American Oncology Network (AONC) 8-KReport of Independent Auditors................................................... 1-2

Central Georgia Cancer Care, P.C. (“CGCC”, or the “Company”) was originally incorporated under the Georgia Business Corporation Code on April 17, 2000 as a professional corporation as Macon Hematology & Oncology Associates, P.C. The Company changed its name to Central Georgia Hematology & Oncology Associates, P.C., effective May 11, 2000 and changed to its current name effective October 6, 2005. The Company provides treatment options to patients for cancer and blood disorders from its two practice locations in Macon, Georgia and Warner Robins, Georgia.

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

A separate statement of comprehensive income is required, however, as net income is the only component of comprehensive income, the Company elected not to include a separate statement of comprehensive income because it would not be meaningful to the users of the financial statements.

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

The Company monitors revenue and receivables to prepare estimated contractual allowances for the anticipated differences between billed and reimbursed amounts. Payments from third-party payors and Government programs including Medicare and Medicaid may be subject to audit and other retrospective adjustments. Such amounts are considered on an estimated basis when net patient revenue is recorded and are adjusted as final adjustments are determined. For the year ended December 31, 2023, such resulting historic adjustments have been immaterial to the financial statements.

In assessing who is the principal in providing patient services and pharmacy prescriptions, the Company considers who controls the provision of services and prescriptions. The Company has determined they are acting as a principal in these relationships as the Company controls the goods or services prior to them being transferred to the ultimate customer. 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents include cash or deposits with financial institutions and deposits in highly liquid money market securities. Deposits with financial institutions are insured by the Federal Deposit Insurance Corporation up to certain defined limits. Bank deposits at times may exceed federally insured limits. The Company has not experienced any losses in these accounts.

Patient accounts receivable consist of amounts due from third-party payors, including Medicare, Medicaid, managed care providers and commercial providers along with self-pay customers which includes the patient responsibility portion for patients with insurance. Patient accounts receivable are carried at the amount of consideration the Company expects to collect based on the historical collection rate which takes into consideration any allowance for credit losses. The Company utilizes a historical loss rate method, adjusted for any changes in economic conditions or risk characteristics, to estimate its expected credit losses each period. When developing an estimate of expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions, and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable. The historical loss rate method considers past write-offs of trade accounts receivable over a period commensurate with the initial term of the Company’s contracts with its customers. The Company recognizes the allowance for credit losses at inception and reassesses periodically based on management’s expectation of the asset’s collectability. The Company’s patient accounts receivable are short-term in nature and written off only when all collection attempts have failed. The Company recorded $620,426 as an

allowance for credit losses as of December 31, 2023 which represents an increase of $128,447 from the balance at adoption of CECL due to additional provisions for credit losses in 2023.

Concentrations of patient accounts receivable, net of allowances for contractual discounts and credit losses, as of December 31, 2023, are as follows:

The patients accounts receivable, net balance was $7,197,321 as of January 1, 2023 and $8,152,414 as of December 31, 2023.

Inventories, consisting primarily of pharmaceuticals finished goods, are valued at the lower of cost or net realizable value, with cost being determined on a first-in, first-out basis. Obsolescence for inventories is estimated based on expiration dates and slow-moving inventory. No obsolescence allowances have been recorded as of December 31, 2023. If the Company determines that an item is obsolete, or the expected net realizable value upon sale is lower than the currently recorded cost, a write-down is recorded and charged to cost of revenue to reduce the inventory to its net realizable value and a new cost basis is established.

Other receivables consist primarily of rebates on drug purchases made in the current period which are offered as an incentive by the distributor and/or manufacturer and are not yet paid as of year-end.

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. A summary of the lives used for computing depreciation is as follows:

The Company’s lease portfolio primarily consists of office and equipment leases for its practice facilities. The Company determines if an arrangement is a lease at inception. Right-of-use assets represent the right to use the underlying assets for the lease term, and the lease liabilities represent the obligation to make lease payments arising from the leases. Right-of-use assets and liabilities are recognized at commencement date based on the present value of future lease payments over the lease term, which includes only payments that are fixed and determinable at the time of commencement. As the Company’s operating leases do not generally provide an implicit rate, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Lease payments included in the measurement of the operating lease right-of-use (“ROU”) assets and lease liabilities are comprised of fixed payments, variable payments that depend on an index or rate, and the exercise price of a lessee option to purchase the underlying asset if the lessee is reasonably certain to exercise. Finance leases are included in property and equipment on the Balance Sheet.

The Company elected not to recognize operating lease ROU assets and lease liabilities for all short-term leases (leases with an initial lease term of 12 months or less). The Company recognizes the lease payments associated with short-term leases as an expense over the lease term. Certain of the lease arrangements contain lease and non-lease components and the Company has elected the practical expedient to combine these components.

The operating lease ROU assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. The operating lease ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The operating lease liabilities are initially measured at the present value of the unpaid lease payments at the lease commencement date.

Advertising costs are expensed as incurred. Advertising costs for the year ended December 31, 2023 were $136,121. All advertising costs are included within general and administrative expenses in the Statement of Operations.

The Company uses the equity method of accounting to record transactions associated with its joint venture when the Company shares in joint control of the investee. Investment in joint venture is not consolidated but is recorded in investment in joint venture in the Company’s Balance Sheet. The Company recognizes its portion of the investee’s results in equity in earnings from joint venture in its Statement of Operations.

The Company evaluates all distributions received from its equity method investments using the nature of distribution approach. Under this approach, the Company evaluates the nature of activities of the investee that generated the distribution. The distributions received are either classified as a return on investment, which is presented as a component of operating activities on the Company’s Statement of Cash Flows, or as a return of investment, which is presented as a component of investing activities on the Company’s Statement of Cash Flows.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. Although certain cash accounts exceed the federally insured deposit amount, management has not previously experienced nonperformance by any financial institution.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The carrying values of cash and cash equivalents, receivables, accounts payable and other current liabilities approximate fair value due to their short-term nature.

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

As of December 31, 2023, there were no Level 3 financial instruments.

There were no recently issued accounting pronouncements during the year ended December 31, 2023 which materially impacted the Company’s financial reporting and disclosures.

The Company, through its arrangements with certain contracts, is subject to the Medicare and Medicaid fraud and abuse laws which prohibit, among other things, any false claims, or any bribe, kick-back or rebate in return for the referral of Medicare and Medicaid patients. Violation of these prohibitions may result in civil and criminal penalties and exclusion from participation in the Medicare and Medicaid programs. Management has implemented policies and procedures they believe will assure that the Company is in substantial compliance with these laws. From time to time, the Company may receive requests for information from government agencies pursuant to their regulatory or investigational authority. Such requests can include subpoenas or demand letters for documents to assist the government in audits or investigations. Management believes that the outcome of any of these investigations would not have a material adverse effect on the Company. Laws and regulations governing the Medicare program are complex and subject to interpretation. The Company believes that it is complying in all material respects with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on the Company’s financial statements. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare Program.

The Company is subject to various legal proceedings and claims arising in the normal course of its business. In the opinion of management, the amount of the ultimate liability, if any, with respect to these lawsuits and claims will not have a material effect on the financial statements of the Company.

The Company has purchased claims-made professional liability insurance coverage through May 31, 2024, covering up to $3,000,000 per incident and $5,000,000 million in annual aggregate for each physician and covering up to $1,000,000 million per incident and $3,000,000 million in the aggregate for each advanced practice provider. The policy does not require a deductible per incident.

The Company sponsors a defined contribution 401(k) profit sharing plan (the “Plan”) pursuant to which employees can elect to defer a portion of their compensation for funding of retirement investments. The Plan covers substantially all of its employees and contributions can be made up to the maximum allowed by law. Employer matching and profit-sharing contributions are discretionary. For the year ended December 31, 2023, total employer 401(k) matching and profit-sharing compensation expense was $224,503. Effective October 31, 2024, the Plan was terminated (See Note 12).

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through December 19, 2024, the date the financial statements were available to be issued.