Quarterly report pursuant to Section 13 or 15(d)

Variable Interest Entities

v3.22.2.2
Variable Interest Entities
9 Months Ended
Sep. 30, 2022
Variable Interest Entities  
Variable Interest Entities

Note 25: Variable Interest Entities

The Company prepares its consolidated financial statements in accordance with ASC 810, Consolidation, which provides for the consolidation of VIEs of which an entity is the primary beneficiary.

In connection with the Business Combinations further described in Note 1 and Note 7, the Company became the sole managing member of P3 LLC. The rights of the non-managing members of P3 LLC are limited and protective in nature and do not give substantive participation rights over the sole managing member. As a result, P3 LLC is considered a VIE. As the sole managing member, the Company has the right to direct the most significant activities of P3 LLC and the obligation to absorb losses and receive benefits and accordingly is considered the primary beneficiary.

Additionally, P3 LLC is the primary beneficiary of the Network.

P3, LLC entered Stock Transfer Restriction Agreements with the Practice Shareholders of the Network. The Stock Transfer Restriction Agreements, by way of a call option, unequivocally permit P3 LLC to appoint Successor Physicians if a Practice Shareholder vacates their ownership position.

Pursuant to ASC 810, Consolidation, both the “power of control” and “economics” criteria were reviewed for VIE consideration. P3 LLC’s ability to appoint Successor Physicians the Network demonstrates “power of control”. Also, there are Deficit Funding Agreements in place between P3 LLC and the Network. The Deficit Funding Agreement between P3 LLC and the members of the Network states that P3 LLC will advance funds, as needed, to support working capital needs to the extent operating expenses exceed gross revenue. These funding arrangements further illustrate and fulfill the economic criteria for VIE consolidation.

Practice Shareholders, who are employees of the Company, retain equity ownership in the Network, which represents nominal noncontrolling interests. The noncontrolling interests do not participate in the profit or loss of the Network, however.

P3 LLC, directly or indirectly via its wholly-owned subsidiaries, may not use or access any net assets of these VIEs to settle its obligations or the obligations of its wholly-owned subsidiaries.

The following tables provide a summary of the VIE’s assets, liabilities and operating performance.

Successor

ASSETS

    

September 30, 2022

    

December 31, 2021

Cash

$

5,413,965

$

7,570,247

Client Fees and Insurance Receivable, net

 

16,653

 

60,815

Prepaid Expenses and Other Current Assets

 

1,353,408

 

406,372

Property, Plant and Equipment, net

 

44,494

 

36,416

Investment in Other P3 Entities

 

6,000,000

 

6,000,000

TOTAL ASSETS

 

12,828,520

 

14,073,850

LIABILITIES AND MEMBERS’ DEFICIT

 

  

 

  

Accounts Payable and Accrued Expenses

 

7,653,560

 

4,804,704

Accrued Payroll

 

2,233,567

 

1,303,615

Due to Consolidated Entities of P3

 

27,001,570

 

24,110,831

TOTAL LIABILITIES

 

36,888,697

 

30,219,150

MEMBERS’ DEFICIT

 

(24,060,177)

 

(16,145,300)

TOTAL LIABILITIES AND MEMBERS’ DEFICIT

$

12,828,520

$

14,073,850

Successor

Predecessor

    

Three Months Ended

    

Three Months Ended

September 30, 2022

September 30, 2021

(As Restated)

Revenue

$

13,594,142

$

1,905,404

Expenses

 

15,731,721

 

4,707,369

Net Loss

$

(2,137,579)

$

(2,801,965)

Successor

Predecessor

    

Nine Months Ended

    

Nine Months Ended

September 30, 2022

September 30, 2021

(As Restated)

Revenue

$

39,462,716

$

5,815,261

Expenses

 

46,708,335

 

13,858,939

Net Loss

$

(7,245,619)

$

(8,043,678)