AdaptHealth(AHCO) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited interim financial statements, management's analysis of financial condition and operations, market risk disclosures, and internal controls Financial Statements The unaudited financial statements for DFB Healthcare Acquisitions Corp. as of June 30, 2019, detail its SPAC financial position, including trust account assets, operational losses, and the impact of a subsequent merger agreement Condensed Balance Sheets Condensed Balance Sheet Highlights (Unaudited) | Account | June 30, 2019 ($) | December 31, 2018 ($) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $878,071 | $947,098 | | Cash and marketable securities held in Trust Account | $254,864,066 | $253,019,179 | | Total Assets | $255,865,717 | $254,124,282 | | Liabilities & Equity | | | | Total Liabilities | $10,157,718 | $8,574,393 | | Common stock subject to possible redemption | $240,707,990 | $240,549,880 | | Total Stockholders' Equity | $5,000,009 | $5,000,009 | Unaudited Condensed Interim Statements of Operations Statement of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2019 ($) | | :--- | :--- | :--- | | Interest Income | $1,482,088 | $2,946,127 | | Loss from Operations | ($1,848,965) | ($2,190,323) | | Net (Loss) Income | ($667,488) | $158,110 | Unaudited Condensed Interim Statements of Cash Flows Cash Flow Summary for the Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,167,442) | ($913,468) | | Net cash provided by (used in) investing activities | $1,098,415 | ($249,548,678) | | Net cash provided by financing activities | $0 | $251,331,043 | | Net change in cash and cash equivalents | ($69,027) | $868,897 | Notes to Unaudited Condensed Interim Financial Statements - The company is a SPAC formed to effect a business combination, focusing on the healthcare industry. It consummated its IPO of 25,000,000 units at $10.00 per unit on February 21, 2018, placing $250 million into a trust account[19][21] - The company must complete a Business Combination by February 21, 2020, or it will be required to cease operations and redeem the public shares[30] - Management has determined that the mandatory liquidation requirement raises substantial doubt about the Company's ability to continue as a going concern[36] - On July 8, 2019, the Company entered into a definitive merger agreement with AdaptHealth Holdings LLC for a total consideration of $515 million, consisting primarily of company stock[33][86] - The Sponsor and its affiliates have significant influence, holding Founder Shares and Private Placement Warrants, and have provided loans and services to the company. An affiliate of the Sponsor also purchased 2,500,000 units in the IPO and has indicated interest in a further $100 million private placement[55][57][61] Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and results, highlighting its blank check status, net income driven by trust account interest, liquidity challenges, going concern doubts due to the February 2020 business combination deadline, and the July 2019 merger agreement with AdaptHealth Results of Operations Summary | Period | Net (Loss) Income ($) | Key Components | | :--- | :--- | :--- | | Three Months Ended June 30, 2019 | ($667,000) | $1.5 million interest income offset by $1.8 million G&A expenses | | Six Months Ended June 30, 2019 | $158,000 | $2.9 million interest income offset by $2.1 million G&A expenses | | Three Months Ended June 30, 2018 | $690,000 | $1.2 million interest income offset by $163,000 G&A expenses | | Six Months Ended June 30, 2018 | $910,000 | $1.5 million interest income offset by $213,000 G&A expenses | - As of June 30, 2019, the company had approximately $878,000 in its operating bank account and about $4.9 million of available interest income to fund operations and a business combination[99] - Management has determined that the mandatory liquidation requirement if a business combination is not completed by February 21, 2020, raises substantial doubt about the company's ability to continue as a going concern[103] - The company has agreements to pay its Sponsor $10,000 per month for office and administrative support, and its CFO $7,500 per month for services until a business combination is completed[124] - On July 8, 2019, the company entered into a merger agreement with AdaptHealth, a provider of home medical equipment. The transaction is valued at $515 million[129] Quantitative and Qualitative Disclosures About Market Risk The company asserts no material market or interest rate risk, as its Trust Account funds are invested in short-term U.S. government treasury securities or money market funds, minimizing interest rate exposure - The company's funds, including those in the Trust Account, are invested in short-term U.S. government treasury bills, notes, or bonds with a maturity of 180 days or less, or in money market funds investing solely in U.S. treasuries[130] - Due to the short-term nature of its investments, management believes there is no material exposure to interest rate risk[130] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2019[131] - There were no material changes to the company's internal control over financial reporting during the fiscal quarter ended June 30, 2019[134] PART II. OTHER INFORMATION This section provides disclosures on legal proceedings, updates on risk factors, details on unregistered equity sales, other required information, and a list of filed exhibits Legal Proceedings The company reported no legal proceedings - None[136] Risk Factors The company reported no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K filed on March 29, 2019 - As of the date of this report, there have been no material changes to the risk factors disclosed in the Annual Report on Form 10-K filed on March 29, 2019[137] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds from registered securities during the period - None[138] Other Information The company reported no other information required to be disclosed under this item - None[141] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications required by the Sarbanes-Oxley Act of 2002 and XBRL documents - The exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[142]