Unless the context requires otherwise, references in this report to "Option Care Health ," the "Company," "we," "us" and "our" refer toOption Care Health, Inc. and its consolidated subsidiaries. The following discussion and analysis of the financial condition and results of operations ofOption Care Health, Inc. ("Option Care Health ", or the "Company") should be read in conjunction with the audited consolidated financial statements and related notes, as presented in the Annual Report on Form 10-K filed with theSecurities and Exchange Commission onMarch 5, 2020 , as well as the Company's unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this report. Forward-Looking Statements This Quarterly Report on Form 10-Q (this "Quarterly Report") contains statements not purely historical and which may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act'), including statements regarding our expectations, beliefs, future plans and strategies, anticipated events or trends concerning matters that are not historical facts or that necessarily depend upon future events. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "project," "predict," "potential," and similar expressions. Such forward-looking statements include, but are not limited to, the effect of the novel coronavirus ("COVID-19") on our business, financial condition and results of operations. This Quarterly Report contains, among others, forward-looking statements based upon current expectations that involve numerous risks and uncertainties, including those described in Item 1A "Risk Factors". Investors are cautioned that any such forward-looking statements are not guarantees of future performance, involve risks and uncertainties and that actual results may differ materially from those possible results discussed in the forward-looking statements as a result of various factors. Do not place undue reliance on such forward-looking statements as they speak only as of the date they are made. Except as required by law, the Company assumes no obligation to publicly update or revise any forward-looking statement even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. Business OverviewOption Care Health , and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 155 locations aroundthe United States . The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients' homes or other nonhospital settings. Our services are provided in coordination with, and under the direction of, the patient's physician. Our multidisciplinary team of clinicians, including pharmacists, nurses, dietitians and respiratory therapists, work with the physician to develop a plan of care suited to each patient's specific needs. We provide home infusion services consisting of anti-infectives, nutrition support, bleeding disorder therapies, immunoglobulin therapy, and other therapies for chronic and acute conditions.HC Group Holdings II, Inc. ("HC II") was incorporated under the laws of theState of Delaware onJanuary 7, 2015 , with its sole shareholder beingHC Group Holdings I, LLC . ("HC I"). OnApril 7, 2015 , HC I and HC II collectively acquiredWalgreens Infusion Services, Inc. and its subsidiaries fromWalgreen Co. , and the business was rebranded asOption Care, Inc. ("Option Care"). OnMarch 14, 2019 , HC I and HC II entered into a definitive agreement (the "Merger Agreement") to merge with and into a wholly-owned subsidiary ofBioScrip, Inc. ("BioScrip") (the "Merger"), a national provider of infusion and home care management solutions, which was completed onAugust 6, 2019 (the "Merger Date"). The Merger was accounted for as a reverse merger under the acquisition method of accounting for business combinations with Option Care being considered the accounting acquirer andBioScrip being considered the legal acquirer. Following the close of the transaction,BioScrip was rebranded asOption Care Health, Inc. and the combined company's stock, par value$0.0001 , was listed on the Nasdaq Global Select Market as ofMarch 31, 2020 . See Note 3, Business Acquisitions, of the unaudited condensed consolidated financial statements for further discussion on the Merger. Update on the Impact of the COVID-19 Pandemic During the first quarter of 2020, the Company did not experience a material financial impact from the COVID-19 pandemic (the "pandemic") on the financial results as reported. However, as the primary operations of the Company focus on providing infusion therapy services and based on the recent impact of the pandemic across the healthcare ecosystem, the Company has experienced a related impact across a number of facets beginning inMarch 2020 . 20
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The Company relies upon patient referrals from multiple sources, including but not limited to patients discharged from acute care settings (e.g., hospitals) and patients requiring treatment for chronic conditions from specialty physicians. With the onset of the pandemic, the Company has experienced variability in the referral trends of patients from acute care settings as hospitals have reduced their non-pandemic related census. Similarly, the Company has also experienced variability in the referral trends of patients with chronic conditions, as patient visits to specialty physician practices has been reduced under general guidelines for non-essential social interactions. The Company's operations involve the compounding of therapeutic drugs in sterile cleanroom facilities by pharmacists and pharmacy technicians, the transportation of such drugs to the patients' home or alternate infusion treatment site and the administration of the drug by a licensed healthcare professional. Due to personal disruption experienced by employees of the Company, the ability to efficiently resource the compounding, delivery and administration of therapies has been negatively impacted given staffing challenges and availability. This has resulted in higher wage costs in the form of overtime expenditures, migration of clinical resources to additional markets and utilization of contract labor resources. In addition to direct labor investments, the Company has experienced similar impacts on the indirect support functions, as employees have generally migrated to a virtual, remote establishment. In delivering infusion therapy, the Company's clinical personnel regularly utilize personal protection equipment ("PPE") and ancillary medical supplies as dictated by the Company's clinical protocols. Based on the increased demand for PPE over the past several weeks, the Company has experienced challenges in procuring necessary PPE to ensure the safety of its personnel and the patients served in the form of higher costs for PPE as well as increased effort and resources dedicated to procurement activities. To date, the Company has maintained adequate levels of PPE to support its operations, albeit at higher procurement costs. The Company continues to evaluate the impact of the pandemic on the merger-related integration activities currently under way and remains confident in the ability to eventually generate at least$60.0 million in net cost synergies. Further, to date, the Company experienced no material deceleration in cash collections and collaboration with payers continues to be productive. However, given the dynamic situation, the Company is not in a position to assess the potential impact of the pandemic on the timing associated with realizing the cost synergies. The Company anticipates that the pandemic will affect its operations for an extended period; however, at this time cannot confidently forecast the duration nor the ultimate financial impact on its operations. See Item 1A. "Risk Factors" under the caption "The COVID-19 pandemic could adversely impact our business, results of operations, cash flows and financial position" for further discussion on risks. Merger Integration Execution The Merger of Option Care andBioScrip intoOption Care Health has created an opportunity to realize cost synergies while continuing to drive organic growth in chronic and acute therapies through our expanded national platform.Option Care Health is well-positioned to leverage the investments in corporate infrastructure and drive economies of scale as a result of the Merger. The forecasted synergy categories are as follows: • Selling, General and Administrative Expenses Savings. Merged corporate infrastructure has created significant opportunity
for
streamlining corporate and administrative costs, including
headcount
and functional spend. • Network Optimization. The previous investments in technology and compounding pharmacies, along with the overlapping geographic footprint, allows for facility rationalization and the
optimization
of assets. • Procurement Savings. The enhanced scale of the Company generates supply chain efficiencies through increased purchasing
leverage. The
Company's platform is also positioned to be the partner of
choice
for pharmaceutical manufacturers seeking innovative
distribution
channels and patient support models to access the market. We continue to make progress on the achievement synergies, which will enable the delivery of high-quality, cost-effective solutions to providers across the country and help facilitate the introduction of new therapies to the marketplace while improving the profitability profile of the Company. Since the Merger, we have worked to align our field and sales teams. We have also made strides at combining our procurement process and contracts, all while continuing to focus on serving our patients. Patient health is personal to us, which is why, throughout the integration process, we strive to improve and set the standard for quality care that is matched by best-in-class service. After completion of the Merger, we have additional resources to invest in our people, process and systems, providing us improved strength and scale to drive better patient outcomes. 21
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Acquisitions
Option Care merged withBioScrip onAugust 6, 2019 .BioScrip was a national provider of infusion and home care management, who partnered with physicians, hospital systems, payers, pharmaceutical manufacturers and skilled nursing facilities to provide patients access to post-acute care services. The fair value of purchase consideration transferred, net of cash acquired, on the closing date of$1,087.2 million includes the value of the number of shares of the combined company to be owned byBioScrip shareholders at closing of the Merger, the value of common shares to be issued to certain warrant and preferred shareholders in conjunction with the Merger, the value of stock-based instruments that were vested or earned as of the Merger, and cash payments made in conjunction with the Merger. For additional information on this transaction, see Note 3, Business Acquisitions, of the unaudited condensed consolidated financial statements. Composition of Results of Operations The following results of operations include the accounts ofOption Care Health and our subsidiaries for the three months endedMarch 31, 2020 and 2019. TheBioScrip results have been included since theAugust 6, 2019 Merger Date. Gross Profit Gross profit represents our net revenue less cost of revenue. Net Revenue. Infusion and related health care services revenue is reported at the estimated net realizable amounts from third-party payers and patients for goods sold and services rendered. When pharmaceuticals are provided to a patient, revenue is recognized upon delivery of the goods. When nursing services are provided, revenue is recognized when the services are rendered. Due to the nature of the health care industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payers may result in adjustments to amounts originally recorded. Cost of Revenue. Cost of revenue consists of the actual cost of pharmaceuticals and other medical supplies dispensed to patients. In addition to product costs, cost of revenue includes warehousing costs, purchasing costs, depreciation expense relating to revenue-generating assets, such as infusion pumps, shipping and handling costs, and wages and related costs for the pharmacists, nurses, and all other employees and contracted workers directly involved in providing service to the patient. The Company receives volume-based rebates and prompt payment discounts from some of its pharmaceutical and medical supplies vendors. These payments are recorded as a reduction of inventory and are accounted for as a reduction of cost of revenue when the related inventory is sold. Operating Costs and Expenses Selling, General and Administrative Expenses. Selling, general and administrative expenses consist principally of salaries for administrative employees that directly and indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees. Depreciation and Amortization Expense. Depreciation within this caption includes infrastructure items such as computer hardware and software, office equipment and leasehold improvements. Depreciation of revenue-generating assets, such as infusion pumps, is included in cost of revenue. Other Income (Expense) Interest Expense, Net. Interest expense consists principally of interest payments on the Company's outstanding borrowings under the ABL Facility, the first lien term loan and second lien notes, as well as the amortization of discount and deferred financing fees. Refer to the "Liquidity and Capital Resources" section below for further discussion of these outstanding borrowings. Equity in Earnings of Joint Ventures. Equity in earnings of joint ventures consists of our proportionate share of equity earnings or losses from equity investments in two infusion joint ventures with health systems. 22
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Other, Net. Other income (expense) primarily includes miscellaneous non-operating expenses and third-party fees paid in conjunction with debt issuances and debt extinguishments, as they occur. Income Tax Expense (Benefit). The Company is subject to taxation inthe United States and various states. The Company's income tax (benefit) expense is reflective of the current federal and state tax rates. Change in unrealized losses on cash flow hedges, net of income taxes. Change in unrealized (losses) gains on cash flow hedges, net of income taxes, consists of the gains and losses associated with the changes in the fair value of hedging instruments related to the interest rate caps and interest rate swaps, net of income taxes. Results of Operations The following table presentsOption Care Health's consolidated results of operations for the three months endedMarch 31, 2020 and 2019 (in thousands): Three Months Ended March 31, 2020 (unaudited) 2019 (unaudited) Amount % of Revenue Amount % of Revenue NET REVENUE$ 705,440 100.0 %$ 476,492 100.0 % COST OF REVENUE 547,411 77.6 % 378,298 79.4 % GROSS PROFIT 158,029 22.4 % 98,194 20.6 % OPERATING COSTS AND EXPENSES: Selling, general and administrative expenses 129,280 18.3 % 82,787 17.4 % Depreciation and amortization expense 20,101 2.8 % 9,969 2.1 % Total operating expenses 149,381 21.2 % 92,756 19.5 % OPERATING INCOME 8,648 1.2 % 5,438 1.1 % OTHER INCOME (EXPENSE): Interest expense, net (28,087 ) (4.0 )% (11,045 ) (2.3 )% Equity in earnings of joint ventures 562 0.1 % 549 0.1 % Other, net 8 - % (76 ) - % Total other expense (27,517 ) (3.9 )% (10,572 ) (2.2 )% LOSS BEFORE INCOME TAXES (18,869 ) (2.7 )% (5,134 ) (1.1 )% INCOME TAX EXPENSE (BENEFIT) 1,041 0.1 % (1,422 ) (0.3 )% NET LOSS$ (19,910 ) (2.8 )%$ (3,712 ) (0.8 )% OTHER COMPREHENSIVE LOSS, NET OF TAX: Change in unrealized losses on cash flow hedges, net of income tax benefit of$0 , and$242 , respectively (16,632 ) (2.4 )% (505 ) (0.1 )% OTHER COMPREHENSIVE LOSS (16,632 ) (2.4 )% (505 ) (0.1 )% NET COMPREHENSIVE LOSS$ (36,542 ) (5.2 )%$ (4,217 ) (0.9 )%
Three Months Ended
The following tables present selected consolidated comparative results of
operations from
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Table of Contents Gross Profit Three Months Ended March 31, 2020 2019 (unaudited) (unaudited) Variance (in thousands, except for percentages) Net revenue$ 705,440 $ 476,492 $ 228,948 48.0 % Cost of revenue 547,411 378,298 169,113 44.7 % Gross profit$ 158,029 $ 98,194 $ 59,835 60.9 % Gross profit margin 22.4 % 20.6 % The increase in net revenue was primarily driven by additional revenue following the Merger of$193.7 million as well as growth in the Company's portfolio of therapies. The increase in cost of revenue was driven by the impact of the Merger and organic growth. The increase in gross profit was primarily related to contribution margin from additional revenue from the Merger. The increase in gross margin percentage was primarily driven by therapy mix shift. Operating Expenses Three Months Ended March 31, 2020 2019 (unaudited) (unaudited) Variance (in thousands, except for percentages) Selling, general and administrative expenses$ 129,280 $ 82,787 $ 46,493 56.2 % Depreciation and amortization expense 20,101 9,969 10,132 101.6 % Total operating expenses$ 149,381 $ 92,756 $ 56,625 61.0 % Operating expenses increased for the three months endedMarch 31, 2020 due to the impact of the Merger. The increase in depreciation and amortization was primarily related to the depreciation of the fixed assets acquired and the amortization of the intangibles acquired from the Merger of$3.9 million and$3.9 million , respectively. Other Income (Expense) Three Months Ended March 31, 2020 2019 (unaudited) (unaudited) Variance (in thousands, except for percentages) Interest expense, net$ (28,087 ) $ (11,045 ) $ (17,042 ) 154.3 % Equity in earnings of joint ventures 562 549 13 2.4 % Other, net 8 (76 ) 84 (110.5 )% Total other expense$ (27,517 ) $ (10,572 ) $ (16,945 ) 160.3 %
The increase in interest expense was primarily attributable to the interest
expense on the new debt issued in conjunction with the Merger. The balance of
debt increased from
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Income Tax Expense (Benefit)
Three Months Ended March 31, 2020 2019 (unaudited) (unaudited) Variance (in thousands, except for percentages)
Income tax expense (benefit)
The Company continues to maintain a full valuation allowance, established at the time of Merger, against all of its netU.S. federal and state deferred tax assets with the exception of approximately$0.7 million of estimated state net operating losses ("NOL"). Because of the Company's full valuation allowance, the Company's tax expense for the three months endedMarch 31, 2020 only consists of quarterly tax liabilities attributable to separate company state tax returns as well as recognized deferred tax expense. These tax expense items created a negative quarterly effective tax rate of 5.5% during the three months endedMarch 31, 2020 . During the three months endedMarch 31, 2019 , the effective tax rate was 27.7%. The variance in the year-over-year effective tax rates is primarily attributable to the valuation allowance established by the Company at the time of the Merger. The quarterly tax rates of both periods differ from the Company's 21% federal statutory rate primarily due to changes in valuation allowance, certain state and local taxes, non-deductible costs and resolution of certain tax matters. Net (Loss) Income and Other Comprehensive (Loss) Income Three Months Ended March 31, 2020 2019 (unaudited) (unaudited) Variance (in thousands, except for percentages) Net loss$ (19,910 ) $ (3,712 ) $ (16,198 ) 436.4 % Other comprehensive loss, net of tax: Changes in unrealized losses on cash flow hedges, net of income taxes (16,632 ) (505 ) (16,127 ) 3,193.5 % Other comprehensive loss (16,632 ) (505 ) (16,127 ) 3,193.5 % Net comprehensive loss$ (36,542 ) $ (4,217 ) $ (32,325 ) 766.5 % The change in net loss was primarily related to the increased interest expense on the increased indebtedness. The changes in unrealized losses on cash flow hedges, net of income taxes, related to the decrease in the variable interest rates during the first quarter of 2020 and projected as ofMarch 31, 2020 resulted in a corresponding liability on the fair value of the interest rate swaps on$1,311.1 million of debt principal. The change in unrealized loss for the three months endedMarch 31, 2019 related to fluctuations on interest rate caps on$250.0 million of the previous first lien term loan. Net comprehensive loss was$36.5 million for the three months endedMarch 31, 2020 , compared to net comprehensive loss of$4.2 million for the three months endedMarch 31, 2019 , as a result of the changes in net loss, discussed above, further reduced by the impact of the fair value of the interest rate swaps. Liquidity and Capital Resources For the three months endedMarch 31, 2020 and the twelve months endedDecember 31, 2019 , the Company's primary sources of liquidity were cash on hand of$77.2 million and$67.1 million , respectively, as well as the$140.4 million of borrowings available under its credit facilities. During the three months endedMarch 31, 2020 and the year endedDecember 31, 2019 , the Company's positive cash flows from operations have enabled investments in pharmacy and information technology infrastructure to support growth and create additional capacity in the future, as well as pursue acquisitions. The Company's primary uses of cash include supporting our ongoing business activities and investment in various acquisitions and our infrastructure to support additional business volumes. Ongoing operating cash outflows are associated with procuring and dispensing prescription drugs, personnel and other costs associated with servicing patients, as well as paying cash interest on the outstanding debt. Ongoing investing cash flows are primarily associated with capital projects related to business acquisitions, the improvement and maintenance of our pharmacy facilities and investment in our information technology systems. Ongoing financing cash flows are primarily associated with the quarterly principal payments on our outstanding debt. Our business strategy includes the selective acquisition of additional infusion pharmacies and other related healthcare businesses. We continue to evaluate acquisition opportunities and view acquisitions as a key part of our growth strategy. The Company historically has funded its acquisitions with cash with the exception of the Merger. The Company may require additional capital in excess of current availability in order to complete future acquisitions. It is impossible to predict the amount of capital that may be required for acquisitions, and there is no assurance that sufficient financing for these activities will be available on acceptable terms. 25
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Short-Term and Long-Term Liquidity Requirements The Company's ability to make principal and interest payments on any borrowings under our credit facilities and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. Based on our current level of operations and planned capital expenditures, we believe that our existing cash balances and expected cash flows generated from operations will be sufficient to meet our operating requirements for at least the next 12 months. We may require additional borrowings under our credit facilities and alternative forms of financings or investments to achieve our longer-term strategic plans. Credit Facilities The Company's asset-based-lending ("ABL") revolving credit facility provides for borrowings up to$150.0 million , which matures onAugust 6, 2024 . The ABL facility bears interest at a per annum rate that is determined by the Company's periodic selection of rate type, either the Base Rate or the Eurocurrency Rate. The Base Rate is charged between 1.25% and 1.75% and the Eurocurrency Rate is charged between 2.25% and 2.75% based on the historical excess availability as a percentage of the Line Cap, as defined in the ABL facility credit agreement. The revolving credit facility contains commitment fees payable on the unused portion of the ABL facility ranging from 0.25% to 0.375%, depending on various factors including the Company's leverage ratio, type of loan and rate type, and letter of credit fees of 2.5%. The Company had no outstanding borrowings under the ABL facility atMarch 31, 2020 . The Company had$9.6 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the ABL facility of$140.4 million as ofMarch 31, 2020 . The principal balance of the first lien term loan is repayable in quarterly installments of$2.3 million plus interest, with a final payment of all remaining outstanding principal due onAugust 6, 2026 . The quarterly principal payments commenced in March of 2020. Interest on the first lien term loan is payable monthly on Base Rate loans at Base Rate, as defined, plus 3.25% to 3.50%, depending on the Company's leverage ratio. Interest is charged on Eurocurrency Rate loans at the Eurocurrency Rate, as defined, plus 4.25% to 4.50%, depending on the Company's leverage ratio. The interest rate on the first lien term loan was 5.49% as ofMarch 31, 2020 . The second lien notes mature onAugust 6, 2027 . Interest on the second lien notes is payable quarterly and is at the greater of 1% or London Interbank Offered Rate ("LIBOR"), plus 8.75%. The Company elected to pay-in-kind the first quarterly interest payment, due inNovember 2019 , which resulted in the Company capitalizing the interest payment to the principal balance on the interest payment date, increasing the outstanding principal balance to$412.3 million . The Company paid the second quarterly interest payment, due inFebruary 2020 ; the interest rate on the second lien notes was 10.49% as ofMarch 31, 2020 . Cash Flows Three Months EndedMarch 31, 2020 Compared to Three Months EndedMarch 31, 2019 The following table presents selected data fromOption Care Health's unaudited condensed consolidated statements of cash flows: Three Months Ended March 31, 2020 2019 (unaudited) (unaudited) Variance (in thousands)
Net cash provided by operating activities
(5,353 ) (4,731 ) (622 ) Net cash used in financing activities (2,862 ) (3,038 ) 176 Net increase in cash and cash equivalents 10,188 1,311 8,877 Cash and cash equivalents - beginning of period 67,056 36,391 30,665
Cash and cash equivalents - end of period
Cash Flows from Operating Activities The increase in cash flows provided by operating activities is due to working capital efficiencies and timing of vendor payments during the three months endedMarch 31, 2020 . 26
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Cash Flows from Investing Activities The increase in cash flows used in investing activities is due to increased fixed asset additions during the three months endedMarch 31, 2020 as we invested more into our pharmacies and infrastructure. Cash Flows from Financing Activities The decrease in cash flows used in financing activities is due to a$2.0 million redemption to related party during the three months endedMarch 31, 2019 . This was offset by an increased principal repayment on the new debt and net payments for taxes on cashless exercises of options and vesting of restricted stock awards during the three months endedMarch 31, 2020 . Commitments and Contractual Obligations There were no material changes to our commitments under contractual obligations, as disclosed in our latest Annual Report on Form 10-K. Off-Balance Sheet Arrangements As ofMarch 31, 2020 ,Option Care Health did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K. Critical Accounting Policies and Estimates The Company prepares its unaudited condensed consolidated financial statements in accordance withUnited States generally accepted accounting principles ("GAAP"), which requires the Company to make estimates and assumptions. The Company evaluates its estimates and judgments on an ongoing basis. Estimates and judgments are based on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period presented. The Company's actual results may differ from these estimates, and different assumptions or conditions may yield different estimates. There have been no significant changes in the critical accounting estimates from those described in the Company's audited consolidated financial statements and related notes, as presented in our Annual report on 10-K for the year endedDecember 31, 2019 , hereby incorporated by reference. Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to our exposure to market risk from those included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , hereby incorporated by reference. Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in theSEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, management evaluated the effectiveness of the Company's disclosure controls and procedures as ofMarch 31, 2020 . Based on that evaluation, the Company's Chief Executive Officer and its Chief Financial Officer concluded that our disclosure controls and procedures were effective as ofMarch 31, 2020 . Changes in Internal Controls over Financial Reporting The Merger, which was completed onAugust 6, 2019 , has had a material impact on the financial position, results of operations, and cash flows of the combined company from the date of acquisition throughMarch 31, 2020 . The business combination also resulted in material changes in the combined company's internal controls over financial reporting. The Company is in the process of designing and integrating policies, processes, operations, technology, and other components of internal controls over financial reporting of the combined company. Management will monitor the implementation of new controls and test the operating effectiveness when instances are available in future periods. 27
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