Full Press Release Details
HOLDINGS, LLC and SUBSIDIARIES
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
HOLDINGS, LLC and SUBSIDIARIES
CONDENSED CONSOLIDATED
| ASSETS | ||||||||
| Unaudited | ||||||||
| September 30, 2021 | December 31, 2020 | |||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 4,336,565 | $ | 36,261,104 | ||||
| Restricted Cash | 346,299 | 3,641,843 | ||||||
| Health Plan Settlement Receivables | 45,847,310 | 38,429,833 | ||||||
| Clinic Fees and Insurance Receivables, Net | 423,885 | 675,954 | ||||||
| Other Receivables | 343,583 | 146,117 | ||||||
| Prepaid Expenses and Other Current Assets | 2,525,356 | 5,192,783 | ||||||
| TOTAL CURRENT ASSETS | 53,822,998 | 84,347,634 | ||||||
| LONG-TERM ASSETS: | ||||||||
| Property, Plant and Equipment, Net | 7,921,914 | 6,150,586 | ||||||
| Goodwill and Other Intangibles | 5,885,628 | 871,128 | ||||||
| Notes Receivable, Net | 3,684,199 | 3,804,662 | ||||||
| Right of Use Asset | 7,190,501 | 4,728,242 | ||||||
| TOTAL LONG-TERM ASSETS | 24,682,242 | 15,554,618 | ||||||
| TOTAL ASSETS | $ | 78,505,240 | $ | 99,902,252 | ||||
| LIABILITIES and MEMBERS' DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts Payable and Accrued Expenses | $ | 15,399,853 | $ | 11,793,125 | ||||
| Accrued Payroll | 2,160,497 | 4,003,373 | ||||||
| Health Plans Settlements Payable | 13,259,118 | 13,742,775 | ||||||
| Claims Payable | 75,108,251 | 56,934,400 | ||||||
| Premium Deficiency Reserve | 4,600,000 | - | ||||||
| Accrued Interest | 8,004,450 | 4,052,406 | ||||||
| Current Portion of Long-Term Debt | 68,873 | 89,988 | ||||||
| TOTAL CURRENT LIABILITIES | 118,601,042 | 90,616,067 | ||||||
| LONG-TERM LIABILITIES: | ||||||||
| Lease Liability | 6,475,923 | 3,634,429 | ||||||
| Liability for Class D Warrants | 18,379,870 | 6,316,605 | ||||||
| Long-Term Debt | 59,358,375 | 45,387,986 | ||||||
| TOTAL LONG-TERM LIABILITIES | 84,214,168 | 55,339,020 | ||||||
| TOTAL LIABILITIES | 202,815,210 | 145,955,087 | ||||||
| Class D Units Subject to Possible Redemption, 16,130,034 Units at $3.10 Redemption Value, Net of Issuance Costs $2,958,446, Plus Accumulated Preferred Returns of $7,895,161 and $4,567,346 at September 30, 2021 and December 31, 2020, Respectively | 54,936,716 | 51,608,900 | ||||||
| MEMBERS' DEFICIT: | ||||||||
| Contributed Capital | 41,764,270 | 41,764,270 | ||||||
| Series A Preferred Returns | 6,594,660 | 3,815,034 | ||||||
| Accumulated Equity-Based Compensation | 2,747,960 | 1,368,567 | ||||||
| Redemption of Profits Interests | (180,000 | ) | (180,000 | ) | ||||
| Retained Loss from Controlling Interests | (203,942,517 | ) | (126,242,225 | ) | ||||
| MEMBERS' DEFICIT | (153,015,627 | ) | (79,474,354 | ) | ||||
| Retained Loss from Non-Controlling Interests | (26,231,059 | ) | (18,187,381 | ) | ||||
| TOTAL MEMBERS' DEFICIT | (179,246,686 | ) | (97,661,735 | ) | ||||
| TOTAL LIABILITIES and MEMBERS' DEFICIT | $ | 78,505,240 | $ | 99,902,252 |
Notes to Condensed Consolidated Financial Statements
HOLDINGS, LLC and SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| OPERATING REVENUE: | ||||||||||||||||
| Capitated Revenue | $ | 152,276,992 | $ | 124,461,275 | $ | 447,137,121 | $ | 351,018,290 | ||||||||
| Other Patient Service Revenue | 4,243,263 | 4,379,716 | 12,366,111 | 9,645,990 | ||||||||||||
| TOTAL OPERATING REVENUE | 156,520,255 | 128,840,991 | 459,503,232 | 360,664,280 | ||||||||||||
| OPERATING EXPENSES (INCOME): | ||||||||||||||||
| Medical Expenses | 161,662,423 | 127,015,976 | 459,233,085 | 348,258,272 | ||||||||||||
| Premium Deficiency Reserve | 1,600,000 | 1,072,540 | 4,600,000 | (1,304,962 | ) | |||||||||||
| Corporate, General and Administrative Expenses | 20,433,538 | 13,742,904 | 53,883,267 | 36,773,545 | ||||||||||||
| Sales and Marketing Expenses | 491,418 | 278,663 | 1,118,160 | 631,073 | ||||||||||||
| Depreciation | 456,418 | 245,488 | 1,218,796 | 613,329 | ||||||||||||
| TOTAL OPERATING EXPENSES | 184,643,797 | 142,355,570 | 520,053,309 | 384,971,257 | ||||||||||||
| OPERATING LOSS | (28,123,542 | ) | (13,514,579 | ) | (60,550,077 | ) | (24,306,977 | ) | ||||||||
| OTHER INCOME (EXPENSES): | ||||||||||||||||
| Interest Expense, Net | (4,643,254 | ) | (2,316,579 | ) | (13,130,628 | ) | (6,877,619 | ) | ||||||||
| Mark-to-Market Adjustment for Class D Warrants | (1,401,686 | ) | - | (12,063,265 | ) | - | ||||||||||
| TOTAL OTHER EXPENSES | (6,044,940 | ) | (2,316,579 | ) | (25,193,893 | ) | (6,877,619 | ) | ||||||||
| NET LOSS | (34,168,482 | ) | (15,831,158 | ) | (85,743,970 | ) | (31,184,596 | ) | ||||||||
| NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS | (2,801,965 | ) | 875,560 | (8,043,678 | ) | (3,450,460 | ) | |||||||||
| NET LOSS ATTRIBUTABLE TO CONTROLLING INTERESTS | $ | (31,366,517 | ) | $ | (16,706,718 | ) | $ | (77,700,292 | ) | $ | (27,734,136 | ) | ||||
| NET LOSS PER SHARE - BASIC AND DILUTED | $ | (0.45 | ) | $ | (0.25 | ) | $ | (1.14 | ) | $ | (0.42 | ) |
Notes to Condensed Consolidated Financial Statements
HEALTH GROUP HOLDINGS, LLC and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' DEFICIT (UNAUDITED)
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| Class A | Class B-1 | Class C | Redemption of | Controlling | Non-Controlling | Total | ||||||||||||||||||||||||||||||||||||||
| Units | Amount | Preferred Return | Units | Amount | Units | Amount | Class C Units | Interests | Interests | Members' Deficit | ||||||||||||||||||||||||||||||||||
| MEMBERS' DEFICIT, June 30, 2021 | 43,000,000 | $ | 41,764,270 | $ | 5,632,497 | 8,000,000 | $ | 1,520,000 | 1,775,833 | $ | 872,872 | $ | (180,000 | ) | $ | (172,576,000 | ) | $ | (23,429,094 | ) | $ | (146,395,455 | ) | |||||||||||||||||||||
| Class B-1 and Class C Unit Based Compensation | - | - | - | - | - | 150,000 | 355,088 | - | - | - | 355,088 | |||||||||||||||||||||||||||||||||
| Preferred Return at 8% for Class A Units | - | - | 962,163 | - | - | - | - | - | - | - | 962,163 | |||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (31,366,517 | ) | (2,801,965 | ) | (34,168,482 | ) | ||||||||||||||||||||||||||||||
| MEMBERS' DEFICIT, September 30, 2021 | 43,000,000 | $ | 41,764,270 | $ | 6,594,660 | 8,000,000 | $ | 1,520,000 | 1,925,833 | $ | 1,227,960 | $ | (180,000 | ) | $ | (203,942,517 | ) | $ | (26,231,059 | ) | $ | (179,246,686 | ) |
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| Class A | Class B-1 | Class C | Redemption of | Controlling | Non-Controlling | Total | ||||||||||||||||||||||||||||||||||||||
| Units | Amount | Preferred Return | Units | Amount | Units | Amount | Class C Units | Interests | Interests | Members' Deficit | ||||||||||||||||||||||||||||||||||
| MEMBERS' DEFICIT, June 30, 2020 | 43,000,000 | $ | 41,764,270 | $ | 2,124,278 | 6,000,000 | $ | 1,140,000 | 1,052,083 | $ | 379,751 | $ | (180,000 | ) | $ | (96,195,133 | ) | $ | (18,206,330 | ) | $ | (69,173,164 | ) | |||||||||||||||||||||
| Class B-1 and Class C Unit Based Compensation | - | - | - | - | - | 225,000 | 52,670 | - | - | - | 52,670 | |||||||||||||||||||||||||||||||||
| Redemption of Class C Units | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Preferred Return at 8% for Class A Units | - | - | 840,805 | - | - | - | - | - | - | - | 840,805 | |||||||||||||||||||||||||||||||||
| Net Income (Loss) | - | - | - | - | - | - | - | - | (16,706,718 | ) | 875,560 | (15,831,158 | ) | |||||||||||||||||||||||||||||||
| MEMBERS' DEFICIT, September 30, 2020 | 43,000,000 | $ | 41,764,270 | $ | 2,965,083 | 6,000,000 | $ | 1,140,000 | 1,277,083 | $ | 432,421 | $ | (180,000 | ) | $ | (112,901,852 | ) | $ | (17,330,770 | ) | $ | (84,110,848 | ) |
| Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| Class A | Class B-1 | Class C | Redemption of | Controlling | Non-Controlling | Total | ||||||||||||||||||||||||||||||||||||||
| Units | Amount | Preferred Return | Units | Amount | Units | Amount | Class C Units | Interests | Interests | Members' Deficit | ||||||||||||||||||||||||||||||||||
| MEMBERS' DEFICIT, December 31, 2020 | 43,000,000 | 41,764,270 | 3,815,041 | 6,000,000 | $ | 1,140,000 | 1,302,083 | $ | 228,560 | $ | (180,000 | ) | $ | (126,242,225 | ) | $ | (18,187,381 | ) | $ | (97,661,735 | ) | |||||||||||||||||||||||
| Class B-1 and Class C Unit Based Compensation | - | - | - | 2,000,000 | 380,000 | 623,750 | 999,400 | - | - | - | 1,379,400 | |||||||||||||||||||||||||||||||||
| Preferred Return at 8% for Class A Units | - | - | 2,779,619 | - | - | - | - | - | - | - | 2,779,619 | |||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (77,700,292 | ) | (8,043,678 | ) | (85,743,970 | ) | ||||||||||||||||||||||||||||||
| MEMBERS' DEFICIT, September 30, 2021 | 43,000,000 | $ | 41,764,270 | $ | 6,594,660 | 8,000,000 | $ | 1,520,000 | 1,925,833 | $ | 1,227,960 | $ | (180,000 | ) | $ | (203,942,517 | ) | $ | (26,231,059 | ) | $ | (179,246,686 | ) |
| Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| Class A | Class B-1 | Class C | Redemption of | Controlling | Non-Controlling | Total | ||||||||||||||||||||||||||||||||||||||
| Units | Amount | Preferred Return | Units | Amount | Units | Amount | Class C Units | Interests | Interests | Members' Deficit | ||||||||||||||||||||||||||||||||||
| MEMBERS' DEFICIT, December 31, 2019 | 43,000,000 | $ | 41,764,270 | $ | 430,230 | 4,000,000 | $ | 760,000 | 1,058,333 | $ | 161,093 | $ | - | $ | (85,167,716 | ) | $ | (13,880,310 | ) | $ | (55,932,433 | ) | ||||||||||||||||||||||
| Class B-1 and Class C Unit Based Compensation | - | - | - | 2,000,000 | 380,000 | 418,750 | 271,328 | - | - | - | 651,328 | |||||||||||||||||||||||||||||||||
| Redemption of Class C Units | - | - | - | - | - | (200,000 | ) | - | (180,000 | ) | - | - | (180,000 | ) | ||||||||||||||||||||||||||||||
| Preferred Return at 8% for Class A Units | - | - | 2,534,853 | - | - | - | - | - | - | - | 2,534,853 | |||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (27,734,136 | ) | (3,450,460 | ) | (31,184,596 | ) | ||||||||||||||||||||||||||||||
| MEMBERS' DEFICIT, September 30, 2020 | 43,000,000 | $ | 41,764,270 | $ | 2,965,083 | 6,000,000 | $ | 1,140,000 | 1,277,083 | $ | 432,421 | $ | (180,000 | ) | $ | (112,901,852 | ) | $ | (17,330,770 | ) | $ | (84,110,848 | ) |
Accompanying Notes to Condensed Consolidated Financial Statements
HOLDINGS, LLC and SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Net Loss | $ | (85,743,970 | ) | $ | (31,184,596 | ) | ||
| Adjustments to Reconcile Net Loss to Cash Used in Operations: | ||||||||
| Depreciation Expense | 1,218,796 | 613,329 | ||||||
| Stock-Based Compensation | 1,379,400 | 651,329 | ||||||
| Class A and Class D Preferred Returns | 6,107,441 | 5,577,812 | ||||||
| Amortization of Discount from Issuance of Debt | 931,958 | - | ||||||
| Mark-to-Market Adjustment for Class D Warrants | 12,063,265 | - | ||||||
| Amortization of Debt Origination Fees | 525,783 | - | ||||||
| Net Change in ROU Assets and Liabilities | 379,235 | (57,496 | ) | |||||
| Premium Deficiency Reserve | 4,600,000 | (1,304,962 | ) | |||||
| Changes in Assets and Liabilities: | ||||||||
| Accounts Receivable, Net | 54,602 | (477,983 | ) | |||||
| Health Plan Settlements Receivable / Premiums Receivable | (7,417,477 | ) | (22,312,352 | ) | ||||
| Other Current Assets | 2,667,427 | (53,293 | ) | |||||
| Accounts Payable and Accrued Expenses | 3,606,729 | 5,822,494 | ||||||
| Accrued Payroll | (1,842,877 | ) | 1,644,954 | |||||
| Accrued Interest | 3,952,044 | 1,201,458 | ||||||
| Health Plan Settlements Payable | (483,657 | ) | 938,965 | |||||
| Claims Payable | 18,173,851 | 32,295,208 | ||||||
| Net Cash Used in Operations | (39,827,450 | ) | (6,645,131 | ) | ||||
| Investing Activities: | ||||||||
| Purchases of Property, Plant and Equipment | (2,990,130 | ) | (2,232,652 | ) | ||||
| Acquisitions | (5,014,500 | ) | - | |||||
| Notes Receivable, Net | 120,463 | 336,130 | ||||||
| Net Cash Used in Investing Activities | (7,884,167 | ) | (1,896,521 | ) | ||||
| Financing Activities: | ||||||||
| Issuance (Redemption) of Member Units | - | (180,000 | ) | |||||
| Issuance of Long-Term Debt | 12,750,000 | 158,134 | ||||||
| Repayment of Long-Term and Short-Term Debt | (67,216 | ) | - | |||||
| Loan Origination and Closing Fees | (191,250 | ) | - | |||||
| Net Cash Provided by (Used In) Financing Activities | 12,491,534 | (21,866 | ) | |||||
| Net Change in Cash and Restricted Cash | (35,220,083 | ) | (8,563,519 | ) | ||||
| Cash and Restricted Cash at Beginning of Period | 39,902,947 | 32,904,847 | ||||||
| Cash and Restricted Cash at End of Period | $ | 4,682,864 | $ | 24,341,328 | ||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash Paid for Interest | 1,707,705 | 312,185 | ||||||
| Accrued Costs for Internally Developed Technology (in Process) | 123,027 | - |
See Accompanying Notes to Condensed Consolidated Financial Statements
HOLDINGS, LLC and SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
Note 1: Company Operations
P3 Health Group Holdings, LLC and Subsidiaries ("P3" or
"the Company" or "Holdings") was founded on April 12, 2017 and began commercial operations on April 20,
2017 to provide population health management services on an at-risk basis to insurance plans offering medical coverage to Medicare beneficiaries
under Medicare Advantage ("MA") programs. MA programs are insurance products created solely for Medicare beneficiaries. Insurance
plans contract directly with the Centers for Medicare and Medicaid Services ("CMS") to offer Medicare beneficiaries benefits
that replace traditional Medicare Fee for Service ("FFS") coverage.
The Company's contracts with health plans are based on an at-risk
shared savings model. Under this model, the Company is financially responsible for the cost of all contractually-covered services provided
to members assigned to the Company by health plans in exchange for a fixed monthly "capitation" payment, which is generally
a percentage of the payment health plans receive from CMS. Under this arrangement, Medicare beneficiaries generally receive all their
healthcare coverage through the Company's network of employed and affiliated physicians and specialists (except for emergency situations).
The services provided to health plans' members vary by contract.
These may include utilization management, care management, disease education, and maintenance of a quality improvement and quality management
program for members assigned to the Company. Effective January 1, 2019, the Company is also responsible for the credentialing of
Company providers, processing and payment of claims and the establishment of a provider network for certain health plans. At September 30,
2021 and December 31, 2020, P3 had agreements with fourteen and twelve health plans, respectively.
The initial terms of the Company's existing health plan contracts
currently extend from periods ending December 31, 2022 through December 31, 2025. After the initial term, most health plan agreements
automatically renew for various terms (usually one to two years) unless either party notifies the other, in writing, of its intent not
to renew in advance based on contractually obligated notification periods. Failure of the Company to retain certain health plan contracts
would have a material adverse impact on operating results.
The Company has Management Services Agreements ("MSAs")
and deficit funding agreements with Kahan, Wakefield, Abdou, PLLC and Bacchus, Wakefield, Kahan, PC (collectively, the "Network").
The MSAs provide that P3 Health Partners-Nevada, LLC will furnish administrative personnel, office supplies and equipment, general business
services, contract negotiation and billing and collection services to the Network. Fees for these services are the excess of the Network's
revenue over expenses. Per the deficit agreement, P3 Health Partners-Nevada, LLC will lend amounts to the Network to the extent expenses
exceed revenue(s). The loan bears interest at prime plus 2%.
In addition to P3's contracts with health plans, through its
relationship with the Network, the Company provides primary healthcare services through its employed physician clinic locations. These
primary care clinics are reimbursed for services provided under FFS contracts with various payers and through capitated - per member,
per month ("PMPM") arrangements.
HOLDINGS, LLC and SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
Note 2: Significant Accounting Policies
Basis of Presentation
These accompanying, interim condensed consolidated financial statements
are prepared in accordance with Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC")
954-205, Health Care Entities - Presentation of Financial Statements in conformity with Generally Accepted Accounting Principles
in the United States of America ("GAAP"). In the opinion of Management, all material adjustments of a normal recurring
nature have been made to present fairly the Company's financial position as of September 30, 2021 and the results of operations
and cash flows for the periods presented.
Principles of Consolidation
These accompanying condensed consolidated financial statements include
the accounts of P3 Health Group Holdings, LLC ("Holdings") and its six wholly-owned subsidiaries: P3 Health Group Management,
LLC ("P3-MGMT"); P3 Consulting, LLC ("P3-CS"); P3 Health Partners, LLC (P3 Health Partners-Arizona, LLC, "P3-AZ");
P3 Health Partners-Nevada, LLC ("P3-NV"); P3 Health Partners-Oregon, LLC ("P3-OR"); and P3 Health Partners-Florida,
LLC ("P3-FL"). P3 Health Partners ACO, LLC (Arizona Connected Care "AzCC") is a wholly owned subsidiary of P3-AZ.
The financial statements of Kahan, Wakefield, Abdou, PLLC ("KWA");
and Bacchus, Wakefield, Kahan, PC ("BACC") are consolidated with P3-NV. P3-NV is the primary beneficiary of these entities
due to management services and deficit funding agreements in place among them, see Note 1.
On August 22, 2019, P3-AZ was assigned all the equity in AzCC
for no consideration. The assets, liabilities, and operating activity of AzCC as of the assignment date are included in the Company's
condensed consolidated financial statements.
All significant transactions among these entities have been eliminated
Variable Interest Entities ("VIE" or "VIEs")
Management analyzes whether (or not) the Company has any financial
interests in VIEs. This analysis includes a qualitative review based on an evaluation of the design of the entity, its organizational
structure, including decision making ability and financial agreements, as well as a quantitative review. ASC 810, Variable Interest
Entities and Principles of Consolidation requires a reporting entity to consolidate a VIE when that reporting entity has a variable
interest that provides it with a controlling financial interest in the VIE. The entity which consolidates a VIE is referred to as the
primary beneficiary of the VIE. See Note 18 pertaining to VIEs.
HOLDINGS, LLC and SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
Management's Use of Estimates
Preparation of these condensed consolidated financial statements and
accompanying footnotes, in conformity with U.S. GAAP, requires Management to make estimates and assumptions that could affect amounts
reported here. Management bases its estimates on the best information available at the time, its experiences and various other assumptions
believed to be reasonable under the circumstances including estimates of the impact of COVID-19. The areas where significant estimates
are used in these accompanying financial statements include revenue recognition, the liability for unpaid claims, unit-based compensation,