P3 Health Partners(PIII) - 2025 Q2 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements This section outlines the inherent risks and uncertainties that may cause actual results to differ from forward-looking statements - The report contains forward-looking statements subject to known and unknown risks, uncertainties, and assumptions that may cause actual results to differ materially[9][10][12] - Key risks include the Company's ability to continue as a going concern, the need to raise additional capital, a history of net losses, potential inability to maintain debt covenant compliance, and the relatively limited operating history[10] - Other significant risks involve reliance on management and key employees, ability to execute growth strategies, dependence on capitation payments, potential termination of Medicare Advantage contracts, and compliance with a heavily regulated industry[10][11] PART I—FINANCIAL INFORMATION This part presents the Company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the Company's organization, going concern status, accounting policies, fair value measurements, debt, and other financial details for the periods ended June 30, 2025 and December 31, 2024 Condensed Consolidated Balance Sheets (Unaudited) This section presents the Company's unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Cash | $38,581 | $38,816 | $(235) | -0.6% | | Restricted cash | $746 | $5,286 | $(4,540) | -85.9% | | Health plan receivable, net | $93,463 | $121,266 | $(27,803) | -22.9% | | Total Current Assets | $156,531 | $184,140 | $(27,609) | -15.0% | | Total Assets | $731,585 | $783,420 | $(51,835) | -6.6% | | Total Current Liabilities | $504,998 | $496,415 | $8,583 | 1.7% | | Total Liabilities | $644,407 | $633,891 | $10,516 | 1.7% | | Redeemable non-controlling interest| $42,719 | $73,593 | $(30,874) | -42.0% | | Total Stockholders' Equity | $44,459 | $75,936 | $(31,477) | -41.5% | - The Company had a working capital deficit of $348.5 million as of June 30, 2025[40] Condensed Consolidated Statements of Operations (Unaudited) This section presents the Company's unaudited condensed consolidated statements of operations for the periods ended June 30, 2025, and 2024 Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (3M) | % Change (3M) | | :-------------------- | :------------------------------- | :------------------------------- | :---------- | :------------ | | Capitated revenue | $351,724 | $374,306 | $(22,582) | -6.0% | | Total Operating Revenue | $355,788 | $379,157 | $(23,369) | -6.2% | | Medical expense | $351,350 | $365,171 | $(13,821) | -3.8% | | Operating Loss | $(34,124) | $(31,334) | $(2,790) | 8.9% | | Net Loss | $(43,665) | $(28,774) | $(14,891) | 51.8% | | Net Loss Attributable to Controlling Interest | $(20,362) | $(12,020) | $(8,342) | 69.4% | | Basic EPS | $(6.23) | $(4.40) | $(1.83) | 41.6% | | Diluted EPS | $(6.23) | $(7.37) | $1.14 | -15.5% | Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (6M) | % Change (6M) | | :-------------------- | :----------------------------- | :----------------------------- | :---------- | :------------ | | Capitated revenue | $721,241 | $758,440 | $(37,199) | -4.9% | | Total Operating Revenue | $729,013 | $767,645 | $(38,632) | -5.0% | | Medical expense | $723,393 | $747,228 | $(23,835) | -3.2% | | Operating Loss | $(72,212) | $(75,165) | $2,953 | -3.9% | | Net Loss | $(87,911) | $(78,380) | $(9,531) | 12.2% | | Net Loss Attributable to Controlling Interest | $(40,842) | $(30,720) | $(10,122) | 32.9% | | Basic EPS | $(12.52) | $(12.02) | $(0.50) | 4.2% | | Diluted EPS | $(12.52) | $(15.19) | $2.67 | -17.6% | Condensed Consolidated Statements of Stockholders' Equity and Mezzanine Equity (Unaudited) This section presents the Company's unaudited condensed consolidated statements of stockholders' equity and mezzanine equity Condensed Consolidated Statements of Stockholders' Equity and Mezzanine Equity (in thousands) | Metric (in thousands) | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :-------------------- | :---------------- | :------------- | :------------ | | Redeemable Non-controlling Interest | $73,593 | $57,829 | $42,719 | | Additional Paid in Capital | $579,129 | $586,923 | $588,494 | | Accumulated Deficit | $(503,193) | $(523,673) | $(544,035) | | Total Stockholders' Equity | $75,936 | $63,250 | $44,459 | - Total stockholders' equity decreased by $31.477 million from December 31, 2024, to June 30, 2025, primarily due to net losses and adjustments to redeemable non-controlling interest[19][28] Condensed Consolidated Statements of Cash Flows (Unaudited) This section presents the Company's unaudited condensed consolidated statements of cash flows for the periods ended June 30, 2025, and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(50,099) | $(30,272) | | Net cash provided by investing activities | $50 | $0 | | Net cash provided by financing activities | $45,274 | $67,540 | | Net change in cash and restricted cash | $(4,775) | $37,268 | | Cash and restricted cash, end of period | $39,327 | $78,202 | - Net cash used in operating activities increased by $19.827 million year-over-year, primarily due to changes in working capital and an increase in net loss[210] - Net cash provided by financing activities decreased by $22.266 million, driven by lower proceeds from debt and equity issuances compared to the prior year[212] Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed notes to the unaudited condensed consolidated financial statements Note 1: Organization This note describes the Company's organizational structure and primary business activities - P3 Health Partners Inc. is a patient-centered, physician-led population health management company, operating as the sole manager of P3 LLC[34] - The Company provides population health management services on an at-risk basis to insurance plans offering medical coverage to Medicare beneficiaries under Medicare Advantage programs, receiving fixed monthly 'capitation' payments[35][36] Note 2: Going Concern and Liquidity This note discusses the Company's going concern status and liquidity challenges - The Company has experienced net losses of $43.7 million and $87.9 million for the three and six months ended June 30, 2025, respectively, primarily due to adverse claims experience[39] - As of June 30, 2025, the Company had $38.6 million in unrestricted cash and a working capital deficit of $348.5 million, leading to substantial doubt about its ability to continue as a going concern within one year[40] Note 3: Significant Accounting Policies This note outlines the significant accounting policies used in preparing the financial statements - The financial statements are prepared in accordance with GAAP for interim information, with certain disclosures condensed or omitted[41][42] - The Company consolidates Variable Interest Entities (VIEs) where it is the primary beneficiary, including P3 LLC and several Network VIEs (physician practices)[45][46] Revenue Type (in thousands) | Revenue Type (in thousands) | Three Months Ended June 30, 2025 | % of Total (2025) | Three Months Ended June 30, 2024 | % of Total (2024) | | :-------------------------- | :------------------------------- | :---------------- | :------------------------------- | :---------------- | | Capitated revenue | $351,724 | 98.9% | $374,306 | 98.7% | | Other patient service revenue | $4,064 | 1.1% | $4,851 | 1.3% | | Total revenue | $355,788 | 100.0% | $379,157 | 100.0% | - On April 11, 2025, the Company effected a 1-for-50 reverse stock split for Class A and Class V common stock, retroactively adjusting all common stock amounts[52] Note 4: Recent Accounting Pronouncements This note details recent accounting pronouncements and their potential impact on the Company - The Company is evaluating the effects of new accounting pronouncements, including ASU 2024-03 (Expense Disaggregation Disclosures), ASU 2023-09 (Income Tax Disclosures), and ASU 2023-06 (Disclosure Improvements)[53][54][55] Note 5: Fair Value Measurements and Hierarchy This note provides information on fair value measurements and their classification within the fair value hierarchy Warrant liability (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Warrant liability | $4,988 | $10,312 | Key Level 3 Input | Key Level 3 Input | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Volatility | 94.9% | 91.7% | | Risk-free interest rate | 3.8% | 4.4% | | Exercise price | $25.45 | $25.00 | | Expected term | 5.8 Years | 6.2 years | - The Company recorded gains of $2.0 million and $5.3 million from mark-to-market adjustments of stock warrants for the three and six months ended June 30, 2025, respectively[59] Note 6: Property and Equipment This note details the Company's property and equipment, including changes during the period Property and Equipment (in thousands) | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Property and equipment, net | $4,687 | $5,734 | - The Company sold its remaining Florida assets for approximately $0.1 million on May 1, 2025, recognizing an immaterial loss on disposal[62] Note 7: Intangible Assets This note provides information on the Company's intangible assets and their amortization Intangible Assets (in thousands) | Intangible Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Medical licenses | $700 | $700 | | Customer relationships | $431,663 | $464,868 | | Trademarks | $94,932 | $102,208 | | Payor contracts | $3,055 | $3,290 | | Provider network | $3,050 | $3,284 | | Total Intangible Assets, net | $533,400 | $574,350 | - Amortization of intangible assets was $20.5 million and $40.9 million for the three and six months ended June 30, 2025, respectively[64] Note 8: Debt This note details the Company's debt obligations, including new promissory notes and their terms Long-term Debt (in thousands) | Long-term Debt (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Long-term debt, gross | $215,307 | $168,807 | | Less: unamortized debt issuance costs and original issue discount | $(33,351) | $(13,983) | | Less: current portion of long-term debt | $(80,000) | $(65,000) | | Long-term debt, net | $101,956 | $89,824 | - P3 LLC entered into a VGS 4 Promissory Note for up to $30.0 million in February 2025, maturing August 2028, with interest at 19.5% per annum (8.0% cash, 11.5% PIK, or 19.5% PIK)[66] - P3 LLC also entered into a VGS 5 Promissory Note for up to $70.0 million in May 2025, maturing August 2028, with interest at 19.5% per annum (8.0% cash, 11.5% PIK, or 19.5% PIK)[71] Note 9: Net Loss per Share This note presents the calculation of basic and diluted net loss per share Net Loss per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | | Basic Net Loss per Share | $(6.23) | $(4.40) | | Diluted Net Loss per Share | $(6.23) | $(7.37) | Net Loss per Share | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :----------------------------- | :----------------------------- | | Basic Net Loss per Share | $(12.52) | $(12.02) | | Diluted Net Loss per Share | $(12.52) | $(15.19) | - Potentially dilutive securities, including stock warrants, stock options, restricted stock units, and Class V common stock, were excluded from diluted EPS computation as their effect would have been anti-dilutive[79][80][81] Note 10: Redeemable Non-controlling Interest This note describes the Company's redeemable non-controlling interest and ownership structure Ownership (in thousands of units) | Ownership (in thousands of units) | June 30, 2025 | Ownership % (2025) | December 31, 2024 | Ownership % (2024) | | :-------------------------------- | :------------ | :----------------- | :---------------- | :----------------- | | P3 Health Partners Inc.'s ownership | 3,268 | 45.5% | 3,257 | 45.4% | | Non-controlling interest holders' | 3,919 | 54.5% | 3,919 | 54.6% | | Total Common Units | 7,187 | 100.0% | 7,176 | 100.0% | - No exchanges of redeemable non-controlling interest for Class A common stock occurred during the six months ended June 30, 2025, unlike the prior year[84] Note 11: Segment Reporting This note provides information on the Company's operating segments - The Company operates under one reportable segment[87] Segment Metric (in thousands) | Segment Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | | Operating revenue | $355,788 | $379,157 | | Medical claims expense | $(321,109) | $(333,217) | | Loss before income taxes | $(41,684) | $(27,806) | | Net loss | $(43,665) | $(28,774) | Note 12: Capitalization This note details changes in the Company's capitalization, including the reverse stock split - On April 11, 2025, the Company effected a 1-for-50 reverse stock split to meet Nasdaq Capital Market bid price requirements, converting 163.2 million Class A shares to 3.26 million and 196.0 million Class V shares to 3.92 million[89][90] Note 13: Variable Interest Entities This note describes the Company's involvement with Variable Interest Entities (VIEs) - P3 LLC is the primary beneficiary of Network VIEs (physician practices) through Management Services Agreements and deficit funding agreements, consolidating their financial results[94] VIE Financials (in thousands) | VIE Financials (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Total Assets | $9,981 | $9,256 | | Total Liabilities | $54,740 | $55,180 | | Members' Deficit | $(44,759) | $(45,924) | VIE Operating Performance (in thousands) | VIE Operating Performance (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Revenue | $5,395 | $9,354 | | Expense | $4,525 | $9,803 | | Net income (loss) | $870 | $(449) | Note 14: Related Parties This note discloses transactions and balances with related parties - The Company incurred Allymar service expenses of $0.7 million and $1.4 million for the three and six months ended June 30, 2025, respectively, included in medical expenses[100] - An immaterial amount of service expense was recorded for Nevada Behavioral Health Systems (NBHS) for the three and six months ended June 30, 2025, compared to $0.1 million and $0.3 million in 2024[101] Note 15: Income Taxes This note provides information on the Company's income tax position - The Company's tax rate is primarily affected by the recognition of a valuation allowance and the portion of income/expense allocated to the non-controlling interest[102] Note 16: Subsequent Events This note describes significant events that occurred after the reporting period - The second tranche of the VGS 5 Promissory Note, totaling $15.0 million, was fully funded as of August 14, 2025, with $8.5 million funded in July 2025 and $6.5 million on August 12, 2025[72][103][193] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the Company's business, key factors affecting performance, non-GAAP financial measures, detailed results of operations for the three and six months ended June 30, 2025 and 2024, and a discussion of liquidity and capital resources, including significant debt financing and going concern considerations Overview This section provides an overview of the Company's business model and market focus - P3 is a patient-centered, physician-led population health management company focused on the Medicare Advantage (MA) market, which covers approximately 33 million lives[107][109] - The Company primarily uses capitated contracts with health plans, receiving per member per month (PMPM) fees to manage healthcare needs, aligning incentives for quality care and cost reduction[110] - As of June 30, 2025, P3's PCP network served approximately 114,100 at-risk members across 24 markets in four states, with a network of approximately 2,800 physicians[112][148][149] Reverse Stock Split This section details the reverse stock split effected by the Company - On April 11, 2025, a 1-for-50 reverse stock split was effected for Class A and Class V common stock to meet Nasdaq listing requirements[113][114] - The split resulted in 3,263,093 Class A shares and 3,919,124 Class V shares outstanding, with proportional adjustments to equity awards and warrants[114][115] Key Factors Affecting our Performance This section outlines the primary factors influencing the Company's financial and operational performance - Performance is driven by growing Medicare Advantage membership through existing contracts (age-ins, FFS to MA conversions), adding new contracts in existing markets, and expanding into adjacent and new markets[118][119][120][121] - The Company aims to grow capitated revenue per member by improving documentation of patient acuity, which leads to higher risk-adjusted payments from Medicare[126] - Effective management of medical expenses, which represent 90% of total operating expense, is crucial, focusing on primary care to avoid costly downstream services[127] - Operating efficiencies are sought at both market and enterprise levels, with local G&A expected to decrease as a percentage of revenue with membership growth, despite absolute increases in corporate G&A due to public company costs[128][129] Impact of Seasonality This section describes how seasonal factors influence the Company's operations and financial results - At-risk member growth is highest in the first quarter due to new contracts and annual enrollment period selections[130] - Revenue per member generally declines over the year as new patients with less complete documentation join and higher-acuity patients expire, following an initial increase in January due to CMS risk adjustment factor revisions[131] - Medical expenses vary seasonally, with higher levels expected in the first and fourth quarters due to factors like prevalent illnesses (e.g., influenza) during colder months[132] Non-GAAP Financial Measures and Key Performance Metrics This section presents and defines the non-GAAP financial measures and key performance metrics used by management Adjusted EBITDA This section defines and presents Adjusted EBITDA, a non-GAAP measure of profitability - Adjusted EBITDA is a non-GAAP metric used to measure profitability and performance, excluding interest, income taxes, depreciation, amortization, mark-to-market warrant gain/loss, premium deficiency reserves, equity-based compensation, and other non-core items[135][136] Adjusted EBITDA (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Adjusted EBITDA loss | $(17,110) | $(8,847) | Adjusted EBITDA (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Adjusted EBITDA loss | $(39,300) | $(28,617) | Medical Margin This section defines and presents Medical Margin, a non-GAAP measure of revenue less medical claims expenses - Medical margin is a non-GAAP metric representing capitated revenue less medical claims expenses, expected to increase in absolute dollars as the platform grows[140][141] Medical Margin (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Medical margin | $30,615 | $41,089 | Medical Margin (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Medical margin | $47,815 | $77,641 | Gross Profit This section defines and presents Gross Profit, a key indicator of the P3 Care Model's economics - Gross profit is total operating revenue less medical claims expenses and other medical expenses, providing insight into the economics of the P3 Care Model[146] Gross Profit (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Gross profit | $4,438 | $13,986 | Gross Profit (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Gross profit | $5,620 | $20,417 | At-Risk Membership This section provides key metrics on the Company's at-risk membership At-Risk Membership | Metric | June 30, 2025 | June 30, 2024 | | :--------------- | :------------ | :------------ | | At-risk members | 114,100 | 128,100 | - At-risk membership decreased by 11% year-over-year[148] Affiliate Primary Care Physicians This section provides key metrics on the Company's network of affiliate primary care physicians Affiliate Primary Care Physicians | Metric | June 30, 2025 | June 30, 2024 | | :------------------------- | :------------ | :------------ | | Affiliate PCPs | 2,800 | 2,900 | - The number of affiliate primary care physicians decreased by 100 year-over-year[149] Platform Support Costs This section details the Company's platform support costs and their relation to operating revenue Platform Support Costs (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Platform support costs | $18,034 | $20,188 | | % of total operating revenue | 5.1% | 5.3% | Platform Support Costs (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Platform support costs | $37,055 | $41,460 | | % of total operating revenue | 5.1% | 5.4% | Key Components of Results of Operations This section explains the key components influencing the Company's financial results - Capitated revenue is derived from at-risk contracts with health plans, based on a fixed PMPM payment that fluctuates with patient acuity and performance incentives/penalties[153][154][155] - Medical expense includes costs for services provided by non-P3 employed providers and an estimate for incurred but not reported (IBNR) claims[157] - Premium deficiency reserves (PDR) are recognized when future healthcare and maintenance costs are expected to exceed anticipated premiums[158] - Other income (expense) includes interest expense, mark-to-market adjustments of stock warrants, and other gains/losses[162][163] Results of Operations This section provides a detailed comparison of the Company's financial results for the reported periods Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares the Company's financial performance for the three months ended June 30, 2025, and 2024 - Capitated revenue decreased by $22.6 million (6%) to $351.7 million, primarily due to an 11% decrease in at-risk members from strategic termination of underperforming contracts[172] - Medical expense decreased by $13.8 million (4%) to $351.4 million, driven by the reduction in at-risk members[174] - Premium deficiency reserve was a benefit of $6.0 million, an increase of $2.6 million (76%), reflecting management's assessment of increased future losses from contracts[175] - Corporate, general and administrative expense decreased by $3.3 million (12%) to $23.3 million, mainly due to reduced headcount and the sale of Florida operations[176] Comparison of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024 This section compares the Company's financial performance for the six months ended June 30, 2025, and 2024 - Capitated revenue decreased by $37.2 million (5%) to $721.2 million, primarily due to an 11% decrease in at-risk members from strategic contract terminations[177] - Medical expense decreased by $23.8 million (3%) to $723.4 million, driven by the decrease in at-risk members[179] - Premium deficiency reserve was a benefit of $12.9 million, an increase of $10.5 million (439%), reflecting increased expected future losses[180] - Corporate, general and administrative expense decreased by $5.7 million (11%) to $48.3 million, due to headcount reduction and the sale of Florida operations[181] Liquidity and Capital Resources This section discusses the Company's liquidity position, capital sources, uses, and going concern considerations Cash Sources This section details the Company's sources of cash and financing activities - Operations are financed through Business Combinations proceeds, equity private placements, payor payments, and promissory notes[184][185] - As of June 30, 2025, the Company had $38.6 million in unrestricted cash and cash equivalents[185] - The Company has experienced net losses and requires additional capital through debt or equity financing; failure to secure funding may necessitate curtailing activities or asset sales[186] VGS 4 Promissory Note This section describes the terms and conditions of the VGS 4 Promissory Note - P3 LLC secured a VGS 4 Promissory Note for up to $30.0 million in February 2025, fully drawn in two tranches, maturing August 2028, with 19.5% annual interest (primarily PIK)[187][191] - The note includes mandatory prepayments from asset sales and VGS 4's right to demand full payment upon change of control or qualified financings, and restricts P3 LLC's ability to incur indebtedness and make investments[188][189] VGS 5 Promissory Note This section describes the terms and conditions of the VGS 5 Promissory Note - P3 LLC secured a VGS 5 Promissory Note for up to $70.0 million in May 2025, with a first tranche of $15.0 million drawn, maturing August 2028, with 19.5% annual interest (primarily PIK)[192][197] - The note includes mandatory prepayments from asset sales and VGS 5's right to demand full payment upon change of control or qualified financings, and restricts P3 LLC's ability to incur indebtedness and make investments[194][195] Asset sale This section details the Company's asset sale activities during the period - On May 1, 2025, P3 Florida sold its remaining MA-related assets in Apollo Beach and Clearwater, Florida, for approximately $0.1 million[199] Cash Uses This section outlines the Company's primary uses of cash - Primary cash uses include payments for medical expenses, administrative expenses, care model costs, and debt service[200] - The estimated Tax Receivable Agreement (TRA) liability is $11.5 million as of June 30, 2025, but no TRA liability has been recorded due to the Company's history of losses making payments not probable[203] Liquidity and Going Concern This section addresses the Company's liquidity challenges and going concern assessment - Existing cash resources are not sufficient to support planned operations for at least the next year, leading to substantial doubt about the Company's ability to continue as a going concern[206] - The Company is exploring additional debt and equity financing, but there is no assurance such funding will be available on favorable terms, potentially requiring curtailment of activities or asset divestment[206] Cash Flows This section provides an analysis of the Company's cash flows from operating, investing, and financing activities Operating Activities This section details cash flows from the Company's operating activities - Net cash used in operating activities was $50.1 million for the six months ended June 30, 2025, an increase from $30.3 million in the prior year, primarily due to changes in working capital and increased net loss[210] Investing Activities This section details cash flows from the Company's investing activities - Net cash provided by investing activities was $0.1 million for the six months ended June 30, 2025, from the sale of remaining Florida assets[211] Financing Activities This section details cash flows from the Company's financing activities - Net cash provided by financing activities was $45.3 million for the six months ended June 30, 2025, primarily from VGS 4 and VGS 5 Promissory Notes and short-term financing[212] - This represents a decrease from $67.5 million in the prior year, which included proceeds from a private placement of Class A common stock and warrants[212] Critical Accounting Estimates This section discusses management's critical accounting estimates and judgments - Management uses judgment in applying accounting policies and making estimates, with no significant changes to critical accounting estimates since the 2024 Form 10-K[214] Recent Accounting Pronouncements This section refers to disclosures on recent accounting standards and their anticipated effects - Refer to Note 4 for a description of recent accounting standards and their anticipated effects[216] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for Smaller Reporting Companies, and therefore, no disclosures are provided - Quantitative and Qualitative Disclosures About Market Risk are not required for Smaller Reporting Companies[217] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2025, concluding they were effective. No material changes in internal control over financial reporting occurred during the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate reporting[219] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[220] PART II—OTHER INFORMATION This part provides additional information including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The Company is involved in various legal and regulatory proceedings in the ordinary course of business. Notably, it received a Civil Investigative Demand (CID) from the DOJ in June 2024 concerning arrangements with insurance agents and brokers, with the Company cooperating with the investigation - The Company is a party to various claims, legal, and regulatory proceedings arising in the ordinary course of business[223] - In June 2024, the Company received a Civil Investigative Demand (CID) from the U.S. Department of Justice (DOJ) regarding its arrangements with insurance agents and brokers, and is cooperating with the investigation[224] Item 1A. Risk Factors This section updates previously disclosed risk factors, highlighting potential issues with California regulations regarding financial solvency for affiliated physician groups and the ongoing risk of delisting from The Nasdaq Capital Market despite regaining compliance with the bid price rule after a reverse stock split - Failure of affiliated physician groups to satisfy California Department of Managed Health Care (DMHC) regulations related to financial solvency and operational performance could lead to sanctions or limitations on business in California[225][228] - The Company faces a risk of delisting from The Nasdaq Capital Market if it fails to meet continued listing requirements, despite regaining compliance with the bid price rule after a 1-for-50 reverse stock split on April 11, 2025[227][229][230] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the quarter ended June 30, 2025, that were not previously disclosed - No unregistered sales of equity securities occurred during the quarter ended June 30, 2025, that were not otherwise disclosed in a Current Report on Form 8-K[232] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company - This item is not applicable[233] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable[234] Item 5. Other Information No other material information is reported, and there were no new insider trading arrangements adopted or terminated by directors or officers during the quarter - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[237] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including merger agreements, certificate of incorporation amendments, debt agreements (VGS 5 Promissory Note, Warrant Agreement, Subordination Agreement, Ninth Amendment to Term Loan Agreement), and certifications - Key exhibits include the Unsecured Promissory Note, Warrant Agreement, Subordination Agreement, and Ninth Amendment to Term Loan Agreement related to VBC Growth SPV 5, LLC[238] - Certifications from the Principal Executive Officer and Principal Financial Officer are filed/furnished as exhibits[238][239]