P3 Health Partners Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Variable Interest Entities

Variable Interest Entities

9 Months Ended

Sep. 30, 2023

Note 13: Variable Interest Entities

P3 LLC has Management Services Agreements (“MSAs”) and deficit funding agreements with the Network. The MSAs provide that the P3 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 funding agreements, P3 LLC is obligated to advance funds, as needed, to support the Network’s working capital needs to the extent operating expenses exceed gross revenue. These advances accrue interest at a rate of prime plus 2%. Net advances made to the Network and accrued interest on those advances are presented within due to consolidated entities of P3 in the table below. Additionally, P3 LLC entered into stock transfer restriction agreements with the practice shareholders of the Network, which, by way of a call option, unequivocally permit P3 LLC to appoint successor physicians if a practice shareholder vacates their ownership position. Accordingly, P3 LLC identifies itself as the primary beneficiary of the Network. Practice shareholders, who are employees of P3 LLC, retain equity ownership in the Network, which represents nominal non-controlling interests; however, the non-controlling interests do not participate in the profit or loss of the Network.

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. Additionally, the creditors of the VIEs do not have recourse to the net assets of P3 LLC.

Since P3 LLC represents substantially all the assets and liabilities of the Company, the following tables provide a summary of the assets, liabilities, and operating performance of only VIEs held at the P3 LLC level.


	September 30, 2023		December 31, 2022
	(in thousands)
ASSETS
Cash	$	9,313	$	1,759
Clinic fees, insurance and other receivable	201		1,178
Prepaid expenses and other current assets	1,424		121

Property and equipment, net	16		44
Other long-term assets	98		—
Due from consolidated entities of P3	—		3,012
TOTAL ASSETS	$	11,052	$	6,114
LIABILITIES AND MEMBERS’ DEFICIT
Accounts payable	$	5,103	$	7,800
Accrued expenses and other current liabilities	916		262
Accrued payroll	2,862		1,885
Claims payable	6,109		—
Other long-term liabilities	886		—
Due to consolidated entities of P3	46,049		36,025
TOTAL LIABILITIES	61,925		45,972
MEMBERS’ DEFICIT	(50,873)		(39,858)
TOTAL LIABILITIES AND MEMBERS’ DEFICIT	$	11,052	$	6,114


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)
Revenue	$	9,024	$	13,594	$	29,374	$	39,463
Expense	11,364		15,732		36,886		46,709
Net loss	$	(2,340)	$	(2,138)	$	(7,512)	$	(7,246)