| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
_____
DFP HEALTHCARE ACQUISITIONS CORP.
|
| ||||||||||
Delaware |
| 84-3562323 | |||||||||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) | |||||||||
18000 Studebaker Rd, Suite 800 | Cerritos | California | 90703 | ||||||||
(Address of Principal Executive Offices) | (Zip Code) |
345 Park Avenue South
New York, New York10010
(Address of Principal Executive Offices, including zip code)
(212) 551-1600
(Registrant’s
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 | ||||||||
| TOI |
| The Nasdaq Stock Market LLC | |||||||
| TOIIW |
| The Nasdaq Stock Market LLC | |||||||
|
|
|
Large accelerated filer | ☐ | Accelerated filer | ý | ||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ý | ||||||||
Emerging growth company | ý |
DFP HEALTHCARE ACQUISITIONS CORP.
Financial Statements and Supplementary Data
| | | | | | |
|
| September 30,2021 |
| December 31, 2020 | ||
| | | (unaudited) | | | |
Assets: |
| |
|
| |
|
Current assets: |
| |
|
| |
|
Cash | | $ | 204,865 | | $ | 916,987 |
Prepaid expenses | |
| 82,245 | |
| 152,474 |
Total current assets | |
| 287,110 | |
| 1,069,461 |
Cash and investments held in Trust Account | |
| 230,012,623 | |
| 230,254,149 |
Total Assets | | $ | 230,299,733 | | $ | 231,323,610 |
| | | | | | |
Liabilities, Class A Common Stock Subject to Possible Redemption, and Stockholders' Equity (Deficit): | |
|
| |
|
|
Current liabilities: | |
|
| |
|
|
Accounts payable | | $ | 961,084 | | $ | — |
Accrued expenses | | | 2,625,925 | | | 50,000 |
Accrued expenses - related parties | |
| 17,500 | |
| 17,500 |
Franchise tax payable | |
| 29,639 | |
| 200,050 |
Total current liabilities | |
| 3,634,148 | |
| 267,550 |
Deferred underwriting commissions | |
| 6,300,000 | |
| 6,300,000 |
Derivative warrant liabilities | | | 15,268,170 | | | 18,791,170 |
Total liabilities | |
| 25,202,318 | |
| 25,358,720 |
| | | | | | |
Commitments and Contingencies | |
|
| |
|
|
| | | | | | |
Class A common stock subject to possible redemption, $0.0001 par value; 23,000,000 shares at $10.00 per share as of September 30, 2021 and December 31, 2020 | |
| 230,000,000 | |
| 230,000,000 |
| | | | | | |
Stockholders' Equity (Deficit): | |
| | |
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — | |
| — |
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; NaN issued and outstanding | |
| — | |
| — |
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020 | |
| 575 | |
| 575 |
Accumulated deficit | |
| (24,903,160) | |
| (24,035,685) |
Total stockholders' equity (deficit) | |
| (24,902,585) | |
| (24,035,110) |
Total Liabilities, Class A Common Stock Subject to Possible Redemption, and Stockholders' Equity (Deficit) | | $ | 230,299,733 | | $ | 231,323,610 |
June 30, 2022 | December 31, 2021 | ||||||||||
(Unaudited) | |||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash (includes restricted cash of $0 and $875 as of June 30, 2022 and December 31, 2021) | $ | 64,208 | $ | 115,174 | |||||||
Accounts receivable | 28,947 | 20,007 | |||||||||
Other receivables | 422 | 1,237 | |||||||||
Inventories, net | 8,580 | 6,438 | |||||||||
Prepaid expenses | 10,048 | 11,200 | |||||||||
Total current assets | 112,205 | 154,056 | |||||||||
Property and equipment, net | 6,014 | 4,192 | |||||||||
Operating right of use assets | 17,255 | — | |||||||||
Intangible assets, net | 19,383 | 18,245 | |||||||||
Goodwill | 34,476 | 26,626 | |||||||||
Other assets | 407 | 320 | |||||||||
Total assets | $ | 189,740 | $ | 203,439 | |||||||
Liabilities and stockholders’ equity | |||||||||||
Current liabilities: | |||||||||||
Current portion of operating lease liabilities | $ | 4,486 | $ | — | |||||||
Current portion of long-term debt | — | 183 | |||||||||
Accounts payable | 13,900 | 15,559 | |||||||||
Income taxes payable | 132 | 132 | |||||||||
Accrued expenses and other current liabilities | 17,610 | 13,924 | |||||||||
Total current liabilities | 36,128 | 29,798 | |||||||||
Operating lease liabilities | 14,614 | — | |||||||||
Derivative warrant liabilities | 1,589 | 2,193 | |||||||||
Derivative earnout liabilities | 9,778 | 60,018 | |||||||||
Other non-current liabilities | 3,146 | 6,900 | |||||||||
Deferred income taxes liability | 502 | 371 | |||||||||
Total liabilities | 65,757 | 99,280 | |||||||||
Commitments and contingencies (Note 15) | — | — | |||||||||
Stockholders’ equity: | |||||||||||
TOI Common shares, $0.0001 par value, authorized 500,000,000 shares; 71,980,872 and 73,249,042 shares issued and outstanding at June 30, 2022 and December 31, 2021 | 7 | 7 | |||||||||
TOI Convertible Series A Common Equivalent Preferred Shares, $0.0001 par value, authorized 10,000,000 shares; 166,640 shares and 163,510 issued and outstanding at June 30, 2022 and December 31, 2021 | — | — | |||||||||
Additional paid-in capital | 173,377 | 167,386 | |||||||||
Accumulated deficit | (49,401) | (63,234) | |||||||||
Total stockholders’ equity | 123,983 | 104,159 | |||||||||
Total liabilities, cumulative preferred shares and stockholders’ equity | $ | 189,740 | $ | 203,439 |
1
For the Three and Nine Months Ended September 30, 2021 and 2020
INCOME (OPERATIONS)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||
Patient services | $ | 39,109 | $ | 29,786 | $ | 74,166 | $ | 59,408 | |||||||||||||||
Dispensary | 20,218 | 17,782 | 38,897 | 35,400 | |||||||||||||||||||
Clinical trials & other | 1,594 | 2,276 | 3,019 | 3,616 | |||||||||||||||||||
Total operating revenue | 60,921 | 49,844 | 116,082 | 98,424 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Direct costs – patient services | 32,875 | 23,574 | 60,253 | 46,660 | |||||||||||||||||||
Direct costs – dispensary | 16,754 | 15,237 | 32,078 | 30,360 | |||||||||||||||||||
Direct costs – clinical trials & other | 150 | 143 | 287 | 312 | |||||||||||||||||||
Selling, general and administrative expense | 28,348 | 11,212 | 58,154 | 22,390 | |||||||||||||||||||
Depreciation and amortization | 1,098 | 794 | 2,085 | 1,571 | |||||||||||||||||||
Total operating expenses | 79,225 | 50,960 | 152,857 | 101,293 | |||||||||||||||||||
Loss from operations | (18,304) | (1,116) | (36,775) | (2,869) | |||||||||||||||||||
Other non-operating expense (income) | |||||||||||||||||||||||
Interest expense | 61 | 81 | 135 | 182 | |||||||||||||||||||
Change in fair value of derivative warrant liabilities | (2,065) | — | (604) | — | |||||||||||||||||||
Change in fair value of earnout liabilities | (10,800) | — | (50,240) | — | |||||||||||||||||||
Gain on debt extinguishment | — | (5,186) | (183) | (5,186) | |||||||||||||||||||
Other, net | (15) | 4 | 136 | (1,072) | |||||||||||||||||||
Total other non-operating income | (12,819) | (5,101) | (50,756) | (6,076) | |||||||||||||||||||
Income before provision for income (loss) taxes | (5,485) | 3,985 | 13,981 | 3,207 | |||||||||||||||||||
Income tax benefit (expense) | 32 | (780) | (148) | (998) | |||||||||||||||||||
Net income (loss) | $ | (5,453) | $ | 3,205 | $ | 13,833 | $ | 2,209 | |||||||||||||||
Net income (loss) per share attributable to common stockholders: | |||||||||||||||||||||||
Basic | $ | (0.06) | $ | 0.05 | $ | 0.15 | $ | 0.03 | |||||||||||||||
Diluted | $ | (0.06) | $ | 0.05 | $ | 0.15 | $ | 0.03 | |||||||||||||||
Weighted-average number of shares outstanding: | |||||||||||||||||||||||
Basic | 72,996,836 | 66,021,829 | 73,123,895 | 64,446,377 | |||||||||||||||||||
Diluted | 72,996,836 | 66,021,829 | 76,106,201 | 64,446,377 |
| | | | | | | | | | | | |
|
| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||
| | 2021 |
| 2020 | | 2021 |
| 2020 | ||||
General and administrative expenses | | $ | 1,472,921 | | $ | 95,980 | | $ | 4,141,810 | | $ | 208,562 |
General and administrative expenses - related party | | | 52,500 | | | 52,500 | | | 157,500 | | | 122,500 |
Franchise tax expense | |
| 50,411 | |
| 50,000 | |
| 149,639 | |
| 149,750 |
Loss from operations | |
| (1,575,832) | |
| (198,480) | |
| (4,448,949) | |
| (480,812) |
Other income (expense) | | | | | | | | | | | | |
Interest income from investments in Trust Account | |
| 5,798 | |
| 73,393 | |
| 58,474 | |
| 194,901 |
Change in fair value of derivative warrant liabilities | | | 1,138,000 | | | (2,279,000) | | | 3,523,000 | | | (5,198,670) |
Financing cost - derivative warrant liabilities | | | — | | | — | | | — | | | (315,080) |
Loss before income tax expense | | | (432,034) | | | (2,404,087) | | | (867,475) | | | (5,799,661) |
Income tax expense | | | — | | | (12,573) | | | — | | | (12,573) |
Net loss | | $ | (432,034) | | $ | (2,416,660) | | $ | (867,475) | | $ | (5,812,234) |
| | | | | | | | | | | | |
Weighted average shares outstanding of Class A common stock, basic and diluted | |
| 23,000,000 | |
| 23,000,000 | |
| 23,000,000 | |
| 23,000,000 |
Basic and diluted net loss per share, Class A | | $ | (0.02) | | $ | (0.08) | | $ | (0.03) | | $ | (0.20) |
| | | | | | | | | | | | |
Weighted average shares outstanding of Class B common stock, basic | |
| 5,750,000 | |
| 5,750,000 | |
| 5,750,000 | |
| 5,552,920 |
Weighted average shares outstanding of Class B common stock, diluted | | | 5,750,000 | |
| 5,750,000 | |
| 5,750,000 | |
| 5,750,000 |
Basic and diluted net loss per share, Class B | | $ | (0.02) | | $ | (0.08) | | $ | (0.03) | | $ | (0.20) |
The
2
For the Three and Nine Months Ended September 30, 2021
| | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | | Total | ||||||||||
| | Class A | | Class B | | Additional Paid-In | | Accumulated | | Stockholders’ | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||||
Balance - December 31, 2020 |
| — | | $ | — |
| 5,750,000 | | $ | 575 | | $ | — | | $ | (24,035,685) | | $ | (24,035,110) |
Net income |
| — | |
| — |
| — | |
| — | |
| — | |
| 5,685,300 | |
| 5,685,300 |
Balance - March 31, 2021 (unaudited) | | — | | $ | — | | 5,750,000 | | $ | 575 | | $ | — | | $ | (18,350,385) | | $ | (18,349,810) |
Net loss | | — | | | — | | — | | | — | | | — | | | (6,120,741) | | | (6,120,741) |
Balance - June 30, 2021 (unaudited) | | — | | $ | — | | 5,750,000 | | $ | 575 | | $ | — | | $ | (24,471,126) | | $ | (24,470,551) |
Net loss | | — | | | — | | — | | | — | | | — | | | (432,034) | | | (432,034) |
Balance - September 30, 2021 (unaudited) | | — | | $ | — | | 5,750,000 | | $ | 575 | | $ | — | | $ | (24,903,160) | | $ | (24,902,585) |
Common stock | Preferred stock | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Additional paid in capital | Retained Earnings/ (Accumulated Deficit) | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | 73,249,042 | $ | 7 | 163,510 | $ | — | $ | 167,386 | $ | (63,234) | $ | 104,159 | |||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 19,286 | 19,286 | ||||||||||||||||||||||||||||||||||
Issuance of common stock upon vesting of RSUs | 27,188 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | 8,553 | — | 8,553 | ||||||||||||||||||||||||||||||||||
Balance at March, 31, 2022 | 73,276,230 | $ | 7 | 163,510 | $ | — | $ | 175,939 | $ | (43,948) | $ | 131,998 | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (5,453) | (5,453) | ||||||||||||||||||||||||||||||||||
Issuance of common stock upon vesting of RSUs | 150,958 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of options | 366,684 | — | — | — | 337 | — | 337 | ||||||||||||||||||||||||||||||||||
Exchange of common stock for preferred stock | (313,000) | — | 3,130 | — | — | — | — | ||||||||||||||||||||||||||||||||||
Repurchase and retirement of common stock | (1,500,000) | — | — | — | (9,000) | — | (9,000) | ||||||||||||||||||||||||||||||||||
Net settlement of taxes for equity awards | — | — | — | — | (413) | — | (413) | ||||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | 6,514 | — | 6,514 | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | 71,980,872 | $ | 7 | 166,640 | $ | — | $ | 173,377 | $ | (49,401) | $ | 123,983 |
Legacy TOI preferred stock | Legacy TOI common stock | Common stock | Preferred stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Additional paid in capital | Retained Earnings/ (Accumulated Deficit) | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December, 31, 2020 (as previously reported) | 11,451 | $ | 100 | — | $ | — | — | $ | — | — | $ | — | $ | 294 | $ | (52,307) | $ | (52,013) | |||||||||||||||||||||||||||||||||||||||||||||||
Retroactive application of the recapitalization due to the Business Combination (refer to Note 1) | (11,451) | (100) | — | — | 59,160,192 | 6 | — | — | 80,108 | — | 80,114 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020, effect of Business Combination (refer to Note 1) | — | $ | — | — | $ | — | 59,160,192 | $ | 6 | — | $ | — | $ | 80,402 | $ | (52,307) | $ | 28,101 | |||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (996) | (996) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Legacy TOI preferred stock issued and issuance of common stock | — | — | — | — | 6,861,637 | 1 | — | — | 19,998 | — | 19,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | — | — | — | — | 42 | — | 42 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March, 31, 2021 | — | $ | — | — | $ | — | 66,021,829 | $ | 7 | — | $ | — | $ | 100,442 | $ | (53,303) | $ | 47,146 | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | 3,205 | 3,205 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | — | — | — | — | 51 | — | 51 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | — | $ | — | — | $ | — | 66,021,829 | $ | 7 | — | $ | — | $ | 100,493 | $ | (50,098) | $ | 50,402 |
For the Three and Nine Months Ended September 30, 2020
| | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | | Total | ||||||||||
| | Class A | | Class B | | Additional Paid-In | | Accumulated | | Stockholders' | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | |||||
Balance - December 31, 2019 |
| — | | $ | — |
| 5,750,000 | | $ | 575 | | $ | 24,425 | | $ | (2,300) | | $ | 22,700 |
Sale of private placement warrants to Sponsor in private placement, less fair value allocation to derivative warrant liabilities |
| — | |
| — |
| — | |
| — | |
| 1,120,000 | |
| — | |
| 1,120,000 |
Accretion of Class A common stock to redemption amount | | — | | | — | | — | | | — | | | (1,144,425) | | | (15,693,481) | | | (16,837,906) |
Net loss |
| — | |
| — |
| — | |
| — | |
| — | |
| (776,839) | |
| (776,839) |
Balance - March 31, 2020 (unaudited) | | — | | $ | — | | 5,750,000 | | $ | 575 | | $ | — | | $ | (16,472,620) | | $ | (16,472,045) |
Net loss | | — | | | — | | — | | | — | | | — | | | (2,618,735) | | | (2,618,735) |
Balance - June 30, 2020 (unaudited) | | — | | $ | — | | 5,750,000 | | $ | 575 | | $ | — | | $ | (19,091,355) | | $ | (19,090,780) |
Net loss | | — | | | — | | — | | | — | | | — | | | (2,416,660) | | | (2,416,660) |
Balance - September 30, 2020 (unaudited) |
| — | | $ | — |
| 5,750,000 | | $ | 575 | | $ | — | | $ | (21,508,015) | | $ | (21,507,440) |
The
3
For the Nine Months Ended September 30, 2021 and 2020
| | | | | | |
| | For the Nine Months Ended September 30, | ||||
|
| 2021 |
| 2020 | ||
Cash Flows from Operating Activities: |
| |
| | |
|
Net loss | | $ | (867,475) | | $ | (5,812,234) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | | |
Interest earned on investments held in Trust Account | |
| (58,474) | | | (194,901) |
Financing cost - derivative warrant liabilities | | | — | | | 315,080 |
Change in fair value of derivative warrant liabilities | | | (3,523,000) | | | 5,198,670 |
Changes in operating assets and liabilities: | |
| | | | |
Prepaid expenses | |
| 70,229 | | | (202,187) |
Accounts payable | |
| 961,084 | | | 1,329 |
Accrued expenses | |
| 2,575,925 | | | 26,500 |
Accrued expenses - related parties | |
| — | | | 17,500 |
Franchise tax payable | |
| (170,411) | | | 149,300 |
Net cash used in operating activities | |
| (1,012,122) | | | (500,943) |
| | | | | | |
Cash Flows from Investing Activities | |
|
| | | |
Cash deposited in Trust Account | |
| — | | | (230,000,000) |
Investment income released from Trust Account for working capital | | | 300,000 | | | — |
Net cash provided by (used in) investing activities | |
| 300,000 | | | (230,000,000) |
| | | | | | |
Cash Flows from Financing Activities: | |
|
| | | |
Proceeds received from initial public offering, gross | |
| — | | | 230,000,000 |
Proceeds received from private placement | |
| — | | | (4,125,486) |
Offering costs paid | |
| — | | | 5,600,000 |
Net cash provided by financing activities | |
| — | | | 231,474,514 |
| | | | | | |
Net change in cash | |
| (712,122) | | | 973,571 |
| | | | | | |
Cash - beginning of the period | |
| 916,987 | | | 25,000 |
Cash - end of the period | | $ | 204,865 | | $ | 998,571 |
| | | | | | |
Supplemental disclosure of noncash activities: | |
|
| | | |
Deferred underwriting commissions in connection with the initial public offering | | $ | — | | $ | 6,300,000 |
Six Months Ended June 30, 2022 2021 Cash flows from operating activities: Net income $ 13,833 $ 2,209 Adjustments to reconcile net income to cash and restricted cash used in operating activities: Depreciation and amortization 2,085 1,571 Amortization of debt issuance costs — 35 Share-based compensation 15,067 93 Decrease in fair value of liability classified warrants (604) — Decrease in fair value of liability classified earnouts (50,240) — Deferred taxes 131 221 Gain on debt extinguishment (183) (5,186) Bad debt expense 259 (722) Loss on disposal of property and equipment 14 — Changes in operating assets and liabilities, net of business combinations: Accounts receivable (9,200) (1,794) Inventories (1,733) (272) Other receivables 815 (390) Prepaid expenses 1,152 249 Other current assets — (6,085) Operating lease right-of-use assets 2,191 — Other assets (86) (60) Accrued expenses and other current liabilities 2,562 1,487 Income taxes payable — 634 Accounts payable (1,658) 951 Current and long-term operating lease liabilities (1,767) — Other non-current liabilities 2 393 Net cash and restricted cash used in operating activities (27,360) (6,666) Cash flows from investing activities: Purchases of property and equipment (2,344) (1,026) Purchases of intangible asset in practice acquisitions — (200) Cash paid for practice acquisitions, net (8,920) (827) Net cash and restricted cash used in investing activities (11,264) (2,053) Cash flows from financing activities: Payments made for financing of insurance payments (2,481) — Payment of deferred consideration liability for acquisition (759) — Principal payments on long-term debt — (2,094) Principal payments on financing leases (26) (16) Common stock repurchase (9,000) — Common stock issuance 337 — Taxes for common shares net settled (413) — Issuance of Legacy TOI preferred stock — 20,000 Net cash and restricted cash (used in) provided by financing activities (12,342) 17,890 Net (decrease) increase in cash and restricted cash (50,966) 9,171 Cash and restricted cash at beginning of period 115,174 5,998 Cash and restricted cash at end of period $ 64,208 $ 15,169 Supplemental disclosure of noncash investing and financing activities: Deferred consideration as part of practice acquisitions $ 2,000 $ 1,118 Supplemental disclosure of cash flow information: Interest and principal forgiven from Paycheck Protection Program loans $ 183 $ 5,186 Cash paid for: Income taxes $ 25 $ 253 Interest $ 135 $ 137
TheSee accompanying notes are an integral part of these unauditedto the condensed consolidated financial statements.
4
As of June 30, 2022 and December 31, 2021 and for the three and six months ended June 30, 2022 and 2021
The Oncology Institute, Inc. (“TOI”) is the successor entity to DFP Healthcare Acquisitions Corp. (the “Company ,” or “DFP”("DFPH") was incorporated as. DFPH is a Delaware corporation on November 1, 2019.
originally formed in Sponsor2019
The Company’s sponsor is DFP Sponsor LLC, as a Delaware limited liabilitypublicly-traded special purpose acquisition company (the “Sponsor”).
Business Purpose
The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more operating businesses (“("Business Combination”Combination"). TOI was originally founded in 2007 and is a community oncology practice that operates value-based oncology services platforms. TOI has 3 wholly-owned subsidiaries, TOI Parent, Inc. ("TOI Parent"), TOI Acquisition, LLC (“TOI Acquisition”) and TOI Management, LLC (“TOI Management”). Additionally, TOI Management holds master services agreements with affiliated physician-owned professional entities ("TOI PCs") that confer controlling financial interest over the professional entities and their wholly-owned subsidiaries (TOI PCs, together with TOI, the “Company”).
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from November 1, 2019 (inception) through September 30, 2021, relates to the Company’s formationCalifornia, Nevada, and the initial public offering (the “Initial Public Offering”) described below, and since the Initial Public Offering, identifying a target company for a Business Combination.Arizona. The Company will not generate any operating revenues until after the completionhas contractual relationships with multiple payors, serving Medicare, including Medicare Advantage, MediCal, and commercial patients.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering, although substantially all of the net proceeds of the Initial Public Offering are intended to be generally applied toward completing a Business Combination. Furthermore, there is no assurance that the Company will be able to successfully complete a Business Combination.
Financing
The registration statement for the Company’s Initial Public Offering was declared effectiveRegulation S-X issued by the Securities and Exchange Commission (the “SEC”) on March 10, 2020. On March 13, 2020, the Company consummated its Initial Public Offering of 23,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including 3,000,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately $10.4 million, inclusive of approximately $6.3 million in deferred underwriting commissions (Note 3). Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 3,733,334 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to the Sponsor, generating proceeds of $5.6 million (Note 4).
Trust Account
Upon the closing of the Initial Public Offering and the Private Placement, $230.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (the “Trust Account”) and invested in permitted United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, which the Company refers to as the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act that invest only in direct U.S. government treasury obligations.
5
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s second amended and restated certificate of incorporation provides that, other than the withdrawal of interest earned on the funds that may be released to the Company to pay taxes, none of the funds held in Trust Account will be released until the earlier of: (i) the completion of the Business Combination; (ii) the redemption of the Public Shares to its holders (the “Public Stockholders”) properly tendered in connection with a stockholder vote to amend the Company’s second amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares or with respect to any other material provision relating to stockholders’ rights or pre-initial Business Combination activity, or (iii) the redemption of 100% of the Public Shares if the Company does not complete a Business Combination within 24 months from the closing of the Initial Public Offering.
The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to fund its working capital requirements (subject to an annual limit of $500,000) and/or to pay its taxes, or (ii) provide the Public Stockholders with the opportunity to sell their shares to the Company by means of a tender offer for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to commencement of the tender offer, including interest earned on the funds held in the Trust Account and not previously released to the Company to fund its working capital requirements (subject to an annual limit of $500,000) and/or to pay taxes. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001.
If the Company holds a stockholder vote in connection with a Business Combination, a Public Stockholder will have the right to redeem its shares for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to fund its working capital requirements (subject to an annual limit of $500,000) and/or to pay its taxes. As a result, such common stock is recorded at redemption amount and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with ASC 480, “Distinguishing Liabilities from Equity.” The amount in the Trust Account is initially anticipated to be $10.00 per public share ($230.0 million held in the Trust Account divided by 23,000,000 public shares).
The Company will have 24 months from the closing of the Initial Public Offering, or until March 13, 2022, to complete its initial Business Combination (the “ Combination Period”("SEC"). If the Company does not complete a Business Combination within this period of time, it will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public Shares for a per share pro rata portion of the Trust Account, including interest and not previously released to the Company to fund its working capital requirements (subject to an annual limit of $500,000) (less taxes payable and up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, liquidate and dissolve the balance of the Company’s net assets to its remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor and the Company’s officers and directors (the “initial stockholders”) have entered into a letter agreement with the Company, pursuant to which they have waived their rights to participate in any redemption with respect to their Founder Shares (as defined below); however, if the initial stockholders acquire shares of common stock in or after the Initial Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption of common stock or liquidation in the event the Company does not complete a Business Combination within the required time period. In the event of such a liquidating distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial price per Unit in the Initial Public Offering.
6
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Going Concern
As of September 30, 2021, the Company had approximately $0.2 million in its operating bank account and a working capital deficit of approximately $3.3 million.
The Company’s liquidity needs to date have been satisfied through a $25,000 contribution from the Sponsor in exchange for the issuance of the Founder Shares to the Sponsor, the Note (defined below) of $200,000 from the Sponsor, and the proceeds from the consummation of the Private Placement not held in the Trust Account. On March 13, 2020, the Company repaid the Note in full to the Sponsor. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company with Working Capital Loans (see Note 4). As of September 30, 2021, and December 31, 2020, there were no Working Capital Loans outstanding.
In connection with the Company’s assessment of going concern considerations in accordance with ASC Topic 205-40, “Presentation of Financial Statements - Going Concern,” management has determined that the liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 13, 2022.
2. Basis of Presentation and Significant Accounting Policies.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotesnote disclosures required by GAAP.U.S. generally accepted accounting principles ("GAAP") for complete financial statements. However, the Company believes that the disclosures are adequate to ensure the information is not misleading. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments which include only(of normal and recurring adjustmentsnature) considered necessary for fair presentation have been reflected in these interim statements. As such, the fair statement ofinformation included in the balances and results for the period presented. Operating results for the period for the three and nine months ended September 30, 2021, are not necessarily indicative of the results that may be expected for the period ending December 31, 2021.
The unaudited condensed consolidated financial statements of the Company include its wholly owned subsidiaries in connection with the proposed business combination (as described below). All inter-company accounts and transactions are eliminated in consolidation.
The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included inas of, and for the Form 10-K/A filed by the Company with the SECyear ended December 31, 2021, issued on May 24, 2021.
7
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revision to Previously Reported Financial Statements
In preparation of the Company’s unauditedThe accompanying condensed consolidated financial statements asinclude the accounts of TOI, its subsidiaries, all of which are controlled by TOI through majority voting control, and variable interest entities (“VIE”) for quarterly period ended September 30, 2021,which TOI (through TOI Management) is the primary beneficiary. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity or voting interest model. All significant intercompany balances and transactions have been eliminated in consolidation.
The impact of the revision to the unaudited condensed balance sheets as of March 31, 2020, June 30, 2020, September 30, 2020, March 31, 2021, and June 30, 2021, is a reclassification of $21.5 million, $24.1 million, $26.5 million, $23.3 million and $29.5 million, respectively, from total stockholders’ equity to Class A common stock subject to possible redemption. The impact of the revision on the audited balance sheet as if December 31, 2020, is presented below:
| | | | | | | | | |
|
| As of December 31, 2020 | |||||||
| | As Previously |
| | |
| | | |
| | Restated | | Adjustment | | As Revised | |||
Total liabilities | | $ | 25,358,720 | | $ | — | | $ | 25,358,720 |
Class A common stock, $0.0001 par value; shares subject to possible redemption | |
| 200,964,880 | |
| 29,035,120 | |
| 230,000,000 |
Stockholders’ equity (deficit) | |
|
| |
|
| |
|
|
Preferred stock - $0.0001 par value | |
| — | |
| — | |
| — |
Class A common stock - $0.0001 par value | |
| 290 | |
| (290) | |
| — |
Class B common stock - $0.0001 par value | |
| 575 | |
| — | |
| 575 |
Additional paid-in-capital | |
| 13,341,349 | |
| (13,341,349) | |
| — |
Accumulated deficit | |
| (8,342,204) | |
| (15,693,481) | |
| (24,035,685) |
Total stockholders’ equity (deficit) | |
| 5,000,010 | |
| (29,035,120) | |
| (24,035,110) |
Total liabilities, Class A common stock subject to possible redemption and stockholders’ (deficit) | | $ | 231,323,610 | | $ | — | | $ | 231,323,610 |
There is no impact toassumptions that affect the reported amounts for totalof assets totaland liabilities cash flows, netand disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates under different assumptions or conditions. Significant items subject to such estimates and assumptions include judgements related to revenue recognition, estimated accounts receivable, useful lives and recoverability of long-lived and intangible assets, recoverability of goodwill, fair values of acquired identifiable assets and assumed liabilities in business combinations, fair value of intangible assets and goodwill, fair value of share-based compensation, fair value of liability classified instruments, and judgements related to deferred income (loss), or thetaxes.
8
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Emerging Growth Company
The Company isqualifies as an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 as amended (the “Securities Act”("Securities Act"), as modified by the Jumpstart ourOur Business Startups Act of 2012 (the “JOBS Act”), and it mayhas elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements ofcompanies.
Further, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended)Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such an election to opt out is irrevocable. We haveThe Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we,the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed consolidated financial statements with those of another public company which is neither an emerging growth company, nor an emerging growth company which has opted out of using the extended transition period, difficult or impossible because of the potential differences in accountantaccounting standards used.
On June 28, 2021,January 1, 2022, the Company entered into an Agreementadopted Accounting Standards Update 2016-02, Leases, with various amendments issued in 2018 and Plan of Merger (as it may be amended, supplemented or otherwise2019 (collectively, “ASC 842”) using the modified from timeretrospective approach, for leases that existed on January 1, 2022. ASC 842 requires lessees to time, the “Merger Agreement”) by and among DFP, Orion Merger Sub I, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of DFP (“First Merger Sub”), Orion Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of DFP (“Second Merger Sub”) and TOI Parent, Inc., a Delaware corporation (“TOI”).
Refer to the Company’s Current Report on Form 8-K, and Proxy Statement/Prospectus filed with the SEC on June 29, 2021 and October 22, 2021, respectively.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts ofrecognize assets and liabilities for most leases. The Company evaluates whether an arrangement is or contains a lease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of an identified asset for a period of time in exchange for consideration. Upon lease commencement, the date on
Concentration of Credit Riskrelated disclosures.
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation limit of $250,000, and investments held in Trust Account. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
9
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Investments Held in Trust Account
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in interest income on investments held in the Trust Account in the accompanying unaudited condensed consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had 0 cash equivalents as of September 30, 2021 and December 31, 2020.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements,” equal or approximate the carrying amounts represented in the condensed consolidated balance sheets.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
As of September 30, 2021, the carrying values of cash, accounts payable, accrued expenses, prepaid expenses and franchise tax payable approximate their fair values due to the short-term nature of the instruments. The Company’s investments held in Trust Account are comprised of investments in U.S. Treasury securities with an original maturity of 185 days or less or investments in money market funds that comprise only U.S. Treasury securities and are recognized at fair value. The fair value of investments held in Trust Account is determined using quoted prices in active markets.
10
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The 5,750,000 Public Warrants and the 3,733,334 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed consolidated statements of operations. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities were expensed as incurred and presented as non-operating expenses in the condensed statements of operations.
Offering costs associated with the Class A common stock issued were charged against the carrying value of the shares of Class A common stock upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Shares of conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021, and December 31, 2020, 23,000,000 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed consolidated balance sheets.
Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Income (Loss) Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.
11
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The calculation of diluted net income (loss) per share of common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to purchase an aggregate of 9,483,334 shares of common stock in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share of common stock for the three and nine months ended September 30, 2021 and 2020. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of common stock:
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
| For the Three Months Ended September 30, | For the Nine Months Ended September 30 |
| |||||||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||||||||||||||
|
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B |
| ||||||||
Basic and diluted net income (loss) per share of common stock: | | | | | | | | | | | | | | | | | | | | |
| | | | |
Numerator: | | | | | | | | | | | | | | | | | | | | | | | | | |
Allocation of net income - basic | | $ | (345,627) | | $ | (86,407) | | $ | (1,933,328) | | $ | (483,332) | | $ | (693,980) | | $ | (173,495) | | $ | (4,681,881) | | $ | (1,130,353) | |
Allocation of net income - diluted | | $ | (345,627) | | $ | (86,407) | | $ | (1,933,328) | | $ | (483,332) | | $ | (693,980) | | $ | (173,495) | | $ | (4,649,787) | | $ | (1,162,447) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Denominator: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Basic weighted average common shares outstanding | |
| 23,000,000 | |
| 5,750,000 | |
| 23,000,000 | |
| 5,750,000 | |
| 23,000,000 | |
| 5,750,000 | |
| 23,000,000 | |
| 5,552,920 | |
Diluted weighted average common shares outstanding | |
| 23,000,000 | |
| 5,750,000 | |
| 23,000,000 | |
| 5,750,000 | |
| 23,000,000 | |
| 5,750,000 | |
| 23,000,000 | |
| 5,750,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Basic net income (loss) per share of common stock | | $ | (0.02) | | $ | (0.02) | | $ | (0.08) | | $ | (0.08) | | $ | (0.03) | | $ | (0.03) | | $ | (0.20) | | $ | (0.20) | |
Diluted net income (loss) per share of common stock | | $ | (0.02) | | $ | (0.02) | | $ | (0.08) | | $ | (0.08) | | $ | (0.03) | | $ | (0.03) | | $ | (0.20) | | $ | (0.20) | |
Income Taxes
The Company complies with the accounting and reporting requirements of Financial Accounting Standards Board Accounting Standard Codification, or ASC, 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
There were 0 unrecognized tax benefits as of September 30, 2021, and as of December 31, 2020. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. NaN amounts were accrued for the payment of interest and penalties as of September 30, 2021, and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
12
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards BoardFASB issued Accounting Standard Update (“ASU”) No.ASU 2020-06, Debt—DebtDebt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—ContractsHedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06"), which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU 2020-06 also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. The new standard is effective for the Company beginning January 1, 2024. The Company is currently evaluating the effect of ASU 2020-06 on the Company’s consolidated financial statements and related disclosures.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Percentage of Net Revenue: | |||||||||||||||||||||||
Payor A | 14 | % | 17 | % | 15 | % | 17 | % | |||||||||||||||
Payor B | 17 | % | 14 | % | 17 | % | 14 | % |
June 30, 2022 | December 31, 2021 | ||||||||||
Percentage of Gross Receivables: | |||||||||||
Payor B | 19 | % | 19 | % | |||||||
Payor C | 13 | % | 14 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Percentage of Cost of Sales: | |||||||||||||||||||||||
Vendor A | 55 | % | 50 | % | 54 | % | 49 | % | |||||||||||||||
Vendor B | 43 | % | 48 | % | 44 | % | 49 | % |
June 30, 2022 | December 31, 2021 | ||||||||||
Percentage of Gross Payables: | |||||||||||
Vendor B | 45 | % | 47 | % | |||||||
Vendor A | 33 | % | 39 | % |
(in thousands) | June 30, 2022 | December 31, 2021 | |||||||||
Oral drug accounts receivable | $ | 2,933 | $ | 2,097 | |||||||
Capitated accounts receivable | 518 | 665 | |||||||||
FFS accounts receivable | 19,985 | 12,530 | |||||||||
Clinical trials accounts receivable | 2,029 | 1,823 | |||||||||
Other trade receivables | 3,482 | 2,892 | |||||||||
Total | $ | 28,947 | $ | 20,007 |
(in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Patient services | |||||||||||||||||||||||
Capitated revenue | $ | 13,944 | $ | 12,897 | $ | 28,460 | $ | 25,227 | |||||||||||||||
FFS revenue | 25,165 | 16,889 | 45,706 | 34,181 | |||||||||||||||||||
Subtotal | 39,109 | 29,786 | 74,166 | 59,408 | |||||||||||||||||||
Dispensary revenue | 20,218 | 17,782 | 38,897 | 35,400 | |||||||||||||||||||
Clinical research trials and other revenue | 1,594 | 2,276 | 3,019 | 3,616 | |||||||||||||||||||
Total | $ | 60,921 | $ | 49,844 | $ | 116,082 | $ | 98,424 |
(in thousands) | June 30, 2022 | December 31, 2021 | |||||||||
Oral drug inventory | $ | 2,877 | $ | 1,484 | |||||||
IV drug inventory | 5,703 | 4,954 | |||||||||
Total | $ | 8,580 | $ | 6,438 |
(in thousands) | June 30, 2022 | December 31, 2021 | |||||||||
Financial assets: | |||||||||||
Cash and restricted cash | $ | 64,208 | $ | 115,174 | |||||||
Accounts receivable | 28,947 | 20,007 | |||||||||
Other receivables | 422 | 1,237 | |||||||||
Financial liabilities: | |||||||||||
Accounts payable | $ | 13,900 | $ | 15,559 | |||||||
Derivative warrant liabilities | 1,589 | 2,193 | |||||||||
Earnout liabilities | 9,778 | 60,018 |
accounts receivable, other receivables, and accounts payable approximate fair value because of the short maturity and high liquidity of these instruments.
(in thousands) | Derivative Warrant Liability | Earnout Liability | |||||||||
Balance at December 31, 2021 | $ | 2,193 | $ | 60,018 | |||||||
Change in fair value included in other expense | (604) | (50,240) | |||||||||
Balance at June 30, 2022 | $ | 1,589 | $ | 9,778 |
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
Derivative Warrant Liability | First Tranche Earnout | Second Tranche Earnout | Derivative Warrant Liability | First Tranche Earnout | Second Tranche Earnout | ||||||||||||||||||||||||||||||
Unit price | $ | 5.06 | $ | 5.06 | $ | 5.06 | $ | 9.75 | $ | 9.75 | $ | 9.75 | |||||||||||||||||||||||
Term (in years) | 4.37 | 1.36 | 1.75 | 4.87 | 1.87 | 2.87 | |||||||||||||||||||||||||||||
Volatility | 37.40 | % | 45.00 | % | 45.00 | % | 12.80 | % | 35.00 | % | 35.00 | % | |||||||||||||||||||||||
Risk-free rate | 2.98 | % | 2.95 | % | 2.95 | % | 1.24 | % | 0.94 | % | 0.94 | % | |||||||||||||||||||||||
Dividend yield | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Cost of equity | — | 14.00 | % | 14.00 | % | — | 11.14 | % | 11.14 | % |
3. Initial Public Offering.
Public Units
On March 13, 2020, the Company consummated its Initial Public Offering of 23,000,000 Units, including 3,000,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately $10.4 million, inclusive of approximately $6.3 million in deferred underwriting commissions. Of the Units soldsignificant change in the Initial Public Offering, 5,000,000 Units were purchased by certain domestic private pooled investment vehicles managed by Deerfield Management Company, L.P. and its affiliates (the “Deerfield Funds”).
Each Unit consists of 1fair value measurement.
(in thousands) | Useful lives | June 30, 2022 | December 31, 2021 | ||||||||||||||
Computers and software | 60 months | $ | 1,233 | $ | 961 | ||||||||||||
Office furniture | 80 months | 531 | 343 | ||||||||||||||
Leasehold improvements | Shorter of lease term or estimated useful life | 4,706 | 3,387 | ||||||||||||||
Medical equipment | 60 months | 981 | 805 | ||||||||||||||
Construction in progress | 1,011 | 518 | |||||||||||||||
Finance lease ROU assets | Shorter of lease term or estimated useful life | 205 | 162 | ||||||||||||||
Less: accumulated depreciation | (2,653) | (1,984) | |||||||||||||||
Total property and equipment, net | $ | 6,014 | $ | 4,192 |
(in thousands) | June 30, 2022 | December 31, 2021 | |||||||||
Compensation, including bonuses, fringe benefits, and payroll taxes | $ | 4,279 | $ | 3,325 | |||||||
Contract liabilities | 1,348 | 262 | |||||||||
Directors and officers insurance premiums | 5,104 | 5,009 | |||||||||
Deferred acquisition consideration (see Note 16) | 3,459 | 2,359 | |||||||||
Other liabilities | 3,420 | 2,969 | |||||||||
Total accrued expenses and other current liabilities | $ | 17,610 | $ | 13,924 |
(in thousands) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | |||||||||
Operating lease costs: | $ | 1,249 | $ | 2,416 | |||||||
Finance lease costs: | |||||||||||
Amortization of ROU asset | $ | 13 | $ | 27 | |||||||
Interest expense | $ | 1 | $ | 3 | |||||||
Other lease costs: | |||||||||||
Short-term lease costs | $ | 103 | $ | 212 | |||||||
Variable lease costs | $ | 222 | $ | 427 |
(in thousands) | Operating Leases | Finance Leases | ||||||
2022 | $ | 2,604 | $ | 28 | ||||
2023 | 4,965 | 46 | ||||||
2024 | 4,324 | 38 | ||||||
2025 | 3,561 | 4 | ||||||
2026 | 2,659 | 1 | ||||||
Thereafter | 3,246 | — | ||||||
Total future lease payment | $ | 21,359 | $ | 117 | ||||
Less: amount representing interest | (2,259) | (6) | ||||||
Present value of future lease payment (lease liability) | $ | 19,100 | $ | 111 | ||||
Reported as: | ||||||||
Lease liabilities, current | $ | 4,486 | $ | 47 | ||||
Lease liabilities, noncurrent | 14,614 | 64 | ||||||
Total lease liabilities | $ | 19,100 | $ | 111 |
June 30, 2022 | |||||
Weighted-average remaining lease term (in years) | |||||
Operating | 4.90 | ||||
Finance | 2.37 | ||||
Weighted-average discount rate | |||||
Operating | 4.17 | % | |||
Finance | 4.42 | % |
(in thousands) | Six Months Ended June 30, 2022 | ||||
Supplemental cash flow information | |||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||
Operating cash payment from operating leases | $ | 2,382 | |||
Financing cash payments for finance leases | 31 | ||||
Lease liabilities arising from obtaining right-of-use assets: | |||||
Operating leases | $ | 20,347 | |||
Finance leases | 40 |
4. Related Party Transactions.
Founder Shares
On December 30, 2019, the Sponsor received 4,312,500 shares of Class B common stock (the “Founder Shares”) in exchange for a capital contribution of $25,000, or approximately $0.004 per share. In January 2020, the Sponsor transferred 100,000 Founder Shares to each of Steven Hochberg, the Company’s President and Chief Executive Officer, Christopher Wolfe, the Company’s Chief Financial Officer and Secretary, and Richard Barasch, the Company’s Executive Chairman, and 30,000 Founder Shares to each of Dr. Jennifer Carter, Dr. Mohit Kaushal and Dr. Gregory Sorensen, the Company’s independent director nominees, for the same per-share price initially paid by the Sponsor, resulting in the Sponsor holding 3,922,500 Founder Shares. On February 19, 2020, the Company effected a split of its Class B common stock resulting in the Sponsor holding 5,360,000 Founder Shares, resulting in an increase in the total number of Founder Shares from 4,312,500 to 5,750,000.
The Founder Shares are identical to the shares of Class A common stock included in the Units being sold in the Initial Public Offering except that the Founder Shares are subject to certain transfer restrictions.
The initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the closingreported last sale price of the Company’s common stock equals or exceeds $12.00$18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-tradinga 30-trading day period commencing at least 150ending 3 business days after the Company’s initial Business Combination and (B) the date on whichbefore the Company completes a liquidation, merger, capital stock exchange or other similar transaction aftersends the initial Business Combination that results in allnotice of redemption to the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.
13
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering,warrant holders, the Company sold 3,733,334 Private Placement Warrants tomay redeem all the Sponsorpublic warrants at a price of $1.50$0.01 per Private Placement Warrant in a Private Placement, generating proceeds of $5.6 million.
Each Private Placement Warrant entitles the holder to purchase 1 share of Class A common stock at $11.50 per share. Certain proceeds of the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. warrant upon not less than 30 days’ prior written notice.
Sponsor Loan
The Sponsor agreed to loan the Company up to an aggregate of $200,000 by the issuance of an unsecured promissory note (the “Note”) to cover expenses related to this Initial Public Offering. The Note was payable, without interest, upon the completion of the Initial Public Offering. The Company received the $200,000 proceeds under the Note and repaid this Note in full on March 13, 2020. Subsequent to the repayment, the facility was no longer available to the Company.
Administrative Services Agreement
Commencing on the date that the Company’s securities were first listed on Nasdaq, the Company has paid and will pay the Sponsor $10,000 per month for office space, secretarial and administrative services provided to members of the Company’s management team. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying such monthly fees. The Company incurred $30,000 and $90,000, in expenses in connection with such services during the three and nine months ended September 30, 2021 and 2020, respectively, as included in general and administrative expenses - related party on the accompanying unaudited condensed consolidated statements of operations. As of September 30, 2021 and December 31, 2020, the Company has $10,000, in connection with such services payable and included as accrued expenses - related parties, in the accompanying condensed consolidated balance sheets.
Wolfe Strategic Services Agreement
Commencing on the date that the Company’s securities were first listed on Nasdaq, the Company will pay and has paid its Chief Financial Officer, Christopher Wolfe, $7,500 per month for his services prior to the initial Business Combination. The Company incurred $22,500 and $67,500 in expenses in connection with such services during the three and nine months ended September 30, 2021, as included in general and administrative expenses - related party on the accompanying unaudited condensed consolidated statements of operations, respectively. During the three and nine months ended September 30, 2020, the Company had incurred $22,500 and $52,500 in expenses in connection with such services, respectively. As of September 30, 2021, and December 31, 2020, the Company had $7,500 in connection with such services in accrued expenses - related parties, as included in the accompanying condensed consolidated balance sheets.
Working Capital Loans
In order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required for working capital (the “Working Capital Loans”). Up to $1.1 million of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant athave the option of the lender. Such warrants would be identical to the Private Placement Warrants. As of September 30, 2021, and December 31, 2020, except for the foregoing, the terms of such loans, if any, have not been determined, no written agreements exist with respect to such loans and 0 amounts have been borrowed under such loans to date.
14
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Commitments and Contingencies.
Registration Rights
The initial stockholders andrequire all holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement. The initial stockholders and holders of the Private Placement Warrants will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option to purchase up to 3,000,000 additional Units to cover any over-allotments, at the initial public offering price less the underwriting discounts and commissions. The warrants that were issued in connection with the 3,000,000 over-allotment Units are identical to the Public Warrants and have no net cash settlement provisions. The underwriters exercised the over-allotment option in full on March 13, 2020.
The underwriters did not receive any underwriting discounts or commission on the Units purchased by the Deerfield Funds. The Company paid an underwriting discount of 2.0% of the per Unit offering price, or $3.6 million, at the closing of the Initial Public Offering, with an additional fee (the “Deferred Underwriting Fees”) of 3.5% of the gross offering proceeds, or $6.3 million, payable upon the Company’s completion of an Initial Business Combination. The Deferred Underwriting Fees will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.
Risks and uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on its industry and has concluded that, while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or close of the proposed transaction, the specific impact is not readily determinable as of the date of these unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
6. Derivative Warrant Liabilities.
As of September 30, 2021, and December 31, 2020, the Company has 9,483,334 Public Warrants and Private Placement Warrants outstanding.
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holderswish to exercise their Public Warrants on a cashless basis under certain circumstances). The Company has agreed that, as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC and have declared effective a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the initial Business Combination, warrantholders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act,
15
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
the Company may, at its option, require holders of Public Warrants who exercise theirpublic warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, thecashless basis. The Company will not be required to file or maintain in effectnet cash settle the warrants.
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination and they will be non-redeemable for cash so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees. If the Private Placement Warrantsprivate warrants are held by someone other than the initial purchasers of the Private Placement Warrants or their permitted transferees, the Private Placement Warrantsprivate warrants will be redeemable by the Company and exercisable by such holders on the same basis as the warrants included inpublic warrants.
adoption and approval of the Share Repurchase Program, authorizing up to $20,000 to be spent on the repurchase of the Company's common stock, expiring on December 31, 2022. The Company may call the Public Warrants for redemption:
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
In addition, commencing ninety days after the warrants become exercisable, the Company may redeem the outstanding warrants forrepurchased and immediately retired 1,500,000 shares of Class A common stock:
16
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The “fair market value” of the Company’s Class A common stock shall mean the average last reported sale price of its Class A common stock for $9,000 from a related party (see Note 21) during the 10 trading days endingthree months ended June 30, 2022. At June 30, 2022, $11,000 of the Share Repurchase Program authorization remained available for repurchases.
No fractional shares of Class A common stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, the Company will roundproduct (rounded down to the nearest whole numbernumber) of (i) the number of shares of Class A common stockLegacy TOI stockholders subject to such Stock Option immediately prior to the Business Combination, and (ii) an exercise price per share equal to (A) the exercise price per share of such Stock Option immediately prior to the consummation of the Business Combination, divided by (B) the Common Stock Exchange Ratio ("Stock Option Exchange Ratio"). Following the Business Combination, each Exchanged Option that was previously subject to time vesting only, will continue to be issuedgoverned by the same terms and conditions (including vesting and exercisability terms) as were applicable to the holder.
Pursuantcorresponding former old Stock Option immediately prior to the warrant agreement, references above to Class A common stock shall include a security other than Class A common stock into which the Class A common stock has been converted or exchanged for in the event the Company is not the surviving company in its initial Business Combination.
In no event will the Company be required to net cash settle any warrant. If the Company does not complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outsideconsummation of the Trust Account with the respectBusiness Combination. Each Exchanged Option that was previously subject to such warrants. Accordingly, the warrants may expire worthless.
7. Class A Common Stock Subject to Possible Redemption.
The Company’s Class A common stock feature certain redemption rights that are considered toperformance vesting, will no longer be outside of the Company’s control and subject to the occurrencesale of future events.the Company, and was modified to include service requirements only, under which, the Exchange Options will vest on a monthly-basis, so long as the optionee has remained continuously employed by the Company from the date of the Business Combination through the third anniversary of the Closing Date. The Company is authorizedtreated the Exchanged Options that were previously subject to issue 100,000,000 shares of Class A common stock withperformance conditions as a par value of $0.0001 per share. Holdersnew award granted at the Closing Date.
The Class A common stock subject to possible redemption reflected on the condensed balance sheet is reconciled on the following table:
| | | |
Gross proceeds |
| $ | 230,000,000 |
Less: | |
|
|
Amount allocated to Public Warrants | |
| (6,727,500) |
Class A common stock issuance costs | |
| (10,110,406) |
Plus: | |
|
|
Accretion of carrying value to redemption value | |
| 16,837,906 |
Class A common stock subject to possible redemption | | $ | 230,000,000 |
8. Stockholder’s Equity (Deficit).
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. consolidated financial statements.
Class A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of September 30, 2021, and December 31, 2020, there were 23,000,000 shares of Class A common stock issued and outstanding, including 23,000,000 shares of Class A common stock subject to possible redemption which were classified as temporary equity. See Note 7.
Class B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of the Company’s Class B common stock are entitled to 1 vote for each share. As of September 30, 2021, and December 31, 2020, there were 5,750,000 shares of Class B common stock issued outstanding.
The Class B common stock will automatically convert into Class A common stock at the time of the Initial Business Combination on a one-for-1 basis, subject to adjustment. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with the initial Business Combination, the number of shares of Class A common stock issuable
17
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
upon conversion of all Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of2022, the total number of shares of Class A common stock remaining available for future awards (e.g., non-qualified stock options, incentive stock options, restricted stock units, restricted stock awards) under the 2021 Plan is 10,822,981.
2022 | 2021 | ||||||||||
Valuation assumptions: | |||||||||||
Expected dividend yield | —% | —% | |||||||||
Expected volatility | 35.0% to 45.0% | 38.60% to 40.20% | |||||||||
Risk-free interest rate | 2.33% to 2.84% | 0.76% to 1.12% | |||||||||
Expected term (years) | 6.07 to 6.65 | 7.00 |
Stock options | Number of shares | Weighted average exercise price | Weighted average remaining contractual term | Aggregate intrinsic value (in thousands) | ||||||||||||||||||||||
Balance at January 1, 2022 | 6,921,180 | $ | 0.89 | |||||||||||||||||||||||
Granted | 1,550,485 | 7.14 | ||||||||||||||||||||||||
Exercised | (366,684) | 0.92 | ||||||||||||||||||||||||
Forfeited | (833,687) | 2.17 | ||||||||||||||||||||||||
Expired | (936) | 1.02 | ||||||||||||||||||||||||
Balance at June 30, 2022 | 7,270,358 | $ | 2.07 | 7.75 | $ | 24,632 | ||||||||||||||||||||
Vested Options Exercisable at June 30, 2022 | 2,424,960 | $ | 0.87 | 6.92 | $ | 10,168 |
Stock options | Number of shares | Weighted average exercise price | Weighted average remaining contractual term | Aggregate intrinsic value (in thousands) | ||||||||||||||||||||||
Balance at January 1, 2021 | 8,683,952 | $ | 0.85 | |||||||||||||||||||||||
Granted | 1,182,218 | 1.08 | ||||||||||||||||||||||||
Exercised | — | — | ||||||||||||||||||||||||
Forfeited | (665,034) | 0.86 | ||||||||||||||||||||||||
Expired | — | — | ||||||||||||||||||||||||
Balance at June 30, 2021 | 9,201,136 | $ | 0.88 | 8.57 | $ | — | ||||||||||||||||||||
Vested Options Exercisable at June 30, 2021 | 1,182,353 | $ | 0.85 | 7.94 | $ | — |
Number of Shares | |||||
Balance at January 1, 2022 | 1,291,492 | ||||
Granted | 1,413,159 | ||||
Vested | (242,429) | ||||
Forfeited | (279,686) | ||||
Balance at June 30, 2022 | 2,182,536 |
Number of Shares | |||||
Balance at January 1, 2021 | 1,390,839 | ||||
Granted | — | ||||
Vested | — | ||||
Forfeited | (23,376) | ||||
Balance at June 30, 2021 | 1,367,463 |
November 12, 2021 | |||||
Valuation assumptions | |||||
Expected dividend yield | — | % | |||
Expected volatility | 35.00 | % | |||
Risk-free interest rate | 0.85 | % |
Number of Shares | ||||||||
Balance at January 1, 2022 | $ | 1,602,435 | ||||||
Granted | — | |||||||
Forfeited | (165,297) | |||||||
Balance at June 30, 2022 | $ | 1,437,138 |
Acquisition | |||||||||||||||||||||||
(in thousands) | Raiker | Grant | Orr | Dave | Yang | Perkins | Total | ||||||||||||||||
Consideration: | |||||||||||||||||||||||
Cash | $ | 892 | $ | 849 | $ | 816 | $ | 2,000 | $ | 4,615 | $ | 8,920 | $ | 18,092 | |||||||||
Deferred | 818 | 200 | 200 | 750 | 2,500 | 2,000 | 6,468 | ||||||||||||||||
Fair value of total consideration transferred | $ | 1,710 | $ | 1,049 | $ | 1,016 | $ | 2,750 | $ | 7,115 | $ | 10,920 | $ | 24,560 | |||||||||
Estimated fair value of identifiable assets acquired and liabilities assumed: | |||||||||||||||||||||||
Cash | $ | 65 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 65 | |||||||||
Accounts receivable | 398 | — | 183 | — | — | — | 581 | ||||||||||||||||
Inventory | 62 | 49 | 16 | — | 115 | 409 | 651 | ||||||||||||||||
Property and equipment, net | — | — | 13 | 35 | 19 | 123 | 190 | ||||||||||||||||
Clinical contracts | — | 450 | 150 | 77 | 68 | 2,550 | 3,295 | ||||||||||||||||
Goodwill | 1,454 | 550 | 837 | 2,645 | 6,913 | 7,850 | 20,249 | ||||||||||||||||
Total assets acquired | 1,979 | 1,049 | 1,199 | 2,757 | 7,115 | 10,932 | 25,031 | ||||||||||||||||
Accounts payable | 120 | — | — | — | — | — | 120 | ||||||||||||||||
Accrued liabilities | — | — | — | 7 | — | 12 | 19 | ||||||||||||||||
Current portion of long term debt | 149 | — | 183 | — | — | — | 332 | ||||||||||||||||
Total liabilities assumed | 269 | — | 183 | 7 | — | 12 | 471 | ||||||||||||||||
Net assets acquired | $ | 1,710 | $ | 1,049 | $ | 1,016 | $ | 2,750 | $ | 7,115 | $ | 10,920 | $ | 24,560 |
(in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenue | $ | 62,386 | $ | 54,455 | $ | 122,096 | $ | 107,646 | |||||||||||||||
Net income (loss) | $ | (5,160) | $ | 4,126 | $ | 15,034 | $ | 4,051 |
(in thousands) | June 30, 2022 | December 31, 2021 | |||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and restricted cash | $ | 1,351 | $ | 1,618 | |||||||
Accounts receivable | 28,947 | 20,007 | |||||||||
Other receivables | 212 | 935 | |||||||||
Inventories, net | 8,580 | 6,438 | |||||||||
Prepaid expenses | 935 | 781 | |||||||||
Total current assets | 40,025 | 29,779 | |||||||||
Property and equipment, net | 26 | — | |||||||||
Other assets | 347 | 276 | |||||||||
Intangible assets, net | 3,543 | 1,181 | |||||||||
Goodwill | 18,946 | 11,096 | |||||||||
Total assets | $ | 62,887 | $ | 42,332 | |||||||
Liabilities | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 12,028 | $ | 14,204 | |||||||
Income taxes payable | 132 | 132 | |||||||||
Accrued expenses and other current liabilities | 7,643 | 5,539 | |||||||||
Current portion of long-term debt | — | 183 | |||||||||
Amounts due to affiliates | 99,583 | 56,312 | |||||||||
Total current liabilities | 119,386 | 76,370 | |||||||||
(in thousands) | June 30, 2022 | December 31, 2021 | |||||||||
Other non-current liabilities | 2,565 | 3,203 | |||||||||
Deferred income taxes liability | 32 | 6 | |||||||||
Total liabilities | $ | 121,983 | $ | 79,579 |
(in thousands) | Weighted average amortization period | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||||||
Intangible assets | |||||||||||||||||||||||
Amortizing intangible assets: | |||||||||||||||||||||||
Payor contracts | 10 years | $ | 19,400 | $ | (7,095) | $ | 12,305 | ||||||||||||||||
Trade names | 10 years | 6,650 | (1,614) | 5,036 | |||||||||||||||||||
Clinical contracts | 9 years | 2,979 | (937) | 2,042 | |||||||||||||||||||
Total intangible assets | $ | 29,029 | $ | (9,646) | $ | 19,383 |
(in thousands) | Weighted average amortization period | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||||||
Intangible assets | |||||||||||||||||||||||
Amortizing intangible assets: | |||||||||||||||||||||||
Payor contracts | 10 years | $ | 19,400 | $ | (6,152) | $ | 13,248 | ||||||||||||||||
Trade names | 10 years | 4,170 | (1,350) | 2,820 | |||||||||||||||||||
Clinical contracts | 9 years | 2,909 | (732) | 2,177 | |||||||||||||||||||
Total intangible assets | $ | 26,479 | $ | (8,234) | $ | 18,245 |
(in thousands) | Amount | ||||
Year ending December 31: | |||||
2022 | $ | 1,469 | |||
2023 | 2,901 | ||||
2024 | 2,901 | ||||
2025 | 2,901 | ||||
2026 | 2,879 | ||||
Thereafter | 6,332 | ||||
Total | $ | 19,383 |
(in thousands) | June 30, 2022 | December 31, 2021 | |||||||||
Patient services | $ | 29,293 | $ | 21,443 | |||||||
Dispensary | 4,551 | 4,551 | |||||||||
Clinical trials & other | 632 | 632 | |||||||||
Total goodwill | $ | 34,476 | $ | 26,626 |
(in thousands) | 2022 | 2021 | |||||||||
Balance as of January 1: | |||||||||||
Gross goodwill | $ | 26,626 | $ | 14,227 | |||||||
Goodwill acquired during the period | 7,850 | 12,399 | |||||||||
Accumulated impairment losses | — | — | |||||||||
Goodwill, net as of June 30 and December 31 | $ | 34,476 | $ | 26,626 |
(in thousands, except share data) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net income (loss) attributable to TOI | $ | (5,453) | $ | 3,205 | $ | 13,833 | $ | 2,209 | |||||||||||||||
Less: Deemed dividend | 64 | — | 64 | — | |||||||||||||||||||
Net income (loss) attributable to TOI available for distribution | (5,517) | 3,205 | 13,769 | 2,209 | |||||||||||||||||||
Net income (loss) attributable to participating securities, basic | (1,013) | — | 2,521 | — | |||||||||||||||||||
Net income (loss) attributable to common stockholders, basic | $ | (4,504) | $ | 3,205 | $ | 11,248 | $ | 2,209 |
(in thousands, except share data) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Weighted average common shares outstanding, basic | 72,996,836 | 66,021,829 | 73,123,895 | 64,446,377 | |||||||||||||||||||
Net income (loss) per share attributable to common stockholders, basic | $ | (0.06) | $ | 0.05 | $ | 0.15 | $ | 0.03 |
(in thousands, except share data) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net income (loss) attributable to TOI | $ | (5,453) | $ | 3,205 | $ | 13,833 | $ | 2,209 | |||||||||||||||
Less: Deemed dividend | 64 | — | 64 | — | |||||||||||||||||||
Net income (loss) attributable to TOI available for distribution | (5,517) | 3,205 | 13,769 | 2,209 | |||||||||||||||||||
Less: Net income attributable to participating securities, diluted | (1,013) | — | 2,441 | — | |||||||||||||||||||
Net income (loss) attributable to common stockholders, diluted | $ | (4,504) | $ | 3,205 | $ | 11,328 | $ | 2,209 | |||||||||||||||
Weighted average shares outstanding, diluted | 72,996,836 | 66,021,829 | 76,106,201 | 64,446,377 | |||||||||||||||||||
Net income (loss) per share attributable to common stockholders, diluted | $ | (0.06) | $ | 0.05 | $ | 0.15 | $ | 0.03 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Stock options | 7,270,358 | 9,201,136 | 4,429,451 | 9,201,136 | |||||||||||||||||||
RSUs | 2,182,536 | 1,367,463 | 1,471,052 | 1,367,463 | |||||||||||||||||||
Earnout Shares | 1,437,138 | — | 1,437,138 | — | |||||||||||||||||||
Public Warrants | 5,749,986 | — | 5,749,986 | — | |||||||||||||||||||
Private Warrants | 3,177,542 | — | 3,177,542 | — |
(in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||
Patient services | $ | 39,109 | $ | 29,786 | $ | 74,166 | $ | 59,408 | |||||||||||||||
Dispensary | 20,218 | 17,782 | 38,897 | 35,400 | |||||||||||||||||||
Clinical trials & other | 1,594 | 2,276 | 3,019 | 3,616 | |||||||||||||||||||
Consolidated revenue | 60,921 | 49,844 | 116,082 | 98,424 | |||||||||||||||||||
Direct costs | |||||||||||||||||||||||
Patient services | 32,875 | 23,574 | 60,253 | 46,660 |
(in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Dispensary | 16,754 | 15,237 | 32,078 | 30,360 | |||||||||||||||||||
Clinical trials & other | 150 | 143 | 287 | 312 | |||||||||||||||||||
Total segment direct costs | 49,779 | 38,954 | 92,618 | 77,332 | |||||||||||||||||||
Depreciation expense | |||||||||||||||||||||||
Patient services | 282 | 139 | 532 | 266 | |||||||||||||||||||
Dispensary | — | — | — | — | |||||||||||||||||||
Clinical trials & other | 1 | 2 | 3 | 3 | |||||||||||||||||||
Total segment depreciation expense | 283 | 141 | 535 | 269 | |||||||||||||||||||
Amortization of intangible assets | |||||||||||||||||||||||
Patient services | 686 | 568 | 1,307 | 1,128 | |||||||||||||||||||
Dispensary | — | — | — | — | |||||||||||||||||||
Clinical trials & other | 52 | 52 | 105 | 105 | |||||||||||||||||||
Total segment amortization | 738 | 620 | 1,412 | 1,233 | |||||||||||||||||||
Operating income | |||||||||||||||||||||||
Patient services | 5,266 | 5,505 | 12,074 | 11,354 | |||||||||||||||||||
Dispensary | 3,464 | 2,545 | 6,819 | 5,040 | |||||||||||||||||||
Clinical trials & other | 1,391 | 2,079 | 2,624 | 3,196 | |||||||||||||||||||
Total segment operating income | 10,121 | 10,129 | 21,517 | 19,590 | |||||||||||||||||||
Selling, general and administrative expense | 28,348 | 11,212 | 58,154 | 22,390 | |||||||||||||||||||
Non-segment depreciation and amortization | 77 | 33 | 138 | 69 | |||||||||||||||||||
Total consolidated operating loss | $ | (18,304) | $ | (1,116) | $ | (36,775) | $ | (2,869) |
(in thousands) | June 30, 2022 | December 31, 2021 | |||||||||
Assets | |||||||||||
Patient services | $ | 54,157 | $ | 44,223 | |||||||
Dispensary | 6,542 | 4,277 | |||||||||
Clinical trials & other | 12,481 | 14,504 | |||||||||
Non-segment assets | 116,560 | 140,435 | |||||||||
Total assets | $ | 189,740 | $ | 203,439 |
(in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
Type | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
American Institute of Research | Consulting | $ | 42 | $ | 33 | $ | 82 | $ | 63 | ||||||||||||||||||||
Karen M Johnson | Board Fees | — | — | 19 | — | ||||||||||||||||||||||||
Richard Barasch | Board Fees | — | — | 5 | — | ||||||||||||||||||||||||
Anne M. McGeorge | Board Fees | — | — | 19 | — | ||||||||||||||||||||||||
Mohit Kaushal | Board Fees | — | — | 19 | — | ||||||||||||||||||||||||
Ravi Sarin | Board Fees | — | — | 19 | — | ||||||||||||||||||||||||
Maeve O'Meara Duke | Board Fees | — | — | 19 | — | ||||||||||||||||||||||||
Havencrest Capital Management, LLC | Management Fees | — | 75 | — | 75 | ||||||||||||||||||||||||
M33 Growth LLC | Management Fees | — | 230 | — | 230 | ||||||||||||||||||||||||
Richy Agajanian MD | Share Repurchase | 8,748 | 5 | 8,764 | 9 | ||||||||||||||||||||||||
Veeral Desai | Board Fees | — | 12 | — | 25 | ||||||||||||||||||||||||
Total | $ | 8,790 | $ | 355 | $ | 8,946 | $ | 402 |
9. Fair Value Measurements.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
September 30, 2021
| | | | | | | | | |
|
| Quoted Prices in |
| Significant Other |
| Significant Other | |||
| | Active Markets | | Observable Inputs | | Unobservable Inputs | |||
Description | | (Level 1) | | (Level 2) | | (Level 3) | |||
Assets | | | | | | | | | |
Investments held in Trust Account |
| $ | 230,012,623 |
| $ | — |
| $ | — |
Liabilities | | | | | | | | | |
Derivative warrant liabilities - Public Warrants | | $ | 9,257,500 | | $ | — | | $ | — |
Derivative warrant liabilities - Private Warrants | | $ | — | | $ | — | | $ | 6,010,670 |
December 31, 2020
| | | | | | | | | |
|
| Quoted Prices in |
| Significant Other |
| Significant Other | |||
| | Active Markets | | Observable Inputs | | Unobservable Inputs | |||
Description | | (Level 1) | | (Level 2) | | (Level 3) | |||
Assets |
| |
|
| |
|
| |
|
Assets held in Trust Account: |
| |
|
| |
|
| |
|
U.S. Treasury securities | | $ | 230,253,395 | | $ | — | | $ | — |
Cash equivalents - money market funds | |
| 754 | |
| — | |
| — |
| | $ | 230,254,149 | | $ | — | | $ | — |
Liabilities | |
|
| |
|
| |
|
|
Derivative warrant liabilities - Public Warrants | | $ | 11,212,500 | | $ | — | | $ | — |
Derivative warrant liabilities - Private Warrants | | $ | — | | $ | — | | $ | 7,578,670 |
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. Therewere 0 transfers between levels for three and nine months ended September 30, 2021.
Level 1 assets include investments in money market funds that invest solely in U.S. government securities and investments in U.S. Treasury Securities. The Company uses inputs such as actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
The fair value of Public Warrants issued in connection with the Initial Public Offering are measured based on the listed market price of such warrants, a quoted price in an active market, a Level 1 measurement. The fair value of the Private Placement Warrants has been estimated using a Monte Carlo simulation model each measurement date.
For the three months and nine months ended September 30, 2021, the Company recognized a gain resulting from a decrease in the fair value of the derivative warrant liabilities of approximately $1.1 million and approximately $3.5 million, respectively, presented as change in fair value of derivative warrant liabilities on the accompanying unaudited condensed consolidated statements of operations.
18
DFP HEALTHCARE ACQUISITIONS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2020, the Company recognized a loss of approximately $2.3 million and approximately $5.2 million resulting from a decrease an increase in the fair value of the derivative warrant liabilities, respectively, presented as change in fair value of derivative warrant liabilities on the accompanying unaudited condensed consolidated statements of operations.
The estimated fair value of the Private Placement Warrants is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:
| | | | | | | |
|
| As of September 30, 2021 |
| As of December 31, 2020 |
| ||
Stock Price | | $ | 9.94 |
| $ | 10.80 | |
Volatility | |
| 22.8 | % | | 24.0 | % |
Expected life of the options to convert | |
| 5.13 |
| | 5.75 | |
Risk-free rate | |
| 1.00 | % | | 0.47 | % |
Dividend yield | |
| 0.0 | % | | 0.0 | % |
The change in the fair value of the warrant liabilities measured with Level 3 inputs for the three and nine months ended September 30, 2021, is summarized as follows:
| | | |
Level 3 - Derivative warrant liabilities at December 31, 2020 |
| $ | 7,578,670 |
Change in fair value of derivative warrant liabilities | |
| (2,426,670) |
Level 3 - Derivative warrant liabilities at March 31, 2021 | | $ | 5,152,000 |
Change in fair value of derivative warrant liabilities | | | 1,306,670 |
Level 3 - Derivative warrant liabilities at June 30, 2021 | | $ | 6,458,670 |
Change in fair value of derivative warrant liabilities | | $ | (448,000) |
Level 3 - Derivative warrant liabilities at September 30, 2021 | | $ | 6,010,670 |
10. Subsequent Events.
Management has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the unaudited condensed consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.
19
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to DFP Healthcare Acquisitions Corp. References to our “management” or our “management team” refer to our officers
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 ("Securities Act"), as amended, (the “Securities Act”) and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)amended. Such statements are based upon current expectations, as well as management's beliefs and assumptions and involve a high degree of risk and uncertainty. Any statements contained herein that are not statements of historical factsfact may be deemed to be forward-looking statements. Statements that include the words "believes," "anticipates," "plans," "expects." "intends," and involve risks and uncertaintiessimilar expressions that could causeconvey uncertainty of future events or outcomes are forward-looking statements. Our actual results tocould differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future eventsdiscussed or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipatedsuggested in the forward-looking statements please referherein. Factors that could cause or contribute to such differences include those described under the Risk Factors section of the Company’s 10-K/Aheading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year 2020 filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 24, 2021 (the “FY 2020 10-K/A”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whetherended December 31, 2021. In addition, as a result of newthese and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information future events or otherwise.
Overview
We are a blank check company incorporated on November 1, 2019available to us as a Delaware corporation and formed forof the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We intend to focus our investment effort broadly across the entire healthcare industry, which encompasses services, therapeutics, devices, diagnostics and animal health. We intend to effectuate our initial Business Combination using cash from the proceedsfiling date of this offeringQuarterly Report on Form 10-Q and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial Business Combination (pursuantwe assume no obligation to forward purchase agreements or backstop agreements we may enter into following the consummation of our initial public offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lendersupdate any forward-looking statements or the owners of the target, or a combination of the foregoing. Our sponsor is DFP Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
Our registration statement forreasons why our initial public offering (the “Initial Public Offering”) was declared effective by the SEC on March 10, 2020. On March 13, 2020, we consummated our Initial Public Offering of 23,000,000 units (the “Units” and, with respect to the Class A common stock includedactual results may differ. All dollar values are expressed in the Units being offered, the “Public Shares”), including 3,000,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately $10.4 million, inclusive of approximately $6.3 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 3,733,334 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to our Sponsor, generating proceeds of $5.6 million.
20
UponThe Company is a leading value-based oncology company that manages community-based oncology practices that serve patients at 69 clinic locations across 13 markets and five states throughout the closing of the Initial Public Offering and the Private Placement, $230.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (the “Trust Account”) and was invested in permitted United States, “government securities” within the meaningwhich are staffed with 104 oncologists and advanced practice providers. 55 of Section 2(a)(16) of the Investment Company Act of 1940, as amended,these clinics are staffed with 93 providers employed by our affiliated physician-owned professional corporations, which we refermanagement refers to as the Investment"TOI PCs", which have provided care for more than 51,000 patients in 2021 and managed a population of approximately 1.7 million patients under value-based agreements as of June 30, 2022. The Company Act, havingalso provides management services on behalf of 14 clinic locations owned by independent oncology practices. The Company's mission is to heal and empower cancer patients through compassion, innovation, and state-of-the-art medical care.
We have only have 24 months from the closing of the Initial Public Offering, or March 13, 2022, to complete our initial Business Combination (the “Combination Period”). If we do not complete a Business Combination within this period of time, it will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public Shares for a per share pro rata portion of the Trust Account, including interest and not previously released to us to fund our working capital requirements (subject to an annual limit of $500,000) (less taxes payable and up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, liquidate and dissolve the balance of our net assets to our remaining stockholders, as part of our plan of dissolution and liquidation.
The issuance of additional shares in connectioninconsistent with a Business Combination to the ownerspatient’s goals of the target or other investors:
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
21
As indicated in the accompanying unaudited condensed consolidated financial statements as of September 30, 2021, we had approximately $0.6 million in our operating bank account. We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our initialThe Business Combination will be successful.
Proposed Business Combination
On June 28, 2021, the Company entered into an Agreement and Plan of Merger by and among DFP Healthcare Acquisition Corp. ("DFPH"), Orion Merger Sub I, Inc., a Delaware corporation ("First Merger Sub") and a direct, wholly-owned subsidiary of DFP, Orion Merger Sub II, LLC a Delaware limited liability company("Second Merger Sub") entered into an agreement and a direct, wholly-owned subsidiary of) andplan of merger ("Merger Agreement") with TOI Parent, Inc. ("TOI Parent") (collectively, the "Business Combination"). In connection with the Business Combination, DFPH entered into subscription agreements with certain investors (the “PIPE Investors”), a Delaware corporation, as disclosed in a Form 8-K filed on June 29, 2021.
Liquiditywhereby it issued 17.5 million shares of common stock at $10.00 per share and Going Concern Considerations
Our liquidity needs to date have been satisfied through a $25,000 contribution from our Sponsor in exchange100,000 shares of preferred stock at $1,000.00 per share (“PIPE Shares”) for the issuancean aggregate investment of our founder shares to our Sponsor, the promissory note of $200,000 from our Sponsor, and the proceeds from$275,000 (“PIPE Investment”), which closed simultaneously with the consummation of the Private Placement not held in the Trust Account. On March 13, 2020, we repaid the promissory note in full to our Sponsor. In addition, in order to finance transaction costs in connection with aBusiness Combination.
Management continues to evaluatebusiness activities. The Company cannot predict the impactongoing impacts of the COVID-19 pandemic or the distribution of vaccines on our industryits business or operations, but will continue to actively monitor the related issues and has concludedmay take further action that whilealters its business operations, including as may be required by federal, state, local or foreign authorities or that it is reasonably possible thatdetermines are in the virus could have a negative effect on the Company’s financial position, resultsbest interests of its operations and/or closeemployees, payors, partners and stockholders.
In connection with our assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements - Going Concern,” management has determined that the liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about our ability to continue as a going concern. No adjustments have been made$4,993 pursuant to the carrying amountsCARES Act; $2,727 under the Accelerated and Advance Payment Program; and $2,001 from Provider Relief Funding under the CARES Act. Additionally, the Company obtained loans of assets or liabilities should we be required to liquidate after March 13, 2022.
Results of Operations
Our entire activity since inception through September 30, 2021, related to our formation,$332 under the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating income in the form of interest income and dividends on investments held in Trust Account. We expect to incur increased expensesCARES Act as a result of being acquisitions of physician practices. As of June 30, 2022, all loans obtained by the Company have been forgiven.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
Clinics (1) | 69 | 58 | 69 | 58 | |||||||||||||||||||||||||||||||
Markets | 13 | 9 | 13 | 9 | |||||||||||||||||||||||||||||||
Lives under value-based contracts (millions) | 1.7 | 1.5 | 1.7 | 1.5 | |||||||||||||||||||||||||||||||
Adjusted EBITDA (in thousands) | $ | (6,867) | $ | 343 | $ | (12,051) | $ | 412 |
Forthe most closely comparable GAAP financial measure, to Adjusted EBITDA:
Three Months Ended June 30, | Change | ||||||||||||||||||||||
(dollars in thousands) | 2022 | 2021 | $ | % | |||||||||||||||||||
Net income (loss) | $ | (5,453) | $ | 3,205 | $ | (8,658) | (270.1) | % | |||||||||||||||
Depreciation and amortization | 1,098 | 794 | 304 | 38.3 | % | ||||||||||||||||||
Interest expense | 61 | 81 | (20) | (24.7) | % | ||||||||||||||||||
Income tax expense | (32) | 780 | (812) | (104.1) | % | ||||||||||||||||||
Board and management fees | 62 | 102 | (40) | (39.2) | % | ||||||||||||||||||
Non-cash addbacks(1) | 108 | (5,728) | 5,836 | (101.9) | % | ||||||||||||||||||
Share-based compensation | 6,515 | 51 | 6,464 | 12,674.5 | % | ||||||||||||||||||
Change in fair value of liabilities | (12,865) | — | (12,865) | N/A | |||||||||||||||||||
Practice acquisition-related costs(2) | 111 | 107 | 4 | 3.7 | % | ||||||||||||||||||
Consulting and legal fees(3) | 1,144 | 543 | 601 | 110.7 | % | ||||||||||||||||||
Other, net(4) | 1,634 | 408 | 1,226 | 300.5 | % | ||||||||||||||||||
Public company transaction costs | 750 | — | 750 | N/A | |||||||||||||||||||
Adjusted EBITDA | $ | (6,867) | $ | 343 | $ | (7,210) | (2,102.0) | % |
Six Months Ended June 30, | Change | ||||||||||||||||||||||
(dollars in thousands) | 2022 | 2021 | $ | % | |||||||||||||||||||
Net income (loss) | $ | 13,833 | $ | 2,209 | $ | 11,624 | 526.2 | % | |||||||||||||||
Depreciation and amortization | 2,085 | 1,571 | 514 | 32.7 | % | ||||||||||||||||||
Interest expense | 135 | 182 | (47) | (25.8) | % | ||||||||||||||||||
Income tax expense | 148 | 998 | (850) | (85.2) | % | ||||||||||||||||||
Board and management fees | 107 | 208 | (101) | (48.6) | % | ||||||||||||||||||
Non-cash addbacks(1) | 305 | (5,741) | 6,046 | (105.3) | % | ||||||||||||||||||
Share-based compensation | 15,067 | 93 | 14,974 | 16,101.1 | % | ||||||||||||||||||
Change in fair value of liabilities | (50,844) | — | (50,844) | N/A | |||||||||||||||||||
Practice acquisition-related costs(2) | 533 | 197 | 336 | 170.6 | % | ||||||||||||||||||
Consulting and legal fees(3) | 1,799 | 930 | 869 | 93.4 | % | ||||||||||||||||||
Other, net(4) | 2,587 | (235) | 2,822 | (1,200.9) | % | ||||||||||||||||||
Public company transaction costs | 2,194 | — | 2,194 | N/A | |||||||||||||||||||
Adjusted EBITDA | $ | (12,051) | $ | 412 | $ | (12,463) | (3,025.0) | % |
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Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenue Patient services 64.2 % 59.8 % 63.9 % 60.4 % Dispensary 33.2 % 35.6 % 33.5 % 35.9 % Clinical trials & other 2.6 % 4.6 % 2.6 % 3.7 % Total operating revenue 100.0 % 100.0 % 100.0 % 100.0 % Operating expenses Direct costs – patient services 54.0 % 47.3 % 51.9 % 47.4 % Direct costs – dispensary 27.5 % 30.6 % 27.6 % 30.9 % Direct costs – clinical trials & other 0.2 % 0.3 % 0.3 % 0.3 % Selling, general and administrative expense 46.5 % 22.5 % 50.1 % 22.7 % Depreciation and amortization 1.8 % 1.5 % 1.8 % 1.6 % Total operating expenses 130.0 % 102.2 % 131.7 % 102.9 % Loss from operations (30.0) % (2.2) % (31.7) % (2.9) % Other non-operating expense (income) Interest expense 0.1 % 0.2 % 0.1 % 0.2 % Change in fair value of derivative warrant liabilities (3.4) % — % (0.5) % — % Change in fair value of earnout liabilities (17.7) % — % (43.2) % — % Gain on debt extinguishment — % (10.4) % (0.2) % (5.3) % Other, net — % — % 0.1 % (1.0) % Total other non-operating income (21.0) % (10.2) % (43.7) % (6.1) % Income before provision for income (loss) taxes (9.0) % 8.0 % 12.0 % 3.2 % Income tax (expense) benefit — % (1.6) % (0.1) % (1.0) % Net income (loss) (9.0) % 6.4 % 11.9 % 2.2 %
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Patient services | $ | 39,109 | $ | 29,786 | $ | 9,323 | 31.3 | % | $ | 74,166 | $ | 59,408 | $ | 14,758 | 24.8 | % | |||||||||||||||||||||||||||||||
Dispensary | 20,218 | 17,782 | 2,436 | 13.7 | % | 38,897 | 35,400 | 3,497 | 9.9 | % | |||||||||||||||||||||||||||||||||||||
Clinical trials & other | 1,594 | 2,276 | (682) | (30.0) | % | 3,019 | 3,616 | (597) | (16.5) | % | |||||||||||||||||||||||||||||||||||||
Total operating revenue | $ | 60,921 | $ | 49,844 | $ | 11,077 | 22.2 | % | $ | 116,082 | $ | 98,424 | $ | 17,658 | 17.9 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Direct costs – patient services | $32,875 | $ | 23,574 | $ | 9,301 | 39.5 | % | $60,253 | $ | 46,660 | $ | 13,593 | 29.1 | % | |||||||||||||||||||||||||||||||||
Direct costs – dispensary | 16,754 | 15,237 | 1,517 | 10.0 | % | 32,078 | 30,360 | 1,718 | 5.7 | % | |||||||||||||||||||||||||||||||||||||
Direct costs – clinical trials & other | 150 | 143 | 7 | 4.9 | % | 287 | 312 | (25) | (8.0) | % | |||||||||||||||||||||||||||||||||||||
Selling, general and administrative expense | 28,348 | 11,212 | 17,136 | 152.8 | % | 58,154 | 22,390 | 35,764 | 159.7 | % | |||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 1,098 | 794 | 304 | 38.3 | % | 2,085 | 1,571 | 514 | 32.7 | % | |||||||||||||||||||||||||||||||||||||
Total operating expenses | $79,225 | $ | 50,960 | $ | 28,265 | 55.5 | % | $152,857 | $ | 101,293 | $ | 51,564 | 50.9 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Interest expense | $ | 61 | $ | 81 | $ | (20) | (24.7) | % | $ | 135 | $ | 182 | $ | (47) | (25.8) | % | |||||||||||||||||||||||||||||||
Change in fair value of derivative warrant liabilities | (2,065) | — | (2,065) | N/A | (604) | — | (604) | N/A | |||||||||||||||||||||||||||||||||||||||
Change in fair value of earnout liabilities | (10,800) | — | (10,800) | N/A | (50,240) | — | (50,240) | N/A | |||||||||||||||||||||||||||||||||||||||
Gain on debt extinguishment | — | (5,186) | 5,186 | N/A | (183) | (5,186) | 5,003 | (96.5) | % | ||||||||||||||||||||||||||||||||||||||
Other, net | (15) | 4 | (19) | (475.0) | % | 136 | (1,072) | 1,208 | (112.7) | % | |||||||||||||||||||||||||||||||||||||
Total other non-operating (income) expense | $ | (12,819) | $ | (5,101) | $ | (7,718) | 151.3 | % | $ | (50,756) | $ | (6,076) | $ | (44,680) | 735.4 | % |
For the three months ended September 30, 2020, we had a net loss of approximately $2.4 million, which consisted of approximately $96,000 in general and administrative expenses, $52,500 in related party general and administrative expenses, $50,000 in franchise tax expense, approximately $13,000 in income tax expense and an approximately $2.3 million loss from changes in fair value of derivative warrant liabilities, partially offset by approximately $73,000 in interest earned from investments held in the Trust Account.
For the nine months ended September 30, 2021, we had a net loss of approximately $867,000, which consisted of approximately $4.1 million in general and administrative expenses, $157,500 in related party general and administrative expenses and approximately $150,000 in franchise tax expense, partially offset by an approximately $3.5 million gain from changes in fair value of derivative warrant liabilities and approximately $58,000 in interest earned from investments held inderivative earnout liabilities which were created as part of the Trust Account.
ForBusiness Combination.
Six Months Ended June 30, | Change | ||||||||||||||||||||||
(dollars in thousands) | 2022 | 2021 | $ | % | |||||||||||||||||||
Net cash and restricted cash (used in) provided by operating activities | $ | (27,360) | $ | (6,666) | $ | (20,694) | 310 | % | |||||||||||||||
Net cash and restricted cash used in investing activities | (11,264) | (2,053) | (9,211) | 449 | % | ||||||||||||||||||
Net cash and restricted cash (used in) provided by financing activities | (12,342) | 17,890 | (30,232) | (169) | % | ||||||||||||||||||
Net (decrease) increase in cash and restricted cash | $ | (50,966) | $ | 9,171 | $ | (60,137) | (656) | % | |||||||||||||||
Cash and restricted cash at beginning of period | 115,174 | 5,998 | 109,176 | 1,820 | % | ||||||||||||||||||
Cash and restricted cash at end of period | $ | 64,208 | $ | 15,169 | $ | 49,039 | 323 | % |
Contractual Obligations
WeCompany's business;
Material Cash Requirements Due by the Year Ended December 31, | ||||||||||||||||||||||||||||||||
(dollars in thousands) | 2022 | 2023-2024 | 2025-2026 | Thereafter | Total | |||||||||||||||||||||||||||
Operating leases | $ | 2,604 | $ | 9,289 | $ | 6,220 | $ | 3,246 | $ | 21,359 | ||||||||||||||||||||||
Deferred acquisition consideration | 1,700 | 4,309 | — | — | 6,009 | |||||||||||||||||||||||||||
Other1 | 2,639 | 3,132 | 5 | — | 5,776 | |||||||||||||||||||||||||||
Total material cash requirements | $ | 6,943 | $ | 16,730 | $ | 6,225 | $ | 3,246 | $ | 33,144 | ||||||||||||||||||||||
Registration Rights
The initial stockholders and holdersopt out of the Private Placement Warrants are entitledextended transition period and comply with the requirements that apply to registration rights pursuantnon-emerging growth companies, but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a registration rights agreement. The initial stockholdersstandard is issued or revised and holdersit has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the Private Placement Warrants will be entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securitiespotential differences in other registration statements filed by us. We will bear the expenses incurred in connection with the filingaccounting standards used.
Contents
The underwriters did not receive any underwriting discounts or commission on the 5,000,000 Units purchased in the Initial Public Offering by certain domestic private pooled investment vehicles managed by Deerfield Management Company, L.P. We paid an underwriting discount of 2.0% of the per Unit offering price, or $3.6 million, at the closing of the Initial Public Offering, with an additional fee (the “Deferred Underwriting Fees”) of 3.5% of the gross offering proceeds, or $6.3 million, payable upon our completion of an Initial Business Combination. The Deferred Underwriting Fees will become payable to the underwriters from the amounts held in the Trust Account solely in the event we complete our initial Business Combination.
Use of Estimates
23
Investments Heldadoption, inception, or modification in determining the present value of lease payments. ROU assets are measured at an amount equal to the initial lease liability, plus any prepaid lease payments (less any incentives received) and initial direct costs, at the lease commencement date. The Company has elected to account for lease and non-lease components as a single lease component for all underlying classes of assets. As a result, the fixed payments that would otherwise be allocable to the non-lease components are account for as lease payments and included in the Trust Account
Our portfoliomeasurement of investments heldthe Company’s right-of-use asset and lease liability.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemptionby segment in accordance with the guidancerelevant accounting literature to provide investors with transparency into how the chief operating decision maker (“CODM”) manages the business. The Company's
Effective with the closing of the Initial Public Offering, wesuch asset, an impairment loss is recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Income (Loss) Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income (loss) per share of common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to purchase an aggregate of 9,483,334 shares of common stock in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share of common stock for the three and nine months ended September 30, 2021 and 2020. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities atdifference between estimated fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in faircarrying value. Fair value is recognized in our unaudited condensed consolidated statements of operations. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each
24
measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measureddetermined based on the listed market price of such warrants.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. We early adopted the ASU on January 1, 2021. Adoption of the ASU did not have a material impact on our financial position, results of operations or cash flows.
Our management does not believe that any other recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
We do not believe that inflation had a material impact on our business, revenues or operating results during the period presented.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the unaudited condensed consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the unaudited condensed consolidated financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
ITEM
Quantitative and Qualitative Disclosures About Market Risk
25
ITEM
Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that the information relating to our Company, including our consolidated subsidiaries, that required to be disclosed in our reports filed or submitted under the
We conducted an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended) as of June 30, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective due to material weaknesses in our internal control over financial reporting, as described below.There was
RemediationChief Executive Officer and Chief Financial Officer, recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of a Material Weakness in Internal Control over Financial Reporting
We recognizeachieving the importancedesired control objectives. Because of the inherent limitations in all control environment as it setssystems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the overall tone forcompany have been detected. The design of any system of controls also is based in part upon certain assumptions about the Companylikelihood of future events, and isthere can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the foundation for all other componentsdegree of internal control. Consequently, we designed and implemented remediation measures to addresscompliance with the material weakness previously identified in the second quarter of 2021 and enhanced our internal control over financial reporting. In lightpolicies or procedures may deteriorate. Because of the material weakness, we enhanced our processesinherent limitations in a cost-effective control system, misstatements due to identifyerror or fraud may occur and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our condensed consolidated financial statements, including providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The foregoing actions, which we believe remediated the material weakness in internal control over financial reporting, were completed as of the date of September 30, 2021.
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ITEM
ITEM
Risk Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our FY 2020 10-K/A filed with the SEC on May 24, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there
ITEM
None.
Period | Total Number of Shares of Stock Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value that May Yet be Purchased Under the Program | ||||||||||||||||||||||
April 1, 2022 - April 30, 2022 | — | $ | — | — | — | |||||||||||||||||||||
May 1, 2022 - May 31, 2022 | — | — | — | $ | 20,000 | |||||||||||||||||||||
June 1, 2022 - June 30, 2022 | 1,500,000 | 6.00 | 1,500,000 | $ | 11,000 | |||||||||||||||||||||
Total | 1,500,000 | $ | 6.00 | 1,500,000 |
ITEM
ITEM
Mine Safety Disclosures
ITEM
None.
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ITEMItem 6. EXHIBITS.
The following exhibits are filed as partExhibitsIncorporated by Reference Filed or Furnished Herewith Exhibit Number Description Form File Number Exhibit Filing Date 2.1 S-4/A 333-258152 2.1 October 20, 2021 3.1 8-K 001-39248 3.1 November 18, 2021 3.2 8-K 001-39248 3.2 November 18, 2021 3.3 8-K/A 001-39248 3.3 November 22, 2021 4.1 8-K 001-39248 4.1 March 13, 2020 4.2 8-K/A 001-39248 4.2 November 22, 2021 10.1 X 10.2 10-Q 001-39248 10.1 May 10, 2022 31.1 X 31.2 X 32.1 X 32.2 X 101 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document
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THE ONCOLOGY INSTITUTE, INC. | |||||||
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