ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
References to
the “Company,” “DFP Healthcare Acquisitions Corp.,” “our,” “us” or “we”
refer to DFP Healthcare Acquisitions Corp. The following discussion and analysis of the Company’s financial condition and
results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in
this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties.
Cautionary
Note Regarding Forward-Looking Statements
This Annual
Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about
us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases,
you can identify forward-looking statements by terminology such as “may,” “should,” “could,”
“would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“continue,” or the negative of such terms or other similar expressions. For information identifying important factors
that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to
the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the SEC. The Company’s
securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required
by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated
on November 1, 2019 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
We intend to focus our investment effort broadly across the entire healthcare industry, which encompasses services, therapeutics,
devices, diagnostics and animal health. We intend to effectuate our initial Business Combination using cash from the proceeds of
this offering and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection
with our initial Business Combination (pursuant to forward purchase agreements or backstop agreements we may enter into following
the consummation of our initial public offering or otherwise), shares issued to the owners of the target, debt issued to bank or
other lenders or the owners of the target, or a combination of the foregoing. Our sponsor is DFP Sponsor LLC, a Delaware limited
liability company (the “Sponsor”).
Our registration statement for our initial
public offering (the “Initial Public Offering”) was declared effective by the SEC on March 10, 2020. On March 13, 2020,
we consummated our Initial Public Offering of 23,000,000 units (the “Units” and, with respect to the Class A common
stock included in the Units being offered, the “Public Shares”), including 3,000,000 additional Units to cover over-allotments
(the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering
costs of approximately $10.4 million, inclusive of approximately $6.3 million in deferred underwriting commissions.
Simultaneously with the closing of the
Initial Public Offering, we consummated the private placement (“Private Placement”) of 3,733,334 warrants (each, a
“Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per
Private Placement Warrant in a private placement to our Sponsor, generating proceeds of $5.6 million.
49
Upon the closing of the Initial Public
Offering and the Private Placement, $230.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain
of the proceeds of the Private Placement was placed in a trust account (the “Trust Account”) and was invested in permitted
United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940,
as amended, which we refer to as the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act that invest only in direct U.S. government treasury
obligations.
Our
management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and
the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination.
We will only have 24 months from the closing
of the Initial Public Offering, or March 13, 2022, to complete our initial Business Combination (the “Combination Period”).
If we do not complete a Business Combination within this period of time, it will (i) cease all operations except for the purposes
of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public
Shares for a per share pro rata portion of the Trust Account, including interest and not previously released to us to fund our
working capital requirements (subject to an annual limit of $500,000) (less taxes payable and up to $100,000 of such net interest
to pay dissolution expenses) and (iii) as promptly as possible following such redemption, liquidate and dissolve the balance
of our net assets to our remaining stockholders, as part of our plan of dissolution and liquidation.
The issuance of additional shares in connection with a Business
Combination to the owners of the target or other investors:
Similarly, if we issue debt securities or otherwise incur significant
debt to bank or other lenders or the owners of a target, it could result in:
· our inability to pay dividends on our Class A common stock;
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As indicated in the accompanying financial statements, at December
31, 2020, we had approximately $0.9 million in our operating bank account. We expect to continue to incur significant costs in
the pursuit of our acquisition plans. We cannot assure you that our plans to complete our initial Business Combination will be
successful.
Results of Operations
Our entire activity from inception through
December 31, 2020 related to our formation, the preparation for the Initial Public Offering, and, since the closing of the Initial
Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We
will generate non-operating income in the form of interest income on our investments held in the Trust Account. We expect to incur
increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance),
as well as for due diligence expenses.
For the year ended
December 31, 2020, we had a net loss of approximately $441,000, which consisted of approximately $309,000 in general and
administrative expenses, $175,000 in administrative expenses – related party, approximately $200,000 in franchise tax expense,
and approximately $11,000 in income tax expense, partly offset by approximately $254,000 of interest income from investments in
Trust Account.
For the period November 1, 2019 (inception)
through December 31, 2019, our only activities had been organization activities and those necessary to prepare for the initial
public offering.
Going Concern
As of December 31, 2020, we had approximately
$0.9 million in our operating bank account, working capital of approximately $0.8 million, and approximately $254,000 of interest
income available in the Trust Account for our tax obligations.
Our liquidity needs to date have been satisfied
through a $25,000 contribution from our Sponsor in exchange for the issuance of our founder shares to our Sponsor, the promissory
note of $200,000 from our Sponsor, and the proceeds from the consummation of the Private Placement not held in the Trust Account.
On March 13, 2020, we repaid the promissory note in full to our Sponsor. In addition, in order to finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may,
but are not obligated to, provide us Working Capital Loans. As of December 31, 2020, there were no Working Capital Loans outstanding.
For the year ended December 31, 2020, cash
used in operating activities was approximately $583,000. Net loss from operations of approximately $441,000 was affected by interest
income on the investments held in Trust Account of approximately $254,000 and changes in operating assets and liabilities which
provided approximately $112,000.
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Management continues to evaluate the impact
of the COVID-19 pandemic on our industry and has concluded that, while it is reasonably possible that the virus could have a negative
effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact
is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
In connection with our assessment of going concern considerations in accordance with FASB ASC Topic 205-40, "Presentation of Financial
Statements - Going Concern," management has determined that the liquidity condition and date for mandatory liquidation and subsequent
dissolution raise substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts
of assets or liabilities should we be required to liquidate after March 13, 2022.
Contractual Obligations
We do not have any long-term debt obligations,
capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement
to pay our Sponsor a monthly fee of $10,000 for office space, secretarial and administrative services and an agreement to pay our
Chief Financial Officer, Christopher Wolfe, $7,500 per month for his services prior to the initial Business Combination.
Registration Rights
The initial stockholders and holders of
the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement. The initial stockholders
and holders of the Private Placement Warrants will be entitled to make up to three demands, excluding short form registration demands,
that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back”
registration rights to include their securities in other registration statements filed by the Company. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option to purchase up to
3,000,000 additional Units to cover any over-allotments, at the initial public offering price of $10.00 per Unit, less the underwriting
discounts and commissions. The warrants that were be issued in connection with the 3,000,000 over-allotment Units are identical
to the public warrants and have no net cash settlement provisions. The underwriters exercised the over-allotment option in full
on March 13, 2020.
The underwriters did not receive any
underwriting discounts or commission on the 5,000,000 Units purchased in the Initial Public Offering by certain domestic
private pooled investment vehicles managed by Deerfield Management Company, L.P. We paid an underwriting discount of
2.0% of the per Unit offering price, or $3.6 million, at the closing of the Initial Public Offering, with an additional fee
(the “Deferred Underwriting Fees”) of 3.5% of the gross offering proceeds, or $6.3 million, payable upon the
Company's completion of an Initial Business Combination. The Deferred Underwriting Fees will become payable to the
underwriters from the amounts held in the Trust Account solely in the event we complete our initial Business Combination.
Critical Accounting Policies
Use of Estimates
This management’s discussion and analysis of our financial
condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The
preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing
basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses.
We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions.
52
Investments Held in the Trust Account
Our portfolio of investments held in the
Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a
combination thereof. The investments held in the Trust Account are classified as trading securities. Trading securities are presented
on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value
of these securities is included as interest income on investments in the Trust Account in the accompanying statements of operations.
The estimated fair values of investments held in the Trust Account are determined using available market information.
Class A Common Stock Subject
to Possible Redemption
The Company accounts for its Class A common
stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity.
The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, at December 31, 2020, 21,975,605 shares of Class
A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section
of the Company’s balance sheets.
Net Income (Loss) Per Share
Net loss per share is computed by dividing net loss by the weighted-average
number of common stock outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial
Public Offering and the Private Placement to purchase an aggregate of 9,483,334 of the Company’s Class A common stock in
the calculation of diluted income per share, since their inclusion would be anti-dilutive under the treasury stock method.
Our statements
of operations include a presentation of loss per share for common stock subject to redemption in a manner similar to the two-class
method of income (loss) per share.
For the year
ended December 31, 2020, net loss per common stock, basic and diluted for Class A common stock are calculated by dividing the interest
income from investments held in the Trust Account of approximately $254,000, less approximately $211,000 of maximum allowance
for tax obligations, minus approximately $43,000 for working capital, resulting in no income for Class A common stock for
the year ended December 31, 2020, by the weighted average number of Class A common stock outstanding for the period. Net loss
per common stock, basic and diluted for Class B common stock is calculated by dividing the net loss of approximately $441,000,
less income attributable to Class A common stock of $0, resulting in a net loss of approximately $441,000 for the year ended December
31, 2020, by the weighted average number of Class B common stock outstanding for the period.
For the period from November 1, 2019, through December 31, 2019,
net loss per common stock, basic and diluted for Class B common stock is calculated by dividing the net loss of approximately $2,300,
by the weighted average number of Class B common stock outstanding for the period excluding 750,000 shares that were subject to
forfeiture.
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a
material effect on our financial statements.
53
Off-Balance
Sheet Arrangements
As of December 31, 2020, we did not have
any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The JOBS Act contains provisions that,
among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth
company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective
date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards,
and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards
is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply
with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of
evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions
set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be
required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial
reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may
be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s
report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv)
disclose certain executive compensation related items such as the correlation between executive compensation and performance and
comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years
following the completion of our initial public offering or until we are no longer an “emerging growth company,” whichever
is earlier.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined
by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
Please see our Financial
Statements beginning on page F-1 of this Annual Report
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ITEM 9: CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls
and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed
to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is accumulated
and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
As required by Rules 13a-15
and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based upon their evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15
(e) and 15d-15 (e) under the Exchange Act) were effective.
Changes in internal control over reporting
During the most recently
completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s report on internal control over financial
reporting
This annual report
does not include a report of management’s assessment regarding internal control over financial reporting due to a transition
period established by rules of the Securities and Exchange Commission for newly public companies. This annual report does
not include an attestation report of the Company’s independent registered public accounting firm regarding internal control
over financial reporting. As an emerging growth company, management’s report is not subject to attestation by our independent
registered public accounting firm.
55
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE.
Directors and Executive Officers
Our directors and executive
officers are as follows:
Name Age Position
Richard Barasch 67 Executive Chairman
Steven Hochberg 59 President, Chief Executive Officer and Director
Christopher Wolfe 40 Chief Financial Officer and Secretary
Dr. Jennifer Carter 56 Director
Dr. Mohit Kaushal 40 Director
Dr. Gregory Sorensen 57 Director
Richard Barasch
has served as the Company’s Chairman since May 2020 and served as the Chairman and Chief Executive Officer of DFB Healthcare
Acquisitions Corp. (“DFB”) from its formation until the closing of its initial business combination with AdaptHealth
Corp., which Mr. Barasch currently serves as Chairman. In addition, Mr. Barasch is Executive Chairman of Deerfield Healthcare
Technology Acquisitions Corp. (“DFHT”). Mr. Barasch was Chief Executive Officer of Universal American Corp., a
publicly-traded health insurance and services company focused on the senior market and government programs, from 1995 until Universal
American’s acquisition by WellCare Health Plans in May 2017. Mr. Barasch has developed an extensive network of
contacts throughout the healthcare industry and speaks regularly at industry conferences as a healthcare services expert. He is
currently founding partner of RAB Ventures, formed to invest in growth healthcare companies, Chairman of HouseWorks LLC and Co-Chairman
of ELMC Risk Management Inc. He is on the Board of Advisors of the Health Policy and Management program at the Columbia University
Mailman School of Public Health, where he is also an Assistant Adjunct Professor, and the Brown School of Public Health. He also
serves on the Board of Trustees of the Maimonides Medical Center in Brooklyn, New York. Mr. Barasch graduated from Swarthmore
College and Columbia University Law School. Mr. Barasch was selected to serve on the board of directors due to his significant
experience managing and investing in healthcare companies.
Steven Hochberg
has been the Company’s President and Chief Executive Officer since May 2020. A partner in the private transactions group
at Deerfield Management, Deerfield Management Company, L.P., a Delaware series limited partnership (Series C) and its affiliates
(“Deerfield Management”); Mr. Hochberg joined Deerfield Management in 2013 to work on structured transactions.
Mr. Hochberg has been a co-founder and manager of many healthcare companies, including DFB and DFHT, and he led the merger
of two New York City-based hospital systems, which created a healthcare delivery system in New York City with revenues in excess
of $5 billion. Mr. Hochberg currently serves as the President and Chief Executive Officer of DFP. Mr. Hochberg has also
led investments in more than 55 healthcare companies, including rollups of companies within the services and the medtech sectors.
Since 2004, Mr. Hochberg has managed Ascent Biomedical Ventures, a leading venture capital firm he co-founded focused on early
stage investment and development of biomedical companies. Since 2011, Mr. Hochberg had been the Chairman of the Board of Continuum
Health Partners until its merger with Mount Sinai in 2013, where he is a Vice Chairman of the Icahn School of Medicine at Mt. Sinai
and the Mount Sinai Health System, a non-profit healthcare integrated delivery system in New York City with over $7 billion in
combined annual revenues. Mr. Hochberg serves on the board of Solar Capital and Solar Senior Capital, two publicly-traded
business development companies and Solar’s private Business Development Corporation. Mr. Hochberg is also a member of
the board of the Cardiovascular Research Foundation, a non-profit organization focused on advancing new technologies and education
in the field of cardiovascular medicine. Mr. Hochberg graduated from the University of Michigan and earned his M.B.A. from
Harvard Business School. Mr. Hochberg was selected to serve on the board of directors due to his significant experience managing
and investing in healthcare companies.
56
Christopher Wolfe
has served as the Company’s Chief Financial Officer and Secretary since May 2020. Mr. Wolfe currently serves as
the Chief Financial Officer and Secretary of DFHT. Mr. Wolfe was a partner of Capital Z Partners, a middle market private
equity firm, from June 2003 until December 2017. He was responsible for sourcing, structuring, execution and monitoring
of private equity transactions across a variety of verticals. Mr. Wolfe served on the board of directors of Universal American
Corp. from 2009 to 2014. Prior to joining Capital Z in 2003, Mr. Wolfe worked in the mergers and acquisitions group at Credit
Suisse First Boston. Mr. Wolfe graduated magna cum laude from Harvard College.
Dr. Jennifer
Carter has served as a director as of March 10, 2020. Dr. Carter is a board-certified internist and healthcare
entrepreneur, with over 20 years of experience evaluating existing and emerging markets, new medical technologies and
early-stage companies in the health care field. Dr. Carter currently serves as the head of the Precision Health
diagnostic and therapeutic platform at Integral Health and as a consultant at JLC Healthcare Strategies, LLC. Dr. Carter
has served on the board of directors of Houseworks, LLC, an elder-care provider, since 2019, on the board of directors of
Target Cancer Foundation, a non-profit organization, since 2018 and has been a member of the Founding Strategic Board of
Xsphera Biosciences, Inc., a biotechnology startup, since 2018. Dr. Carter has B.S. degrees in Biochemistry and
Biophysics from Yale University. She received an M.D. from Harvard Medical School and an M.P.H. from The Harvard School of
Public Health. Dr. Carter was selected to serve on the board of directors due to her significant experience in
healthcare technology and strategic consulting.
Dr. Mohit Kaushal
has served as a director as of March 10, 2020. He has had an extensive career within investing, clinical medicine and public
policy. Dr. Kaushal has served as a special advisor to General Atlantic since 2015. He was a partner in Aberdare Ventures
from 2013 to 2014. During his time in the Obama administration, he was a member of the White House Health IT task force; a cross
agency team implementing the technology aspects of the ACA and testified to Congress on the application of technology and payment
reform to the Medicare population. He also built and led the first dedicated healthcare team at the Federal Communications Commission,
where his team initiated collaboration with the Food and Drug Administration for the regulatory streamlining of converged telecommunications,
data analytics and medical devices leading to the release of the mobile medical applications guidance by the FDA. In addition,
his team reformed the Rural Healthcare fund to create the Healthcare Connect Fund, which aligned the funding mechanism with wider
healthcare payment policy and technology reform. Dr. Kaushal is a lead investor, board member or advisor to numerous transformational
healthcare companies. Dr. Kaushal is an emergency room physician, holds an MBA from Stanford and an MD with distinction from
Imperial College of Science, Technology and Medicine, London. He is an Adjunct Professor at Stanford University with a joint position
within the newly created Biomedical Data Science Department and the medical school's Clinical Excellence Research Center. Dr. Kaushal
was selected to serve on the board of directors due to his significant management experience in the healthcare and technology industries.
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Dr. Gregory
Sorensen has served as a director as of March 10, 2020. He served as the president and CEO of Siemens Healthcare North
America from June 2011 to September 2015. Prior to Siemens, he served as Professor of Radiology and Health Sciences &
Technology at Harvard Medical School; a faculty member of the Harvard-MIT Division of Health Sciences and Technology; and co-director
of the A.A. Martinos Center for Biomedical Imaging at Massachusetts General Hospital, as well as a visiting Professor of Neuroradiology
at Oxford University. Leading up to his appointment with Siemens, Dr. Sorensen was a practicing Neuroradiologist and active
researcher with significant experience in clinical care, clinical trials, and translational research. His research and techniques
are utilized by numerous centers throughout the world in phase II and III trials in cancer, stroke, and other illnesses. He holds
a B.S. in biology from California Institute of Technology, Pasadena, CA, a M.S. in computer science from Brigham Young University,
Provo, Utah, and a medical degree from Harvard Medical School, Boston, Massachusetts. Dr. Sorensen has served as the Executive
Chairman of the Board of Directors for IMRIS, Inc., the leader in image-guided therapy solutions, the President and Chief
Executive Officer of DeepHealth, Inc. since April 2017, the Chairman of Fusion Healthcare Staffing, LLC, and a member
of the board of directors of Inviero LLC since December 2017. Dr. Sorensen was selected to serve on the board of directors
due to his significant management experience in the healthcare and technology industries.
Number and Terms of Office of Officers and Directors
Our Board consists
of five members is divided into three classes with only one class of directors being elected in each year, and with each class
(except for those directors appointed prior to its first annual meeting of stockholders) serving a three-year term. In accordance
with Nasdaq corporate governance requirements, the Company is not required to hold an annual meeting until one year after its first
fiscal year end following its listing on Nasdaq. The term of office of the first class of directors, consisting of Drs. Kaushal
and Sorensen, will expire at the first annual meeting of stockholders. The term of office of the second class of directors, consisting
of Messrs. Barasch and Hochberg, will expire at the second annual meeting of stockholders. The term of office of the third
class of directors, consisting of Dr. Carter, will expire at the third annual meeting of stockholders.
The officers are appointed
by the Board and serve at the discretion of the Board, rather than for specific terms of office. The Board is authorized to appoint
officers as it deems appropriate pursuant to our second amended and restated certificate of incorporation.
Director Independence
Nasdaq listing standards
require that a majority of our board of directors be independent. An “independent director” is defined generally as
a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which
in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment
in carrying out the responsibilities of a director. Our board of directors has determined that Drs. Carter, Kaushal and Sorensen
are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors
will have regularly scheduled meetings at which only independent directors are present.
Board Committees
Audit Committee
We have an audit committee
comprised of Drs. Sorensen, Kaushal and Carter, each of whom are independent under the Nasdaq listing standards and applicable
SEC rules.
Dr. Sorensen serves
as the Chairman of the audit committee. Each member of the audit committee is financially literate and our board of directors has
determined that Dr. Sorensen qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
58
The audit committee
is responsible for:
· appointing or replacing the independent registered public accounting firm;
59
Compensation Committee
We have a compensation
committee comprised of Drs. Kaushal, Sorensen and Carter, and Dr. Kaushal serves as chairman of the compensation committee.
We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
· reviewing our executive compensation policies and plans;
The charter also provides
that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel
or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser.
However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation
committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Director Nominations
We do not have a standing
nominating committee though we intend to form a corporate governance and nominating committee as and when required to do so by
law or Nasdaq rules. In accordance with Rule 5605(e)(2) of the Nasdaq Rules, a majority of the independent directors
may recommend a director nominee for selection by our board of directors. Our board of directors believes that the independent
directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation
of a standing nominating committee. The directors who shall participate in the consideration and recommendation of director nominees
are Drs. Carter, Kaushal and Sorensen. In accordance with Rule 5605(e)(1)(A) of the Nasdaq Rules, all such directors
are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
The board of directors
will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed
nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders).
Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth
in our bylaws.
60
We have not
formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to
possess. In general, in identifying and evaluating nominees for director, our board of directors considers educational
background, diversity of professional experience, knowledge of our business, integrity, professional reputation,
independence, wisdom, and the ability to represent the best interests of our stockholders.
Code of Ethics and Committee Charters
We have adopted a code of ethics that applies
to our directors, officers and employees (“Code of Ethics”). We have filed a copy of our Code of Ethics and our audit
committee and compensation committee charters as exhibits to our registration statement in connection with the initial public offering.
You may review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy
of the Code of Ethics will be provided without charge upon request from us in writing at 345 Park Avenue South, New York, New
York 10010 or by telephone at (212) 551-1600. We intend to disclose any amendments to or waivers
of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange
Act requires our officers, directors and persons who own more than ten percent of a registered class of our equity securities to
file reports of ownership and changes in ownership with the SEC. Officers, directors and ten percent stockholders are required
by regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of
such forms furnished to us, or written representations that no Forms 5 were required, we believe that, during the fiscal year ended
December 31, 2020, all Section 16(a) filing requirements applicable to our officers and directors were complied
with.
ITEM 11: EXECUTIVE COMPENSATION.
None of the Company’s
executive officers or directors have received any cash compensation for services rendered to the Company. From March 13, 2020
through the earlier of consummation of the Company’s initial business combination and its liquidation, the Company will pay
(i) its Chief Financial Officer $7,500 per month for his services and (ii) the sponsor $10,000 per month for office space,
secretarial and administrative services provided to members of its management team. In addition, the sponsor, the Company’s
executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred
in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due
diligence on suitable business combinations. The Company’s audit committee will review on a quarterly basis all payments
that were made to the sponsor, the Company’s executive officers or directors, or the Company’s or their affiliates.
Any such payments prior to an initial business combination will be made from funds held outside the Trust Account. Other than quarterly
audit committee review of such reimbursements, the Company does not expect to have any additional controls in place governing the
Company’s reimbursement payments to its directors and executive officers for their out-of-pocket expenses incurred in connection
with the Company’s activities on the Company’s behalf in connection with identifying and consummating an initial business
combination. Other than these payments and reimbursements, no compensation of any kind, including finder’s and consulting
fees, will be paid by the company to the sponsor, the Company’s executive officers and directors, or any of their respective
affiliates, prior to completion of its initial business combination.
After the completion
of our initial business combination, directors or members of our management team who remain with the combined company may be paid
consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent
then known, in the proxy solicitation materials or tender offer materials furnished to our stockholders in connection with a proposed
business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to
our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed
business combination, because the directors of the post-combination business will be responsible for determining executive officer
and director compensation. Any compensation to be paid to our executive officers will be determined, or recommended to the board
of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority
of the independent directors on our board of directors.
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We do not intend to
take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial
business combination, although it is possible that some or all of our executive officers and directors may negotiate employment
or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment
or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or
selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of
our initial business combination will be a determining factor in our decision to proceed with any potential business combination.
We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table
sets forth information regarding the beneficial ownership of our common stock as of March 1, 2021, by:
· each of our executive officers, directors and director nominees; and
· all our executive officers and directors as a group.
We have no compensation
plans under which equity securities are authorized for issuance.
The beneficial ownership
of our common stock is based on 29,500,000 shares of our common stock issued and outstanding as of March 1, 2021, of which
23,000,000 shares were Class A common stock and 5,750,000 were shares of Class B common stock.
Unless otherwise indicated,
the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of Class A
common stock beneficially owned by them.
Directors and Executive Officers of the Company:
Dr. Jennifer Carter 30,000 *
Dr. Mohit Kaushal 30,000 *
Dr. Gregory Sorensen 30,000 *
Five Percent Holders:
Davidson Kempner Capital management LP(6) 1,440,048 6.26 %
Park West Investors Master Fund, Limited(7) 1,199,515 5.2 %
* Less than one percent
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(1) Unless otherwise indicated, the
business address of each of the individuals and entities is 345 Park Avenue South, New York, New York 10010.
(2) Interests of our directors and
executive officers consist solely of founder shares, classified as Class B common stock. Such shares will automatically convert
into Class A common stock concurrently with or immediately following the closing of our initial business combination on a
one-for-one basis, subject to adjustment, as described elsewhere in this Report.
(3) Shares held by Deerfield Management
Company, L.P. consists of: (i) 2,500,000 units held by Deerfield Private Design Fund IV, (ii) 2,500,000 shares of Class A
common stock included within 2,500,000 units held by Deerfield Partners; (iii) 5,360,000 shares of Class B common stock
held by DFP Sponsor LLC that are convertible into shares of Class A common stock and (iv) 100,000 shares of Class B
common stock held by Mr. Hochberg, for the benefit, and at the direction, of Deerfield Management.
(4) Shares held by DFP Sponsor LLC
consists of: 5,360,000 shares of Class B common stock held by DFP Sponsor LLC that are convertible into shares of Class A
common stock. Richard Barasch, through an investment vehicle, and Christopher Wolfe are among the members of DFP Sponsor LLC and
may be entitled to distributions of securities held by DFP Sponsor LLC. Mr. Hochberg is among the managers of DFP Sponsor
LLC and will be deemed to beneficially own the securities held by DFP Sponsor LLC.
(5) According to a Schedule 13G filed
on March 16, 2020 and a Schedule 13G/A filed on February 1, 2021, Millennium Management LLC, Millennium Group Management
LLC and Israel A. Englander have beneficial ownership of 1,684,200 shares of Class A common stock. Their business address
is c/o Millennium Management LLC, 666 Fifth Avenue, New York, New York 10103.
(6) According to a Schedule 13G filed
on February 11, 2021, Davidson Kempner Capital Management LP and Anthony A. Yoseloff have beneficial ownership of 1,440,048
shares of Class A common stock. Their business address is c/o Davidson Kempner Capital Management LP, 520 Madison Avenue,
30th Floor, New York, New York 10022.
7) According to a Schedule 13G filed on
March 12, 2021, Park West Asset Management LLC (“PWAM”) and Peter S. Park have beneficial ownership of 1,317,263
shares of Class A common stock. Park West Investors Master Fund, Limited (“PWIMF”) has beneficial ownership of
1,199,515 shares of Class A common stock. PWAM is the investment manager to PWIMF and Park West Partners International, Limited
(“PWPI,” and collectively with PWIMF, the “PW Funds”). Mr. Park, through one or more affiliated entities,
is the controlling manager of PWAM. Their business address is 780 Third Avenue, 37th Floor, New York, New York 10017.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Founder Shares
On December 30,
2019, our sponsor purchased an aggregate of 4,312,500 shares of Class B common stock (the “founder shares”) in
exchange for a capital contribution of $25,000, or approximately $0.006 per share. In January 2020, our sponsor transferred
100,000 founder shares to each of Mr. Hochberg, Mr. Wolfe, and Mr. Barasch, our executive officers, and 30,000 founder
shares to each of Dr. Carter, Dr. Kaushal and Dr. Sorensen, our independent directors, for the same per-share price
initially paid by our sponsor, resulting in our sponsor holding 3,922,500 founder shares. On February 19, 2020, we effected
a 1:1 1/3 stock split of Class B
common stock resulting in our sponsor holding an aggregate of 5,360,000 founder shares, resulting in an increase in the total number
of founder shares from 4,312,500 to 5,750,000. The number of founder shares outstanding was determined so that such founder shares
would represent 20% of the outstanding shares after our IPO.
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Our initial
stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their founder shares until the
earlier to occur of: (A) one year after the completion of the initial business combination or (B) subsequent to the
initial business combination, (x) if the closing price of the our common stock equals or exceeds $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within
any 30-trading day period commencing at least 150 days after the initial business combination, or (y) the date on which
we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our
stockholders having the right to exchange their shares of our common stock for cash, securities or other property.
Private Placement Warrants
Concurrently with the
closing of our IPO, our sponsor purchased an aggregate of 3,733,334 private placement warrants at a price of $1.50 per private
placement warrant, generating gross proceeds to the Company of $5,600,000. Each private placement warrant is exercisable for one
share of our common stock at a price of $11.50 per share. The proceeds from the private placement warrants were added to the proceeds
from our IPO held in the Trust Account. If we do not complete the Business Combination or another business combination by March 13,
2022, the private placement warrants will expire worthless. The private placement warrants are non-redeemable and exercisable on
a cashless basis so long as they are held by our sponsor or its permitted transferees. Our initial stockholders have agreed, subject
to limited exceptions, not to transfer, assign or sell any of their private placement warrants until 30 days after the completion
of our initial business combination.
Administrative Services Agreement
Commencing on the date
that our securities were first listed on Nasdaq, we agreed to pay the sponsor $10,000 per month for office space, secretarial and
administrative services provided to members of our management team. Upon completion of the initial Business Combination or our
liquidation, we will cease paying such monthly fees.
Wolfe Strategic Services Agreement
Commencing on the date
that our securities were first listed on Nasdaq, we agreed to pay our Chief Financial Officer, Christopher Wolfe, $7,500 per month
for his services prior to the initial Business Combination.
Registration Rights
The initial stockholders
and holders of the private placement warrants are entitled registration rights pursuant to a registration rights agreement entered
into on March 13, 2020. The initial stockholders and holders of the private placement warrants are entitled to make up to
three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In
addition, these holders will have “piggy-back” registration rights to include their securities in other registration
statements filed by us. We will bear the expenses incurred in connection with the filing of any such registration statements. In
connection with the signing of the Business Combination Agreement, we entered into the Amended and Restated Registration Rights
Agreement, which amended and restated in its entirety the existing registration rights agreement described above if the initial
business combination is consummated.
Underwriting Agreement
We granted the underwriters
a 45-day option to purchase up to 3,000,000 additional units to cover any over-allotments, at the initial public offering price
less the underwriting discounts and commissions. The warrants that were issued in connection with the 3,000,000 over-allotment
units are identical to the public warrants and have no net cash settlement provisions. The underwriters exercised the over-allotment
option in full on March 13, 2020.
We paid an underwriting
discount of 2.0% of the per unit offering price, or $3.6 million in the aggregate at the closing of the IPO, and agreed to pay an
additional fee (the “Deferred Underwriting Fees”) of 3.5% of the gross offering proceeds, or $6.3 million in the
aggregate upon the Company’s completion of an initial business combination. The Deferred Underwriting Fees will become payable
to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial business
combination.
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ITEM 14: PRINCIPAL ACCOUNTING
FEES AND SERVICES.
The firm of WithumSmith+Brown, PC, or Withum, acts as our independent
registered public accounting firm. The following is a summary of fees paid to Withum for services rendered.
Audit Fees. Audit fees consist of fees incurred for professional
services rendered for the audit of our year-end financial statements, quarterly reviews and services that are normally provided by Withum
in connection with regulatory filings. The aggregate fees incurred by WithumSmith+Brown, PC for audit fees, inclusive of required filings
with the SEC for the period from November 1, 2019 (inception) to December 31, 2020 and of services rendered in connection with our initial
public offering, totaled $116,295.
Audit-Related Fees. Audit-related fees consist of fees billed
for assurance and related services that are reasonably related to performance of the audit or review of our year-end financial statements
and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation