

The fair value of the Company’s Class A ordinary shares is determined by the closing price, on the date before the grant, of the Class A ordinary shares, which are traded on the NYSE. Prior to the Merger described in the 2022 Form 10-K, the estimated fair value of the Class A ordinary shares had been determined by the board of directors as of the date of each grant, with input from management, considering the most recently available third-party valuations of the Group’s Class A ordinary shares, and the assessment of additional objective and subjective factors that they believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant.

Volatility

The Company uses an average historical stock price volatility of a peer group of comparable publicly traded healthcare companies representative of our expected future stock price volatility, as there is not sufficient trading history for our Class A ordinary shares. For purposes of identifying these peer companies, the Company considers the industry, stage of development, size and financial leverage of potential comparable companies. For each grant, the Company measures historical volatility over a period equivalent to the expected term.

Risk-Free Interest Rate

The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with maturities similar to the expected term of the award.

Expected Dividend Yield

The Company has not paid and does not anticipate paying any dividends in the foreseeable future. Accordingly, the Company estimates the dividend yield to be zero.

Expected Term

The Company determines the expected term of awards using the simplified method which is used when there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method.

The following table displays option activity, aggregate intrinsic values, and weighted average exercise prices and remaining contractual lives for the three months ended March 31, 2023:


	Weighted average exercise price	Number of options	Weighted average remaining contractual life in years	Aggregate intrinsic value
	$			$’000
Outstanding at the beginning of the period	19.76	368,069	8.32	$	(4,723)
Granted during the period	—	—	N/A
Exercised during the period	0.01	(5,792)	N/A	$	(40)
Forfeited / cancelled during the period	21.04	(43,388)	N/A
Outstanding at the end of the period	19.96	318,889