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Oncology Institute, Inc.

Oncology Institute, Inc.TOIIWEarnings & Financial Report

Nasdaq

What changed in Oncology Institute, Inc.'s 10-K — 2023 vs 2024

Top changes in Oncology Institute, Inc.'s 2024 10-K

228 paragraphs added · 220 removed · 174 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Independent oncologists continue to face multitude of challenges and our acquisition model offers a path for these oncologists to continue to practice in their community without the burdens of business building or administration, while at the same time working alongside a dynamic and growing organization at the forefront of value-based care.
Independent oncologists continue to face a multitude of challenges and our acquisition model offers a path for these oncologists to continue to practice in their community without the burdens of business building or administration, while at the same time working alongside a dynamic and growing organization at the forefront of value-based care.
The non-medical functions and services we provide under the management services agreements include practice management services and non-clinical operational assistance for all TOI PC clinic locations, assistance with provider and payor contract negotiations and administration, billing 7 and collection services, financial and accounting services, electronic medical records and practice management technology solutions, assistance in maintaining licensure, permits and other credentialing requirements for the TOI PCs, risk management services, non-clinical personnel services, provider recruitment services and other administrative services required for the day-to-day operations of the clinics and TOI PCs.
The non-medical functions and services we provide under the management services agreements include practice management services and non-clinical operational assistance for all TOI PC clinic locations, assistance with provider and payor contract negotiations and administration, billing and collection services, financial and accounting services, electronic medical records and practice management technology solutions, assistance in maintaining licensure, permits and other credentialing requirements for the TOI PCs, risk management services, non-clinical personnel services, provider recruitment services and other administrative services required for the day-to-day operations of the clinics and TOI PCs.
Our value-based contracts could also take on other forms, such as sharing with payors in the cost savings generated for specific medical oncology costs (which we refer to as 'gain-sharing' contract), along with incentives to meet certain quality metrics. These contracts, despite their modifications on how reimbursement is structured, still meet the definition of value-based care.
Our value-based contracts could also take on other forms, such as sharing with payors in the cost savings generated for specific medical oncology costs (which we refer to as 'gain-sharing' contracts), along with incentives to meet certain quality metrics. These contracts, despite their modifications on how reimbursement is structured, still meet the definition of value-based care.
We are continuously improving and innovating our care model, using the clinical data from the HVCC program to develop evidence-based care and treatment protocols for all patients. 9 Our Value Proposition and Differentiated Care Model Our managed clinics primarily serve adult and senior cancer patients in markets that have MA plans and primary care medical groups reimbursed on a capitated basis.
We are continuously improving and innovating our care model, using the clinical data from the HVCC program to develop evidence-based care and treatment protocols for all patients. Our Value Proposition and Differentiated Care Model Our managed clinics primarily serve adult and senior cancer patients in markets that have MA plans and primary care medical groups reimbursed on a capitated basis.
We believe that these new contracting methodologies are furthering our mission to provide access to world-class oncology care in an affordable manner to underserved populations. We believe that our position in the market and focus on elevating the state of oncology care with a value-based care model positions our affiliated providers well for future growth.
We believe that these new contracting methodologies are furthering our mission to provide access to world-class oncology care in an affordable manner to underserved populations. 8 We believe that our position in the market and focus on elevating the state of oncology care with a value-based care model positions our affiliated providers well for future growth.
Our dispensary operations must also comply with applicable laws. Sanctions for failure to comply with applicable state and federal licensing, accreditation, certification and other regulatory requirements include suspension, revocation or limitation of the applicable authorization, significant fines and penalties and/or an inability to receive reimbursement from government healthcare programs and other third-party payors.
Our pharmacy and dispensary operations must also comply with applicable laws. Sanctions for failure to comply with applicable state and federal licensing, accreditation, certification and other regulatory requirements include suspension, revocation or limitation of the applicable authorization, significant fines and penalties and/or an inability to receive reimbursement from government healthcare programs and other third-party payors.
According to a study conducted by researchers at Stanford University on the TOI PCs’ patients in 2019 who were enrolled in our HVCC program, we saw improvements in several key metrics, including: Overall, the study demonstrated greater than 25% lower median total healthcare costs from diagnosis to death.
According to a study conducted by researchers at Stanford University on the TOI PCs’ patients in 2019 who were enrolled in our HVCC program, we saw improvements in several key metrics, including: 10 Overall, the study demonstrated greater than 25% lower median total healthcare costs from diagnosis to death.
We define value-based care as care that focuses on providing optimal health outcomes and healthcare 6 affordability and a value-based contract as any contract that removes the incentive to drive up cost of care or overutilization, while rewarding better clinical outcomes, cost and quality.
We define value-based care as care that focuses on providing optimal health outcomes and healthcare affordability and a value-based contract as any contract that removes the incentive to drive up cost of care or overutilization, while rewarding better clinical outcomes, cost and quality.
These laws include, but are not limited to, federal and state anti- kickback, false claims, self-referral and other healthcare fraud and abuse laws. 13 The federal Anti-Kickback Statute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid.
These laws include, but are not limited to, federal and state anti- kickback, false claims, self-referral and other healthcare fraud and abuse laws. 14 The federal Anti-Kickback Statute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid.
In 2023, we continued to evolve the way we structure our value-based arrangements, particularly in areas of the country where there are limits on medical group delegation, or an increased desire from groups to incentivize TOI for cost of care that extends beyond medical oncology and includes elements such as management of acute care utilization and/or management of non-employed oncologists.
In 2024, we continued to evolve the way we structure our value-based arrangements, particularly in areas of the country where there are limits on medical group delegation, or an increased desire from groups to incentivize TOI for cost of care that extends beyond medical oncology and includes elements such as management of acute care utilization and/or management of non-employed oncologists.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, including HIPAA, and federal and state consumer protection laws and regulations (e.g., Section 5 of 15 the Federal Trade Commission ["FTC"] Act), that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of the TOI PCs.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, including HIPAA, and federal and state consumer protection laws and regulations (e.g., Section 5 of 16 the Federal Trade Commission ["FTC"] Act), that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of the TOI PCs.
Our initial approach to value-based contracting in new markets is likely to be in the form of gain share contracts These new contracts, which will enable us to work with payors and risk-taking providers as they continue their shift to value-based care, are likely to produce lower revenue and profitability in the initial period as compared to full capitation.
Our initial approach to value-based contracting in new markets is likely to be in the form of gain- sharing contracts These new contracts, which will enable us to work with payors and risk-taking providers as they continue their shift to value-based care, are likely to produce lower revenue and profitability in the initial period as compared to full capitation.
We have flexibility around clinic size to allow us to establish smaller clinics and part time staffing in areas where needed to ensure the 12 TOI PCs can meet network adequacy under existing payor contracts. We group our managed clinics in a similar geographic area into pods, with multiple pods in each market.
We have flexibility around clinic size to allow us to establish smaller clinics and part time staffing in areas where needed to ensure the 13 TOI PCs can meet network adequacy under existing payor contracts. We group our managed clinics in a similar geographic area into pods, with multiple pods in each market.
The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare. It is unclear how other 14 healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact the ACA or our business.
The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare. It is unclear how other 15 healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact the ACA or our business.
We have the potential to scale significantly faster with additional capital via 11 new oncologist on-boarding and training, further technology investments, investments in ancillaries, and strategic acquisitions. In Q4 2023, we opened our California-based pharmacy for specialty medication fills.
We have the potential to scale significantly faster with additional capital via 12 new oncologist on-boarding and training, further technology investments, investments in ancillaries, and strategic acquisitions. In Q4 2023, we opened our California-based pharmacy for specialty medication fills.
In 2023, we generated more than 47% of our revenue from patients who are covered by value-based contracts. Historically, our value-based contracts have predominately taken the form of capitated contracts. Our capitated contracts remove incentives to drive up costs, and they also have incentives for meeting or exceeding certain quality metrics.
In 2024, we generated more than 46% of our revenue from patients who are covered by value-based contracts. Historically, our value-based contracts have predominately taken the form of capitated contracts. Our capitated contracts remove incentives to drive up costs, and they also have incentives for meeting or exceeding certain quality metrics.
Many of the patients that we manage under value-based arrangements are referred to as “capitated” populations, however our affiliated providers also provide care to patients outside of these arrangements under traditional FFS arrangements as well as other types of value-based contract. As of December 31, 2023, we were active in 15 markets in five states.
Many of the patients that we manage under value-based arrangements are referred to as “capitated” populations, however our affiliated providers also provide care to patients outside of these arrangements under traditional FFS arrangements as well as other types of value-based contract. As of December 31, 2024, we were active in 16 markets in five states.
Employees and Human Capital Resources As of December 31, 2023, we and TOI PCs collectively had approximately 800 employees, including approximately 119 oncologists and advanced practice providers. We consider our relationship with our employees to be good. None of our employees are represented by a labor union or party to a collective bargaining agreement.
Employees and Human Capital Resources As of December 31, 2024, we and TOI PCs collectively had approximately 825 employees, including approximately 119 oncologists and advanced practice providers. We consider our relationship with our employees to be good. None of our employees are represented by a labor union or party to a collective bargaining agreement.
These include companies such as AIM Specialty Health, eviCore Healthcare, Magellan Health, New Century Health, One Oncology, Thyme Care, and OncoHealth. These benefit managers seek to change provider behavior by reviewing and authorizing treatment requests.
These include companies such as AIM Specialty Health, eviCore Healthcare, Magellan Health, New Century Health, OneOncology, Inc., Thyme Care, and OncoHealth. These benefit managers seek to change provider behavior by reviewing and authorizing treatment requests.
More than half of our revenue in 2023 was generated from value-based contracts where payors have made our affiliated providers their preferred or exclusive oncology group. While our relationships with payors are long-standing, we believe we have limited concentration risk as our largest customer by revenue in 2023 represented approximately 15% of our revenue.
More than half of our revenue in 2024 was generated from value-based contracts where payors have made our affiliated providers their preferred or exclusive oncology group. While our relationships with payors are long-standing, we believe we have limited concentration risk as our largest customer by revenue in 2024 represented approximately 16% of our patient services revenue.
Our care model is designed to remove physicians’ incentives to over-prescribe or prescribe high-cost chemotherapy that is of limited clinical utility to patients, but rather focus on NCCN guideline adherence and, when possible, choose clinically equivalent but lower-cost therapeutics to benefit patients and our payor partners.
Our care model is designed to remove physicians’ incentives to over-prescribe or prescribe high-cost chemotherapy that is of limited clinical utility to patients, but rather focus on adherence to National Comprehensive Cancer Network ("NCCN") 9 guidelines and, when possible, choose clinically equivalent but lower-cost therapeutics to benefit patients and our payor partners.
NCCN is a not-for-profit alliance of 32 leading cancer centers devoted to patient care, research and education (not including TOI). NCCN focuses on improving cancer care through the input of clinical thought leaders at its member organizations.
Our treatment regimens are based on algorithms established by the NCCN and are evidence-based. NCCN is a not-for-profit alliance of 32 leading cancer centers devoted to patient care, research and education (not including TOI). NCCN focuses on improving cancer care through the input of clinical thought leaders at its member organizations.
Our footprint as of December 31, 2023 spanned five states and is growing rapidly. 10 California Arizona Nevada Florida Texas Markets 7 1 1 5 1 Managed and Affiliated Clinics (1) 62 4 4 11 2 Providers 99 5 4 21 2 (1) 69 clinics operated under the TOI PCs, whereby we receive a percentage of revenues under our management services agreements, or MSAs and are consolidated; and 14 independent oncology practice locations that are under MSAs for limited management and administrative services but do not bear any direct operating costs.
Growth Strategy and Opportunities Our footprint as of December 31, 2024 spanned five states and is growing rapidly. 11 California Arizona Nevada Florida Oregon Markets 7 1 1 5 2 Managed and Affiliated Clinics (1) 63 4 3 14 2 Providers 101 5 3 20 2 (1) 72 clinics operated under the TOI PCs, whereby we receive a percentage of revenues under our management services agreements, or MSAs and are consolidated; and 14 independent oncology practice locations that are under MSAs for limited management and administrative services but do not bear any direct operating costs.
Through TOI Clinical Research, LLC ("TCR") , the clinical research arm of the TOI PCs, we also provide and manage clinical trial services and research for the benefit of cancer patients.
Clinical Trials and Other Through TOI Clinical Research, LLC ("TCR") , the clinical research arm of our affiliated professional corporations, or TOI PCs, we also provide and manage clinical trial services and research for the benefit of cancer patients, as well as palliative care for patients in the last stages of disease.
We employ a continuous feedback mechanism to ensure superior patient experience and satisfaction among our affiliated physicians and advanced practice providers.
We employ a continuous feedback mechanism to ensure superior patient experience and satisfaction among our affiliated physicians and advanced practice providers. Based on the latest 3,500+ Google reviews we have an average patient rating of 4.6 out of 5 stars.
We give patients the education and tools to make their own decisions about when the right time is to choose palliative care or hospice. 8 While the TOI PCs treat patients under both value-based and FFS contracts, our affiliated providers’ approach to care focuses on achieving the best outcomes at the lowest cost, regardless of the reimbursement methodology.
While the TOI PCs treat patients under both value-based and FFS contracts, our affiliated providers’ approach to care focuses on achieving the best outcomes at the lowest cost, regardless of the reimbursement methodology. We have developed a High Value Cancer Care, or HVCC, program, in which patients are able to access targeted care resources that augment and support their treatment.
We invest in nurse practitioners to help with advanced care planning and palliative care discussions with patients.
We invest in nurse practitioners to help with advanced care planning and palliative care discussions with patients. We give patients the education and tools to make their own decisions about when the right time is to choose palliative care or hospice.
Our community-based oncology practices are staffed with 130 oncologists and advanced practice providers. 69 of these clinics are staffed with 119 providers employed by our affiliated physician-owned professional corporations, referred to as the "TOI PCs", which provided care for more than 72,000 patients in 2023 and managed a population of approximately 1.8 million patients under value-based agreements as of December 31, 2023.
Through this network, TOI provided care for more than 72,000 patients in 2024 and managed a population of approximately 1.9 million patients under value-based agreements as of December 31, 2024.
As a value-based oncology company, we seek to deliver better quality care while managing costs for patients and payors that we serve.
Revenue in our clinical trials business is billed to pharmaceutical companies or the contract research organizations engaged by pharmaceutical companies to administer their trials, and paid in arrears based on which individual medical procedures were performed on enrolled patients during the course of the trial. 7 Our Mission As a value-based oncology company, we seek to deliver better quality care while managing costs for patients and payors that we serve.
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Item 1. Business Overview The Oncology Institute, Inc. ("TOI", the "Company", "we", or "our) is a leading value-based oncology company that manages community-based oncology practices which serve patients at 83 clinic locations across 15 markets and five states throughout the United States.
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Item 1. Business Overview Formed in 2007, the business of what is now The Oncology Institute, Inc.
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We also provide management services to 14 clinic locations owned by independent oncology practices. Our mission is to heal and empower cancer patients through compassion, innovation, and state-of-the-art medical care. Our managed clinics provide a range of medical oncology services, including physician services, in-house infusion and dispensary, radiation, innovative programs like outpatient blood product transfusions, along with 24/7 patient support.
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("TOI", the "Company", "we", or "our) and its affiliated professional corporations was created initially as a collection of community oncology practices in southern California, and has evolved to be a national leader in the pursuit of reducing the ever-rising cost of oncology care, while embracing clinical best practices, state-of-the-art technology, and compassionate treatment of patients.
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As scientific research progresses and more treatment options become available, cancer care is shifting from acute care episodes to chronic disease management. With this shift, it is increasingly important for high-quality, high-value cancer care to be available in a local community setting to all patients in need.
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While we continue our original purpose of seeing our patients on a fee-for-service basis for their oncology, hematology, specialty infusion, oral pharmacy needs, as well as enrolling patients in clinical trials, where appropriate, TOI's true mission lies in our differentiated ability to partner with managed care providers and other risk-bearing entities to transfer the risk and patient coordination responsibility of treating cancer in the subset of the population that is experiencing an oncology treatment episode.
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We have developed a High Value Cancer Care, or HVCC, program, in which patients are able to access targeted care resources that augment and support their treatment. Our treatment regimens are based on algorithms established by the National Comprehensive Cancer Network (“NCCN”) and are evidence-based.
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To do this, we utilize a combination of gain/loss sharing, capitation, and full delegation contracts at the population-level, which allow TOI to control the treatment of oncology patients in an outpatient setting, across both medical oncology (traditional IV-based infusion therapy) and radiation oncology (radiation therapy provided by linear accelerator equipment).
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As of a recent patient survey in 2022, 88% of our oncologists and 90% of our locations were rated 4.0 or above as measured by our survey, which we distribute to patients via text or e-mail following their clinic visit.
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TOI treats patients across 16 markets and 5 states throughout the United States, via our 72 clinics owned by affiliated physicians and staffed with 130 providers (the "TOI PCs"), 14 independently-owned clinics which are contracted with TOI's managed services organization and staffed with 11 providers, as well as our contracted network of independent clinics unaffiliated with TOI in instances where TOI is the fully delegated market manager under a value-based contract.
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Growth Strategy and Opportunities To date, revenue has grown at a roughly 26% CAGR from 2016 to 2023, driven by robust growth in capitated lives under value-based contracts.
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(1) Based on study conducted by the American Society of Clinical Oncology and published in the Journal of Oncology Practice in September 2019 titled “Lay Health Worker-Led Cancer Symptom Screening Intervention and the Effect on Patient-Reported Satisfaction, Health Status, Health Care Use, and Total Costs: Results from a Tri-Party Collaboration” Our Business Lines Patient Services Fee for Service TOI provides medical care on a fee-for service basis for physician services, in-house infusion, radiation, and innovative programs like outpatient blood product transfusions, along with 24/7 patient support.
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The services TOI provides in its fee for service business are generally covered under commercial and government managed care programs, which are billed retrospectively for care provided in clinics, following a typically small patient co-pay collected at the time of service. We customarily bill for physician and infusion services on a CPT-code basis, and for drugs on a cost-plus basis.
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We are generally reliant on outside referrals of these fee-for-service patients, who may be in the care of a primary care provider, non-oncology specialist physician, or hospitalist, who then refers the patient upon diagnosis to an oncology provider within TOI.
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We generate these referrals based on the reputation of our doctors and our platform within the communities we serve, as well as our active and direct referrer education efforts.
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Value-based 6 TOI offers value-based contracts to payors, including managed care organizations and other risk-bearing entities, who are interested in transferring both the risk and responsibility for managing outpatient oncology care to us.
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These arrangements can take multiple different forms, but typically involve a population-level assignment, where TOI receives 100% share of a patient population and is paid either a fixed amount per member on a regular (typically monthly) schedule, or is paid/recouped a portion of gains/losses at the end of a measurement period.
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In this way, TOI receives a predictable, recurring payment for oncology care, and generates a profit to the extent the actual cost of oncology care for our contracted patient populations is less than this fixed payment.
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Generally, we are able to offer fixed payments to payors that represent a discount to the historical oncology cost for these patient populations, while still generating positive profitability for TOI.
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We do this through active management of clinical pathways and drug formulary, incorporating best clinical practices and recognized quality metrics, using both our affiliated and MSO clinics, as well as negotiating network contracts with third-party providers.
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TOI's decade-plus of experience efficiently managing oncology populations, intensive clinical interventions, and comprehensive knowledge of therapeutic options across both pharmaceuticals and radiation therapy positions us to effectively manage these contracts in a way that adds value to both our payor partners and patients.
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Dispensary TOI operates specialty and retail pharmacies in all 5 states through which we are capable of filling medication orders that are incidental or coincidental to our patients' oncology care.
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Often patients undergoing outpatient oncology treatment are receiving a combination of IV-infused, oral, and injectable medications, for oncology treatment as well as other co-occurring conditions, making our populations particularly relevant for pharmacy services on therapeutics that are not provider-administered within the clinic and therefore would typically fall outside of our traditional Patient Services fee for service business.
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Because of the relationship derived from the repeated visits and close consultation that occurs during treatment for an active oncology episode, our patients develop a relationship to providers in the TOI clinics, as well as a cadence of regular visits.
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This provides TOI a complementary opportunity to service these patients by ordering and filling oral, IV, and injectable medications that the patients frequently self-administer or have administered inside or outside of TOI's clinics. For these medications, we are typically billing patients pharmacy benefit managers, which are generally incorporated within patients' managed care plans, whether commercial or government.
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Pharmacy claims are generally billed at the time medication is ordered, along with a customary patient co-pay, which TOI seeks to collect at the time of pickup. Reimbursement for the pharmacy is generally calculated using a wholesale acquisition cost, or WAC-minus basis, which is on average a higher rate than TOI is able to procure the medication from its vendors.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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In addition, the Facility Agreement restricts our and the guarantors’ ability to, among other things, (i) merge, consolidate, dissolve or liquidate into or convey, transfer, lease or dispose of all or substantially all of its assets (other than into another Loan Party or if the Company determines in good faith in the best interest of a subsidiary and not materially disadvantageous), (ii) create or incur any lien on our assets beyond those outstanding on the date of the Facility Agreement and certain other permitted liens, (iii) dispose of any assets or property or issue, transfer, or provide a controlling, management, or other interest in certain securities of the Company or its guarantors, (iv) incur any indebtedness not to exceed $1,000,000 or as otherwise permitted, (v) 43 make any investments other than as otherwise permitted, (vi) amend our organizational documents or any material agreements in a manner that would reasonably be expected to be materially adverse to the rights of the lenders or (vii) change our reporting practices or fiscal year, in each case, subject to exceptions set forth in the Facility Agreement.
In addition, the Facility Agreement restricts our and the guarantors’ ability to, among other things, (i) merge, consolidate, dissolve or liquidate into or convey, transfer, lease or dispose of all or substantially all of its assets (other than into another Loan Party or if the Company determines in good faith in the best interest of a subsidiary and not materially disadvantageous), (ii) create or incur any lien on our assets beyond those outstanding on the date of the Facility Agreement and certain other permitted liens, (iii) dispose of any assets or property or issue, transfer, or provide a controlling, management, or other interest in certain securities of the Company or its guarantors, (iv) incur any indebtedness not to exceed $1,000,000 or as otherwise permitted, (v) make any investments other than as otherwise permitted, (vi) amend our organizational documents or any material agreements in a manner that would reasonably be expected to be materially adverse to the rights of the lenders or (vii) change our reporting practices or fiscal year, in each case, subject to exceptions set forth in the Facility Agreement.
Our failure to adequately compete could adversely affect our business . • Competition for physicians and clinical personnel, including nurses, shortages of qualified personnel or other factors could increase our labor costs and adversely affect our revenue, growth rate, profitability and cash flows. • Because competition for qualified personnel is intense, we may not be able to attract and retain the highly skilled employees we need to execute our business strategies and growth plans. • If we are unable to provide consistently high quality of care, o ur business will be adversely impacted. • If certain of our suppliers do not meet our needs, if there are material price increases on supplies, if we are not reimbursed or adequately reimbursed for drugs we purcha se or if we are unable to effectively access new technology or superior products, it could negatively impact our ability to effectively provide the services we offer and could have a material adverse effect on our business, results of operations, financial condition and cash flows. 17 • We depend on our information technology systems, and those of our third-party vendors, contractors and consultants, and any failure or significant disruptions of these systems, security breaches or loss of data could materially adversely affect our business, financial condition and results of operations. • We may be subject to legal proceedings and litig ation, including intellectual property and privacy disputes, which are costly to defend and could materially harm our business and results of operations. • Some jurisdictions preclude the TOI PCs from e ntering into non-compete agreements with our physicians, and other non-compete agreements and restrictive covenants applicable to certain physicians and other clinical employees may not be enforceable. • Current and future acquisitions may use significant resources, may be unsuccessful, and could expose us to unforeseen liabilities. • We conduct some clinical trials in contract with TOI Clinical Research, LLC ("TCR") .
Our failure to adequately compete could adversely affect our business . • Competition for physicians and clinical personnel, including nurses, shortages of qualified personnel or other factors could increase our labor costs and adversely affect our revenue, growth rate, profitability and cash flows. • Because competition for qualified personnel is intense, we may not be able to attract and retain the highly skilled employees we need to execute our business strategies and growth plans. • If we are unable to provide consistently high quality of care, o ur business will be adversely impacted. • If certain of our suppliers do not meet our needs, if there are material price increases on supplies, if we are not reimbursed or adequately reimbursed for drugs we purcha se or if we are unable to effectively access new technology or superior products, it could negatively impact our ability to effectively provide the services we offer and could have a material adverse effect on our business, results of operations, financial condition and cash flows. 18 • We depend on our information technology systems, and those of our third-party vendors, contractors and consultants, and any failure or significant disruptions of these systems, security breaches or loss of data could materially adversely affect our business, financial condition and results of operations. • We may be subject to legal proceedings and litig ation, including intellectual property and privacy disputes, which are costly to defend and could materially harm our business and results of operations. • Some jurisdictions preclude the TOI PCs from e ntering into non-compete agreements with our physicians, and other non-compete agreements and restrictive covenants applicable to certain physicians and other clinical employees may not be enforceable. • Current and future acquisitions may use significant resources, may be unsuccessful, and could expose us to unforeseen liabilities. • We conduct some clinical trials in contract with TOI Clinical Research, LLC ("TCR") .
An adverse inspection, review, audit or investigation could result in: • refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from payors; • state or federal agencies imposing fines, penalties and other sanctions on us; • temporary suspension of payment for new patients to the facility or agency; • decertification or exclusion from participation in the Medicare or Medicaid programs or one or more payor networks; • self-disclosure of violations to applicable regulatory authorities; • damage to our reputation; • the revocation of a facility’s or agency’s license; and • loss of certain rights under, or termination of, our contracts with payors.
An adverse inspection, review, audit or investigation could result in: • refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from payors; • state or federal agencies imposing fines, penalties and other sanctions on us; 33 • temporary suspension of payment for new patients to the facility or agency; • decertification or exclusion from participation in the Medicare or Medicaid programs or one or more payor networks; • self-disclosure of violations to applicable regulatory authorities; • damage to our reputation; • the revocation of a facility’s or agency’s license; and • loss of certain rights under, or termination of, our contracts with payors.
Negative publicity regarding the managed healthcare industry generally, or the MA program in particular, may result in increased regulation and legislative review of industry practices that further increase our costs of doing business and adversely affect our results of operations or business by: • requiring us to change our products and services; • increasing the regulatory, including compliance, burdens under which we operate, which, in turn, may negatively impact the manner in which the TOI PCs provide services and increase our costs of providing services; 31 • adversely affecting our ability to market the TOI PCs products or services through the imposition of further regulatory restrictions regarding the manner in which plans and providers market to MA enrollees; or • adversely affecting our ability to attract and retain patients.
Negative publicity regarding the managed healthcare industry generally, or the MA program in particular, may result in increased regulation and legislative review of industry practices that further increase our costs of doing business and adversely affect our results of operations or business by: • requiring us to change our products and services; • increasing the regulatory, including compliance, burdens under which we operate, which, in turn, may negatively impact the manner in which the TOI PCs provide services and increase our costs of providing services; • adversely affecting our ability to market the TOI PCs products or services through the imposition of further regulatory restrictions regarding the manner in which plans and providers market to MA enrollees; or • adversely affecting our ability to attract and retain patients.
If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our patients and care teams and hinder our ability to provide services, establish appropriate pricing for services, 28 retain and attract patients, manage our patient risk profiles, establish reserves, report financial results timely and accurately and maintain regulatory compliance, among other things.
If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our patients and care teams and hinder our ability to provide services, establish appropriate pricing for services, retain and attract patients, manage our patient risk profiles, establish reserves, report financial results timely and accurately and maintain regulatory compliance, among other things.
Further, because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of the business activities undertaken by us or the TOI PCs could be subject to challenge under one or more of these laws, including, without limitation, our patient assistance programs that waive or reduce the patient’s obligation to pay copayments, coinsurance or deductible amounts owed for the services we 34 provide to them if they meet certain financial need criteria.
Further, because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of the business activities undertaken by us or the TOI PCs could be subject to challenge under one or more of these laws, including, without limitation, our patient assistance programs that waive or reduce the patient’s obligation to pay copayments, coinsurance or deductible amounts owed for the services we provide to them if they meet certain financial need criteria.
Furthermore, under the Facility Agreement, we are required to, among other things, (i) remain a reporting company and maintain the listing of our common shares on an eligible market, (ii) provide the lenders with information regarding any event of default or the occurrence of any material adverse event and (iii) publicly disclose material, nonpublic information that is provided to the lenders without their prior written consent.
Furthermore, under the Facility Agreement, we are required to, among other things, (i) remain a reporting company and maintain the listing of our common shares on an eligible market, (ii) provide the lenders with information 44 regarding any event of default or the occurrence of any material adverse event and (iii) publicly disclose material, nonpublic information that is provided to the lenders without their prior written consent.
If medical costs and expenses exceed estimates, except in very limited circumstances, the TOI PCs will not be able to increase the fee received under these risk agreements during their then-current terms and we could suffer losses with respect to such agreements. Changes in our anticipated ratio of medical expense to revenue can significantly impact our financial results.
If medical costs and expenses exceed estimates, except in very limited circumstances, the TOI PCs will not be able to increase the fee received under these risk agreements during their then-current terms and we could suffer losses with respect to such agreements. 22 Changes in our anticipated ratio of medical expense to revenue can significantly impact our financial results.
These claims, with or without merit, could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management and our affiliated providers from our core business, harm our reputation and adversely affect the TOI PCs’ ability to attract and retain patients, any of which could have a material adverse effect on our business, financial condition and results of operations.
These claims, with or without merit, could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the 30 attention of management and our affiliated providers from our core business, harm our reputation and adversely affect the TOI PCs’ ability to attract and retain patients, any of which could have a material adverse effect on our business, financial condition and results of operations.
Of particular importance are: • the federal Anti-Kickback Statute, or AKS, which prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or 33 leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid.
Of particular importance are: • the federal Anti-Kickback Statute, or AKS, which prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid.
You should read this summary together with the full and complete discussion of risk factors contained below: • Our growth strategy depends on our ability to build or acquire clinics to service our contracts and treat our patients. • We have experienced, and may continue to experience, rapid growth and organizational change, which has placed, and may continue to place, significant demands on our management and o ur operational and financial resources. • We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve or maintain profitability. • A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the current COVID-19 epidemic, could adversely affect our business. • Our services are concentrated in certain geographic areas and popula tions exposing us to unfavorable changes in local benefit costs, reimbursement rates, competition and economic conditions. • If we are unable to attract new patients, our revenue growth will be ad versely affected. • We primarily depend on reimbursement from third-party payors, as well as payments by individuals, which could lead to delays, denials, or uncertainties in the reimbursement process. • With many of our value-based agreements, our consolidating professional corporations ("TOI PCs") assume the risk that the cost of providing services will exceed our compensation.
You should read this summary together with the full and complete discussion of risk factors contained below: • Our growth strategy depends on our ability to build or acquire clinics to service our contracts and treat our patients. • We have experienced, and may continue to experience, rapid growth and organizational change, which has placed, and may continue to place, significant demands on our management and o ur operational and financial resources. • We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve or maintain profitability. • A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the re-emergence of the COVID-19 pandemic, could adversely affect our business. • Our services are concentrated in certain geographic areas and popula tions exposing us to unfavorable changes in local benefit costs, reimbursement rates, competition and economic conditions. • If we are unable to attract new patients, our revenue growth will be ad versely affected. • We primarily depend on reimbursement from third-party payors, as well as payments by individuals, which could lead to delays, denials, or uncertainties in the reimbursement process. • With many of our value-based agreements, our consolidating professional corporations ("TOI PCs") assume the risk that the cost of providing services will exceed our compensation.
Our ability to grow organically depends upon a number of factors, including our affiliated providers obtaining referrals for cancer patient care services, the TOI PCs entering into contracts with additional payors, identifying appropriate facilities, obtaining leases, completing internal build-outs of new facilities within proposed timelines and budgets and hiring care teams and other employees.
Our ability to grow organically depends upon a number of factors, including our affiliated providers obtaining referrals for cancer patient care services, the TOI PCs entering into contracts with additional payors, identifying appropriate facilities, obtaining leases, completing internal build-outs of new facilities within proposed timelines and budgets and hiring care teams and other 19 employees.
In 23 addition, PBMs could at any time change their contracting and/or credentialing requirements, the effect of which could prohibit the TOI PCs from billing for prescription drugs dispensed by the TOI PCs. If such changes, individually or in the aggregate, are material, they would have an adverse effect on our business, results of operations and financial condition.
In addition, PBMs could at any time change their contracting and/or credentialing requirements, the effect of which could prohibit the TOI PCs from billing for prescription drugs dispensed by the TOI PCs. If such changes, individually or in the aggregate, are material, they would have an adverse effect on our business, results of operations and financial condition.
Individual physicians, physician groups and companies in other healthcare industry segments, including those with which the TOI PCs have contracts, and some of which have greater financial, marketing and staffing resources, may become competitors in providing health care services, and this competition may have a material adverse effect on our business operations and financial position.
Individual physicians, physician groups and companies in other healthcare industry segments, including those with 27 which the TOI PCs have contracts, and some of which have greater financial, marketing and staffing resources, may become competitors in providing health care services, and this competition may have a material adverse effect on our business operations and financial position.
The Medicare program and its reimbursement rates and rules are subject to frequent change. These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates at which Medicare reimburses the TOI PCs for patient care services.
The Medicare program and its reimbursement rates and rules are subject to frequent change. These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government 24 funding restrictions, all of which may materially adversely affect the rates at which Medicare reimburses the TOI PCs for patient care services.
By way of example, the ACA, which was enacted in 2010, made major changes in how healthcare is delivered and reimbursed, and it increased access to health insurance benefits to the uninsured and underinsured populations of the United States. Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.
By way of example, the ACA, which was 25 enacted in 2010, made major changes in how healthcare is delivered and reimbursed, and it increased access to health insurance benefits to the uninsured and underinsured populations of the United States. Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.
We rely, in part, on non-disclosure, confidentiality and assignment-of-invention agreements with our employees, independent contractors, consultants and companies with which we conduct business to protect our internally developed information. These agreements may not be self-executing, or they may be breached and we may not have adequate remedies for such breach.
We rely, in part, on non-disclosure, confidentiality and assignment-of-invention agreements with our employees, independent contractors, consultants and companies with which we conduct business to protect our internally 31 developed information. These agreements may not be self-executing, or they may be breached and we may not have adequate remedies for such breach.
Because the interpretation and application of laws, standards, contractual and other obligations relating to privacy and data protection are still uncertain and changing, it is possible that these laws, standards, contractual and other obligations may be interpreted and applied in a manner that is inconsistent with our data management practices, our privacy, data protection or data security policies or procedures or the features of our technology.
Because the interpretation and application of laws, standards, contractual and other obligations relating to privacy and data protection are still uncertain and changing, it is possible that these laws, standards, contractual and other obligations may be interpreted and applied in a manner that is inconsistent with our data management practices, our 37 privacy, data protection or data security policies or procedures or the features of our technology.
As a result, we have incurred and will continue to incur increased legal, accounting and other expenses that Legacy TOI did not previously incur. Our entire management team and many of our other employees have devoted and will continue to devote substantial time to compliance and may not effectively or efficiently manage our transition into a public company.
As a result, we have incurred and will continue to incur increased legal, accounting and other expenses that Legacy TOI did not previously 43 incur. Our entire management team and many of our other employees have devoted and will continue to devote substantial time to compliance and may not effectively or efficiently manage our transition into a public company.
It is 21 unclear which, if any, of these changes will remain in place permanently and which will be rolled-back. If regulations change to restrict the TOI PCs’ or our affiliated providers ability to deliver care through telehealth modalities, our financial condition and results of operations may be adversely affected.
It is unclear which, if any, of these changes will remain in place permanently and which will be rolled-back. If regulations change to restrict the TOI PCs’ or our affiliated providers ability to deliver care through telehealth modalities, our financial condition and results of operations may be adversely affected.
Risks Related to Our Regulatory Environment We are dependent on our relationships with the TOI PCs, which are affiliated professional entities that we do not own, to provide healthcare services, and our business would be harmed if those relationships were disrupted or if our arrangements with the TOI PCs become subject to legal challenges.
Risks Related to Our Regulatory Environment 32 We are dependent on our relationships with the TOI PCs, which are affiliated professional entities that we do not own, to provide healthcare services, and our business would be harmed if those relationships were disrupted or if our arrangements with the TOI PCs become subject to legal challenges.
Although, we are confident that this recent cyberattack will not have a material adverse impact, similar cybersecurity breaches could be successfully launched in the future, and there is no assurance that such attacks will not have material adverse effect on our results of operations and cash flows.
Although, we are confident that this recent cyberattack did not have a material adverse impact, similar cybersecurity breaches could be successfully launched in the future, and there is no assurance that such attacks will not have material adverse effect on our results of operations and cash flows.
In 2022 37 and 2023, we completed an ownership change analysis pursuant to IRC Section 382 of the Code for the period from September 10, 2018 through taxable year ended December 31, 2021 and from January 1, 2022 through taxable year ended December 31, 2022 in which we determined that the Company did not experience an ownership change.
In 2022 and 2023, we completed an ownership change analysis pursuant to IRC Section 382 of the Code for the period from September 10, 2018 through taxable year ended December 31, 2021 and from January 1, 2022 through taxable year ended December 31, 2023 in which we determined that the Company did not experience an ownership change.
There are many potential bases for liability under the FCA. The government has used the FCA to prosecute Medicare and other government healthcare program fraud such as coding errors, billing for services not provided, and providing care that is not medically necessary or that is substandard in quality.
There are many potential bases for liability under the FCA. The government has used the FCA to prosecute Medicare and other government healthcare program fraud such as coding errors, billing for services not provided, and providing care that is not medically necessary or that is 34 substandard in quality.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of 40 certain accounting standards until those standards would otherwise apply to private companies.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
Our Common Stock and Warrants may be delisted if we fail to comply with the requirements for continued listing on The Nasdaq Stock Market LLC (“Nasdaq”), and if our securities were delisted, the price of our Common Stock and Warrants, our ability to access the capital markets and our ability to comply with the covenants in our Facility Agreement could be negatively impacted.
Our Common Stock and Warrants may be delisted if we fail to comply with the requirements for continued listing on The Nasdaq Stock Market LLC (“Nasdaq”), and if our securities were delisted, the price of our Common Stock and 41 Warrants, our ability to access the capital markets and our ability to comply with the covenants in our Facility Agreement could be negatively impacted.
As noted above, our certificate of incorporation and our bylaws provide that the federal district courts of the United States shall have jurisdiction 41 over any action arising under the Securities Act. Accordingly, there is uncertainty as to whether a court would enforce such provision.
As noted above, our certificate of incorporation and our bylaws provide that the federal district courts of the United States shall have jurisdiction over any action arising under the Securities Act. Accordingly, there is uncertainty as to whether a court would enforce such provision.
Revenues associated with Medicare and Medicaid programs are also subject to estimating risk related to the amounts not paid by the primary government payor that will ultimately be 22 collectible from other government programs paying secondary coverage, the patient’s commercial health plan secondary coverage or the patient.
Revenues associated with Medicare and Medicaid programs are also subject to estimating risk related to the amounts not paid by the primary government payor that will ultimately be collectible from other government programs paying secondary coverage, the patient’s commercial health plan secondary coverage or the patient.
If we are unable to successfully address these risks 19 and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected. Our failure to achieve or maintain profitability could negatively impact the value of our Common Stock.
If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected. Our failure to achieve or maintain profitability could negatively impact the value of our Common Stock.
Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. The market price of our Common Stock may be volatile or may decline regardless of our operating performance. You may lose some or all of your investment.
Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. 42 The market price of our Common Stock may be volatile or may decline regardless of our operating performance. You may lose some or all of your investment.
Any of these events could materially and adversely affect our business, financial condition and results of operations. 44 The terms of the Senior Secured Convertible Note may have a negative impact on our business and the value of our securities and may result in substantial dilution to our other equity securityholders.
Any of these events could materially and adversely affect our business, financial condition and results of operations. The terms of the Senior Secured Convertible Note may have a negative impact on our business and the value of our securities and may result in substantial dilution to our other equity securityholders.
To the extent that such changes have a negative impact on us, they may materially and adversely impact its business, financial condition, results of operations and cash flows. Risks Related to Our Financial Condition Goodwill and other intangible assets represent a significant portion of our total assets.
To the extent that such changes have a negative impact on us, they may materially and adversely impact its business, financial condition, results of operations and cash flows. Risks Related to Our Financial Condition Goodwill and other intangible assets represent a portion of our total assets.
Our failure to take any steps perceived by the FTC as 36 appropriate to protect consumers’ personal information may result in claims by the FTC that we have engaged in unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act.
Our failure to take any steps perceived by the FTC as appropriate to protect consumers’ personal information may result in claims by the FTC that we have engaged in unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act.
Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Certain of these matters may include speculative claims for substantial or indeterminate amounts of damages and include claims 29 for injunctive relief. Additionally, our litigation costs could be significant.
Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Certain of these matters may include speculative claims for substantial or indeterminate amounts of damages and include claims for injunctive relief. Additionally, our litigation costs could be significant.
As such, we may not be successful in continuing to attract and retain qualified personnel. 27 Our recruiting efforts may also be limited by laws and regulations, such as restrictive immigration laws, and restrictions on travel or availability of visas.
As such, we may not be successful in continuing to attract and retain qualified personnel. Our recruiting efforts may also be limited by laws and regulations, such as restrictive immigration laws, and restrictions on travel or availability of visas.
There are many other companies and individuals currently providing healthcare services, many of which have been in business 26 longer and/or have substantially more resources. Other companies could enter the healthcare industry in the future and divert some or all of our business.
There are many other companies and individuals currently providing healthcare services, many of which have been in business longer and/or have substantially more resources. Other companies could enter the healthcare industry in the future and divert some or all of our business.
Such consolidation for accounting and/or tax purposes does not, is not intended to, and should not be deemed to, imply or 32 provide us any control over the medical or clinical affairs of the TOI PCs.
Such consolidation for accounting and/or tax purposes does not, is not intended to, and should not be deemed to, imply or provide us any control over the medical or clinical affairs of the TOI PCs.
Future sales, or the perception of future sales, of our Common Stock and Warrants by us or our existing securityholders in the public market could cause the market price for our Common Stock and Warrants to decline. 39 Our Common Stock and Warrants are traded on The Nasdaq Capital Market.
Future sales, or the perception of future sales, of our Common Stock and Warrants by us or our existing securityholders in the public market could cause the market price for our Common Stock and Warrants to decline. Our Common Stock and Warrants are traded on The Nasdaq Capital Market.
In addition, during the 24 COVID-19 public health emergency, DHCS delayed the processing of Medi-Cal annual redeterminations and delayed discontinuances and negative actions for Medi-Cal and other state and county healthcare programs.
In addition, during the COVID-19 public health emergency, DHCS delayed the processing of Medi-Cal annual redeterminations and delayed discontinuances and negative actions for Medi-Cal and other state and county healthcare programs.
In addition, some of these new models are being offered as pilot programs and there is no assurance that they will continue or be renewed.
In addition, some of these new models 26 are being offered as pilot programs and there is no assurance that they will continue or be renewed.
Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Goodwill is not amortized and is tested for impairment at least annually or whenever 39 events or changes in circumstances indicate that the carrying value may not be recoverable.
If any of these suppliers do not meet the TOI PCs’ needs for the products they supply, including in the event of a product recall, shortage or dispute, and we are not able to find adequate alternative sources, if we experience material price increases from these suppliers that we are unable to mitigate, or if some of the drugs that the TOI PCs purchase are not reimbursed or not adequately reimbursed by commercial or government payors, it could have a material adverse impact on our business, results of operations, financial condition and cash flows.
If our suppliers terminate the relationship or do not meet the TOI PCs’ needs for the products they supply, including in the event of a product recall, shortage or dispute, and we are not able to find adequate alternative sources, if we experience material price increases from these suppliers that we are unable to mitigate, or if some of the drugs that the TOI PCs purchase are not reimbursed or not adequately reimbursed by commercial or government payors, it could have a material adverse impact on our business, results of operations, financial condition and cash flows.
If our growth rate were to decline significantly or become negative, it could adversely affect our financial condition and results of operations.
If our growth rate were to decline 20 significantly or become negative, it could adversely affect our financial condition and results of operations.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our 16 business. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially adversely affected.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our 17 business. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially adversely affected.
Additionally, the Convertible Note is guaranteed by certain of our subsidiaries, effectively providing for claims against such subsidiaries which are structurally senior to our other equity securityholders generally. The Senior Secured Convertible Note is convertible into common stock, subject to certain terms and conditions, which may result in dilution to our other equity securityholders. Item 1B.
Additionally, the Convertible Note is guaranteed by certain of our subsidiaries, effectively providing for claims against such subsidiaries which are structurally senior to our other equity securityholders generally. The Senior Secured Convertible Note is convertible into common stock, subject to certain terms and conditions, which may result in dilution to our other equity securityholders.
Other states are reluctant to strictly enforce non-compete agreements and restrictive covenants applicable to physicians and other healthcare professionals. Additionally, the Federal Trade Commission recently proposed new rules which, if enacted, would ban non-compete agreements in employee contracts.
Other states are reluctant to strictly enforce non-compete agreements and restrictive covenants applicable to physicians and other healthcare professionals. Additionally, the Federal Trade Commission recently proposed new rules which, if enforced, would ban non-compete agreements in employee contracts.
To the extent the COVID-19 pandemic, or another pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, adversely affects our business and financial results, it may also have the effect of heightening many 20 of the other risks described in this “Risk Factors” section, including but not limited to those relating to cyberattacks and security vulnerabilities, interruptions or delays due to third-parties, or our ability to raise additional capital or generate sufficient cash flows necessary to fulfill our obligations under our existing indebtedness or to expand our operations.
To the extent any pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including but not limited to those relating to cyberattacks and security vulnerabilities, interruptions or delays due to third-parties, or our ability to raise additional capital or generate sufficient cash flows necessary to fulfill our obligations under our existing indebtedness or to expand our operations.
Because of our business model, the full impact of the ongoing COVID-19 or other pandemic outbreaks may not be fully reflected in our results of operations and overall financial condition until future periods. It is not currently possible to reliably project the direct impact of the COVID-19 pandemic on our operating revenues and expenses.
Because of our business model, the full impact of pandemic outbreaks may not be fully reflected in our results of operations and overall financial condition until future periods. It is not currently possible to reliably project the direct impact of the COVID-19 pandemic on our operating revenues and expenses.
As of December 31, 2023, the vast majority of the TOI PC members under capitation agreements were residents of California. In addition, during 2023, approximately 85% of our revenues were generated in California.
As of December 31, 2024, the vast majority of the TOI PC members under capitation agreements were residents of California. In addition, during 2024, approximately 85% of our revenues were generated in California.
In 2023, the KFF reported that two payors together accounted for nearly half of Medicare Advantage enrollment and seven firms accounted for nearly 85% of covered lives.
In 2024, the KFF reported that two payors together accounted for nearly half of Medicare Advantage enrollment and seven firms accounted for nearly 85% of covered lives.
Reductions in government reimbursement rates or changes in the rules governing government healthcare programs could have a material adverse effect on our financial condition and results of operations. The TOI PCs receive a significant portion of revenue directly from Medicare, which accounted for approximately 14% of our Patient Services revenue in 2023.
Reductions in government reimbursement rates or changes in the rules governing government healthcare programs could have a material adverse effect on our financial condition and results of operations. The TOI PCs receive a significant portion of revenue directly from Medicare, which accounted for approximately 16% of our Patient Services revenue in 2024.
Compliance with such covenants and our indebtedness will result in the following, which could materially and adversely affect our business, financial condition and results of operations: • require us to dedicate a substantial portion of cash and cash equivalents to the payment of interest on, and principal of, the indebtedness, which will reduce the amounts available to fund working capital, capital expenditures, product development efforts and other general corporate purposes; • oblige us to comply with negative covenants restricting our activities, including limitations on dispositions, mergers or acquisitions, encumbering our intellectual property, incurring indebtedness or liens, paying dividends, making investments and engaging in certain other business transactions; • limit our flexibility in planning for, or reacting to, changes in our business and our industry; • place us at a competitive disadvantage compared to our competitors who have less debt or competitors with comparable debt at more favorable interest rates; and • limit our ability to borrow additional amounts for working capital, capital expenditures, research and development efforts, acquisitions, debt service requirements, execution of our business strategy and other purposes and otherwise restrict our financing options.
Compliance with such covenants and our indebtedness will result in the following, which could materially and adversely affect our business, financial condition and results of operations: • require us to dedicate a substantial portion of cash and cash equivalents to the payment of interest on, and principal of, the indebtedness, which will reduce the amounts available to fund working capital, capital expenditures, product development efforts and other general corporate purposes and require us to pay a make-whole amount, exit fee, and issue warrants to the lenders if the debt is prepaid; • oblige us to comply with negative covenants restricting our activities, including limitations on dispositions, mergers or acquisitions, encumbering our intellectual property, incurring indebtedness or liens, paying dividends, making investments and engaging in certain other business transactions; • limit our flexibility in planning for, or reacting to, changes in our business and our industry; • place us at a competitive disadvantage compared to our competitors who have less debt or competitors with comparable debt at more favorable interest rates; and • limit our ability to borrow additional amounts for working capital, capital expenditures, research and development efforts, acquisitions, debt service requirements, execution of our business strategy and other purposes and otherwise restrict our financing options.
Managing legal proceedings, litigation and audits, even if we achieve favorable outcomes, is time-consuming and diverts the attention of management and our affiliated providers from our business. The results of regulatory proceedings, litigation, claims, and audits cannot be predicted with certainty, and determining reserves for pending litigation and other legal, regulatory and audit matters requires significant judgment.
Managing legal proceedings, litigation and audits, even if we achieve favorable outcomes, is time-consuming and diverts the attention of management and our affiliated providers from our business. The results of regulatory proceedings, litigation, claims, audits, and investigations cannot be predicted with certainty, and determining reserves for pending litigation and legal, regulatory, audit or other matters may require significant judgment.
A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the COVID-19 pandemic, could adversely affect our business. A pandemic, epidemic or outbreak of an infectious disease, including the current COVID-19 pandemic, that occurs in the United States or worldwide, may adversely affect our business.
A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the re-emergence of the COVID-19 pandemic, could adversely affect our business. A pandemic, epidemic or outbreak of an infectious disease, including the re-emergence of the COVID-19 pandemic, that occurs in the United States or worldwide, may adversely affect our business.
Although Medicare Advantage enrollment has increased significantly over the past decade, there can be no assurance that this trend will continue. Further, fluctuation in Medicare Advantage payment rates are evidenced by CMS’s annual announcement of the expected average change in revenue from the prior year: for 2023, CMS announced an average increase of 4.88%; and for 2024, 2.28%.
Although Medicare Advantage enrollment has increased significantly over the past decade, there can be no assurance that this trend will continue. Further, fluctuation in Medicare Advantage payment rates are evidenced by CMS’s annual announcement of the expected average change in revenue from the prior year: for 2024, CMS announced an average increase of 2.28%; and for 2025, 3.70%.
Goodwill impairment charges of $16,867 and $9,944 were recorded during the years ended December 31, 2023 and 2022, respectively, based on management's evaluation of the value of goodwill. It is not possible at this time, under current market conditions, to determine if there will be any future impairment charge, or if there is, whether such charges would be material.
Goodwill impairment charges of $0 and $16,867,000 were recorded during the years ended December 31, 2024 and 2023, respectively, based on management's evaluation of the value of goodwill. It is not possible at this time, under current market conditions, to determine if there will be any future impairment charge, or if there is, whether such charges would be material.
The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal control over financial reporting.
We are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal control over financial reporting.
Under a fee-for-service payor arrangement, the TOI PCs collect fees directly from the payor as services are provided. Our Patient Services revenue accounted for approximately 66% of total revenue for the year ended December 31, 2023.
Under a fee-for-service payor arrangement, the TOI PCs collect fees directly from the payor as services are provided. Our Patient Services revenue accounted for approximately 52% of total revenue for the year ended December 31, 2024.
As of December 31, 2023, we have 6,008,329 shares available for issuance under the 2021 Plan, which amount will automatically increase on January 1 of each successive year through and including January 1, 2031 in amount equal to 4% of the fully diluted shares outstanding as of the preceding December 31 or such lesser amount as is determined by the Board.
As of December 31, 2024, we have 6,590,321 shares available for issuance under the 2021 Plan, which amount will automatically increase on January 1 of each successive year through and including January 1, 2031 in amount equal to 4% of the fully diluted shares outstanding as of the preceding December 31 or 40 such lesser amount as is determined by the Board.
Adverse market conditions resulting from the spread of COVID-19 or other epidemic, pandemic, or infectious disease outbreak could materially adversely affect our business and the value of our Common Stock.
Adverse market conditions resulting from the spread of any epidemic, pandemic, or infectious disease outbreak could materially adversely affect our business and the value of our Common Stock.
Nevertheless, we do not believe the impact to be material and remain confident in our ability to resolve these challenges.
Nevertheless, we do not believe the impact to have been material and remain confident in our ability to resolve these challenges.
In addition, if our 38 assumptions used in preparing our valuations for purposes of impairment testing differ materially from actual future results, we may record impairment charges in the future and our financial results may be materially adversely affected. We had $7,230 and $21,418 of goodwill recorded on our Consolidated Balance Sheets at December 31, 2023 and 2022, respectively.
In addition, if our assumptions used in preparing our valuations for purposes of impairment testing differ materially from actual future results, we may record impairment charges in the future and our financial results may be materially adversely affected. We had $7,230,000 of goodwill recorded on our Consolidated Balance Sheets at December 31, 2024 and 2023.
Approximately 57% of the TOI PCs’ total costs are related to drug purchases, including both oral and chemotherapy drugs, for the year ended December 31, 2023.
Approximately 45% of the TOI PCs’ total costs are related to drug purchases, including both oral and chemotherapy drugs, for the year ended December 31, 2024.
After conducting a two-step quantitative assessment, we recorded an impairment of $16,867 of goodwill during the three months ended March 31, 2023 (there was no impairment recorded as of March 31, 2022).
After conducting a two-step quantitative assessment, we recorded an impairment of $16,867,000 of goodwill during the three months ended March 31, 2023 (there was no impairment recorded in 2024).
Approximately 22% of our revenue for 2023 was derived from fixed fees paid by payors under capitation agreements with the TOI PCs.
Approximately 17% of our revenue for 2024 was derived from fixed fees paid by payors under capitation agreements with the TOI PCs.
If certain of our suppliers do not meet our needs, if there are material price increases on supplies, if we are not reimbursed or adequately reimbursed for drugs purchased or if we are unable to effectively access new technology or superior products, it could negatively impact the ability of the TOI PCs to effectively provide the services we offer and could have a material adverse effect on our business, results of operations, financial condition and cash flows.
We are substantially dependent on a single source of drug supplies and if that supplier does not meet our needs, if there are material price increases on supplies, if we are not reimbursed or adequately reimbursed for drugs purchased or if we are unable to effectively access new technology or superior products, it could negatively impact the ability of the TOI PCs to effectively provide the services we offer and could have a material adverse effect on our business, results of operations, financial condition and cash flows.
As of December 31, 2023, there were 3,177,542 private placement warrants outstanding. To the extent such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to our stockholders and increase the number of shares of Common Stock eligible for resale in the public market.
As of December 31, 2024, there were 2,187,283 private placement warrants outstanding. To the extent such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to our stockholders and increase the number of shares of Common Stock eligible for resale in the public market.
Our business is dependent upon the TOI PCs and our affiliated providers providing high-quality care to our patients. In particular, our ability to attract and retain patients and patient referrals dependent upon providing cost effective, quality patient care that meets or exceeds our patients’ and payors’ expectations. We depend on third parties for certain of our patient care needs.
In particular, our ability to attract and retain patients and patient referrals dependent upon providing cost effective, quality patient care that meets or exceeds our patients’ and payors’ expectations. We depend on third parties for certain of our patient care needs.
We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve or maintain profitability. We incurred a net loss of $83,068 in 2023, and a loss from operations in 2023.
We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve or maintain profitability. We incurred a net loss of $64,663,000 in 2024, and a loss from operations in 2024.
We generally manage the TOI PCs’ payor contracts on a state by state basis, entering into a separate contract in each state with the local affiliate of the relevant payor such that no one local payor contract accounts for a majority of our collective revenue.
We generally manage the TOI PCs’ payor contracts on a state by state basis, entering into a separate contract in each state with the local affiliate of the relevant payor such that no one local payor contract accounts for a majority of our collective revenue. No non-government payor accounted for more than 10% of the Patient Services revenue in 2024.
Finally, while we have been impacted by the recent Change Healthcare cyberattack which has caused disruptions to healthcare companies across the US, our team has been actively collaborating with our practice management vendor to swiftly establish alternative channels for transmitting claims to payors.
Finally, while we were impacted by the Change Healthcare cyberattack in February 2024, which caused disruptions to healthcare companies across the US, our team actively collaborated with our practice management vendor to swiftly establish alternative channels for transmitting claims to payors.
Tax rules and regulations are subject to interpretation and require judgment by us that may be successfully challenged by the applicable taxation authorities upon audit, which could result in additional tax liabilities.
Tax rules and regulations are subject to interpretation and require judgment by us that may be successfully challenged by the applicable taxation authorities upon audit, which could result in additional tax liabilities. • There can be no assurance that we maintain our listing on Nasdaq.
Inflation can adversely affect us by increasing the costs of drugs, clinical trials and research, administration and other costs of doing business. We may experience increases in the prices of labor and other costs of doing business. In an inflationary environment, cost increases may outpace our expectations, causing us to use our cash and other liquid assets faster than forecasted.
We may experience increases in the prices of labor and other costs of doing business. In an inflationary environment, cost increases may outpace our expectations, causing us to use our cash and other liquid assets faster than forecasted.
These acquisitions could also have a negative impact on our results of operations if it is subsequently determined that goodwill or other acquired intangible assets are impaired, thus resulting in an impairment charge in a future period. 30 In addition, these acquisitions involve risks that the acquired businesses will not perform in accordance with expectations; that we may become liable for unforeseen financial or business liabilities of the acquires businesses, including liabilities for failure to comply with applicable healthcare regulations; that the expected synergies associated with acquisitions will not be achieved; and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect, which could have a material adverse effect on our financial condition and results of operations.
In addition, these acquisitions involve risks that the acquired businesses will not perform in accordance with expectations; that we may become liable for unforeseen financial or business liabilities of the acquires businesses, including liabilities for failure to comply with applicable healthcare regulations; that the expected synergies associated with acquisitions will not be achieved; and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect, which could have a material adverse effect on our financial condition and results of operations.
As of December 31, 2023, we had federal income tax NOLs of approximately $139,195 and state income tax NOLs of approximately $132,511 available to offset our future taxable income, if any, prior to consideration of annual limitations that may be imposed under Section 382 of the Code or otherwise.
As of December 31, 2024, we had federal income tax NOLs of $184,835,785 and state income tax NOLs of $175,187,277 available to offset our future taxable income, if any, prior to consideration of annual limitations that may be imposed under Section 382 of the Code or otherwise.
It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods. If we are unable to provide consistently high quality of care, our business will be adversely impacted.
It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.
Significant progress has been made in successfully submitting claims to commercial payors and completed applications for Medicare and Medicaid agencies to accept our claims through a new intermediary, which is pending approval. It is anticipated that the delays in claim submissions will temporarily impact our cash flow in the first and second quarters of 2024.
Significant progress was made in successfully submitting claims to commercial payors and applications were completed for Medicare and Medicaid agencies to accept our claims through a new intermediary. Delays in claim submissions temporarily impacted our cash flow in the first and second quarters of 2024.
Security incidents compromising the confidentiality, integrity, and availability of our confidential or personal information and our and our third-party service providers’ information technology systems could result from cyber-attacks, computer malware, viruses, social engineering (including spear phishing and ransomware attacks), credential stuffing, supply chain attacks, efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored organizations, errors or malfeasance of our personnel, and security vulnerabilities in the software or systems on which we and our third party service providers rely.
Further, because system development projects are long-term in nature, they may be more costly than expected to complete and may not deliver the expected benefits upon completion. 29 Security incidents compromising the confidentiality, integrity, and availability of our confidential or personal information and our and our third-party service providers’ information technology systems could result from cyber-attacks, computer malware, viruses, social engineering (including spear phishing and ransomware attacks), credential stuffing, supply chain attacks, efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored organizations, errors or malfeasance of our personnel, and security vulnerabilities in the software or systems on which we and our third party service providers rely.
The obligations under the Senior Secured Convertible Note are secured and the lenders thereunder will have a claim against the assets and equity interests securing the related debt obligations that will have priority to claims of the Company’s equity securityholders generally.
Obligations under such agreement mature on August 9, 2027 and carry the possibility of the issuance of Convertible Note Warrants upon prepayment. 45 The obligations under the Senior Secured Convertible Note are secured and the lenders thereunder will have a claim against the assets and equity interests securing the related debt obligations that will have priority to claims of the Company’s equity securityholders generally.
If we fail to evaluate and execute new business opportunities properly, we may not achieve anticipated benefits and may incur increased costs. 18 Our growth strategy involves a number of risks and uncertainties, including that: • the TOI PCs may not be able to successfully enter into contracts with local payors on terms favorable to us or at all.
Our growth strategy involves a number of risks and uncertainties, including that: • the TOI PCs may not be able to successfully enter into contracts with local payors on terms favorable to us or at all.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Additionally, we employ incident response playbooks with predefined actions for various scenarios, ensuring a coordinated and efficient response. Our plan also 45 incorporates post-incident reviews and lessons learned sessions to continuously improve our response capabilities and resilience against future threats.
Additionally, we employ incident response playbooks with predefined actions for various scenarios, ensuring a coordinated and efficient response. Our plan also incorporates post-incident reviews and lessons learned sessions to continuously improve our response capabilities and resilience against future threats.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Compliance Committee (the "Committee") oversight of cybersecurity and other information technology risks.
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information. 46 We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Compliance Committee (the "Committee") oversight of cybersecurity and other information technology risks.
Removed
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.

Item 2. Properties

Properties — owned and leased real estate

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We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of our operations. As of December 31, 2023, we have leases for 69 clinics located in California, Arizona , Nevada, Florida and Texas.
We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of our operations. As of December 31, 2024, we have leases for 72 clinics located in California, Arizona , Nevada, Florida, Oregon, and Texas.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Mine Safety Disclosures Not applicable. 46 Table of Contents PART II
Mine Safety Disclosures Not applicable. 47 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Price Information Our common stock trades on the Nasdaq under the symbol “TOI.” Our publicly traded warrants trade on Nasdaq under the symbol “TOIIW.” Holders As of March 19, 2024, we had approximately 72 holders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Price Information Our common stock trades on the Nasdaq under the symbol “TOI.” Our publicly traded warrants trade on Nasdaq under the symbol “TOIIW.” Holders As of March 10, 2025, we had approximately 29 active holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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(4) Consulting and legal fees were comprised of a subset of the Company’s total consulting and legal fees during the years ended December 31, 2023 and 2022, and related to certain advisory projects, software implementations, and legal fees for debt financing and predecessor litigation matters.
(4) Consulting and legal fees were comprised of a subset of the Company’s total consulting and legal fees during the years ended December 31, 2024 and 2023, and related to certain advisory projects, software implementations, and legal fees for debt financing and predecessor litigation matters.
If subsequent information resolves uncertainties related to the transaction price, adjustments will be recognized in the period they are resolved. When payment has been received but services have not yet been rendered, the payment is recognized as a contract liability. Fee For Service FFS revenue consists of fees for medical services actually provided to patients.
If subsequent information resolves uncertainties related to the transaction price, adjustments will be 58 Table of Contents recognized in the period they are resolved. When payment has been received but services have not yet been rendered, the payment is recognized as a contract liability. Fee For Service FFS revenue consists of fees for medical services actually provided to patients.
The discussion should be read together with the historical audited annual financial statements for the years ended December 31, 2023 and 2022 , and the related notes that are included elsewhere in this Annual Report.
The discussion should be read together with the historical audited annual financial statements for the years ended December 31, 2024 and 2023 , and the related notes that are included elsewhere in this Annual Report.
Additionally, the Company is subject to certain outside claims and litigation arising out of the ordinary course of business, however, no such litigation requires future cash expenditure as of December 31, 2023.
Additionally, the Company is subject to certain outside claims and litigation arising out of the ordinary course of business, however, no such litigation requires future cash expenditure as of December 31, 2024.
The Company has the power to control all financial activities of the TOI PCs, the rights to receive substantially all benefits from the VIEs, and consequently consolidates the TOI PCs. Revenues, 57 Table of Contents expenses, and income from the TOI PCs are included in the consolidated amounts as presented on the Consolidated Statements of Operations.
The Company has the power to control all financial activities of the TOI PCs, the rights to receive substantially all benefits from the VIEs, and consequently consolidates the TOI PCs. Revenues, expenses, and income from the TOI PCs are included in the consolidated amounts as presented on the Consolidated Statements of Operations.
The Company defines Adjusted EBITDA as net income (loss) adjusting for: • Depreciation and amortization, 53 Table of Contents • Interest expense, net, • Income tax expense, • Non-cash addbacks, • Share-based compensation, • Goodwill impairment charges, • Changes in fair value of liabilities, • Unrealized (gains) losses on investments • Practice acquisition-related costs, • Post combination compensation expense, • Consulting and legal fees, • Infrastructure and workforce costs, and • Transaction costs.
The Company defines Adjusted EBITDA as net income (loss) adjusting for: • Depreciation and amortization, • Interest expense, net, • Tax payments and penalties, • Non-cash addbacks, • Share-based compensation, • Goodwill impairment charges, • Changes in fair value of liabilities, • Unrealized (gains) losses on investments • Practice acquisition-related costs, • Post combination compensation expense, • Consulting and legal fees, • Infrastructure and workforce costs, and • Transaction costs.
Dispensary and pharmacy Oral prescription drugs prescribed by doctors to their patients are sold directly through the TOI PCs’ dispensaries and our 49 Table of Contents newly-acquired pharmacy. Revenue for the prescriptions is based on fee schedules set by various PBMs and other third-party payors.
Dispensary and pharmacy Oral prescription drugs prescribed by doctors to their patients are sold directly through the TOI PCs’ dispensaries and our newly-acquired pharmacy. Revenue for the prescriptions is based on fee schedules set by various PBMs and other third-party payors.
As of December 31, 2023, o ur community-based oncology practices are staffed with 130 oncologists and advanced practice providers. 69 of these clinics are staffed with 119 providers employed by our affiliated physician-owned professional corporations, referred to as the "TOI PCs," which provided care for more than 64,000 and 72,000 patients in 2022 and 2023, respectively, and managed a population of approximately 1.8 million patients under value-based agreements as of December 31, 2023 .
As of December 31, 2024, o ur community-based oncology practices are staffed with 130 oncologists and advanced practice providers. 72 of these clinics are staffed with 119 providers employed by our affiliated physician-owned professional corporations, referred to as the "TOI PCs," which provided care for more than 72,000 patients in 2023 and 2024, respectively, and managed a population of approximately 1.9 million patients under value-based agreements as of December 31, 2024 .
During the year ended December 31, 2022, non-cash addbacks were primarily comprised of a $476 of net bad debt write-off, deferred rent of $711, and other miscellaneous charges of $22. (2) Practice acquisition-related costs were comprised of consulting and legal fees incurred to perform due diligence, execute, and integrate acquisitions of various oncology practices.
During the year ended December 31, 2023, non-cash addbacks were primarily comprised of a $2,020 of net bad debt write-off. (2) Practice acquisition-related costs were comprised of consulting and legal fees incurred to perform due diligence, execute, and integrate acquisitions of various oncology practices.
Year Ended December 31, 2023 2022 Clinics (1) 83 76 Markets 15 15 Lives under value-based contracts (millions) 1.8 1.7 Net income (loss) $ (83,068) $ 152 Adjusted EBITDA (in thousands) (2) $ (25,805) $ (23,543) (1) Includes independent oncology practices to which we provide limited management services, but do not bear the operating costs.
Year Ended December 31, 2024 2023 Clinics (1) 86 83 Markets 16 15 Lives under value-based contracts (millions) 1.9 1.8 Net loss $ (64,663) $ (83,068) Adjusted EBITDA (in thousands) (2) $ (35,688) $ (25,805) (1) Includes independent oncology practices to which we provide limited management services, but do not bear the operating costs.
The Company performs annual testing of impairment for goodwill in the fourth quarter of each year or earlier if potential impairment indicators exist. When impairment indicators are identified, the Company compares the reporting unit’s fair value to its carrying amount, including goodwill.
Goodwill is not amortized but is required to be evaluated for impairment at the same time every year. The Company performs annual testing of impairment for goodwill in the fourth quarter of each year or earlier if potential impairment indicators exist. When impairment indicators are identified, the Company compares the reporting unit’s fair value to its carrying amount, including goodwill.
Dispensary The increase in dispensary revenue was primarily due to a 31.5% increase in the number of fills offset by 0.5% decrease in the average revenue per fill.
Dispensary The increase in dispensary revenue was primarily due to a 85.9% increase in the number of fills offset by 6.8% decrease in the average revenue per fill.
(6) Transaction costs were comprised of consulting, legal, administrative and regulatory fees associated with share repurchases and practice acquisitions during the year ended December 31, 2023, and related to the Senior Secured Convertible Note during the year ended December 31, 2022.
(6) Transaction costs were comprised of consulting and legal fees associated with non-recurring due diligence projects during the year ended December 31, 2024, and related to consulting, legal, administrative and regulatory fees associated with share repurchases and practice acquisitions during the year ended December 31, 2023.
(5) Infrastructure and workforce costs were comprised of recruiting expenses to build out corporate infrastructure of $2,227 and $2,835, software implementation fees of $105 and $116, severance expenses resulting from cost rationalization programs of $979 and $248, temporary labor of $1,365 and $1,829, and lease terminations, settlements, and penalty addbacks of $1,289 and $0 during the years ended December 31, 2023 and 2022, respectively.
(5) Infrastructure and workforce costs were primarily comprised of recruiting expenses to build out corporate infrastructure of $1,294 and $2,227, severance expenses resulting from cost rationalization programs of $343 and $979, temporary labor of $748 and $1,365, and lease terminations, settlements, and penalty addbacks of $3,921 and $1,289 during the years ended December 31, 2024 and 2023, respectively.
The Company's selling, general and administrative expenses also includes occupancy costs, technology infrastructure, operations, clinical and quality support, finance, legal, human resources, and business development.
These expenses include salaries and related costs and stock-based compensation for our executives and physicians. The Company's selling, general and administrative expenses also includes occupancy costs, technology infrastructure, operations, clinical and quality support, finance, legal, human resources, and business development.
The customer is invoiced periodically based on the progress of the trial such that each invoice captures the revenue earned to date based on the state of the trial as established under contract with the customer.
The Company has elected to recognize revenue for clinical trials using the ‘as-invoiced’ practical expedient. The customer is invoiced periodically based on the progress of the trial such that each invoice captures the revenue earned to date based on the state of the trial as established under contract with the customer.
The Company’s management is not aware of material events or uncertainties that would cause the financial information below to not be indicative of future operating results or results of future financial condition, although past results should not be relied upon as an indication of future performance or future financial condition. 50 Table of Contents Year Ended December 31, 2023 2022 Revenue Patient services 65.9 % 66.1 % Dispensary 32.0 % 31.4 % Clinical trials & other 2.1 % 2.5 % Total operating revenue 100.0 % 100.0 % Operating expenses Direct costs – patient services 55.8 % 53.4 % Direct costs – dispensary 25.6 % 25.8 % Direct costs – clinical trials & other 0.2 % 0.2 % Goodwill impairment charges 5.2 % 3.9 % Selling, general and administrative expense 35.1 % 47.4 % Depreciation and amortization 1.8 % 1.7 % Total operating expenses 123.7 % 132.4 % Loss from operations (23.7) % (32.4) % Other non-operating expense (income) Interest expense, net 2.1 % 1.6 % Change in fair value of derivative warrant liabilities 0.1 % (0.7) % Change in fair value of earnout liabilities (0.2) % (23.5) % Change in fair value of conversion option derivative liabilities (0.3) % (9.6) % Gain on loan forgiveness — % (0.1) % Other, net 0.3 % (0.1) % Total other non-operating loss expense (income) 2.0 % (32.4) % Loss before provision for income taxes (25.7) % — % Income tax benefit (expense) — % 0.1 % Net income (loss) (25.7) % 0.1 % Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Patient services $ 213,504 $ 166,785 $ 46,719 28.0 % Dispensary 103,835 79,343 24,492 30.9 % Clinical trials & other 6,900 6,355 545 8.6 % Total operating revenue $ 324,239 $ 252,483 $ 71,756 28.4 % 51 Table of Contents Patient services The increase in patient services revenue was primarily due to a 22.7% increase in FFS revenue as a result of practice acquisitions and an overall increase in clinic count as well as a 4.5% increase in capitation revenue due to new capitation contracts entered into during 2023 and in the latter half of 2022.
The Company’s management is not aware of material events or uncertainties that would cause the financial information below to not be indicative of future operating results or results of future financial condition, although past results should not be relied upon as an indication of future performance or future financial condition. 51 Table of Contents Year Ended December 31, 2024 2023 Revenue Patient services 52.1 % 66.0 % Dispensary 45.7 % 32.0 % Clinical trials & other 2.2 % 2.0 % Total operating revenue 100.0 % 100.0 % Operating expenses Direct costs – patient services 47.5 % 55.8 % Direct costs – dispensary 38.4 % 25.6 % Direct costs – clinical trials & other 0.3 % 0.2 % Goodwill impairment charges — % 5.2 % Selling, general and administrative expense 27.4 % 35.1 % Depreciation and amortization 1.6 % 1.8 % Total operating expenses 115.2 % 123.7 % Loss from operations (15.2) % (23.7) % Other non-operating expense (income) Interest expense, net 1.9 % 2.1 % Change in fair value of derivative warrant liabilities (0.2) % 0.1 % Change in fair value of earnout liabilities — % (0.2) % Change in fair value of conversion option derivative liabilities (0.7) % (0.3) % Gain on loan forgiveness — % — % Other, net 0.2 % 0.3 % Total other non-operating loss expense 1.2 % 2.0 % Loss before provision for income taxes (16.4) % (25.7) % Income tax benefit — % — % Net loss (16.4) % (25.7) % Comparison of the Years Ended December 31, 2024 and 2023 Revenue Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Patient services $ 204,883 $ 213,504 $ (8,621) (4.0) % Dispensary 179,916 103,835 76,081 73.3 % Clinical trials & other 8,613 6,900 1,713 24.8 % Total operating revenue $ 393,412 $ 324,239 $ 69,173 21.3 % Patient services The decrease in patient services revenue was primarily due to a 5.0% decrease in FFS revenue and a 1.3% decrease in capitation revenue as a result of a terminated contract during the year, partially offset by other contract starts.
Overview The Company is a leading value-based oncology company that manages community-based oncology practices that serve patients at 83 clinic locations across 15 markets and five states throughout the United States.
Overview The Company is a leading value-based oncology company that manages community-based oncology practices for the Company and for independent oncology practices that together serve patients at 86 clinic locations across 16 markets and five states throughout the United States. The Company commenced operations in Oregon in October 2024.
When the performance obligation is not satisfied, the billing is recognized as a contract liability. Dispensary Dispensed prescriptions that are filled and delivered to the patient are considered a distinct performance obligation. The transaction price for the prescriptions is based on fee schedules set by PBMs and other third-party payors.
Dispensary Dispensed prescriptions that are filled and delivered to the patient are considered a distinct performance obligation. The transaction price for the prescriptions is based on fee schedules set by PBMs and other third-party payors. The fee schedule is often subject to DIR fees, which are based primarily on pre-established metrics.
Under the clinical trial contracts, the TOI PCs receive a fixed payment for administrative, set-up, and close-down fees; a fixed amount for each patient site visit; and certain expense reimbursements. The Company recognizes revenue for these arrangements on the fees earned to date based on the state of the trial, as established under contract with the customer.
Under the clinical trial contracts, the TOI PCs receive a fixed payment for administrative, set-up, and close-down fees; a fixed amount for each patient site visit; and certain expense reimbursements.
The fee schedule is often subject to DIR fees, which are based primarily on pre-established metrics. DIR fees may be assessed in periods after payments are received against future payments. The Company estimates DIR fees to arrive at the transaction price for prescriptions.
DIR fees may be assessed in periods after payments are received against future payments. The Company estimates DIR fees to arrive at the transaction price for prescriptions. Revenue is recognized based on the transaction at the time the patient takes possession of the oral drug.
Change in fair value of liabilities The decrease in non-operating (income) expense was primarily due to the decrease in gains of $58,412 and $23,322, respectively during the year ended December 31, 2023, as a result of decreases in the fair value of earnout liabilities and conversion option derivative liabilities, which were created as part of the Business Combination and the issuance of the Senior Secured Convertible Note, respectively.
Change in fair value of liabilities The decrease in non-operating (income) expense was primarily due to the decrease in gains of $803 and $1,819, respectively during the year ended December 31, 2024, as a result of decreases in the fair value of earnout liabilities and conversion option derivative liabilities, which were created as part of the Business Combination and the issuance of the Senior Secured Convertible Note, respectively. 53 Table of Contents Key Business Metrics In addition to our financial information, the Company's management reviews a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
The performance obligation is satisfied over time as the output is captured in data and documentation that is available for the customer to consume over the course of arrangement and furthers progress of the clinical trial. The Company has elected to recognize revenue for clinical trials using the ‘as-invoiced’ practical expedient.
Clinical Research & Other Clinical research contracts represent a single, integrated set of research activities and thus are a single performance obligation. The performance obligation is satisfied over time as the output is captured in data and documentation that is available for the customer to consume over the course of arrangement and furthers progress of the clinical trial.
Operating Expenses Direct costs - patient services Direct costs - patient services primarily includes chemotherapy drug costs, clinician salaries and benefits, and medical supplies. Clinicians include oncologists, advanced practice providers such as physician assistants and nurse practitioners, and registered nurses employed by the TOI PCs.
Clinicians include oncologists, advanced practice providers such as physician assistants and nurse practitioners, and registered nurses employed by the TOI PCs. Direct costs - dispensary Direct costs - dispensary primarily includes the cost of oral medications dispensed in the TOI PCs’ clinic locations.
The following tables provide a reconciliation of net income (loss), the most closely comparable GAAP financial measure, to Adjusted EBITDA: Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Net income (loss) $ (83,068) $ 152 $ (83,220) (54,750.0) % Depreciation and amortization 5,873 4,411 1,462 33.1 % Interest expense, net 6,777 4,082 2,695 66.0 % Income tax benefit (36) (243) 207 (85.2) % Non-cash addbacks (1) 2,029 1,208 821 68.0 % Share-based compensation 17,548 27,683 (10,135) (36.6) % Goodwill impairment charges 16,867 9,944 6,923 N/A Change in fair value of liabilities (1,395) (85,258) 83,863 (98.4) % Unrealized (gains) losses on investments (237) (640) 403 N/A Practice acquisition-related costs (2) 113 790 (677) (85.7) % Post-combination compensation expense (3) 2,048 2,243 (195) N/A Consulting and legal fees (4) 1,570 3,797 (2,227) (58.7) % Infrastructure and workforce costs (5) 5,965 5,029 936 18.6 % Transaction costs (6) 141 3,259 (3,118) (95.7) % Adjusted EBITDA $ (25,805) $ (23,543) $ (2,262) 9.6 % 54 Table of Contents (1) During the year ended December 31, 2023, non-cash addbacks were primarily comprised of net bad debt write-offs of $2,020.
Management encourages investors and others to review the Company's financial information in its entirety, not to rely on any single financial measure. 54 Table of Contents The following tables provide a reconciliation of net loss, the most closely comparable GAAP financial measure, to Adjusted EBITDA: Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Net loss $ (64,663) $ (83,068) $ 18,405 (22.2) % Depreciation and amortization 6,287 5,873 414 7.0 % Interest expense, net 7,496 6,777 719 10.6 % Tax payments and penalties (32) (36) 4 (11.1) % Non-cash addbacks (1) (139) 2,029 (2,168) (106.9) % Share-based compensation 11,152 17,548 (6,396) (36.4) % Goodwill impairment charges — 16,867 (16,867) N/A Change in fair value of liabilities (3,316) (1,395) (1,921) 137.7 % Unrealized (gains) losses on investments (133) (237) 104 N/A Practice acquisition-related costs (2) — 113 (113) (100.0) % Post-combination compensation expense (3) 374 2,048 (1,674) N/A Consulting and legal fees (4) 841 1,570 (729) (46.4) % Infrastructure and workforce costs (5) 6,427 5,965 462 7.7 % Transaction costs (6) 18 141 (123) (87.2) % Adjusted EBITDA $ (35,688) $ (25,805) $ (9,883) 38.3 % (1) During the year ended December 31, 2024, non-cash addbacks were primarily comprised of non-cash rent of $411 and $259 loss on disposal of fixed assets.
GAAP,"), which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods.
Selling, general and administrative expense Selling, general and administrative expenses include employee-related expenses, including both clinic and field support staff as well as central administrative and corporate staff. These expenses include salaries and related costs and stock-based compensation for our executives and physicians.
Direct costs - clinical trials & other Direct costs - clinical trials & other primarily includes costs related to clinical trial contracts and medical supplies. Selling, general and administrative expense Selling, general and administrative expenses include employee-related expenses, including both clinic and field support staff as well as central administrative and corporate staff.
At these levels, portfolios share the characteristics conducive to ensuring that the results do not materially differ from the standard applied to individual patient contracts related to each medical service provided. 58 Table of Contents Revenue is recorded on the date the services are rendered based on the information known at the time of entering of such information into our billing systems as well as an estimate of the revenue associated with medical services.
At these levels, portfolios share the characteristics conducive to ensuring that the results do not materially differ from the standard applied to individual patient contracts related to each medical service provided.
Variable Interest Entities The Company consolidates entities for which it has a variable interest and is determined to be the primary beneficiary.
We believe that the following accounting policies reflects the most critical judgments and estimation uncertainty used in the preparation of our Consolidated Financial Results. Variable Interest Entities The Company consolidates entities for which it has a variable interest and is determined to be the primary beneficiary.
Operating Expenses Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Direct costs – patient services $181,017 $ 134,761 $ 46,256 34.3 % Direct costs – dispensary 83,071 65,111 17,960 27.6 % Direct costs – clinical trials & other 578 518 60 11.6 % Goodwill impairment charges 16,867 9,944 6,923 N/A Selling, general and administrative expense 113,851 119,689 (5,838) (4.9) % Depreciation and amortization 5,873 4,411 1,462 33.1 % Total operating expenses $401,257 $ 334,434 $ 66,823 20.0 % Patient services cost The increase in patient services cost was primarily due to a 26.1% increase in intravenous drug costs, primarily driven by the Company's patient mix and volume, as well as the rising rate of inflation during 2023.
Clinical trials & other For the year ended December 31, 2024, the increase in clinical trials and other revenue was primarily due to an increase in other revenue compared to the prior year. 52 Table of Contents Operating Expenses Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Direct costs – patient services $186,880 $ 181,017 $ 5,863 3.2 % Direct costs – dispensary 151,231 83,071 68,160 82.1 % Direct costs – clinical trials & other 1,304 578 726 125.6 % Goodwill impairment charges 0 16,867 (16,867) N/A Selling, general and administrative expense 107,828 113,851 (6,023) (5.3) % Depreciation and amortization 6,287 5,873 414 7.0 % Total operating expenses $453,530 $ 401,257 $ 52,273 13.0 % Patient services cost The increase in patient services cost was primarily due to a 13.9% increase in clinical payroll costs due to the expectation of growth from additional contracts, partially offset by a 0.4% decrease in intravenous drug costs, primarily driven by the Company's patient mix and volume.
Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Net cash and cash equivalents used in operating activities $ (36,315) $ (61,756) $ 25,441 (41.2) % Net cash and cash equivalents provided by (used in) investing activities 62,640 (131,614) 194,254 (147.6) % Net cash and cash equivalents provided by (used in) financing activities (6,847) 92,206 (99,053) (107.4) % Net (decrease) increase in cash and cash equivalents $ 19,478 $ (101,164) $ 120,642 (119.3) % Cash and cash equivalents at beginning of period 14,010 115,174 (101,164) (87.8) % Cash and cash equivalents at end of period $ 33,488 $ 14,010 $ 19,478 139.0 % Operating Activities Significant changes impacting net cash and cash equivalents used in operating activities for the year ended December 31, 2023 as compared to the year ended December 31, 2022 were as follows: • Net loss increased to $83,220, primarily as a result of a decrease in the fair value of liabilities of $1,395 for the year ended December 31, 2023 as compared to a decrease in fair value of liabilities of $85,258 during the year ended December 31, 2022; • Share based compensation for the year ended December 31, 2023 decreased by $9,873 as compared to the year ended December 31, 2022; • Cash used by accounts receivable decreased $15,721 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 due to the collection stabilization of the Company's receivables; • Cash provided by accounts payable, accrued expenses and income taxes payable increased $11,874 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to an increase in vendor payables resulting from the growth in the Company's business; • Cash used by purchasing inventory increased $2,653 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 as a result of an increase in inventory acquired through practice acquisition; and • Cash provided by prepaid and other current assets decreased $1,154 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to the financing of the Company's directors and officers insurance policy that occurred in 2022.
Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Net cash and cash equivalents used in operating activities $ (26,538) $ (36,315) $ 9,777 (26.9) % Net cash and cash equivalents provided by investing activities 46,211 62,640 (16,429) (26.2) % Net cash and cash equivalents used in financing activities (3,492) (6,847) 3,355 (49.0) % Net increase in cash and cash equivalents $ 16,181 $ 19,478 $ (3,297) (16.9) % Cash and cash equivalents at beginning of period 33,488 14,010 19,478 139.0 % Cash and cash equivalents at end of period $ 49,669 $ 33,488 $ 16,181 48.3 % Operating Activities Significant changes impacting net cash and cash equivalents used in operating activities for the year ended December 31, 2024 as compared to the year ended December 31, 2023 were as follows: • Net loss decreased of $18,405, primarily as a result of a $16,900 reduction of operation loss and a $1,921 decrease in the fair value of warrant, earnout and conversion option liabilities of for the year ended December 31, 2024 as compared to the year ended December 31, 2023; • Cash used by accounts receivable increased $1,411 for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to new contract wins and therefore more services being provided and billed. • Cash provided by accounts payable and accrued expenses increased $10,527 for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to an increase in vendor payables resulting from the growth in the Company's business and strategic cash management; • Cash used by purchasing inventory decreased $8,024 for the year ended December 31, 2024 as compared to the year ended December 31, 2023 as a result of favorable payment terms with suppliers and improved inventory management; • Cash provided by prepaid and other current assets decreased $1,952 for the year ended December 31, 2024 as compared to the year ended December 31, 2023. 56 Table of Contents Investing Activities Net cash provided by investing activities decreased $16,429 for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to the decrease in sale of marketable securities of $31,258, offset by $9,595 reduction in purchases of marketable securities, and a decrease in cash used for purchases of practice acquisitions and intangibles of $4,456.
Selling, general and administrative expense The decrease in selling, general and administrative expense was primarily driven by a 8.5% decrease in share-based compensation expense, a 2.6% decrease in transaction costs and a 1.7% decrease in professional fees offset by 1.9% increase in salaries and benefits due to the growth in the Company's management and corporate team, as well as a 3.1% increase in office expenses, and a 1.4% increase in real estate and equipment expenses. 52 Table of Contents Other Non-Operating Expenses (Income) Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Interest expense, net $ 6,777 $ 4,082 $ 2,695 66.0 % Change in fair value of derivative warrant liabilities 286 (1,843) 2,129 (115.5) % Change in fair value of earnout liabilities (803) (59,215) 58,412 (98.6) % Change in fair value of conversion option derivative liabilities (878) (24,200) 23,322 N/A Gain on loan forgiveness — (183) 183 (100.0) % Other, net 704 (501) 1,205 (240.5) % Total other non-operating expense (income) $ 6,086 $ (81,860) $ 87,946 (107.4) % Interest expense The increase in interest expense was primarily the result of interest and amortization related to the Senior Secured Convertible Notes issued during the year ended December 31, 2023.
Other Non-Operating Expenses (Income) Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Interest expense, net $ 7,496 $ 6,777 $ 719 10.6 % Change in fair value of derivative warrant liabilities (619) 286 (905) (316.4) % Change in fair value of earnout liabilities — (803) 803 (100.0) % Change in fair value of conversion option derivative liabilities (2,697) (878) (1,819) N/A Other, net 365 704 (339) (48.2) % Total other non-operating expense $ 4,545 $ 6,086 $ (1,541) (25.3) % Interest expense The increase in interest expense was primarily the result of interest and amortization related to the Senior Secured Convertible Notes issued during the year ended December 31, 2024.
Critical Accounting Policies The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States ("U.S.
Critical Accounting Policies and Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.
Material Cash Requirements Due by the Year Ended December 31, (dollars in thousands) 2024 2025-2026 2027-2028 Thereafter Total Convertible note 1 $ 4,461 $ 8,922 $ 112,664 $ — $ 126,047 Operating leases 8,176 15,128 9,825 6,243 39,372 Deferred acquisition and contingent consideration 2,515 50 — — 2,565 Other 2 1,049 81 29 — 1,159 Total material cash requirements $ 16,201 $ 24,181 $ 122,518 $ 6,243 $ 169,143 (1) Includes principal and interest payments due.
Material Cash Requirements Due by the Year Ended December 31, (dollars in thousands) 2025 2026-2027 2028-2029 Thereafter Total Convertible note 1 $ 4,461 $ 117,125 $ — $ — $ 121,586 Operating leases 8,467 14,961 8,221 3,556 35,205 Deferred acquisition and contingent consideration 225 — — — 225 Other 2 840 68 — — 908 Total material cash requirements $ 13,993 $ 132,154 $ 8,221 $ 3,556 $ 157,924 (1) Includes principal and interest payments due.
Goodwill impairment charges During the years ended December 31, 2023 and 2022, impairment charges of $16,867 and $9,944 were recorded related to goodwill, respectively. See Note 2 and Note 18 in Item. 8 Financial Statements and Supplementary Data for additional detail.
See Note 2 and Note 18 in Item. 8 Financial Statements and Supplementary Data for additional detail.
If unable to raise additional capital when desired, or if the Company cannot expand operations or otherwise capitalize on business opportunities because the Company's lack of sufficient capital, the Company's business, results of operations, and financial condition would be adversely affected. 55 Table of Contents Cash Flows The following table presents a summary of the Company's consolidated cash flows from operating, investing, and financing activities for the periods indicated.
Cash Flows The following table presents a summary of the Company's consolidated cash flows from operating, investing, and financing activities for the periods indicated.
In addition, clinical payroll costs increased 8.1% from the prior year due to the growth in clinic count. Dispensary cost The increase in dispensary cost was primarily due to a 31.5% increase in the number of prescriptions filled offset by a 3.0% decrease in the average cost of the prescriptions filled.
The increase in dispensary cost was primarily due to a 85.9% increase in the number of prescriptions filled offset by a 2.1% decrease in the average cost of the prescriptions filled. Goodwill impairment charges During the years ended December 31, 2024 and 2023, impairment charges of $0 and $16,867 were recorded related to goodwill, respectively.
Financing Activities Net cash provided by financing activities decreased $99,053 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to $110,000 of proceeds from the issuance of the Senior Secured Convertible during the year ended December 31, 2022, offset by $7,981 decrease in common stock repurchase, and by deferred cash consideration and finance insurance premium payments of $2,584 and $3,269, respectively, during year ended December 31, 2023. 56 Table of Contents Material Cash Requirements The Company's material cash requirements for the following five years consist of principal and interest due on the convertible note, operating leases and other miscellaneous administrative expenses.
Financing Activities Net cash used by financing activities decreased $3,355 for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to a $1,019 decrease in the common stock repurchase that was done in the prior year, and a $2,113 decrease in finance insurance premium payments during year ended December 31, 2024.
The Company believes its affiliated providers enjoy the stability and predictability of a large multi-state practice, are not incentivized or pressured to overtreat when it may be inconsistent with a patient’s goals of care, and can focus on practicing outstanding evidence-based medicine, rather than business building. 2023 Highlights • Consolidated revenue of $324.2 million, an increase of 28% compared to the prior year • Gross profit of $59.6 million, an increase of 14% compared to the prior year, and gross margin of 18.4%, a decrease from 20.6% the prior year • Adjusted EBITDA of $(25.8) million compared to $(23.5) million for the prior year 48 Table of Contents • Ended the fiscal year 2023 with $83 million in cash, cash equivalents, and investments • Signed full-risk capitated contract in South Florida, effective January 1, 2024 and have now successful onboarded the membership and the IPA providers. • Successfully acquired and launched our California-based pharmacy in November and have already completed over 1,300 specialty medication fills Components of Results of Operations Revenue The Company receives payments from the following sources for services rendered: (i) commercial insurers; (ii) pharmacy benefit managers (“PBMs”), (iii) the federal government under the Medicare program administered by the Centers for Medicare and Medicaid Services (“CMS”); (iv) state governments under Medicaid and other programs; (v) other third-party payors and managed care organizations (e.g., risk bearing organizations and independent practice associations (“IPAs”)); and (vi) individual patients and clients.
Components of Results of Operations Revenue The Company receives payments from the following sources for services rendered: (i) commercial insurers; (ii) pharmacy benefit managers (“PBMs”), (iii) the federal government under the Medicare program administered by the Centers for Medicare 49 Table of Contents and Medicaid Services (“CMS”); (iv) state governments under Medicaid and other programs; (v) other third-party payors and managed care organizations (e.g., risk bearing organizations and independent practice associations (“IPAs”)); and (vi) individual patients and clients.
Costs for clinical personnel wages are expensed as incurred and costs for inventory and medical supplies are expensed when used, generally by applying the specific identification method. Goodwill and Intangible Assets 59 Table of Contents The Company accounts for goodwill and intangible assets under Accounting Standards Codification Topic No. 350, Goodwill and Other (“ASC 350”).
Goodwill and Intangible Assets The Company accounts for goodwill and intangible assets under Accounting Standards Codification Topic No. 350, Goodwill and Other (“ASC 350”). Goodwill represents the excess of the fair value of the consideration conveyed in acquisition over the fair value of net assets acquired.
Removed
Direct costs - dispensary Direct costs - dispensary primarily includes the cost of oral medications dispensed in the TOI PCs’ clinic locations. Direct costs - clinical trials & other Direct costs - clinical trials & other primarily includes costs related to clinical trial contracts and medical supplies.
Added
The Company believes its affiliated providers enjoy the stability and predictability of a large multi-state practice, are not incentivized or pressured to overtreat when it may be inconsistent with a patient’s goals of care, and can focus on practicing outstanding evidence-based medicine, rather than business building.
Removed
Clinical trials & other For the year ended December 31, 2023, the increase in clinical trials and other revenue was primarily due to an increase in other revenue compared to the prior year.
Added
The Company recognizes revenue for these arrangements on the fees earned to date based on the state of the trial, as established under contract with the customer. 50 Table of Contents Operating Expenses Direct costs - patient services Direct costs - patient services primarily includes chemotherapy drug costs, clinician salaries and benefits, and medical supplies.
Removed
Gain on loan forgiveness There was no gain on loan forgiveness during the year ended December 31, 2023. During the year ended December 31, 2022, gain on loan forgiveness of $183 was a result of forgiveness of all CARES Act loans, including those obtained through physician practice acquisition.
Added
Selling, general and administrative expense The decrease in selling, general and administrative expense was primarily driven by a 5.6% decrease in share-based compensation expense, a 2.1% decrease in non-clinical payroll, a 2.2% decrease in insurance expense, and a 1.5% decrease in deferred purchase price expense offset by a 2.2% increase in professional fees, a 1.6% increase in real estate and equipment expenses and a 5.1% increase in office expenses and supplies due to the growth in the Company's management and corporate teams.
Removed
Other, net The change in other, net was primarily due to Provider Relief Funding received under the CARES Act during the year ended December 31, 2022 that did not occur in 2023.
Added
Liquidity and Capital Resources General The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business.
Removed
Key Business Metrics In addition to our financial information, the Company's management reviews a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
Added
In connection with the preparation of the consolidated financial statements for the year ended December 31, 2024, the Company conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to its ability to continue as a going concern within one year after the date of the issuance of such financial statements.
Removed
Management encourages investors and others to review the Company's financial information in its entirety, not to rely on any single financial measure.
Added
The Company had cash and cash equivalents of $49,669 and an accumulated deficit of $210,813 at December 31, 2024, and a net loss of $64,663 and net cash used in operating and investing activities of $26,538 for the year ended December 31, 2024.
Removed
Liquidity and Capital Resources General To date, the Company has financed its operations principally through debt facilities, issuances of equity securities and payments received from various payors. As of December 31, 2023, the Company had $33,488 of cash and cash equivalents, none of which are restricted cash, as well as $49,367 of current marketable securities.
Added
In February 2025, the Company entered into an Amendment to the Facility Agreement (see Note 11 - Debt) in which the Company made a partial prepayment of approximately $20 million together with accrued and unpaid interest.
Removed
The Company expects to incur operating losses and generate negative cash flows from operations for the foreseeable future due to the investments; management intends to continue to make in expanding operations and sales and marketing and due to additional general and administrative expenses management expects to incur in connection with operating as a public company.
Added
Among other items, the Amendment provided for the removal of the financial covenant that required the Company to hold at least $40 million of cash 55 Table of Contents and cash equivalents (see Note 22 — Subsequent Events).
Removed
As a result, the Company may require additional capital resources to execute strategic initiatives to grow the business. Management believes that the cash on hand and investments in marketable securities will be sufficient to fund the Company's operating and capital needs for at least the next 12 months.
Added
Additionally, in March 2025, the Company entered into a securities purchase agreement for a private placement that resulted in gross proceeds of approximately $16.5 million, before deducting placement agent fees and offering expenses.
Removed
Management's assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties.
Added
Additionally, the Company's lender and existing investor, entered into an exchange agreement, in which approximately $4.1 million aggregate principal amount of the Company's senior secured convertible notes would be exchanged for common-equivalent preferred stock and warrants for common stock. The Company has also taken a number of other actions to increase cash flow.
Removed
The Company's actual results could vary because of, and its future capital requirements will depend on, many factors, including our growth rate, the timing and extent of spending to open or acquire new clinics and expand into new markets and the expansion of sales and marketing activities.
Added
As one of our strategic priorities in 2024 and beyond, the Company implemented an initiative to eliminate cash burn. Due to efforts towards working capital management that saw improvements across receivables, inventory, and payables, the Company was able to generate a positive cash flow from operations in Q4 2024 of approximately $4 million.
Removed
The Company may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. The Company has based this estimate on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than management currently expects.
Added
Additionally, we generated an 11% reduction in SG&A expenses compared to the prior year directly as a result of our ongoing efforts to streamline operations, improve efficiency, and optimize our overhead resourcing.
Removed
The Company may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, the Company may not be able to raise it on terms acceptable to management or at all.
Added
Accordingly, the Company has concluded that it will have sufficient liquidity to fund its operations for at least one year from the date these consolidated financial statements are issued.
Removed
Investing Activities Net cash used by investing activities decreased $194,254 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 due to $107,913 reduction in purchases of marketable securities and a decrease in cash used for purchases of property and equipment of $962 for new clinic builds and clinic remodels, and a decrease in cash used for purchases of practice acquisitions and intangibles of $4,121.
Added
Although the Company currently expects its sources of capital to be sufficient to meet its near-term liquidity needs, there can be no assurance that such sources will be sufficient to satisfy its liquidity requirements in the future.
Removed
Revenue is recognized based on the transaction at the time the patient takes possession of the oral drug. Clinical Research & Other Clinical research contracts represent a single, integrated set of research activities and thus are a single performance obligation.
Added
If the Company cannot generate or obtain needed funds, it might be forced to make substantial reductions in its operating and capital expenses or pursue restructuring plans, which could adversely affect its business operations and ability to execute its current business strategy.
Removed
Leases On January 1, 2022, the Company adopted ASU 2016-02, Leases , with various amendments issued in 2018 and 2019 (collectively, “ASC 842”) using the modified retrospective approach, for leases that existed on January 1, 2022. ASC 842 requires lessees to recognize assets and liabilities for most leases.
Added
Material Cash Requirements The Company's material cash requirements for the following five years consist of principal and interest due on the convertible note, operating leases and other miscellaneous items.
Removed
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.
Added
These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future.
Removed
Upon lease commencement, the date on which a lessor makes the underlying asset available to the Company for use, the Company classifies the lease as either an operating or finance lease.
Added
We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Removed
The Company applied certain practical expedients permitted under the transition guidance, including the package of practical expedients, which permits the Company not to reassess its prior conclusions related to lease identification, lease classification, and initial direct costs capitalization.
Added
Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ significantly from these estimates under different assumptions or conditions. 57 Table of Contents Our significant accounting policies are more fully described in the notes to our audited consolidated financial statements elsewhere in this Annual Report on Form 10-K.
Removed
The Company solely acts as a lessee and its leases primarily consist of operating leases for its real estate in the states in which the Company operates. The Company has other operating or financing leases for various clinical and non-clinical equipment. Generally, upon the commencement of a lease, the Company will record a right-of-use (“ROU”) asset and lease liability.
Added
Revenue is recorded on the date the services are rendered based on the information known at the time of entering of such information into our billing systems as well as an estimate of the revenue associated with medical services. When the performance obligation is not satisfied, the billing is recognized as a contract liability.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed5 unchanged
If this happens, we may need to raise additional capital to fund our operations, which may not be available in sufficient amounts or on reasonable terms, if at all, sooner than expected. Impairment Risk Impairment risk refers to the risk that the Company will write down a material amount of its goodwill or intangible assets.
If this happens, we may need to raise additional capital to fund our operations, which may not be available in sufficient amounts or on reasonable terms, if at all, sooner than expected. 60 Table of Contents Impairment Risk Impairment risk refers to the risk that the Company will write down a material amount of its goodwill or intangible assets.
Interest Rate Risk We held cash and cash equivalents of $33,488, current marketable securities of $49,367 as of December 31, 2023, consisting of bank deposits and Treasury bills. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation.
Interest Rate Risk We held cash and cash equivalents of $49,669 as of December 31, 2024, consisting of bank deposits and Treasury bills. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation.
For the year ended December 31, 2023, the Company recognized an impairment charge of $16,867 to write-down the carrying value of goodwill related to patient services in excess of the fair value. 60 Table of Contents
For the year ended December 31, 2024, the Company recognized no impairment charge to write-down the carrying value of goodwill related to patient services in excess of the fair value. 61 Table of Contents

Other TOIIW 10-K year-over-year comparisons