SEC Filing - American Oncology Network

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aonc-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2024


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

Commission file number 001-04177

American Oncology Network, Inc.

(Exact name of registrant as specified in its charter)


Delaware			85-3984427
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

14543 Global Parkway, Suite 110, Fort Myers, Florida			33913
(Address of Principal Executive Offices)			(Zip Code)

(833) 886-1725

Registrant's telephone number, including area code

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A common stock, par value $0.0001, per share	AONC	NONE
Warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share	AONCW	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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	o

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. o

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

As of August 12, 2024, the registrant had outstanding 15,871,684 shares of Class A common stock, inclusive of the Sponsor Earnout shares, and 20,445,123 shares of Class B common stock.

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TABLE OF CONTENTS


			PAGE
Cautionary Note Regarding Forward-Looking Statements			i
Part I - Financial Information			1
Item 1. Financial Statements			1
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)			3
Condensed Consolidated Statements of Mezzanine and Stockholders’ Deficit			5
Condensed Consolidated Statements of Cash Flows			7
Notes to Consolidated Financial Statements			9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			47
Item 3. Quantitative and Qualitative Disclosures About Market Risk			59
Item 4. Controls and Procedures			60
Part II - Other Information			61
Item 1. Legal Proceedings			61
Item 1A. Risk Factors			61
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities			61
Item 3. Defaults Upon Senior Securities			62
Item 4. Mine Safety Disclosures			62
Item 5. Other Information			62
Item 6. Exhibits			62
Signatures			64

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Form 10-Q”), including, without limitation, statements under the headings “Management's Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995, including statements about the financial condition, results of operations, earnings outlook and prospects of American Oncology Network, Inc. (“AON”, “New AON”, “AON Inc.”, or the “Company”). Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements are based on current expectations and projections about future events and various assumptions. AON cannot guarantee that it will actually achieve the plans, intentions, or expectations disclosed in its forward-looking statements and you should not place undue reliance on AON’s forward-looking statements.

These forward-looking statements involve a number of risks, uncertainties (many of which are beyond the control of AON), or other assumptions that may cause actual results or performance to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in AON’s filings with the Securities and Exchange Commission, including “Risk Factors” in the Company’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The risks described in the “Risk Factors” sections are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can AON assess the impact of all such risk factors on the business of AON, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement. The statements made herein are made as of the date of this Quarterly Report and, except as may be required by law, AON undertakes no obligation to update them, whether as a result of new information, developments, or otherwise.

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Part I - Financial Information

Item 1. Financial Statements

American Oncology Network, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

($ in thousands, except share and per share data)


	As of June 30, 2024		As of December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	33,818	$	28,539
Short-term marketable securities	21,391		35,389
Patient accounts receivable, net	125,421		129,151
Inventories	54,280		44,569
Other receivables	60,928		34,274
Prepaid expenses and other current assets	8,250		4,277
Current portion of notes receivable - related parties	2,174		1,604
Total current assets	306,262		277,803

Property and equipment, net	42,510		40,439
Operating lease right-of-use assets, net (1)	50,609		43,349
Notes receivable - related parties	-		1,150
Other assets	18,005		7,588
Goodwill	10,900		1,230
Intangibles, net	2,476		-
Deferred tax asset, net	-		2,894
Total assets	$	430,762	$	374,453

Liabilities, Mezzanine Equity, and Stockholders' Equity
Current liabilities
Accounts payable (2)	$	189,483	$	127,645
Accrued compensation related costs	11,640		11,410
Accrued other	18,202		22,327
Income tax payable	971		971
Current portion of operating lease liabilities (3)	7,450		6,692
Current portion of long-term debt	3,809		-
Total current liabilities	231,555		169,045

Long-term debt, net	88,241		80,641
Long-term operating lease liabilities (4)	46,167		39,803
Other long-term liabilities	10,948		14,251
Total liabilities	$	376,911	$	303,740

Mezzanine equity

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Series A convertible preferred stock; $0.0001 par value; 7,500,000 shares authorized; 6,651,610 issued and outstanding at June 30, 2024 and December 31, 2023, with an aggregate liquidation preference of $70,744,488 and $68,009,015 at June 30, 2024 and December 31, 2023, respectively.	64,986		64,986
Redeemable noncontrolling interest	28,331		167,025

Stockholders' equity
Class A Common Stock; $0.0001 par value; 200,000,000 shares authorized; 13,495,847 and 9,517,816 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively.	1		1
Class B Common Stock; $0.0001 par value; 100,000,000 shares authorized; 20,571,323 and 25,109,551 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively.	3		3
Additional paid-in capital	27,074		-
Treasury stock, at cost, 122,743 shares at June 30, 2024 and 14,729 shares at December 31, 2023	(368)		-
Accumulated other comprehensive income	26		81
Retained deficit	(66,720)		(161,812)
Total AON stockholders' deficit	(39,984)		(161,727)
Noncontrolling interest	518		429
Total deficit	$	(39,466)	$	(161,298)
Total liabilities, mezzanine equity, noncontrolling interest, and stockholders' equity	$	430,762	$	374,453

(1)Includes related party operating right-of-use assets, net of $15,605 and $10,931 at June 30, 2024 and December 31, 2023, respectively

(2)Includes amounts due to related party of $178,460 and $120,857 at June 30, 2024 and December 31, 2023, respectively

(3)Includes related party current portion of operating lease liabilities of $3,524 and $1,888 at June 30, 2024 and December 31, 2023, respectively

(4)Includes related party long-term operating lease liabilities of $10,712 and $9,472 at June 30, 2024 and December 31, 2023, respectively

The accompanying notes are an integral part of these condensed consolidated financial statements.

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American Oncology Network, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

($ in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue
Patient service revenue, net	$	431,750	$	311,713	$	793,258	$	613,486
Other revenue	2,232		3,254		5,063		5,212
Total revenue	433,982		314,967		798,321		618,698
Costs and expenses
Cost of revenue (1)	404,589		291,399		759,537		569,933
General and administrative expenses (2)	36,738		23,915		65,015		47,633
Transaction expenses	664		3,312		1,016		5,282
Total costs and expenses	441,991		318,626		825,568		622,848
Loss from operations	(8,009)		(3,659)		(27,247)		(4,150)

Other income (expense)
Interest expense	(1,833)		(1,551)		(3,596)		(2,968)
Interest income	1,025		68		1,818		126
Other (expense) income, net	5,547		(4,846)		3,639		(4,380)
Loss before income taxes, equity loss in affiliate, and noncontrolling interest	(3,270)		(9,988)		(25,386)		(11,372)
Income tax expense (benefit)	(324)		-		2,570		-
Loss before equity loss in affiliate and noncontrolling interest	(2,946)		(9,988)		(27,956)		(11,372)
Equity in loss of affiliate	(179)		(118)		(130)		(219)
Net loss before noncontrolling interest	$	(3,125)	$	(10,107)	$	(28,086)	$	(11,591)
Net loss attributable to noncontrolling interest	(334)		-		(291)		-
Net loss before redeemable noncontrolling interest	(2,791)		(10,107)		(27,795)		(11,591)
Net loss and noncontrolling interest attributable to Legacy AON Stockholders prior to the reverse recapitalization	-		(10,107)		-		(11,591)
Net loss attributable to redeemable noncontrolling interest	(6,412)		-		(23,575)		-
Net income (loss) attributable to AON Inc.	$	3,621	$	-	$	(4,220)	$	-
Series A Preferred Cumulative Dividends	(1,375)		-		(2,735)		-
Undistributed net income to participating securities	(856)		-		-		-
Net income (loss) attributable to Class A Common Stockholders	$	1,390	$	-	$	(6,955)	$	-
Reallocation of net income (loss) attributable to Class A Common Stockholders as a result of the impact and conversion of dilutive securities	(5,556)		-		(23,575)		-
Net income (loss) attributable to Class A Common Stockholders for diluted earnings per share	$	(4,166)	$	-	$	(30,530)	$	-

Income (loss) per share of Class A Common Stock:
Basic	$	0.12	$	-	$	(0.74)	$	-
Diluted	$	(0.11)	$	-	$	(0.84)	$	-

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Weighted average shares of Class A Common Stock Outstanding:
Basic	11,377,407		-		9,457,518		-
Diluted	37,089,605		-		36,430,441		-

Other comprehensive income (loss):
Unrealized (loss) gain on marketable securities	(167)		24		(189)		88
Other comprehensive (loss) gain	(167)		24		(189)		88
Comprehensive loss	$	(2,958)	$	(10,083)	$	(27,984)	$	(11,503)
Other comprehensive loss attributable to Legacy AON Shareholders	—		(10,083)		—		(11,503)
Other comprehensive loss attributable to noncontrolling interests	(6,528)		—		(23,708)		—
Total comprehensive income (loss) attributable to AON Inc.	$	3,570	$	-	$	(4,276)	$	-

(1)Includes related party inventory expense of $364,664 and $253,083 and $675,541 and $500,569 for the three and six months ended June 30, 2024 and 2023, respectively.

(2)Includes related party rent of $672 and $679 and $1,378 and $1,358 for the three and six months ended June 30, 2024 and 2023, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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American Oncology Network, Inc.

Condensed Consolidated Statements of Mezzanine and Stockholders’ Deficit

(Unaudited)($ in thousands, except share and per share data)


	Mezzanine Equity - Series A Preferred Stock			NCI(1)		Class A Common Stock			Class B Common Stock
In thousands (except share and per share data)	Stock	$				Stock	$		Stock	$		APIC(1)		Treasury Stock	AOCI(1)		Noncontrolling Interest		Retained Deficit		Total Equity (Deficit)
Balances at March 31, 2024	6,652	$	64,986	$	157,716	10,334,734	$	1	23,725,998	$	3	$	8,164	(97)	$	77	$	852	$	(175,594)	$	(166,594)

Other comprehensive income				(116)											(51)						(51)
Equity based compensation & NCI rebalancing				30		116,725	—					1,276									1,276
Repurchases of Class A Common Stock						(110,287)								(271)							(271)
Capital contribution from noncontrolling interest member						—															—
Net loss				(6,412)													(334)		3,621		3,287
Fair value adjustment to redeemable noncontrolling interest				(114,949)								9,696							105,253		114,949
Redemptions of Class B Common Stock to Class A Common Stock				(7,938)		3,154,675			(3,154,675)			7,938									7,938
Balances at June 30, 2024	6,652	$	64,986	$	28,331	13,495,847	$	1	20,571,323	$	3	$	27,074	(368)	$	26	$	518	$	(66,720)	$	(39,466)

Balances at December 31, 2023	6,652	64,986		167,025		6,678,441	1		25,109,551	3		—		—	81		429		(161,812)		(161,298)

Other comprehensive income	—	—		(133)		—	—		—	—		—		—	(55)		—		—		(55)
Equity based compensation & NCI rebalancing	—	—		429		2,405,906	—		—	—		10,972		—	—		—		—		10,972
Repurchases of Class A Common Stock	—	—		—		(126,728)	—		—	—		—		(368)	—		—		—		(368)
Capital contribution from noncontrolling interest member	—	—		—		—	—		—	—		—		—	—		380		—		380
Net loss	—	—		(23,575)		—	—		—	—		—		—	—		(291)		(4,221)		(4,512)
Fair value adjustment to redeemable noncontrolling interest	—	—		(99,313)		—	—		—	—		—		—	—		—		99,313		99,313
Redemptions of Class B Common Stock to Class A Common Stock	—	—		(16,102)		4,538,228	—		(4,538,228)	—		16,102		—	—		—		—		16,102
Balances at June 30, 2024	6,652	$	64,986	$	28,331	13,495,847	$	1	20,571,323	$	3	$	27,074	(368)	$	26	$	518	$	(66,720)	$	(39,466)

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In thousands (except share and unit data)	Mezzanine Equity - Convertible Preferred Class C			Class A			Class A-1			Class B
Three Months Ended June 30, 2023	Units	$		Units	$		Units	$		$		AOCI(1)		Retained Earnings (Deficit)		Noncontrolling Interest		Total Equity (Deficit)
Balances at March 31, 2023	-	$	-	19,495,376	$	7,725	1,842,520	$	28,500	$	80	$	(53)	$	24,342	$	-	$	60,594
Net loss														$	(10,105)			(10,105)
Issuance of Class C Units, net of offering costs	2,459	64,246																-
Class C derivative liability		(1,349)																-
Class A and A-1 preferred returns														(8,174)				(8,174)
Derivative liability on Class A-1 anti-dilution feature								2,540										2,540
Tax distributions														(260)				(260)
Capital contribution from noncontrolling interest member																134		134
Class A-1 distribution							439,176											-
Other comprehensive income												24						24
Balances at June 30, 2023	2,459	$	62,897	19,495,376	$	7,725	2,281,696	$	31,040	$	80	$	(29)	$	5,803	$	134	$	44,753

Six Months Ended June 30, 2023
Balances at December 31, 2022	-	$	—	19,495,376	$	7,725	1,842,520	$	28,500	$	80	$	(117)	$	25,828	$	-	$	62,016
Activity prior to reverse recapitalization
Net loss	-	-		-	-		-	-		-		-		(11,591)		-		(11,591)
Issuance of Class C Units, net of offering costs	2,459	64,246		-	-		-	-		-		-		-		-		-
Class C derivative liability	-	(1,349)		-	-		-	-		-		-		-		-		-
Class A and A-1 preferred returns	-	-		-	-		-	-		-		-		(8,174)		-		(8,174)
Derivative liability on Class A-1 anti-dilution feature	-	-		-	-		-	2,540		-		-		-		-		2,540
Tax distributions	-	-		-	-		-	-		-		-		(260)		-		(260)
Capital contribution from noncontrolling interest member	-	-		-	-		-	-		-		-		-		134		134
Class A-1 distribution	-	-		-	-		439,176	-		-		-		-		-		-
Other comprehensive income	-	-		-	-		-	-		-		88		-		-		88
Balances at June 30, 2023	2,459	$	62,897	19,495,376	$	7,725	2,281,696	$	31,040	$	80	$	(29)	$	5,803	$	134	$	44,753

(1) The acronyms in the table above are defined as follows:

APIC - Accumulated paid in capital

AOCI - Accumulated other comprehensive income

NCI - Mezzanine equity classified noncontrolling interest

The accompanying notes are an integral part of these condensed consolidated financial statements.

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American Oncology Network, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

($ in thousands, except share and per share data)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities
Net loss	$	(28,086)	$	(11,591)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization	4,890		4,308
Amortization of debt issuance costs	430		353
Amortization of postcombination compensation	352		-
Provision for income taxes	2,894		-
Equity in loss of affiliate	130		219
Amortization of operating right-of-use assets (1)	4,330		4,309
Changes in fair value adjustments of warrants and derivative liabilities	(2,888)		5,066
Equity-based compensation	11,400		-
Loss (gain) on sale and abandonment of property and equipment	760		(2)
Bargain purchase gain on acquisition of physician practice	(1,040)		-
Deferred taxes	(324)		-
Changes in operating assets and liabilities, net of business combinations:
Patient accounts receivable, net	3,730		(9,061)
Inventories (2)	(7,239)		(5,410)
Prepaid expenses and other current assets	(3,713)		(728)
Other receivables	(23,346)		(4,728)
Other assets	(4,948)		(2,430)
Accounts payable (3)	60,964		15,673
Accrued compensation related costs	2,944		2,710
Accrued other	(2,972)		1,199
Operating lease liabilities (4)	(4,467)		(3,784)

Other long-term liabilities	(2,590)		1,626
Net cash provided by (used in) operating activities	11,210		(2,271)
Cash flows from investing activities
Purchases of property and equipment and intangible assets	(8,176)		(6,899)
Proceeds from disposals of property and equipment	141		5
Acquisition of physician practices, net of cash acquired	(6,712)		-
Purchases of marketable securities	(17,710)		(2,280)
Proceeds from sales of marketable securities	31,961		2,235

Collections on notes receivable - related parties	305		630
Net cash used in investing activities	(191)		(6,309)
Cash flows from financing activities

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Issuance of redeemable convertible Class C Units	-		64,996
Class A and A-1 preferred returns	-		(8,174)
Repayments on debt	(1,521)		-
Contribution from noncontrolling interest	-		134
Repurchases of Class A Common Stock	(368)		-
Payment of tax withholding obligation on net RSU settlement	(3,258)		-
Tax distributions	-		(260)
Repayments on finance lease liabilities	(593)		(233)
Cash paid for debt financing costs	-		(446)
Cash paid for offering costs on Class C issuance	-		(750)
Cash paid for offering costs on business combination	-		(905)

Net cash (used in) provided by financing activities	(5,740)		54,362
Net increase in cash and cash equivalents	5,279		45,782
Cash and cash equivalents
Beginning of period	28,539		26,926
End of period	$	33,818	$	72,708
Supplemental noncash investing and financing activities
Right-of-use assets and lease liabilities removed in termination of lease	$	-	$	1,023
Promissory note issued in connection with acquisition of physician practices	(6,550)		-
Promissory note issued in connection with asset acquisition	(1,420)		-
Changes in accounts payable for capital additions to property and equipment	(581)		-
Noncash consideration paid by assumption of note for purchase of physician practice	(4,530)
Contribution from noncontrolling interest	(380)		-

Derivative liability on issuance of Class C Units	-		1,349
Derivative liability on Class A-1 anti-dilution feature	-		2,540

(1)Includes related party amortization of operating right-of-use assets of $1,053 and $1,062 for the six months ended June 30, 2024 and 2023, respectively.

(2)Includes changes in related party balances of ($9,225) and $(5,140) for the six months ended June 30, 2024 and 2023, respectively.

(3)Includes changes in related party balances of $57,603 and $15,718 for the six months ended June 30, 2024 and 2023, respectively.

(4)Includes changes in related party balances of ($1,313) and ($1,303) for the six months ended June 30, 2024 and 2023, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Notes to Consolidated Financial Statements

1.Business

American Oncology Network, Inc. (“AON”, “New AON”, “AON Inc.”, or the “Company”), through its subsidiary companies and variable interest entities (together, “its subsidiaries”), is an alliance of physicians and seasoned healthcare leaders who provide comprehensive oncology services across 35 oncology practices located in twenty states (Arizona, Arkansas, Florida, Georgia, Hawaii, Iowa, Idaho, Indiana, Louisiana, Maryland, Missouri, Michigan, North Carolina, Nevada, Nebraska, Ohio, South Carolina, Texas, Virginia, Washington, and the District of Columbia). The Company also provides expertise in drug procurement and payor contracting, along with practice diversification through centralized laboratory and pathology services, as well as specialty pharmacy services, clinical research, radiation oncology, and imaging. During the six months ended June 30, 2024, the Company entered into affiliation agreements with or acquired the following oncology practices. The Company did not enter into any affiliation agreements or complete any acquisitions of oncology practices during the six months ended June 30, 2023.


Six Months Ended June 30, 2024
State
Maryland (a)
Texas (a)
Hawaii (b)
Georgia (b)

(a)The Company entered into affiliation agreements with the physicians for these respective practices. The Company evaluated each of the affiliation agreements and determined that the transactions did not represent a business combination.

(b)The Company completed acquisitions which were accounted for as business combinations with the physicians for these respective practices (See Note 5 for further discussion).

The operations of the practices above have been included in the Company’s condensed consolidated financial statements.

Business Combination Agreements

Digital Transformation Opportunities Corp. (“DTOC”), American Oncology Network, LLC (“AON LLC”), GEF AON Holdings Corp. (“AON Class C Preferred Investor”), and DTOC Merger Sub, Inc., a direct, wholly owned subsidiary of DTOC (“Merger Sub”) entered into a Business Combination Agreement (the “Business Combination Agreement”), dated as of June 14, 2023 (which further amended and restated the Business Combination Agreement entered into by DTOC and AON as of October 5, 2022, and amended and restated on January 6, 2023, and April 27, 2023), pursuant to which, among other transactions, on September 20, 2023 (the “Closing Date”), DTOC and AON undertook a series of transactions (the “Business Combination” or “Reverse Recapitalization”) resulting in the organization of the combined post-business combination company as an umbrella partnership C corporation, in which substantially all of the assets and the business of the combined company are held by AON LLC, and DTOC became a member of AON LLC. In connection with the closing of the Business Combination (“the Closing”), DTOC changed its name to “American Oncology Network, Inc.”. The Business Combination was completed on September 20, 2023.

As a result of, and in connection with, the Closing, among other things, (i) AON LLC amended and restated its operating agreement (the “Amended and Restated AON LLC Agreement”) to reclassify its existing Class A units, Class A-1 units and Class B units into a single class of AON LLC common units (“AON LLC Common Units”) that can be exchanged on a one-to-one basis for shares of New AON Class A common stock (“New AON Class A Common Stock”) and its existing AON LLC Class C units into AON LLC Series A preferred units (AON LLC Series A Preferred Units”); (ii) AON LLC converted profit pool units of certain of AON LLC’s subsidiaries into an equal number of AON LLC Common Units and shares of New AON Class B common stock (“New AON Class B Common Stock”), which together are exchangeable into shares of New AON Class A Common Stock (together with the New AON Class B Common Stock, the “New AON Common Stock”); (iii) New AON amended and

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restated its charter (the “Charter”) to provide for (a) the conversion of all existing shares of DTOC Class B common stock into shares of New AON Class A Common Stock on a one-to-one basis, (b) amendment of the terms

of New AON Class B Common Stock to provide holders voting rights but no economic rights and (c) designation of a new series of New AON preferred stock as Series A convertible preferred stock (the “New AON Series A

Preferred Stock” or “Series A Preferred Stock") with such rights and preferences as provided for in the certificate of designation of the New Aon Series A Preferred Stock (the “New AON Series A Certificate of Designation”); and (iv) among other things, (a) AON LLC issued common units to New AON in exchange for a combination of cash and shares of New AON Class B Common Stock and warrants to acquire shares of New AON Class B Common Stock (the “Class B Prefunded Warrants”), (b) New AON was admitted as a member of AON LLC, (c) AON LLC distributed shares of New AON Class B common stock or Class B Prefunded Warrants, as applicable, to AON LLC equity holders, (d) New AON reserved a specified number of additional shares of New AON Class A Common Stock after the Closing for issuance to eligible participants, (e) Merger Sub merged with and into the AON Class C Preferred Investor whereby the separate existence of Merger Sub ceased and New AON issued a number of shares of New AON Series A Preferred Stock equal to the number of AON LLC Series A preferred units held by the AON Class C Preferred Investor to AEA Growth Management LP, the parent of AON Class C Preferred Investor (“AEA Growth”) in exchange for all the shares of common stock held by AEA Growth in the AON Class C Preferred Investor (the “First Step”), (f) promptly after the First Step, the AON Class C Preferred Investor merged with and into New AON whereby the separate existence of the AON Class C Preferred Investor ceased and New AON held all the AON LLC Series A preferred units and (g) from and after the Closing (but subject to lock-up restrictions), the AON LLC common equity holders (other than New AON), referred to herein as “Legacy AON Shareholders” (former AON LLC Class A, Class A-1, and Class B unit holders), will have the right (but not the obligation) to exchange AON LLC Common Units together with an equal number of shares of New AON Class B Common Stock (whether held directly or indirectly through Class B Prefunded Warrants) for shares of New AON Class A Common Stock.

In addition, in connection with the Closing, DTOC completed the offer to the holders of AON LLC Class B-1 units to exchange their AON LLC Class B-1 units for such number of newly issued shares of New AON Class A Common Stock equal to the ratio set forth in the Business Combination Agreement (such offer, the “Exchange Offer”). DTOC and AON LLC solicited consents from the holders of AON LLC Class B-1 units to make certain amendments to the terms of the awards and the unit grant agreements pursuant to which the AON LLC Class B-1 units were granted, which provided for the automatic exchange, as of immediately prior to the adoption of the Amended and Restated AON LLC Agreement, of all outstanding AON LLC Class B-1 units into shares of New AON Class A Common Stock (collectively, the “Proposed Amendments”). The requisite number of holders of Class B-1 units provided their consent to the Proposed Amendments, and as a result, in connection with the Closing, all AON LLC Class B-1 units were exchanged for an aggregate of 1,047,343 shares of New AON Class A Common Stock.

Upon the consummation of the Business Combination, the outstanding membership units in AON LLC and the outstanding shares in AON Inc. (New AON) are as follows:

•AON LLC Common Units held by the Legacy AON Shareholders - 28,109,796

•AON LLC Common Units held by New AON - 9,532,354

•AON LLC Series A Preferred Units held by New AON - 6,651,610

•Class A Common Stock held by the former AON LLC Class B-1 unit holders - 1,047,343

•Class A Common Stock held by the DTOC unredeemed shareholders - 147,511

•Class A Common Stock held by the DTOC Sponsor and their permitted transferees - 5,498,125(a)

•Class B Common Stock held by Legacy AON Shareholders - 25,109,551(b)

•New AON Series A Preferred Stock held by AEA Growth Management LP - 6,651,610

(a) Sponsor Earnout Shares of 2,839,375 are subject to vesting and forfeiture provisions and are not outstanding for GAAP purposes as of the Closing Date.

(b) Certain Legacy AON Shareholders hold 3,000,245 Class B Prefunded Warrants, which underlying shares of Class B common stock are not outstanding as of the Closing Date.

Accounting Treatment for the Business Combination

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As AON LLC does not meet any of the characteristics of a VIE under Accounting Standards Codification (“ASC”) 810, Consolidations (“ASC 810”) the Business Combination was evaluated under ASC 805, Business Combinations (“ASC 805”). Notwithstanding the legal form of the Business Combination pursuant to the Business Combination Agreement, the Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, DTOC was treated as the acquired company and AON LLC was considered the acquirer for financial statement reporting purposes. AON LLC was determined to be the accounting acquirer based on, in summary, an evaluation of the following primary facts and circumstances:

•AON LLC’s directors will represent a majority of the board seats for New AON’s board of directors;

•AON LLC’s senior management will be the senior management of the combined company;

•AON LLC’s operations comprising the ongoing operations of the post-combination company; and

•AON LLC’s relative size (i.e., assets, revenues, and earnings) is significantly larger compared to DTOC.

Accordingly, for accounting purposes, the financial statements of the post-combination entity will represent a continuation of the financial statements of AON LLC with the acquisition being treated as the equivalent of AON LLC issuing stock for the net assets of DTOC, accompanied by a recapitalization. The net assets of DTOC are stated at historical cost, with no goodwill or other intangible assets recorded. Refer to Note 3 for additional information.

Accounting for the Earnout Shares

Following the Closing and for five years thereafter, the DTOC Sponsor agreed to subject 35%, or 2,839,375 shares of New AON Class A common stock held by it as of the Closing (the “Sponsor Earnout Shares”) to the following vesting and forfeiture provisions:

•the Sponsor Earnout Shares will vest when the volume-weighted average price of the New AON Class A common stock equals or exceeds $13.50 per share for any 20 trading days within any 30 trading day period beginning after the Closing and ending 60 months following the Closing;

•the Sponsor Earnout Shares will be released immediately upon the consummation of a change of control transaction within the 60-month period following the Closing; and

•if the Sponsor Earnout Shares are not released pursuant to the foregoing provisions on or before the date that is 60 months after the Closing, then the Sponsor Earnout Shares will be forfeited immediately following such date.

As the Business Combination was accounted for as a reverse recapitalization, the issuance of the Sponsor Earnout Shares to the Company’s existing shareholders will be accounted for as an equity transaction. The accounting for the Sponsor Earnout Shares was evaluated under ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Subtopic 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, to determine if the Sponsor Earnout Shares should be classified as a liability or within equity. As part of that analysis, it was determined that the Sponsor Earnout Shares are freestanding, do not meet the criteria within ASC 480 to be classified as a liability, and meet the criteria in ASC 815-40 to be considered indexed to the post-combination entity’s common stock and classified within equity.

Warrants

As of the Closing Date, New AON assumed the outstanding warrants (Public Warrants and Private Placement Warrants) that were issued by DTOC as part of DTOC’s IPO. Further, New AON issued the Class B Prefunded Warrants to former Class A-1 unit holders, in lieu of New AON Class B Common Stock. The accounting treatment for the Public Warrants, the Private Placement Warrants, and the Class B Prefunded Warrants, collectively referred to as “the Warrants”, is disclosed in Note 2.

Public Warrants

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As of the Closing Date, New AON assumed 8,337,500 public warrants (the “Public Warrants”) issued by DTOC in its IPO. Each whole warrant entitles the holder to purchase one share of New AON Class A Common Stock at a price of $11.50 per share, subject to adjustment. The warrants will become exercisable on the later of 12 months from the closing of the DTOC Initial Public Offering or 30 days after the completion of its initial business combination and will expire five years after the Closing of the Business Combination, or earlier upon redemption or liquidation.

Private Warrants

As of the Closing Date, New AON assumed 6,113,333 Private Placement Warrants held by the DTOC Sponsor (the “Private Placement Warrants” or “Private Warrants”). The Private Placement Warrants will be non-redeemable in certain circumstances so long as they are held by the Sponsor or its permitted transferees. The Private Placement Warrants may also be exercised by the Sponsor and its permitted transferees for cash or on a cashless basis. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants, including as to exercise price, exercisability, and exercise period.

Class B Prefunded Warrants

As of the Closing Date, New AON issued 3,000,245 of Class B Prefunded Warrants to former AON Class A-1 unitholders. Because the Class B Warrants are prefunded, there was not any cash consideration exchanged as part of the Class B Warrant issuance. Each Class B Prefunded Warrant entitles the holder to purchase one share of New AON Class B common stock at a price of $0.01 per share. The exercise term of the Class B Warrant shall continue indefinitely so long as the holder of the Class B Warrant is also the holder of an AON LLC Common Unit, provided that the number of shares of Common Stock that this Warrant is exercisable for shall not exceed the number of AON LLC Common Units held by holder.

Transaction Expenses

In connection with the Reverse Recapitalization, AON LLC and New AON incurred costs of $0.7 million and $3.3 million during the three months ended June 30, 2024 and 2023, respectively. AON LLC and New AON incurred costs of $1.0 million and $5.3 million during the six months ended June 30, 2024 and 2023, respectively. These costs were reported as transaction expenses in the condensed consolidated statements of operations and comprehensive income (loss).

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2.Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. Management believes the unaudited condensed consolidated financial statements for the interim periods presented contain all necessary adjustments, of a normal recurring nature, to state fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements were prepared on the same basis as and should be read in conjunction with such audited consolidated financial statements and related notes thereto of AON Inc. and its wholly-owned subsidiaries, included in the Annual Report on Form 10-K, dated and filed on March 28, 2024 with the SEC (the “Annual Report 2023"). Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results the Company expects for the entire year.

For the three and six months ended June 30, 2024, these unaudited condensed consolidated financial statements reflect the consolidated results of operations, comprehensive (income) loss, cash flows and changes in equity of AON Inc. and its wholly-owned subsidiaries. The condensed consolidated balance sheet at June 30, 2024 presents the financial condition of AON Inc. and its consolidated subsidiaries.

For the three and six months ended June 30, 2023, these unaudited condensed consolidated financial statements present the consolidated results of operations, comprehensive (income) loss, cash flows and changes in equity of AON LLC. The condensed consolidated balance sheet as of December 31, 2023 presents the financial condition of AON Inc. and its consolidated subsidiaries after the Reverse Recapitalization. All intercompany balances and transactions of AON LLC have been eliminated.

In accordance with ASC 805 the historical equity of AON LLC has been recasted in all periods up to the Closing Date, to reflect the number of shares of New AON’s Class A Common Stock and Class B Common Stock issued to Legacy AON Shareholders in connection with the Reverse Recapitalization. The Company recasted the units outstanding related to the historical AON LLC Class A, Class A-1, and Class B units prior to the Reverse Recapitalization (“Historical AON LLC Equity”) as common equity of New AON, equal to the Per Company Class Unit Exchange Ratio, pursuant to the Business Combination Agreement.

The Per Company Unit Exchange Ratio at which AON LLC Class A units and Class A-1 units were reclassified is equal to 2,524 AON Common Units. The Per Company Unit Exchange Ratio at which AON LLC Class B units were reclassified varied depending on participation threshold, and is equal to 2,524, 2,453, or 1,976, AON Common Units. The Per Company Unit Exchange Ratio at which Class C units were reclassified is equal to 2,705 AON LLC Series A Preferred Units.

The condensed consolidated financial statements and related notes thereto give effect to the conversion for all periods presented, without any change to par value or per unit amounts. The condensed consolidated financial statements do not necessarily represent the capital structure of New AON had the Reverse Recapitalization occurred in prior periods. The Company has not made retroactive adjustments related to the historical book values of Historical AON LLC Equity as the adjustments were considered immaterial.

For the three and six months ended June 30, 2024, $3.6 million of the consolidated net income of AON LLC and $4.2 million of the consolidated net loss of AON LLC, respectively, were attributable to the Class A Common Stockholders, and reflects the Class A Common Stockholders’ absorption of 30.7% and 25.9%, respectively, of the consolidated net income and loss of AON LLC. For the three and six months ended June 30, 2024, $6.4 million and $23.6 million, respectively, of the consolidated net losses of AON LLC were attributable to noncontrolling interest, and reflects the Legacy AON Stockholders’ absorption of 69.3% and 74.1% of the consolidated net losses of AON LLC.

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For the three and six months ended June 30, 2023, $10.1 million and $11.6 million, respectively, of the consolidated net losses of AON LLC were attributable to the Legacy AON Stockholders, to reflect their absorption of 100% of the consolidated net losses of AON LLC pertaining to the days prior to the Reverse Recapitalization.

Principles of Consolidation

For the period of January 1, 2024 through June 30, 2024, the condensed consolidated financial statements include the accounts of the Company, American Oncology Network, LLC (“AON LLC”), and its wholly owned subsidiary American Oncology Management Company, LLC (“AOMC”), and its consolidated variable interest entities (“VIEs”) American Oncology Partners, P.A. (“AON Partners”), American Oncology Partners of Maryland, P.A. (“Partners of Maryland”), AON Central Services, LLC (“AON Central Services”), and Meaningful Insights Biotech Analytics, LLC (“MIBA”). All intercompany accounts and transactions between the entities have been eliminated in consolidation.

The accounting treatment of the Business Combination was a Reverse Recapitalization.

For the periods prior to the Reverse Recapitalization, the consolidated financial statements of the Company comprise the accounts of AON LLC and its wholly-owned subsidiaries. All intercompany accounts and transactions among AON LLC and its consolidated subsidiaries were eliminated.

The Company accounts for American Oncology Network, LLC, AON Partners, Partners of Maryland, AON Central Services, and MIBA in accordance with Financial Accounting Standards Board (“FASB”) ASC 810. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a VIE. A VIE is broadly defined as an entity that has any of the following three characteristics: (i) the equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (ii) substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights; or (iii) the equity investors as a group lack any of the following, the power through voting or similar rights to direct the activities of the entity that most significantly impact the entity’s economic performance, the obligation to absorb the expected losses of the entity, or the right to receive the expected residual returns of the entity. The Company consolidates a VIE if it has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively, if any.

AON LLC has contractual relationships with AON Partners, Partners of Maryland and AON Central Services and the physician owners through management service agreements (“MSAs”) and other contractual agreements to provide all practice management services outside of medical services provided by the physicians. In addition, despite not being required by the contractual relationships, AON LLC regularly provides funding to support AON Partners and Partners of Maryland’s operations and acquisitions of physician practices. AON Central Services was formed July 15, 2022 and, effective January 1, 2023, entered into an agreement with AOMC to provide qualified non-clinical and non-medical employees to AOMC to support the operation of the physician practices. MIBA was established during the first quarter of 2023 for the purpose of developing intellectual property to synergize the collection, de-identification, and dissemination of the Company’s patient data for sale to external parties for research, development, and clinical decisions. In May 2023, the Company contributed $0.2 million for a 56% interest in the equity of MIBA. As of June 30, 2024, MIBA had no significant operating activity. The Company concluded that AON LLC had a controlling financial interest in MIBA and has consolidated the entity at June 30, 2024 and recorded the noncontrolling interest in equity.

The Company has concluded that AON Partners, Partners of Maryland, AON Central Services, and MIBA are all VIEs in which AON LLC has the characteristics of a controlling financial interest and is deemed to be the primary beneficiary. The variable interest subjects AON LLC to all potential losses in the entities and, therefore, requires AON LLC, and in turn AON Inc., to consolidate the results of AON Partners, Partners of Maryland, AON Central Services, and MIBA in its condensed consolidated financial statements.

Refer to Note 4 for further information on the VIEs.

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Significant Accounting Policies

The accounting policies included below should be read in conjunction with the annual consolidated financial statements.

Accounting Estimates and Assumptions

The preparation of financial statements in conformity with GAAP 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 financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Segments

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (the “CODM”). The Company’s CODM is its chief executive officer who reviews financial information together with certain operating metrics principally to make decisions about how to allocate resources and to measure the Company’s performance. The Company has one operating segment and one reportable segment that are structured around the organizational management of oncology practice operations. All revenue and assets are in the United States.

Revenue Recognition

Revenue is recognized under Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (“Topic 606”). The Company determines the transaction price based upon standard charges for goods and services with anticipated consideration due from patients, third-party payors (including health insurers and government agencies) and others. The Company’s revenue is primarily derived from patient service revenues, which encompass oncology services provided during patient visits and shipments of pharmacy prescriptions. Performance obligations for the Company’s services provided to patients and most procedures, are satisfied over the time of visit which is the same day services are performed. Performance obligations relating to pharmacy revenue are considered fully satisfied at a point in time upon the customer receiving delivery of the prescription. Accordingly, the Company does not anticipate a significant amount of revenue from performance obligations satisfied (or partially satisfied) in previous periods, and any such revenue recognized during the three and six month periods ended June 30, 2024 and 2023 was immaterial. Additionally, the Company does not expect to recognize material revenue in the future related to performance obligations that are unsatisfied (or partially satisfied) as of June 30, 2024 and December 31, 2023. Approximately $229.5 million and $227.0 million and $545.6 million and $444.8 million of the Company’s revenues are generated from services performed during patient visits with the remainder primarily generated from shipments of pharmacy prescriptions for the three and six month periods ended June 30, 2024 and 2023, respectively.

As services are performed and prescriptions are shipped, timely billing occurs for services rendered and prescriptions shipped less discounts provided to uninsured patients and contractual adjustments to third-party payors based upon prospectively determined rates and discounted charges. Payment is requested at the time of service for self-paying patients and for patients covered by third-party payors that are responsible for paying deductibles and coinsurance.

The Company monitors revenue and receivables to prepare estimated contractual allowances for the anticipated differences between billed and reimbursed amounts. Payments from third-party payors and Government programs including Medicare and Medicaid may be subject to audit and other retrospective adjustments. Such amounts are considered on an estimated basis when net patient revenue is recorded and are adjusted as final adjustments are determined. For the three and six month periods ended June 30, 2024 and 2023, such resulting historic adjustments have been immaterial to the condensed consolidated financial statements.

In assessing who is the principal in providing patient services and pharmacy prescriptions, the Company considered who controls the provision of services and prescriptions. The Company has determined they are acting as a principal in these relationships.

In April 2022, the Company entered into an arrangement to sponsor and manage a clinical trial. The Company subsequently contracted with a third-party to provide the clinical research services and is the principal in this arrangement. The performance of clinical research services are considered a single performance obligation because

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the Company provides a highly-integrated service. Revenue is recognized for the single performance obligation over time due to the Company’s right to payment for work performed to date. The contract provides for invoices based on predetermined milestones.

The Company uses the cost-to-cost measure of progress for the Company’s contract because it best depicts the transfer of control to the customer as the performance obligation is fulfilled. For this method, the Company compares the contract costs incurred to date to the estimated total contract costs through completion. As part of the client proposal and contract negotiation process, the Company develops a detailed project budget for the direct costs and reimbursable costs based on the scope of the work, the complexity of the study, the geographical location involved and the Company’s historical experience. The estimated total contract costs at the project level are reviewed and revised periodically throughout the life of the contract, with adjustments to revenue resulting from such revisions being recorded on a cumulative basis in the period in which the revisions are identified. Contract costs consist primarily of direct labor and other reimbursable project-related costs such as travel, third-party vendor costs and investigator fees. The Company establishes pricing based on the Company’s internal pricing guidelines, discount agreements, if any, and negotiations with the client. The transaction price is the contractually defined amount. Revenue related to the clinical trial, which is included within other revenue, was $0.0 million and $1.5 million and $0.5 million and $1.5 million for the three and six months ended June 30, 2024 and 2023, respectively. This arrangement concluded during the three months ended June 30, 2024.

The Company has a system and estimation process for recording Medicare net patient service revenue and estimated recoupments as it relates to value-based care (“VBC”) revenue included in patient service revenue in the condensed consolidated statements of operations and comprehensive (income) loss. The Company’s VBC revenue is primarily generated through its participation in the CMS Oncology Care Model (“OCM”) which is an episode-based payment model to promote high-quality cancer care. Participants enter six-month episode periods, and the Company bills a monthly fee during the six-month period based on a fixed rate per participant per month and the total number of participants. Certain quality and compliance metrics are tracked as part of the program and submitted to CMS at the end of the episode period which may result in recoupment of funds. The Company estimates the recoupment amount by developing a recoupment percentage for each period based on historical known recoupment from CMS and applies the recoupment percentage against total fees for the period. Based on the estimate, the Company accrues a liability representing the expected final recoupments based on historical settlement trends.

Short-term Marketable Securities

Investments in marketable securities consist of corporate bonds and U.S. Treasury securities.

Management determines the appropriate classification of investments at the time of purchase and reevaluates such determination at each balance sheet date. Marketable securities are classified as available-for-sale and are carried at fair value in the consolidated balance sheets. The marketable securities are classified as short-term based on management’s intent to convert such securities within one year and the ability to convert them within two to three days.

Certain of our available-for-sale securities are debt securities. For an available-for-sale debt security with an amortized cost that exceeds its fair value, the Company first determines if it intends to sell or will more-likely-than-not be required to sell the security before the expected recovery of its amortized cost. If it intends to sell or will more-likely-than-not be required to sell the security, then the Company recognizes the impairment as a credit loss in the condensed consolidated statements of operations and comprehensive (income) loss by writing down the security’s amortized cost to its fair value. If it does not intend to sell or it is not more-likely-than-not that it will be required to sell the security before the expected recovery of its amortized cost, the Company recognizes the portion of the impairment that is due to a credit loss, if any, in the condensed consolidated statements of operations and comprehensive (income) loss through an allowance. The portion of the impairment that is due to factors other than a credit loss is recognized in other comprehensive income (loss) in the condensed consolidated statements of operations and comprehensive (income) loss as an unrealized loss.

Equity Investment in Affiliate

In January 2023, the Company contributed noncash consideration, with a fair value of approximately $2.3 million, in return for a 49% equity interest in OCP Management Arizona, LLP. Investments in entities over which the Company has the ability to exercise significant influence but does not control the entity are accounted for using the

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equity method. Equity method investments are included with other assets in the condensed consolidated balance sheets. The carrying amount of the investment is adjusted to reflect the Company’s proportionate share of the net earnings or losses and reduced by any dividends received. The Company’s share of income or loss related to this investment is reported as an equity in loss of affiliate in the condensed consolidated statements of operations and comprehensive (income) loss.

Noncontrolling Interests

The Company consolidates the results of entities in which it has a controlling financial interest. Refer to Note 15 for additional considerations and presentation for noncontrolling interest.

Mezzanine Equity

New AON Series A Preferred Stock is redeemable for cash or the value of the property, rights or securities to be paid or distributed in the event of a Deemed Liquidation Event (which is outside of the Company’s control). As a result, Management has determined that the New AON Series A Preferred Stock should be classified as mezzanine equity. As of June 30, 2024, the Preferred Stock are recorded at their initial carrying value, net of offering costs of $0.8 million. The Series A Preferred Stock are not being accreted to redemption value, as the redemption is not probable. The Series A Preferred Stock are classified outside of members’ equity on the consolidated balance sheets. Refer to Note 14 for mezzanine equity presentation considerations for redeemable noncontrolling interest.

Treasury Stock

We account for treasury stock purchased under the cost method and include treasury stock as a component of

accumulated paid in capital. Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock. The company repurchased 14,729 shares of Class A common stock at the spot rate as of each transaction date for a total cost of less than $0.1 million for the year ended December 31, 2023. For the three and six months ended June 30, 2024 the Company repurchased an additional 16,441 and 91,573 shares of Class A common stock, respectively, at the spot rate as of each transaction date for a total cost of less than $0.4 million. To date, the Company has repurchased a total of 122,743 shares.

Equity-Based Compensation

The Company issues stock-based awards to employees and directors in the form of stock options and restricted stock units. The Company measures and recognizes compensation expense for its stock-based awards granted to its employees and directors based on the estimated grant date fair value in accordance with ASC 718, Compensation-Stock Compensation, and determines the fair value of restricted stock units based on the fair value of its common stock. The Company measures all share-based options granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model. Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. The Company records the expense for awards with service-based conditions using the straight-line method over the requisite service period, net of any actual forfeitures. The Company classifies share-based compensation expense in its consolidated statements of operations and comprehensive (income) loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Business Combinations

The Company evaluates acquired practices in accordance with ASU 2017-01, Business Combinations (Topic 805)-Clarifying the Definition of a Business. This standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Because substantially all of the value of each acquired practice did not relate to a similar group of assets and as each acquired practice contained both inputs and processes necessary to provide economic benefits to the Company, it was determined that each acquisition represents a business combination. Therefore, the transactions have been accounted for using the acquisition method of accounting, which requires, with limited exceptions, that assets acquired, and liabilities assumed be recognized at their estimated fair values as of the acquisition date. Any excess of the consideration transferred over the estimated fair values of the net assets acquired is recorded as goodwill. Transaction costs related to business combinations are expensed in the period in which they are incurred.

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Offering Costs

The Company defers specific incremental costs directly attributable to proposed offerings of securities. These costs consist of legal, accounting, and other similar expenses incurred through the balance sheet date that are directly related to a potential offering. If the offering is completed, these costs will be charged against the gross proceeds of the offering. These offering costs will be allocated to the separable financial instruments issued in the transaction on a relative fair value basis of the securities issued, compared to total proceeds received. Offering costs associated with any instruments classified as liabilities will be expensed as incurred, presented as non-operating expenses in the condensed consolidated statement of operations and comprehensive (income) loss.

Goodwill and Intangible Assets

Goodwill and indefinite-lived identifiable intangible assets

Goodwill represents the fair value of acquired businesses in excess of the fair value of the individually identified net assets acquired. Goodwill is not amortized but is tested for impairment annually or whenever indications of impairment exist. Impairment exists when the carrying amount, including goodwill, of the reporting unit exceeds its fair value, resulting in an impairment charge for this excess. The Company can elect to qualitatively assess goodwill for impairment if it is more likely than not that the fair value of its reporting unit exceeds its carrying value. When performing a qualitative assessment, the Company considers relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. If goodwill is more likely than not impaired, the Company must then complete a quantitative analysis. When performing a quantitative impairment test, the Company utilizes the market approach in estimating the fair values of its reporting unit. If the carrying value of a reporting unit exceeds its fair value, an impairment charge is recognized equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying value of goodwill of the reporting unit. The Company has determined that it has only one reporting unit for purposes of evaluating goodwill impairment. The Company’s annual impairment testing date is October 1.

Other indefinite-lived intangible assets consist of a certificate of need acquired in an asset acquisition and is not subject to amortization. The Company has concluded that the certificate of need has an indefinite life because there are no legal, regulatory, contractual, economic or other factors that would limit the useful life, and the Company intends to renew and operate the certificate of need indefinitely. Indefinite-lived intangible assets are reviewed annually for impairment or more frequently if circumstances indicate impairment may have occurred.

Finite-lived identifiable intangible assets

Finite-lived intangible assets consist of trade names acquired in business combinations and are recorded at fair value. Finite-lived intangible assets are amortized using the straight-line method over the estimated economic life of the assets, which best reflects the pattern of use. Trade names are amortized over an estimated useful life of ten years. The Company’s finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets or asset groups may not be recoverable. If the expected undiscounted future cash flows are less than the carrying amount of such assets or asset groups, the Company recognizes an impairment loss to the extent the carrying amount exceeds its estimated fair value

Professional Liability

The Company maintains insurance policies for exposure to professional malpractice insurance risk. The limits of malpractice insurance provide each physician/advanced practice provider with a dedicated $1.0 million limit per claim and a $3.0 million limit in the aggregate per policy period – on a first dollar basis, as no deductible applies. The policy further then extends coverage to the Company, by providing a $2.0 million limit per claim and a $4.0 million limit in the aggregate per policy period - on a first dollar basis, additionally, as no deductible applies. Reserves are established for estimates of the loss that will ultimately be incurred on claims that have been reported but not paid and claims that have been incurred but not reported. These reserves are established based on consultation with a third-party actuary. The actuarial valuations consider a number of factors, including historical claims payment patterns, changes in case reserves and the assumed rate of increase in healthcare costs. Management believes the use of actuarial methods to account for these reserves provides a consistent and effective way to measure these subjective accruals. However, due to the sensitive nature of this estimation technique, recorded reserves could differ from ultimate costs related to these claims due to changes in claims reporting, claims

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payment and settlement practices and differences in assumed future cost increases. All accrued unpaid claims and expenses and the associated insurance recoveries are classified as short-term and long-term liabilities and assets based on when they are expected to be paid or collected.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.

Accounting guidance establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:


Level 1			Inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.

Level 2			Inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

Level 3			Inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities being measured within the fair value hierarchy.

Our financial instruments include cash, short-term marketable securities, accounts receivable, notes receivable, accounts payable, accrued expenses, long-term debt and contractual agreements that resulted in derivative liabilities. Our nonfinancial assets such as property and equipment are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that impairment may exist.

The carrying amounts of cash, accounts receivable, accounts payable, notes receivable, and accrued expenses approximate their fair value because of the short-term maturity and highly liquid nature of these instruments. We determine the fair value of long-term debt and marketable securities based on various factors including maturity schedules and current market rates.

See Note 6 for a discussion of the Company’s Level 1 and Level 2 Marketable Securities as of June 30, 2024. See below for a discussion of the Company’s Level 1 and Level 3 warrant liabilities as of June 30, 2024. As of June 30, 2024 and December 31, 2023, there were no Level 3 financial instruments. There were no transfers between any levels of the hierarchy during any periods presented.

Warrant Liabilities

Upon Closing of the Business Combination, on September 20, 2023, the Company evaluated the Public Warrants and Private Placement Warrants and the Class B Prefunded Warrants, collectively referred to herein as “Warrants”, in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, and concluded that a provision in the warrant agreements related to potential net cash settlement of the warrants upon an exchange or tender offer that may not result in a change in control of the entity precludes the warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as current liabilities within accrued other on the condensed consolidated balance sheets and measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in other income (expense), net on the condensed consolidated statements of operations and comprehensive (income) loss in the period of change.

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As of June 30, 2024, the Public Warrants were trading separately from the Class A Common Stock and the quoted market price was used to establish fair value. As such, the Public Warrants fair value was determined using a Level 1 input. The fair value of the Public Warrants as of June 30, 2024 is $0.3 million and recorded in accrued other on the condensed consolidated balance sheets.

Management has utilized the public warrant price to value the private warrants and believes the public and private warrants have materially consistent fair values given the existence of the make-whole redemption feature. As of June 30, 2024, a valuation of the private warrants was performed which confirmed the private warrant value was materially consistent with the public warrants. The details of this valuation are included in the paragraph below.

The fair value of the Private Placement warrants was determined using Level 3 inputs. As of June 30, 2024, the fair value of the Private Placement Warrants was estimated to be $0.2 million and recorded in accrued other on the condensed consolidated balance sheets. The fair value was estimated at June 30, 2024, using the Black-Scholes Option Pricing model using the following assumptions:

Expected annual dividend yield – 0.0%

Expected volatility – 55.00%

Risk-free rate of return – 4.39%

Expected Option Term – 5.0 years

The AON Class B Prefunded Warrants are exercisable into one share of New AON Class B Common Stock. A share of New AON Class B Common Stock, together with an AON LLC Common Unit, may be exchanged for one share of New AON Class A Common Stock. Considering New AON Class B Common Stock has no economic rights and limited liquidity or value if the holder does not also possess an AON LLC Common Unit, and because the AON Class B Prefunded Warrants are exercisable into New AON Class B Common Stock, the Company has estimated fair value of the Class B Prefunded Warrants to be immaterial.

Earnings Per Share

The Company recast Historical AON LLC Equity as AON Inc. common equity for all periods prior to the Reverse Recapitalization, refer to Note 2. However, as 100% of the net losses of AON LLC prior to the Reverse Recapitalization were absorbed by the Legacy AON Shareholders, basic and diluted earnings (loss) per share is zero for the three and six months ended June 30, 2023. Basic and diluted earnings (loss) per share for the three and six months ended June 30, 2024 represents the period where the Company had earnings (loss) attributable to Class A Common Stockholders. Class B Common Stock does not have economic rights in AON Inc., including rights to dividends or distributions upon liquidation, and as a result, is not considered a participating security for basic and diluted earnings (loss) per share. As such, basic and diluted earnings (loss) per share of Class B Common Stock has not been presented.

The Company has issued and outstanding Sponsor Earnouts, which are subject to forfeiture if the achievement of certain stock price thresholds are not met. In accordance with ASC Topic 260, “Earnings Per Share,” the Sponsor Earnouts are excluded from weighted-average shares outstanding to calculate basic earnings (loss) per share as they are considered contingently issuable shares due to their potential forfeiture. Sponsor Earnouts will be included in weighted-average shares outstanding to calculate basic earnings (loss) per share as of the date of their stock price thresholds are met and they are no longer subject to forfeiture.

Basic and diluted earnings (loss) per share is computed by use of the two-class method as a result of outstanding Series A Preferred Stock, which accrue dividends at the annual rate of 8% of the original price per share, participate with common stock on all other dividends, and accordingly have participation rights in undistributed earnings as if all such earnings had been distributed during the period (see Note 12). Under such method income available to common shareholders is computed by deducting both dividends declared or, if not declared, accumulated on Series A Preferred Stock from net income. Loss attributable to common shareholders is computed by increasing net loss by such dividends. Since the participating Series A Preferred Stock has no contractual obligation to share in the losses of the Company, there is no loss allocation between Class A Common Stock and Series A Preferred Stock.

Basic earnings (loss) per share is based on the weighted-average number of shares of Class A Common Stock outstanding during the period. Diluted earnings (loss) per share is based on the weighted-average number of shares

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of Class A Common Stock used for the basic earnings (loss) per share calculation, adjusted for the dilutive effect of the Public and Private Warrants, Restricted Stock Units, and Sponsor Earnout, if any, using the “treasury stock” method and the convertible Series A Preferred Stock and, exchangeable Class B Common Stock and Class B Prefunded Warrants, if any, using the “if-converted” method. Net earnings (loss) for diluted loss per share is adjusted for the Company’s share of AON LLC’s consolidated net earnings (loss), net of AON Inc. taxes, after giving effect to the Class B Common Stock and Class B Prefunded Warrants that are exchanged into potential shares of Class A Common Stock, Public and Private Warrants that are liability classified, and Series A Preferred Stock, to the extent it is dilutive.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial instruments-Credit Losses (“ASU 2016- 13”). ASU 2016-13 requires entities to report ‘‘expected’’ credit losses on financial instruments and other commitments to extend credit rather than the current ‘‘incurred loss’’ model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures relating to significant estimates and judgments used in estimating credit losses, as well as the credit quality. ASU 2016-13 is effective for the Company for annual reporting periods beginning after December 15, 2022. ASU 2016-13 was adopted by the Company effective January 1, 2023, with no material impact on the Company’s consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which provides that an acquirer must recognize, and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. The guidance is effective for the Company for annual reporting periods beginning after December 15, 2023, with early adoption permitted. The adoption of this standard as of January 1, 2024, did not have an impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker, a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the chief operating decision maker when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280, “Segment Reporting,” to be included in interim periods. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The Company is evaluating the impact this will have on the Company's consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this upgrade enhance the transparency and decision usefulness of income tax disclosures. This ASU requires disclosures of specific categories and disaggregation of information in the rate reconciliation table. The ASU also requires disclosure of disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The requirements of the ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the effect that ASU 2023-09 will have on its disclosures.

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3.Reverse Recapitalization

As discussed in Note 1, AON LLC merged with DTOC, with AON LLC surviving the Merger. AON LLC is governed by a board of managers composed of three (3) persons that were designated by New AON and two (2) persons that were designated by holders of a majority of the AON LLC Common Units, held by members of AON LLC other than New AON. Management determined AON LLC was not a variable interest entity (Refer to Note 2), and as result, identified AON LLC as the accounting acquirer of the Merger in accordance ASC Topic 805. Management concluded that AON LLC was the accounting acquirer due to (i) the Legacy AON Shareholders, defined as the former AON Class A, Class A-1, and Class B unit holders, receiving the largest portion of the voting rights in the combined company, New AON, (ii) significantly all of the Legacy AON Shareholders retained their equity interest as stockholders in New AON, (iii) AON LLC’s operations prior to the Reverse Recapitalization comprising the only ongoing operations of New AON, (iv) the Legacy AON Shareholders have the right to appoint a majority of the directors of New AON, (v) the executive management of AON LLC will become the executive management of New AON and (vi) AON LLC is significantly larger than DTOC in terms of revenue, total assets, and employees. Therefore, the Merger was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with ASC 805. DTOC was treated as the “acquired” company for financial reporting purposes, and for accounting purposes, the Reverse Recapitalization was treated as the equivalent of AON LLC issuing stock for the net assets of DTOC, accompanied by a recapitalization. The net assets of DTOC were recorded at historical cost on the condensed consolidated balance sheet as of September 20, 2023, the Closing Date of the Reverse Recapitalization, with no goodwill or other intangible assets recorded. For additional information on the capitalization of New AON and AON LLC immediately following the Closing of the Reverse Recapitalization, see Note 1.

The following table provides the historical cost of assets and liabilities of DTOC. as of September 20, 2023.


	As of September 20, 2023
Cash and Cash Equivalents	$	1,493
Current Liabilities	(13,295)
Long Term Liabilities	(6,791)
Total Net Liabilities	$	(18,593)

The Company recorded a Day 1 expense as of the Closing of the Business Combination equal to $18.2 million. Of that total amount, $13.0 million was recorded in transaction expenses on the condensed consolidated statement of operations and comprehensive (income) loss. The remaining $5.2 million was recorded in other income (expense) net on the condensed consolidated statement of operations and comprehensive (income) loss. This amount represented the loss on the issuance of Public and Private Warrants, as of the Closing, net of cash received. The Company also recorded a $4.3 million gain in other income (expense), net related to the change in the fair value of the Public and Private Warrants during the period of September 21, 2023 through September 30, 2023.

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4.Variable Interest Entities

AOMC is a wholly owned subsidiary of AON LLC and neither AOMC nor AON LLC has ownership interest in AON Partners and Partners of Maryland. Both AON Partners and Partners of Maryland are fully owned by physicians. AON LLC operates its physician practices through the MSAs and other contractual agreements between AOMC, AON Partners, and Partners of Maryland. The responsibilities of AOMC include, but are not limited to, negotiating provider and payor contracts, employment and compensation decisions, billing and collections, furnishing all supplies and equipment necessary for the respective practice’s operations as well as, necessary real estate, contracting on behalf of AON Partners and Partners of Maryland, entering into leases, holding a power of attorney to perform the above activities, preparing, maintaining and administering all accounting records (including financial reporting), expense payment, and maintenance of all information systems/software. AON LLC is paid a management fee to compensate AOMC for the services provided. AON Central Services is 80% physician owned and 20% owned by AON LLC. AOMC entered into an agreement with AON Central Services, effective January 1, 2023, to provide qualified non-clinical and non-medical employees to AOMC to support the operation of the physician practices. AOMC pays a monthly management fee to AON Central Services equal to the aggregate cost of compensation, benefits and all other costs related to these employees. AON LLC invested $0.2 million in MIBA, a newly formed LLC, during the second quarter of 2023 in exchange for 56% equity ownership. The Company evaluated AON LLC’s relationship with MIBA under the VIE model and determined it was a VIE and the Company is the primary beneficiary based on its financial controlling interest.

Based on various quantitative and qualitative factors, including assessment of certain services performed and relationships held above, management has determined that AON Partners, Partners of Maryland, AON Central Services, and MIBA are all variable interest entities and AOMC is the primary beneficiary who holds the decision-making rights over the activities that most significantly impact the economic performance of AON Partners, Partners of Maryland, AON Central Services, and MIBA through the MSAs and other contractual agreements. Accordingly, the results of AON Partners, Partners of Maryland, AON Central Services, and MIBA have been consolidated with the Company for the three and six month periods ended June 30, 2024. The results of AON Partners, Partners of Maryland, and AON Central Services have been consolidated with the Company for the three and six month periods ended June 30, 2023.

The assets of AON Partners, Partners of Maryland, AON Central Services, and MIBA as of June 30, 2024 and December 31, 2023, are as follows:


	As of June 30, 2024		As of December 31, 2023
Assets
Cash and cash equivalents	$	34,046	$	26,574
Accounts receivable	125,421		129,151
Inventories	54,280		44,569
Prepaid expenses and other current assets	17,894		895
Goodwill	9,850		—
Intangibles, net	2,476		180
Other receivables	47,784		33,809
Other assets	13,887		2,091
Total assets	$	305,638	$	237,269

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The liabilities of AON Partners, Partners of Maryland, AON Central Services, and MIBA as of June 30, 2024 and December 31, 2023, are as follows:


	As of June 30, 2024		As of December 31, 2023
Liabilities
Accounts payable	$	181,180	$	122,324
Accrued compensation and benefits	28,708		21,380
Accrued other	13,233		16,723
Other long-term liabilities	764		273
Due to AON LLC and subsidiaries, net	118,169		117,194
Total liabilities	$	342,054	$	277,894

All intercompany transactions and balances with the VIEs are eliminated in consolidation.

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5.Business Combinations

2024 Acquisitions

During the six months ended June 30, 2024, the Company closed on two business combinations (the “Transactions”), allowing the Company to expand its domestic reach related to its comprehensive oncology and practice management services.

For the acquisition of the clinical practices, the Company applied the acquisition method of accounting, where the total purchase price was allocated, or preliminarily allocated, to the tangible and intangible assets acquired and liabilities assumed, based on their fair values as of the acquisition dates.

Central Georgia Practice Acquisition

On April 1, 2024 ("Central Georgia Acquisition Date"), AOMC acquired certain non-clinical assets of Central Georgia Cancer Care, P.C., (the “Central Georgia Practice” or “CGCC”) from the CGCC Shareholders. In addition, AOP acquired certain clinical assets of the Central Georgia Practice from the CGCC Shareholders. In conjunction with the acquisition, AOP entered into Physician Employment Agreements with the selling CGCC Shareholders covering an initial period of five years. Intangible assets were recognized pursuant to the acquisition in the form of trade names of $1,300 with an amortization period of 10 years. The Company transferred total consideration of $13,462.

The Central Georgia Practice Acquisition was determined to constitute a business combination in accordance with ASC 805.

Hawaii Practice Acquisition

On April 1, 2024 ("Hawaii Acquisition Date"), AOMC acquired certain non-clinical assets of Hawaii Cancer Care, Inc. (the “Hawaii Practice” or “HCC”) from the HCC Shareholders. In addition, American Oncology Partners of Hawaii, LLC (“AOPH”), a wholly owned subsidiary of AOP, acquired certain clinical assets of the Hawaii Practice from the HCC Shareholders. In conjunction with the acquisition, AOP entered into Physician Employment Agreements with the HCC Shareholders. Intangible assets were recognized pursuant to the acquisition in the form of trade names of $520 with an amortization period of 10 years. The Company transferred total consideration of $(4,530).

The Hawaii Practice Acquisition was determined to constitute a business combination in accordance with ASC 805.

In connection with each of the Transactions, the Company acquired 100% of both the clinical and nonclinical assets of the respective seller. The clinical assets, acquired by AON Partners, primarily consist of medical supplies and drugs. Nonclinical assets, acquired by AOMC, primarily consist of tangible fixed assets and equipment. The following table summarizes the preliminary amounts of the assets acquired and consideration transferred recognized on respective acquisition dates.

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	Central Georgia		Hawaii
Consideration
Cash	$	6,912	$	—
Seller note	6,550		—
Debt assumed	—		(4,530)
Fair value of consideration transferred	13,462		(4,530)

Estimated fair values of identifiable assets acquired and liabilities assumed:
Cash	$	—	$	200
Patient accounts receivable	—		3,183
Inventories	2,312		159
Prepaid expenses and other current assets	—		58
Property and equipment	—		223
Other assets	—		202
Intangible assets - trade names	1,300		520
Right of use asset - operating	3,159		2,711
Goodwill	9,850		—
Total assets acquired	$	16,621	$	7,256
Account Payable	—		1,453
Accrued compensation related costs	—		544
Accrued other	—		733
Income taxes payable	—		452
Operating lease liability - current portion	189		375
Deferred income taxes	—		324
Note payable	—		4,530
Operating lease liability - long-term	2,970		2,335
Total liabilities acquired	3,159		10,745
Net assets (liabilities) acquired	$	13,462	$	(3,489)

Bargain purchase gain	$	—	$	(1,040)

At the time of each acquisition, the Company developed an estimate of fair values of assets for the purpose of allocating the estimated purchase price. In developing these estimates, Management utilized a specialist and determined the applicable fair values for any acquired intangible assets utilizing the relief-from-royalty method, a commonly accepted valuation technique which is an application of the income approach. This method employs various assumptions such as discount rates, forecasted revenues and growth rates. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 fair value measurements.

The purchase price allocations are subject to further change when additional information is obtained. The Company intends to finalize the purchase price allocations as soon as practicable within the measurement period, but in no event later than one year following the respective closing date of the acquisitions referenced above. The final purchase price allocation may result in additional adjustments to the net assets acquired, including the residual amount allocated to goodwill during the measurement period. Transaction expenses related to the above acquisitions were not material.

Goodwill reflects the expected synergies and other benefits that the Company believes will result from the combination of the Central Georgia Practice and expanded market opportunities along with the value of the assembled workforce. The goodwill is expected to be tax deductible. A bargain purchase gain of $1,040 for the Hawaii Practice Acquisition was recorded within Other (expense) income, net in the condensed consolidated statement of operations and comprehensive income (loss). The bargain purchase gain was driven by the asset purchase agreement containing certain provisions requiring repayment of the assumed debt, cash paid, and seller note by the HCC Shareholders and the in-substance service period.

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As the business combinations occurred on April 1, 2024, the following table presents revenue for the six months ended June 30, 2024 and the three and six months ended June 30, 2023, as if the 2024 acquisitions had occurred as of January 1, 2023. Prior to the acquisition date, expenses were recognized on the cash basis of accounting. CGCC’s and HCC’s historical books and records did not contain the information required to prepare financial statements on a basis that would be comparable to us. Thus, the required pro-forma financial disclosures related to net income are not presented herein.


Pro Forma
	Three months ended June 30,		Six months ended June 30,
	2023		2024		2023

Revenue	$	343,558	$	826,912	$	675,881

From the dates of acquisition through June 30, 2024, revenue attributable to the 2024 acquired businesses was $32.7 million. Net income (loss) has not been included as the Company recognizes expenses on the cash basis of accounting at the practice level.

2023 Acquisitions

The Company did not have any ASC 805 acquisitions during the year ended December 31, 2023.

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6.Marketable Securities

The following table summarizes the Company’s marketable securities financial assets that are measured at fair value on a recurring basis and cash equivalents:


	As of June 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash equivalents (1)
Level 1:
Overnight repurchase agreements (2)	$	31,954	$	-	$	-	$	31,954
Money market funds	245		-		-		245
Level 1 total	$	32,199	$	—	$	—	$	32,199
Marketable securities
Level 2:
Corporate bonds	11,298		129		(4)		11,423
U.S. Treasury securities	9,891		80		(3)		9,968
Level 2 total	21,189		209		(7)		21,391
Total	$	53,388	$	209	$	(7)	$	53,590


	As of December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash equivalents (1)
Level 1:
Overnight repurchase agreements (2)	$	28,593	$	-	$	-	$	28,593
Money market funds	723		-		-		723
Level 1 total	29,316		—		—		29,316
Marketable securities
Level 2:
Corporate bonds	13,678		191		(9)		13,860
U.S. Treasury securities	21,318		211		—		21,529
Level 2 total	34,996		402		(9)		35,389
Total	$	64,312	$	402	$	(9)	$	64,705

(1)Included in cash and cash equivalents in the condensed consolidated balance sheets at June 30, 2024 and December 31, 2023.

(2)Cash equivalents as of June 30, 2024 included overnight repurchase agreements in which cash from the Company's main operating checking account is invested overnight in highly liquid, short-term investments sponsored by a large financial institution.

The Company uses quoted prices in active markets for identical assets to determine the fair value of its Level 1 investments. The fair value of the Company’s Level 2 investments is determined using pricing based on quoted market prices or alternative market observable inputs.

The fair value of the Company’s marketable securities as of June 30, 2024, by remaining contractual maturities, were as follows:


	Corporate Bonds		U.S. Treasuries		Total
Due in one year or less	$	6,333	$	7,352	$	13,685
Due in one to five years	5,090		2,616		7,706
Total	$	11,423	$	9,968	$	21,391

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7. Supplemental Condensed Balance Sheet Information

Other receivables

Other receivables consisted of the following at June 30, 2024 and December 31, 2023:


	As of June 30, 2024		As of December 31, 2023
Rebates receivable	$	44,340	$	33,708
Other	16,588		566
Total other receivables	$	60,928	$	34,274

Inventory

Inventory consisted of the following purchased finished goods at June 30, 2024 and December 31, 2023:


	As of June 30, 2024		As of December 31, 2023
Intravenous drugs	$	44,026	$	32,388
Oral pharmaceuticals	10,254		12,181
Total inventories