Filed Pursuant to Rule 424(b)(3)
Registration No. 333-236011

PROSPECTUS SUPPLEMENT NO. 18

(to Prospectus dated March 23, 2020)

AdaptHealth Corp.

Primary Offering of

9,601,909 shares of Class A Common Stock
Issuable Upon Exercise of Warrants

Secondary Offering of

75,053,512 shares of Class A Common Stock and
4,333,333 Warrants to Purchase Class A Common Stock

This prospectus supplement supplements the prospectus dated March 23, 2020 (the “Prospectus”), which forms a part of our registration statement on Form S-1 (No. 333-236011). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (the “Commission”) on November 6, 2020 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.

The Prospectus and this prospectus supplement relate to (i) the issuance by us of up to 9,601,909 shares of our Class A Common Stock, par value $0.0001 per share (“Class A Common Stock”), which consists of (A) 5,268,576 shares issuable upon the exercise of warrants that were issued in our initial public offering pursuant to the registration statement declared effective on February 15, 2018 (the “public warrants”) and (B) 4,333,333 shares issuable upon the exercise of warrants initially issued to Deerfield/RAB Ventures LLC (our “Sponsor”) in a private placement that occurred simultaneously with our initial public offering (the “private placement warrants” and collectively with the public warrants, the “warrants”), which private placement warrants have been distributed from the Sponsor to its members, and (ii) the offer and sale from time to time in one or more offerings by the selling securityholders identified in the Prospectus of up to 75,053,512 shares of our Class A Common Stock and up to 4,333,333 private placement warrants.

Our Class A Common Stock is listed on the Nasdaq Capital Market (“Nasdaq”) and trades under the symbol “AHCO”.  On November 5, 2020, the closing price of our Class A Common Stock was $30.00. Our public warrants were formerly listed on Nasdaq under the symbol “AHCOW” and were suspended from trading on Nasdaq on December 6, 2019 because the public warrants did not satisfy the minimum 300 round lot holder requirement for listing, at which time the warrants became eligible to trade “over-the-counter” under the trading symbol “AHCOW”. A Form 25-NSE with respect to the public warrants was filed by Nasdaq on January 21, 2020, and the formal delisting of the public warrants became effective ten days thereafter. The private placement warrants are not listed on any exchange.

This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement. This prospectus supplement is qualified by reference to the Prospectus, except to the extent that the information in this prospectus supplement updates and supersedes the information contained in the Prospectus.


This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus.

__________________

See the section entitled “Risk Factors” beginning on page 5 of the Prospectus and any similar section contained in any applicable prospectus supplement to read about factors you should consider before buying our securities.

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act and are subject to reduced public company reporting requirements. We are also a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and are subject to reduced public company reporting requirements. See “Risk Factors.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

__________________

The date of this prospectus supplement is November 6, 2020

- 2 -


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-38399

AdaptHealth Corp.

(Exact name of registrant as specified in its charter)

Delaware

82-3677704

(State of Other Jurisdiction of incorporation or Organization)

(I.R.S. Employer Identification No.)

220 West Germantown Pike Suite 250, Plymouth Meeting, PA

19462

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: (610) 630-6357

Securities registered pursuant to Section 12(b) of the Act:

    

    

Name Of Each Exchange

Title of Each Class

Trading Symbol(s)

On Which Registered

Class A Common Stock, par value $0.0001 per share

AHCO

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 4, 2020, there were 63,882,204 shares of the Registrant’s Class A Common Stock issued and outstanding and 25,751,706 shares of the Registrant’s Class B Common Stock issued and outstanding.


ADAPTHEALTH CORP.

FORM 10-Q

TABLE OF CONTENTS

Page Number

PART I FINANCIAL INFORMATION

Item 1. Consolidated Interim Financial Statements (Unaudited)

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

5

Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019

6

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019

7

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2020 and 2019

8

Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

10

Notes to Consolidated Interim Financial Statements

11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 3. Quantitative and Qualitative Disclosures About Market Risk

52

Item 4. Controls and Procedures

52

PART II OTHER INFORMATION

53

Item 1. Legal Proceedings

53

Item 1A. Risk Factors

53

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

78

Item 3. Defaults upon Senior Securities

79

Item 4. Mine Safety Disclosure

79

Item 5. Other Information

79

Item 6. Exhibits

79

Signatures

82

1


CERTAIN DEFINED TERMS

Throughout this Quarterly Report on Form 10-Q, unless otherwise specified or the context so requires:

A Blocker” means Access Point Medical, Inc., a Delaware corporation;

A Blocker Seller” means Clifton Bay Offshore Investments L.P., a British Virgin Islands limited partnership;

A&R AdaptHealth Holdings LLC Agreement” means the Fifth Amended and Restated Limited Liability Company Agreement of AdaptHealth Holdings, dated as of November 8, 2019;

AdaptHealth Holdings” means AdaptHealth Holdings LLC, a Delaware limited liability company;

AdaptHealth Units” means units of AdaptHealth Holdings;

Blocker Companies” means A Blocker and BM Blocker;

Blocker Sellers” means A Blocker Seller and the BlueMountain Entities;

BlueMountain Entities” means BM AH Holdings, LLC, BlueMountain Summit Opportunities Fund II (US) L.P., BMSP L.P., BlueMountain Foinaven Master Fund L.P. and BlueMountain Fursan Fund L.P., collectively;

BM Blocker” means BM AH Holdings, LLC, a Delaware limited liability company;

BM Notes” means, collectively, the Promissory Notes, dated as of November 8, 2019, and Amended and Restated Promissory Notes, dated as of March 20, 2019, issued by AdaptHealth Holdings in favor of affiliates of BlueMountain Capital Management, LLC, which amended and restated the Promissory Notes, dated as March 20, 2019, issued by AdaptHealth Holdings in favor of affiliates of BlueMountain Capital Management, LLC;

Business Combination” means our business combination with AdaptHealth Holdings, which we completed on November 8, 2019;

Class A Common Stock” means our Class A Common Stock, par value $0.0001 per share, created on the Closing;

Class B Common Stock” means our Class B Common Stock, par value $0.0001 per share, created on the Closing;

Closing” means the closing of the Business Combination;

Common Stock” means our Class A Common Stock and our Class B Common Stock, collectively;

Consideration Unit” means one AdaptHealth Unit together with one share of Class B Common Stock;

Deerfield Private Design Fund IV” means Deerfield Private Design Fund IV, L.P., a Delaware limited partnership;

Deerfield Subscription Agreement” means the Amended and Restated Subscription Agreement, dated as of October 15, 2019, among DFB, Deerfield Private Design Fund IV and RAB Ventures (DFB) LLC;

Exchange Agreement” means the Exchange Agreement, dated as of November 8, 2019, by and among AdaptHealth, AdaptHealth Holdings, and holders of AdaptHealth Units;

2


OEP Purchaser” means OEP AHCO Investment Holdings, LLC, a Delaware limited liability company;

Put/Call Agreement” means the Put/Call Option and Consent Agreement, dated as of May 25, 2020, by and among the Company, AdaptHealth Holdings, BlueMountain Foinaven Master Fund L.P., BMSB L.P., BlueMountain Fursan Fund L.P. and BlueMountain Summit Opportunities Fund II (US) L.P., as amended on October 16, 2020;

Registration Rights Agreement” means the Registration Rights Agreement, dated as of November 8, 2019, by and among AdaptHealth, AdaptHealth Holdings, and certain investors party thereto, as amended on June 24, 2020;

Series A Preferred Stock” means the series of preferred stock of the Company designated as “Series A Convertible Preferred Stock,” par value $0.0001 per share;

Series B-1 Preferred Stock” means the series of preferred stock of the Company designated as “Series B-1 Convertible Preferred Stock,” par value $0.0001 per share;

Series B-2 Preferred Stock” means the series of preferred stock of the Company designated as “Series B-2 Convertible Preferred Stock,” par value $0.0001 per share;

Solara” means Solara Holdings, LLC, a Delaware limited liability company;

Sponsor” means Deerfield/RAB Ventures LLC;

Tax Receivable Agreement” means the Tax Receivable Agreement, dated as of November 8, 2019, by and among AdaptHealth, AdaptHealth Holdings, and holders of AdaptHealth Units; and

“Warrants” means, collectively, the warrants that were issued in our initial public offering (our “IPO”) pursuant to the registration statement declared effective on February 15, 2018 and which were redeemed on September 2, 2020 (the “public warrants”) and the warrants initially issued to our Sponsor in a private placement that occurred simultaneously with our IPO (the “private placement warrants”), which private placement warrants have been distributed from the Sponsor to its members.

3


CAUTIONARY STATEMENT

In this Quarterly Report on Form 10-Q, including "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part I Item 2, and the documents incorporated by reference herein, we make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. These statements may be preceded by, followed by or include the words "may," "might," "will," "will likely result," "should," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "continue," "target" or similar expressions.

These forward-looking statements are based on information available to us as of the date they were made, and involve a number of risks and uncertainties which may cause them to turn out to be wrong. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward- looking statements. Some factors that could cause actual results to differ include:

the ability to maintain the listing of our Class A Common Stock on Nasdaq;
competition and the ability of our business to grow and manage growth profitably;
changes in applicable laws or regulations;
fluctuations in the U.S. and/or global stock markets;
the possibility that we may be adversely affected by other economic, business, and/or competitive factors;
the impact of the coronavirus (COVID-19) pandemic and our response to it; and
other risks and uncertainties set forth in this Form 10-Q, as well as all documents incorporated by reference herein.

4


PART I – FINANCIAL INFORMATION

Item 1. Consolidated Interim Financial Statements

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

September 30, 

December 31,

2020

2019

Assets

Current assets:

  

  

Cash and cash equivalents

$

272,318

$

76,878

Accounts receivable

 

147,335

 

78,619

Inventory

 

46,477

 

13,239

Prepaid and other current assets

 

18,255

 

12,679

Total current assets

 

484,385

 

181,415

Equipment and other fixed assets, net

 

101,656

 

63,559

Goodwill

 

810,480

 

266,791

Identifiable intangible assets, net

94,725

Other assets

 

6,466

 

6,851

Deferred tax assets

 

51,114

 

27,505

Total Assets

$

1,548,826

$

546,121

Liabilities and Stockholders' Equity (Deficit)

 

 

Current liabilities:

 

 

Accounts payable and accrued expenses

$

192,337

$

102,728

Current portion of capital lease obligations

 

19,699

 

19,750

Current portion of long-term debt

 

8,479

 

1,721

Contract liabilities

 

13,231

 

9,556

Other liabilities

 

81,059

 

17,139

Total current liabilities

 

314,805

 

150,894

Long-term debt, less current portion

 

722,730

 

395,112

Other long-term liabilities

 

71,576

 

29,364

Total Liabilities

 

1,109,111

 

575,370

Commitments and contingencies (note 14)

 

 

Stockholders’ Equity (Deficit)

 

 

Class A Common Stock, par value of $0.0001 per share, 210,000,000 shares authorized; 62,680,967 and 40,816,292 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

6

4

Class B Common Stock, par value of $0.0001 per share, 35,000,000 shares authorized; 25,874,704 and 31,563,799 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

3

3

Preferred Stock, par value of $0.0001 per share, 5,000,000 shares authorized; 183,560 and 0 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

1

Additional paid-in capital

476,861

11,252

Accumulated deficit

(23,130)

(27,210)

Accumulated other comprehensive (loss) income

 

(5,111)

 

1,431

Total stockholders' equity (deficit) attributable to AdaptHealth Corp.

 

448,630

 

(14,520)

Noncontrolling interests in subsidiaries

 

(8,915)

 

(14,729)

Total stockholders' equity (deficit)

 

439,715

 

(29,249)

Total Liabilities and Stockholders' Equity (Deficit)

$

1,548,826

$

546,121

See accompanying notes to unaudited consolidated interim financial statements.

5


ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2020

    

2019

    

2020

    

2019

Net revenue

$

284,405

$

136,451

$

707,960

$

380,103

Costs and expenses:

 

  

 

  

 

 

Cost of net revenue

 

240,720

 

114,797

 

604,777

 

317,174

General and administrative expenses

 

26,306

 

12,090

 

57,745

 

31,508

Depreciation and amortization, excluding patient equipment depreciation

 

4,120

 

840

 

6,398

 

2,439

Total costs and expenses

 

271,146

 

127,727

 

668,920

 

351,121

Operating income

 

13,259

 

8,724

 

39,040

 

28,982

Interest expense, net

 

12,406

 

10,756

 

27,826

 

31,651

Loss on extinguishment of debt

 

5,316

 

 

5,316

 

2,121

Income (loss) before income taxes

 

(4,463)

 

(2,032)

 

5,898

 

(4,790)

Income tax expense (benefit)

 

(636)

 

1,027

 

2,290

 

5,444

Net income (loss)

(3,827)

(3,059)

3,608

(10,234)

Income (loss) attributable to noncontrolling interests

 

(1,338)

 

627

 

2,222

 

1,336

Net income (loss) attributable to AdaptHealth Corp.

$

(2,489)

$

(3,686)

$

1,386

$

(11,570)

Weighted average common shares outstanding - basic

57,372

21,721

47,986

19,130

Weighted average common shares outstanding - diluted

57,372

21,721

50,848

19,130

Basic earnings (loss) per share (1)

$

(0.04)

$

(0.17)

$

0.03

$

(0.60)

Diluted earnings (loss) per share (1)

$

(0.04)

$

(0.17)

$

0.02

$

(0.60)

(1) The Company's preferred stock are considered participating securities and are therefore excluded from the earnings per share calculation under the two-class method (see Note 11 to the unaudited consolidated interim financial statements).

See accompanying notes to unaudited consolidated interim financial statements.

6


ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS)

(UNAUDITED)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2020

2019

2020

2019

Net income (loss)

$

(3,827)

$

(3,059)

$

3,608

$

(10,234)

Other comprehensive loss:

 

  

 

  

 

 

Interest rate swap agreements, inclusive of reclassification adjustment

 

925

 

850

 

(11,558)

 

850

Comprehensive income (loss)

 

(2,902)

 

(2,209)

 

(7,950)

 

(9,384)

Income (loss) attributable to noncontrolling interests

 

(1,338)

 

627

 

2,222

 

1,336

Comprehensive income (loss) attributable to AdaptHealth Corp.

$

(1,564)

$

(2,836)

$

(10,172)

$

(10,720)

See accompanying notes to unaudited consolidated interim financial statements.

7


ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS)

(UNAUDITED)

Controlling

Accumulated

Additional

interest

other

Noncontrolling

Class A Common Stock

Class B Common Stock

Preferred Stock

paid-in

Members'

members'

Accumulated

comprehensive

interests in

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

capital

  

interest

  

deficit

  

deficit

  

income (loss)

  

subsidiaries

  

Total

Balance, December 31, 2019

40,816

$

4

31,564

$

3

$

$

11,252

$

$

$

(27,210)

$

1,431

$

(14,729)

$

(29,249)

Issuance of Class A Common Stock for an acquisition

387

6,248

6,248

Exchange of Class B Common Stock for Class A Common Stock

1,000

(1,000)

(361)

361

Exercise of warrants

1,092

Equity-based compensation

59

2,223

2,223

Net income (loss)

(158)

424

266

Equity activity resulting from Tax Receivable Agreement

2,482

2,482

Change in fair value of interest rate swaps, inclusive of reclassification adjustment

(6,570)

(4,847)

(11,417)

Balance, March 31, 2020

43,354

$

4

30,564

$

3

$

$

21,844

$

$

$

(27,368)

$

(5,139)

$

(18,791)

$

(29,447)

Exchange of Class B Common Stock for Class A Common Stock

2,055

(2,055)

(1,580)

1,580

Exercise of warrants

1,034

1

11,882

11,883

Equity-based compensation

32

3,244

3,244

Exchange of Class A Common Stock for Series B-1 Preferred Stock

(15,810)

(2)

158

1

1

Distributions to noncontrolling interests

(800)

(800)

Net income

4,033

3,136

7,169

Equity activity resulting from Tax Receivable Agreement

2,223

2,223

Change in fair value of interest rate swaps, inclusive of reclassification adjustment

(656)

(410)

(1,066)

Balance, June 30, 2020

30,665

$

3

28,509

$

3

158

$

1

$

37,614

$

$

$

(23,335)

$

(5,795)

$

(15,285)

$

(6,794)

Issuance of Class A Common Stock for acquisitions

4,344

1

83,280

83,281

Sale of Class A Common Stock and Series A Preferred Stock, net of offering costs of $1,639

10,930

1

75

223,360

223,361

Issuance of Class A Common Stock, net of offering costs of $9,558

9,200

1

133,041

133,042

Exchange of Class B Common Stock for Class A Common Stock

2,634

(2,634)

(7,467)

7,467

Exercise of warrants

1,979

12,612

12,612

Equity-based compensation

35

5,502

5,502

Conversion of Series B-2 Preferred Stock to Series B-1 Preferred Stock

(9)

Conversion of Series A Preferred Stock to Class A Common Stock

2,888

(40)

Class A Common Stock issued in connection with Employee Stock Purchase Plan

6

Net loss

(2,489)

(1,338)

(3,827)

Equity activity resulting from Tax Receivable Agreement

2,236

2,236

Equity activity resulting from the impact of other changes in ownership and deferred taxes

(10,623)

(10,623)

Equity activity resulting from the Put/Call Agreement

(2,694)

2,694

Change in fair value of interest rate swaps, inclusive of reclassification adjustment

684

241

925

Balance, September 30, 2020

62,681

$

6

25,875

$

3

184

$

1

$

476,861

$

$

$

(23,130)

$

(5,111)

$

(8,915)

$

439,715

8


Controlling

Accumulated

Additional

interest

other

Noncontrolling

Class A Common Stock

Class B Common Stock

Preferred Stock

paid-in

Members'

members'

Accumulated

comprehensive

interests in

    

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

capital

  

interest

  

deficit

  

deficit

  

income (loss)

  

subsidiaries

  

Total

Balance, December 31, 2018

$

$

$

$

$

113,274

$

(13,371)

$

$

$

2,865

$

102,768

Issuance of members' interest, net of offering costs of $837

 

19,163

19,163

Redemption of members' interest

 

(2,112)

(1,601)

(3,713)

Equity-based compensation

 

5,223

5,223

Distributions to members

 

(250,000)

(250,000)

Net income (loss)

(5,801)

348

(5,453)

Balance, March 31, 2019

 

$

$

$

$

$

135,548

$

(270,773)

$

$

$

3,213

$

(132,012)

Equity-based compensation

 

183

183

Distributions to noncontrolling interest

 

(1,338)

(1,338)

Net income (loss)

(2,083)

361

(1,722)

Balance, June 30, 2019

$

$

$

$

$

135,731

$

(272,856)

$

$

$

2,236

$

(134,889)

Equity-based compensation

400

400

Net income (loss)

(3,686)

627

(3,059)

Change in fair value of interest rate swaps, inclusive of reclassification adjustment

850

850

Balance, September 30, 2019

 

$

$

$

$

$

136,131

$

(276,542)

$

$

850

$

2,863

$

(136,698)

See accompanying notes to unaudited consolidated interim financial statements.

9


ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

Nine Months Ended September 30, 

2020

2019

Cash flows from operating activities:

Net income (loss)

$

3,608

$

(10,234)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

Depreciation and amortization, including patient equipment depreciation

 

55,186

 

45,077

Equity-based compensation

 

10,969

 

5,806

Deferred income tax (benefit) expense

 

(564)

 

2,115

Change in fair value of interest rate swaps, net of reclassification adjustment

(2,130)

12,141

Change in fair value of contingent consideration

(2,900)

Payment of contingent consideration in connection with an acquisition

(1,000)

Amortization of intangible assets

2,675

Amortization of deferred financing costs

 

1,189

 

830

Amortization of bond discount

128

Imputed interest expense

46

Write-off of deferred financing costs

 

5,316

 

2,121

Gain on sale of investment

(591)

Changes in operating assets and liabilities, net of effects from acquisitions:

 

 

Accounts receivable

 

(19,251)

 

(17,250)

Inventory

 

(10,166)

 

(2,388)

Prepaid and other assets

 

(1,459)

 

(2,381)

Accounts payable and accrued expenses and other current liabilities

 

104,231

 

7,337

Net cash provided by operating activities

 

145,287

 

43,174

Cash flows from investing activities:

 

 

Payments for business acquisitions, net of cash acquired

 

(605,309)

 

(47,946)

Purchases of equipment and other fixed assets

 

(22,834)

 

(14,453)

Payments for investments in cost method companies

(1,000)

Proceeds from sale of investment

2,046

Net cash used in investing activities

 

(627,097)

 

(62,399)

Cash flows from financing activities:

 

 

Proceeds from borrowings on long-term debt and lines of credit

 

536,275

 

345,500

Repayments on long-term debt and lines of credit

 

(545,584)

 

(156,062)

Proceeds from the sale of Class A Common Stock and Series A Preferred Stock

225,000

Proceeds from the issuance of Class A Common Stock

142,600

Proceeds from the issuance of senior unsecured notes, net of related discount

343,875

Proceeds from exercise of warrants

24,495

Payments on capital leases

 

(29,710)

 

(28,660)

Payments for equity issuance costs

 

(11,197)

 

(837)

Payments of deferred financing costs

 

(6,754)

 

(9,028)

Distributions to noncontrolling interests

 

(800)

 

(1,338)

Payment of contingent consideration in connection with acquisitions

 

(200)

 

(13,000)

Payment of deferred purchase price in connection with an acquisition

(750)

Proceeds from issuance of promissory note payable

 

 

100,000

Proceeds from issuance of members' interests

 

 

20,000

Distributions to members

 

 

(250,000)

Payments for redemption of members' interests

 

 

(3,713)

Net cash provided by financing activities

 

677,250

 

2,862

Net increase (decrease) in cash and cash equivalents

 

195,440

 

(16,363)

Cash and cash equivalents at beginning of period

 

76,878

 

25,186

Cash and cash equivalents at end of period

$

272,318

$

8,823

Supplemental disclosures:

 

 

Cash paid for interest

$

22,788

$

15,769

Cash paid for income taxes

3,062

492

Noncash investing and financing activities:

Equipment acquired under capital lease obligations

$

28,888

$

29,565

Unpaid equipment and other fixed asset purchases at end of period

8,452

8,483

Equity consideration issued in connection with acquisitions

89,529

Contingent purchase price in connection with acquisitions

6,464

6,425

Seller note issued in connection with an acquisition

2,000

Deferred purchase price in connection with acquisitions

33

1,500

See accompanying notes to unaudited consolidated interim financial statements.

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Table of Contents

ADAPTHEALTH CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements (Unaudited)

(1)          General Information

AdaptHealth Corp. and subsidiaries (AdaptHealth or the Company), f/k/a DFB Healthcare Acquisitions Corp. (DFB), is a leading provider of home healthcare equipment, medical supplies to the home and related services in the United States. The Company focuses primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea (OSA), (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps), (iii) home medical equipment (HME) to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME medical devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs. The Company services beneficiaries of Medicare, Medicaid and commercial insurance payors.

On July 8, 2019, AdaptHealth Holdings LLC (AdaptHealth Holdings) entered into an Agreement and Plan of Merger (the Merger Agreement), as amended on October 15, 2019, with DFB, pursuant to which AdaptHealth Holdings combined with DFB (the Business Combination). The Business Combination closed on November 8, 2019. Refer to Note 3, Significant Transactions, for additional information regarding the Business Combination.

Unless the context otherwise requires, “the Company”, “we,” “us,” and “our” refer, for periods prior to the closing of the Business Combination, to AdaptHealth Holdings and its subsidiaries and, for periods upon or after the closing of the Business Combination, to AdaptHealth Corp. and its subsidiaries, including AdaptHealth Holdings and its subsidiaries.

The consolidated interim financial statements are unaudited, but reflect all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Interim results are not necessarily indicative of the results for a full year.

There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

(a)          Basis of Presentation

The consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). In the opinion of management, the consolidated interim financial statements include all necessary adjustments for a fair presentation of the financial position and results of operations for the periods presented.

The Business Combination was accounted for as a reverse recapitalization, with DFB treated as the acquired company and AdaptHealth Holdings as the acquirer, for financial reporting purposes. Therefore, the equity structure has been restated to that of the Company.

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the Securities Act), as modified by the Jumpstart our Business Startups Act of 2012, (the JOBS Act), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and other exemptions.

(b)         Basis of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

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ADAPTHEALTH CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements (Unaudited)

(c)          Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

(d)          Accounting Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management 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 consolidated financial statements, and reported amounts of revenues and expenses during the reporting period. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements and other factors that management believes to be reasonable. Significant areas requiring the use of management estimates relate to revenue recognition and the valuation of accounts receivable (implicit price concession), income taxes, contingent consideration, equity-based compensation, interest rate swaps, and long-lived assets, including goodwill. Actual results could differ from those estimates.

(e)          Valuation of Goodwill and Intangible Assets

The Company has a significant amount of goodwill on its balance sheet that resulted from the business acquisitions the Company has made in recent years. Goodwill is not amortized and is tested for impairment annually and upon the occurrence of a triggering event or change in circumstances indicating a possible impairment. Such changes in circumstance can include, among others, changes in the legal environment, reimbursement environment, operating performance, and/or future prospects. The Company performs its annual impairment review of goodwill during the fourth quarter of each year. The impairment testing can be performed on either a quantitative or qualitative basis. The Company first assesses qualitative factors to determine whether it is necessary to perform quantitative goodwill impairment testing. If determined necessary, the Company applies the quantitative impairment test to identify and measure the amount of impairment, if any.

Definite-lived intangible assets consist of payor contracts, developed technology and tradenames. These assets are amortized using the straight-line method over their estimated useful lives, which reflects the pattern in which the economic benefits of the assets are expected to be consumed. These assets are tested for impairment consistent with the Company’s long-lived assets. The following table summarizes the useful lives of the intangible assets acquired:

Payor contracts

10

years

Developed technology

5

years

Tradenames

5 to 10

years

(f)          Business Segment

The Company’s chief operating decision-makers are its Chief Executive Officer and President, who make resource allocation decisions and assess performance based on financial information presented on an aggregate basis. There are no segment managers who are held accountable by the chief operating decision-makers, or anyone else, for any planning, strategy and key decision-making regarding operations. The corporate office is responsible for contract negotiation with vendors and payors, corporate compliance with healthcare laws and regulations, and revenue cycle management. Accordingly, the Company has a single reportable segment and operating segment structure.

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ADAPTHEALTH CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements (Unaudited)

(g)        Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (ASU 2016-02), which amended authoritative guidance on accounting for leases. The new provisions require that a lessee of operating leases recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. The Company is required to adopt the new standard for the annual reporting period beginning January 1, 2022, and interim reporting periods beginning January 1, 2023. The adoption of this standard is expected to have a material impact on the Company’s financial position. The Company is still evaluating the impact on its results of operations and does not expect the adoption of this standard to have an impact on liquidity.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (ASC Topic 350): Simplifying the Test for Goodwill Impairment, which will eliminate the requirement to calculate the implied fair value of goodwill, commonly referred to as “Step 2” in the current goodwill impairment test. An entity will still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company adopted this standard on January 1, 2020, which did not have any impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”. This guidance aims to simplify accounting for income taxes, changes the accounting for certain income tax transactions, and makes minor improvements to the codification. The guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years, with early adoption permitted. Specific amendments in the guidance should be applied on retrospective or modified retrospective basis while other amendments should be applied on a prospective basis. The Company has elected to early adopt this guidance in the third quarter of 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which is intended to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets. The standard replaces the current incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. Further, the FASB issued ASU 2019-04 and ASU 2019-05 to provide additional guidance on the credit losses standard. The standard is effective for fiscal years beginning after December 15, 2022, for smaller reporting companies, including interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under GAAP. It further allows hedge accounting to be maintained and a one-time transfer or sale of qualifying held-to-maturity securities. The expedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of December 31, 2022. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

..

(2)         Revenue Recognition and Accounts Receivable

Revenue Recognition

The Company generates revenues for services and related products that the Company provides to patients for home medical equipment, related supplies, and other items. The Company’s revenues are recognized in the period in

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ADAPTHEALTH CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements (Unaudited)

which services and related products are provided to customers and are recorded either at a point in time for the sale of supplies and disposables, or over the fixed monthly service period for equipment.

Revenues are recognized when control of the promised good or service is transferred to customers, in an amount that reflects the consideration to which the Company expects to receive from patients or under reimbursement arrangements with Medicare, Medicaid and third-party payors, in exchange for those goods and services.

Sales revenue is recognized upon transfer of control of products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenues for the sale of durable medical equipment and related supplies, including oxygen equipment, ventilators, wheelchairs, hospital beds and infusion pumps, are recognized at the time of delivery.

The Company provides certain equipment to patients which is reimbursed periodically in fixed monthly payments for as long as the patient is using the equipment and medical necessity continues (in certain cases, the fixed monthly payments are capped at a certain amount). The equipment provided to the patient is based upon medical necessity as documented by prescriptions and other documentation received from the patient’s physician. The patient generally does not negotiate or have input with respect to the manufacturer or model of the equipment prescribed by their physician and delivered by the Company. Once initial delivery of this equipment is made to the patient for initial setup, a monthly billing process is established based on the initial setup service date. The Company recognizes the fixed monthly revenue ratably over the service period as earned, less estimated adjustments, and defers revenue for the portion of the monthly bill that is unearned. No separate revenue is earned from the initial setup process. Included in fixed monthly revenue are unbilled amounts for which the revenue recognition criteria had been met as of period-end but were not yet billed to the payor. The estimate of net unbilled fixed monthly revenue recognized is based on historical trends and estimates of future collectability.

The Company disaggregates net revenue from contracts with customers by payor type and by core service lines. The Company believes that disaggregation of net revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The payment terms and conditions within the Company’s revenue-generating contracts vary by payor type and payor source.

The composition of net revenue by payor type for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands):

Three Months Ended September 30, 

Nine Months Ended September 30, 

2020

    

2019

    

2020

2019

Insurance

$

175,418

$

77,136