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United States securities and exchange commission logo
August 27, 2021
Steven Hochberg
Chief Executive Officer
DFP Healthcare Acquisitions Corp.
345 Park Avenue South
New York, New York 10010
Re: DFP Healthcare
Acquisitions Corp.
Registration
Statement on Form S-4
Filed July 23, 2021
File No. 333-258152
Dear Mr. Hochberg:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-4 filed July 23, 2021
Cautionary Note Regarding Forward-Looking Statements, page 1
1. We note the inclusion
of forecasts and projections in your identification of forward-
looking statements, and
your statement that [t]he forward-looking statements are based
on projections prepared
by, and are the responsibility of, TOI s management. Revise to
clarify that the
registrant is responsible for all the disclosure in the filing, including the
projections.
What is TOI?, page 3
2. We note several
references here and throughout the prospectus that TOI is a leading
value-based oncology
company". Please revise to clarify the basis for this leadership
claim.
Steven Hochberg
FirstName LastNameSteven
DFP Healthcare AcquisitionsHochberg
Corp.
Comapany
August 27, NameDFP
2021 Healthcare Acquisitions Corp.
August
Page 2 27, 2021 Page 2
FirstName LastName
Questions and Answers About the Business Combination and the Special Meeting
What is being voted on?, page 5
3. Unbundle the stock issuance proposal so that shareholders may vote
separately whether to
increase the authorized number of shares for the proposed business
combination and for
the subscription/PIPE financing. Refer to Exchange Act Rule 14a-3. For
additional
guidance, see the Compliance and Disclosure Interpretations under Rule
14a-4(a)(3)
generally and regarding unbundling in the M&A context.
Summary of the Proxy Statement/Prospectus
Structure of the Business Combination, page 21
4. Revise the pre- and post-combination structures to reflect the various
forms and
percentages of ownership interests, including the subscription
agreements and earnout
warrants addressed on pages 22-23.
Redemption Rights, page 28
5. Revise your disclosure to show the potential impact of the redemptions
on the per share
value of the shares owned by non-redeeming shareholders by including a
sensitivity
analysis showing a range of redemptions scenarios, including minimum,
maximum and
interim redemption levels.
Interests of the Sponsor and DFP's Directors and Officers in the Business
Combination, page 29
6. Please quantify the aggregate dollar amount and describe the nature of
what the sponsor
and its affiliates have at risk that depends on completion of the
business combination.
Include the current value of securities held, loans extended, fees due
and out-of-pocket
expenses for which the sponsor and its affiliates are awaiting
reimbursement. Provide
similar disclosure for the company s officers and directors, if
material.
7. Please clarify if the sponsor and its affiliates can earn a positive
rate of return on their
investment, even if other SPAC shareholders experience a negative rate
of return in the
post-business combination company.
Risk Factors, page 42
8. Please revise the DFP risk factors section to more prominently provide
disclosure related
to its going concern determination.
9. We note the disclosure in the risk factor on page 69 regarding the
material weakness that
led management to conclude that internal control over financial
reporting (ICFR) was not
effective as of December 31, 2020. Please confirm, if true, that
management performed an
assessment of ICFR subsequent to the date that your December 31, 2020
Form 10-K/A
was filed on May 24, 2021. Otherwise, explain how you were not able to
provide this
conclusion in the Form 10-K/A. Alternatively, please revise your
disclosure herein to be
Steven Hochberg
FirstName LastNameSteven
DFP Healthcare AcquisitionsHochberg
Corp.
Comapany
August 27, NameDFP
2021 Healthcare Acquisitions Corp.
August
Page 3 27, 2021 Page 3
FirstName LastName
consistent with the disclosure in the Form 10-K/A.
The Business Combination Proposal
Background of the Business Combination, page 95
10. On page 96, disclose the number of targets with which DFP entered into
letters of intent.
Disclose why you determined the three identified targets are the
relevant potential
targets. Disclose the timing of the negotiations with Companies A,
B and C.
11. On page 97, revise to identify the roles of Alvarez & Marsal,
Polsinelli, and W&C and on
whose behalf they performed their respective roles.
12. With respect to the March 17 entry, please revise to explain how DFP
determined to
indicate its interest at the $700 to $750 million level, including
whether it had received
forecasts from TOI and any financial models that it used.
13. Please revise the discussion concerning the March 17 to March 26
period to clarify
whether TOI offered counterproposals to DFP's initial indication of
interest. Discuss the
material terms, as applicable.
14. On page 98, revise to explain what a "locked box mechanism" is and the
key features of
the mechanism under negotiation. For instance, it should be whether
the price would be
set based upon a pre-signing balance sheet or something else. With
reference to the June
21 entry, revise the remainder of the Background section to discuss
how the terms of the
mechanism evolved over time and whether the mechanism is employed in
the Business
Combination Agreement.
15. With reference to the April 26 entry, please discuss the "financial
model" that the two
parties discussed as well as the growth plan and the use of proceeds.
16. At various points in the risk factors and elsewhere, you disclose that
TOI provided
financial projections. Revise this section to clarify at what points
those projections were
disclosed. We note various reference to the TOI team sharing their
vision and growth
prospects, and the follow-up call on April 26, 2021 on the
financial model.
17. On page 99, revise to explain who and what drove the change in
consideration on June 19,
2021 that resulted in the $100 million reduction in transaction
consideration and increase
in earnout consideration.
18. With reference to the disclosure on page 101 and the joint press
release dated June 28,
2021 announcing the business combination agreement, please tell us,
and as applicable
revise to clarify, whether both parties agreed to the valuation based
on a 2.4 multiple to
TOI's 2022 forecasted revenue.
DFP's Board of Directors' Reasons for the Approval of the Business Combination,
page 100
19. Revise the discussion of the board s comparable companies analysis
to disclose the data
and valuations for each selected company.
Steven Hochberg
DFP Healthcare Acquisitions Corp.
August 27, 2021
Page 4
20. You describe additional analyses the board performed with respect to
the TOI financial
projections, including that the board compared the projected
revenue growth to the
revenue growth of Comparable Companies to assess its reasonableness.
Revise to
disclose the board s conclusions regarding the reasonableness of the
TOI projections.
Clarify whether the board felt the projected revenue growth was
reasonable given the
pipeline of potential acquisitions TOI had disclosed.
The Business Combination Proposal
Certain Projected Financial Information, page 102
21. Expand your disclosures to provide additional information surrounding
the
material assumptions and estimates underlying the projections on page
103 to provide
investors with sufficient information to evaluate the projected
financial information. For
example:
Identify the market and geographical regions for the revenue
projections and the
specific market growth rates and projected market rate
penetrations to help provide
additional insight into the range in these rates underlying the
revenue projections.
Explain how the market rate growth and market rate penetrations
were determined;
Disclose material assumptions related to acquisitions and de novo
build-out;
Provide any specific assumptions related to regulatory approvals
disclosed on page
104;
Disclose how you determined adjusted EBITDA; and
Disclose material assumptions used to determine projected expense
amounts in
arriving at growth profit and adjusted EBITDA.
22. With respect to the projections on page 104, please:
clarify the "VBC" abbreviation and, with reference to the fourth
bullet point on page
42, explain briefly explain how these contracts differ and why it
is appropriate to
quantify them together;
tell us how the 20% CAGR figure is calculated; and
revise to explain what the two "% Growth" metrics relate to and
how they are
calculated.
23. Revise the fifth paragraph on page 103 to clarify that you have
disclosed all material
assumptions underlying the projections. In addition, revise to discuss
more specifically
the assumptions supporting the projections presented on page 104. In
particular, please
explain the assumptions underlying the considerable annual growth in
revenue despite
more modest growth (and even a reduction) in the number of Capitated/VBC
Lives. With
FirstName LastNameSteven Hochberg
reference to the "Key Business Metrics" disclosure on page 188, disclose
whether the
Comapany NameDFP
projections Healthcare
assume materialAcquisitions Corp.
changes to the number of clinics and
markets. Also, discuss
Augustmore specifically
27, 2021 Page 4 the assumptions that support increased adjusted EBITDA
and margins.
FirstName LastName
Steven Hochberg
FirstName LastNameSteven
DFP Healthcare AcquisitionsHochberg
Corp.
Comapany
August 27, NameDFP
2021 Healthcare Acquisitions Corp.
August
Page 5 27, 2021 Page 5
FirstName LastName
Certain Interests of TOI's Management and Directors, page 106
24. Provide examples to quantify the potential interests of TOI management
and directors in
the business combination.
Unaudited Pro Forma Condensed Combined Financial Information, page 143
25. Please appropriately notate the adjustment of $806 impacting
Accumulated deficit in the
pro forma balance sheet on page 146 under the Maximum Redemption
Scenario.
26. Please expand your description in Note (N) to the pro forma balance
sheet to explain the
circumstances that resulted in the change of classification of the
public warrants from
liability to equity upon closing of the business combination.
27. Please explain to us why the adjustment in Note (BB) for compensation
is recognized in
its entirety in the pro forma statement of operations for the year
ended December 31, 2020
since it has a requisite service period of 3 years.
28. We note the calculation of pro forma net income (loss) per share for
basic and diluted EPS
under both redemption scenarios on page 155. Please disclose how you
determined the
following amounts:
Pro forma net income allocated to participating securities of $346
(no redemption)
and $198 (maximum redemption) as of March 31, 2021 in the
calculation of basic
EPS;
Pro forma net income allocated to participating securities of $341
(no
redemption) and $195 (maximum redemption) as of March 31, 2021 in
the
calculation of diluted EPS;
Weighted average shares outstanding of DFP Class A Common Stock,
basic of
90,666,539 (no redemption) and 82,256,547 (maximum redemption) as
of March 31,
2021;
Weighted average shares outstanding of DFP Class A Common Stock,
diluted of
91,924,672 (no redemption) and 83,920,434 (maximum redemption) as
of March 31,
2021;
Pro forma net loss allocated to participating securities of
$(11,016) (no redemption)
and $(10,507) (maximum redemption) in the calculation of basic
and diluted EPS as
of December 31, 2020; and
Weighted average shares outstanding of DFP Class A Common Stock,
basic and
diluted of 90,349,008 (no redemption) and 81,939,016 (maximum
redemption) as of
December 31, 2020.
Business of TOI, page 173
29. With reference to the disclosures on pages 103-104, please revise to
disclose the operating
plan for the business in the coming few years as well as the intended
uses of the proceeds
raised through the merger and PIPE financings.
Steven Hochberg
FirstName LastNameSteven
DFP Healthcare AcquisitionsHochberg
Corp.
Comapany
August 27, NameDFP
2021 Healthcare Acquisitions Corp.
August
Page 6 27, 2021 Page 6
FirstName LastName
Our Care Model, page 175
30. With reference to the disclosures on pages 98-99, please revise to
discuss the NCCN
guidelines.
Government Regulation, page 181
31. With reference to your disclosures on pages 46 and 178, please revise
your disclosure
under the first three sub-headings to discuss specifically California
state regulation in
these areas.
Key Business Metrics, page 188
32. We note the Adjusted EBITDA reconciliations on page 189. Please
separately
quantify each of the items in non-cash addbacks in Note (1) and in
unusual/nonrecurring
expenses in Note (2).
Results of Operations, page 191
33. Please expand your disclosures to separately discuss each of the
factors contributing to the
changes in revenue and expense amounts each period. For example, on
page 192, quantify
the increase in patient services revenue that resulted from new
capitated contracts that
began in the fourth quarter of 2020 and the decrease in FFS revenues
resulting from the
transition of several FFS contracts to capitation. The increase is
dispensary revenue that
related to the number or prescriptions filled and average revenue per
fill should also be
separately disclosed. Revise to address this comment for significant
period to period
variances for all other income and expense amounts each period.
Critical Accounting Policies
Variable Interest Entities, page 197
34. We note that the discussion that you hold variable interests in the
TOI PCs, which are
comprised of two separate professional entities. Please clarify if
these two entities
are TOI FL and TOI CA as disclosed in Note 17 on page F-66. Please
also clarify your
accounting treatment for PCs located in the other states in which you
operate such
Arizona and Nevada noted on page F-49 and explain the reasons you do
not consolidate
the financial statements of any these other PCs. Finally, please also
revise to disclose, if
true, that all MSAs entered into with your operating PCs are all
substantially similar, i.e.,
subject to the same or similar risks, rewards, policies, procedures
and accounting.
Beneficial Ownership of Securities,, page 223
35. Please identify the natural person or persons who directly or
indirectly exercise sole or
shared voting and/or dispositive power with respect to the common
stock held by Park
West Investors Master Fund, Limited and each of the five entities
listed on page 225.
Steven Hochberg
DFP Healthcare Acquisitions Corp.
August 27, 2021
Page 7
Refer to Item 403 of Regulation S-K.
TOI Parent Financial Statements
Note 16. Business Combination , page F-65
36. You state on page F-65 that the present value of the deferred cash
consideration of
$817,500 to be paid in installments and related to the acquisition of PCC
"is not material."
Please explain why the present value of this cash would not be material
and how
you determined that.
Report of Independent Registered Public Accounting Firm, page F-71
37. Please have your auditors amend their audit report to indicate that their
audit was
conducted in accordance with the standards of the PCAOB, rather
than the auditing standards of the PCAOB. Refer to the guidance in
paragraph .09 of AS
3101.
Note. 11 Debt, page F-90
38. You state on page F-91 that TOI applied for loan forgiveness in December
2020 for the
PPP loan and on June 17, 2021, the Company received "notice of the loan."
Please revise
to disclose what you mean by "notice of the loan." For example, if true,
clarify that the
loan was forgiven and explain the related accounting treatment.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Jenn Do at (202) 551-3743 or Brian Cascio at (202)
551-3676 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Abby Adams at (202) 551-6902 or Joe McCann at (202) 551-6262 with any
other
questions.
Sincerely,
FirstName LastNameSteven Hochberg
Division of
Corporation Finance
Comapany NameDFP Healthcare Acquisitions Corp.
Office of Life
Sciences
August 27, 2021 Page 7
cc: Joel Rubinstein, Esq.
FirstName LastName