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INDEX TO FINANCIAL STATEMENTS

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As filed with the Securities and Exchange Commission on February 28, 2020

Registration No. 333-236011


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Pre-Effective Amendment No. 1 to FORM S-3
on
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ADAPTHEALTH CORP.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  8082
(Primary Standard Industrial
Classification Code Number)
  82-3677704
(I.R.S. Employer
Identification Number)

220 West Germantown Pike, Suite 250
Plymouth Meeting, PA 19462
(610) 630-6357

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)

Christopher Joyce
General Counsel
220 West Germantown Pike, Suite 250
Plymouth Meeting, PA 19462
(610) 630-6357

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:

Steven Gartner
Michael Brandt
Danielle Scalzo
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
Telephone: (212) 728-8000
Facsimile: (212) 718-8111

Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this registration statement.

            If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.    ý

            If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

            If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

            If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.    o

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

Large accelerated filer o   Accelerated filer ý   Non-accelerated filer o   Smaller reporting company ý

Emerging growth company ý

            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 7(a)(2)(B) of the Securities Act. o

CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered(1)

  Proposed Maximum
Offering Price Per
Security

  Proposed Maximum
Aggregate Offering
Price

  Amount of
Registration Fee

 

Primary Offering

               

Class A Common Stock, par value $0.0001 per share ("Class A Common Stock"), issuable upon the exercise of warrants issued in the registrant's initial public offering ("public warrants")

  8,333,333   $11.50(2)   $95,833,329.50(2)   $12,439.17(2)
 

Class A Common Stock, issuable upon the exercise of warrants issued in private placements ("private placement warrants")

  4,333,333   $11.50(2)   $49,833,329.50(2)   $6,468.37(2)
 

Secondary Offering

               

Class A Common Stock

  75,053,512   $11.63(3)   $872,872,344.56(3)   $113,298.83(3)
 

Private placement warrants

  4,333,333               (4)               (4)               (4)
 

Total

              $132,206.37(5)

 

(1)
Pursuant to Rule 416 under the Securities Act of 1933 (the "Securities Act"), the Registrant is also registering hereunder an indeterminate number of additional shares of common stock that shall be issuable to prevent dilution resulting from stock splits, stock dividends or similar transactions.

(2)
Calculated pursuant to Rule 457(g) under the Securities Act based on the fixed conversion or exercise price of the security.

(3)
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) of the Securities Act based on the average of the high and low sales prices of the Registrant's common stock on January 17, 2020, as reported on the Nasdaq Capital Market.

(4)
Pursuant to Rule 457(g) of the Securities Act, no separate registration fee is required with respect to these securities.

(5)
An aggregate registration fee of $132,206.37 was previously paid.

            The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


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EXPLANATORY NOTE

        This Pre-Effective Amendment No. 1 to Form S-3 on Form S-1 is being filed to convert the registration statement on Form S-3 filed by AdaptHealth Corp. on January 22, 2020 (Registration No. 333-236011) into a registration statement on Form S-1.


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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED FEBRUARY 28, 2020

PRELIMINARY PROSPECTUS

AdaptHealth Corp.

Primary Offering of

12,666,666 shares of Class A Common Stock
Issuable Upon Exercise of Warrants

Secondary Offering of

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

          This prospectus relates to the issuance by us of up to 12,666,666 shares of our Class A Common Stock, par value $0.0001 per share ("Class A Common Stock"). Of these shares:

    8,333,333 shares are issuable upon the exercise of warrants that were issued in our initial public offering pursuant to the registration statement declared effective on February 15, 2018 (the "public warrants"); and

    4,333,333 shares are issuable upon the exercise of warrants initially issued to Deerfield/RAB Ventures LLC (our "Sponsor") in a private placement that occurred simultaneously with our initial public offering (the "private placement warrants" and collectively with the public warrants, the "warrants"), which private placement warrants have been distributed from the Sponsor to its members.

          Each warrant entitles the holder thereof to purchase one share of our Class A Common Stock at a price of $11.50 per share. We will receive the proceeds from the exercise of the warrants, but not from the sale of the underlying shares of Class A Common Stock.

          In addition, the selling securityholders identified in this prospectus may, from time to time in one or more offerings, offer and sell up to 75,053,512 shares of our Class A Common Stock, of which:

    6,250,000 shares were issued to our Sponsor in a private placement prior to our initial public offering ("founder shares"), which founder shares have been distributed from the Sponsor to its members;

    2,500,000 shares were acquired by Deerfield Management Company, L.P. in connection with our initial public offering;

    17,356,380 shares were issued as partial consideration in connection with our business combination with AdaptHealth Holdings LLC ("AdaptHealth Holdings"), which we completed on November 8, 2019 (the "Business Combination");

    31,063,799 shares are issuable upon the exchange of an equal number of units (the "AdaptHealth Units") representing limited liability company interests in AdaptHealth Holdings, our direct subsidiary, together with a corresponding number of shares of our Class B Common Stock, par value $0.0001 per share (the "Class B Common Stock");

    1,050,000 shares were issued upon the exchange of an equal number of AdaptHealth Units, together with a corresponding number of shares of our Class B Common Stock;

    12,500,000 shares were issued in private placements in connection with the Business Combination; and

    4,333,333 shares are issuable upon the exercise of private placement warrants.

          The selling securityholders may also, from time to time in one or more offerings, offer and sell up to 4,333,333 private placement warrants.

          We will not receive any proceeds from the sale of our Class A Common Stock or private placement warrants by selling securityholders, but we are required to pay certain offering fees and expenses in connection with the registration of the selling securityholders' securities and to indemnify certain selling securityholders against certain liabilities.

          This prospectus describes the general manner in which these securities may be offered and sold. If necessary, the specific manner in which these securities may be offered and sold will be described in one or more supplements to this prospectus. Any prospectus supplement may add, update or change information contained in this prospectus. You should carefully read this prospectus, and any applicable prospectus supplement, before you invest in any of our securities.

          The selling securityholders may offer and sell our Class A Common Stock or private placement warrants to or through one or more underwriters, dealers and agents, or directly to purchasers, on a continuous or delayed basis. In addition, certain selling securityholders may offer and sell these securities from time to time, together or separately. If the selling securityholders use underwriters, dealers or agents to sell such securities, we will name them and describe their compensation in a prospectus supplement. The price to the public of those securities and the net proceeds any selling securityholders expect to receive from that sale will also be set forth in a prospectus supplement.

          Our Class A Common Stock is listed on the Nasdaq Capital Market ("Nasdaq") and trades under the symbol "AHCO". On February 27, 2020, the closing price of our Class A Common Stock was $16.42. Our public warrants were formerly listed on Nasdaq under the symbol "AHCOW" and were suspended from trading on Nasdaq on December 6, 2019 because the public warrants did not satisfy the minimum 300 round lot holder requirement for listing, at which time the warrants became eligible to trade "over-the-counter" under the trading symbol "AHCOW". A Form 25-NSE with respect to the public warrants was filed by Nasdaq on January 21, 2020, and the formal delisting of the public warrants became effective ten days thereafter. The private placement warrants are not listed on any exchange.



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

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

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



   

The date of this prospectus is                    , 2020


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        You should rely only on the information contained in this prospectus or any supplement to this prospectus. We have not authorized anyone to provide you with different information. Neither we nor the selling securityholders are making an offer to sell or soliciting an offer to buy these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus or any supplement to this prospectus is accurate as of any date other than the date on the front cover of those documents.


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ABOUT THIS PROSPECTUS

        This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the "SEC") using a "shelf" registration process. Under this shelf process, we may issue up to an aggregate of 12,666,666 shares of our Class A Common Stock upon the exercise of our public warrants and our private placement warrants and the selling securityholders may sell from time to time in one or more offerings up to an aggregate of 75,053,512 shares of our Class A Common Stock and up to an aggregate of 4,333,333 private placement warrants.

        This prospectus describes the general manner in which the securities may be offered and sold. If necessary, the specific manner in which these securities may be offered and sold will be described in one or more supplements to this prospectus. Any prospectus supplement may add, update or change information contained in this prospectus. You should carefully read this prospectus, and any applicable prospectus supplement, before you invest in any of our securities.

        Unless the context requires otherwise, references in this prospectus to "AdaptHealth," the "Company," "we," "us," "our" and similar terms refer to AdaptHealth Corp. and its consolidated subsidiaries on and after the consummation of the Business Combination, and references to "DFB" refer to us prior to the consummation of the Business Combination.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        We make forward-looking statements in this prospectus within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. These statements may be preceded by, followed by or include the words "may," "might," "will," "will likely result," "should," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "continue," "target" or similar expressions.

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

    the ability to maintain the listing of our Class A Common Stock on Nasdaq;

    the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of our business to grow and manage growth profitably;

    changes in applicable laws or regulations;

    fluctuations in the U.S. and/or global stock markets;

    the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and

    other risks and uncertainties set forth in this prospectus or in any applicable prospectus supplement.

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FREQUENTLY USED TERMS

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

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

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

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

        "AdaptHealth Holdings Unitholders' Representative" means AH Representative LLC;

        "Blocker Companies" means A Blocker and BM Blocker;

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

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

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

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

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

        "Closing" means the closing of the Business Combination;

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

        "Deerfield" means Deerfield Private Design Fund IV, L.P.;

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

        "Lock-Up Agreements" means the Lock-Up Agreements, dated as of July 8, 2019, among DFB, AdaptHealth Holdings and certain members of AdaptHealth Holdings;

        "Merger Agreement" means the Merger Agreement, dated as of July 8, 2019, among DFB, Merger Sub, AdaptHealth Holdings, the Blocker Companies, the AdaptHealth Holdings Unitholders' Representative and, solely for the purposes specified therein, the Blocker Sellers, as amended by the Merger Agreement Amendment;

        "Merger Agreement Amendment" means the Amendment No. 1 to the Merger Agreement, dated as of October 15, 2019, by and among DFB, Merger Sub, AdaptHealth Holdings, the Blocker Companies, the AdaptHealth Holdings Unitholders' Representative and, solely for the purposes specified therein, the Blocker Sellers;

        "Merger Sub" means DFB Merger Sub LLC, a wholly-owned subsidiary of DFB prior to the Closing, which merged with and into AdaptHealth Holdings at the Closing;

        "Non-Blocker AdaptHealth Members" means the owners of AdaptHealth Units immediately prior to the Closing, other than the Blocker Companies;

        "RAB Ventures" means RAB Ventures (DFB) LLC;

        "Registration Rights Agreement" means the Registration Rights Agreement, dated as of November 8, 2019, by and among AdaptHealth, AdaptHealth Holdings, and certain investors party thereto;

        "Subscription Agreement" means the Amended and Restated Subscription Agreement, dated as of October 15, 2019, among DFB, Deerfield and RAB Ventures; and

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

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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included in this prospectus and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."


Our Company

Company History

        We were originally formed in November 2017 as a special purpose acquisition company under the name DFB Healthcare Acquisitions Corp. for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination involving one or more businesses. Until the consummation of the Business Combination, our shares of Class A Common Stock, Public Warrants and units, consisting of one share of Common Stock and one-third of one redeemable warrant, were traded on Nasdaq under the symbols "DFB", "DFBW" and "DFBU," respectively.

        On November 8, 2019, we completed our initial business combination with AdaptHealth Holdings pursuant to that certain Agreement and Plan of Merger, dated as of July 8, 2019, by and among the Company, the Blocker Companies, Merger Sub, AdaptHealth Holdings, AdaptHealth Holdings Unitholders' Representative, solely for purposes of Section 7.20 thereof, the BlueMountain Entities and, solely for purposes of Section 7.21 thereof, A Blocker Seller, pursuant to which the Company acquired 56% of the economic and voting interests of AdaptHealth Holdings through a series of transactions, including: (i) the merger of each of the Blockers with and into the Company, with the Company surviving; (ii) the merger of Merger Sub with and into AdaptHealth Holdings, with AdaptHealth Holdings surviving (the "AdaptHealth Merger"); and (iii) the contribution by the Company to AdaptHealth Holdings of all its available funds (other than cash used to pay certain transaction expenses of the Company) in exchange for equity interests in AdaptHealth Holdings. The transactions contemplated by the Merger Agreement are collectively referred to in this prospectus as the "Business Combination." As part of the Business Combination, we changed our name from DFB Healthcare Acquisitions Corp. to AdaptHealth Corp.

Business Overview

        Following the completion of the Business Combination (the "Closing"), substantially all of the Company's assets and operations are held and conducted by AdaptHealth Holdings and its subsidiaries, and the Company's only assets are equity interests in AdaptHealth Holdings. The Company owns a majority of the economic and voting interests of AdaptHealth Holdings and is the sole manager of AdaptHealth Holdings.

        We are a leading provider of home healthcare equipment, supplies and related services in the United States. We focus primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi-PAP services) to individuals suffering from obstructive sleep apnea ("OSA"), (ii) home medical equipment to patients discharged from acute care and other facilities, (iii) oxygen and related chronic therapy services in the home and (iv) diabetes management medical devices and supplies (including insulin pumps and continuous glucose monitors). We also provide hospice-focused home medical equipment ("HME") services and wound care, urological, ostomy and nutritional supply services for chronic patients. We service beneficiaries of Medicare, Medicaid and commercial insurance payors. As of December 31, 2019, we serviced over 1.0 million patients annually in 49 states through our network of 173 locations in 35 states. Subsequent to our acquisition of the

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Patient Care Solutions business (PCS) from McKesson Corporation in January 2020, we service over 1.4 million patients annually in all 50 states through our network of 187 locations in 38 states.

Recent Developments

        On January 1, 2020, the Company purchased 100% of the equity interests of NRE Holding Corporation ("NRE"), a subsidiary of McKesson Corporation ("McKesson"). In connection with the transaction, AdaptHealth Corp. acquired the Patient Care Solutions business ("PCS") from McKesson. PCS provides wound care supplies, ostomy supplies, urological supplies, incontinence supplies, diabetic care supplies, and breast pumps directly to patients across the United States. The total cash paid at closing was approximately $15 million. In addition, the Company may be required to make an additional payment of $1.5 million to McKesson after the closing of the transaction pursuant to the terms and conditions of a Transition Services Agreement executed in connection with the transaction. The total investment of AdaptHealth in PCS, including restructuring costs, is expected to be approximately $30.0 million.

Our Emerging Growth Company Status

        As a company with less than $1.0 billion in revenue during its last fiscal year, we qualify as an "emerging growth company" as defined in the JOBS Act. As an emerging growth company, we are eligible for certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements.

        We may take advantage of these provisions until we are no longer an emerging growth company, which will occur on the earliest of (i) the last day of the fiscal year in which the market value of our Class A Common Stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1 billion or more during such fiscal year, (iii) the date on which we have issued more than $1.07 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock in the IPO, which would be December 31, 2023.

        In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the same time private companies adopt the new or revised standard.

Our Smaller Reporting Company Status

        Notwithstanding the above, we are also currently a "smaller reporting company," meaning that we have a public float of less than $250 million and annual revenues of less than $100 million. In the event that we are still considered a "smaller reporting company," at such time as we cease being an "emerging growth company," the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an "emerging growth

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company" or a "smaller reporting company." Specifically, similar to "emerging growth companies," "smaller reporting companies" are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings.

        Accordingly, the information that we provide you may be different than what you may receive from other public companies in which you hold equity interests.

Additional Information

        Our principal executive office is located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462, and its telephone number is (610) 630-6357. Our website is https://www.adapthealth.com. The information on our website does not constitute part of, and is not incorporated by reference in, this prospectus or any accompanying prospectus supplement, and you should not rely on our website or such information in making a decision to invest in our Common Stock.

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The Offering

Shares Offered by the Selling Securityholders

  75,053,512 shares of Class A Common Stock held by the selling securityholders named herein or issuable upon exchange of shares of Class B Common Stock.

 

8,333,333 shares of Class A Common Stock issuable upon exercise of the public warrants.

 

4,333,333 shares of Class A Common Stock issuable upon exercise of the private placement warrants.

Warrants Offered by the Selling Securityholders

 

4,333,333 warrants to purchase shares of Class A Common Stock that are the private placement warrants issued to the Sponsor in a private placement concurrent with our IPO.

Terms of the Offering

 

The selling securityholders will determine when and how they will dispose of the shares of Class A Common Stock and private placement warrants registered under this prospectus for resale.

Shares of Common Stock Outstanding

 

As of                        , 2020 we had issued and outstanding (i)                  shares of Class A Common Stock and (ii)                  shares of Class B Common Stock.

Use of Proceeds

 

We will not receive any proceeds from the sale of our securities offered by the selling securityholders under this prospectus (the "Securities"). We will receive up to an aggregate of approximately $145,666,659 from the exercise of the warrants, assuming the exercise in full of all of the warrants for cash. We expect to use the net proceeds from the exercise of the warrants for general corporate purposes, including acquisitions and other business opportunities, capital expenditures and working capital. See the section titled "Use of Proceeds."

Risk Factors

 

See the section titled "Risk Factors" and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our securities.

Trading Markets and Ticker Symbols

 

Our Class A Common Stock is listed on Nasdaq under the symbol "AHCO." Our warrants are quoted on the OTC Pink marketplace operated by OTC Markets Group, Inc. under the symbol "AHCOW."

        The number of issued and outstanding shares of Class A Common Stock does not include (i) the 7,588,750 shares of Class A Common Stock available for future issuance under the AdaptHealth Corp. 2019 Stock Incentive Plan or (ii) the 12,666,666 shares of Class A Common Stock issuable upon the exercise of the public warrants or the private placement warrants.

        For additional information concerning the offering, see the section titled "Plan of Distribution."

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RISK FACTORS

        Investing in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under "Cautionary Note Regarding Forward-Looking Statements" and the risks described below, you should carefully consider the specific risks set forth under the caption "Risk Factors" in any applicable prospectus supplement, as well as in our definitive proxy statement on Schedule 14A filed in connection with the Business Combination, our most recent Annual Report on Form 10-K and any subsequently filed Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K (other than, in each case, information furnished rather than filed). If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment.

        Additionally, the risks and uncertainties described in this prospectus or any prospectus supplement are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

Risks Related to Our Business and Industry

AdaptHealth's revenue could be impacted by federal and state changes to reimbursement and other aspects of Medicaid and Medicare.

        AdaptHealth derived approximately 31% of its revenue for the year ended December 31, 2019 from Medicare and various state-based Medicaid programs. These programs are subject to statutory and regulatory changes affecting overall spending, base rates or basis of payment, retroactive rate adjustments, annual caps that limit the amount that can be paid (including deductible and coinsurance amounts) for rehabilitation therapy services rendered to Medicare beneficiaries, administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates and frequency at which these programs reimburse AdaptHealth. For example, the Medicaid Integrity Contractor program is increasing the scrutiny placed on Medicaid payments and could result in recoupments of alleged overpayments in an effort to rein in Medicaid spending. Recent budget proposals and legislation at both the federal and state levels have called for cuts in reimbursement for healthcare providers participating in the Medicare and Medicaid programs. Enactment and implementation of measures to reduce or delay reimbursement or overall Medicare or Medicaid spending could result in substantial reductions in AdaptHealth's revenue and profitability. Payors may disallow AdaptHealth's requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable because either adequate or additional documentation was not provided or because certain services were not covered or considered reasonably necessary. Additionally, revenue from these payors can be retroactively adjusted after a new examination during the claims settlement process or as a result of post-payment audits.

AdaptHealth's business may be adversely impacted by healthcare reform efforts, including repeal of or significant modifications to the ACA.

        In recent years, the U.S. Congress and certain state legislatures have considered and passed a number of laws that are intended to result in significant changes to the healthcare industry. However, there is significant uncertainty regarding the future of the Patient Protection and Affordable Care Act ("ACA"), the most prominent of these reform efforts. The law has been subject to legislative and regulatory changes and court challenges, and the current presidential administration and certain members of Congress have stated their intent to repeal or make additional significant changes to the ACA, its implementation or its interpretation. In 2017, the Tax Cuts and Jobs Acts was enacted, which, effective January 1, 2019, among other things, removed penalties for not complying with ACA's individual mandate to carry health insurance. In addition, President Trump has signed an executive

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order that directs agencies to minimize "economic and regulatory burdens" of the ACA. Because the penalty associated with the individual mandate was eliminated, a federal judge in Texas ruled in December 2018 that the entire ACA was unconstitutional. The presidential administration and the Centers for Medicare and Medicaid Services have both stated that the ruling will have no immediate effect, and on December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. Pending review, the law remains in effect, but it is unclear at this time what effect the latest ruling will have on the status of the ACA.These changes and court challenges may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased. The presidential administration and the U.S. Congress may take further action regarding the ACA, including, but not limited to, repeal or replacement. Additionally, all or a portion of the ACA and related subsequent legislation may be modified, repealed or otherwise invalidated through further legislation or judicial challenge, which could result in reduced funding for state Medicaid programs, lower numbers of insured individuals, and reduced coverage for insured individuals. There is uncertainty regarding whether, when, and how the ACA will be further changed, what alternative provisions, if any, will be enacted, and the impact of alternative provisions on providers and other healthcare industry participants. Government efforts to repeal or change the ACA or to implement alternative reform measures could cause AdaptHealth's revenues to decrease to the extent such legislation reduces Medicaid and/or Medicare reimbursement rates.

AdaptHealth is affected by continuing efforts by private third-party payors to control their costs. If AdaptHealth agrees to lower its reimbursement rates due to pricing pressures from private third-party payors, AdaptHealth's financial condition and results of operations would likely deteriorate.

        AdaptHealth derived approximately 69% of its revenue for the year ended December 31, 2019 from third-party private payors. Such payors continually seek to control the cost of providing healthcare services through direct contracts with healthcare providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations. These private payors are increasingly demanding discounted fee structures, including setting reimbursement rates based on Medicare fee schedules and the assumption by the healthcare provider of all or a portion of the financial risk. Reimbursement payments under private payor programs may not remain at current levels and may not be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to such programs, and AdaptHealth may suffer deterioration in pricing flexibility, changes in payor mix and growth in operating expenses in excess of increases in payments by private third-party payors. AdaptHealth may be compelled to lower its prices due to increased pricing pressures, which could adversely impact AdaptHealth's financial condition and results of operations.

Changes in governmental or private payor supply replenishment schedules could adversely affect AdaptHealth.

        AdaptHealth generated approximately 42% of its revenue for the year ended December 31, 2019 through the sale of masks, tubing and other ancillary products related to patients utilizing CPAP devices. Medicare, Medicaid and private payors limit the number of times per year that patients may purchase such supplies. To the extent that any governmental or private payor revises their resupply guidelines to reduce the number of times such supplies can be purchased, such reductions could adversely impact AdaptHealth's revenue, financial condition and results of operations.

AdaptHealth generates a significant portion of its revenue from the provision of sleep therapy equipment and supplies to patients, and AdaptHealth is therefore highly dependent on it for its success.

        Approximately 58% of AdaptHealth's revenue for the year ended December 31, 2019 was generated from the provision of sleep therapy equipment and supplies to patients. AdaptHealth's ability to execute its growth strategy therefore depends upon the adoption by patients, physicians and sleep

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centers, among others, of AdaptHealth's sleep therapy equipment and supplies to treat their patients suffering from OSA. There can be no assurance that AdaptHealth will continue to maintain broad acceptance among physicians and patients. Any failure by AdaptHealth to satisfy physician or patient demand or to maintain meaningful market acceptance will harm its business and future prospects.

AdaptHealth may be adversely affected by consolidation among health insurers and other industry participants.

        In recent years, a number of health insurers have merged or increased efforts to consolidate with other non-governmental payors. Insurers are also increasingly pursuing alignment initiatives with healthcare providers. Consolidation within the health insurance industry may result in insurers having increased negotiating leverage and competitive advantages, such as greater access to performance and pricing data. AdaptHealth's ability to negotiate prices and favorable terms with health insurers in certain markets could be affected negatively as a result of this consolidation. In addition, the shift toward value-based payment models could be accelerated if larger insurers, including those engaging in consolidation activities, find these models to be financially beneficial. There can be no assurance that AdaptHealth will be able to negotiate favorable terms with payors and otherwise respond effectively to the impact of increased consolidation in the payor industry or vertical integration efforts.

AdaptHealth's payor contracts are subject to renegotiation or termination, which could result in a decrease in AdaptHealth's revenue or profits.

        The majority of AdaptHealth's payor contracts are subject to unilateral termination by either party on between 30 and 90 days' prior written notice. Such contracts are routinely amended (sometimes by unilateral action by payors regarding payment policy), renegotiated, subjected to a bidding process with AdaptHealth's competitors, or terminated altogether. Sometimes in the renegotiation process, certain lines of business may not be renewed or a payor may enlarge its provider network or otherwise adversely change the way it conducts its business with AdaptHealth. In other cases, a payor may reduce its provider network in exchange for lower payment rates. AdaptHealth's revenue from a payor may also be adversely affected if the payor alters its utilization management expectations and/or administrative procedures for payments and audits, changes its order of preference among the providers to which it refers business or imposes a third-party administrator, network manager or other intermediary. Any reduction in AdaptHealth's projected home respiratory therapy/home medical equipment reporting unit revenues as a result of these or other factors could lead to a reduction in AdaptHealth's revenues. There can be no assurance that AdaptHealth's payor contracts will not be terminated or altered in ways that are unfavorable to AdaptHealth as a result of renegotiation or such administrative changes. Payors may decide to refer business to their owned provider subsidiaries, such as specialty pharmaceuticals and/or HME networks owned by such payors or by third-party management companies. These activities could materially reduce AdaptHealth's revenue from these payors.

If AdaptHealth fails to manage the complex and lengthy reimbursement process, its revenue, financial condition and results of operations could suffer.

        Because AdaptHealth depends upon reimbursement from Medicare, Medicaid and third-party payors for a significant majority of its revenues, AdaptHealth's revenue, financial condition and results of operations may be affected by the reimbursement process, which in the healthcare industry is complex and can involve lengthy delays between the time that services are rendered and the time that the reimbursement amounts are settled. Depending on the payor, AdaptHealth may be required to obtain certain payor-specific documentation from physicians and other healthcare providers before submitting claims for reimbursement. Certain payors have filing deadlines and will not pay claims

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submitted after such time. AdaptHealth cannot ensure that it will be able to effectively manage the reimbursement process and collect payments for its equipment and services promptly.

If the Centers for Medicare and Medicaid Services ("CMS") require prior authorization or implement changes in documentation necessary for AdaptHealth's products, AdaptHealth's revenue, financial condition and results of operations could be negatively impacted.

        CMS has established and maintains a Master List (called the Master List of Items Frequently Subject to Unnecessary Utilization) of certain DMEPOS that the Secretary determined, based on prior payment experience, are frequently subject to unnecessary utilization. This list identifies items that CMS has determined could potentially be subject to Prior Authorization as a condition of Medicare payment. With certain exceptions for reductions in Payment Threshold, items remain on the Master List for 10 years from the date the item was added to the Master List. The presence of an item on the Master List does not automatically mean that a prior authorization is required. Currently, CMS selects items from the Master List for inclusion on the "Required Prior Authorization List." On April 22, 2019, CMS has added items that are a part of AdaptHealth's product lines to the Master List of Items Frequently Subject to Unnecessary Utilization. If CMS imposes Prior Authorization requirements for these products, such Prior Authorization requirements may adversely impact AdaptHealth's revenue, financial condition and results from operations.

Reimbursement claims are subject to audits by various governmental and private payor entities from time to time and such audits may negatively affect AdaptHealth's revenue, financial condition and results of operations.

        AdaptHealth receives a substantial portion of its revenues from the Medicare program. Medicare reimbursement claims made by healthcare providers, including HME providers, are subject to audit from time to time by governmental payors and their agents, such as Medicare Administrative Contractors ("MACs") that act as fiscal intermediaries for all Medicare billings, auditors contracted by CMS, and insurance carriers, as well as HHS-OIG, CMS and state Medicaid programs. These include specific requirements imposed by the Durable Medical Equipment Medicare Administrative Contractor ("DME MAC") Supplier Manuals. To ensure compliance with Medicare, Medicaid and other regulations, government agencies or their contractors, including MACs, Recovery Audit Contractors and Zone Program Integrity Contractors, often conduct audits and request customer records and other documents to support our claims submitted for payment of services rendered. In many instances, there are only limited publicly-available guidelines and methodologies for determining errors with certain audits. As a result, there can be a significant lack of clarity regarding required documentation and audit methodology. The clarity and completeness of each patient medical file, some of which is the work product of physicians not employed by AdaptHealth, is essential to successfully challenging any payment denials. For example, the DME MAC Supplier Manuals provide that clinical information from the "patient's medical record" is required to justify the initial and ongoing medical necessity for the provision of DME. Some DME MACs, CMS staff and government subcontractors have taken the position, that the "patient's medical record" refers not to documentation maintained by the Durable Medical Equipment ("DME") supplier but instead to documentation maintained by the patient's physician, healthcare facility or other clinician, and that clinical information created by the DME supplier's personnel and confirmed by the patient's physician is not sufficient to establish medical necessity. If the physicians working with AdaptHealth's patients do not adequately document, among other things, their diagnoses and plans of care, AdaptHealth's risks related to audits and payment denials in general are greater. Depending on the nature of the conduct found in such audits and whether the underlying conduct could be considered systemic, the resolution of these audits could adversely impact AdaptHealth's revenue, financial condition and results of operations.

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        CMS has developed and instituted various audit programs under which CMS contracts with private companies to conduct claims and medical record audits. These audits are in addition to those conducted by existing MACs. Some contractors are paid a percentage of the overpayments recovered. One type of audit contractor, the Recovery Audit Contractors ("RACs"), receive claims data directly from MACs on a monthly or quarterly basis and are authorized to review previously paid claims. It is unclear whether CMS intends to conduct RAC prepayment reviews in the future and if so, what providers and claims would be the focus of those reviews.

        Moreover, the ACA now requires that overpayments be reported and returned within 60 days of identification of the overpayment. Any overpayment retained after this deadline will now be considered an "obligation" for purposes of the False Claims Act and subject to fines and penalties. CMS currently has a six-year "lookback period," for reporting and returning the "identified" overpayment. Private payors also reserve rights to conduct audits and make monetary adjustments.

        AdaptHealth's third-party payors may also, from time to time, request audits of the amounts paid, or to be paid, to AdaptHealth. AdaptHealth could be adversely affected in some of the markets in which it operates if the auditing payor alleges substantial overpayments were made to AdaptHealth due to coding errors or lack of documentation to support medical necessity determinations.

        AdaptHealth cannot currently predict the adverse impact, if any, that these audits, methodologies and interpretations might have on its financial condition and results of operations.

Significant reimbursement reductions and/or exclusion from markets or product lines could adversely affect AdaptHealth.

        All Medicare Durable Medical Equipment, Prosthetics, Orthotics, & Supplies (DMEPOS) Competitive Bidding Program contracts expired on December 31, 2018, and, as a result, there is a temporary gap in the entire DMEPOS Competitive Bidding Program that CMS expects will last until December 31, 2020.

        On March 7, 2019, CMS announced plans to consolidate the competitive bidding areas (CBAs) included in the Round 1 2017 and Round 2 Recompete DMEPOS Competitive Bidding Programs into a single round of competition named "Round 2021." Round 2021 contracts are scheduled to become effective on January 1, 2021, and extend through December 31, 2023. The bid window for the Round 2021 DMEPOS Competitive Bidding Program closed on September 18, 2019.

        For each CBA, providers will submit bids to CMS offering to supply certain covered items of DME in the CBA at certain prices. A number of products in AdaptHealth's product lines are included on the list of products subject to Round 2021. For the year ended December 31, 2019, AdaptHealth estimates that approximately $145.0 million of revenue was generated with respect to covered items in competitive bidding areas subject to Round 2021. The $145.0 million estimate excludes amounts generated in non-rural and rural non-bid areas, as well as products not currently part of Competitive Bidding Programs. As part of the competitive bidding process, single payment amounts ("SPAs") replace the current Medicare durable medical equipment fee schedule payment amounts for selected items in certain areas of the country. The SPAs are determined by using bids submitted by DME suppliers. CMS will select winning bidders based upon the CMS-determined demand in each CBA, and the price assigned to the winning bidders shall be the price submitted by the final bidder accepted to meet such CBA's volume demand. Successful bidders are expected to meet certain program quality standards in order to be awarded a contract and only successful bidders can supply the covered items to Medicare beneficiaries in the acquisition area (there are, however, regulations in place that allow non-contracted providers to continue to provide equipment and services to their existing customers at the new prices determined through the bidding process). The contracts are expected to be re-bid at least every three years. CMS is required to award contracts to multiple entities submitting bids in each area for an item or service, but has the authority to limit the number of contractors in a competitive

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acquisition area to the number it determines to be necessary to meet projected demand. AdaptHealth's exclusion from certain markets or product lines could materially adversely affect its financial condition and results of operations.

        The competitive bidding process has historically put pressure on the amount AdaptHealth is reimbursed in the markets in which it exists, as well as in areas that are not subject to the Competitive Bidding Program. The rates required to win future competitive bids could continue to compress reimbursement rates. AdaptHealth will continue to monitor developments regarding the competitive bidding program. While AdaptHealth cannot predict the outcome of the competitive bidding program on its business in the future nor the Medicare payment rates that will be in effect in future years for the items subjected to competitive bidding, the program may materially adversely affect its financial condition and results of operations.

Failure by AdaptHealth to maintain controls and processes over billing and collections or the deterioration of the financial condition of AdaptHealth's payors or disputes with third parties could have a significant negative impact on its financial condition and results of operations.

        The collection of accounts receivable requires constant focus and involvement by management and ongoing enhancements to information systems and billing center operating procedures. There can be no assurance that AdaptHealth will be able to improve upon or maintain its current levels of collectability and days sales outstanding in future periods. Further, some of AdaptHealth's payors and/or patients may experience financial difficulties, or may otherwise not pay accounts receivable when due, resulting in increased write-offs. If AdaptHealth is unable to properly bill and collect its accounts receivable, its financial condition and results of operations will be adversely affected. In addition, from time to time AdaptHealth is involved in disputes with various parties, including its payors and their intermediaries regarding their performance of various contractual or regulatory obligations. These disputes sometimes lead to legal and other proceedings and cause AdaptHealth to incur costs or experience delays in collections, increases in its accounts receivable or loss of revenue. In addition, in the event such disputes are not resolved in AdaptHealth's favor or cause AdaptHealth to terminate its relationships with such parties, there may be an adverse impact on its financial condition and results of operations.

If AdaptHealth is unable to maintain or develop relationships with patient referral sources, its growth and profitability could be adversely affected.

        AdaptHealth's success depends in large part on referrals from acute care hospitals, sleep laboratories, pulmonologist offices, skilled nursing facilities, hospice operators and other patient referral sources in the communities served by AdaptHealth. By law, referral sources cannot be contractually obligated to refer patients to any specific provider. However, there can be no assurance that other market participants will not attempt to steer patients to competing post-acute providers or otherwise limit AdaptHealth's access to potential referrals. The establishment of joint ventures or networks between referral sources, such as acute care hospitals, and other post-acute providers may hinder patient referrals to AdaptHealth. AdaptHealth's growth and profitability depend on its ability to establish and maintain close working relationships with patient referral sources and to increase awareness and acceptance of the benefits of inpatient rehabilitation, home health, and hospice care by its referral sources and their patients. There can be no assurance that AdaptHealth will be able to maintain its existing referral source relationships or that it will be able to develop and maintain new relationships in existing or new markets. AdaptHealth's loss of, or failure to maintain, existing relationships or its failure to develop new relationships could adversely affect its ability to grow its business and operate profitably.

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Failure by AdaptHealth to successfully design, modify and implement technology-based and other process changes to maximize productivity and ensure compliance could ultimately have a significant negative impact on AdaptHealth's financial condition and results of operations.

        AdaptHealth has identified a number of areas throughout its operations, including revenue cycle management and fulfilment logistics, where it intends to centralize and/or modify current processes or systems in order to attain a higher level of productivity or ensure compliance. Failure to achieve the cost savings or enhanced quality control expected from the successful design and implementation of such initiatives may adversely impact AdaptHealth's financial condition and results of operations. Additionally, Medicare and Medicaid often change their documentation requirements with respect to claims submissions. The standards and rules for healthcare transactions, code sets and unique identifiers also continue to evolve, such as ICD 10 and HIPAA 5010 and other data security requirements. Moreover, government programs and/or commercial payors may have difficulties administering new standards and rules for healthcare transactions and this may adversely affect timelines of payment or payment error rates. The DMEPOS competitive bidding program also imposes new reporting requirements on contracted providers. Failure by AdaptHealth to successfully design and implement system or process modifications could have a significant impact on its operations and financial condition. From time to time, AdaptHealth's outsourced contractors for certain information systems functions, such as Brightree LLC and Parachute Health LLC, may make operational, leadership or other changes that could impact AdaptHealth's plans and cost-savings goals. The implementation of many of the new standards and rules will require AdaptHealth to make substantial investments. Further, the implementation of these system or process changes could have a disruptive effect on related transaction processing and operations. If AdaptHealth's implementation efforts related to systems development are unsuccessful, AdaptHealth may need to write off amounts that it has capitalized related to systems development projects. Additionally, if systems development implementations do not occur, AdaptHealth may need to incur additional costs to support its existing systems.

AdaptHealth's business depends on its information systems, including software licensed from third parties. AdaptHealth's information systems and those of AdaptHealth's third-party software providers are subject to security breaches and other cybersecurity incidents, which may disrupt AdaptHealth's operations.

        AdaptHealth's business depends on the proper functioning and availability of its computer systems and networks. AdaptHealth relies on an external service provider to provide continual maintenance, upgrading and enhancement of AdaptHealth's primary information systems used for its operational needs. AdaptHealth licenses third-party software that supports intake, personnel scheduling and other human resources functions, office clinical and centralized billing and receivables management in an integrated database, enabling AdaptHealth to standardize the care delivered across its network of locations and monitor its performance and consumer outcomes. AdaptHealth also uses a third-party software provider for its order processing and inventory management platform. To the extent that its third-party providers fail to support, maintain and upgrade such software or systems, or if AdaptHealth loses its licenses with third-party providers, the efficiency of AdaptHealth's operations could be disrupted or reduced.

        If AdaptHealth experiences a reduction in the performance, reliability, or availability of its information systems, its operations and ability to process transactions and produce timely and accurate reports could be adversely affected. If AdaptHealth experiences difficulties with the transition and integration of information systems or is unable to implement, maintain, or expand its systems properly, AdaptHealth could suffer from, among other things, operational disruptions, regulatory problems, and increases in administrative expenses.

        There can be no assurance that AdaptHealth's and its third-party software providers' safety and security measures and disaster recovery plan will prevent damage, interruption or breach of its

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information systems and operations. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect, AdaptHealth may be unable to anticipate these techniques or implement adequate preventive measures. In addition, hardware, software or applications AdaptHealth develops or procures from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise the security of its information systems. Unauthorized parties may attempt to gain access to AdaptHealth's systems or facilities, or those of third parties with whom AdaptHealth does business, through fraud or other forms of deceiving its employees or contractors. On occasion, AdaptHealth has acquired additional information systems through its business acquisitions. AdaptHealth has upgraded and expanded its information system capabilities and has committed significant resources to maintain, protect, enhance existing systems and develop new systems to keep pace with continuing changes in technology, evolving industry and regulatory standards, and changing customer preferences. In addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems also could disrupt or reduce the efficiency of AdaptHealth's operations. A cyber security attack or other incident that bypasses AdaptHealth's information systems security could cause a security breach which may lead to a material disruption to its information systems infrastructure or business and may involve a significant loss of business or patient health information. If a cyber security attack or other unauthorized attempt to access AdaptHealth's systems or facilities were to be successful, it could result in the theft, destruction, loss, misappropriation or release of confidential information or intellectual property, and could cause operational or business delays that may materially impact AdaptHealth's ability to provide various healthcare services. Any successful cyber security attack or other unauthorized attempt to access AdaptHealth's systems or facilities also could result in negative publicity which could damage its reputation or brand with its patients, referral sources, payors or other third parties and could subject AdaptHealth to substantial penalties under HIPAA and other federal and state privacy laws, in addition to private litigation with those affected. Failure to maintain the security and functionality of AdaptHealth's information systems and related software, or a failure to defend a cyber security attack or other attempt to gain unauthorized access to AdaptHealth's systems, facilities or patient health information, could expose AdaptHealth to a number of adverse consequences, the vast majority of which are not insurable, including but not limited to disruptions in AdaptHealth's operations, regulatory and other civil and criminal penalties, fines, investigations and enforcement actions (including, but not limited to, those arising from the SEC, Federal Trade Commission, the OIG or state attorneys general), private litigation with those affected by the data breach, loss of customers, disputes with payors and increased operating expense, which could adversely impact AdaptHealth's financial condition and results of operations.

AdaptHealth experiences competition from numerous other home respiratory and mobility equipment providers, and this competition could adversely affect its revenues and its business.

        The home respiratory and mobility equipment markets are highly competitive and include a large number of providers, some of which are national providers, but most of which are either regional or local providers, including hospital systems, physician specialists and sleep labs. The primary competitive factors are quality considerations such as responsiveness, access to payor contracts, the technical ability of the professional staff and the ability to provide comprehensive services. These markets are very fragmented. Some of AdaptHealth's competitors may now or in the future have greater financial or marketing resources than AdaptHealth. In addition, in certain markets, competitors may have more effective sales and marketing activities. AdaptHealth's largest national home respiratory/home medical equipment provider competitors include AeroCare Holdings, Inc., Apria Healthcare Group Inc., Lincare Holdings Inc. and Rotech Healthcare Inc. The rest of the homecare market in the United States consists of regional providers and product-specific providers, as well as numerous local organizations. Hospitals and health systems are routinely looking to provide coverage and better control

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of post-acute healthcare services, including homecare services of the types AdaptHealth provides. These trends may continue as new payment models evolve, including bundled payment models, shared savings programs, value based purchasing and other payment systems.

        There are relatively few barriers to entry in local home healthcare markets, and new entrants to the home respiratory/home medical equipment markets could have a material adverse effect on AdaptHealth's business, results of operations and financial condition. A number of manufacturers of home respiratory equipment currently provide equipment directly to patients on a limited basis. Such manufacturers have the ability to provide their equipment at prices below those charged by AdaptHealth, and there can be no assurance that such direct-to-patient sales efforts will not increase in the future or that such manufacturers will not seek reimbursement contracts directly with AdaptHealth's third-party payors, who could seek to provide equipment directly to patients from the manufacturer. In addition, pharmacy benefit managers (known as "PBMs"), including CVS Health Corporation and the OptumRx business of UnitedHealth Group Incorporated, could enter the HME market and compete with AdaptHealth. Large technology companies, such as Amazon.com, Inc. and Alphabet Inc., have disrupted other supply businesses and have publicly stated an interest in the entering the healthcare market. In the event such companies enter the HME market, AdaptHealth may experience a loss of referrals or revenue.

Changes in medical equipment technology and development of new treatments may cause AdaptHealth's current equipment or services to become obsolete.

        AdaptHealth evaluates changes in home medical equipment technology and treatments on an ongoing basis for purposes of determining the feasibility of replacing or supplementing items currently included in the patient service equipment inventory and services that AdaptHealth offers patients. AdaptHealth's selection of medical equipment and services is formulated on the basis of a variety of factors, including overall quality, functional reliability, availability of supply, payor reimbursement policies, product features, labor costs associated with the technology, acquisition, repair and ownership costs and overall patient and referral source demand, as well as patient therapeutic and lifestyle benefits. Manufacturers continue to invest in research and development to introduce new products to the marketplace. It is possible that major changes in available technology, payor benefit or coverage policies related to those changes or the preferences of patients and referral sources may cause AdaptHealth's current product offerings to become less competitive or obsolete, and it will be necessary to adapt to those changes. Unanticipated changes could cause AdaptHealth to incur increased capital expenditures and accelerated equipment write-offs, and could force AdaptHealth to alter its sales, operations and marketing strategies.

AdaptHealth's operations involve the transport of compressed and liquid oxygen, which carries an inherent risk of rupture or other accidents with the potential to cause substantial loss.

        AdaptHealth's operations are subject to the many hazards inherent in the transportation of medical gas products and compressed and liquid oxygen, including ruptures, leaks and fires. These risks could result in substantial losses due to personal injury or loss of life, severe damage to and destruction of property and equipment and pollution or other environmental damage and may result in curtailment or suspension of AdaptHealth's related operations. If a significant accident or event occurs, it could adversely affect AdaptHealth's business, financial position and results of operations. Additionally, corrective action plans, fines or other sanctions may be levied by government regulators who oversee transportation of hazardous materials such as compressed or liquid oxygen.

        AdaptHealth provides a significant number of patients with oxygen-based therapy, and from time to time, AdaptHealth has operated medical gas facilities in several states subject to federal and state regulatory requirements. AdaptHealth's medical gas facilities and operations are subject to extensive regulation by the Food and Drug Administration ("FDA") and other federal and state authorities. The

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FDA regulates medical gases, including medical oxygen, pursuant to its authority under the federal Food, Drug and Cosmetic Act. Among other requirements, the FDA's current Good Manufacturing Practice ("cGMP") regulations impose certain quality control, documentation and recordkeeping requirements on the receipt, processing and distribution of medical gas. Further, in each such state, its medical gas facilities would be subject to regulation under state health and safety laws, which vary from state to state. The FDA and state authorities conduct periodic, unannounced inspections at medical gas facilities to assess compliance with the cGMP and other regulations, and AdaptHealth expends significant time, money and resources in an effort to achieve substantial compliance with the cGMP regulations and other federal and state law requirements at each of its medical gas facilities. AdaptHealth also complies with the FDA's requirement for medical gas providers to register their sites with the agency. There can be no assurance, however, that these efforts will be successful and that AdaptHealth's medical gas facilities will maintain compliance with federal and state law regulations. Failure by AdaptHealth to maintain regulatory compliance at its medical gas facilities could result in enforcement action, including warning letters, fines, product recalls or seizures, temporary or permanent injunctions, or suspensions in operations at one or more locations, and civil or criminal penalties which would materially harm its business, financial condition, results of operations, cash flow, capital resources and liquidity.

AdaptHealth is subject, directly or indirectly, to United States federal and state healthcare fraud and abuse and false claims laws and regulations. Prosecutions under such laws have increased in recent years and AdaptHealth may become subject to such litigation. If AdaptHealth is unable to or has not fully complied with such laws, it could face substantial penalties.

        AdaptHealth's operations are subject to various state and federal fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal Stark Law and the federal False Claims Act. These laws may impact, among other things, AdaptHealth's sales, marketing and education programs.

        The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs. Several courts have interpreted the statute's intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. The Anti-Kickback Statute is broad and, despite a series of narrow safe harbors, prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.

        The federal Ethics in Patient Referrals Act of 1989, commonly known as the "Stark Law," prohibits, subject to certain exceptions, physician referrals of Medicare and Medicaid patients to an entity providing certain "designated health services" if the physician or an immediate family member has any financial relationship with the entity. The Stark Law also prohibits the entity receiving the referral from billing any good or service furnished pursuant to an unlawful referral. Various states have corollary laws to the Stark Law, including laws that require physicians to disclose any financial interest they may have with a healthcare provider to their patients when referring patients to that provider. Both the scope and exceptions for such laws vary from state to state.

        The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from the federal government. Suits

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filed under the False Claims Act, known as qui tam actions, can be brought by any individual on behalf of the government and such individuals, commonly known as "whistleblowers," may share in any amounts paid by the entity to the government in fines or settlement. The frequency of filing qui tam actions has increased significantly in recent years, causing greater numbers of medical device, pharmaceutical and healthcare companies to have to defend a False Claim Act action. When an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act.

        From time to time, AdaptHealth has been and is involved in various governmental audits, investigations and reviews related to its operations. Reviews and investigations can lead to government actions, resulting in the assessment of damages, civil or criminal fines or penalties, or other sanctions, including restrictions or changes in the way AdaptHealth conducts business, loss of licensure or exclusion from participation in Medicare, Medicaid or other government programs. If AdaptHealth fails to comply with applicable laws, regulations and rules, its financial condition and results of operations could be adversely affected. Furthermore, becoming subject to these governmental investigations, audits and reviews may result in substantial costs as AdaptHealth cooperates with the government authorities, regardless of whether the particular investigation, audit or review leads to the identification of underlying issues.

        AdaptHealth is unable to predict whether it could be subject to actions under any of these laws, or the impact of such actions. If AdaptHealth is found to be in violation of any of the laws described above or other applicable state and federal fraud and abuse laws, AdaptHealth may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from Medicare, Medicaid and other government healthcare reimbursement programs and the curtailment or restructuring of its operations.

Failure by AdaptHealth to maintain required licenses and accreditation could impact its operations.

        AdaptHealth is required to maintain a significant number of state and/or federal licenses for its operations and facilities. Certain employees are required to maintain licenses in the states in which they practice. AdaptHealth manages the facility licensing function centrally. In addition, individual clinical employees are responsible for obtaining, maintaining and renewing their professional licenses, and AdaptHealth has processes in place designed to notify branch or pharmacy managers of renewal dates for the clinical employees under their supervision. State and federal licensing requirements are complex and often open to subjective interpretation by various regulatory agencies. Accurate licensure is also a critical threshold issue for the Medicare enrollment and the Medicare competitive bidding program. From time to time, AdaptHealth may also become subject to new or different licensing requirements due to legislative or regulatory requirements developments or changes in its business, and such developments may cause AdaptHealth to make further changes in its business, the results of which may be material. Although AdaptHealth believes it has appropriate systems in place to monitor licensure, violations of licensing requirements may occur and failure by AdaptHealth to acquire or maintain appropriate licensure for its operations, facilities and clinicians could result in interruptions in its operations, refunds to state and/or federal payors, sanctions or fines or the inability to serve Medicare beneficiaries in competitive bidding markets which could adversely impact AdaptHealth's financial condition and results of operations.

        Accreditation is required by most of AdaptHealth's managed care payors and is a mandatory requirement for all Medicare DMEPOS providers. If AdaptHealth or any of its branches lose accreditation, or if any of its new branches are unable to become accredited, such failure to maintain accreditation or become accredited could adversely impact AdaptHealth's financial condition and results of operations.

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Compliance with regulations under the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the Health Information Technology for Economic and Clinical Health Act ("HITECH Act") and related rules relating to the transmission, security and privacy of health information could impose additional significant costs on AdaptHealth's operations.

        Numerous federal and state laws and regulations addressing patient privacy and consumer privacy, including HIPAA and the HITECH Act, govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or personal information. HIPAA and the HITECH Act require AdaptHealth to comply with standards for the use and disclosure of health information within AdaptHealth and with third parties. HIPAA and the HITECH Act also include standards for common healthcare electronic transactions and code sets, such as claims information, plan eligibility, payment information and the use of electronic signatures, and privacy and electronic security of individually identifiable health information.

        HIPAA requires healthcare providers, including AdaptHealth, in addition to health plans and clearinghouses, to develop and maintain policies and procedures with respect to protected health information that is used or disclosed. The HITECH Act expands the notification requirement for breaches of patient-identifiable health information, restricts certain disclosures and sales of patient-identifiable health information and provides a tiered system for civil monetary penalties for HIPAA violations.

        In addition, under the Federal CAN-SPAM Act, the Telephone Consumer Protection Act and the Telemarketing Sales Rule, AdaptHealth is limited in the ways in which it can market and service its products and services by use of email or telephone marketing. If AdaptHealth does not comply with existing or new laws and regulations related to patient health information, it could be subject to criminal or civil sanctions. New health information standards, whether implemented pursuant to HIPAA, the HITECH Act, congressional action or otherwise, could have a significant effect on the manner in which AdaptHealth handles healthcare-related data and communicates with payors, and the cost of complying with these standards could be significant.

AdaptHealth is highly dependent upon senior management; failure by AdaptHealth to attract and retain key members of senior management could adversely affect AdaptHealth's financial condition and results of operations.

        AdaptHealth is highly dependent on the performance and continued efforts of its senior management team. AdaptHealth's future success is dependent on its ability to continue to attract and retain qualified executive officers and senior management. Any inability to manage AdaptHealth's operations effectively could adversely impact its financial condition and results of operations.

AdaptHealth's reliance on relatively few suppliers for the majority of its patient service equipment and supplies could adversely affect AdaptHealth's ability to operate.

        AdaptHealth currently relies on a relatively small number of suppliers to provide it with the majority of its patient service equipment and supplies. Significant price increases, or disruptions in the ability to obtain such equipment and supplies from existing suppliers, may force AdaptHealth to use alternative suppliers. Additionally, any new excise taxes imposed on manufacturers of certain medical equipment could be passed on to customers, such as AdaptHealth. Such manufacturers may be forced to make other changes to their products or manufacturing processes that are unacceptable to AdaptHealth, resulting in a need to change suppliers. Any change in suppliers AdaptHealth uses could cause delays in the delivery of such products and possible losses in revenue, which could adversely affect AdaptHealth's results of operations. In addition, alternative suppliers may not be available, or may not provide their products and services at similar or favorable prices. If AdaptHealth cannot obtain the patient service equipment and supplies it currently uses, or alternatives at similar or

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favorable prices, AdaptHealth's ability to provide such products may be severely impacted, which could have an adverse effect on its business, financial condition, results of operations, cash flow, capital resources and liquidity. In December 2019, a novel strain of coronavirus began to impact the population of China, where several of our suppliers' manufacturing facilities are located. Although cases have been confirmed in other countries, the outbreak has been largely concentrated in China where certain businesses have suspended or terminated operations, a portion of the population has been subject to self-imposed or mandatory quarantines and economic activity has slowed. While the closures and limitations on movement in China are expected to be temporary, the potential supply chain disruption or its duration, and its related financial impact, cannot be estimated at this time. Should the closures and limitations on movement continue for an extended period of time, the impact on our supply chain could materially and adversely affect our business and results of operations.

AdaptHealth's strategic growth plan, which involves the acquisition of other companies, may not succeed.

        AdaptHealth's strategic plan calls for significant growth in its business over the next several years through an increase in its density in select markets where it is established as well as the expansion of its geographic footprint into new markets. This growth would place significant demands on AdaptHealth's management team, systems, internal controls and financial and professional resources. As a result, AdaptHealth could be required to incur expenses for hiring additional qualified personnel, retaining professionals to assist in developing the appropriate control systems and expanding AdaptHealth's information technology infrastructure. If AdaptHealth is unable to effectively manage growth, its financial results could be adversely impacted.

        AdaptHealth's strategic plan also contemplates continued growth from future acquisitions of home medical equipment providers. AdaptHealth may face increased competition for attractive acquisition candidates, which may limit the number of acquisition opportunities available to AdaptHealth or lead to the payment of higher prices for its acquisitions. Without successful acquisitions, AdaptHealth's future growth rate could decline. In addition, AdaptHealth cannot guarantee that any future acquisitions, if consummated, will result in further growth.

        AdaptHealth's strategic plan contemplates successful integration of acquired home medical equipment providers with AdaptHealth's existing business, including reduction in operating expenses with respect to the acquired companies. Integrating an acquisition could be expensive and time-consuming and could disrupt AdaptHealth's ongoing business, negatively affect cash flow and distract management and other key personnel from day-to-day operations. AdaptHealth may not be able to combine successfully the operations of recently acquired companies with its operations, and, even if such integration is accomplished, AdaptHealth may never realize the potential benefits of such acquisition. The integration of acquisitions requires significant attention from management, may impose substantial demands on AdaptHealth's operations or other projects and may impose challenges on us including, but not limited to, consistencies in business standards, procedures, policies and business cultures. There can be no assurance that any future acquisitions, if consummated, will result in further growth.

        Specific integration risks relating to the acquisition of other companies by AdaptHealth may include:

    difficulties related to combining previously separate businesses into a single unit, including patient transitions, product and service offerings, distribution and operational capabilities and business cultures;

    availability of financing to the extent needed to fund acquisitions;

    customer loss and other general business disruption;

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    managing the integration process while completing other independent acquisitions or dispositions;

    diversion of management's attention from day-to-day operations;

    assumption of liabilities of an acquired business, including unforeseen or contingent liabilities or liabilities in excess of the amounts estimated;

    failure to realize anticipated benefits and synergies, such as cost savings and revenue enhancements;

    potentially substantial costs and expenses associated with acquisitions and dispositions;

    failure to retain and motivate key employees;

    coordinating research and development activities to enhance the introduction of new products and services;

    difficulties in establishing and applying AdaptHealth's internal control over financial reporting and disclosure controls and procedures to an acquired business;

    obtaining necessary regulatory licenses and payor-specific approvals, which may impact the timing of when AdaptHealth is to bill and collect for services rendered;

    AdaptHealth's ability to transition patients in a timely manner may impact AdaptHealth's ability to collect amounts for services rendered;

    AdaptHealth's estimates for revenue accruals during the integration of acquisitions may require adjustments in future periods as the transition of patient information is finalized; and

    delays in obtaining new government and commercial payor identification numbers for acquired branches, resulting in a slowdown and/or loss of associated revenue.

        In addition, AdaptHealth faces competition for acquisition candidates and, which may limit the number of acquisition opportunities available to AdaptHealth or lead to the payment of higher prices for its acquisitions. There can be no assurance that AdaptHealth will be able to identify suitable acquisition opportunities in the future or that any such opportunities, if identified, will be consummated on favorable terms, if at all. Without successful acquisitions, AdaptHealth's future growth rate could decline.

        While AdaptHealth conducts due diligence in connection with any acquisition opportunity, there may be risks or liabilities that such due diligence efforts fail to discover that are not disclosed to AdaptHealth or that AdaptHealth inadequately assesses. The failure to timely identify any material liabilities associated with any acquisitions could adversely impact AdaptHealth's financial condition and results of operations.

If AdaptHealth were required to write down all or part of its goodwill its net earnings and net worth could be materially adversely affected.

        Goodwill represents a significant portion of AdaptHealth's assets. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. For example, if our market capitalization drops significantly below the amount of net equity recorded on our balance sheet, it might indicate a decline in our fair value and would require us to further evaluate whether our goodwill has been impaired. If, as part of our annual review of goodwill, we are required to write down all or a significant part of AdaptHealth's goodwill our net earnings and net worth could be materially adversely affected, which could affect our flexibility to obtain additional financing. In addition, if our assumptions used in preparing our valuations for purposes of impairment testing differ materially from actual future results, we may record impairment charges in the future and our financial results may be materially adversely affected. AdaptHealth had $266.8 million and $202.4 million of goodwill recorded on its Consolidated Balance Sheets at December 31, 2019 and December 31, 2018, respectively. It is not possible at this time to determine if there will be any future impairment charge, or if there is, whether such charges would be material.

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AdaptHealth may not be able to generate sufficient cash flow to cover required payments or meet operating covenants under its long-term debt and long-term operating leases.

        Failure to generate sufficient cash flow to cover required payments or meet operating covenants under AdaptHealth's long-term debt and long-term operating leases could result in defaults under such agreements and cross-defaults under other debt or operating lease arrangements, which could harm its operating subsidiaries. AdaptHealth may not generate sufficient cash flow from operations to cover required interest, principal and lease payments. In addition, AdaptHealth's outstanding credit facility contains restrictive covenants and requires AdaptHealth to maintain or satisfy specified coverage tests. These restrictions and operating covenants include, among other things, requirements with respect to total leverage ratios and fixed charge coverage ratios. These restrictions, together with the restrictive covenants included in promissory notes with the BlueMountain Entities, may interfere with AdaptHealth's ability to obtain additional advances under its existing credit facility or to obtain new financing or to engage in other business activities, which may inhibit AdaptHealth's ability to grow its business and increase revenue. In addition, failure by AdaptHealth to comply with these restrictive covenants could result in an event of default which, if not cured or waived, could result in the acceleration of its debt.

AdaptHealth may need additional capital to fund its operating subsidiaries and finance its growth, and AdaptHealth may not be able to obtain it on acceptable terms, or at all, which may limit its ability to grow.

        AdaptHealth's ability to maintain and enhance its operating subsidiaries and equipment to meet regulatory standards, operate efficiently and remain competitive in its markets requires AdaptHealth to commit substantial resources to continued investment in its affiliated facilities and equipment. Additionally, the continued expansion of its business through the acquisition of existing facilities, expansion of existing facilities and construction of new facilities may require additional capital, particularly if AdaptHealth were to accelerate its acquisition and expansion plans. Financing may not be available or may be available only on terms that are not favorable. In addition, some of AdaptHealth's outstanding indebtedness restrict, among other things, its ability to incur additional debt. If AdaptHealth is unable to raise additional funds or obtain additional funds on acceptable terms, it may have to delay or abandon some or all of its growth strategies. Further, if additional funds are raised through the issuance of additional equity securities, the percentage ownership of our stockholders would be diluted. Any newly issued equity securities may have rights, preferences or privileges senior to those of the Common Stock.

Political and economic conditions, including significant global or regional developments such as economic and political events, international conflicts, natural disasters, and public health crises that are out of AdaptHealth's control, could adversely affect its revenue, financial condition and results of operations.

        AdaptHealth's business can be affected by a number of factors that are beyond its control, such as general geopolitical, economic and business conditions, financial services market conditions, and general political and economic developments, including slower economic growth, disruptions in financial markets, economic downturns in the form of either contained or widespread recessionary conditions, inflation, elevated unemployment levels, sluggish or uneven economic recovery, government actions impacting trade agreements including the imposition of trade restrictions such as tariffs and retaliatory counter measures, government deficit reduction, natural and other disasters and public health crises affecting the operations of AdaptHealth or its customers or suppliers. Any Medicare, Medicaid or third-party payor reimbursement reductions as a result of such factors could adversely impact AdaptHealth's business, financial condition, results of operations, cash flow, capital resources and liquidity. Turmoil in the financial markets, including in the capital and credit markets, and any uncertainty over its breadth, depth and duration may put pressure on the global economy and could have a negative effect on AdaptHealth's business. Further, historical worldwide financial and credit

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turmoil could reduce the availability of liquidity and credit to fund the continuation and expansion of business operations worldwide. The shortage of liquidity and credit combined with substantial losses in worldwide equity markets could cause an economic recession in the United States or worldwide. If financial markets in the United States, Europe and Asia experience extreme disruption, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others, governments may take unprecedented actions intended to address extreme market conditions that may include severely restricted credit and declines in real estate values. If conditions in the global economy, U.S. economy or other key vertical or geographic markets are weak or uncertain, AdaptHealth could experience material adverse impacts on its revenue, financial condition and results of operations.

If AdaptHealth's subsidiary fails to comply with the terms of its Corporate Integrity Agreement, it could be subjected to substantial monetary penalties or suspension or termination from participation in the Medicare and Medicaid programs.

        Braden Partners, L.P., d/b/a Pacific Pulmonary Services ("PPS"), which was acquired by AdaptHealth in May 2017, entered into a five-year Corporate Integrity Agreement ("CIA") with the Office of Inspector General of the Department of Health and Human Services (the "OIG-HHS"), effective March 31, 2017, concurrent with the execution of a settlement agreement with the United States, acting through the DOJ and on behalf of the OIG-HHS. The CIA imposes certain compliance, auditing (including by an independent review organization), self-reporting and training requirements with which PPS must comply. If PPS fails to comply with the terms of its CIA, it could be subjected to substantial monetary penalties and/or suspension or exclusion from participation in federal healthcare programs. Any such suspension, exclusion or termination would result in the revocation or termination of contracts and/or licenses and potentially have a material adverse effect on the results of PPS' operations. The imposition of monetary penalties and/or termination of contracts with respect to PPS could adversely affect AdaptHealth's profitability and financial condition.

AdaptHealth's current insurance program may expose it to unexpected costs and negatively affect its business, financial condition and results of operations, particularly if it incurs losses not covered by its insurance or if claims or losses differ from its estimates.

        There is an inherent risk of liability in the provision of healthcare services. As participants in the healthcare industry, AdaptHealth may periodically be subject to lawsuits, some of which may involve large claims and significant costs to defend, such as mass tort or other class actions. Although AdaptHealth's insurance coverage reflects deductibles, self-insured retentions, limits of liability and similar provisions that it believes are reasonable based on its operations, the coverage under its insurance programs may not be adequate to protect it in all circumstances. AdaptHealth's insurance policies contain exclusions and conditions that could have a materially adverse impact on AdaptHealth's ability to receive indemnification thereunder, as well as customary sub-limits for particular types of losses. Additionally, insurance companies that currently insure companies in AdaptHealth's industry may cease to do so, may change the coverage provided or may substantially increase premiums in the future. The incurrence of losses and liabilities that exceed AdaptHealth's available coverage, therefore, could have a material adverse effect on its business, financial condition and results of operations.

        AdaptHealth currently self-insures a significant portion of expected losses under its workers' compensation, automobile liability and employee health insurance programs and, to offset negative insurance market trends, AdaptHealth may elect to increase its self-insurance coverage, accept higher deductibles or reduce the amount of coverage. Unanticipated changes in any applicable actuarial assumptions and management estimates underlying its liabilities for these losses could result in materially different expenses than expected under these programs, which could have a material adverse effect on AdaptHealth's financial condition and results of operations. In addition, if AdaptHealth

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experiences a greater number of these losses than it anticipates, it could have a material adverse effect on its business, financial condition and results of operations.

AdaptHealth currently outsources, and from time to time in the future may outsource, a portion of its internal business functions to third-party providers. Outsourcing these functions has significant risks, and AdaptHealth's failure to manage these risks successfully could materially adversely affect its business, results of operations, and financial condition.

        AdaptHealth currently, and from time to time in the future, may outsource portions of its internal business functions, including billing and administrative functions relating to revenue cycle management, to third-party providers in India, the Philippines and Central America. These third-party providers may not comply on a timely basis with all of AdaptHealth's requirements, or may not provide AdaptHealth with an acceptable level of service. In addition, AdaptHealth's reliance on third-party providers could have significant negative consequences, including significant disruptions in its operations and significantly increased costs to undertake its operations, either of which could damage AdaptHealth's relationships with its customers. In addition, AdaptHealth's outsourced functions may be negatively impacted by any number of factors, including political unrest; social unrest; terrorism; war; vandalism; currency fluctuations; changes to the law of India, the Philippines, the United States or any of the states or other jurisdictions in which AdaptHealth does business or outsources operations; or increases in the cost of labor and supplies in India, the Philippines or Central America or any other jurisdiction in which AdaptHealth outsources any portion of its internal business functions. AdaptHealth's outsourced operations may also be affected by trade restrictions, such as tariffs or other trade controls. As a result of its outsourcing activities, it may also be more difficult for AdaptHealth to recruit and retain qualified employees for its business needs at any time. AdaptHealth's failure to successfully outsource certain of its business functions could materially adversely affect its business, results of operations, and financial condition.

Risks Related to Our Securities

Our only significant assets are the ownership of a majority interest in AdaptHealth Holdings, and such ownership may not be sufficient to generate the funds necessary to meet our financial obligations or to pay any dividends on our Class A Common Stock.

        We have no direct operations and no significant assets other than the ownership of a majority of the economic and voting interests in AdaptHealth Holdings. We depend on AdaptHealth Holdings and its subsidiaries for distributions, loans and other payments to generate the funds necessary to meet our financial obligations or to pay any dividends with respect to our Class A Common Stock. Legal and contractual restrictions in agreements governing the indebtedness of AdaptHealth Holdings and its subsidiaries may limit our ability to obtain cash from AdaptHealth Holdings. The earnings from, or other available assets of, AdaptHealth Holdings and its subsidiaries may not be sufficient to enable us to satisfy our financial obligations or pay any dividends on our Class A Common Stock. AdaptHealth Holdings is classified as a partnership for U.S. federal income tax purposes and, as such, is generally not subject to entity-level U.S. federal income tax. Instead, taxable income is allocated to holders of AdaptHealth Units, including us. As a result, we generally will incur taxes on our allocable share of any net taxable income generated by AdaptHealth Holdings. Under the terms of the A&R AdaptHealth Holdings LLC Agreement, AdaptHealth Holdings is obligated to make tax distributions to holders of AdaptHealth Units, including us, except to the extent such distributions would render AdaptHealth Holdings insolvent or are otherwise prohibited by law or the terms of AdaptHealth's credit facility. In addition to our tax obligations, we also incur expenses related to our operations and our interests in AdaptHealth Holdings, including costs and expenses of being a publicly-traded company, all of which could be significant. To the extent that we require funds and AdaptHealth Holdings or its subsidiaries are restricted from making distributions under applicable law or regulation or under the terms of their

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financing arrangements, or are otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition, including our ability to pay our income taxes when due.

Fluctuations in the price of our securities could contribute to the loss of all or part of your investment.

        Prior to the Business Combination, there was no public market for AdaptHealth Holdings' securities. As an active market for our securities continues to develop, the trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

        Factors affecting the trading price of our securities may include:

    actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

    changes in the market's expectations about our operating results;

    success of competitors;

    our operating results failing to meet the expectation of securities analysts or investors in a particular period;

    changes in financial estimates and recommendations by securities analysts concerning AdaptHealth or the home medical equipment industry in general;

    operating and stock price performance of other companies that investors deem comparable to us;

    our ability to market new and enhanced products on a timely basis;

    changes in laws and regulations affecting our business;

    our ability to meet compliance requirements;

    commencement of, or involvement in, litigation involving us;

    changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

    the volume of shares of our Class A Common Stock available for public sale;

    any major change in our board of directors or management;

    sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and

    general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

        Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and Nasdaq in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial condition or results of operations. A

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decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act that are applicable to us.

        As a public company, we are required to comply with the SEC's rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. To comply with the requirements of being a public company, we are required to provide attestation on internal controls, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those that were required of AdaptHealth Holdings as a privately held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable to us after the Business Combination. If we are not able to implement the additional requirements of Section 404 in a timely manner or with adequate compliance, it may not be able to assess whether its internal controls over financial reporting are effective, which may subject it to adverse regulatory consequences and could harm investor confidence and the market price of our Class A Common Stock. Further, as an emerging growth company, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which our controls are documented, designed or operating.

        In connection with the audit of AdaptHealth Holdings' consolidated financial statements for the fiscal year ended December 31, 2018, there were certain controls over financial reporting that did not operate as designed. AdaptHealth continues to be actively engaged in the development and implementation of its remediation plan to address such material weakness, including:

    implementation of processes to improve overall efficiency and accuracy of accounting;

    assignment of dedicated and experienced technical resources, including engaging a third party consultant to assist management, with its responsibility of strengthening corporate oversight over financial reporting and enhancing controls associated with complex accounting matters; and

    hiring additional qualified personnel and continue to evaluate the adequacy of our accounting personnel staffing level.

        This remediation plan is intended to ensure that the key controls over the financial reporting oversight process are operating effectively and are sustainable.

        In addition, our management and other personnel will need to continue to devote a substantial amount of time to compliance initiatives applicable to public companies, including compliance with Section 404 and the evaluation of the effectiveness of our internal controls over financial reporting within the prescribed timeframe. AdaptHealth has begun the process of evaluating the adequacy of its accounting personnel staffing level and other matters related to internal controls over financial reporting. AdaptHealth may discover additional deficiencies in existing systems and controls that it may not be able to remediate in an efficient or timely manner.

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Certain of our principal stockholders have significant influence over us.

        Entities affiliated with Deerfield Management Company, L.P. (collectively, "Deerfield Management") collectively beneficially own approximately 26.14% of our Class A Common Stock, assuming (i) the exchange of 31,063,799 AdaptHealth Units together with the same number of shares of Class B Common Stock for shares of Class A Common Stock and (ii) the exercise of 1,640,981 private placement warrants and 833,333 public warrants held by Deerfield Management. Everest Trust beneficially owns approximately 21.717% of our Class A Common Stock, assuming (i) the exchange of 31,063,799 AdaptHealth Units together with the same number of shares of Class B Common Stock for shares of Class A Common Stock and (ii) the exercise of 665,628 private placement warrants held by Clifton Bay Offshore Investments L.P. and 41,473 private placement warrants held by Quadrant Management, Inc. As long as Deerfield Management and/or Everest Trust owns or controls a significant percentage of our outstanding voting power, it will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment to our certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets.

        The interests of Deerfield Management and/or Everest Trust may not align with the interests of our other stockholders. Each of Deerfield Management and Everest Trust is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Each of Deerfield Management and Everest Trust may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. Our second amended and restated certificate of incorporation provides that our stockholders and our directors, including any who were designated by any of our stockholders, other than any such persons who are employees of us or any of our subsidiaries, do not have any obligation to offer to us any corporate opportunity of which he or she may become aware prior to offering such opportunities to other entities with which they may be affiliated, subject to certain limited exceptions.

We will continue to incur significant increased expenses and administrative burdens as a result of being a public company, which could have a material adverse effect on our business, financial condition and results of operations.

        We will continue to face increased legal, accounting, administrative and other costs and expenses as a public company that AdaptHealth Holdings did not incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements increases costs and makes certain activities more time-consuming. A number of those requirements require us to carry out activities AdaptHealth had not prior to the Business Combination. In addition, additional expenses associated with SEC reporting requirements will continue to be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of us. It may also be more expensive to obtain director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on the board of directors or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These

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increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

AdaptHealth's management has limited experience in operating a public company.

        AdaptHealth's executive officers and certain directors have limited experience in the management of a publicly traded company. AdaptHealth's management team may not successfully or effectively manage its transition to a public company that is subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the company. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.

Our ability to successfully operate our business is largely dependent upon the efforts of certain key personnel of AdaptHealth, including the key personnel of AdaptHealth who have stayed with us following the Business Combination. The loss of such key personnel could negatively impact our operations and financial results.

        Our ability to successfully operate our business is dependent upon the efforts of certain key personnel of AdaptHealth. It is possible that AdaptHealth will lose some key personnel, the loss of which could negatively impact our operations and profitability. Furthermore, certain of the key personnel of AdaptHealth may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.

Because we have no current plans to pay cash dividends on our Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your Class A Common Stock for a price greater than that which you paid for it.

        We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in our Class A Common Stock unless you sell our Class A Common Stock for a price greater than that which you paid for it.

We are required to make payments under the Tax Receivable Agreement for certain tax benefits we may claim, and the amounts of such payments could be significant.

        The Tax Receivable Agreement, which we entered into at the Closing with the Blocker Sellers and Non-Blocker AdaptHealth Members (collectively, the "TRA Holders"), generally provides for the payment by us to the Blocker Sellers of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that we actually realize (or are deemed to realize in certain circumstances) in periods after the Closing as a result of: (i) certain tax attributes of Access Point Medical, Inc. existing prior to the Business Combination; (ii) certain increases in tax basis resulting from exchanges of AdaptHealth Units; (iii) imputed interest deemed to be paid by us as a result of payments we make under the Tax Receivable Agreement; and (iv) certain increases in tax basis resulting from payments we make under

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the Tax Receivable Agreement. We will retain the benefit of the remaining 15% of these cash savings. The amount of the cash payments that we may be required to make under the Tax Receivable Agreement could be significant and is dependent upon significant future events and assumptions, including the timing of the exchanges of AdaptHealth Units, the price of our Class A Common Stock at the time of each exchange, the extent to which such exchanges are taxable transactions and the amount of the exchanging TRA Holder's tax basis in its AdaptHealth Units at the time of the relevant exchange. The amount of such cash payments is also based on assumptions as to the amount and timing of taxable income we generate in the future, the U.S. federal income tax rate then applicable and the portion of our payments under the Tax Receivable Agreement that constitute interest or give rise to depreciable or amortizable tax basis. Moreover, payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine, which tax reporting positions are subject to challenge by taxing authorities. We are dependent on distributions from AdaptHealth Holdings to make payments under the Tax Receivable Agreement, and we cannot guarantee that such distributions will be made in sufficient amounts or at the times needed to enable us to make our required payments under the Tax Receivable Agreement, or at all. Any payments made by us to the TRA Holders under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us. To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us. Nonpayment for a specified period may constitute a breach of a material obligation under the Tax Receivable Agreement, and therefore, may accelerate payments due under the Tax Receivable Agreement. The payments under the Tax Receivable Agreement are also not conditioned upon the TRA Holders maintaining a continued ownership interest in AdaptHealth Holdings or us.

In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreement.

        The Tax Receivable Agreement provides that if we breach any of our material obligations under the Tax Receivable Agreement, if we undergo a change of control or if, at any time, we elect an early termination of the Tax Receivable Agreement, then the Tax Receivable Agreement will terminate and our obligations, or our successor's obligations, to make payments under the Tax Receivable Agreement would accelerate and become immediately due and payable. The amount due and payable in those circumstances is determined based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement. We may need to incur debt to finance payments under the Tax Receivable Agreement to the extent our cash resources are insufficient to meet our obligations under the Tax Receivable Agreement as a result of timing discrepancies or otherwise.

        As a result of the foregoing, (i) we could be required to make cash payments to the TRA Holders that are greater than the specified percentage of the actual benefits we ultimately realize in respect of the tax benefits that are subject to the Tax Receivable Agreement, and (ii) we would be required to make a cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combination, or other changes of control due to the additional transaction costs a potential acquirer may attribute to satisfying such obligations. There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreement.

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We will not be reimbursed for any payments made to TRA Holders under the Tax Receivable Agreement in the event that any tax benefits are disallowed.

        We will not be reimbursed for any cash payments previously made to the TRA Holders pursuant to the Tax Receivable Agreement if any tax benefits initially claimed by us are subsequently challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by us to a TRA Holder will be netted against any future cash payments that we might otherwise be required to make under the terms of the Tax Receivable Agreement. However, a challenge to any tax benefits initially claimed by us may not arise for a number of years following the initial time of such payment or, even if challenged early, such excess cash payment may be greater than the amount of future cash payments that we might otherwise be required to make under the terms of the Tax Receivable Agreement and, as a result, there might not be future cash payments from which to net against. The applicable U.S. federal income tax rules are complex and factual in nature, and there can be no assurance that the Internal Revenue Service or a court will not disagree with our tax reporting positions. As a result, it is possible that we could make cash payments under the Tax Receivable Agreement that are substantially greater than our actual cash tax savings.

Certain of the TRA Holders have substantial control over us, and their interests, along with the interests of other TRA Holders, in our business may conflict with yours.

        The TRA Holders may receive payments from us under the Tax Receivable Agreement upon any redemption or exchange of their AdaptHealth Units, including the issuance of shares of our Class A Common Stock upon any such redemption or exchange. As a result, the interests of the TRA Holders may conflict with the interests of holders of our Class A Common Stock. For example, the TRA Holders may have different tax positions from us which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement, and whether and when we should terminate the Tax Receivable Agreement and accelerate our obligations thereunder. In addition, the structuring of future transactions may take into consideration tax or other considerations of TRA Holders even in situations where no similar considerations are relevant to us.

There can be no assurance that we will be able to continue to comply with the continued listing standards of Nasdaq.

        Our Class A Common Stock is currently listed on Nasdaq. There can be no assurance that we will continue to be able to meet Nasdaq's listing requirements with respect to our Class A Common Stock. If our Class A Common Stock is delisted, there could be limited availability of market quotations for the Class A Common Stock and reduced liquidity in trading. Our public warrants were formerly listed on Nasdaq; however, on November 27, 2019, we received a letter from Nasdaq stating that our public warrants failed to meet the Nasdaq Capital Market's round lot holder requirement. Our public warrants were suspended from trading on Nasdaq on December 6, 2019 and subsequently delisted. Upon suspension of trading on Nasdaq, our public warrants began trading on the over-the-counter market. Although we anticipate that our Class A Common Stock, if delisted from Nasdaq, would be eligible for quotation and trading on the over-the-counter market, there can be no assurance that trading would be commenced or maintained on the over-the-counter market for our Class A Common Stock.

        In addition, if we failed to meet Nasdaq's listing requirements with respect to our Class A Common Stock, in addition to reduced liquidity, we and our stockholders could face significant material consequences including:

    a determination that our Class A Common Stock is a "penny stock" which will require brokers trading in our Class A Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

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    a limited amount of news and analyst coverage; and

    a decreased ability to issue additional securities or obtain additional financing in the future.

        The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as "covered securities." Because our Class A Common Stock is listed on Nasdaq, it is a covered security. Although the states are preempted from regulating the sale of our Class A Common Stock, if we were no longer listed on Nasdaq, our Class A Common Stock would not be a covered security and we would be subject to regulation in each state in which we offer our Class A Common Stock.

A significant portion of our total outstanding Class A Common Stock is restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our Class A Common Stock to drop significantly, even if our business is doing well.

        Sales of a substantial number of shares of Class A Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A Common Stock. After the Business Combination:

    certain persons collectively own 3,672,500 shares of Class A Common Stock and 2,643,333 private placement warrants distributed to them by our Sponsor in connection with its dissolution, subject to restrictions on transfer under the terms of a letter agreement entered into by our Sponsor at the time of our initial public offering ("IPO");

    38,290,298 shares of Class A Common Stock which were either issued or may be issued upon the exchange of AdaptHealth Units are subject to restrictions on transfer under the terms of the Lock-up Agreements; and

    Deerfield and Richard Barasch collectively own 12,500,000 shares of Class A Common Stock that are subject to restrictions on transfer under the terms of the Deerfield Subscription Agreement.

We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then outstanding public warrants.

        Our warrants are issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of our Class A Common Stock purchasable upon exercise of a warrant.

We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.

        We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant; provided that the last reported sales price of our Class A Common Stock equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30

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trading-day period ending on the third trading day prior to the date we send the notice of such redemption to the warrant holders. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. In addition, we may redeem your warrants after they become exercisable for a number of shares of Class A Common Stock determined based on the redemption date and the fair market value of our Class A Common Stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are "out-of-the-money," in which case you would lose any potential embedded value from a subsequent increase in the value of the Common Stock had your warrants remained outstanding.

        In addition, we may redeem your warrants after they become exercisable for a number of shares of Class A Common Stock determined based on the redemption date and the fair market value of our Class A Common Stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are "out-of-the-money," in which case you would lose any potential embedded value from a subsequent increase in the value of the Class A Common Stock had your warrants remained outstanding. None of the private placement warrants will be redeemable by us so long as they are held by our Sponsor or its permitted transferees, which include the selling securityholders.

Our warrants may have an adverse effect on the market price of our Class A Common Stock.

        We issued warrants to purchase 8,333,333 shares of our Class A Common Stock as part of the units offered in our IPO and, simultaneously with the closing of our IPO, we issued in a private placement an aggregate of 4,333,333 private placement warrants, each exercisable to purchase one share of Class A Common Stock at $11.50 per share. To the extent such warrants are exercised, additional shares of our Class A Common Stock will be issued, which will result in dilution to our stockholders and increase the number of shares of Class A Common Stock eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our Class A Common Stock.

The JOBS Act permits "emerging growth companies" like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

        We qualify as an "emerging growth company" as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we plan to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our Class A Common Stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1 billion or more during such fiscal year, (iii) the date on which we have issued more than $1.07 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the

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fifth anniversary of the date of the first sale of our common stock in the IPO, which would be December 31, 2023. AdaptHealth had revenues for the year ended December 31, 2019 of approximately $529.6 million. If we continue to expand our business through acquisitions and/or continue to grow revenues organically, we may cease to be an emerging growth company prior to December 31, 2023.

        In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the same time private companies adopt the new or revised standard. Investors may find our Class A Common Stock less attractive because we will rely on these exemptions, which may result in a less active trading market for our Class A Common Stock and its stock price may be more volatile.

        We are also currently a "smaller reporting company." In the event that we are still considered a "smaller reporting company," at such time are we cease being an "emerging growth company," the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an "emerging growth company" or a "smaller reporting company." Specifically, similar to "emerging growth companies," "smaller reporting companies" are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings. Decreased disclosures in our SEC filings due to our status as an "emerging growth company" or "smaller reporting company" may make it harder for investors to analyze our results of operations and financial prospects.

Our second amended and restated certificate of incorporation requires that the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America be the exclusive forums for substantially all disputes between us and our stockholders, which may have the effect of discouraging lawsuits against our directors and officers.

        Our second amended and restated certificate of incorporation requires, to the fullest extent permitted by law, other than any claim to enforce a duty or liability created by the Exchange Act or other claim for which federal courts have exclusive jurisdiction, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of the State of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder's counsel. Our second amended and restated certificate of incorporation further provides that the federal district courts of the United States of America are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. These provisions may have the effect of discouraging lawsuits against our directors and officers. If a court were to find either exclusive forum provision in our second amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business. For example, the Court of Chancery of the State of Delaware determined in December 2018 that the exclusive forum provision of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. However, this decision may be reviewed and ultimately overturned by the Delaware Supreme Court. If the Court of Chancery's decision were to be overturned, we would enforce the federal district court exclusive forum provision in our second amended and restated certificate of incorporation.

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USE OF PROCEEDS

        We will receive up to an aggregate of approximately $145,666,659 from the exercise of the warrants, assuming the exercise in full of all of the warrants for cash. We expect to use the net proceeds from the exercise of the warrants for general corporate purposes, including acquisitions and other business opportunities, capital expenditures and working capital.

        We will not receive any proceeds from the sale of Class A Common Stock or private placement warrants by selling securityholders, but we are required to pay certain offering fees and expenses in connection with the registration of the selling securityholders' securities and to indemnify certain selling securityholders against certain liabilities.

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MARKET INFORMATION

        Our Class A Common Stock is currently listed on Nasdaq under the symbol "AHCO" and our public warrants are quoted on the OTC Pink marketplace operated by OTC Markets Group, Inc. under the symbol "AHCOW." Through November 8, 2019, our Class A Common Stock and warrants were quoted under the symbols "DFB" and "DFBW," respectively. As of February 27, 2020, there were 40 holders of record of shares of our Class A Common Stock, 18 holders of record of shares of our Class B Common Stock and 26 holders of record of our warrants. Such numbers do not include beneficial owners holding our securities through nominee names. There is no public market for our Class B Common Stock.


DIVIDENDS

        We have not paid any cash dividends on our Common Stock to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, our ability to declare dividends may be limited by restrictive covenants contained in any of our existing or future indebtedness.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF DFB

        The following discussion and analysis should be read in conjunction with the financial statements and related notes of DFB included in this prospectus. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factors that could cause such differences are discussed below and elsewhere in this prospectus, particularly "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors." For the purposes of this section, "we" and "the Company" refer to DFB prior to the Closing.

Results of Operations

        Our entire activity since November 22, 2017 (inception) through September 30, 2019 was in preparation for our Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination. We have increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

        For the three months ended September 30, 2019, we had net loss of approximately $154,000, which consisted of approximately $1.4 million of interest income, offset by approximately $1.2 million in general and administrative expenses, $50,000 in franchise tax expense, and approximately $277,000 in income tax expense. Of the $1.2 million in general and administrative expenses, approximately $972,000 was in connection with the Transaction.

        For the nine months ended September 30, 2019, we had net income of approximately $3,600, which consisted of approximately $4.3 million in interest income, offset by approximately $3.3 million in general and administrative expenses, approximately $150,000 in franchise tax expense, and approximately $874,000 in income tax expense. Of the $3.3 million in general and administrative expenses, approximately $2.6 million was in connection with the Transaction.

        For the three months ended September 30, 2018, we had net income of approximately $518,000, which consisted of approximately $1.2 million in interest income, offset by approximately $391,000 in general and administrative costs, $54,000 in franchise tax expense, and $242,000 in income tax expense.

        For the nine months ended September 30, 2018, we had net income of approximately $1.4 million, which consisted of approximately $2.7 million in interest income, offset by approximately $605,000 in general and administrative costs, $147,000 in franchise tax expense, and $546,000 in income tax expense.

        For the year ended December 31, 2018, we had net income of approximately $2.1 million, which consisted of approximately $4.1 million in interest income, offset by approximately $1.0 million in general and administrative costs, $198,000 in franchise tax expense, and $830,000 in income tax expense. For the year ended December 31, 2017, we had net loss of $693, which consisted solely of general and administrative costs.

Liquidity and Going Concern

        In connection with our management's assessment of going concern considerations in accordance with the Financial Accounting Standards Board's Accounting Standards Update 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," our management has determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after February 21, 2020.

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        Through September 30, 2019, our liquidity needs have been satisfied through receipt of a $25,000 capital contribution from our Sponsor in exchange for the issuance of the Founder Shares (defined below) to our Sponsor, $270,531 in loans from our Sponsor, the proceeds from the consummation of the Private Placement not held in the Trust Account, and interest withdrawn from the Trust Account for working capital and tax purposes. We withdrew approximately $1.4 million and $666,000 of interest income from the Trust Account during the nine months ended September 30, 2019 and 2018, respectively to pay for tax obligations and working capital purposes. Of the $1.4 million of interest income withdrawn in 2019, $250,000 was for working capital.

        Following our Initial Public Offering and the Private Placement, $250,000,000 was placed in the Trust Account, including $7,875,000 of deferred underwriting commissions. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of taxes payable by us and any amounts released to us to fund working capital requirements, subject to an annual limit of $250,000, and excluding deferred underwriting commissions) to complete our initial Business Combination. We may withdraw interest to pay taxes and fund working capital requirements (subject to an annual limit of $250,000 for withdrawals to fund working capital requirements). To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

        We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination, and to pay taxes to the extent the interest earned on the Trust Account is not sufficient to pay our taxes.

        As indicated in the accompanying financial statements, as of September 30, 2019, we had approximately $622,000 in our operating bank account, and approximately $5.9 million of interest income available (which interest shall be net of taxes payable by us and any amounts, subject to an annual limit of $250,000, released to us to fund working capital requirements), and a working capital deficit of approximately $2.4 million. In order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required ("Working Capital Loans"). We have incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. Based on the foregoing, we may have insufficient funds available to operate our business through February 21, 2020. Following the initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations. We cannot be certain that additional funding will be available on acceptable terms, or at all. Our plans to raise capital or to consummate the initial Business Combination may not be successful. These matters, among others, raise substantial doubt about our ability to continue as a going concern.

Related Party Transactions

Founder Shares

        In December 2017, our Sponsor purchased an aggregate of 7,187,500 shares of our common stock, par value $0.0001 per share, for an aggregate purchase price of $25,000 (the "Founder Shares"). In December 2017 and January 2018, our Sponsor transferred 100,000 Founder Shares to Christopher Wolfe, our Chief Financial Officer, and 30,000 Founder Shares to each of our independent directors. Following the expiration of the underwriters' over-allotment option on April 2, 2018, the holders of the

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Founder Shares forfeited an aggregate of 937,500 Founder Shares, so that the Founder Shares would represent 20.0% of our issued and outstanding shares after our Initial Public Offering.

        Our Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Private Placement Warrants

        Concurrently with the closing of our Initial Public Offering, our Sponsor purchased an aggregate of 4,333,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $6,500,000 in the Private Placement. Our Sponsor had agreed that if the over-allotment option was exercised, our Sponsor would have purchased up to an additional 500,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, for additional gross proceeds of $750,000.

        Each Private Placement Warrant is exercisable for one share of common stock at a price of $11.50 per share. The proceeds from the Private Placement Warrants were added to the proceeds from our Initial Public Offering held in the Trust Account. If we do not complete a Business Combination by February 21, 2020, the Private Placement Warrants will expire worthless. The Private Placement Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by our Sponsor or its permitted transferees.

        Our Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.

        An affiliate of Deerfield Management Company, L.P, a Delaware series limited partnership ("Deerfield Management"), which is a significant owner of our Sponsor, purchased 2,500,000 Units in our Initial Public Offering at $10.00 per Unit. The underwriters did not receive any underwriting discounts or commissions on the Units purchased by Deerfield Management's affiliate.

Transactions with Deerfield

        Deerfield, which is a significant owner of our Sponsor, purchased 2,500,000 units in our IPO at $10.00 per unit. The underwriters did not receive any underwriting discounts or commissions on the units purchased by Deerfield. In addition, we have entered into the Subscription Agreement with Deerfield and RAB Ventures, an entity that is controlled by Mr. Barasch and is one of the two members of our Sponsor. See "Proposal No. 1—The Business Combination Proposal—Related Agreements—Subscription Agreement."

Related-Party Loans

        Our Sponsor loaned us an aggregate of $270,531 to cover expenses related to our Initial Public Offering and working capital needs. The loan was non-interest bearing. We repaid this loan on February 21, 2018.

        In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not

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obligated to, loan us funds as may be required ("Working Capital Loans"). If we complete a Business Combination, we would repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender's discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity

Services Agreements and Reimbursements

        We entered into an agreement, commencing on February 16, 2018 through the earlier of our consummation of a Business Combination and our liquidation, to pay our Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support.

        We are obligated to pay $7,500 per month to Mr. Wolfe, our Chief Financial Officer, for his services prior to the consummation of the initial Business Combination, subject to the terms of the strategic services agreement.

        Our Sponsor, executive officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.

        We recorded an aggregate of $52,500 during the three months ended September 30, 2019 and 2018 each, and $157,500 and $130,000 during the nine months ended September 30, 2019 and 2018, respectively, in general and administrative expenses in connection with the related agreements in the accompanying unaudited condensed consolidated interim statements of operations.

    Critical Accounting Policies and Estimates

        This management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instrument and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We had identified the following as our critical accounting policies:

    Common Stock Subject to Possible Redemption

        We account for our common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity." Shares of common stock subject to

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mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable shares of common stock (including shares of common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders' equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2019 and December 31, 2018, 24,055,352 and 24,054,988, respectively, shares of common stock subject to possible redemption at the redemption amount are presented as temporary equity, outside of the stockholders' equity section of our condensed consolidated balance sheets.

Net Income (Loss) per Share

        Net income (loss) per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the periods. We have not considered the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase an aggregate of 12,666,666 shares of our common stock in the calculation of diluted income per share, since their inclusion would be anti-dilutive under the treasury stock method.

        Our unaudited condensed consolidated interim statements of operations include a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share. Net income per common share, basic and diluted for public shares is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes and funds available to be withdrawn from the Trust Account for working capital purposes (subject to an annual limit of $250,000), resulting in a total of approximately $1.0 million and $3.3 million for the three and nine months ended September 30, 2019, respectively, by the weighted average number of public shares outstanding for the period. Net loss per common share, basic and diluted for Founder Shares is calculated by dividing the net income, less income attributable to public shares by the weighted average number of Founder Shares outstanding for the period.

Recent Accounting Pronouncements

        Management does not believe that there are any recently issued, but not yet effective, accounting pronouncements, that, if currently adopted, would have a material effect on our unaudited condensed consolidated interim financial statements.

Off-Balance Sheet Arrangements

        As of September 30, 2019 and December 31, 2018, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Contractual Obligations

        We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement to pay our Sponsor a monthly fee of $10,000 for office space, utilities and administrative support and an agreement to pay $7,500 per month to Mr. Wolfe for his services prior to the consummation of the initial Business Combination.

        We began incurring these fees on February 16, 2018 and will continue to incur these fees until the earlier of the completion of our initial Business Combination or our liquidation.

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JOBS Act

        On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

        Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company", we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an "emerging growth company," whichever is earlier.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ADAPTHEALTH HOLDINGS LLC

        The following discussion should be read in conjunction with AdaptHealth Holdings LLC's (for the purposes of this section, "AdaptHealth Holdings" or the "Company") consolidated interim financial statements and the accompanying notes contained in this prospectus, as well as the financial information and MD&A contained in our annual report. All amounts presented are in accordance with U.S. generally accepted accounting principles (GAAP), except as noted. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factors that could cause such differences are discussed below and elsewhere in this prospectus, particularly "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors."


AdaptHealth Holdings LLC Overview

        AdaptHealth Holdings is a leading provider of home healthcare equipment, supplies and related services in the United States. AdaptHealth Holdings focuses primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from OSA, (ii) home medical equipment to patients discharged from acute care and other facilities, (iii) oxygen and related chronic therapy services in the home and (iv) diabetes management medical devices and supplies (including insulin pumps and continuous glucose monitors). AdaptHealth Holdings also provides hospice focused HME services and wound care, urological, ostomy and nutritional supply services for chronic patients. AdaptHealth Holdings services beneficiaries of Medicare, Medicaid and commercial payors. As of December 31, 2019, AdaptHealth Holdings serviced over 1.0 million patients annually in 49 states through its network of 173 locations in 35 states. Following its acquisition of the Patient Care Solutions business (PCS) from McKesson Corporation in January 2020, AdaptHealth Holdings services over 1.4 million patients annually in all 50 states through its network of 187 locations in 38 states. AdaptHealth Holdings' principal executive offices are located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462.

        On July 8, 2019, AdaptHealth Holdings entered into an Agreement and Plan of Merger, as amended on October 15, 2019, with DFB Healthcare Acquisitions Corp. (DFB), pursuant to which AdaptHealth Holdings agreed to combine with DFB. DFB mailed proxy statements and related materials to shareholders of record as of October 15, 2019 and scheduled its special meeting in lieu of an annual meeting of shareholders on November 7, 2019. One of the agenda items for the special meeting was a vote to approve and adopt the proposed merger. The merger was approved and closed on November 8, 2019.

Trends and Factors Affecting AdaptHealth Holdings' Future Performance

        Significant trends and factors that AdaptHealth Holdings believes may affect its future performance include:

    Home Medical Equipment Growth.  According to CMS, the HME industry has grown from $40 billion in 2010 to $56 billion in 2018 (representing a 4.3% CAGR), of which AdaptHealth's total addressable market for its sleep therapy, oxygen services, mobility products and hospice HME business lines comprised approximately $12 billion to $15 billion in 2018. During that time Medicaid data shows a continued shift of long-term services and supports (LTSS) spending into the home, with 57% of that spending going to home and community-based services in 2016. According to CMS, the HME market is projected to continue to grow at a 6.1% CAGR over the next nine years.

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    Aging U.S. Population.  The population of adults aged 65 and older in the U.S., a significant group of end users of AdaptHealth's products and services, is expected to continue to grow and thus grow AdaptHealth's market opportunity. According to CMS, in the U.S., the population of adults between the ages of 65 and 84 is expected to grow at a 2.5% CAGR through 2030, while the population of adults over 85 is projected to grow at a 2.9% CAGR during that same time period. Not only is the elderly population expected to grow, but they are also expected to make up a larger percentage of the total U.S. population. According to the U.S. Census Bureau, the U.S. geriatric population was approximately 15% of the total population in 2014 and is expected to grow to approximately 24% of the total population by 2060.

    Increasing Prevalence of Chronic Conditions.  HME is necessary to help treat significant health issues affecting millions of Americans, such as chronic obstructive pulmonary disease, congestive heart failure and obstructive sleep apnea.

    Increasing Prevalence of and Preference for In-Home Treatments.  The number of conditions that can be treated in the home continues to grow, with recent additions including chronic wound care, sleep testing, dialysis and chemotherapy. In-home care is also increasingly becoming the preferred method of treatment, particularly for the elderly population. According to the AARP Public Policy Institute, 90% of patients over age 55 have indicated a preference to receive care in the home rather than in an institutional setting.

    Home Care is the Lowest Cost Setting.  Not only is in-home care typically just as effective as care delivered in an inpatient setting, but it has also proven to be more cost effective. This is especially important within the context of government pressures to lower the cost of care, pushing clinicians to seek care settings that are less costly than hospitals and inpatient facilities. On a daily basis, home health has been estimated by Cain Brothers & Company, LLC to be approximately seven times less expensive than care provided in skilled nursing facilities, the closest acuity site of care. Home care offers a significant cost reduction opportunity relative to facility-based care without sacrificing quality.

        Certain additional items may impact the comparability of the historical results presented below with AdaptHealth Holdings' future performance, such as the cost of being a public company. To operate as a public company, AdaptHealth Holdings will be required to continue to implement changes in certain aspects of its business and develop, manage, and train management-level and other employees to comply with ongoing public company requirements. AdaptHealth Holdings will also incur new expenses as a public company, including expenses associated with public reporting obligations, proxy statements and stockholder meetings, stock exchange fees, transfer agent fees, SEC and Financial Industry Regulatory Authority filing fees and offering expenses.

Key Components of Operating Results

        Net Revenues.    Net revenues are recorded for services that AdaptHealth Holdings provides to patients for home healthcare equipment and related services. AdaptHealth Holdings' primary service lines are (i) sleep therapy equipment, supplies and related services (including CPAP and bi-PAP services) to individuals suffering from OSA, (ii) home medical equipment to patients discharged from acute care and other facilities and (iii) respiratory, including oxygen and related chronic therapy services in the home. Net revenues also include other services and supplies, primarily related to orthotics, enteral and hospice. Revenues are recorded either (x) at a point in time for the sale of supplies and disposables, or (y) over the service period for equipment rental (including, but not limited to, CPAP machines, hospital beds, wheelchairs and other equipment), at amounts estimated to be received from patients or under reimbursement arrangements with Medicare, Medicaid and other third-party payors, including private insurers. For the nine months ended September 30, 2019, approximately 59% and 41% of revenues were recognized at a point in time and over the service period, respectively.

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For the nine months ended September 30, 2018, approximately 54% and 46% of revenues were recognized at a point in time and over the service period, respectively. Net revenues are net of related provision for doubtful accounts. Provision for doubtful accounts consists of billed charges that are ultimately deemed uncollectible due a patient's or a third-party payor's unwillingness to pay. The amount is based on management's best estimate of the net realizable value of accounts receivable.

        Cost of Net Revenues.    Cost of net revenues includes the cost of non-capitalized medical equipment and supplies, distribution expenses, labor costs, facilities rental costs, third-party revenue cycle management costs and depreciation for capitalized patient equipment. Distribution expenses represents the cost incurred to coordinate and deliver products and services to the patients. Included in distribution expenses are leasing, maintenance, licensing and fuel costs for the vehicle fleet; salaries, benefits and other costs related to drivers and dispatch personnel; and amounts paid to couriers.

        General and Administrative Expenses.    General and administrative expenses consist of corporate support costs including information technology, human resources, finance, contracting, legal, compliance and other administrative costs.

        Depreciation, Excluding Patient Equipment Depreciation.    Depreciation expense includes depreciation charges for capital assets other than patient equipment (which is included as part of the cost of net revenues).

        Interest Expense.    Interest expense includes the cost of borrowing on AdaptHealth Holdings' credit facility, amortization expense related to capitalized loan costs, obligations under capital leases and the change in fair value of its interest rate swap contracts prior to such contracts being designated as effective cash flow hedges. On August 22, 2019, in accordance with the provisions of FASB ASC 815, Derivatives and Hedging, and FASB ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, AdaptHealth Holdings designated its swaps as effective cash flow hedges. Accordingly, subsequent to August 22, 2019, changes in the fair value of its interest rate swaps will be recorded as a component of other comprehensive income rather than interest expense.

        Income Tax (Benefit) Expense.    AdaptHealth Holdings is treated as a partnership for income tax purposes. A partnership is not a tax-paying entity for federal and state income tax purposes; therefore, income and loss from AdaptHealth Holdings flows through to its members' tax returns. In addition, there are regular C corporations included in the AdaptHealth Holdings group where taxes are paid at the entity level. AdaptHealth Holdings makes no provision for federal income taxes because its members are responsible for the tax on their share of the taxable income and loss and are entitled to any available tax credits on their income tax returns. However, a provision is made for entity level taxes attributable to the C corporations.

        At the closing of the merger, DFB and AdaptHealth Holdings entered into the Tax Receivable Agreement with the Blocker Sellers and Non-Blocker AdaptHealth Members. The Tax Receivable Agreement will generally provide for the payment by DFB to the Blocker Sellers and Non-Blocker AdaptHealth Members of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that DFB actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the merger as a result of: (i) certain tax attributes of Access Point Medical, Inc. existing prior to the merger; (ii) certain increases in tax basis resulting from exchanges of New AdaptHealth Units and shares of Class B Common Stock; (iii) imputed interest deemed to be paid by DFB as a result of payments it makes under the Tax Receivable Agreement; and (iv) certain increases in tax basis resulting from payments DFB makes under the Tax Receivable Agreement.

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Factors Affecting AdaptHealth Holdings' Operating Results

        AdaptHealth Holdings' operating results and financial performance are influenced by certain unique events during the periods discussed herein, including the following:

Significant Acquisitions

        AdaptHealth Holdings accounts for its acquisitions in accordance with FASB ASC Topic 805, Business Combinations, and the operations of the acquired entities are included in the historical results of AdaptHealth Holdings for the periods following the closing of the acquisition. The most significant of these acquisitions impacting the comparability of AdaptHealth Holdings' operating results were:

    Gould's.  On January 2, 2019, AdaptHealth Holdings acquired Gould's Discount Medical, LLC ("Gould's") for total consideration $24.3 million, consisting of $20.8 million in cash, a $2.0 million promissory note (payable in six equal quarterly installments commencing on September 30, 2019 and accruing 5.0% interest annually), and $1.5 million in potential earn-out payments (the "Gould's Acquisition"). Gould's is headquartered in Louisville, Kentucky and provides home medical equipment supplies and respiratory products such as home oxygen and sleep apnea equipment. At the time of the acquisition, Gould's had annual revenues of approximately $33 million based on the results for the 12 months ended December 31, 2018.

    SleepMed.  On July 5, 2019, AdaptHealth Holdings purchased certain assets relating to the durable medical equipment business of SleepMed Therapies, Inc. ("SleepMed") for total consideration of $15.4 million, consisting of $11.4 million in cash and $4.0 million in potential earn-out payments. SleepMed is headquartered in Atlanta, GA and provides positive airway pressure devices and related supplies to customers in their homes or other alternative site care facilities. At the time of the acquisition, SleepMed had annual revenues of approximately $26 million based on the results for the 12 months ended June 30, 2019.

    CCLI.  On October 15, 2018, AdaptHealth Holdings acquired Continued Care of Long Island, Inc. ("CCLI") for total cash consideration of $4.8 million. CCLI is headquartered in New York and provides home medical equipment and services. At the time of the acquisition, CCLI had annual net revenues of approximately $19 million based on results for the 12 months ended June 30, 2018.

    Med Way.  On December 31, 2018, AdaptHealth Holdings acquired Med Way Medical, Inc. ("Med Way") for total consideration of $5.4 million consisting of $4.9 million in cash and $0.5 million in deferred payments (the "Med Way Acquisition"). In addition, the sellers have the potential to receive earn-out payments up to a maximum of $5.0 million which are based on the achievement of certain financial targets during the three year period after the transaction. Based on the available information at the date of the acquisition, the targets were not determined to be probable of achievement, and therefore these potential payments were not reflected in the acquisition accounting for the acquisition and are not included in the total consideration noted above. Med Way is headquartered in Utah and provides respiratory durable medical equipment and hospice services. At the time of the acquisition, Med Way had annual revenues of approximately $6 million based on the results for the 12 months ended September 30, 2018.

    HMEI.  On July 31, 2018, AdaptHealth Holdings acquired Home Medical Express Inc. ("HMEI") for total initial consideration of $13.3 million, consisting of $9.0 million in cash, $1.0 million in escrow payments and estimated contingent consideration of up to $3.3 million (the "HMEI Acquisition"). HMEI is headquartered in Illinois and provides respiratory and durable medical equipment and services. At the time of the acquisition, HMEI had annual revenues of approximately $16 million based on annualized year-to-date results through July 31, 2018.

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    Verus.  On May 17, 2018, AdaptHealth Holdings acquired Verus Healthcare, Inc. ("Verus") for $100.4 million of total consideration, consisting of $58.4 million in cash, $13.2 million of AdaptHealth Holdings Common Units, the issuance of $16.8 million of convertible notes and $12.0 of contingent consideration (the "Verus Acquisition"). Verus is headquartered in Nashville, Tennessee and operates a national CPAP resupply business. The contingent consideration was paid in February 2019 following the achievement of certain financial targets after the transaction. The convertible notes converted to 10,802 AdaptHealth Holdings Common Units on December 31, 2018. At the time of the acquisition, Verus had annual net revenues of approximately $70 million based on annualized year-to-date results through May 17, 2018.

    PPS.  On May 17, 2018, AdaptHealth Holdings acquired PPS HME Holdings LLC ("PPS") for $7 million in cash and $48.5 million of AdaptHealth Holdings Common Units (the "PPS Acquisition"). PPS is headquartered in California, and provides home oxygen, respiratory medications, and sleep therapy equipment and services. At the time of the acquisition, PPS had annual net revenues of approximately $78 million based on annualized year-to-date results through May 17, 2018.

Debt and Recapitalization

        On March 20, 2019, AdaptHealth Holdings entered into the Third Amended and Restated Credit and Guaranty Agreement and restructured its debt borrowings with its bank group. The debt restructuring consisted of $425 million in credit facilities, which includes a $300 million Initial Term Loan (the "Credit Facility Term Loan"), $50 million Delayed Draw Term Loan (the "Delayed Draw Loan"), and $75 million Revolving Credit Facility (the "New Revolver"), all with maturities in March 2024. The Credit Facility Term Loan may consist of Base Rate Loans or LIBOR Rate Loans (as defined in the agreement). See "—Liquidity and Capital Resources—2019 Recapitalization."

        On March 20, 2019, AdaptHealth Holdings signed a Note and Unit Purchase Agreement with BM AH Holdings, LLC, an affiliate of Blue Mountain Capital (Blue Mountain). In connection with the agreement, Blue Mountain purchased 37,050 AdaptHealth Holdings Common Units for $20 million, and AdaptHealth Holdings also signed a promissory note agreement with Blue Mountain with a principal amount of $100 million. The outstanding principal amount under the note agreement is due on the tenth anniversary of the agreement and bears interest at the following rates (a) for the period starting on the closing date and ending on the seventh anniversary, a rate of 12% per annum, with 6% payable in cash and 6% payment in kind, and (b) for the period starting on the day after the seventh anniversary of the closing date and ending on the maturity date, a rate equal to the greater of (i) 15% per annum or (ii) the twelve-month LIBOR plus 12% per annum.

        The transactions consummated with respect to the Third Amended and Restated Credit and Guaranty Agreement and the Note and Unit Purchase Agreement are hereinafter referred to as the "2019 Recapitalization."

        In connection with the closing of the merger with DFB, the Company amended its credit facility primarily to (i) increase the amount available under the Delayed Draw Loan from $50 million to $100 million, and (ii) revise the Consolidated Total Leverage Ratio thresholds and lower the applicable margin to determine the variable quarterly interest rate under the credit facility. In addition, in connection with the closing of the merger, the $100 million promissory note issued to Blue Mountain discusesed above was cancelled and Blue Mountain was issued a new amended and restated promissory note with a principal amount of $100 million. In addition, Blue Mountain converted 19,747 of Common Units to a $43.5 million promissory note. The new $100 million promissory note, together with the $43.5 million promissory note, are collectively referred to herein as the New Promissory Note. The outstanding principal amount under the New Promissory Note is due on the tenth anniversary of the closing date of the merger and bears interest at the following rates (a) for the period starting on the

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closing date and ending on the seventh anniversary, a rate of 12% per annum, with 6% payable in cash and 6% Payment in Kind (PIK), and (b) for the period starting on the day after the seventh anniversary of the closing date and ending on the maturity date, a rate equal to the greater of (i) 15% per annum or (ii) the twelve-month LIBOR plus 12% per annum. The Company has the option to pay the PIK interest in cash.

Seasonality

        AdaptHealth Holdings' business is somewhat sensitive to seasonal fluctuations. Its patients are generally responsible for a greater percentage of the cost of their treatment or therapy during the early months of the year due to co-insurance, co-payments and deductibles, and therefore may defer treatment and services of certain therapies until meeting their annual deductibles. In addition, changes to employer insurance coverage often go into effect at the beginning of each calendar year which may impact eligibility requirements and delay or defer treatment. These factors may lead to lower net revenues and cash flow in the early part of the year relative to the latter half of the year. Additionally, the increased incidence of respiratory infections during the winter season may result in initiation of additional respiratory services such as oxygen therapy for certain patient populations. AdaptHealth Holdings' quarterly operating results may fluctuate significantly in the future depending on these and other factors.

Key Business Metrics

        AdaptHealth Holdings focuses on net revenues, EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex as it reviews its performance. Total net revenue is comprised of net sales revenue and net revenue from fixed monthly equipment reimbursements. Net sales revenue consists of revenue recognized at a point in time for the sale of supplies and disposables less a provision for doubtful accounts. Net revenue from fixed monthly equipment reimbursements consists of revenue recognized over the service period for equipment (including, but not limited to, CPAP machines, hospital beds, wheelchairs and other equipment) less a provision for doubtful accounts.

 
  Nine Months Ended
September 30, 2019
  Nine Months Ended
September 30, 2018
 
Net Revenues
(in thousands)
  Dollars   Revenue
Percentage
  Dollars   Revenue
Percentage
 
 
  (Unaudited)
 

Net sales revenue

                         

Sleep

  $ 156,677     41.2 % $ 79,191     33.4 %

Respiratory

  $ 4,121     1.1 % $ 3,529     1.5 %

HME

  $ 33,971     8.9 % $ 27,296     11.5 %

Other

  $ 30,247     8.0 % $ 17,577     7.4 %

Total Net sales revenue

  $ 225,016     59.2 % $ 127,593     53.8 %

Net revenue from fixed monthly equipment reimbursments

   
 
   
 
   
 
   
 
 

Sleep

  $ 57,762     15.2 % $ 35,345     15.0 %

Respiratory

  $ 60,085     15.8 % $ 47,040     19.9 %

HME

  $ 31,767     8.4 % $ 26,304     11.1 %

Other

  $ 5,473     1.4 % $ 343     0.2 %

Total Net revenue from fixed monthly equipment reimbursments

  $ 155,087     40.8 % $ 109,032     46.2 %

Total net revenue

   
 
   
 
   
 
   
 
 

Sleep

  $ 214,439     56.4 % $ 114,536     48.4 %

Respiratory

  $ 64,206     16.9 % $ 50,569     21.4 %

HME

  $ 65,738     17.3 % $ 53,600     22.6 %

Other

  $ 35,720     9.4 % $ 17,920     7.6 %

Total net revenue

  $ 380,103     100 % $ 236,625     100 %

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Results of Operations

Comparison of Nine Months Ended September 30, 2019 and Nine Months Ended September 30, 2018.

        The following table summarizes AdaptHealth Holdings' unaudited consolidated results of operations for the nine months ended September 30, 2019 and September 30, 2018:

 
  Nine Months Ended September 30,    
   
 
 
  2019   2018    
   
 
 
  Increase/(Decrease)  
 
   
  Revenue
Percentage
   
  Revenue
Percentage
 
(in thousands, except percentages)
  Dollars   Dollars   Dollars   Percentage  
 
  (unaudited)
 

Revenue:

                                     

Revenue, net of contractual allowances and discounts

  $ 400,958     105.5 % $ 246,092     104.0 % $ 154,866     62.9 %

Provision for doubtful accounts

    (20,855 )   (5.5 )%   (9,467 )   (4.0 )%   (11,388 )   120.3 %

Net revenue less provision for doubtful accounts

    380,103     100.0 %   236,625     100.0 %   143,478     60.6 %

Costs and expenses:

                                     

Cost of net revenue

    317,174     83.4 %   199,586     84.3 %   117,588     58.9 %

General and administrative expenses

    31,508     8.3 %   12,229     5.2 %   19,279     157.6 %

Depreciation, excluding patient equipment depreciation

    2,439     0.6 %   2,293     1.0 %   146     6.4 %

Total costs and expenses

    351,121     92.3 %   214,108     90.5 %   137,013     64.0 %

Operating income

    28,982     7.7 %   22,517     9.5 %   6,465     28.7 %

Interest expense

    31,651     8.3 %   5,200     2.2 %   26,451     508.7 %

Loss on extinguishment of debt, net

    2,121     0.6 %   1,399     0.6 %   722     51.6 %

(Loss) income before income taxes

    (4,790 )   (1.2 )%   15,918     6.7 %   (20,708 )   (130.1 )%

Income tax expense

    5,444     1.4 %   (4,519 )   (1.9 )%   9,963     NM  

Net (loss) income

    (10,234 )   (2.6 )%   20,437     8.6 %   (30,671 )   (150.1 )%

Income attributable to noncontrolling interest

    1,336     0.4 %   681     0.3 %   655     96.2 %

Net (loss) income attributable to AdaptHealth Holdings LLC

  $ (11,570 )   (3.0 )% $ 19,756     8.3 % $ (31,326 )   (158.6 )%

        Net Revenue.    Net revenue for the nine months ended September 30, 2019 were $380.1 million compared to $236.6 million for the nine months ended September 30, 2018, an increase of $143.5 million or 60.6%. The increase of net revenue was driven primarily by acquisitions, which increased revenue by approximately $128.5 million. Approximately 54.3% of the increase in net revenue was attributable to acquisitions and approximately 6.3% was attributable to internal growth. Internal growth in net revenue is attributable to demographic growth in core markets and CPAP resupply sales and marketing initiatives. For the nine months ended September 30, 2019, sales revenue comprised 59.2% of total net revenue, compared to 53.8% of total net revenue for the nine months ended September 30, 2018. The increase in sales revenue was driven primarily by the Verus Acquisition, which is predominantly a CPAP resupply business and therefore has a high sales revenue mix. For the nine months ended September 30, 2019, revenue from fixed monthly equipment reimbursements

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comprised 40.8% of total net revenue, compared to 46.2% of total net revenue for the nine months ended September 30, 2018.

        Cost of Net Revenue.    Cost of net revenue for the nine months ended September 30, 2019 was $317.2 million compared to $199.6 million for the nine months ended September 30, 2018, an increase of $117.6 million or 58.9%. Cost of net revenue as a percentage of net revenue was 83.4% of net revenues for the nine months ended September 30, 2019, compared to 84.3% of net revenues for the nine months ended September 30, 2018. The 0.9% decrease in cost of net revenue as a percentage of net revenue is due in part to lower product cost and lower labor expense due to an increased usage of a global workforce. The $117.6 million increase in cost of net revenue is primarily attributable to acquisition growth.

        General and Administrative Expenses.    General and administrative expenses for the nine months ended September 30, 2019 were $31.5 million compared to $12.2 million for the nine months ended September 30, 2018, an increase of $19.3 million or 157.6%. General and administrative expenses as a percentage of net revenues was 8.3% for the nine months ended September 30, 2019, and 5.2% for the nine months ended September 30, 2018. General and administrative expenses for the nine months ended September 30, 2019 included $5.8 million in equity-based compensation expense, $7.8 million in transaction costs, $0.1 million in severance expenses and $0.3 million in other non-recurring expenses. General and administrative expenses for the nine months ended September 30, 2018 included $0.6 million in equity-based compensation expense and $1.3 million in transaction costs. Excluding the impact of equity-based compensation expense, transaction costs, severance and other non-recurring expenses, general and administrative expenses as a percentage of net revenues was 4.6% and 4.4% for the nine months ended September 30, 2019 and 2018, respectively. The $19.3 million increase was primarily comprised of an increase in labor costs of $10.7 million which included a $5.2 million increase in equity-based compensation expense, and an increase in other general and administrative expenses of $8.6 million of which $6.5 million was transaction related. Excluding the impact attributable to equity-based compensation and transaction expenses, the increase was primarily a result of increased support costs related to acquisition growth.

        Interest Expense.    Interest expense for the nine months ended September 30, 2019 was $31.7 million compared to $5.2 million for the nine months ended September 30, 2018. The increase in interest expense was driven by higher long-term debt obligations to fund acquisitions as well as the 2019 Recapitalization. Additionally, during the nine months ended September 30, 2019, AdaptHealth Holdings recorded non-cash interest expense representing the change in fair value of its interest rate swap agreements of $12.4 million, as compared to non-cash interest income of $0.3 million recorded in the nine months ended September 30, 2018; such amounts would only be paid out if the interest rate swap agreements were terminated. On August 22, 2019, in accordance with the provisions of FASB ASC 815, Derivatives and Hedging, and FASB ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, AdaptHealth Holdings designated its swaps as effective cash flow hedges. Accordingly, subsequent to August 22, 2019, changes in the fair value of its interest rate swaps will be recorded as a component of other comprehensive income rather than interest expense.

        Loss on Extinguishment of Debt.    Loss on extinguishment of debt for the nine months ended September 30, 2019 was $2.1 million which was a result of the write-off of deferred financing costs related to the 2019 Recapitalization. Loss on extinguishment of debt for the nine months ended September 30, 2018 was $1.4 million which was the result of the write-off of deferred financing costs and prepayment penalties incurred related to a debt restructuring that occurred in February 2018 offset by gain on debt extinguishment.

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        Income Tax Expense.    Income tax expense for the nine months ended September 30, 2019 was $5.4 million compared to income tax benefit of $4.5 million for the nine months ended September 30, 2018. The increase in income tax expense was primarily related to increased pre-tax income associated with the tax paying entities. In the quarter ended September 30, 2018, AdaptHealth Holdings reversed a previously established valuation allowance on deferred tax assets as a result of its profitability over the previous two years, resulting in an income tax benefit of $5.0 million recorded during that period. The recorded income tax benefit was shown as recorded in the three months ended December 31, 2018 in the "Quarterly Results of Operations and Other Financial and Operations Data" in the Proxy Statement. The change has no impact on net income for the year ended December 31, 2018.

Comparison of Years Ended December 31, 2018 and December 31, 2017.

        The following table summarizes AdaptHealth Holdings' consolidated results of operations for the years ended December 31, 2018 and December 31, 2017:

 
  Year Ended December 31,    
   
 
 
  2018   2017    
   
 
 
  Increase/(Decrease)  
 
   
  Revenue Percentage    
  Revenue Percentage  
(in thousands, except percentages)
  Dollars   Dollars   Dollars   Percentage  

Revenue:

                                     

Revenue, net of contractual allowances and discounts

  $ 361,054     104.6 % $ 201,757     104.8 % $ 159,297     79.0 %

Provision for doubtful accounts

    (15,776 )   (4.6 )%   (9,198 )   (4.8 )%   (6,578 )   71.5 %

Net revenue less provision for doubtful accounts

    345,278     100.0 %   192,559     100.0 %   152,719     79.3 %

Costs and expenses:

                                     

Cost of net revenue

    293,384     85.0 %   165,707     86.1 %   127,677     77.0 %

General and administrative expenses

    18,069     5.2 %   9,482     4.9 %   8,587     90.6 %

Depreciation, excluding patient equipment depreciation

    2,734     0.8 %   1,282     0.7 %   1,452     113.3 %

Total costs and expenses

    314,187     91.0 %   176,471     91.6 %   137,716     78.0 %

Operating income

    31,091     9.0 %   16,088     8.4 %   15,003     93.3 %

Interest expense

    7,453     2.2 %   5,041     2.6 %   2,412     47.8 %

Loss on extinguishment of debt, net

    1,399     0.4 %   324     0.2 %   1,075     NM  

Income before income taxes from continuing operations

    22,239     6.4 %   10,723     5.6 %   11,516     107.4 %

Income tax (benefit) expense

    (2,098 )   (0.6 )%   249     0.1 %   (2,347 )   NM  

Income from continuing operations

    24,337     7.0 %   10,474     5.4 %   13,863     132.4 %

Loss from discontinued operations

        0.0 %   207     0.1 %   (207 )   NM  

Net income

    24,337     7.0 %   10,267     5.3 %   14,070     137.0 %

Income attributable to noncontrolling interest

    1,077     0.3 %   580     0.3 %   497     85.7 %

Net income attributable to AdaptHealth Holdings LLC

  $ 23,260     6.7 % $ 9,687     5.0 % $ 13,573     140.1 %

"NM" indicates not meaningful.

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        Net Revenue.    Net revenue for the year ended December 31, 2018 were $345.3 million compared to $192.6 million for the year ended December 31, 2017, an increase of $152.7 million or 79.3%. The increase of net revenue was driven primarily by acquisitions which increased revenue by approximately $134.0 million. Approximately 70.1% of the increase in net revenue was attributable to acquisitions and approximately 9.7% was attributable to internal growth. Internal growth in net revenue is comprised of demographic growth in core markets and CPAP resupply sales and marketing initiatives. For the year ended December 31, 2018 sale revenue comprised 55.0% of total net revenue, compared to 48.2% of total net revenue for the year ended December 31, 2017. For the year ended December 31, 2018, revenue from fixed monthly equipment reimbursements comprised 45.0% of total net revenue, compared to 51.8% of total net revenue for the year ended December 31, 2017.

        Cost of Net Revenue.    Cost of net revenue for the year ended December 31, 2018 was $293.4 million compared to $165.7 million for the year ended December 31, 2017, an increase of $127.7 million or 77.0%. Cost of net revenue as a percentage of net revenue was 85.0% of net revenue for the year ended December 31, 2018, compared to 86.1% of net revenue for the year ended December 31, 2017. The 1.1% decrease in cost of net revenue as a percentage of net revenue is due in part to a shift in revenue mix and lower product cost. The $127.7 million increase in cost of net revenue is primarily attributable to acquisition growth.

        General and Administrative Expenses.    General and administrative expenses for the year ended December 31, 2018 were $18.1 million compared to $9.5 million for the year ended December 31, 2017, an increase of $8.6 million or 90.6%. General and administrative expenses as a percentage of net revenues was 5.2% for the year ended December 31, 2018, and 4.9% for the year ended December 31, 2017. The $8.6 million increase was comprised of an increase in labor costs of $4.0 million, and an increase in other general and administrative expenses of $4.6 million. The increase was primarily a result of increased support costs related to fiscal 2018's acquisition growth.

        Depreciation, Excluding Patient Equipment Depreciation.    Depreciation, excluding patient equipment depreciation, for the year ended December 31, 2018 was $2.7 million compared to $1.3 million for the year ended December 31, 2017, an increase of $1.5 million or 113.3%. Depreciation, excluding patient equipment depreciation, as a percentage of net revenues was 0.8% for the year ended December 31, 2018, and 0.7% for the year ended December 31, 2017.

        Interest Expense.    Interest expense for the year ended December 31, 2018 was $7.5 million compared to $5.0 million for the year ended December 31, 2017. The increase in the interest expense was driven by higher long-term debt obligations, which are used to fund acquisitions.

        Loss on Extinguishment of Debt.    Loss on extinguishment of debt for the year ended December 31, 2018 was $1.4 million which was a result of the write-off of deferred financing costs and prepayment penalties incurred related to the debt restructuring that occurred in February 2018 offset by gain on debt extinguishment. Loss on extinguishment of debt for the year ended December 31, 2017 was $0.3 million which was the result of the write-off of deferred financing costs and prepayment penalties incurred related to the debt restructuring that occurred in May 2017.

        Income Tax Expense (Benefit).    Income tax expense (benefit) for the year ended December 31, 2018 was ($2.1) million compared to $0.2 million for the year ended December 31, 2017. In the quarter ended December 31, 2018, AdaptHealth Holdings reversed a previously established valuation allowance on deferred tax assets as a result of its profitability over the previous two years.

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Comparison of Years Ended December 31, 2017 and December 31, 2016.

        The following table summarizes AdaptHealth Holdings' consolidated results of operations for the years ended December 31, 2017 and December 21, 2016:

 
  Year Ended December 31,    
   
 
 
  2017   2016    
   
 
 
  Increase/(Decrease)  
 
   
  Revenue
Percentage
   
  Revenue
Percentage
 
(in thousands, except percentages)
  Dollars   Dollars   Dollars   Percentage  

Revenue:

                                     

Revenue, net of contractual allowances and discounts

  $ 201,757     104.8 % $ 186,368     106.9 % $ 15,389     8.3 %

Provision for doubtful accounts

    (9,198 )   (4.8 )%   (12,052 )   (6.9 )%   2,854     (23.7 )%

Net revenue less provision for doubtful accounts

    192,559     100.0 %   174,316     100.0 %   18,243     10.5 %

Costs and expenses:

                                     

Cost of net revenue

    165,707     86.1 %   161,681     92.8 %   4,026     2.5 %

General and administrative expenses

    9,482     4.9 %   8,404     4.8 %   1,078     12.8 %

Depreciation, excluding patient equipment depreciation

    1,282     0.7 %   1,908     1.1 %   (626 )   (32.8 )%

Total costs and expenses

    176,471     91.6 %   171,993     98.7 %   4,478     2.6 %

Operating income

    16,088     8.4 %   2,323     1.3 %   13,765     592.6 %

Interest expense

    5,041     2.6 %   5,761     3.3 %   (720 )   (12.5 )%

Loss on extinguishment of debt, net

    324     0.2 %       0.0 %   324     NM  

Income (loss) before income taxes from continuing operations

    10,723     5.6 %   (3,438 )   (2.0 )%   14,161     (411.9 )%

Income tax (benefit) expense

    249     0.1 %   (208 )   (0.1 )%   457     (219.7 )%

Income (loss) from continuing operations

    10,474     5.4 %   (3,230 )   (1.9 )%   13,704     (424.3 )%

Loss from discontinued operations

    207     0.1 %   390     0.2 %   (183 )   (46.9 )%

Net income (loss)

    10,267     5.3 %   (3,620 )   (2.1 )%   13,887     (383.6 )%

Income attributable to noncontrolling interest

    580     0.3 %   563     0.3 %   17     3.0 %

Net income (loss) attributable to AdaptHealth Holdings LLC

  $ 9,687     5.0 % $ (4,183 )   (2.4 )% $ 13,870     (331.6 )%

"NM" indicates not meaningful.

        Net Revenue.    Net revenue for the year ended December 31, 2017 were $192.6 million compared to $174.3 million for the year ended December 31, 2016, an increase of $18.2 million or 10.5%. The increase of net revenue was driven primarily by internal growth which increased revenue by approximately $10.6 million. Approximately 6.1% of the increase in net revenue was attributable to internal growth and approximately 4.4% was attributable to the Roberts acquisition. Internal growth in net revenue is comprised of demographic growth in core markets and CPAP resupply sales and marketing initiatives, partly offset by the impact of Medicare price reductions implemented in July 2016 and January 2017. For the year ended December 31, 2017, sale revenue comprised 48.2% of total net revenue, compared to 45.7% of total net revenue for the year ended December 31, 2016. For the year

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ended December 31, 2017, revenue from fixed monthly equipment reimbursements comprised 51.8% of total net revenue, compared to 54.3% of total net revenue for the year ended December 31, 2016.

        Cost of Net Revenue.    Cost of net revenue for the year ended December 31, 2017 was $165.7 million compared to $161.7 million for the year ended December 31, 2016, an increase of $4.0 million or 2.5%. Cost of net revenue as a percentage of net revenue was 86.1% of net revenue for the year ended December 31, 2017, compared to 92.8% of net revenue for the year ended December 31, 2016. The 6.7% decrease in cost of net revenue as a percentage of net revenue is mainly due to lower labor expense resulting from restructuring activities in New York and lower product costs. The $4.0 million increase in cost of net revenue is attributable to growth in net revenue.

        General and Administrative Expenses.    General and administrative expenses for the year ended December 31, 2017 were $9.5 million compared to $8.4 million for the year ended December 31, 2016, an increase of $1.1 million or 12.8%. General and administrative expenses as a percentage of net revenues was 4.9% for the year ended December 31, 2017, and 4.8% for the year ended December 31, 2016. The $1.1 million increase was fully attributable to an increase in labor costs required to support fiscal 2017's business expansion.

        Depreciation, Excluding Patient Equipment Depreciation.    Depreciation, excluding patient equipment depreciation for the year ended December 31, 2017 was $1.3 million compared to $1.9 million for the year ended December 31, 2016, a decrease of $0.6 million or 32.8%. Depreciation, excluding patient equipment depreciation as a percentage of net revenues was 0.7% for the year ended December 31, 2017, and 1.1% for the year ended December 31, 2016.

        Interest Expense.    Interest expense for the year ended December 31, 2017 was $5.0 million compared to $5.8 million for the year ended December 31, 2016.

        Loss on Extinguishment of Debt.    Loss on extinguishment of debt for the year ended December 31, 2017 was $0.3 million which was the result of the write-off of deferred financing costs and prepayment penalties incurred related to the debt restructuring that occurred in May 2017. For the year ended December 31, 2016, there was no loss on extinguishment of debt.

EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex

        AdaptHealth Holdings uses EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex, which are financial measures that are not prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, to analyze its financial results and believes that it is useful to investors, as a supplement to U.S. GAAP measures. Under AdaptHealth Holdings' existing credit agreement, its ability to engage in activities such as incurring additional indebtedness and making investments is governed, in part, by its ability to satisfy tests based on EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex.

        AdaptHealth Holdings defines EBITDA as net income (loss) attributable to AdaptHealth Holdings LLC, plus net income (loss) attributable to noncontrolling interest, plus interest expense, income tax expense (benefit), depreciation and amortization and loss from discontinued operations, net of tax.

        AdaptHealth Holdings defines Adjusted EBITDA as EBITDA, plus loss on extinguishment from debt, equity-based compensation, transaction costs, severance, and certain other non-recurring expenses.

        AdaptHealth Holdings defines Adjusted EBITDA less Patient Equipment Capex as Adjusted EBITDA (as defined above) less patient equipment acquired during the period without regard to whether the equipment was purchased or financed through lease transactions.

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        AdaptHealth Holdings presents Adjusted EBITDA less Patient Equipment Capex because it believes this measure is useful to investors in evaluating AdaptHealth Holdings' financial performance. AdaptHealth Holdings' business requires significant investment in equipment purchases to maintain its patient equipment inventory. Some equipment title transfers to patients' ownership after a prescribed number of fixed monthly payments. Equipment that does not transfer wears out or oftentimes is not recovered after a patient's use of the equipment terminates.

        AdaptHealth Holdings uses the Adjusted EBITDA less Patient Equipment Capex metric internally in the following ways:

    All incentive compensation plans that have a profitability component use Adjusted EBITDA less Patient Equipment Capex as the relevant profitability measure;

    AdaptHealth Holdings evaluates acquisition opportunities using Adjusted EBITDA less Patient Equipment Capex as the metric and most contingent consideration arrangements are based on this metric; and

    AdaptHealth Holdings' debt agreements contain covenants that use a variation of Adjusted EBITDA less Patient Equipment Capex for purposes of determining debt covenant compliance.

        For purposes of this metric, patient equipment capital expenditure is measured as the value of the patient equipment received during the accounting period without regard to whether the equipment is purchased or financed through lease transactions.

        EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex are significant components in understanding and assessing financial performance. Both key business metrics have limitations as an analytical tool. Some of these limitations are:

    they do not reflect AdaptHealth Holdings' cash expenditures, future requirements for capital expenditures or contractual commitments;

    they do not reflect changes in, or cash requirements for, AdaptHealth Holdings' working capital needs;

    they do not reflect significant interest expense, or the cash requirements necessary to service interest or principal payments on AdaptHealth Holdings' debts; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

    Stock-based compensation is and will remain a key element of AdaptHealth Holdings' overall long-term incentive compensation package, although AdaptHealth Holdings excludes it as an expense when evaluating its ongoing operating performance for a particular period; and

    they do not reflect the impact of certain cash charges resulting from matters AdaptHealth Holdings considers not to be indicative of its ongoing operations; and other companies in AdaptHealth Holdings' industry may calculate Adjusted EBITDA differently than AdaptHealth Holdings does, limiting its usefulness as a comparative measure.

        Because of these limitations, EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP, and should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of AdaptHealth Holdings' liquidity.

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        The following unaudited table presents the reconciliation of net income (loss) attributable to AdaptHealth Holdings LLC, to EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex for the nine months ended September 30, 2019 and 2018:

 
  Nine Months Ended
September 30,
 
(in thousands)
  2019   2018  
 
  (Unaudited)
 

Net (loss) income attributable to AdaptHealth Holdings LLC

  $ (11,570 ) $ 19,756  

Income attributable to noncontrolling interest

    1,336     681  

Interest expense excluding change in fair value of interest rate swaps

    19,292     5,481  

Interest expense (income) representing change in fair value of interest rate swaps

    12,359     (281 )

Income tax expense

    5,444     (4,519 )

Depreciation

    45,077     33,012  

EBITDA

    71,938     54,130  

Loss on extinguishment of debt, net(a)

    2,121     1,399  

Equity-based compensation expense(b)

    5,806     571  

Transaction costs(c)

    8,232     1,342  

Severance(d)

    721     1,198  

Non-recurring expenses(e)

    534     94  

Adjusted EBITDA

    89,352     58,734  

Less: Patient equipment capex(f)

    (35,589 )   (27,906 )

Adjusted EBITDA less Patient Equipment Capex

  $ 53,763   $ 30,828  

(a)
Represents write off of deferred financing costs and prepayment penalty expense related to refinancing of debt offset by gain on debt extinguishment.

(b)
Represents amortization of equity-based compensation to employees and expense resulting from accelerated vesting and modification of certain profit interests.

(c)
Represents transaction costs primarily related to acquisition growth, the 2019 Recapitalization, and costs related to the DFB merger.

(d)
Represents severance costs related to acquisition integration and internal AdaptHealth Holdings restructuring and workforce reduction activities.

(e)
Represents one-time legal and consulting expenses, in addition to certain other non-recurring expenses.

(f)
Represents patient equipment acquired during the respective period without regard to the manner in which the equipment was financed.

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Liquidity and Capital Resources

        AdaptHealth Holdings' principal sources of liquidity are its operating cash flow, borrowings under its credit agreements and proceeds from equity issuances. AdaptHealth Holdings has used these funds to meet its capital requirements, which consist of salaries, labor, benefits and other employee-related costs, product and supply costs, third-party customer service, billing and collections and logistics costs, capital expenditures including patient equipment, acquisitions and debt service. Their future capital expenditure requirements will depend on many factors, including its patient volume and revenue growth rates. AdaptHealth Holdings' capital expenditures are made in advance of patients beginning service. Certain operating costs are incurred at the beginning of the equipment service period and during initial patient set up. AdaptHealth Holdings may be required to seek additional equity or debt financing in connection with the business. In the event that additional financing is required from outside sources, AdaptHealth Holdings may not be able to raise it on acceptable terms or at all. If additional capital is unavailable when desired, AdaptHealth Holdings' business, results of operations, and financial condition would be materially and adversely affected. AdaptHealth Holdings believes that its operating cash flow, together with its existing cash, cash equivalents, and credit facility, will continue to be sufficient to fund its operations and growth strategies for at least the next 12 months.

        As of September 30, 2019, AdaptHealth Holdings had $8.8 million of cash and cash equivalents and $94.0 million available under the Third Amended and Restated Credit and Guaranty Agreement (including $50.0 million available under the Delayed Draw Loan and $44.0 million available under its Revolving Credit Facility after consideration of stand-by letters of credit outstanding of $2.5 million).

2019 Recapitalization

        On March 20, 2019, AdaptHealth Holdings entered into a credit agreement with its bank group. The credit agreement consists of $425 million in credit facilities, which includes a $300 million Credit Facility Term Loan, a $50 million Delayed Draw Term Loan and a $75 million New Revolver, all with maturities in March 2024.

        The Credit Facility Term Loan may consist of Base Rate Loans or LIBOR Rate Loans (as defined in the agreement). Each LIBOR Rate Loan bears interest quarterly at variable rates based upon the sum of (a) the LIBOR Rate for such interest period, plus (b) an applicable margin based upon the AdaptHealth Holdings' Consolidated Total Leverage Ratio. Each Base Rate Loan bears interest quarterly at variable rates based upon the sum of (a) the Base Rate (as defined in the agreement), plus (b) an applicable margin based upon the AdaptHealth Holdings' Consolidated Total Leverage Ratio. The applicable margin was set at 3.50% and 2.50% for LIBOR Rate Loans and Base Rate Loans, respectively, following the closing of the transaction and are reset each quarter. As of September 30, 2019, AdaptHealth Holdings had $296.3 outstanding under the Credit Facility Term Loan (5.11% interest rate at September 30, 2019). The Credit Facility Term Loan requires quarterly principal repayments of $1.875 million beginning June 30, 2019 through March 31, 2021, quarterly principal repayments of $3.75 million beginning June 30, 2021 through December 31, 2023, and the unpaid principal amount of the Credit Facility Term Loan is due at maturity in March 2024.

        The Delayed Draw Loan allows up to $50 million to be drawn in order to fund permitted acquisitions and to pay fees and transaction costs associated with such acquisitions, and has an availability period from the first business day immediately following the closing date of the credit agreement (March 20, 2019) to the earliest of (a) the Credit Facility Term Loan maturity date (March 2024), (b) 24 months following the closing date, or (c) the date of the termination of the commitment. The Delayed Draw Loan may consist of Base Rate Loans or LIBOR Rate Loans. As of September 30, 2019, AdaptHealth Holdings did not have any borrowings outstanding under the Delayed Draw Loan.

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        The New Revolver allows up to $75 million to be drawn in order to (1) finance working capital, make capital expenditures and for other general corporate purposes in an amount not to exceed $25 million, and (2) finance permitted acquisitions and to pay fees and transaction costs associated with such acquisitions in an amount not to exceed $50 million. As of September 30, 2019, AdaptHealth Holdings had $28.5 million outstanding under the New Revolver. Amounts outstanding under the New Revolver are due at maturity in March 2024. The interest rate under the New Revolver was 5.11% at September 30, 2019.

        Under the credit agreement, AdaptHealth Holdings is subject to various agreements that contain a number of restrictive covenants that, among other things, impose operating and financial restrictions on AdaptHealth Holdings. Financial covenants include a total leverage ratio and a fixed charges coverage ratio, as defined in the agreement. Additionally, under the terms of the credit agreement, AdaptHealth Holdings may be required to repay principal based on excess cash flow, as defined. AdaptHealth Holdings was in compliance with all debt covenants as of September 30, 2019.

        On March 20, 2019, AdaptHealth Holdings signed a Note and Unit Purchase Agreement with BM AH Holdings, LLC, an affiliate of Blue Mountain Capital (Blue Mountain). In connection with the agreement, Blue Mountain purchased 37,050 AdaptHealth Holdings Common Units for $20 million, and AdaptHealth Holdings also signed a promissory note agreement with Blue Mountain with a principal amount of $100 million. The outstanding principal amount under the note agreement is due on the tenth anniversary of the agreement and bears interest at the following rates (a) for the period starting on the closing date and ending on the seventh anniversary, a rate of 12% per annum, with 6% payable in cash and 6% payment in kind, and (b) for the period starting on the day after the seventh anniversary of the closing date and ending on the maturity date, a rate equal to the greater of (i) 15% per annum or (ii) the twelve-month LIBOR plus 12% per annum.

        At September 30, 2019, AdaptHealth Holdings' working capital deficit was $35.6 million, as compared to a working capital deficit of $44.9 million at December 31, 2018. A significant portion of AdaptHealth Holdings' assets consists of accounts receivable from third-party payors that are responsible for payment for the equipment and the services that AdaptHealth Holdings provides.

        Cash Flow.    The following table presents selected data from AdaptHealth Holdings' unaudited consolidated statement of cash flows:

 
  Nine Months Ended
September 30,
  Year Ended December 31,  
(in thousands)
  2019   2018   2018   2017   2016  
 
  (unaudited)
   
   
   
 

Net cash provided by operating activities

  $ 43,174   $ 43,147   $ 68,427   $ 45,930   $ 29,936  

Net cash used in investing activities

    (62,399 )   (86,048 )   (96,284 )   (15,077 )   (2,676 )

Net cash provided by financing activities

    2,862     59,528     48,769     (30,263 )   (27,580 )

Net (decrease) increase in cash and cash equivalents

    (16,363 )   16,627     20,912     590     (320 )

Cash at beginning of period

    25,186     4,274     4,274     3,684     4,004  

Cash at end of period

  $ 8,823   $ 20,901   $ 25,186   $ 4,274   $ 3,684  

        Net cash provided by operating activities for the nine months ended September 30, 2019 was $43.2 million compared to $43.1 million for the nine months ended September 30, 2018, an increase of less than $0.1 million. The increase in net cash provided by operating activities was primarily the result of a $30.7 million decrease in net income, a net increase of $43.1 million in non-cash charges primarily from depreciation, provision for doubtful accounts, interest expense relating to the Company's interest rate swaps, equity-based compensation expense and write-off of deferred financing costs, an increase in deferred income taxes expense of $7.2 million, and a $19.5 million increase in cash used resulting from

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the change in operating assets and liabilities, primarily due to an increase in accounts receivable for the period.

        Net cash used in investing activities for the nine months ended September 30, 2019 was $62.4 million compared to $86.0 million for the nine months ended September 30, 2018. The use of funds in the nine months ended September 30, 2019 consisted of $14.5 million for equipment and other fixed asset purchases and $47.9 million for acquisitions, including the Gould's Acquisition and the SleepMed Acquisition. The use of funds in the nine months ended September 30, 2018 consisted of $7.9 million for equipment and other fixed asset purchases and $78.1 million for acquisitions, including the Verus Acquisition and the PPS Acquisition.

        Net cash provided by financing activities for the nine months ended September 30, 2019 was $2.9 million compared to $59.5 million of cash provided by financing activities for the nine months ended September 30, 2018. Net cash provided by financing activities for the nine months ended September 30, 2019 was primarily related to the 2019 Recapitalization, and consisted of $345.5 million of borrowings from long-term debt and lines of credit, $20.0 million of proceeds from an equity offering, and proceeds of $100.0 million from a preferred debt issuance, offset by total repayments of $184.7 million on long-term debt and capital lease obligations, payments of $9.0 million for deferred financing costs, payments of $0.8 million for equity issuance costs, payment of $3.7 million for the redemption of preferred units, payment of $13.0 million in contingent consideration in connection with the Verus Acquisition and the HMEI Acquisition, distributions to members of $250.0 million and $1.4 million of distributions to noncontrolling interests. For the nine months ended September 30, 2018, net cash provided by financing activities consisted of $164.7 million of borrowings from long-term debt and lines of credit, offset by total repayments of $101.2 million on long-term debt, lines of credit and capital lease obligations, and payments of $2.7 million for deferred financing costs, $1.0 million for debt prepayment penalties and $0.3 million of distributions to noncontrolling interest.

Comparison of the Years Ended December 31, 2018 and December 31, 2017

        Net cash provided by operating activities for the year ended December 31, 2018 was $68.4 million compared to $45.9 million for the year ended December 31, 2017, an increase of $22.5 million. The increase in net cash provided by operating activities was primarily the result of a $14.1 million increase in net income, a net increase of $23.9 million in non-cash charges primarily from depreciation, provision for doubtful accounts, equity-based compensation expense and write-off of deferred financing costs, offset by a $15.4 million increase in cash used resulting from the change in operating assets and liabilities, primarily due to an increase in accounts receivable.

        Net cash used in investing activities for the year ended December 31, 2018 was $96.3 million, compared to $15.1 million for the year ended December 31, 2017. The primary use of funds in 2018 was $86.3 million for business acquisitions, including the Verus Acquisition, the PPS Acquisition, the HMEI Acquisition, the CCLI Acquisition and the Med Way Acquisition. The primary use of funds in 2017 was $8.5 million for business acquisitions. Purchases of equipment and other fixed assets were $9.9 million and $6.9 million for the years ended December 31, 2018 and 2017, respectively.

        Net cash provided by financing activities for the year ended December 31, 2018 was $48.8 million compared to net cash used in financing activities of $30.3 million for the year ended December 31, 2017. Net cash provided by financing activities for 2018 primarily related to $164.8 million of borrowings from long-term debt and lines of credit, offset by total repayments of $112.0 million on long-term debt, lines of credit and capital lease obligations, and payments of $2.7 million for deferred financing costs, $1.0 million for debt prepayment penalties and $0.3 million of distributions to noncontrolling interests. Net cash used in financing activities for 2017 primarily related to $201.6 million of borrowings from long-term debt and lines of credit and $2.0 million from contributed capital, offset by total payments of $231.3 million on long-term debt, lines of credit and capital lease

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obligations, and payments of $1.4 million for deferred financing costs, $0.8 million for acquisition of noncontrolling interest, $0.2 million of equity issuance costs and $0.2 million of distributions to noncontrolling interests.

Comparison of the Years Ended December 31, 2017 and December 31, 2016

        Net cash provided by operating activities for the year ended December 31, 2017 was $45.9 million compared to $29.9 million for the year ended December 31, 2016, an increase of $16.0 million. The increase in net cash provided by operating activities was primarily the result of a $13.9 million increase in net income, a net decrease of $0.9 million in non-cash charges primarily from depreciation, provision for doubtful accounts and a gain on sale of assets, and a $3.0 million decrease in cash used resulting from changes in operating assets and liabilities, primarily due to an increase in accounts payable and accrued expenses, offset by a decrease in accounts receivable.

        Net cash used in investing activities for the year ended December 31, 2017 was $15.1 million, compared to $2.7 million for the year ended December 31, 2016. The primary use of funds in 2017 was $8.5 million to acquire businesses, $6.9 million for the purchase of equipment and other fixed assets, offset by $0.3 million of proceeds from the disposition of entities. The primary use of funds in 2016 was $1.3 million to acquire businesses, $2.5 million for the purchase of equipment and other fixed assets, offset by $1.1 million of proceeds from the disposition of entities.

        Net cash used in financing activities for the year ended December 31, 2017 was $30.3 million, compared to $27.6 million of cash used in financing activities for the year ended December 31, 2016. Net cash used in financing activities for 2017 primarily related to $201.6 million of borrowings from long-term debt and lines of credit and $2.0 million from contributed capital, offset by total repayments of $231.3 million on long-term debt, lines of credit and capital lease obligations, and payments of $1.4 million for deferred financing costs, $0.8 million for acquisition of noncontrolling interests, $0.2 million of equity issuance costs and $0.2 million of distributions to noncontrolling interests. Net cash used in financing activities for 2016 primarily related to $177.7 million of borrowings from lines of credit, offset by total repayments of $203.4 million on lines of credit, long-term debt and capital lease obligations, and payments of $0.1 million for deferred financing costs, $0.8 million for acquisition of noncontrolling interests, $0.8 million for the repurchase of common units and $0.2 million of distributions to noncontrolling interests.

Off-Balance Sheet Arrangements

        As of September 30, 2019, AdaptHealth Holdings did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Commitments and Contingencies

        In the normal course of business, AdaptHealth Holdings is subject to loss contingencies, such as legal proceedings and claims arising out of its business that cover a wide range of matters. In accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 450, Accounting for Contingencies, AdaptHealth Holdings records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. AdaptHealth Holdings management believes that any liability that may ultimately result from its resolution will not have a material adverse effect on AdaptHealth Holdings' financial conditions or results of operations.

        Other contingencies arising in the normal course of business relate to acquisitions and the related contingent purchase prices and deferred payments.

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Quantitative and Qualitative Disclosures about Market Risk

        AdaptHealth Holdings' exposure to market risk relates to fluctuations in interest rates from borrowings under its credit facility. Interest on AdaptHealth Holdings' debt borrowings carries a floating interest rate which is tied to LIBOR, and therefore AdaptHealth Holdings is exposed to changes in interest rates.

        AdaptHealth Holdings' secured term loans and revolving credit facility expose it to variability in interest payments due to changes in interest rates. As of September 30, 2019, and December 31, 2018, the total amount of outstanding debt subject to interest rate fluctuations was $324.8 million and $134.9 million, which approximates fair value. A hypothetical 1% increase in the applicable interest rate on our variable-rate debt would result in an approximately $3.2 million and $1.3 million increase in our annual interest expense in 2019 and 2018, respectively.

        AdaptHealth Holdings maintained interest rate swap agreements with notional amounts totaling $250 million and $85 million as of September 30, 2019 and December 31, 2018, respectively, with maturity dates through March 2024. These swap agreements convert a portion of AdaptHealth Holdings' variable rate borrowings to a fixed rate. As of September 30, 2019 and December 31, 2018, the total fair value of these swap agreements was a liability of $10.7 million and $0.4 million, respectively, and an asset of $0 and $0.9 million, respectively.

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BUSINESS

General

        AdaptHealth is a leading provider of home healthcare equipment, supplies and related services in the United States. AdaptHealth focuses primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi-PAP services) to individuals suffering from obstructive sleep apnea (OSA), (ii) home medical equipment (HME) to patients discharged from acute care and other facilities, (iii) oxygen and related chronic therapy services in the home and (iv) diabetes management medical devices and supplies (including insulin pumps and continuous glucose monitors). AdaptHealth also provides hospice-focused HME services and wound care, urological, ostomy and nutritional supply services for chronic patients. AdaptHealth services beneficiaries of Medicare, Medicaid and commercial payors. As of December 31, 2019, we serviced over 1.0 million patients annually in 49 states through our network of 173 locations in 35 states. Subsequent to our acquisition of the Patient Care Solutions business (PCS) from McKesson Corporation in January 2020, we service over 1.4 million patients annually in all 50 states through our network of 187 locations in 38 states. AdaptHealth's principal executive offices are located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462.

Industry Overview

        The HME industry provides critical medical products and recurring supply services, designed to improve quality of life, to patients in their homes. The HME industry allows patients with complex and chronic conditions to transition to their homes and achieve a greater level of independence, which is often lost in facility-based settings. While the industry has traditionally treated outpatient and lower acuity ailments, recent technological improvements have helped make higher acuity treatment more affordable and, in turn, have allowed the industry to shift to the treatment of more advanced acute ailments. The equipment and supplies that HME providers deliver can include respiratory products, mobility, diabetes management, nutritional and other general home needs (bathroom needs, nutritional needs, hospital beds, etc.).

        According to CMS, the HME industry has grown from $40 billion in 2010 to $56 billion in 2018 (representing a 4.3% CAGR), of which AdaptHealth estimates its total addressable market for its sleep therapy, oxygen services, mobility products and hospice HME business lines to be approximately $12 billion to $15 billion in 2018. During that time Medicaid data shows a continued shift of long-term services and supports spending into the home, with 57% of that spending going to home and community-based services in 2016. According to CMS, the HME market is projected to continue to grow at a 6.1% CAGR over the next nine years. Primary drivers of continued market growth include:

    Aging U.S. Population:  The population of adults aged 65 and older in the U.S., a significant group of end users of AdaptHealth's products and services, is expected to continue to grow and thus grow AdaptHealth's market opportunity. According to CMS, in the U.S., the population of adults between the ages of 65 and 84 is expected to grow at a 2.5% CAGR through 2030, while the population of adults over 85 is projected to grow at a 2.9% CAGR during that same time period. Not only is the elderly population expected to grow, but it is also expected to make up a larger percentage of the total U.S. population. According to the U.S. Census Bureau, the U.S. geriatric population was approximately 15% of the total population in 2014 and is expected to grow to approximately 24% of the total population by 2060. This growth emphasizes the need for companies such as AdaptHealth to provide efficient and effective equipment to a patient's home, shortening the amount of time that the patient population spends in an inpatient setting.

    Increasing Prevalence of Chronic Conditions:  HME is necessary to help treat significant health issues affecting millions of Americans. For example, chronic obstructive pulmonary disease ("COPD") was the third leading cause of death in the U.S. in 2014 with over 15 million

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      reported diagnoses, according to the Centers for Disease Control and Prevention ("CDC"). Congestive heart failure ("CHF"), another condition where HME plays a role in successful treatment, impacts more than five million Americans, according to the CDC. The Centers for Disease control also estimates that more than 9% of the US population suffers from diabetes. Finally, according to the American Sleep Apnea Association, obstructive sleep apnea affects 20 million people across the nation, with 15 million undiagnosed, including many individuals younger than 65 years old. As these conditions continue to increase in prevalence, AdaptHealth expects that the demand within the HME industry for suppliers, such as AdaptHealth, will grow with it, positioning AdaptHealth to be able to expand its market reach and penetration.

    Advancements in Technology:  Continuing development of technology and supply logistics has enabled more efficient and effective delivery of care in the home along with the collection of data that can be used for ongoing treatment. This, in turn, has helped grow AdaptHealth's total addressable market. With improvements in technology, physicians are often able to monitor patients' adherence to prescribed therapy which previously required admission to a facility. With the advancement of technology, physicians are more confident in shifting care to a patient's home and patients are more comfortable receiving care in this setting.

    Increasing Prevalence of and Preference for In-Home Treatments:  The number of conditions that can be treated in the home continues to grow, with recent additions including chronic wound care, sleep testing, dialysis and chemotherapy. In-home care is also increasingly becoming the preferred method of treatment, particularly for the elderly population. According to the AARP Public Policy Institute, 90% of patients over age 55 have indicated a preference to receive care in the home rather than in an institutional setting. Patient preference is supported by data that has shown that the efficacy of home care is often equivalent to that of facility-based care. The home setting provides comfort and convenience for a population that often faces barriers to receiving effective traditional treatment, such as transportation and adherence. By bringing the care to them, the elderly population can maintain a higher quality of life while still receiving high-quality care and equipment. As a result, more companies within the healthcare industry that are primarily facility-based are beginning to shift towards in-home offerings.

    Home Care is the Lowest Cost Setting:  Not only is in-home care typically just as effective as care delivered in a facility-based setting, but it has also proven to be more cost effective. The cost effectiveness of in home care is particularly important within the context of government pressures to lower the cost of care, pushing payors, such as Medicare and Medicaid, and clinicians to seek care settings that are less costly than hospitals and inpatient facilities. On a daily basis, home healthcare has been estimated by Cain Brothers & Company, LLC to be approximately seven times less expensive than care provided in skilled nursing facilities, the closest acuity site of care. Home care generally offers a significant cost reduction opportunity relative to facility-based care without sacrificing quality.

Business Strategy

        AdaptHealth's strategy is to grow its revenue while expanding margins through targeted strategies for organic growth as well as opportunistic acquisitions that take advantage of AdaptHealth's scalable, integrated platform.

    Drive Market Share Gains in the HME Market:  AdaptHealth plans to leverage its technological and clinical advantages as well as its relationships with key constituents across the HME supply chain to deepen its presence in the HME market. AdaptHealth has built a strong network of highly diversified referral relationships that its sales force will continue to grow to help expand market penetration in certain geographies. Primary referral sources include acute care hospitals, sleep laboratories, pulmonologist offices, skilled nursing facilities and hospice operators, with no

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      one source accounting for greater than 2% of its revenue as of December 31, 2019. AdaptHealth believes that maintaining and broadening these relationships will drive organic growth. AdaptHealth's ability to provide many products across its contracted payors is particularly valuable, especially to providers and facilities that discharge patients with a variety of product needs and insurance coverages. While some of its HME competitors focus on certain specific product lines, AdaptHealth is able to offer a wide array of products to its customers. AdaptHealth believes that its strong referral relationships and its broad product portfolio will help drive market share growth.

    Grow through Acquisitions:  The HME industry is highly fragmented, with more than 6,000 unique suppliers. AdaptHealth believes that ongoing reimbursement changes will continue the consolidation trend in the HME industry that has accelerated in recent years. AdaptHealth believes that in the current environment, companies with the ability to scale operations possess competitive advantages that can drive volume to their platforms. As one of a limited number of national HME companies, AdaptHealth plans to continue to evaluate acquisitions and execute upon attractive opportunities to help drive growth. For the year ended December 31, 2019, AdaptHealth completed 18 acquisitions for aggregate consideration of $67 million.

    Improve Profitability with Technology-Enabled Platform:  AdaptHealth plans to leverage its integrated technology system (based upon third-party applications and proprietary software products) to reduce costs and improve operational efficiency in its current business and the businesses it acquires. During 2018 and 2019, AdaptHealth has deployed its technology solutions with respect to 39 acquisitions and has established the ability to improve logistics performance and operating margins. AdaptHealth intends to continue to improve its technology platform to enhance its communications with referral sources and provide better patient service.

    Expand Product Portfolio:  In addition to its other growth initiatives, AdaptHealth also plans to augment its product portfolio to help drive growth. While AdaptHealth offers a suite of products to its referrers and patients, it has identified several key expansion opportunities, including products in the respiratory device, respiratory medicine, diabetes management, orthotic bracing and hospice HME markets. AdaptHealth believes that these products will deepen its portfolio and allow it to further address key clinical conditions which, in turn, are expected to help drive growth across its customer base. AdaptHealth's scale has helped it to be successful in the past when bidding on Medicare contracts.

    Utilize Value-Based Reimbursement Arrangements:  AdaptHealth's broad HME service offerings and technology-enabled infrastructure provide the opportunity to enter into value-based reimbursement arrangements with its payors and referrers (including large multi-specialty physician groups, hospital systems, and accountable care organizations) pursuant to which AdaptHealth provides certain HME services on a per-patient, per-month basis or shares in reduction of HME service costs over baseline periods. Such arrangements are attractive to risk-bearing providers (such as capitated medical groups) and payors wishing to reduce administrative costs related to HME services.

Competitive Strengths

        AdaptHealth believes that the following strengths will continue to enable it to provide high-quality products and services to its customers and to create value for stockholders:

    Differentiated Technology-Enabled Platform:  Over the last five years, AdaptHealth has developed an integrated technology system (based upon best-in-class third party applications and proprietary software products) which AdaptHealth believes provides a competitive advantage within the HME industry. AdaptHealth's integrated platform distinguishes itself from other industry participants by automating processes that can be complex, prone to mistakes and

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      inefficient. AdaptHealth believes that its platform's ease of use, improved compliance and automated, integrated workflow for delivery of care appeals to physicians and payors. Additionally, AdaptHealth believes its adoption of e-prescribing solutions enhances transparency and reduces clinical errors and delays. AdaptHealth believes such systems provide better patient service by reducing the time between an order's receipt and the delivery of the products to the patient. AdaptHealth believes its model is scalable, supporting future organic growth while also allowing for timely on-boarding of acquisitions. AdaptHealth believes that this differentiated technology platform will help generate business from new clients, as other competitors either lack the resources to modernize their infrastructure or utilize systems which do not easily allow for changes from traditional, less automated models.

    National Scale and Operational Excellence:  As of December 31, 2019, AdaptHealth served over 1.0 million patients annually across 49 states and performed over 7,000 equipment and supply deliveries a day through 173 locations, consisting of 128 patient servicing centers, 36 distribution-only depots and 9 administrative offices. Following AdaptHealth's acquisition of PCS in January 2020, AdaptHealth services over 1.4 million patients annually across all 50 states and performs over 10,000 equipment and supply deliveries a day through its network of 187 locations in 38 states. AdaptHealth also has relationships with national healthcare distribution companies to drop ship certain HME products directly to patients homes in one to two days. AdaptHealth believes that its scale makes AdaptHealth attractive to payors as it is able to service its patients across the nation. As of December 31, 2019, AdaptHealth has been able to build a network of more than 1,200 payors, including 10 national and over 150 regional insurers. AdaptHealth's payor network allows the organization to provide in-network rates for most prospective patients, unlike many of its competitors. AdaptHealth believes that this, in turn, makes it more attractive to referral sources and helps to drive volume. AdaptHealth has a broad distribution network to leverage with respect to timely and efficient delivery of products. AdaptHealth has strategically located small depots across the country based upon equipment volume and drive times to support its delivery fleet and help enhance operational success.

    Experienced Management Team:  AdaptHealth is led by a proven management team with significant experience in the HME and healthcare services industries. The team has domain knowledge within the industry having been employed at various healthcare organizations throughout their careers. Multiple members of the management team have also built independent HME companies and have the proven ability to scale a business within the HME industry. Additionally, several members of the management team have experience within their specific roles in both private and public company settings. Given the complexity of the highly regulated industry in which AdaptHealth operates, AdaptHealth believes that management's experience is a meaningful differentiator relative to its competitors.

    Proven M&A Success:  AdaptHealth's integrated platform includes scalable and centralized front-end and back office processes that facilitate the effective onboarding of potential acquisitions and help achieve cost synergies. AdaptHealth has demonstrated its ability to execute upon acquisitions, deploying over $320 million in capital to complete 64 transactions from its founding through December 31, 2019. As AdaptHealth continues to grow it expects to deploy incrementally more capital and integrate substantially larger targets over time, which in turn it expects will be a source of continued growth for AdaptHealth. For the year ended December 31, 2019, AdaptHealth completed 18 acquisitions for aggregate consideration of $67 million.

Company Operations

        Product Offering.    AdaptHealth delivers home medical equipment and supplies directly to a patient's home upon discharge from a hospital and/or receipt of referral. The breadth of AdaptHealth's products is particularly valuable to acute care hospitals, sleep laboratories and long-term care facilities that discharge patients with complex conditions and multiple product needs.

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        AdaptHealth is often paid a fixed monthly amount over a prescribed service period for certain HME products as designated by CMS or commercial payors, such as CPAP, wheelchairs, hospital beds, oxygen concentrators, continuous glucose monitors and other similar products. These types of equipment accounted for approximately 40% of AdaptHealth's revenue for the year ended December 31, 2019.

        For other products, which include those deemed to be consumables, AdaptHealth receives a single payment upon shipment of the product. Sales of these products, which include CPAP masks and related supplies, diabetes management supplies, woundcare supplies, wheelchair cushions accessories, orthopedic bracing, breast pumps and supplies, walkers, commodes and canes, nutritional supplies and incontinence supplies, accounted for approximately 60% of AdaptHealth's revenue for the year ended December 31, 2019.

        Supply Chain.    AdaptHealth plays an important role in delivering HME products to patients in their homes. Manufacturers of home medical equipment sell their products to AdaptHealth and ship them to AdaptHealth directly. AdaptHealth also contracts with national healthcare distribution companies to ship certain HME products directly to patients' homes. These distributors invoice AdaptHealth for the cost of shipped products at the time of sale. AdaptHealth receives referrals from a variety of sources, such as acute care hospitals, sleep laboratories, pulmonologist offices, skilled nursing facilities and hospice operators. AdaptHealth's products are either shipped to patients' homes by AdaptHealth-operated or contracted delivery trucks or shipped using proprietary or third-party distribution services. AdaptHealth bills payors and patients directly for the products that are delivered and for the services that are provided. As of December 31, 2019, AdaptHealth served over 1.0 million patients annually across 49 states and performed over 7,000 equipment and supply deliveries a day through 173 locations, consisting of 128 patient servicing centers, 36 distribution-only depots and 9 administrative offices. Subsequent to AdaptHealth's acquisition of PCS in January 2020, AdaptHealth services over 1.4 million patients annually across all 50 states and performs over 10,000 equipment and supply deliveries a day through its network of 187 locations in 38 states, to help service its patient population efficiently and effectively.

Operating Structure

        Management.    AdaptHealth is led by a proven management team with experience in the HME industry across a variety of healthcare organizations. AdaptHealth adopts a centralized approach for key business processes, including M&A activity, revenue cycle management, strategic purchases, payor contracting, finance, compliance, legal, human resources, IT and sales management. In addition, AdaptHealth has centralized many of the functions relating to its CPAP and other resupply businesses. However, AdaptHealth believes that the personalized nature of customer requirements and referral relationships, characteristic of the home healthcare business, mandate that it emphasize a localized operating structure as well. AdaptHealth focuses on regional management to respond promptly and effectively to local market demands and opportunities. AdaptHealth's regional managers are responsible and accountable for maintaining and developing relationships with referral sources, customer service for non-CPAP supply product lines and logistics for non-drop-shipped products.

        IT.    AdaptHealth has established an integrated, technology-enabled, centralized platform, distinguishing itself from many of its competitors who traditionally use less automated processes that are typically complex, can be prone to mistakes and are inefficient. AdaptHealth's technology enables automated, compliant, and integrated workflow into patients' delivery of care. AdaptHealth believes that this advanced technology platform provides it with a competitive advantage through its unique components that cater to patients and physicians. AdaptHealth believes that its technology platform has several characteristics that appeal to physicians, including its ease of use, the improved compliance it enables through its integrated systems and the automated, integrated workflow it provides for patients' delivery of care. Additionally, AdaptHealth's e-prescribing capabilities enhance transparency and reduce

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transcription and other errors. AdaptHealth believes that patients are also better served due to the efficiency from time of order to delivery and the seamless integration across points of care enabled by AdaptHealth's platform. The integrated system also provides AdaptHealth management with critical information in a timely manner, allowing them to track performance levels company-wide.

        AdaptHealth has formed close relationships with its third-party software providers, including Apacheta Corporation, Brightree, Parachute Health and SnapWorx, LLC, to optimize its HME workflow. An example of this optimization is AdaptHealth's automated point-of-delivery technology, which tracks AdaptHealth's drivers and produces paperless, secure delivery tickets which are uploaded directly to the patient's file and available immediately on an enterprise-wide basis. In addition, to address ongoing and growing threats related to cyberattacks, AdaptHealth continues to deploy market leading defense tools to protect and secure its networks and data.

        Revenue Cycle Management.    AdaptHealth's revenue cycle management and billing processes have both manual and computerized elements that are designed to maintain the integrity of revenue and accounts receivable. Third-party payors that can accommodate electronic claims submission, such as Medicare, certain state Medicaid payors and many commercial payors, are billed electronically on a daily basis. For other payors who are unable to accept electronic submissions, AdaptHealth generates paper claims and invoices.

        AdaptHealth contracts with several business process outsourcing providers to provide certain billing and administrative functions related to revenue cycle management. These providers are based in the Philippines, India and Central America and provide AdaptHealth with the ability to scale its workforce in a cost effective manner. As of December 31, 2019, approximately 1,436 full-time equivalent employees were provided to AdaptHealth under such arrangements. Subsequent to AdaptHealth's acquisition of PCS in January 2020, approximately 1,505 full-time equivalent employees are provided to AdaptHealth under such arrangements.

Sales and Marketing

        Sales activities are generally carried out by AdaptHealth's full-time sales representatives with assistance from on-site liaisons in certain markets who interact directly with hospital discharge coordinators and patients. AdaptHealth's sales team works closely with AdaptHealth's trained respiratory therapists in carrying out their daily sales activities. AdaptHealth primarily acquires new patients through referrals. Sources of referrals include acute care hospitals, sleep laboratories, pulmonologist offices, skilled nursing facilities and hospice operators, among others. AdaptHealth's sales representatives maintain continual contact with medical professionals across these facilities. AdaptHealth believes that its relationships with its referral sources are strong and that these entities will continue to be a source of organic growth through new patients. While AdaptHealth views its referral sources as fundamental to its business, no single referral source accounted for more than 2% of its revenues as of December 31, 2019. AdaptHealth serviced more than 1.0 million patients annually as of December 31, 2019, and subsequent to AdaptHealth's acquisition of PCS in January 2020, AdaptHealth services over 1.4 million patients annually, and the loss of any single referral source or patient would not materially impact its business.

Acquisitions

        Continuing to grow through accretive acquisitions is a key element of AdaptHealth's growth strategy, and AdaptHealth continuously reviews its pipeline of potential acquisition candidates. AdaptHealth maintains a dedicated M&A integration team and leverages its scalable front-end and back-office technology platform to facilitate acquisition integration to help realize short-term cost saving synergies and longer term revenue growth synergies.

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        During the year ended December 31, 2019, AdaptHealth completed acquisitions involving 18 companies for total purchase consideration of approximately $67 million. For the year ended December 31, 2018, AdaptHealth completed acquisitions involving 21 companies for total purchase consideration of approximately $171 million.

Suppliers

        AdaptHealth purchases medical equipment from a variety of suppliers. AdaptHealth's sleep therapy equipment and supplies are primarily provided by two suppliers, and its mobility and home services products (such as hospital beds, wheelchairs, walkers and commodes) are principally supplied by a single supplier. Notwithstanding its significant supply relationships with these vendors, AdaptHealth believes that it is not dependent upon any single supplier and that its product needs can be met by an adequate number of qualified manufacturers.

Facilities

        AdaptHealth does not own any properties and leases its headquarters facility located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, PA. As of December 31, 2019, AdaptHealth served over 1.0 million patients annually across 49 states and performed over 7,000 equipment and supply deliveries a day through 173 locations, consisting of 128 patient servicing centers, 36 distribution-only depots and 9 administrative offices. Subsequent to AdaptHealth's acquisition of PCS in January 2020, AdaptHealth services over 1.4 million patients annually across all 50 states and performs over 10,000 equipment and supply deliveries a day through its network of 187 locations in 38 states. Full service locations are typically between 300 and 5,000 square feet, and are usually a combination office and warehouse space. Many of these facilities are accredited to provide patient services, and their adjacent warehouse space is used for storage of adequate supplies of equipment and accessories for such patient services. AdaptHealth believes that these facilities are adequate to meet its current needs, and expects to add additional facilities in connection with its growth strategies. AdaptHealth believes that such additional space, when required, will be available on commercially reasonable terms, consistent with historical cost trends.

Employees

        As of December 31, 2019, AdaptHealth had 2,591 employees. Following AdaptHealth's acquisition of PCS in January 2020, AdaptHealth has 3,066 employees. AdaptHealth believes that relations between its management and employees are good.

Competition

        The HME market is fragmented and highly competitive. AdaptHealth competes with other large national providers, including AeroCare, Apria Healthcare, Lincare and Rotech; regional providers, including Advanced Home Care, LLC, Binson's Medical Equipment, Inc., Norco, Inc. and Protech Home Medical Corp.; and product-specific providers, including Breg, Inc., Byram Healthcare Centers, Inc., Inogen, Inc. and KCI Holdings, Inc., as well as over 6,000 local organizations. In addition, non-HME providers, including CVS, Amazon and certain manufacturers of HME equipment are considering entering or expanding their presence in the HME market.

        Consolidation of the HME market is a continuing trend, as required technology investments and reduced reimbursements put financial pressure on smaller providers. Larger HME providers with integrated technology and automated processes are generally better positioned to gain market share and more attractive vendor pricing. Competitive bidding also emphasizes the importance of relationships with both the payors and referral sources. Because payors typically select a limited

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number of exclusive suppliers and physicians typically refer based on timely delivery and consistency, relationships with both are critical to the success of competitors in the market.

        AdaptHealth believes that the most important competitive factors in the regional and local markets are:

    Reputation with referral sources, including local physicians and hospital-based professionals;

    Service quality and efficient, responsive referral process;

    Differentiated technology platform that provides a superior physician and patient experience;

    Comprehensive offering across the home medical equipment space;

    Broad network of payor contracts and regional insurers;

    Overall ease of doing business; and

    Quality of patient care, including clinical expertise.

        AdaptHealth believes that it competes favorably with competitors on the basis of these and other factors.

Legal Proceedings

        AdaptHealth is involved in investigations, claims, lawsuits and other proceedings arising in the ordinary course of its business. These matters involve personnel and employment issues, regulatory matters, personal injury, contract and other proceedings arising in the ordinary course of business, which have not resulted in any material losses to date. Although AdaptHealth does not expect the outcome of these proceedings will have a material adverse effect on its financial condition or results of operations, such matters are inherently unpredictable. Therefore, AdaptHealth could incur judgments or enter into settlements or claims that could materially impact its financial condition or results of operations.

        In addition, on July 25, 2017, AdaptHealth Holdings was served with a subpoena by the U.S. Attorney's Office for the United States District Court for the Eastern District of Pennsylvania ("EDPA") pursuant to 18 U.S.C. §3486 to produce certain audit records and internal communications regarding ventilator billing. The investigation appears to be focused on billing practices regarding one payor that contracted for bundled payments for certain ventilators. AdaptHealth Holdings has cooperated with investigators and, through agreement with the EDPA, has submitted all information requested. An independent third party was retained by AdaptHealth Holdings that identified overpayments and underpayments for ventilator billings related to the payor, and a remittance was sent to reconcile that account. AdaptHealth Holdings has cooperated and fully complied with the subpoena. On October 3, 2019 AdaptHealth received a follow-up civil investigative demand from the EDPA regarding a document previously produced to the EDPA and patients included in the review by the independent third party. AdaptHealth has responded to the EDPA and supplemented its production as requested. At this time, AdaptHealth Holdings cannot provide any assurance as to whether the EDPA will seek additional information or pursue this matter further.

Government Regulation

        The federal government and all states in which AdaptHealth currently operates regulate various aspects of AdaptHealth's business. In particular, AdaptHealth's operations are subject to federal laws that regulate the reimbursement of its products and services under various government programs and that are designed to prevent fraud and abuse. AdaptHealth's operations are also subject to state laws governing, among other things, pharmacies, nursing services, medical equipment suppliers and certain

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types of home health activities. Certain of its employees are subject to state laws and regulations governing the licensure and professional practice of respiratory therapy, pharmacy and nursing.

        AdaptHealth maintains a Compliance Program that meets the guidelines set forth by the Office of Inspector General of CMS, and provides ongoing compliance training designed to keep AdaptHealth's officers, directors and employees well-educated and up-to-date regarding developments on relevant topics and to emphasize AdaptHealth's policy of strict compliance. Federal and state laws require that AdaptHealth obtain facility and other regulatory licenses and that AdaptHealth enroll as a supplier with federal and state health programs.

        As a healthcare provider, AdaptHealth is subject to extensive regulation to prevent fraud and abuse and laws regulating reimbursement under various government programs. The marketing, billing, documenting and other practices of healthcare companies are all subject to government scrutiny. To ensure compliance with Medicare, Medicaid and other regulations, regional health insurance carriers and state agencies often conduct audits and request customer records and other documents to support AdaptHealth's claims submitted for payment of services rendered to customers. Similarly, government agencies and their contractors periodically open investigations and obtain information from healthcare providers pursuant to the legal process. Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs, which could have a material adverse effect on AdaptHealth's financial condition and results of operations.

        Numerous federal and state laws and regulations, including HIPAA and the HITECH Act, govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information. As part of AdaptHealth's provision of, and billing for, healthcare equipment and services, AdaptHealth is required to collect and maintain patient-identifiable health information. New health information standards, whether implemented pursuant to HIPAA, the HITECH Act, congressional action or otherwise, could have a significant effect on the manner in which AdaptHealth handles healthcare-related data and communicate with payers, and the cost of complying with these standards could be significant. If AdaptHealth does not comply with existing or new laws and regulations related to patient health information, it could be subject to criminal or civil sanctions.

        Healthcare is an area of rapid regulatory change. Changes in the laws and regulations and new interpretations of existing laws and regulations may affect permissible activities, the relative costs associated with doing business, and reimbursement amounts paid by federal, state and other third-party payers. AdaptHealth cannot predict the future of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations, or possible changes in national healthcare policies. Future legislative and regulatory changes could have a material adverse effect on AdaptHealth's financial condition and results of operations.

Implemented Regulation

        As a provider of home oxygen, respiratory and other chronic therapy equipment to the home healthcare market, AdaptHealth participates in Medicare Part B, the Supplementary Medical Insurance Program, which was established by the Social Security Act of 1965. Providers of home oxygen and other respiratory therapy services and equipment have historically been heavily dependent on Medicare reimbursement due to the high proportion of elderly persons suffering from respiratory disease. Durable medical equipment, including oxygen equipment, is traditionally reimbursed by Medicare based on fixed fee schedules.

        Impact of the ACA and MIPPA.    The ACA, the Medicare Improvements for Patients and Providers Act of 2008 ("MIPPA"), the Medicare, Medicaid and SCHIP Extension Act of 2007 ("SCHIP Extension Act"), the Deficit Reduction Act of 2005 ("DRA") and the Medicare Prescription Drug,

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Improvement, and Modernization Act of 2003 ("MMA"), contain provisions that directly impacted reimbursement for the primary respiratory and other DME products provided by AdaptHealth.

        In recent years, the U.S. Congress and certain state legislatures have considered and passed a large number of laws intended to result in significant change to the ACA, The law has been subject to legislative and regulatory changes and court challenges, and the current presidential administration and certain members of Congress have stated their intent to repeal or make additional significant changes to the ACA, its implementation or its interpretation. In 2017, the Tax Cuts and Jobs Acts was enacted, which, among other things, removed penalties for not complying with ACA's individual mandate to carry health insurance. In addition, the president has signed an executive order that directs agencies to minimize "economic and regulatory burdens" of the ACA. Because the penalty associated with the individual mandate was eliminated, a federal judge in Texas ruled in December 2018 that the entire ACA was unconstitutional. However, the law remains in place pending appeal. These changes and court challenges may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased. The presidential administration and the U.S. Congress may take further action regarding the ACA, including, but not limited to, repeal or replacement. Additionally, all or a portion of the ACA and related subsequent legislation may be modified, repealed or otherwise invalidated through further legislation or judicial challenge, which could result in lower numbers of insured individuals, and reduced coverage for insured individuals. There is uncertainty regarding whether, when, and how the ACA will be further changed, what alternative provisions, if any, will be enacted, and the impact of alternative provisions on providers and other healthcare industry participants. Government efforts to repeal or change the ACA or to implement alternative reform measures could cause AdaptHealth's revenues to decrease to the extent such legislation reduces Medicaid and/or Medicare reimbursement rates.

        MIPPA delayed the implementation of a Medicare competitive bidding program for oxygen equipment and certain other DME items that was scheduled to begin on July 1, 2008, and instituted a 9.5% price reduction nationwide for these items as of January 1, 2009. The SCHIP Extension Act reduced Medicare reimbursement amounts for covered Part B drugs, including inhalation drugs that AdaptHealth provides, beginning April 1, 2008. DRA provisions negatively impacted reimbursement for oxygen equipment beginning in 2009 through the implementation of a capped rental arrangement. MMA changed the pricing formulas used to establish payment rates for inhalation drug therapies resulting in significantly reduced reimbursement beginning in 2005, established a competitive acquisition program for DME, established a Recovery Audit Contractors program, which implemented a new method for recovery of Medicare overpayments by utilizing private companies operating on a contingent fee basis to identify and recoup Medicare overpayments, and implemented quality standards and accreditation requirements for DME suppliers. The RACs are empowered to audit claims submitted by healthcare providers and to withhold future payments, including in cases where the reimbursement rules are unclear or subject to differing interpretations. This activity, as well as the activity of intermediaries and others involved in government reimbursement, may include changes in long-standing interpretations of reimbursement rules, which could adversely impact AdaptHealth's future financial condition and results of operations. In October 2008, CMS established Zone Program Integrity Contractors ("ZPICs"), who are responsible for ensuring the integrity of all Medicare-related claims. The ZPICs assumed the responsibilities previously held by Medicare's Program Safeguard Contractors ("PSCs"). These legislative and regulatory provisions, as currently in effect have and will continue to adversely impact AdaptHealth's financial condition and results of operations.

        Impact of Competitive Bidding.    In December 2003, MMA was signed into law. The MMA legislation directly impacted reimbursement for the primary respiratory and other DME products that AdaptHealth provides. Among other things, MMA established a competitive acquisition program for DME that was expected to commence in 2008, but was subsequently delayed by further legislation. MMA instructed CMS to establish and implement programs under which competitive acquisition areas

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would be established throughout the United States for purposes of awarding contracts for the furnishing of competitively priced items of DME, including oxygen equipment. The program was initially intended to be implemented in phases such that competition under the program would occur in nine of the largest metropolitan statistical areas ("MSAs") in the first year and an additional 70 of the largest MSAs in a second, subsequent round of bidding. The second round was subsequently expanded to include 91 MSAs.

        For each competitive acquisition area, CMS is required to conduct a competition under which providers submit bids to supply certain covered items of DME. Successful bidders are expected to meet certain program quality standards in order to be awarded a contract, and only successful bidders can supply the covered items to Medicare beneficiaries in the acquisition area (there are, however, regulations in place that allow non-contracted providers to continue to provide equipment and services to their existing customers at the new prices determined through the bidding process). The contracts are expected to be re-bid at least every three years. CMS is required to award contracts to multiple entities submitting bids in each area for an item or service but has the authority to limit the number of contractors in a competitive acquisition area to the number it determines to be necessary to meet projected demand. CMS concluded the bidding process for the first round of MSAs in September 2007. However, in July 2008, Congress enacted the MIPPA legislation which retroactively delayed the implementation of competitive bidding and reduced Medicare prices nationwide by 9.5% beginning in 2009 for the product categories, including oxygen, that were initially included in competitive bidding.

        In 2009, CMS reinstituted the bidding process in the nine largest MSA markets. Reimbursement rates from the re-bidding process were publicly released by CMS on June 30, 2010. CMS announced average savings of approximately 32% off the current payment rates in effect for the product categories included in competitive bidding. As of January 1, 2011, these payment rates were in effect in the nine markets only (Charlotte, Cincinnati, Cleveland, Dallas, Kansas City, Miami, Orlando, Pittsburgh and Riverside). AdaptHealth's annual Medicare revenues from the product categories in the nine markets affected by competitive bidding were approximately $5.6 million at the time the program commenced.

        On January 30, 2013, CMS announced new, lower Medicare pricing for the second round of competitive bidding effective July 1, 2013. CMS announced average savings of approximately 45% for the product categories included in Round 2. The ACA legislation requires CMS to expand competitive bidding further to additional geographic markets (certain markets may be excluded at the discretion of CMS) or to use competitive bid pricing information to adjust the payment amounts otherwise in effect for areas that are not competitive acquisition areas by January 1, 2016.

        CMS is required by law to re-compete competitive bidding contracts at least once every three years. With the Round 1 rebid contracts expiring on December 31, 2013, new Round 1 re-compete contracts and pricing went into effect on January 1, 2014. Round 1 re-compete bidding occurred in the same nine Metropolitan Statistical Areas (MSAs) as the Round 1 rebid. CMS' contract prices under the Round 1 re-compete averaged 37% below Medicare's fee schedule rates for the six product categories.

        On March 7, 2019, CMS announced plans to consolidate the competitive bidding areas included in the Round 2 re-compete and Round 1 2017 DMEPOS Competitive Bidding Program into a single round of competition referred to as "Round 2021." Round 2021 contracts are scheduled to become effective on January 1, 2021, and extend through December 31, 2023. The competitive bidding process has historically put pressure on the amount AdaptHealth is reimbursed in the markets in which it exists as well as in areas that are not subject to the Competitive Bidding Program. The rates required to win future competitive bids could continue to compress reimbursement rates. AdaptHealth will continue to monitor developments regarding the Competitive Bidding Program. While AdaptHealth cannot predict the outcome of the Competitive Bidding Program on its business in the future nor the Medicare

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payment rates that will be in effect in future years for the items subjected to competitive bidding, the program may materially adversely affect its future financial condition and results of operations.

        Durable Medical Equipment Medicare Administrative Contractor.    In order to ensure that Medicare beneficiaries only receive medically necessary and appropriate items and services, the Medicare program has adopted a number of documentation requirements. For example, the DME MAC Supplier Manuals provide that clinical information from the "patient's medical record" is required to justify the initial and ongoing medical necessity for the provision of DME. Some DME MACs, CMS staff and government subcontractors have recently taken the position, among other things, that the "patient's medical record" refers not to documentation maintained by the DME supplier but instead to documentation maintained by the patient's physician, healthcare facility or other clinician, and that clinical information created by the DME supplier's personnel and confirmed by the patient's physician is not sufficient to establish medical necessity. It may be difficult, and sometimes impossible, for AdaptHealth to obtain documentation from other healthcare providers. Moreover, auditors' interpretations of these policies are inconsistent and subject to individual interpretation, leading to significant increases in individual supplier and industry-wide perceived error rates. High error rates lead to further audit activity and regulatory burdens. If these or other burdensome positions are generally adopted by auditors, DME MACs, other contractors or CMS in administering the Medicare program, AdaptHealth would have the right to challenge these positions as being contrary to law. If these interpretations of the documentation requirements are ultimately upheld, however, it could result in AdaptHealth making significant refunds and other payments to Medicare, and AdaptHealth's future revenues and cash flows from Medicare may be reduced. AdaptHealth cannot currently predict the adverse impact these interpretations of the Medicare documentation requirements might have on its financial condition and results of operations, but such impact could be material.

        Federal and state budgetary and other cost-containment pressures will continue to impact the home respiratory care industry. AdaptHealth cannot predict whether new federal and state budgetary proposals will be adopted or the effect, if any, such proposals would have on its financial condition and results of operations.

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MANAGEMENT

Officers and Directors

        Set forth below are the names, ages and positions of each of our directors and executive officers:

Name
  Age   Position   Class (1)  
Richard Barasch     66   Chairman of the Board     I  

Alan Quasha

 

 

70

 

Director

 

 

I

 

Terence Connors

 

 

65

 

Director

 

 

II

 

Dr. Susan Weaver

 

 

58

 

Director

 

 

III

 

Dale Wolf

 

 

65

 

Director

 

 

III

 

Luke McGee

 

 

36

 

Chief Executive Officer, Director

 

 

I

 

Joshua Parnes

 

 

41

 

President, Director

 

 

II

 

Gregg Holst

 

 

61

 

Chief Financial Officer

 

 


 

Christopher Joyce

 

 

56

 

General Counsel

 

 


 

Shaw Rietkerk

 

 

45

 

Chief Operating Officer

 

 


 

(1)
The term of office of the Class I directors expires at our 2020 annual meeting of stockholders, the term of office of the Class II directors expires at our 2021 annual meeting of stockholders and the term of office of the Class III directors expires at our 2022 annual meeting of stockholders.

        Richard Barasch has served as our Chairman since our formation and served as the President and Chief Executive Officer of DFB from our formation to the Closing. Mr. Barasch was Chief Executive Officer of Universal American Corp., a publicly-traded health insurance and services company focused on the senior market and government programs, from 1995 until Universal American's acquisition by WellCare Health Plans in May 2017. Mr. Barasch has developed an extensive network of contacts throughout the healthcare industry and speaks regularly at industry conferences as a healthcare services expert. He is currently on the Board of Directors of ELMC Risk Management Inc., HouseWorks, LLC and Quest Analytics. He is on the Board of Advisors of the Health Policy and Management program at the Columbia University School of Public Health, where he is also an Assistant Adjunct Professor, and the Brown School of Public Health. He also serves on the Board of Trustees of the Maimonides Medical Center in Brooklyn, New York. Mr. Barasch graduated from Swarthmore College and Columbia University Law School.

        Alan Quasha has served on our board of directors since the Closing. Mr. Quasha is the Chief Executive Officer of Quadrant Management, Inc., the predecessor of which was founded in 1978. Mr. Quasha has also been a Partner of Vanterra Capital LLC since 2008 and an Investment Committee Member of Trilantic Capital Partners Fund IV since 2009. He serves as a board member of numerous companies, including his roles as Chairman of Carret Asset Management, LLC since 2004, Chairman of Brean Capital, LLC since 2005, Non-Executive Director of Compagnie Financiere Richemont SA (SWISS: CFR.VX) since 2000 and ARC Group Worldwide, Inc. since 2016, where he also serves as the Chief Executive Officer. As a venture capital investor, Mr. Quasha brings strategic and financial experience to our board of directors. He has evaluated and invested in numerous companies in the U.S. and emerging markets, across various industries. Many of these investments involved significant hands-on operating experience. He is also Chairman of the Brain Trauma Foundation, was a past Director of American Express Funds and a former Governor of the American Stock Exchange.

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Mr. Quasha holds a bachelor's degree from Harvard College, an MBA from Harvard Business School, a Master of Law degree from New York University Law School and a Doctorate of Law from the Harvard Law School.

        Terence Connors has served on our board of directors since the Closing. Mr. Connors currently serves as board member and audit committee chairman of FS Credit Real Estate Income Trust, Inc. and Suburban Propane Partners L.P. (NYSE) and previously served as board member and audit committee chairman of Cardone Industries, Inc., a privately-held automotive aftermarket parts remanufacturer. After a nearly 40-year career with two international public accounting firms, he retired from KPMG LLP in 2015, where he held the positions of Professional Practice Partner and SEC Reviewing Partner. He was also a member of KPMG's Board of Directors from 2011 to 2015 and chaired the Audit, Finance & Operations Committee. Mr. Connors has worked with numerous public and private companies, including Fortune 500 companies, as a senior audit and global lead partner. Mr. Connors served 14 years on the board of the Philadelphia Chapter of the National Association of Corporate Directors (NACD), including as Chairman and President and is a NACD Board Leadership Fellow. He has served on several nonprofit boards, including the Philadelphia YMCAs and Gesu School and currently serves as a Trustee and Finance Committee Chair at St. Joseph's Preparatory School in Philadelphia. He is a graduate of LaSalle University with a bachelor's degree in Accounting.

        Susan Weaver, M.D. has served on our board of directors since February 2018. She has served as the Chief Executive Officer of C 3 HealthcareRX, a healthcare and pharmacy services company, since July 2016, and as the Founder and President of Transformation Health Partners, LLC since September 2015. Dr. Weaver was the Chief Medical Officer for Blue Cross Blue Shield of North Carolina from 2014 to 2015 after serving as the Vice President, Health Delivery Redesign from December 2012 to early 2014. Prior to joining Blue Cross Blue Shield of North Carolina, Dr. Weaver was the Executive Vice President, Medical Affairs for WakeMed Health & Hospital from September 2011 to December 2012 and the Senior Vice President, Medical Affairs and Physician Practices from January 2009 to September 2011. Dr. Weaver also served as an Executive Director and Physician and founding member for Alliance Medical Ministry, a 501(c)(3) providing medical care to the working uninsured of Wake County, North Carolina. She holds an M.D. from Duke University School of Medicine and a B.S. in Psychology from Duke University.

        Dale Wolf has served on our board of directors since the Closing. Mr. Wolf has served as a member of the board of directors of Molina Healthcare, Inc. since 2013 and as chairman of the board since 2017. Mr. Wolf served as the President and Chief Executive Officer of Onecall Care Management Inc. from January 2016 to February 2019 and as executive chairman from September 2015 to January 2016. Mr. Wolf served as the President and Chief Executive Officer of DBW Healthcare, Inc. from January 2014 to June 2018. Mr. Wolf served as the executive chairman of Correctional Healthcare Companies, Inc., a national provider of correctional health care solutions, from December 2012 to July 2014. From 2005 to 2009, Mr. Wolf served as Chief Executive Officer of Coventry Health Care, Inc., a diversified national health care company, and served as the Executive Vice President, Chief Financial Officer and Treasurer of Coventry Health Care, Inc. from 1996 to 2005. Mr. Wolf was also a member of the boards of directors of Correctional Healthcare Companies, Inc. from 2012 to 2014, Coventry Healthcare, Inc. from 2005 to 2009 and Catalyst Health Solutions, Inc. from 2003 to 2012. Mr. Wolf graduated from Eastern Nazarene College with a Bachelor of Arts degree in Mathematics, with honors, and from the MIT Sloan School Senior Executive Program. He has also been a fellow in the Society of Actuaries since 1979.

        Luke McGee has served as the Chief Executive Officer of AdaptHealth Holdings since 2012 and as a member of our board of directors since the Closing. Mr. McGee joined Quadrant Management, Inc. in 2010 and holds director positions in certain of Quadrant's portfolio companies along with executive level roles at certain times. Prior to joining Quadrant, Mr. McGee was in the investment banking group

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at Deutsche Bank and before that Merrill Lynch. He holds a bachelor's degree in Economics from Duke University.

        Joshua Parnes joined AdaptHealth Holdings in 2013 with the acquisition of Ocean Home Health and was appointed President of AdaptHealth Holdings in August 2017. Mr. Parnes has served on our board of directors since the Closing. Mr. Parnes built Ocean Home Health from a startup into a successful home medical equipment provider and has over 14 years of operating experience in the home medical equipment industry.

        Gregg Holst joined AdaptHealth Holdings in 2014 as its Chief Financial Officer. Mr. Holst has previously served as chief financial officer for various publicly traded and private equity-backed companies in the healthcare and consumer products sectors, and previously spent eight years at GE Capital in several senior finance roles. Mr. Holst holds a bachelor's degree in Accounting from Pennsylvania State University and is a Certified Public Accountant.

        Christopher Joyce joined AdaptHealth Holdings in 2018 as its General Counsel. Mr. Joyce has over 25 years of experience as chief legal officer and business development executive for publicly-traded and privately-held provider-based and managed care companies. Mr. Joyce most recently served as General Counsel of InnovaCare, Inc., a $2.0 billion managed care insurance company with 450,000 Medicare and Medicaid beneficiaries. Mr. Joyce holds a bachelor's degree in Economics from the State University of New York at Albany and a JD from the University of Chicago.

        Shaw Rietkerk joined AdaptHealth Holdings in 2018. Mr. Rietkerk most recently served as Executive Vice President of Revenue Cycle Management at Brightree. Mr. Rietkerk has over two decades of healthcare service leadership experience, with an extensive background in revenue cycle management, operations, business process outsourcing, account management and process. Prior to joining Brightree in 2015, Mr. Rietkerk was Senior Vice President, Worldwide Operations at M*Modal, a leading healthcare technology provider of advanced clinical documentation solutions.

Board of Directors and Terms of Office of Officers and Directors

        We are managed under the direction of our board of directors. Our board of directors is divided into three classes of directors with only one class of directors being elected in each year and each class serving a three-year term. The term of office of the first class of directors, consisting of Messrs. Barasch, Quasha and McGee, will expire at our 2020 annual meeting of stockholders. The term of office of the second class of directors, consisting of Messrs. Parnes and Connors will expire at our 2021 annual meeting of stockholders. The term of office of the third class of directors, consisting of Mr. Wolf and Dr. Weaver, will expire at our 2022 annual meetings of stockholders.

        Pursuant to the terms of the Subscription Agreement, Deerfield is entitled to designate for nomination by us for election one director to serve on our board of directors. Deerfield's designee is Dr. Susan Weaver.

        Pursuant to the terms of the Board Designee Rights Letter Agreement, the BlueMountain Entities or their permitted transferees holding a majority of the outstanding principal amount under the BM Notes have the right, commencing on the Closing Date and ending on the date on which the BM Notes have been paid in full, to designate and nominate for election one director to our board of directors. BlueMountain's designee is Dale Wolf.

        Officers are appointed by our board of directors and serve at the discretion of our board of directors, rather than for specific terms of office.

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Committees of the Board of Directors

        The standing committees of our board of directors currently consist of an audit committee, a compensation committee, a nominating and governance committee and a compliance committee. Each of the committees reports to the board of directors as they deem appropriate and as the board may request. The composition, duties and responsibilities of these committees are set forth below.

Audit Committee

        Our audit committee consists of Dale Wolf, Alan Quasha and Terence Connors, and Mr. Connors serves as chairman of the audit committee. Under Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent. We have determined that each of Messrs. Wolf, Quasha and Connors qualifies as independent under Nasdaq listing standards and applicable SEC rules with respect to audit committee membership. We have also determined Mr. Connors qualifies as an "audit committee financial expert" as defined in applicable SEC rules.

        We have adopted an audit committee charter, which details the principal functions of the audit committee including:

    the appointment, compensation, retention, replacement, and oversight of the work of the independent registered accounting firm and any other independent registered public accounting firm engaged by us;

    pre-approving all audit and non-audit services to be provided by the independent registered accounting firm or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

    reviewing and discussing with the independent registered accounting firm all relationships the auditors have with us in order to evaluate their continued independence;

    setting clear hiring policies for employees or former employees of the independent registered accounting firm;

    setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

    obtaining and reviewing a report, at least annually, from the independent registered accounting firm describing (i) the independent registered accounting firm's internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

    reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and

    reviewing with management, the independent registered accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

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Compensation Committee

        Our compensation committee consists of Richard Barasch, Dale Wolf and Alan Quasha, and Mr. Quasha serves as chairman of the compensation committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent. We have determined that each of Messrs. Barasch, Wolf and Quasha qualifies as independent under Nasdaq listing standards and applicable SEC rules. We have adopted a compensation committee charter, which details the principal functions of the compensation committee including:

    reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer's compensation, evaluating our Chief Executive Officer's performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation in executive session at which the Chief Executive Officer is not present;

    reviewing and approving the compensation of all of our other executive officers;

    reviewing our executive compensation policies and plans;

    implementing and administering our equity-based remuneration plans;

    assisting management in complying with our SEC filings;

    approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;

    producing a report on executive compensation to be included in our annual proxy statement; and

    reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

        The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and is directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.

Nominating and Governance Committee

        Our nominating and governance committee is responsible for, among other matters: (i) identifying individuals qualified to become members of our board of directors consistent with criteria approved by our board; (ii) overseeing the organization of our board of directors to discharge the board's duties and responsibilities properly and efficiently; (iii) identifying best practices and recommending corporate governance principles; and (iv) developing and recommending to our board of directors a set of corporate governance guidelines and principles applicable to us.

        Our nominating and governance committee consists of Terence Connors, Dr. Susan Weaver and Richard Barasch, with Mr. Barasch serving as the chair of the nominating and governance committee. Our board of directors adopted a written charter for the nominating and governance committee, which is available free of charge on our corporate website at https://www.adapthealth.com/investor-relations. The information on our website does not constitute part of, and is not incorporated by reference in, this prospectus or any accompanying prospectus supplement.

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Compliance Committee

        Our compliance committee exercises oversight responsibility, review regulatory compliance issues and report to our board of directors with respect to our regulatory compliance programs. Our compliance committee consists of Dr. Weaver and Messrs. Barasch and Wolf, with Dr. Weaver serving as the chair of the compliance committee.

Code of Ethics and Committee Charters

        We have adopted a Code of Ethics applicable to our directors, officers and employees. We have previously filed a copy of our Code of Ethics, our audit committee charter and our compensation committee charter as exhibits to our registration statement. You may review these documents by accessing our public filings at the SEC's web site at www.sec.gov. In addition, a copy of our Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.

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EXECUTIVE COMPENSATION

Executive and Director Compensation

Executive Compensation

        The following disclosure describes the material elements of the compensation of the Company's named executive officers for the year ended December 31, 2019 and is presented based on the reduced disclosure rules applicable to the Company as an "emerging growth company" within the meaning of the Securities Act. For the year ended December 31, 2019, our named executive officers were:

    Luke McGee, Chief Executive Officer;

    Joshua Parnes, President; and

    Christopher Joyce, General Counsel.


Summary Compensation Table

Name and Principal Position
  Year   Salary(1)
($)
  Bonus(2)
($)
  Stock
Awards(3)
($)
  Option
Awards(4)
($)
  Non-equity
Incentive Plan
Compensation(5)
($)
  All Other
Compensation(6)
($)
  Total
($)
 

Luke McGee

    2019     458,333     1,000,000     5,278,612     1,325,974         1,602     8,064,521  

Chief Executive Officer

    2018     300,000         1,724,100         211,250     12,324     2,247,674  

Joshua Parnes

    2019     458,333         4,583,925     1,325,974         11,278     6,379,510  

President

    2018     300,000         1,724,100         211,250     10,664     2,246,014  

Christopher Joyce(7)

    2019     343,750         1,352,745     530,390         12,367     2,239,252  

General Counsel

                                 

(1)
On March 11, 2019, the annual base salaries for Messrs. McGee, Parnes and Joyce were increased to $500,000, $500,000 and $350,000, respectively. Effective as of the Closing, the annual base salary for Mr. Joyce was increased to $375,000.

(2)
The amount reported in this column represents a transaction bonus paid to Mr. McGee in connection with the closing of BlueMountain's investment in AdaptHealth Holdings on March 20, 2019.

(3)
The amounts reported in this column represent the aggregate grant date fair value of the incentive units, shares of restricted stock and founder shares granted and/or modified during the fiscal year ended December 31, 2019, in accordance with FASB ASC 718. These amounts reflect the equity-based compensation expense for these grants and do not represent the actual economic value that may be realized by each named executive officer. There can be no assurance that these amounts will ever be realized. See note 11, Stockholders' Equity, to our consolidated financial statements for the fiscal year ended December 31, 2019 to our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the assumptions used to calculate these values.
Name
  2019
Incentive
Units(1)
($)
  Modification
of 2018
Incentive Units(2)
($)
  Restricted
Stock(3)
($)
  Founder
Shares(4)
($)
  Total
($)
 

Luke McGee

    1,718,640     1,734,097     436,500     1,389,375     5,278,612  

Joshua Parnes

    1,718,640     1,734,097     436,500     694,688     4,583,925  

Christopher Joyce

        715,020     174,600     463,125     1,352,745  

(1)
The amounts reported in this column represent the grant date fair value of the incentive units of AdaptHealth Holdings granted to Messrs. McGee and Parnes. For additional information, see "—Narrative to Summary Compensation Table—Long Term Incentives—Incentive Units" below.

(2)
The amounts reported in this column represent the equity-based compensation expense computed in accordance with FASB ASC 718 as a result of the accelerated vesting and modifications to the incentive units granted to each of our named executive officers in 2018. For accounting purposes, the 2018 Incentive Units were modified because satisfactions of the threshold amount was deferred and our named executive officers received a dividend in connection with the closing of BlueMountain's investment in AdaptHealth Holdings on March 20, 2019 without regard to the threshold amounts. For each of Messrs. McGee and Parnes, the equity-based compensation expenses reported in this column includes $1,347,101 related to the accelerated vesting of such units at the same time and for Mr. Joyce, the equity-based compensation expenses reported in this column includes $325,871 related to the accelerated vesting of such units in connection with the Closing. For additional information, see "—Narrative to Summary Compensation Table—Long Term Incentives—Incentive Units" below.

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(3)
The amounts reported in this column represent the restricted shares of our Class A Common Stock granted to each of our named executive officers. For additional information, see "—Narrative to Summary Compensation Table—Long Term Incentives—2019 Stock Incentive Plan" below.

(4)
The amounts reported in this column represent the grant date fair value of the founder shares granted to our named executive officers in connection with the Closing. The fair value attributable to the founder shares incorporates the transfer restrictions and other restrictions applicable to such founder shares. For additional information, please see "Description of Securities—Authorized and Outstanding Stock—Founder Shares" above.
(4)
The amounts reported in this column represent the aggregate grant date fair value of the options to purchase shares of our Class A Common Stock granted to each of our named executive officers during the fiscal year ended December 31, 2019, in accordance with FASB ASC 718. The amounts reported reflect the value at the grant date based upon the probable outcome of the performance conditions applicable to the options. The value of such awards as of the grant date, assuming that the highest level of performance conditions will be achieved, was $2,651,948, $2,651,948 and $1,060,780 for Messrs. McGee, Parnes and Joyce, respectively. These amounts reflect the equity-based compensation expense for these stock options and do not represent the actual economic value that may be realized by each named executive officer. There can be no assurance that these amounts will ever be realized. For additional information, see "—Narrative to Summary Compensation Table—Long Term Incentives—2019 Stock Incentive Plan" below. See note 11, Stockholders' Equity, to our consolidated financial statements for the fiscal year ended December 31, 2019 to our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the assumptions used to calculate these values.

(5)
Bonuses earned with respect to 2019 by each named executive officer have not yet been determined, but will be finalized and paid in the first quarter of 2020. We will, in accordance with Securities and Exchange Commission rules and regulations, file a Current Report on Form 8-K disclosing such bonus amounts once they have been determined. For additional information, please see "—Narrative to Summary Compensation Table—Executive Employment Agreements" below.

(6)
The amounts reported as earned by each named executive officer in this column represent the following amounts for the ended December 31, 2019: (i) for Mr. McGee, represents $1,602 in life insurance premiums, (ii) for Mr. Parnes, represents $300 in life insurance premiums and $10,978 in reimbursement of health insurance premiums, and (iii) For Mr. Joyce, represents $1,290 in life insurance premiums and $11,077 in automobile expenses.

(7)
Mr. Joyce was not one of our named executive officers for the year ended December 31, 2018.

Narrative to Summary Compensation Table

Executive Employment Agreements

        Certain of the compensation paid to our named executive officers reflected in the summary compensation table was provided pursuant to employment agreements with the Company or one of its subsidiaries, which are summarized below. For a discussion of the severance pay and other benefits to be provided to our named executive officers in connection with a termination of employment and/or a change in control under arrangements with each of our named executive officers, please see "—Potential Payments Upon Termination or Change In Control" below.

        Luke McGee and Joshua Parnes.    Each of Messrs. McGee and Parnes are party to substantially similar employment agreements, dated March 20, 2019, pursuant to which each of Messrs. McGee and Parnes are entitled to receive an annual base salary of $500,000, and are eligible to receive a target annual incentive bonus equal to 100% of their base salary based on the achievement of annual company and individual performance objectives for such fiscal year, subject to continued employment through the applicable payment date. In connection with their employment agreements, each of Messrs. McGee and Parnes entered into restrictive covenant agreements which include a 24-month post-termination non-compete and non-solicit of the employees, consultants, clients, customers and other business relationships of the Company and its affiliates, and an indefinite covenant against making any disparaging or defamatory comments regarding the Company or any of its affiliates.

        Christopher Joyce.    Mr. Joyce is party to an offer letter dated January 15, 2018, pursuant to which Mr. Joyce is entitled to receive a base salary, currently $375,000, and is eligible to receive a target annual incentive bonus equal to 60% of base salary based on company performance as determined by the Company at its sole discretion, subject to continued employment through the applicable payment date. Mr. Joyce is also entitled to a car allowance of $1,000 per month.

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2019 Bonuses

        Bonuses payable to our named executive officers in respect of service during 2019 are determined based on the achievement of company performance, Adjusted EBITDA Less Patient Equipment Capex and compliance thresholds established by our compensation committee. Bonuses for 2019 have not yet been determined with respect to our named executive officers, but will be finalized and paid in the first calendar quarter of 2020. We will, in accordance with Securities and Exchange Commission rules and regulations, file a Current Report on Form 8-K disclosing such bonus amounts once they have been determined.

Long-Term Incentives

        Incentive Units.    Prior to the Business Combination, AdaptHealth Holdings made grants of incentive units pursuant to the A&R AdaptHealth Holdings LLC Agreement and a form of AdaptHealth Holdings Incentive Unit Grant Notice to certain executive officers, including its named executive officers. The incentive units were intended to qualify as profits interests for federal income tax purposes, and each named executive officer, through single-member limited liability companies, became members of AdaptHealth Holdings, bound by all the terms and conditions set forth in the AdaptHealth Holdings LLC Agreement.

        On July 1, 2018, AdaptHealth Holdings granted incentive units (the "2018 Incentive Units") to certain executive officers, including each of our named executive officers, which vest 50% on the second anniversary of the vesting commencement date and 25% on each of the third and fourth anniversaries of the vesting commencement date. In connection with the closing of BlueMountain's investment in AdaptHealth Holdings on March 20, 2019, AdaptHealth Holdings agreed to make distributions in respect of the 2018 Incentive Units, as if the 2018 Incentive Units were vested, in the same amount distributed with respect to the AdaptHealth Holdings Common Units. The distributions made in respect of the 2018 Incentive Units that were made below the threshold value of such units was treated as an advance for tax purposes against any future consideration the named executive officers would receive in respect of the 2018 Incentive Units in a "Sale of the Company" (as defined in the A&R AdaptHealth Holdings LLC Agreement). As of the same date, pursuant to their employment agreements, the vesting of the 2018 Incentive Units held by each of Messrs. McGee and Parnes were fully accelerated.

        On June 13, 2019, AdaptHealth Holdings granted incentive units to certain executive officers, including each of Messrs. McGee and Parnes, 50% of which vest in substantially equal installments on each of the first, second, third and fourth anniversaries of the vesting commencement date (the "Time Units"), and 50% of which vest on the earlier to occur of (x) a Sale of the Company and (y) the fourth anniversary of the vesting commencement date (the "Performance Units"). If (i) a named executive officer's employment is terminated for an act or omission giving rise to cause that results directly from a breach of his fiduciary duties to, or directly results, or could be reasonably be expected to directly result, in material liability to, AdaptHealth Holdings or any of its affiliates, or (ii) the named executive officer breaches any restrictive covenant to which he is bound, in each case, the named executive officer forfeits their incentive units in their entirety, regardless of whether or not they have vested. If the named executive officer's employment is terminated for any other reason, then all unvested incentive units will be forfeited and cancelled on and after the effective date of such termination.

        In connection with the Business Combination, all of the incentive units were exchanged for AdaptHealth Units, together with a corresponding number of shares of Class B Common Stock based on the equity consideration valuation at the closing of the Business Combination, provided that the consideration received in respect of the 2018 Incentive Units and the Time Units remained subject to the same vesting terms and conditions as were applicable to the 2018 Incentive Units and the Time Units immediately prior to the Closing and the consideration received in respect of the Performance

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Units were deemed to have satisfied the applicable performance criteria as of the closing of the Business Combination pursuant to the terms of the Merger Agreement and will be subject to time-based vesting, with 25% of such consideration vesting on each of the first four quarterly anniversaries of the Closing.

        For additional information on the consideration received in respect of the incentive units, see "Description of Securities—Authorized and Outstanding Stock—Common Stock" above.

        2019 Stock Incentive Plan.    On October 14, 2019, our board of directors adopted the 2019 Stock Incentive Plan (the "Plan"), which was subsequently approved on November 7, 2019 by our stockholders and the Plan became effective on the Closing. On November 21, 2019, our compensation committee approved the grants of stock options and restricted stock to certain executive officers, including our named executive officers, pursuant to the Plan and the applicable form of award agreement. The stock options and the shares of restricted stock are eligible to vest 1/3rd on December 31st of each of 2020, 2021 and 2022 subject to the achievement of the applicable performance criteria. The performance criteria applicable to the stock options is based on the growth of per share Adjusted EBITDA less Patient Equipment CapEx in respect of the 2020 fiscal year against the per share Adjusted EBITDA less Patient Equipment CapEx in respect of the 2019 fiscal year. The performance criteria applicable to the shares of restricted stock is based on the compound annual growth rate of the price per share of our Class A Common Stock as of the applicable vesting date against a baseline per share price of $10.00. The stock options and the shares of restricted stock, in each case, that fail to vest based on the achievement of the performance criteria will be forfeited for no consideration.

        In the event that a named executive officer experiences a termination of employment by us without "cause" (other than due to death or disability) or by the named executive officer for "good reason," in each case, the named executive officer will vest in the stock options (with such vesting to occur on the latter of the date of termination and December 31, 2020) and will remain eligible to vest in shares of restricted stock, as applicable, that would have vested had the named executive not undergone a termination until the end of the 24 month period for Messrs. McGee and Parnes, or 12 month period for Mr. Joyce, following the date of termination; provided, however, that if such termination occurs within one year of a "change in control," or the named executive officer experiences a termination as a result of his death or disability, the named executive officer will vest in the stock options (with such vesting to occur on the latter of the date of termination and December 31, 2020) and will remain eligible to vest in shares of restricted stock, as applicable, that would have vested had the named executive not undergone a termination until December 31, 2022. Any vesting of stock options or eligibility for continued vesting of restricted stock, in each case, following a termination of employment is subject to the respective named executive officer's execution and non-revocation of a general release of claims in favor of the Company and its affiliates.

Health and Welfare Plans

        Our named executive officers are eligible to participate in the employee benefit plans, including medical, dental, vision, life, disability, health and dependent care flexible spending accounts and accidental death and dismemberment benefit plans maintained by the Company or one of our subsidiaries, in each case on the same basis as all of our other employees, except that (i) our named executive officers were also entitled to reimbursement of automobile expenses of up to $1,000 per month each and (ii) Messrs. McGee and Parnes could elect to receive an annual reimbursement of $15,000 for participation in a family health insurance plan of their choosing in lieu of participation in a family health insurance plan maintained by us.

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Retirement Plan

        One of our subsidiaries sponsors a retirement plan intended to qualify for favorable tax treatment under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), containing a cash or deferred feature that is intended to meet the requirements of Section 401(k) of the Code, for the benefit of our employees, including our named executive officers. Participants may make pre-tax contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit on pre-tax contributions under the Code. Participants who are 50 years of age or older may contribute additional amounts based on the statutory limits for catch-up contributions. All employee contributions are allocated to each participant's individual account and are then invested in selected investment alternatives according to the participant's directions. Pre-tax contributions by participants to the plan and the income earned on those contributions are generally not taxable to participants until withdrawn, and, participant contributions are held in trust as required by law. No minimum benefit is provided under the plan. An employee is 100% vested in his or her pre-tax deferrals when contributed. We do not currently make any discretionary or employer matching contributions under the plan.


Outstanding Equity Awards at Fiscal Year End

        The following table sets forth outstanding equity awards held by each of our named executive officers as of December 31, 2019.

 
   
  Option Awards   Stock Awards  
Name
  Grant Date   Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
  Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
  Option
Exercise
Price
($)
  Option
Expiration
Date
  Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
  Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)
 

Luke McGee

  June 13, 2019(1)                   639,448     7,021,135 (4)

  November 21, 2019(2)                   150,000     1,647,000 (5)

  November 21, 2019(3)         1,250,000     11.50   November 21, 2029          

Joshua Parnes

  June 13, 2019(1)                   639,448     7,021,135 (4)

  November 21, 2019(2)                   150,000     1,647,000 (5)

  November 21, 2019(3)         1,250,000     11.50   November 21, 2029          

Christopher Joyce

  November 21, 2019(2)                   60,000     658,800 (5)

  November 21, 2019(3)         500,000     11.50   November 21, 2029          

(1)
Represents AdaptHealth Units and a corresponding number of shares of Class B Common Stock received in consideration of outstanding incentive units in connection with the Closing, of which (i) 50% vest in substantially equal installments on each of the first four quarterly anniversaries of the closing of the Business Combination, and (ii) 50% vest in substantially equal installments on each of the first, second, third and fourth anniversaries of May 20, 2019. For additional information, see "—Narrative to Summary Compensation Table—Long-Term Incentives—Incentive Units" above.

(2)
Represents grants of restricted stock eligible to vest 1/3rd on December 31, 2020, December 31, 2021 and December 31, 2022, subject to the achievement of performance criteria. For additional information, see "—Narrative to Summary Compensation Table—Long-Term Incentives—2019 Stock Incentive Plan" above.

(3)
Represents grants of stock options eligible to vest 1/3rd on December 31, 2020, December 31, 2021 and December 31, 2022, subject to the achievement of performance criteria. For additional information, see "—Narrative to Summary Compensation Table—Long-Term Incentives—2019 Stock Incentive Plan" above.

(4)
As of December 31, 2019, the fair market value of an AdaptHealth Unit and a corresponding share of Class B Common Stock was approximately $10.98, which is the closing price of a share of our Class A Common Stock on December 31, 2019.

(5)
As of December 31, 2019, the fair market value of a share of our Class A Common Stock was $10.98.

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Potential Payments Upon Termination or Change in Control

        The following summaries describe the potential payments and benefits that we would provide to its named executive officers in connection with a termination of employment and/or a change in control, in each case, as of December 31, 2019.

Severance Benefits

        Other than as set forth below, we did not offer or have in place for its named executive officers any formal retirement, severance or similar compensation programs providing for additional benefits or payments in connection with a termination of employment, change in job responsibility or change in control (other than our contributory defined contribution plan) as of December 31, 2019.

        Luke McGee and Joshua Parnes.    Pursuant to their employment agreements, in the event either of Messrs. McGee's or Parnes's employment is terminated by us without cause or by Messrs. McGee or Parnes for good reason, as applicable, subject to their execution and non-revocation of a general release of claims in favor of the Company and its affiliates, Messrs. McGee and Parnes, as applicable, are entitled to (x) any unpaid annual bonus in respect of any completed fiscal year that has ended prior to the date of such termination, (y) continued payment of base salary for a period of 24 months following such date of termination, and (z) an amount equal to two times their then-current target annual bonus, payable in substantially equal installments during the 24-month period following such date of termination in accordance with regular payroll practices.

        Christopher Joyce.    Pursuant to his offer letter, if Mr. Joyce's employment is terminated by us without cause, subject to his execution and non-revocation of a general release of claims in favor of the Company and its affiliates, Mr. Joyce is entitled to an amount equal to his annual base salary and his target annual incentive bonus, payable in accordance with normal payroll practices until the earlier of (x) the 12-month anniversary of such date of termination and (y) such date Mr. Joyce accepts another position as an employee, consultant or independent contractor.

        Long-Term Incentives.    See "—Narrative to Summary Compensation Table—Long-Term Incentives—2019 Stock Incentive Plan" above for the treatment of equity awards held by our named executive officers in connection with a termination of employment and/or a change in control.

Director Compensation

        The following table sets forth the material terms of the compensation received by each of our non-employee directors for the year ended December 31, 2019.

Name
  Fees Earned or
Paid in Cash(1)
($)
  Stock
Awards(2)
($)
  Total
($)
 

Richard Barasch

    12,500     106,600     119,100  

Alan Quasha

    12,500     66,625     79,125  

Terence Connors

    25,000     53,300     78,300  

Susan Weaver, M.D. 

    18,750     53,300     72,050  

Dale Wolf

    12,500     53,300     65,800  

(1)
For the year ended December 31, 2019, each of non-employee directors received a cash payment of $12,500, representing a quarter of their annual retainer fees for their service following the Closing. The amounts reported for each of Dr. Weaver and Mr. Connors include an additional cash payment of $6,250 and $12,500, respectively, representing a quarter of their annual retainer fees for their service as chairs of our compliance committee and audit committee, respectively.

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(2)
Represents the aggregate grant date fair value, in accordance with FASB ASC 718, of (i) 5,000 shares of restricted shares to each of our non-employee directors, and (ii) with respect to Messrs. Barasch and Quasha, an additional 5,000 and 1,250, respectively, shares of restricted shares for their service as our Chairman and the chair of our compensation committee, respectively, in each case, representing the equity compensation in respect of their service following the Closing and for the first quarter of the 2020 fiscal year, granted pursuant to the Plan and approved by our compensation committee on December 16, 2019 and will vest 100% on the occurrence of our 2020 annual meeting of stockholders. See note 11, Stockholders' Equity, to our consolidated financial statements for the fiscal year ended December 31, 2019 to our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the assumptions used to calculate these values.

Narrative to Director Compensation

        In general, during each fiscal year, our non-employee directors are eligible to receive (i) an annual cash retainer of $50,000 and (ii) a grant of shares of restricted stock in the amount of $100,000. Our Chairman and the chairs of certain of our board committees are eligible to receive an additional annual retainer (in cash or as a grant of restricted shares, at the non-employee director's election) in the following amounts:

    $100,000 for our Chairman;

    $50,000 for the chair of our audit committee; and

    $25,000 for the chairs of each of our compensation committee and compliance committee.

        Our Chairman also serves as the chair of our nominating and governance committee, for which he does not receive any additional retainer fees.

        For the year ended December 31, 2019, the cash retainer fees received by our non-employee directors for their service on the board and chair positions, as applicable, represents a quarter of their annual fees for their service following the Closing, and the retainer fees paid in shares of restricted stock received by our non-employee directors for their service on the board and chair positions, as applicable, represents half of their annual fees for their service following the Closing and for the first quarter of the 2020 fiscal year.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Founder Shares

        In December 2017, our Sponsor purchased an aggregate of 7,187,500 founder shares for an aggregate purchase price of $25,000. In December 2017 and January 2018, our Sponsor transferred 100,000 founder shares to Christopher Wolfe, our former Chief Financial Officer, and 30,000 founder shares to each of our independent directors. Following the expiration of the underwriters' over-allotment option on April 2, 2018, the holders of the founder shares forfeited an aggregate of 937,500 founder shares, so that the founder shares would represent 20.0% of our issued and outstanding shares after our IPO.

        Our Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A) one year after the completion of the Initial Business Combination or (B) subsequent to the Initial Business Combination, (x) if the last sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Initial Business Combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of Common Stock for cash, securities or other property.

Private Placement Warrants

        Concurrently with the closing of our IPO, our Sponsor purchased an aggregate of 4,333,333 private placement warrants at a price of $1.50 per private placement warrant, generating gross proceeds of $6.5 million.

        Each private placement warrant is exercisable for one share of Common Stock at a price of $11.50 per share. The proceeds from the private placement warrants were added to the proceeds from our IPO held in the Trust Account. The private placement warrants are non-redeemable and exercisable on a cashless basis so long as they are held by our Sponsor or its permitted transferees.

        Our Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their private placement warrants until 30 days after the completion of our initial business combination.

Transactions with Deerfield

        Deerfield, which was a significant owner of our Sponsor, purchased 2,500,000 units in our IPO at $10.00 per unit. The underwriters did not receive any underwriting discounts or commissions on the units purchased by Deerfield. In addition, we entered into the Subscription Agreement with Deerfield and RAB Ventures, an entity that is controlled by Mr. Barasch and is one of the two members of our Sponsor.

Related-Party Loans

        Our Sponsor loaned us an aggregate of $270,531 to cover expenses related to our IPO and working capital needs. The loan was non-interest bearing. We repaid this loan on February 21, 2018.

        On December 31, 2014, Mr. McGee entered into a loan agreement to borrow $1.0 million from AdaptHealth Holdings in order to acquire AdaptHealth Holdings Common Units. Monthly, interest-only payments were due at a rate of 1.9% per annum, and the principal was due in full at maturity on December 31, 2021. The loan was forgiven prior to the Closing.

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Vendor Relationships

        AdaptHealth Holdings and each of Messrs. McGee and Parnes previously owned equity in SnapWorx, LLC, a vendor of AdaptHealth Holdings that provides workflow technology services. Each of Messrs. McGee and Parnes owned less than 1% of SnapWorx, LLC. AdaptHealth Holdings' expense for the year ended December 31, 2018 for SnapWorx, LLC was $1.9 million. AdaptHealth Holdings and each of Messrs. McGee and Parnes sold their ownership in SnapWorx, LLC in February 2020.

        AdaptHealth Holdings and each of Messrs. McGee, Parnes and Gvodas own equity in Parachute Health, a vendor of AdaptHealth Holdings that provides automated order intake software. Each of Messrs. McGee, Parnes and Gvodas owns less than 1% of Parachute Health. AdaptHealth Holdings' expense for the year ended December 31, 2018 for Parachute Health was $1.6 million.

        In 2014, Ocean Home Health Supply LLC, an indirect subsidiary of AdaptHealth Holdings, executed an agreement with a company affiliated with Mr. Parnes for software and billing services. The agreement had an initial term of one year and automatically renewed from year to year. AdaptHealth Holdings' expense for the year ended December 31, 2018 under the agreement was $2.3 million. The agreement was terminated effective December 31, 2018.

BlueMountain Investment

        On February 27, 2019, AdaptHealth Holdings entered into a Note and Unit Purchase Agreement with the BM Blocker, pursuant to which, on March 26, 2019, among other things, in exchange for $120.0 million in cash, AdaptHealth Holdings issued (i) an aggregate of 17,302.79 Existing AdaptHealth Units and 19,747.43 BM Capped Common Units (as defined in the AdaptHealth Holdings LLC Agreement) to the BM Blocker and to BlueMountain Summit Opportunities Fund II (US) L.P., whereby such entities became members in AdaptHealth Holdings, and (ii) the BM Notes, in an aggregate initial principal amount of $100.0 million to the BlueMountain Entities. Interest accrues under the BM Notes (a) for the first seven years of the term of the BM Notes, at a rate of 12.0% per annum, with interest at a rate of 6.0% per annum payable in cash and interest at a rate of 6.0% per annum as PIK interest and (b) for the final three years of the term, at a rate equal to the greater of (i) 15.0% per annum or (ii) the 12-month LIBOR rate plus 12.0% per annum. Pursuant to a letter agreement entered into on July 8, 2019 between AdaptHealth Holdings, the BM Blocker and the BlueMountain Entities, at the Closing, (i) the BM Capped Common Units were canceled, (ii) an additional $43.5 million aggregate principal amount of promissory notes was issued to the BlueMountain Entities and (iii) the BM Notes were amended and restated such that, among other things: (A) the maturity date of the BM Notes were extended to the tenth anniversary of the Closing and (B) certain covenants contained in the AdaptHealth Holdings LLC Agreement restricting AdaptHealth Holdings' ability to engage in certain corporate actions were added to the BM Notes. See "—Liquidity and Capital Resources—2019 Recapitalization."

Policies and Procedures for Related Party Transactions

        Our board of directors has adopted a written related party transaction policy that sets forth the following policies and procedures for the review and approval or ratification of related party transactions.

        A "Related Party Transaction" is a transaction, arrangement or relationship in which we or any of our subsidiaries was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest. A "Related Person" means:

    any person who is, or at any time during the applicable period was, one of our officers or directors;

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    any person who is known by us to be the beneficial owner of more than 5% of our voting stock;

    any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, an officer or a beneficial owner of more than 5% of our voting stock, and any person (other than a tenant or employee) sharing the household of such director, officer or beneficial owner of more than 5% of our voting stock; and

    any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

        We have policies and procedures designed to minimize potential conflicts of interest arising from any dealings we may have with our affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time. Specifically, pursuant to its charter, the audit committee has the responsibility to review related party transactions.

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BENEFICIAL OWNERSHIP OF SECURITIES

        The following table sets forth information known to us regarding the beneficial ownership of Common Stock as of                           , 2020:

    each person who is the beneficial owner of more than 5% of the outstanding shares of our Common Stock;

    each of our named executive officers and directors; and

    all of our current officers and directors, as a group.

        Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire securities within 60 days, including options and warrants that are currently exercisable or exercisable within 60 days.

        The beneficial ownership of our Common Stock as of                           , 2020 is based on                shares of Class A Common Stock and                 shares of Class B Common Stock issued and outstanding in the aggregate as of                           , 2020.

        Unless otherwise indicated, the Company believes that all persons named in the table below have sole voting and investment power with respect to all shares of voting stock beneficially owned by them.

 
  Beneficial Ownership Table  
 
  Class A Common
Stock
  Class B Common
Stock
   
 
 
  % of
Total
Voting
Power(2)
 
Name and Address of Beneficial Owner(1)
  Number of
Shares
  %   Number of
Shares
  %  

Entities or Persons affiliated with Deerfield Management(3)

    19,674,202     44.5 %           26.1 %

Richard Barasch(4)

    853,217     2.0 %           1.2 %

Dr. Susan Weaver

    20,000     *             *  

Alan Quasha(5)

    6,250     *             *  

Terence Connors

    5,000     *             *  

Dale Wolf(6)

    5,000     *             *  

Luke McGee(7)

    744,951     2.1 %   4,626,028     14.9 %   7.6 %

Joshua Parnes

    73,125     *             *  

Gregg Holst(8)

    137,834     *     688,334     2.1 %   1.1 %

Christopher Joyce(9)

    105,994     *     266,331     *     *  

Shaw Rietkerk(10)

    56,034     *     239,793     *     *  

Everest Trust(11)

    15,105,280     35.6 %   856,044     2.7 %   21.9 %

Still Water Nevada Trust(12)

    1,079,189     2.6 %   8,338,659     26.8 %   12.9 %

The Mykonos 2019 NGCG Nevada Trust(13)

    525,586     1.3 %   5,613,851     18.1 %   8.4 %

McLarty Capital Partners SBIC, L.P.(14)

            4,526,189     14.6 %   6.2 %

Richardson M. Roberts(15)

            4,222,598     13.6 %   5.8 %

BlueMountain Capital Management, LLC(16)

    3,647,353     8.7 %   150,581     *     5.2 %

Highbridge Capital Management, LLC(17)

    1,999,998     4.8 %           2.8 %

All directors and executive officers as a group(10 individuals)

    7,829,162     18.8 %   5,820,486     18.8 %   18.6 %

*
Less than 1%.

(1)
Unless otherwise noted, the business address of each of the listed entities or individuals is c/o AdaptHealth LLC, 220 West Germantown Pike, Suite 250, Plymouth Meeting, PA 19462.

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(2)
The Class A Common Stock and Class B Common Stock vote together as a single class, except as required by law or the A&R Charter.

(3)
Comprised of (i) 17,179,888 shares of Class A Common Stock, 1,640,981 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable, and 833,333 shares of Class A Common Stock issuable upon exercise of an equal number of public warrants that are currently exercisable held by Deerfield Private Design Fund IV, L.P and (ii) 20,000 shares of Class A Common Stock held by Steven Hochberg. Deerfield Mgmt IV, L.P. is the general partner of Deerfield Private Design Fund IV, L.P. Deerfield Management Company, L.P. is the investment manager of Deerfield Private Design Fund IV, L.P. Mr. James E. Flynn is the sole member of the general partner of each of Deerfield Mgmt IV, L.P. and Deerfield Management Company, L.P. Steven Hochberg is a partner at Deerfield Management Company, L.P., and the Class A Common Stock owned by Steven Hochberg is held for the benefit, and at the direction, of Deerfield Management Company, L.P. Deerfield Mgmt IV, L.P. may be deemed to beneficially own the securities held by Deerfield Private Design Fund IV, L.P. Each of Deerfield Management Company, L.P. and Mr. James E. Flynn may be deemed to beneficially own the securities held by each of Deerfield Private Design Fund IV, L.P. and Steven Hochberg. The address of Deerfield Private Design Fund IV, L.P. and Steven Hochberg is 780 Third Avenue, 37th Floor, New York, NY 10017.

(4)
The business address of Mr. Barasch is 780 Third Avenue, New York, NY 10017.

(5)
The business address of Mr. Quasha is c/o Quadrant Management, Inc., 320 Park Avenue, New York, NY 10022.

(6)
The business address of Mr. Wolf is c/o Molina Healthcare, Inc., 200 Oceangate, Suite 100, Long Beach, California 90802.

(7)
Includes shares and warrants held directly by Fresh Pond Investment LLC ("Fresh Pond"), 2321 Capital LLC ("2321 Capital") and LBM DME Holdings LLC ("LBM"), entities controlled by Mr. McGee. Fresh Pond holds 209,766 shares of Class A Common Stock (including 78,525 shares of Class A Common Stock underlying warrants that are currently exercisable) and 1,620,815 shares of Class B Common Stock. 2321 Capital holds 249,000 shares of Class A Common Stock (including 93,212 shares of Class A Common Stock underlying warrants that are currently exercisable) and 1,923,964 shares of Class B Common Stock. LBM holds 139,935 shares of Class A Common Stock (including 52,384 shares of Class A Common Stock underlying warrants that are currently exercisable) and 1,081,249 shares of Class B Common Stock.

(8)
Includes shares and warrants held directly by Wheatfield LLC, an entity controlled by Mr. Holst. The number of shares of Class A Common Stock includes shares underlying 33,348 warrants that are currently exercisable.

(9)
Includes shares and warrants held directly by Mayaid2001 LLC, an entity controlled by Mr. Joyce. Includes shares of Class A Common Stock underlying 12,903 warrants that are currently exercisable.

(10)
Includes shares of Class A Common Stock underlying 11,617 warrants that are currently exercisable.

(11)
Includes shares and warrants held directly by Clifton Bay Offshore Investments L.P. ("Clifton Bay Investments") and Quadrant Management, Inc. ("QMI"). Clifton Bay Investments holds 15,025,135 shares of Class A Common Stock (including shares of Class A Common Stock underlying 665,628 warrants that are currently exercisable). QMI holds 80,145 shares of Class A Common Stock (including 41,473 shares of Class A Common Stock underlying warrants that are currently exercisable) and 856,044 shares of Class B Common Stock. The general partner of Clifton Bay Investments is Clifton Bay Management Ltd. ("Clifton Bay Management"), which is indirectly owned by the Trustee of the Everest Trust ("Everest"), a trust settled by Mr. Wayne Quasha. Q

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    Management Services (PTC) Ltd., as Trustee of Everest Trust, owns all of the shares of Everest Hill Group Inc., which indirectly controls Clifton Bay Management. Vicali Services (BVI) Inc., a British Virgin Islands company ("Vicali"), is the sole director of Everest Hill Group Inc. and Q Management, and Susan V. Demers, a United States citizen, and Andrea J. Douglas, a citizen of New Zealand, are the directors of Vicali and each of them has voting power over Vicali and thus power over investment and voting determinations made by Clifton Bay Management. QMI is owned by Everest Hill Group Inc. Mr. Wayne Quasha, ultimately beneficially owns all of the shares of Everest Hill Group Inc., and as such, is in a position, indirectly, to determine the investment and voting decisions made by Everest Hill Group Inc. and Clifton Bay Management. The business address of Clifton Bay Investments and Clifton Bay Management is Tropic Isle Building, P.O. Box 3331, Road Town, Tortola, British Virgin Islands VG 1110. The business address of Mr. Wayne Quasha is c/o PFD Corporate Services (BVI) Limited, Tropic Isle Building, P.O. Box 3331, Road Town, Tortola, British Virgin Islands VG 1110. The business address of Everest Hill Group Inc. is Tropic Isle Building, P.O. Box 3331, Road Town, Tortola, British Virgin Islands VG 1110.

(12)
Includes shares and warrants held directly by Blue River NJ LLC ("Blue River"), and Quad Cap LLC ("Quad Cap"). Blue River holds 733,997 shares of Class A Common Stock (including 274,768 shares of Class A Common Stock underlying warrants that are currently exercisable) and 5,671,441 shares of Class B Common Stock. Quad Cap holds 345,192 shares of Class A Common Stock (including 129,221 shares of Class A Common Stock underlying warrants that are currently exercisable) and 2,667,218 shares of Class B Common Stock. The trustee of the trust is Peak Trust Company—NV, with a principal business address of 1840 East Warm Springs Road, Suite 105, Las Vegas, Nevada 89119.

(13)
Includes shares and warrants held directly by Ocean Rock NJ LLC ("Ocean Rock") and Plains Capital LLC ("Plains Capital"). Ocean Rock holds 464,888 shares of Class A Common Stock (including 240,568 shares of Class A Common Stock underlying warrants that are currently exercisable) and 4,965,525 shares of Class B Common Stock. Plains Capital holds 60,698 shares of Class A Common Stock (including 31,410 shares of Class A Common Stock underlying warrants that are currently exercisable) and 648,326 shares of Class B Common Stock. The trustee of the trust is Peak Trust Company—NV, with a principal business address of 1840 East Warm Springs Road, Suite 105, Las Vegas, Nevada 89119.

(14)
Includes shares held directly by McLarty Capital Partners SBIC, L.P. ("McLarty Capital Partners"). The general partner of McLarty Capital Partners is McLarty Capital Partners SBIC, LLC. The business address of McLarty Capital Partners is c/o The Firmament Group, 1 Rockefeller Plaza Suite 1203, New York, NY 10020.

(15)
Includes shares held directly by Verus Equity Holding Company LLC ("Verus Equity Holding") and Verus Note Holding Company LLC ("Verus Note Holding"). Verus Equity Holding holds 1,851,469 shares of Class B Common Stock. Verus Note Holding holds 2,371,129 shares of Class B Common Stock. Richardson M. Roberts is the managing member of each of Verus Equity Holding and Verus Note Holding. The business address of Mr. Roberts is 1569 Mallory Lane Building 200, Brentwood, TN 37027.

(16)
Includes shares held directly by investment funds for which BlueMountain Capital Management, LLC is the investment manager. The business address of BlueMountain Capital Management, LLC is 280 Park Avenue, 12th Floor, New York NY 10017.

(17)
According to a Schedule 13G/A filed with the SEC on February 14, 2019, on behalf of Highbridge Capital Management, LLC and 1992 MSF International Ltd. As the trading manager of 1992 MSF International Ltd., Highbridge Capital Management, LLC may be deemed to beneficially own all of the shares, which are held directly by 1992 MSF International Ltd. The business address of this stockholder is 40 West 57th Street, 32nd Floor, New York, New York 10019.

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SELLING SECURITYHOLDERS

        Up to 75,053,512 shares of our Class A Common Stock may be offered for resale by the selling securityholders under this prospectus, including (i) 6,250,000 shares issued in a private placement prior to our initial public offering, (ii) 2,500,000 shares acquired by Deerfield Management Company, L.P. in connection with our initial public offering, (iii) 17,356,380 shares issued as partial consideration in connection with the Business Combination, (iv) 31,063,799 shares that are be issuable upon the exchange of an equal number of AdaptHealth Units, together with a corresponding number of shares of Class B Common Stock, (v) 1,050,000 shares issued upon exchange of an equal number of AdaptHealth Units, together with a corresponding number of shares of Class B Common Stock, (vi) 12,500,000 shares issued in private placements in connection with the Business Combination, and (vii) 4,333,333 shares issuable upon the exercise of private placement warrants. Additionally, up to 4,333,333 private placement warrants may be offered for resale by selling securityholders under this prospectus. A portion of the securities being registered by the registration statement of which this prospectus forms a part are being registered pursuant to registration rights granted to certain selling securityholders in connection with the Business Combination. We are registering the securities as required under the Registration Rights Agreement.

        To the extent permitted by law, the selling securityholders listed below may resell shares of our Class A Common Stock and private placement warrants pursuant to this prospectus. We have registered the sale of the shares of our Class A Common Stock and the private placement warrants to permit the selling securityholders and their respective permitted transferees or other successors-in-interest that receive their shares of Class A Common Stock or private placement warrants from the selling securityholders after the date of this prospectus to resell their shares of Class A Common Stock and private placement warrants.

        The following table sets forth the number of shares of Class A Common Stock and private placement warrants being offered by the selling securityholders, including shares of our Class A Common Stock issuable upon the exercise of the private placement warrants and assuming the exchange of 31,063,799 AdaptHealth Units together with the same number of shares of Class B Common Stock for shares of Class A Common Stock. The selling securityholders are not making any representation that any shares of Class A Common Stock or private placement warrants covered by this prospectus will be offered for sale. The selling securityholders reserve the right to accept or reject, in whole or in part, any proposed sale of shares of Class A Common Stock or private placement warrants. For purposes of the table below, we assume that all of the shares of our Class A Common Stock and private placement warrants covered by this prospectus will be sold.

        Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to shares of Class A Common Stock and the right to acquire such voting or investment power within 60 days through the exercise of any option, warrant or other right. Unless otherwise indicated, the Company believes that all persons named in the table below have sole voting and investment power with respect to all shares of voting stock beneficially owned by them. Except as described in the footnotes to the following table, none of the persons named in the table has held any position or office or had any other material relationship with us or our affiliates during the three years prior to the date of this prospectus. The inclusion of any shares of Class A Common Stock in this table does not constitute an admission of beneficial ownership for the person named below.

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        As of                       , 2020, assuming the exchange of 31,063,799 AdaptHealth Units together with the same number of shares of our Class B Common Stock for shares of our Class A Common Stock, there were                shares of our Class A Common Stock issued and outstanding.

Selling Securityholder
  Shares of Class A
Common
Stock
Beneficially
Owned
Prior to
Offering
  Private
Placement
Warrants
Beneficially
Owned Prior to
Offering
  Shares of
Class A
Common Stock
Offered
  Private
Placement
Warrants
Offered
  Shares of
Class A
Common Stock
Beneficially
Owned After
the Offered
Shares are Sold
  %   Private
Placement
Warrants
Beneficially
Owned After the
Offered Private
Placement
Warrants
are Sold
  %  

Entities or Persons affiliated with Deerfield Management(1)

    19,674,202     1,640,981     19,674,202     1,640,981                  

2014 Barasch Family Trust #1(2)

    510,010         510,010                      

Richard Barasch

    858,217 (3)   527,314     853,217     527,314                  

Robert Spass

    177,778 (4)   74,654     177,778     74,654                  

Bradley Cooper

    115,008 (5)   48,299     115,008     48,299                  

Roland Bernardon

    21,099 (6)   8,859     21,099     8,859                  

Robert Goldstein

    125,614 (7)   52,785     125,614     52,785                  

J&R Family Investments

    94,244 (8)   39,571     94,244     39,571                  

Para Partners

    125,716 (9)   52,785     125,716     52,785                  

Gary Davis 1995 Trust for Children

    125,716 (10)   52,785     125,716     52,785                  

Tony Wolk

    31,473 (11)   13,215     31,473     13,215                  

Dr. Mohit Kaushal

    20,000         20,000                      

Dr. Susan Weaver(12)

    20,000         20,000                      

Dr. Gregory Sorenson(13)

    20,000         20,000                      

Christopher Wolfe

    375,089 (14)   132,085     375,089     132,085                  

Luke McGee(15)

    5,520,979 (16)   224,121     5,370,979     224,121                  

Joshua Parnes

    223,125 (17)       73,125                      

Shaw Rietkerk

    295,827 (18)   11,617     270,827     11,617                  

Christopher Murray(19)

    14,000         14,000                      

Clifton Bay Offshore Investments L.P. 

    15,025,135 (20)   665,628     15,025,135     665,628                  

BlueMountain Foinaven Master Fund L.P. 

    688,613         688,613                      

BMSB L.P. 

    2,115,972         2,115,972                      

BlueMountain Fursan Fund L.P. 

    842,768         842,768                      

Ocean Rock NJ LLC

    5,430,413 (21)   240,568     5,430,413     240,568                  

Plains Capital LLC

    709,024 (22)   31,410     709,024     31,410                  

Blue River NJ LLC

    6,405,438 (23)   274,768     6,405,438     274,768                  

Quad Capital, LLC

    3,012,410 (24)   129,221     3,012,410     129,221                  

Jedi Enterprises LLC

    1,020,541         1,020,541                      

Wheatfield LLC

    826,168 (25)   33,348     826,168     33,348                  

Quadrant Management, Inc. 

    936,189 (26)   41,473     936,189     41,473                  

McLarty Capital Partners SBIC L.P. 

    4,526,189         4,526,189                      

Mayaid2001 LLC

    325,228 (27)   12,903     325,228     12,903                  

CFCP LLC

    400,930 (28)   17,198     400,930     17,198                  

BlueMountain Summit Opportunities Fund II (US) L.P. 

    150,581         150,581                      

Verus Equity Holding Company LLC

    1,851,469         1,851,469                      

Verus Note Holding Company LLC

    2,371,129         2,371,129                      

Anthony Gonzalez

    180,551 (29)   7,745     180,551     7,745                    

Kent Lake Partners L.P. 

    550,000         550,000                        

Destinations Multi-Strategy Alternatives Fund, a series of Brinker Capital Destinations Trust

    404,000         404,000                        

Driehaus Event Driven Fund, a series of the Driehaus Mutual Funds

    96,000         96,000                        

(1)
Comprised of (i) 17,179,888 shares of Class A Common Stock, 1,640,981 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable, and 833,333 shares of Class A Common Stock issuable upon exercise of an equal number of public warrants that are currently exercisable held by Deerfield Private Design Fund IV, L.P and (ii) 20,000 shares of Class A Common Stock held by Steven Hochberg. Deerfield Mgmt IV, L.P. is the general partner of Deerfield Private Design Fund IV, L.P. Deerfield Management Company, L.P. is the investment manager of Deerfield Private Design Fund IV, L.P. Mr. James E. Flynn is the sole member of the general partner of each of Deerfield Mgmt IV, L.P. and Deerfield Management Company, L.P. Steven Hochberg is a partner at Deerfield Management Company, L.P., and the Class A Common Stock owned by Steven Hochberg is held for the benefit, and at the direction, of Deerfield Management Company, L.P. Deerfield Mgmt IV, L.P. may be deemed to beneficially own the securities held by Deerfield Private Design Fund IV, L.P. Each of Deerfield Management Company, L.P. and Mr. James E. Flynn may be deemed to beneficially own the securities held by each of Deerfield Private Design Fund IV, L.P. and

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    Steven Hochberg. The address of Deerfield Private Design Fund IV, L.P. and Steven Hochberg is 780 Third Avenue, 37th Floor, New York, NY 10017.

(2)
Richard Barasch is not the trustee, but is a beneficiary of, the 2014 Barasch Family Trust #1.

(3)
Includes 527,314 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable. Includes 5,000 restricted shares of Class A Common Stock, which vest on November 7, 2020. Mr. Barasch is the Chairman of our board of directors.

(4)
Includes 74,654 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(5)
Includes 48,299 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(6)
Includes 8,859 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(7)
Includes 52,785 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(8)
Includes 39,571 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(9)
Includes 52,785 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(10)
Includes 52,785 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(11)
Includes 13,215 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(12)
Dr. Weaver is a member of our board of directors.

(13)
Dr. Sorenson is a stockholder in, and Executive Chairman on the board of directors of, Deerfield Imaging Holdings, Inc., an affiliate of Deerfield Management.

(14)
Includes 132,085 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(15)
Includes shares of Class A Common Stock and private placement warrants held directly by Fresh Pond Investment LLC, 2321 Capital LLC and LBM DME Holdings LLC.

(16)
Includes 224,121 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable. Includes 150,000 restricted shares of Class A Common Stock, which will be eligible to vest on December 31 on each of 2020, 2021 and 2022 (each, a "Vesting Date"). The number of shares eligible to vest on each Vesting Date (the "Vesting Eligible Restricted Shares") that will actually vest on each Vesting Date will be based on the compound annual growth rate of the price per share of the Company's Class A Common Stock from the grant date through the applicable Vesting Date ("CAGR") (where the stock price on each Vesting Date will be determined based on the dollar volume-weighted average price over the previous 20 trading days) as follows (the "Restricted Stock Vesting Condition"): (i) If CAGR is negative, all Vesting Eligible Restricted Shares will be forfeited for no consideration, (ii) if CAGR is 0%, one-third of the Vesting Eligible Restricted Shares will vest and the remainder will be forfeited for no consideration, (iii) if CAGR is 15%, two-thirds of the Vesting Eligible Restricted Shares will vest and the remainder will be forfeited for no consideration, (iv) if CAGR is 30%, all of the Vesting Eligible Restricted Shares will vest and (v) if the CAGR is between any of the foregoing thresholds, the number of Vesting Eligible Restricted Shares that will vest and that will be forfeited will be determined by straight-line interpolation.

(17)
Includes 150,000 restricted shares of Class A Common Stock, which will be eligible to vest on December 31 on each of 2020, 2021 and 2022 (each, a "Vesting Date"). The number of shares eligible to vest on each Vesting Date (the "Vesting Eligible Restricted Shares") that will actually vest on each Vesting Date will be based on the compound annual growth rate of the price per share of the Company's Class A Common Stock from the grant date through the applicable Vesting Date ("CAGR") (where the stock price on each Vesting Date will be determined based on the dollar volume-weighted average price over the previous 20 trading days) as follows (the "Restricted Stock Vesting Condition"): (i) If CAGR is negative, all Vesting Eligible Restricted Shares will be forfeited for no consideration, (ii) if CAGR is 0%, one-third of the Vesting Eligible Restricted Shares will vest and the remainder will be forfeited for no consideration, (iii) if CAGR is 15%, two-thirds of the Vesting Eligible Restricted Shares will vest and the remainder will be forfeited for no consideration, (iv) if CAGR is 30%, all of the Vesting Eligible Restricted Shares will vest and (v) if the CAGR is between any of the foregoing thresholds, the number of Vesting Eligible Restricted Shares that will vest and that will be forfeited will be determined by straight-line interpolation.

(18)
Includes 11,617 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable. Includes 25,000 restricted shares of Class A Common Stock, which will be eligible to vest on December 31 on each of 2020, 2021 and 2022 (each, a "Vesting Date"). The number of shares eligible to vest on each Vesting Date (the "Vesting Eligible Restricted Shares") that will actually vest on each Vesting Date will be based on the compound annual growth rate of the price per share of the Company's Class A Common Stock from the grant date through the applicable Vesting Date ("CAGR") (where the stock price on each Vesting Date will be determined based on the dollar volume-weighted average price over the previous 20 trading days) as follows (the "Restricted Stock Vesting Condition"): (i) If CAGR is negative, all Vesting Eligible Restricted Shares will be forfeited for no consideration, (ii) if CAGR is 0%, one-third of the Vesting Eligible Restricted Shares will vest and the remainder will be forfeited for no consideration, (iii) if CAGR is 15%, two-thirds of the Vesting Eligible Restricted Shares will vest and the remainder

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    will be forfeited for no consideration, (iv) if CAGR is 30%, all of the Vesting Eligible Restricted Shares will vest and (v) if the CAGR is between any of the foregoing thresholds, the number of Vesting Eligible Restricted Shares that will vest and that will be forfeited will be determined by straight-line interpolation.

(19)
Mr. Murray is an employee of AdaptHealth and/or its affiliates.

(20)
Includes 665,628 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(21)
Includes 240,568 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(22)
Includes 31,410 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(23)
Includes 274,768 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(24)
Includes 129,221 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(25)
Includes 33,348 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable. Gregg Holst is the sole member of Wheatfield LLC and may be deemed to have beneficial ownership of the shares of Class A Common Stock owned thereby. Mr. Holst currently serves as our Chief Financial Officer.

(26)
Includes 41,473 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable.

(27)
Includes 12,903 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable. Christopher Joyce is the sole member of Mayaid2001 LLC and may be deemed to have beneficial ownership of the shares of Class A Common Stock owned thereby. Mr. Joyce currently serves as our General Counsel.

(28)
Includes 17,198 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable. Nick Gargano is the sole member of CFCP LLC and may be deemed to have beneficial ownership of the shares of Class A Common Stock owned thereby. Mr. Gargano is an employee of AdaptHealth and/or its affiliates.

(29)
Includes 7,745 shares of Class A Common Stock issuable upon exercise of an equal number of private placement warrants that are currently exercisable. Mr. Gonzalez is an employee of AdaptHealth and/or its affiliates.

        Please see "Certain Relationships and Related Transactions" appearing elsewhere in this prospectus for information regarding material relationships with our selling stockholders within the past three years.

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PLAN OF DISTRIBUTION

Issuance of Class A Common Stock Underlying Warrants

        This prospectus covers our issuance of the shares of Class A Common Stock underlying the warrants upon the exercise of the warrants by the holders thereof. The warrants may be exercised upon the surrender of the certificate evidencing such warrant on or before the expiration date at the offices of the warrant agent, Continental Stock Transfer & Trust Company, in the borough of Manhattan, City and State of New York, with the subscription form, as set forth in the warrants, duly executed, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for the number of warrants being exercised. Additionally, the private placement warrants may be exercised on a cashless basis provided that the private placement warrants are held by the initial holders or a permitted transferee, and the public warrants will be required to be exercised on a cashless basis in the event of a redemption of the public warrants pursuant to the warrant agreement governing the warrants in which our board of directors has elected to require all holders of the public warrants who exercise their public warrants to do so on a cashless basis. In such event, holders would pay the exercise price by surrendering his, her or its warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the warrants to be exercised, multiplied by the difference between the exercise price of the warrants per share and the "fair market value" (defined below) by (y) the fair market value. The "fair market value" means the average reported last sale price of our Class A Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise or redemption is sent to the warrant agent.

        Warrants are exercisable only for a whole number of shares of Class A Common Stock. No fractional shares will be issued upon the exercise of the warrants. If, upon the exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon the exercise, round down to the nearest whole number the number of shares of Class A Common Stock to be issued to such holder.

Sale of Class A Common Stock and Private Placement Warrants by Selling Securityholders

        The selling securityholders and any of their pledgees, donees, assignees, transferees and successors-in-interest may, from time to time, sell, separately or together, some or all of the shares of our Class A Common Stock or private placement warrants covered by this prospectus on Nasdaq or any other stock exchange, market or trading facility on which the shares or private placement warrants are traded or in private transactions. These sales may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. To the extent any of the selling securityholders gift, pledge or otherwise transfer the securities offered hereby, such transferees may offer and sell the securities from time to time under this prospectus, provided that, if required under the Securities Act, and the rules and regulations promulgated thereunder, this prospectus has been amended under Rule 424(b)(3) or other applicable provision of the Securities Act, to include the name of such transferee in the list of selling securityholders under this prospectus. Subject to compliance with applicable law, the selling securityholders may use any one or more of the following methods when selling shares of Class A Common Stock or private placement warrants:

    ordinary brokerage transactions and transactions in which the broker-dealer solicits the purchaser;

    block trades in which the broker-dealer will attempt to sell the shares of Class A Common Stock as agent but may position and resell a portion of the block as principal to facilitate the transaction;

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    purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

    an exchange distribution in accordance with the rules of the applicable exchange;

    privately negotiated transactions;

    "at the market" or through market makers or into an existing market for the shares of Class A Common Stock or private placement warrants;

    through one or more underwritten offerings on a firm commitment or best efforts basis;

    settlement of short sales entered into after the date of this prospectus;

    agreements with broker-dealers to sell a specified number of such shares of Class A Common Stock or private placement warrants at a stipulated price per share or warrant;

    through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

    through the distribution of Class A Common Stock or private placement warrants by any selling securityholder to its partners, members or securityholders;

    a combination of any such methods of sale; or

    any other method permitted pursuant to applicable law.

        To our knowledge, the selling securityholders have not entered into any agreements, understandings or arrangements with any underwriters or broker/dealers regarding the sale of the shares of Class A Common Stock or private placement warrants covered by this prospectus. At any time a particular offer of the shares of Class A Common Stock or private placement warrants covered by this prospectus is made, a revised prospectus or prospectus supplement, if required, will set forth the aggregate amount of shares of Class A Common Stock or private placement warrants covered by this prospectus being offered and the terms of the offering, including the name or names of any underwriters, dealers, brokers or agents. In addition, to the extent required, any discounts, commissions, concessions and other items constituting underwriters' or agents' compensation, as well as any discounts, commissions or concessions allowed or reallowed or paid to dealers, will be set forth in such revised prospectus or prospectus supplement. Any such required prospectus supplement, and, if necessary, a post-effective amendment to the registration statement of which this prospectus is a part, will be filed with the SEC to reflect the disclosure of additional information with respect to the distribution of the shares of Class A Common Stock or private placement warrants covered by this prospectus.

        To the extent required, any applicable prospectus supplement will set forth whether or not underwriters may over-allot or effect transactions that stabilize, maintain or otherwise affect the market price of the Class A Common Stock at levels above those that might otherwise prevail in the open market, including, for example, by entering stabilizing bids, effecting syndicate covering transactions or imposing penalty bids.

        The selling securityholders may also sell shares of our Class A Common Stock or private placement warrants under Rule 144 under the Securities Act, if available, or in other transactions exempt from registration, rather than under this prospectus. The selling securityholders have the sole and absolute discretion not to accept any purchase offer or make any sale of securities if they deem the purchase price to be unsatisfactory at any particular time.

        Broker-dealers engaged by the selling securityholders may arrange for other broker-dealers to participate in sales. If the selling securityholders effect such transactions by selling securities to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling securityholders

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(and/or, if any broker-dealer acts as agent for the purchaser of shares of Class A Common Stock or private placement warrants, from the purchaser) in amounts to be negotiated.

        In connection with the sale of the Class A Common Stock or private placement warrants or interests therein, the selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Class A Common Stock or private placement warrants in the course of hedging the positions they assume. The selling securityholders may also sell shares of the Class A Common Stock or private placement warrants short after the effective date of the registration statement of which this prospectus is a part and deliver these securities to close out their short positions, or loan or pledge the Class A Common Stock or private placement warrants to broker-dealers that in turn may sell these securities. The selling securityholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares or private placement warrants offered by this prospectus, which shares or private placement warrants such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

        The selling securityholders may from time to time pledge or grant a security interest in some or all of their shares of Class A Common Stock or private placement warrants to their broker-dealers under the margin provisions of customer agreements or to other parties to secure other obligations. If a selling securityholder defaults on a margin loan or other secured obligation, the broker-dealer or secured party may, from time to time, offer and sell the shares of Class A Common Stock pledged or secured thereby pursuant to this prospectus. The selling securityholders and any other persons participating in the sale or distribution of the shares of Class A Common Stock or private placement warrants will be subject to applicable provisions of the Securities Act and the Exchange Act, and the rules and regulations thereunder, including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares of Class A Common Stock or private placement warrants by, the selling securityholders or any other person, which limitations may affect the marketability of the shares of Class A Common Stock or private placement warrants.

        The selling securityholders also may transfer the shares of our Class A Common Stock or private placement warrants in other circumstances, in which case the transferees, pledgees or other successors-in-interest will be the selling beneficial owners for purposes of this prospectus.

        A selling securityholder that is an entity may elect to make a pro rata in-kind distribution of shares of Class A Common Stock or warrants to its members, partners or shareholders pursuant to the registration statement of which this prospectus is a part by delivering a prospectus. To the extent that such members, partners or shareholders are not affiliates of ours, such members, partners or shareholders would thereby receive freely tradeable shares of Class A Common Stock pursuant to the distribution through a registration statement.

        The selling securityholders and any broker-dealers or agents that are involved in selling the shares of Class A Common Stock or private placement warrants may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of Class A Common Stock or private placement warrants purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. To our knowledge, no selling securityholder has entered into any agreement or understanding, directly or indirectly, with any person to distribute the shares of our Class A Common Stock.

        We are required to pay all fees and expenses incident to the registration of shares of our Class A Common Stock and private placement warrants. We have agreed to indemnify certain selling securityholders against certain losses, claims, damages and liabilities, including liabilities under the

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Securities Act. We and the selling securityholders may agree to indemnify underwriters, broker-dealers or agents against certain liabilities, including liabilities under the Securities Act, and may also agree to contribute to payments which the underwriters, broker- dealers or agents may be required to make.

        There can be no assurance that any selling securityholder will sell any or all of the securities registered pursuant to the registration statement of which this prospectus is a part.

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DESCRIPTION OF SECURITIES

        The following summary of the material terms of our securities is not intended to be a complete summary of the rights and preferences of such securities. We urge you to read our second amended and restated certificate of incorporation in its entirety for a complete description of the rights and preferences of our securities.

Authorized and Outstanding Stock

        Our second amended and restated certificate of incorporation authorizes the issuance of 250,000,000 shares of Common Stock, consisting of 210,000,000 shares of Class A Common Stock and 35,000,000 shares of Class B Common Stock, and 5,000,000 shares of undesignated preferred stock, $0.0001 par value per share. The outstanding shares of our Common Stock are duly authorized, validly issued, fully paid and non-assessable. As of                       , 2020, there were                shares of Class A Common Stock and                shares of Class B Common Stock issued and outstanding.

Common Stock

        Our second amended and restated certificate of incorporation provides for two classes of Common Stock, Class A Common Stock and Class B Common Stock. In connection with the Business Combination and pursuant to the Merger Agreement, the Non-Blocker AdaptHealth Members were issued AdaptHealth Units and an equal number of shares of Class B Common Stock, and the Non-Blocker AdaptHealth Members collectively own all of our outstanding shares of Class B Common Stock. We expect to continue to maintain a one-to-one ratio between the number of outstanding shares of Class B Common Stock and the number of AdaptHealth Units held by persons other than AdaptHealth, so holders of AdaptHealth Units (other than AdaptHealth) will continue to have a voting interest in AdaptHealth that is proportionate to their economic interest in AdaptHealth Holdings.

        Shares of Class B Common Stock (i) may be issued only in connection with the issuance by AdaptHealth Holdings of a corresponding number of AdaptHealth Units and only to the person or entity to whom such AdaptHealth Units are issued and (ii) may be registered only in the name of (a) a person or entity to whom shares of Class B Common Stock are issued as described above, (b) its successors and assigns, (c) their respective permitted transferees or (d) any subsequent successors, assigns and permitted transferees. A holder of shares of Class B Common Stock may transfer shares of Class B Common Stock to any transferee (other than AdaptHealth) only if, and only to the extent permitted by the A&R AdaptHealth Holdings LLC Agreement, such holder also simultaneously transfers an equal number of such holder's AdaptHealth Units to the same transferee in compliance with the A&R AdaptHealth Holdings LLC Agreement.

Voting Power

        Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of Common Stock possess all voting power for the election of our directors and all other matters requiring stockholder action. Holders of Common Stock are entitled to one vote per share on matters to be voted on by stockholders. Holders of shares of our Class B Common Stock vote together as a single class with holders of shares of our Class A Common Stock on all matters properly submitted to a vote of the stockholders.

Dividends

        Holders of Class A Common Stock are entitled to receive such dividends, if any, as may be declared from time to time by our board of directors in its discretion out of funds legally available therefor. In no event will any stock dividends or stock splits or combinations of stock be declared or made on Class A Common Stock unless the shares of Class A Common Stock at the time outstanding

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are treated equally and identically. Holders of shares of Class B Common Stock are not entitled to receive any dividends on account of such shares.

Liquidation, Dissolution and Winding Up

        In the event of our voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, the holders of the Class A Common Stock will be entitled to receive an equal amount per share of all of our assets of whatever kind available for distribution to stockholders, after the rights of the holders of the preferred stock have been satisfied. Holders of shares of Class B Common Stock will not be entitled to receive any of our assets on account of such shares.

Preemptive or Other Rights

        Our stockholders have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to our Common Stock.

Election of Directors

        Our board of directors is divided into three classes, each of which generally serves for a term of three years with only one class of directors being elected in each year. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors.

Founder Shares

        The founder shares are identical to the shares of Common Stock sold in our IPO, and holders of founder shares have the same stockholder rights as public stockholders, except that the founder shares are subject to certain transfer restrictions. Pursuant to a letter agreement, with certain limited exceptions, the founder shares are not transferable, assignable or salable (except to our officers and directors and other persons or entities affiliated with our Sponsor, which include the selling securityholders, each of whom will be subject to the same transfer restrictions) until the earlier of one year after the completion of the Business Combination or earlier if, (x) subsequent to the Business Combination, the last sale price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, or (y) the date following the completion of the Business Combination on which we complete a liquidation, merger, stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of Common Stock for cash, securities or other property.

Preferred Stock

        Our second amended and restated certificate of incorporation provides that shares of preferred stock may be issued from time to time in one or more series. Our board of directors is authorized to fix the voting rights, if any, designations, powers and preferences, the relative, participating, optional or other special rights, and any qualifications, limitations and restrictions thereof, applicable to the shares of each series of preferred stock. The board of directors is able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the Common Stock and could have anti-takeover effects. The ability of our board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. We have no preferred stock outstanding at the date hereof.

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Redeemable Warrants

Public Stockholders' Warrants

        Each whole warrant entitles the registered holder to purchase one share of our Class A Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion of the Business Combination. This means that only a whole warrant may be exercised at any given time by a warrant holder. For example, if a warrant holder holds one-third of one warrant, such warrant will not be exercisable. The warrants will expire five years after the date on which they first became exercisable, at 5:00 p.m., New York time, or earlier upon redemption or liquidation.

        We will not be obligated to deliver any shares of Class A Common Stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A Common Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of Class A Common Stock upon exercise of a warrant unless Class A Common Stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A Common Stock underlying such unit.

        We have agreed that we will use our best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A Common Stock issuable upon exercise of the warrants. We will use our best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if our Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a "covered security" under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a "cashless basis" in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

        Redemption of warrants for cash.    Once the warrants become exercisable, we may redeem the warrants:

    in whole and not in part;

    at a price of $0.01 per warrant;

    upon not less than 30 days' prior written notice of redemption (the "30-day redemption period") to each warrant holder; and

    if, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before we send the notice of redemption to the warrant holders.

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        If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.

        We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the Class A Common Stock may fall below the $18.00 redemption trigger price as well as the $11.50 warrant exercise price after the redemption notice is issued.

        Redemption of warrants for Class A Common Stock.    Ninety days after the warrants become exercisable, we may redeem the warrants:

    in whole and not in part;

    at a price equal to a number of shares of Class A Common Stock to be determined by reference to the table set forth under "Description of Securities—Redeemable Warrants—Public Stockholders' Warrants" based on the redemption date and the "fair market value" of our Class A Common Stock except as otherwise described in "Description of Securities—Redeemable Warrants—Public Stockholders' Warrants";

    upon a minimum of 30 days' prior written notice of redemption, which we refer to as the 30-day redemption period; and

    if, and only if, the last sale price of our Class A Common Stock equals or exceeds $10.00 per share (as adjusted for share splits, share dividends, reorganizations, recapit