P3 Health Partners Inc 10-Q for FY2022 Q1

P3 Health Partners Inc. (PIII)

10-Q 2022-10-21 For: 2022-03-31

Added on April 07, 2026

About this 10-Q

P3 Health Partners Inc filed this 10-Q on October 21, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $273.54M; up 80.8% from $151.3M a year earlier
Net loss: $10.58M; compared with a net loss of $24.65M a year earlier
Diluted EPS: -$0.25

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Delaware	85-2992794
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2370 Corporate Circle Suite 300 Henderson, Nevada	89074
(Address of principal executive offices)	(Zip code)


		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
Class A Common Stock, Par Value $0.0001 per share Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50	PIII PIIIW	The Nasdaq Stock Market LLC The Nasdaq Stock Market LLC


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒	Emerging growth company ☒


		Page
	Cautionary Statement Regarding Forward-Looking Statements

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) and Mezzanine Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	51

SIGNATURES


	Successor
	As of March 31, 2022		As of December 31, 2021
ASSETS
CURRENT ASSETS:
Cash	$	110,345,801	$	140,477,586
Restricted Cash		356,242		356,286
Health Plan Receivables		94,587,702		50,251,004
Clinic Fees and Insurance Receivables, Net		767,396		1,090,104
Other Receivables		587,833		726,903
Prepaid Expenses and Other Current Assets		6,743,525		6,959,067
TOTAL CURRENT ASSETS		213,388,499		199,860,950
LONG-TERM ASSETS:
Property and Equipment		9,085,895		8,230,250
Less: Accumulated Depreciation		(757,158)		(182,321)
Property and Equipment, Net		8,328,737		8,047,929
Goodwill		1,309,750,216		1,309,750,216
Intangible Assets, Net		814,677,323		835,838,605
Notes Receivable, Net		3,561,508		3,590,715
Right of Use Asset		6,933,928		7,020,045
TOTAL LONG-TERM ASSETS		2,143,251,712		2,164,247,510
TOTAL ASSETS ⁽¹⁾	$	2,356,640,211	$	2,364,108,460
LIABILITIES, MEZZANINE EQUITY and STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses	$	21,726,910	$	17,730,683
Accrued Payroll		7,686,205		6,304,362
Health Plans Settlements Payable		18,640,013		22,548,694
Claims Payable		137,407,952		101,958,324
Premium Deficiency Reserve		36,511,129		37,835,642
Accrued Interest		10,011,573		8,771,065
Current Portion of Long-Term Debt		23,144		46,101
Short-Term Debt		2,394,079		3,578,561
TOTAL CURRENT LIABILITIES		234,401,005		198,773,432
LONG-TERM LIABILITIES:
Right of Use Liability		6,327,733		6,296,883
Warrant Liabilities		17,244,101		11,382,826
Contingent Consideration		3,577,417		3,486,593
Long-Term Debt		80,000,000		80,000,000
TOTAL LONG-TERM LIABILITIES		107,149,251		101,166,302
TOTAL LIABILITIES ⁽¹⁾		341,550,256		299,939,734
COMMITMENTS AND CONTINGENCIES (NOTE 23)
MEZZANINE EQUITY
Redeemable Non-Controlling Interest		1,752,115,963		1,790,617,285
STOCKHOLDERS’ EQUITY:
Class A Common Stock, $.0001 par value; 800,000,000 shares authorized; 41,578,890 shares issued and outstanding as of March 31, 2022, and December 31, 2021, respectively		4,158		4,158
Class V Common Stock, $.0001 par value; 205,000,000 shares authorized; 197,103,405 shares and 196,553,523 shares issued and outstanding as of March 31, 2022, and December 31, 2021, respectively		19,710		19,655
Additional Paid in Capital		312,945,752		312,945,752
Accumulated Deficit		(49,995,628)		(39,418,124)
TOTAL STOCKHOLDERS’ EQUITY		262,973,992		273,551,441
TOTAL LIABILITIES, MEZZANINE EQUITY & STOCKHOLDERS’ EQUITY	$	2,356,640,211	$	2,364,108,460


	Successor		Predecessor
	Three Months Ended		Three Months Ended
	March 31, 2022		March 31, 2021
			(As Restated)
OPERATING REVENUE:
Capitated Revenue	$	269,684,815	$	148,964,190
Other Patient Service Revenue		3,859,519		2,333,750
TOTAL OPERATING REVENUE		273,544,334		151,297,940
OPERATING EXPENSES:
Medical Expenses		265,820,802		146,624,505
Premium Deficiency Reserve		(1,324,513)		2,000,000
Corporate, General and Administrative Expenses		38,599,412		15,059,076
Sales and Marketing Expenses		864,530		270,241
Amortization of Intangibles		21,161,282		—
Depreciation		590,549		332,548
TOTAL OPERATING EXPENSES		325,712,062		164,286,370
OPERATING LOSS		(52,167,728)		(12,988,430)
OTHER INCOME (EXPENSES):
Interest Expense, net		(2,761,250)		(2,124,286)
Mark-to-Market of Stock Warrants		(5,861,276)		(9,537,996)
TOTAL OTHER INCOME (EXPENSE)		(8,622,526)		(11,662,282)
LOSS BEFORE INCOME TAXES		(60,790,254)		(24,650,712)
PROVISION FOR INCOME TAXES		—		—
NET LOSS		(60,790,254)		(24,650,712)
LESS NET LOSS ATTRIBUTABLE TO REDEEMABLE NON-CONTROLLING INTERESTS		(50,212,750)		—
NET LOSS ATTRIBUTABLE TO CONTROLLING INTERESTS	$	(10,577,504)	$	(24,650,712)
NET LOSS PER SHARE (BASIC AND DILUTED)	$	(0.25)		N/A¹


Predecessor
	Class A			Class D			Class B‑1			Class C
													Redemption of		Accumulated		Total Members’
	Units	Amount		Units	Amount		Units	Amount		Units	Amount		Profit Interest		Deficit		Deficit
MEMBERS' DEFICIT, DECEMBER 31, 2020 As Restated	43,000,000	$	43,656,270	16,130,034	$	47,041,554	6,000,000	$	380,000	1,302,083	$	67,474	$	(180,000)	$	(130,485,179)	$	(130,217,705)
Class C Unit Based Compensation	—		—	—		—	—		—	333,750		460,515		—		—		460,515
Net Loss	—		—	—		—	—		—	—		—		—		(24,650,712)		(24,650,712)
MEMBERS’ DEFICIT, MARCH 31, 2021 As Restated	43,000,000	$	43,656,270	16,130,034	$	47,041,554	6,000,000	$	380,000	1,635,833	$	527,989	$	(180,000)	$	(155,135,891)	$	(154,407,902)


Successor
									Additional Paid in
	Redeemable Noncontrolling		Class A Common Stock			Class V Common Stock			Capital		Accumulated Deficit		Total Stockholders’ Equity
	Interests		Shares	Amount		Shares	Amount		Amount		Amount		Amount
STOCKHOLDERS’ EQUITY (DEFICIT), December 31, 2021	$	1,790,617,285	41,578,890	$	4,158	196,553,523	$	19,655	$	312,945,752	$	(39,418,124)	$	273,551,441
Vesting of stock compensation awards		—	—		—	549,822		55		—		—		55
Stock compensation		11,711,428	—		—	—		—		—		—		—
Net Loss		(50,212,750)	—		—	—		—		—		(10,577,504)		(10,577,504)
STOCKHOLDERS’ EQUITY (DEFICIT), March 31, 2022	$	1,752,115,963	41,578,890	$	4,158	197,103,345	$	19,710	$	312,945,752	$	(49,995,628)	$	262,973,992


	As Previously		Network		Preferred Returns		Class A Units		Revenue
	Reported		Adjustment		Adjustment		Adjustments		Adjustment		As Restated
Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2021 (Unaudited)
Capitated Revenue	$	147,700,465	$	—	$	—	$	—	$	1,263,725	$	148,964,190
Other Patient Service Revenue		3,863,915		—		—		—		(1,530,165)		2,333,750
Total Operating Revenue		151,564,380		—		—		—		(266,440)		151,297,940
Medical Expenses		146,890,945		—		—		—		(266,440)		146,624,505
Total Operating Expenses		164,552,810		—		—		—		(266,440)		164,286,370
Interest Expense, net		(4,081,134)		—		1,956,848		—		—		(2,124,286)
Total Other Expenses		(13,619,130)		—		1,956,848		—		—		(11,662,282)
Net Loss Attributable to Non-Controlling Interests		(3,282,292)		3,282,292		—		—		—		—
Net Loss (formerly Net Loss Attributable to Controlling Interests)		(23,325,268)		(3,282,292)		1,956,848		—		—		(24,650,712)
Condensed Consolidated Statements of Changes in Members’ Deficit for the 3 Months Ended March 31, 2021
Preferred Return at 8% for Class A Units	$	890,612	$	—	$	(890,612)	$	—		—	$	—
Net Loss		(26,607,560)		—		1,956,848		—		—		(24,650,712)
Balance as of March 31,2021		(122,918,168)		—		5,633,581		(43,656,269)		6,532,954		(154,407,902)

Condensed Consolidated Statements of Cash Flows for the 3 Months Ended March 31, 2021
Net Loss	$	(26,607,560)	$	—	$	1,956,848		—		—	$	(24,650,712)
Class A and Class D Preferred Returns		1,956,848		—		(1,956,848)		—		—		—
Consolidated Statements of Changes in Members’ Deficit for the Year Ended December 31, 2020
Balance as of December 31, 2020	$	(97,661,735)	$	—	$	4,567,346	$	(43,656,270)	$	6,532,954	$	(130,217,705)


	Successor
	March 31, 2022		December 31, 2021
Checking	$	110,345,801	$	140,477,586
Restricted		356,242		356,286
Total Cash Balances	$	110,702,043	$	140,833,872


	Predecessor
	March 31, 2021
Unrestricted	$	22,341,413
Restricted		3,687,918
Total Cash Balances	$	26,029,331


	Successor				Predecessor
						Three Months
	Three Months					Ended
	Ended					March 31, 2021
Revenue Type	March 31, 2022		% of Total			(As Restated)	% of Total
Capitated Revenue	$	269,684,815	98.6	%	$	148,964,190	98.5	%
Other Patient Service Revenue:
Clinical Fees & Insurance Revenue		1,882,254	0.7	%		821,762	0.5	%
Care Coordination / Management Fees		1,921,105	0.7	%		1,503,353	1.0	%
Incentive Fees		56,160	0.0	%		8,635	0.0	%
Total Other Patient Service Revenue		3,859,519	1.4	%		2,333,750	1.5	%
Total Revenue	$	273,544,334	100.0	%	$	151,297,940	100.0	%


	Health Plan Settlement Payables
	Successor
	March 31, 2022		December 31, 2021
Health Plan A	$	109,084	$	—
Health Plan B		11,700,274		11,700,274
Health Plan D		—		3,882,250
Health Plan F		5,847,814		6,085,425
Health Plan G		835,623		776,164
Health Plan I		(166,562)		(215,626)
Health Plan O		(910)		(39,151)
Health Plan U		226,209		226,209
Health Plan V		88,481		133,149
Total Health Plan Settlement Payables	$	18,640,013	$	22,548,694


Purchase Consideration	Amounts
Equity	$	80,300,733
Fair Value of Noncontrolling Interest		1,807,427,576
Stock Compensation Pre-combination Services		26,313,476
Cash Consideration		18,405,083
Payment of P3 Health Group Holdings, LLC's Transaction Costs		19,151,752
Total Purchase Consideration	$	1,951,598,620


Purchase Price Allocation	Amounts
Assets Acquired:
Cash	$	5,300,842
Restricted Cash		54,095
Health Plan Settlement Receivables		47,733,033
Clinic Fees and Insurance Receivables, Net		426,064
Other Receivables		1,880,939
Prepaid Expenses and Other Current Assets		938,413
Property and Equipment, Net		7,875,234
Intangible Assets, Net:
Customer Relationships		684,000,000
Provider Network		3,700,000
Trademarks		147,700,000
Goodwill		1,278,452,778
Notes Receivable		3,734,012
Right of Use Assets		6,870,279
Total Assets Acquired	$	2,188,665,689

Liabilities Assumed:
Accounts Payable and Accrued Expenses	$	25,819,091
Accrued Payroll		2,868,664
Health Plans Settlements Payable		25,007,542
Claims Payable		76,031,460
Premium Deficiency Reserve		11,559,067
Accrued Interest		9,268,846
Current Portion of Long-Term Debt		301,443
Lease Liability		6,210,956
Long-Term Debt, Net of Current Portion		80,000,000
Total Liabilities Assumed	$	237,067,069
Net Assets Acquired	$	1,951,598,620


Purchase Price Allocation	Successor Period		Predecessor Period
Assets Acquired:
Cash	$	20,547,337	$	3,000
Restricted Cash		302,187		—
Health Plan Settlement Receivables		5,754,006		—
Clinic Fees and Insurance Receivables, Net		141,186		—
Other Receivables		726,378		—
Prepaid Expenses and Other Current Assets		1,189,575		—
Property and Equipment, Net		113,436		5,896
Intangible Assets, Net:				—
Customer Relationships		—		2,045,604
Pay or Contracts		4,700,271
Provider Network		1,100,000		—
Trademarks		900,000		—
Medical Licenses		700,000		—
Goodwill		31,297,438		2,934,500
Total Assets Acquired	$	67,471,814	$	4,989,000

Liabilities Assumed:
Accounts Payable and Accrued Expenses	$	150,196	$	—
Accrued Payroll		277,074		—
Health Plans Settlements Payable		133,149		—
Claims Payable		26,898,074		—
Total Liabilities Assumed		27,458,493		—
Net Assets Acquired	$	40,013,321	$	4,989,000


	Three Months Ended
	March 31,
	2021
	(Unaudited)
Total Operating Revenue	$	186,188,678
Net Profit	$	(72,130,030)
Net Loss Attributable to Non-controlling Interest	$	(59,579,405)
Net Loss Attributable to Controlling Interest	$	(12,550,625)


	Level 1		Level 2		Level 3	Total
Warrant liability as of March 31, 2022,	$	16,761,251	$	—	482,850	$	17,244,101
Warrant liability as of December 31, 2021		10,880,550		—	502,276		11,382,826


Volatility		60.00	%
Risk-Free Interest rate		2.42	%
Exercise Price	$	11.50
Expected Term		4.7 Years


Volatility		60.00	%
Risk-Free Interest rate		1.26	%
Exercise Price	$	11.50
Expected Term		4.9 Years


	Customer						Provider		Medical
	Relationships		Trademarks		Payor Contracts		Network		Licenses		Total
Balance at December 31, 2021	$	678,300,000	$	147,369,167	$	4,700,271	$	4,769,167	$	700,000	$	835,838,605
Amortization		(17,118,774)		(3,805,000)		(117,508)		(120,000)		—		(21,161,282)
Balance at March 31, 2022	$	661,181,226	$	143,564,167	$	4,582,763	$	4,649,167	$	700,000	$	814,677,323


Successor	LTD-A		LTD-C		LTD-D		LTD-E		Total
Balance at December 31, 2021	$	—	$	15,000,000	$	65,000,000	$	46,101	$	80,046,101
Issued in 2022		—		—		—		—		—
Principal Payments in 2022		—		—		—		(22,957)		(22,957)
Balance at March 31, 2022	$	—	$	15,000,000	$	65,000,000	$	23,144	$	80,023,144


			Interest				Total Cash
	Principal		PIK		Cash Interest		Payments^*
April 1, 2022, to December 31, 2022	$	23,144	$	3,954,949	$	4,161,790	$	4,184,934
2023		—		5,624,513		5,675,461		5,675,461
2024		—		6,061,814		5,882,309		5,882,309
2025		65,000,000		6,274,526		19,518,225		84,518,225
2026		15,000,000		1,851,284		20,054,451		35,054,451
Total	$	80,023,144	$	23,767,086	$	55,292,236	$	135,315,380


Second quarter 2022	$	1,235,955
Third quarter 2022		1,158,124
Total	$	2,394,079


	Weighted			Weighted
	Average			Average
	Grant-Date		Time Based	Grant-Date		Performance
	Fair Value		Units	Fair Value		Based Units
Outstanding and non-vested at December 31, 2021	$	9.20	5,471,400	$	—	—
Granted during period		—	—		—	—
Vested		9.20	549,822		—	—
Cancelled/forfeited		—	—		—	—
Outstanding and non-vested at March 31, 2022	$	9.20	4,921,578	$	—	—


			Weighted
			Average
	Number of	Weighted	Remaining
	Options	Average	Contractual
	Outstanding	Exercise Price	Life (Years)
Outstanding and non-vested at December 31, 2021	—	—	—
Granted	2,034,279	6.43	2.99
Vested	—	—	—
Cancelled/forfeited	—	—	—
Outstanding and non-vested at March 31, 2022	2,034,279	6.43	2.99


	March 31, 2022
April 1, 2022, to December 31, 2022	$	2,028,692
2023		2,121,248
2024		1,911,705
2025		1,631,163
2026		1,089,562
Thereafter		2,240,230
Total Payments for Leases		11,022,600
Less: Interest		(2,666,176)
Present Value of Lease Liabilities	$	8,356,424


	Successor
	March 31, 2022
Balance at Beginning of Period	$	24,110,831
Advanced During Period		1,367,151
Interest Accrued During period		404,315
Balance at End of Period	$	25,882,297


	Successor
ASSETS	March 31, 2022		December 31, 2021
Cash	$	8,628,115	$	7,570,247
Client Fees and Insurance Receivable, net		29,571		60,815
Prepaid Expenses and Other Current Assets		475,754		406,372
Property, Plant and Equipment, net		45,775		36,416
Investment in Other P3 Entities		6,000,000		6,000,000
TOTAL ASSETS		15,179,215		14,073,850
LIABILITIES AND MEMBERS’ DEFICIT
Accounts Payable and Accrued Expenses		6,225,689		4,804,704
Accrued Payroll		1,593,065		1,303,615
Due to Consolidated Entities of P3		25,511,795		24,110,831
TOTAL LIABILITIES		33,330,549		30,219,150
MEMBERS’ DEFICIT		(18,151,334)		(16,145,300)
TOTAL LIABILITIES AND MEMBERS’ DEFICIT	$	15,179,215	$	14,073,850


	December 31,		December 31,		December 31,		March 31,
	2019		2020		2021		2022		CAGR
At-risk Medicare Advantage Members	19,700		50,600		67,000		100,000		106	%
Year-over-year % change	89	%	157	%	32	%	76	%


	Payments due by Period
			Less than 1						More than 5
	Total		year		1‑3 years		3‑5 years		years
Unpaid Claims	$	137,408	$	137,408	$	—	$	—	$	—
Short-term debt		2,394		2,394		—		—		—
Term loan		65,000		—		—		65,000		—
Unsecured debt		15,000		—		—		15,000		—
Lease obligation		8,356		3,146		2,689		1,451		1,070
Other		23		23		—		—		—
Total	$	228,181	$	142,971	$	2,689	$	81,451	$	1,070


Date: October 20, 2022	P3 Health Partners Inc.

	By:		/s/ Eric A. Atkins
		Eric A. Atkins
		Chief Financial Officer
		(Principal Financial Officer and Principal
		Accounting Officer)

Date: October 20, 2022	/s/ Sherif W. Abdou, M.D.
	Sherif W. Abdou, M.D.
	Chief Executive Officer
	(Principal Executive Officer)