ONCOLOGY INSTITUTE, INC. – 10-Q – Management’s Discussion and Analysis of Financial Condition and Results of Operations


The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the consolidated
results of operations and financial condition of The Oncology Institute, Inc.
("TOI") along with its consolidating subsidiaries (the "Company"). The
discussion should be read together with the unaudited consolidated financial
statements and the related notes that are included elsewhere in this Report. The
information in this discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities and Exchange Act of 1934, as amended. Such statements are
based upon current expectations, as well as management's beliefs and assumptions
and involve a high degree of risk and uncertainty. Any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements. Statements that include the words "believes,"
"anticipates," "plans," "expects." "intends," and similar expressions that
convey uncertainty of future events or outcomes are forward-looking statements.
Our actual results could differ materially from those discussed or suggested in
the forward-looking statements herein. Factors that could cause or contribute to
such differences include those described under the heading "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31, 2021. In addition, as
a result of these and other factors, our past financial performance should not
be relied on as an indication of future performance. All forward-looking
statements in this document are based on information available to us as of the
filing date of this Quarterly Report on Form 10-Q and we assume no obligation to
update any forward-looking statements or the reasons why our actual results may
differ. All dollar values are expressed in thousands, unless otherwise noted.

Overview

The Company is a leading value-based oncology company that manages
community-based oncology practices that serve patients at 67 clinic locations
across 11 markets and four states throughout the United States, which are
staffed with 96 oncologists and advanced practice providers. 53 of these clinics
are staffed with 84 providers employed by our affiliated physician-owned
professional corporations, which management refers to as the "TOI PCs", which
have provided care for more than 51,000 patients in 2021 and managed a
population of approximately 1.5 million patients under value-based agreements as
of March 31, 2022. The Company also provides management services on behalf of 14
clinic locations owned by independent oncology practices. The Company's mission
is to heal and empower cancer patients through compassion, innovation, and
state-of-the-art medical care.

The Company's managed clinics provide a range of medical oncology services,
including physician services, in-house infusion and dispensary, clinical trial
services, radiation, innovative programs like outpatient stem cell transplants
and transfusions, along with 24/7 patient support. Many of our services, such as
managing clinical trials, palliative care programs and stem cell transplants,
are traditionally accessed through academic and tertiary care settings, while
the TOI PCs bring these services to patients in a community setting. As
scientific research progresses and more treatment options become available,
cancer care is shifting from acute care episodes to chronic disease management.
With this shift, it is increasingly important for high-quality, high-value
cancer care to be available in a local community setting to all patients in
need.

As a value-based oncology company, the Company seeks to deliver both better
quality care and lower cost of care. The Company works to accomplish this goal
by reducing wasteful, inefficient or counterproductive care that drives up costs
but does not improve outcomes. The Company believes payors and employers are
aligned with the value-based model due to its enhanced access, improved
outcomes, and lower costs. Patients under the Company's affiliated providers'
care can benefit from evidence-based and personalized care plans, gain access to
sub-specialized care in convenient community locations, and lower out-of-pocket
costs. The Company believes its affiliated providers enjoy the stability and
predictability of a large multi-state practice, are not incentivized or
pressured to overtreat when it may be inconsistent with a patient's goals of
care, and can focus on practicing outstanding evidence-based medicine, rather
than business building.

The Business Combination

On June 28, 2021, DFP Healthcare Acquisition Corp. ("DFPH"), Orion Merger Sub I,
Inc. ("First Merger Sub") and Orion Merger Sub II, LLC ("Second Merger Sub")
entered into an agreement and plan of merger ("Merger Agreement") with TOI
Parent, Inc. ("TOI Parent") (collectively, the "Business Combination"). In
connection with the Business Combination, DFPH entered into subscription
agreements with certain investors (the "PIPE Investors"), whereby it issued 17.5
million shares of common stock at $10.00 per share and 100,000 shares of
preferred stock at $1,000.00 per share ("PIPE Shares") for an aggregate
investment of $275,000 ("PIPE Investment"), which closed simultaneously with the
consummation of the Business Combination.

The Business Combination closed on November 12, 2021 ("Closing Date"). On the
Closing Date, (i) First Merger Sub merged with and into TOI Parent, with TOI
Parent being the surviving corporation and (ii) immediately following, TOI
Parent merged with and into Second Merger Sub ("Legacy TOI"), with Second Merger
Sub being the surviving entity and a wholly

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owned subsidiary of DFPH. DFPH was renamed "The Oncology Institute, Inc." and
TOI Common Stock and Public Warrants continued to be listed on Nasdaq under the
ticker symbols "TOI" and "TOIIW," respectively.

The total merger consideration on the Closing Date was $762,052, consisting of
51.3 million shares of common stock, valued at $10.00 per share (aggregate
$595,468, inclusive of shares of DFPH common stock issuable per restricted stock
units and the exercise of Legacy TOI stock options), and $166,584 in cash.
Legacy TOI also issued 12.5 million shares of common stock pursuant to the terms
of an earnout ("Earnout Shares"). The earnout shares are allocable to both
Legacy TOI stockholders and Legacy TOI option holders. On the Closing Date,
shares of DFPH common stock that were not otherwise redeemed as part of the DFPH
public stockholder vote and PIPE Shares automatically converted into shares of
TOI stock on a one-for-one basis.

The Business Combination was accounted for as a reverse recapitalization in
accordance with U.S. generally accepted accounting principles ("U.S. GAAP").
Under this method of accounting, DFPH was treated as the "acquired" company for
accounting purposes and the Business Combination was treated as the equivalent
of Legacy TOI issuing stock for the net assets of DFPH, accompanied by a
recapitalization. The net assets of DFPH are stated at historical cost, with no
goodwill or other intangible assets recorded. Operations prior to the Business
Combination were those of Legacy TOI.

Public Company Costs

Subsequent to the Business Combination, the Company continues as an
SEC-registered and Nasdaq-listed company. The Company expects to hire additional
staff and implement new processes and procedures to address public company
requirements. The Company also expects to incur substantial additional expenses
for, among other things, directors' and officers' liability insurance, director
fees, and additional internal and external costs for investor relations,
accounting, audit, legal and other functions.

Impact of COVID-19

The measures to contain the spread and impact of COVID-19 and other developments
related to COVID-19 have affected the way in which the Company conducts its
day-to-day business. The Company has followed U.S. guidance to protect its
employees and operations during the pandemic and implemented a partially remote
environment for certain business activities. The Company cannot predict the
ongoing impacts of the COVID-19 pandemic or the distribution of vaccines on its
business or operations, but will continue to actively monitor the related issues
and may take further action that alters its business operations, including as
may be required by federal, state, local or foreign authorities or that it
determines are in the best interests of its employees, payors, partners and
stockholders.

As a result of the COVID-19 pandemic, federal and state governments have passed
legislation, promulgated regulations, and taken other administrative actions
intended to assist healthcare providers in providing care to COVID-19 and other
patients during the public health emergency. Sources of relief include the
Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which was
enacted on March 27, 2020, the Paycheck Protection Program and Health Care
Enhancement Act (the "PPPHCE Act"), which was enacted on April 24, 2020, and the
Consolidated Appropriations Act, 2021 (the "CAA"), which was enacted on December
27, 2020. In addition, the CARES Act provides for an expansion of the Medicare
Accelerated and Advance Payment Program whereby inpatient acute care hospitals
and other eligible providers were able to request accelerated payment of up to
100% of their Medicare payment amount for a six-month period to be repaid
through withholding of future Medicare fee-for-service payments. Various other
state and local programs also exist to provide relief, either independently or
through distribution of monies received via the CARES Act. During 2021 and 2020,
the Company obtained loans of $4,993 pursuant to the CARES Act; $2,727 under the
Accelerated and Advance Payment Program; and $2,001 from Provider Relief Funding
under the CARES Act. Additionally, the Company obtained loans of $332 under the
CARES Act as a result of acquisitions of physician practices. As of March 31,
2022, all loans obtained by the Company had been forgiven.

Key Factors Affecting Performance

Through the TOI PCs, the Company serves adult and senior cancer patients in
markets that have Medicare Advantage ("MA") plans. The Company plans to leverage
its long-established, strong relationships with payors to continue to build out
its network and increase access to cancer patients in adjacent markets, while at
the same time, decreasing oncology care costs for both patients and payors. The
Company seeks to provide high quality and lower cost care delivery through the
following capabilities:

•a recruiting process focused on selecting physicians that want to practice
evidence-based medicine;

•technology-enabled care pathways ensuring adherence to evidence-based clinical
protocols;

•strong clinical culture and physician oversight;

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•care management to prevent unnecessary hospitalizations;

•care delivered in community clinics versus hospital setting;

•clinically appropriate integration of palliative care and hospice aligned with
patients’ goals for care;

•access to clinical trials providing cutting-edge treatment options at low or no
cost to patients or payors; and

•appropriate provider training on clinical documentation to ensure proper risk
adjustment and reimbursement for complex patients.

Key Business Metrics

In addition to our financial information, the Company's management reviews a
number of operating and financial metrics, including the following key metrics,
to evaluate our business, measure our performance, identify trends affecting our
business, formulate business plans, and make strategic decisions.

                                                                Three Months Ended March 31,
                                                                 2022                   2021
Clinics (1)                                                            67                    55
Markets                                                                11                     8
Lives under value-based contracts (millions)                          1.5                   1.2
Adjusted EBITDA (in thousands)                             $       (5,184)

$ 69

(1) Includes independent oncology practices to which we provide limited
management services, but do not bear the operating costs.

The Company defines adjusted EBITDA as net income (loss) excluding:

•Depreciation and amortization,

•Interest expense,

•Income tax expense,

•Board and management fees,

•Non-cash addbacks,

•Changes in fair value of liabilities,

•Stock-based compensation,

•Practice acquisition-related costs,

•Consulting and legal fees,

•Public company transaction costs, and

•Other specific charges.

The Company includes adjusted EBITDA because it is an important measure upon
which our management uses to assess the results of operations, to evaluate
factors and trends affecting the business, and to plan and forecast future
periods.

Adjusted EBITDA is "non-GAAP" financial measure within the meaning of Item 10 of
Regulation S-K promulgated by the SEC. Management believes that this measure
provides an additional way of viewing aspects of the Company's operations that,
when viewed with the GAAP results, provides a more complete understanding of the
Company's results of operations and the factors and trends affecting the
business. However, non-GAAP financial measures should be considered a supplement
to, and not as a substitute for, or superior to, the corresponding measures
calculated in accordance with U.S. GAAP. Non-GAAP financial measures used by
management may differ from the non-GAAP measures used by other companies,
including the Company's competitors. Management encourages investors and others
to review the Company's financial information in its entirety, not to rely on
any single financial measure.

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The following table provides a reconciliation of net income (loss), the most
closely comparable GAAP financial measure, to Adjusted EBITDA:

                                                       Three Months Ended March 31,                       Change
(dollars in thousands)                                   2022                2021                $                    %
Net income (loss)                                    $   19,286$    (996)$  20,282               (2036.3) %
Depreciation and amortization                               987                777                210                  27.0  %
Interest expense                                             74                101                (27)                (26.7) %
Income tax expense                                          180                218                (38)                (17.4) %
Board and management fees                                    45                106                (61)                (57.5) %
Non-cash addbacks(1)                                        197                (13)               210               (1615.4) %
Share-based compensation                                  8,552                 42              8,510               20261.9  %
Change in fair value of liabilities                     (37,979)                 -            (37,979)                     N/A
Practice acquisition-related costs(2)                       422                 90                332                 368.9  %
Consulting and legal fees(3)                                655                387                268                  69.3  %
Other, net(4)                                               953               (643)             1,596                (248.2) %
Public company transaction costs                          1,444                  -              1,444                      N/A
Adjusted EBITDA                                      $   (5,184)$      69$  (5,253)              (7613.0) %


(1)  During the three months ended March 31, 2022, non-cash addbacks were
primarily comprised of bad debt write-offs of $154, non-cash rent of $29 and
other miscellaneous charges of $14. During the three months ended March 31,
2021, non-cash addbacks were primarily comprised of a $13 tenant improvement
allowance.

(2)  Practice acquisition-related costs were comprised of consulting and legal
fees incurred to perform due diligence, execute, and integrate acquisitions of
various oncology practices.

(3)  Consulting and legal fees were comprised of a subset of the Company's total
consulting and legal fees during the three months ended March 31, 2022 and 2021,
and related to certain advisory projects, software implementations, and legal
fees for debt financing and predecessor litigation matters.

(4)  Other, net is comprised of severance expenses resulting from cost
rationalization programs of $18 and $0, as well as temporary labor of $485 and
$223, recruiting expenses to build out corporate infrastructure of $424 and $155
and other miscellaneous charges of $26 and $0 during the three months ended
March 31, 2022 and 2021, respectively. During the three months ended March 31,
2022 and 2021 such expenses were partially offset by $0 and $1,023,
respectively, of stimulus funds received under the CARES Act.

Components of Results of Operations

Revenue

The Company receives payments from the following sources for services rendered:
(i) commercial insurers; (ii) pharmacy benefit managers ("PBMs"), (iii) the
federal government under the Medicare program administered by the Centers for
Medicare and Medicaid Services ("CMS"); (iv) state governments under Medicaid
and other programs; (v) other third-party payors and managed care organizations
(e.g., risk bearing organizations and independent practice associations
("IPAs")); and (vi) individual patients and clients.

Revenue primarily consists of capitation revenue, fee-for-service ("FFS")
revenue, dispensary revenue, and clinical trials revenue. Capitation and FFS
revenue comprise the revenues within the Company's patient services segment and
are presented together in the results of operations. The following paragraphs
provide a summary of the principal forms of our billing arrangements and how
revenue is recognized for each type of revenue.

Capitation

Capitation revenues consist primarily of fees for medical services provided by
the TOI PCs to the Company's patients under a capitated arrangement with various
managed care organizations. Capitation revenue is paid monthly based on the
number of enrollees by the contracted managed care organization (per member per
month or "PMPM"). Capitation contracts generally have a legal term of one year
or longer. Payments in capitation contracts are variable since they primarily
include PMPM fees associated with unspecified membership that fluctuates
throughout the term of the contract; however, based on our

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experience, our total underlying membership generally increases over time as
penetration of MA products grows. Certain contracts include terms for a
capitation deduction where the cost of out-of-network referrals of members are
deducted from the future payment. Revenue is recognized in the month services
are rendered on the basis of the transaction price established at that time.

Fee-for-service revenue

FFS revenue represents revenue earned under contracts in which we bill and
collect for medical services rendered by the TOI PCs' employed physicians. The
terms for FFS contracts are short in duration and only last for the period over
which services are rendered (typically, one day). FFS revenue consists of fees
for medical services provided to patients. As specialist providers, our FFS
revenue is dependent on referrals from other physicians, such as primary care
physicians. The Company's affiliated providers build trusted, professional
relationships with these physicians and their associated medical groups, which
can lead to recurring FFS volume; however, this volume is subject to numerous
factors the Company cannot control and can fluctuate over time. The Company also
receives FFS revenue for capitated patients that receive medical services which
are excluded from the Company's capitation contracts. Under the FFS
arrangements, third-party payors and patients are billed for patient care
services provided by the TOI PCs. Payments for services provided are generally
less than billed charges. The Company records revenue net of an allowance for
contractual adjustments, which represents the net revenue expected to be
collected from third-party payors (including managed care, commercial, and
governmental payors such as Medicare and Medicaid), and patients. These expected
collections are based on fees and negotiated payment rates in the case of
third-party payors, the specific benefits provided for under each patient's
healthcare plan, mandated payment rates in the case of Medicare and Medicaid
programs, and historical cash collections (net of recoveries). The recognition
of net revenue (gross charges less contractual allowances) from such services is
dependent on certain factors, such as the proper completion of medical charts
following a patient visit, the forwarding of such charts to our billing center
for medical coding and entering into the Company's billing system, and the
verification of each patient's submission or representation at the time services
are rendered as to the payor(s) responsible for payment of such services.
Revenue is recorded on the date the services are rendered based on the
information known at the time of entering of such information into the Company's
billing systems as well as an estimate of the revenue associated with medical
services.

Dispensary

Oral prescription drugs prescribed by doctors to their patients are sold
directly through the TOI PCs' dispensaries. Revenue for the prescriptions is
based on fee schedules set by various PBMs and other third-party payors. The fee
schedule is often subject to direct and indirect remuneration ("DIR") fees,
which are based primarily on pre-established metrics. DIR fees may be assessed
in the periods after payments are received against future payments. The Company
recognizes revenue, deducted by estimated DIR fees, at the time the patient
takes possession of the oral drug.

Clinical trials revenue

The TOI PCs also enter into contracts to perform clinical research trials. The
terms for clinical trial contracts last many months as the clinical research is
performed. Each contract represents a single, integrated set of research
activities that are satisfied over time as the output of results from the trial
is captured for the trial sponsor to review. Under the clinical trial contracts,
the TOI PCs receive a fixed payment for administrative, set-up, and close-down
fees; a fixed amount for each patient site visit; and certain expense
reimbursements. The Company recognizes revenue for these arrangements on the
fees earned to date based on the state of the trial, as established under
contract with the customer.

Operating Expenses

Cost of services

Cost of services primarily includes chemotherapy drug costs, clinician salaries
and benefits, and medical supplies. Clinicians include oncologists, advanced
practice providers such as physician assistants and nurse practitioners, and
registered nurses employed by the TOI PCs.

Dispensary cost

Dispensary cost primarily includes the cost of oral medications dispensed in the
TOI PCs’ clinic locations.

Selling, general and administrative expense

Selling, general and administrative expenses include employee-related expenses,
including both clinic and field support staff as well as central administrative
and corporate staff. These expenses include salaries and related costs and
stock-based

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compensation for our executives and physicians. The Company's selling, general
and administrative expenses also includes occupancy costs, technology
infrastructure, operations, clinical and quality support, finance, legal, human
resources, and business development. The Company expects its general and
administrative expenses to increase over time following the consummation of the
Business Combination due to the additional legal, accounting, insurance,
investor relations and other costs that the Company will incur as a public
company, as well as other costs associated with continuing to grow the business.
While the Company expects its selling, general and administrative expenses to
increase in absolute dollars in the foreseeable future. such expenses are on
average expected to decrease as a percentage of revenue over the long term.

Results of Operations

The following table sets forth our consolidated statements of operations data
expressed as a percentage of total revenues for the periods indicated. The
Company's management is not aware of material events or uncertainties that would
cause the financial information below to not be indicative of future operating
results or results of future financial condition.

                                                                           Three Months Ended March 31,
                                                                           2022                     2021
Revenue
Patient services                                                               63.6  %                  61.0  %
Dispensary                                                                     33.8  %                  36.2  %
Clinical trials & other                                                         2.6  %                   2.8  %
Total operating revenue                                                       100.0  %                 100.0  %
Operating expenses
Direct costs - patient services                                                49.6  %                  47.5  %
Direct costs - dispensary                                                      27.8  %                  31.1  %
Direct costs - clinical trials & other                                          0.2  %                   0.3  %
Selling, general and administrative expense                                    54.0  %                  23.0  %
Depreciation and amortization                                                   1.8  %                   1.6  %
Total operating expenses                                                      133.4  %                 103.5  %
Loss from operations                                                          (33.4) %                  (3.5) %
Other non-operating expense (income)
Interest expense                                                                0.1  %                   0.2  %
Change in fair value of derivative warrant liabilities                          2.6  %                     -  %
Change in fair value of earnout liabilities                                   (71.5) %                     -  %
Gain on debt extinguishment                                                    (0.3) %                     -  %
Other, net                                                                      0.3  %                  (2.2) %
Total other non-operating income                                              (68.8) %                  (2.0) %
Income before provision for income (loss) taxes                                35.4  %                  (1.5) %
Income tax (expense) benefit                                                   (0.3) %                  (0.4) %
Net income (loss)                                                              35.1  %                  (1.9) %

Comparison of the Three Months Ended March 31, 2022 and 2021

Revenue

                                  Three Months Ended March 31,                    Change
(dollars in thousands)                 2022                    2021           $            %
Patient services           $        35,057$ 29,622$ 5,435        18.3  %
Dispensary                          18,679                    17,618        1,061         6.0  %
Clinical trials & other              1,425                     1,340           85         6.3  %
Total operating revenue    $        55,161$ 48,580$ 6,581        13.5  %


Patient services

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The increase in patient services revenue was primarily due to a 11.0% increase
in FFS revenue as a result of the Q4 2021 practice acquisitions and an overall
increase in clinic count as well as a 7.4% increase in capitation revenue due to
new capitation contracts entered into in the latter half of 2021.

Dispensary

The increase in dispensary revenue was primarily due to a 18.5% increase in the
average revenue per fill offset by a 10.6% decline in the number of fills due to
the new Medi-Cal reimbursement policy that was implemented in 2022 that
transitioned claims processing from medical claims to pharmacy claims.

Clinical trials & other

The increase in clinical trials and other revenue was primarily due to an
increase in clinical trials volumes which were negatively impacted in the prior
year due to the COVID-19 pandemic.

Operating Expenses

                                                 Three Months Ended March 31,                         Change
(dollars in thousands)                              2022                  2021                $                   %
Direct costs - patient services              $        27,378$  23,086$   4,292                 18.6  %
Direct costs - dispensary                             15,324             15,123                201                  1.3  %
Direct costs - clinical trials & other                   137                169                (32)               (18.9) %
Selling, general and administrative expense           29,806             11,178             18,628                166.6  %
Depreciation and amortization                            987                777                210                 27.0  %
Total operating expenses                     $        73,632$  50,333$  23,299                 46.3  %


Patient services cost

The increase in patient services cost was primarily due to a 6.3% increase in
intravenous drug costs, driven by the Company's patient mix and volume, as well
as 11.4% increase in clinical payroll costs due to the growth in clinic count.

Dispensary cost

The increase in dispensary cost was primarily due to a 13.3% increase in the
average cost of the prescriptions filled offset by a decline in the number of
prescriptions filled.

Selling, general and administrative expense

The increase in selling, general and administrative expense was primarily driven
by an increase in share-based compensation expense of 76.1% and transaction
costs of 12.9% due to the Business Combination as well as an increase in
salaries and benefits of 30.3%, due to the growth in the Company's management
and corporate team. The remainder of the increases were primarily to support the
continued growth of our business.

Other Expenses (Income)

                                             Three Months Ended March 31,                         Change
(dollars in thousands)                         2022                 2021                 $                    %
Interest expense                          $        74$       101$     (27)                (26.7) %
Change in fair value of derivative
warrant liabilities                             1,461                    -              1,461                      N/A
Change in fair value of earnout
liabilities                                   (39,440)                   -            (39,440)                     N/A
Gain on debt extinguishment                      (183)                   -               (183)                     N/A
Other, net                                        151               (1,076)             1,227                (114.0) %
Total other non-operating (income)
expense                                   $   (37,937)$      (975)$ (36,962)               3791.0  %


Interest expense

The decrease in interest expense was due to the pay-off of our term loan balance
in Q4 2021.

Change in fair value of liabilities

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The increase in non-operating (income) expense was primarily due to a loss of
$1,461 and a gain of $39,440 for three months ended March 31, 2022 as a result
of an increase in the fair value of derivative warrant liabilities and decrease
in the fair value of derivative earnout liabilities, respectively, which were
created as part of the Business Combination.

Gain on debt extinguishment

The increase in gain on debt extinguishment was a result of forgiveness of a
CARES Act loan during the three months ended March 31, 2022. The Cares Act loan
was acquired as part of an acquisition of a physician practice in 2021.

Other, net

The change in other, net was primarily due to Provider Relief Funding under the
CARES Act received during the three months ended March 31, 2021.

Liquidity and Capital Resources

General

To date, the Company has financed its operations principally through private
placements of its equity securities and payments received from various payors.
As of March 31, 2022, the Company had $95,534 of cash including $875 of
restricted cash.

The Company may incur operating losses and generate negative cash flows from
operations for the foreseeable future due to the investments management intends
to continue to make in expanding operations and sales and marketing and due to
additional general and administrative expenses management expects to incur in
connection with operating as a public company. As a result, the Company may
require additional capital resources to execute strategic initiatives to grow
the business.

Management believes that the cash on hand and cash conferred from the Business
Combination will be sufficient to fund the Company's operating and capital needs
for at least the next 12 months. Management's assessment of the period of time
through which our financial resources will be adequate to support our operations
is a forward-looking statement and involves risks and uncertainties. The
Company's actual results could vary because of, and its future capital
requirements will depend on, many factors, including our growth rate, the timing
and extent of spending to open or acquire new clinics and expand into new
markets and the expansion of sales and marketing activities. The Company may in
the future enter into arrangements to acquire or invest in complementary
businesses, services and technologies, including intellectual property rights.
The Company has based this estimate on assumptions that may prove to be wrong,
and the Company could use its available capital resources sooner than management
currently expects. The Company may be required to seek additional equity or debt
financing. In the event that additional financing is required from outside
sources, the Company may not be able to raise it on terms acceptable to
management or at all. If unable to raise additional capital when desired, or if
the Company cannot expand operations or otherwise capitalize on business
opportunities because the Company's lack of sufficient capital, the Company's
business, results of operations, and financial condition would be adversely
affected.

Cash Flows

The following table presents a summary of the Company’s consolidated cash flows
from operating, investing, and financing activities for the periods indicated.


                                               Three Months Ended March 31,                        Change
(dollars in thousands)                           2022                2021                 $                    %
Net cash and restricted cash (used in)
provided by operating activities             $  (16,981)$      464$ (17,445)               (3,760) %
Net cash and restricted cash used in
investing activities                             (1,002)             (1,446)               444                   (31) %
Net cash and restricted cash (used in)
provided by financing activities                 (1,657)             22,396            (24,053)                 (107) %
Net (decrease) increase in cash and
restricted cash                              $  (19,640)$   21,414$ (41,054)                 (192) %
Cash and restricted cash at beginning of
period                                          115,174               5,998            109,176                 1,820  %

Cash and restricted cash at end of period $ 95,534$ 27,412

         $  68,122                   249  %


Operating Activities

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Significant changes impacting net cash (used in) provided by operating
activities for the three months ended March 31, 2022 as compared to the three
months ended March 31, 2021 were as follows:

•Net income declined by $20,282 for the three months ended March 31, 2022 as
compared to the three months ended March 31, 2021 and the fair value of earnout
liabilities decreased $39,440, offset by a $8,511 increase in share-based
compensation expense and a $1,461 increase in the fair value of warrant
liabilities;

•Cash used by accounts receivable increased $4,110 for the three months ended
March 31, 2022 as compared to the three months ended March 31, 2021 due to the
growth in the Company's business;

•Cash used by accounts payable, accrued expenses and income taxes payable
increased $3,371 for the three months ended March 31, 2022 as compared to the
three months ended March 31, 2021 primarily due to an increase in vendor
payables due to the growth in the Company’s business; and

•Cash used by inventory increased $1,342 for the three months ended March 31,
2022 as compared to the three months ended March 31, 2021 due to the growth in
the Company's business.

Investing Activities

Net cash used in investing activities decreased $444 for the three months ended
March 31, 2022 as compared to the three months ended March 31, 2021 due to
acquisitions that occurred in Q1 2021, offset by an increase in cash used for
purchases of property and equipment of $383 for new clinic builds and clinic
remodels.

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2022
primarily relates to cash payments made on the directors and officers insurance
policy financing arrangement. For the three months ended March 31, 2021, net
cash provided by financing activities primarily relates to the issuance of
$20,000 of Legacy Preferred Stock.

Material Cash Requirements

The Company's material cash requirements for the following five years consist of
operating leases and other miscellaneous administrative expenses. Additionally,
the Company is subject to certain outside claims and litigation arising out of
the ordinary course of business, however, no such litigation requires future
cash expenditure as of March 31, 2022.

                                                       Material Cash Requirements Due by the Year Ended December 31,
(dollars in thousands)                      2022              2023-2024           2025-2026           Thereafter            Total
Operating leases                       $      3,717$   8,823$    5,812$     2,505$ 20,857
Deferred acquisition
consideration                                 2,050              2,309                   -                    -             4,359
Other1                                        3,961              3,132                   5                    -             7,098

Total material cash requirements $ 9,728$ 14,264

$ 5,817$ 2,505$ 32,314

(1) Other is comprised of finance leases and directors and officers insurance
premiums.

JOBS Act

The Company qualifies as an "emerging growth company," as defined in Section
2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business
Startups Act of 2012 (the "JOBS Act"), and has elected to take advantage of
certain exemptions from various reporting requirements that are applicable to
other public companies that are not emerging growth companies. Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply
with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange
Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the
extended transition period and comply with the requirements that apply to
non-emerging growth companies, but any such election to opt out is irrevocable.
The Company has elected not to opt out of such extended transition period, which
means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth
company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of our financial
statements with another public company that is neither an emerging growth
company nor an emerging growth company which has opted out of using the extended
transition period difficult or impossible because of the potential differences
in accounting standards used.

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Critical Accounting Policies

The Company prepares its financial statements in accordance with generally
accepted accounting principles in the United States ("U.S. GAAP"), which
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates under different assumptions or
conditions.

Leases

On January 1, 2022, the Company adopted ASU 2016-02, Leases, with various
amendments issued in 2018 and 2019 (collectively, "ASC 842") using the modified
retrospective approach, for leases that existed on January 1, 2022. ASC 842
requires lessees to recognize assets and liabilities for most leases. The
Company evaluates whether an arrangement is or contains a lease at contract
inception. A lease exists when a contract conveys to the customer the right to
control the use of an identified asset for a period of time in exchange for
consideration. Upon lease commencement, the date on which a lessor makes the
underlying asset available to the Company for use, the Company classifies the
lease as either an operating or finance lease. The Company applied certain
practical expedients permitted under the transition guidance, including the
package of practical expedients, which permits the Company not to reassess its
prior conclusions related to lease identification, lease classification, and
initial direct costs capitalization. The Company solely acts as a lessee and its
leases primarily consist of operating leases for its real estate in the states
in which the Company operates. The Company has other operating or financing
leases for various clinical and non-clinical equipment.

Generally, upon the commencement of a lease, the Company will record a
right-of-use ("ROU") asset and lease liability. An ROU asset represents the
Company's right to use an underlying asset for the lease term and lease
liabilities represent the Company's obligation to make lease payments arising
from the lease. Lease liabilities are measured at the present value of the
remaining, fixed lease payments at lease commencement. The Company uses its
incremental borrowing rate, based on the information available at the later of
adoption, inception, or modification in determining the present value of lease
payments. ROU assets are measured at an amount equal to the initial lease
liability, plus any prepaid lease payments (less any incentives received) and
initial direct costs, at the lease commencement date. The Company has elected to
account for lease and non-lease components as a single lease component for all
underlying classes of assets. As a result, the fixed payments that would
otherwise be allocable to the non-lease components are account for as lease
payments and included in the measurement of the Company's right-of-use asset and
lease liability.

Lease arrangements with an initial term of 12 months or less are considered
short-term leases and are not recorded on the balance sheet. The short-term
lease payments are recognized as an expense on a straight-line basis over the
lease term. The lease term includes any period covered by renewal options
available that the Company is reasonably certain to exercise and any options to
terminate the lease that the Company is not reasonably certain to exercise.

Variable Interest Entities

The Company consolidate entities for which it has a variable interest and is
determined to be the primary beneficiary. The Company holds variable interests
in the TOI PCs, comprised of The Oncology Institute, A Professional Corporation
("TOI CA") and The Oncology Institute FL, LLC ("TOI FL"), which the Company
cannot legally own due to jurisdictional laws governing the corporate practice
of medicine. The TOI PCs employ physicians and other clinicians in order to
provide professional services to patients of our managed clinics, and under
substantially similar MSAs, we serve as the exclusive manager and administrator
of the TOI PCs' non-medical functions and services. The TOI PCs are considered
variable interest entities ("VIEs") as they do not have sufficient equity to
finance their activities without additional financial support from the Company.
An enterprise having a controlling financial interest in a VIE must consolidate
the VIE if it has both power and benefits - that is, it has (1) the power to
direct the activities of a VIE that most significantly impacts the VIE's
economic performance (power), and (2) the obligation to absorb the losses of the
VIE that potentially could be significant to the VIE or the right to receive
benefits from the VIE that potentially could be significant to the VIE
(benefits). The Company has the power to control all financial activities of the
TOI PCs, the rights to receive substantially all benefits from the VIEs, and
consequently consolidates the TOI PCs. Revenues, expenses, and income from the
TOI PCs are included in the consolidated amounts as presented on the
consolidated statements of operations.

Segment Reporting

The Company presents the financial statements by segment in accordance with the
relevant accounting literature to provide investors with transparency into how
the chief operating decision maker ("CODM") manages the business. The Company's

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CODM is our Chief Executive Officer. The CODM reviews financial information and
allocates resources across three operating segments: dispensary, patient care,
and clinical trials & other.

Revenue Recognition

The Company recognizes consolidated revenue based upon the principle of the
transfer of control of our goods and services to customers in an amount that
reflects the consideration it expects to be entitled. This principle is achieved
through applying the following five-step approach:

1.Identification of the contract, or contracts, with a customer.

2.Identification of the performance obligations in the contract.

3.Determination of the transaction price.

4.Allocation of the transaction price to the performance obligations in the
contract.

5.Recognition of revenue when, or as, the entity satisfies a performance
obligation.

Consolidated revenue primarily consists of capitation revenue, fee-for-service
(FFS) revenue, dispensary revenue, and clinical trials revenue. Revenue is
recognized in the period in which services are rendered or the period in which
the TOI PCs are obligated to provide services. The form of billing and related
risk of collection for such services may vary by type of revenue and the payor.
The following paragraphs provide a summary of the principal forms of billing
arrangements and how revenue is recognized for each.

Capitation

Capitation contracts have a single performance obligation that is a stand ready
obligation to perform specified healthcare services to the population of
enrolled members and constitutes a series for the provision of managed
healthcare services for the term of the contract, which is deemed to be one
month since the mix of patient-customers can and do change month over month. The
transaction price for capitation contracts is variable as it primarily includes
PMPM fees associated with unspecified membership that fluctuates throughout the
term of the contract. Further, we adjust the transaction price for capitation
deductions based on historical experience. Revenue is recognized in the month
services are rendered on the basis of the transaction price established at that
time. If subsequent information resolves uncertainties related to the
transaction price, adjustments will be recognized in the period they are
resolved. When payment has been received but services have not yet been
rendered, the payment is recognized as a contract liability.

Fee For Service

FFS revenue consists of fees for medical services actually provided to patients.
These medical services are distinct since the patient can benefit from the
medical services on their own. Each service constitutes a single performance
obligation for which the patient accepts and receives the benefit of the medical
services as they are performed.

The transaction price from FFS arrangements is variable in nature because fees
are based on patient encounters, credits due to patients, and reimbursement of
provider costs, all of which can vary from period to period. The Company
estimates the transaction price using the most likely methodology and amounts
are only included in the net transaction price to the extent that it is probable
that a significant reversal of cumulative revenue will not occur once any
uncertainty is resolved. As a practical expedient, the Company adopted a
portfolio approach to determine the transaction price for the medical services
provided under FFS arrangements. Under this approach, the Company bifurcated the
types of services provided and grouped health plans with similar fees and
negotiated payment rates.

At these levels, portfolios share the characteristics conducive to ensuring that
the results do not materially differ from the standard applied to individual
patient contracts related to each medical service provided.

Revenue is recorded on the date the services are rendered based on the
information known at the time of entering of such information into our billing
systems as well as an estimate of the revenue associated with medical services.
When the performance obligation is not satisfied, the billing is recognized as a
contract liability.

Dispensary

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Dispensed prescriptions that are filled and delivered to the patient are
considered a distinct performance obligation. The transaction price for the
prescriptions is based on fee schedules set by PBMs and other third-party
payors. The fee schedule is often subject to DIR fees, which are based primarily
on pre-established metrics. DIR fees may be assessed in periods after payments
are received against future payments. The Company estimates DIR fees to arrive
at the transaction price for prescriptions. Revenue is recognized based on the
transaction at the time the patient takes possession of the oral drug.

Clinical Research

Clinical research contracts represent a single, integrated set of research
activities and thus are a single performance obligation. The performance
obligation is satisfied over time as the output is captured in data and
documentation that is available for the customer to consume over the course of
arrangement and furthers progress of the clinical trial. The Company has elected
to recognize revenue for clinical trials using the 'as-invoiced' practical
expedient. The customer is invoiced periodically based on the progress of the
trial such that each invoice captures the revenue earned to date based on the
state of the trial as established under contract with the customer.

Direct Costs of Sales

Direct cost of sales primarily consists of wages paid to clinical personnel and
other health professionals, oral and IV drug costs, and other medical supplies
used to provide patient care. Costs for clinical personnel wages are expensed as
incurred and costs for inventory and medical supplies are expensed when used,
generally by applying the specific identification method.

Goodwill and Intangible Assets

Goodwill is not amortized but is required to be evaluated for impairment at the
same time every year. The Company performs annual testing of impairment for
goodwill in the fourth quarter of each year. When impairment indicators are
identified, the Company compares the reporting unit's fair value to its carrying
amount, including goodwill. An impairment loss is recognized as the difference,
if any, between the reporting unit's carrying amount and its fair value to the
extent the difference does not exceed the total amount of goodwill allocated to
the reporting unit.

Finite-lived intangible assets are stated at acquisition-date fair value.
Intangible assets are amortized using the straight-line method. Finite-lived
intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. When circumstances indicate that recoverability may be impaired,
the Company assesses its ability to recover the carrying value of the asset
group from the expected future pre-tax cash flows (undiscounted and without
interest charges) of the related operations. If these cash flows are less than
the carrying value of such asset, an impairment loss is recognized for the
difference between estimated fair value and carrying value. Fair value is
determined based on appropriate valuation techniques.





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