Filed Pursuant to Rule 424(b)(3)
Registration No. 333-271565
Prospectus Supplement No. 3
(To Prospectus dated June 14, 2023)
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P3 Health Partners, Inc.
139,847,114 Shares of Class A Common Stock 
This prospectus supplement updates, amends and supplements the prospectus dated June 14, 2023 (the “Prospectus”), relating to the resale or other disposition by the selling stockholders identified in the prospectus of up to an aggregate of 139,847,114 shares of Class A Common Stock, par value $0.0001 per share (the “Class A Common Stock”) of P3 Health Partners Inc. (the “Company”), of which 69,157,145 shares are presently issued and outstanding, 59,934,479 shares are issuable upon exercise of warrants to purchase shares of Class A Common Stock and 10,755,490 shares are issuable upon exercise of pre-funded warrants to purchase shares of Class A Common Stock, which forms a part of our Registration Statement on Form S-1 (Registration No. 333-271565).
This prospectus supplement is being filed to update, amend and supplement the Prospectus with the information contained in our Quarterly Report on Form 10-Q filed with the SEC on November 8, 2023, which is set forth below.
This prospectus supplement is not complete without the Prospectus. This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement, and is qualified by reference thereto, except to the extent that the information in this prospectus supplement updates or supersedes the information contained in the Prospectus. Please keep this prospectus supplement with your Prospectus for future reference.
Our Class A Common Stock is listed on the Nasdaq Stock Market (“Nasdaq”) under the symbol “PIII”. On November 7, 2023, the closing sale price of our Class A Common Stock was $1.42 per share.
INVESTING IN OUR SECURITIES INVOLVES RISKS THAT ARE DESCRIBED IN THE “RISK FACTORS” SECTION BEGINNING ON PAGE 4 OF THE PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the Prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is November 8, 2023.



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to

Commission file number: 001-40033

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P3 Health Partners Inc.
(Exact name of registrant as specified in its charter)
Delaware85-2992794
(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)
(702) 910–3950
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange
on which registered
Class A common stock, par value $0.0001 per share PIIIThe Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50PIIIWThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer oAccelerated filer xNon-accelerated filer oSmaller reporting company xEmerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 1, 2023, the registrant had 115,242,028 shares of Class A common stock, par value $0.0001 and 197,846,771 shares of Class V common stock, par value $0.0001 outstanding.




TABLE OF CONTENTS
Page


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 (the “Form 10-Q”) contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Form 10-Q, including statements regarding our future results of operations and financial position, business and growth strategy, prospective products, product approvals, research and development costs, future revenue, timing and likelihood of success, plans and objectives of management for future operations, our ability to raise additional capital and continue as a going concern, future results of anticipated products and prospects, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “would” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.
The forward-looking statements in this Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Form 10-Q and are subject to a number of known and unknown risks, uncertainties and assumptions, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, without limitation, the following:
Our ability to continue as a going concern.
Our need to raise additional capital to fund our existing operations or develop and commercialize new services or expand our operations.
We have a history of net losses. We expect to continue to incur losses for the foreseeable future and may never achieve or maintain profitability.
We may not be able to maintain compliance with our debt covenants in the future, or obtain required waivers from our lenders, which could result in an event of default.
Our relatively limited operating history makes it difficult to evaluate our future prospects and the risks and challenges we may encounter.
Intangible assets represent a substantial component of our total assets. If our operating performance falls below projections or if there are material changes to management’s assumptions, we have been and could in the future be required to recognize significant non-cash charges to operating earnings for intangible asset impairment.
We rely on our management team and key employees, and our business, financial condition, cash flows and results of operations could be harmed if we are unable to retain qualified personnel.
Our growth depends in part on our ability to identify and develop successful new geographies, physician partners, payors and patients. If we are not able to successfully manage our growth or execute upon our growth strategies, there may be material adverse effect on our business, financial condition, cash flows and results of operations.
If growth in the number of patients and physician partners on our platform decreases, or the number of services that we are able to provide to physician partners and members decreases, due to legal, economic or business developments, our business, financial condition and results of operations will be harmed.
We primarily depend on reimbursement by third-party payors, as well as payments by individuals, which could lead to delays and uncertainties in the timing and process of reimbursement, including any changes or reductions in Medicare reimbursement rates or rules.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 1

The termination or non-renewal of the Medicare Advantage (“MA”) contracts held by the health plans with which we contract, or the termination or nonrenewal of our contracts with those plans, could have a material adverse effect on our revenue and our operations.
We are dependent on our affiliated professional entities, physician partners and other providers to effectively manage the quality and cost of care and perform obligations under payor contracts.
Reductions in the quality ratings of the health plans we serve could have a material adverse effect on our business, results of operations, financial condition and cash flows.
We conduct business in a heavily regulated industry and if we fail to adhere to all of the complex government laws and regulations that apply to our business, we could incur fines or penalties or be required to make changes to our operations or experience adverse publicity, any or all of which could have a material adverse effect on our business, results of operations, financial condition, cash flows, and reputation.
Developments affecting spending by the healthcare industry could adversely affect our business.
The factors described under Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2023, as amended by our Form 10-K/A filed with the SEC on May 1, 2023 (as amended, the “2022 Form 10-K”), as updated by Part II, Item 1A. “Risk Factors” and Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in our subsequent filings with the SEC).
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
You should read this Form 10-Q and the documents that we reference in this Form 10-Q and have filed as exhibits hereto completely and with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Unless the context otherwise requires, “we,” “us,” “our,” “P3” and the “Company” refer to P3 Health Partners Inc. and its subsidiaries.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 2

PART I—FINANCIAL INFORMATION.
Item 1. Financial Statements.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 3

P3 HEALTH PARTNERS INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
September 30, 2023December 31, 2022
ASSETS
CURRENT ASSETS:
Cash$52,562 $17,537 
Restricted cash4,878 920 
Health plan receivable, net of allowance for credit losses of $150 and $0, respectively
117,200 72,092 
Clinic fees, insurance and other receivable2,225 7,500 
Prepaid expenses and other current assets2,799 2,643 
TOTAL CURRENT ASSETS179,664 100,692 
Property and equipment, net9,360 8,839 
Intangible assets, net687,875 751,050 
Other long-term assets19,993 15,990 
TOTAL ASSETS (1)
$896,892 $876,571 
LIABILITIES, MEZZANINE EQUITY and STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$11,630 $11,542 
Accrued expenses and other current liabilities20,957 16,647 
Accrued payroll5,629 8,224 
Health plan settlements payable35,422 13,608 
Claims payable155,497 151,207 
Premium deficiency reserve17,014 26,375 
Accrued interest21,153 14,061 
TOTAL CURRENT LIABILITIES267,302 241,664 
Operating lease liability13,556 11,516 
Warrant liabilities1,844 1,517 
Contingent consideration4,907 4,794 
Long-term debt, net108,252 94,421 
TOTAL LIABILITIES (1)
395,861 353,912 
COMMITMENTS AND CONTINGENCIES (Note 12)
MEZZANINE EQUITY:
Redeemable non-controlling interest313,088 516,805 
STOCKHOLDERS’ EQUITY:
Class A common stock, $.0001 par value; 800,000 shares authorized; 114,249 shares and 41,579 shares issued and outstanding, respectively
11 
Class V common stock, $.0001 par value; 205,000 shares authorized; 198,354 shares and 201,592 shares issued and outstanding, respectively
20 20 
Additional paid in capital529,794 315,375 
Accumulated deficit(341,882)(309,545)
TOTAL STOCKHOLDERS’ EQUITY187,943 5,854 
TOTAL LIABILITIES, MEZZANINE EQUITY & STOCKHOLDERS’ EQUITY$896,892 $876,571 
____________________
(1)The Company’s condensed consolidated balance sheets include the assets and liabilities of its consolidated variable interest entities (“VIEs”). As discussed in Note 13 “Variable Interest Entities,” P3 LLC is itself a VIE. P3 LLC represents substantially all the assets and liabilities of the Company. As a result, the language and amounts below refer only to VIEs held at the P3 LLC level. The condensed consolidated balance sheets include total assets that can be used only to settle obligations of the P3 LLC’s VIEs totaling $11.1 million and $3.1 million as of September 30, 2023 and December 31, 2022, respectively, and total liabilities of the P3 LLC’s consolidated VIEs for which creditors do not have recourse to the general credit of the Company totaled $15.9 million and $9.9 million as of September 30, 2023 and December 31, 2022, respectively. These VIE assets and liabilities do not include $45.9 million and $33.0 million of net amounts due to affiliates as of September 30, 2023 and December 31, 2022, respectively, as these are eliminated in consolidation and not presented within the condensed consolidated balance sheets. See Note 13 “Variable Interest Entities.”
See accompanying notes to condensed consolidated financial statements.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 4

P3 HEALTH PARTNERS INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
OPERATING REVENUE:
Capitated revenue$285,153 $243,988 $909,473 $780,775 
Other patient service revenue3,198 4,272 10,041 10,483 
TOTAL OPERATING REVENUE288,351 248,260 919,514 791,258 
OPERATING EXPENSE:    
Medical expense279,220 254,777 867,061 788,046 
Premium deficiency reserve (12,489)(7,302)(9,361)(10,116)
Corporate, general and administrative expense33,065 37,863 97,931 117,560 
Sales and marketing expense654 1,118 2,512 3,391 
Depreciation and amortization21,721 21,815 65,041 65,287 
Goodwill impairment— — — 851,456 
TOTAL OPERATING EXPENSE322,171 308,271 1,023,184 1,815,624 
OPERATING LOSS(33,820)(60,011)(103,670)(1,024,366)
OTHER INCOME (EXPENSE):    
Interest expense, net(4,002)(2,963)(11,939)(8,418)
Mark-to-market of stock warrants755 (2,568)(327)3,386 
Other190 213 (455)173 
TOTAL OTHER EXPENSE(3,057)(5,318)(12,721)(4,859)
LOSS BEFORE INCOME TAXES(36,877)(65,329)(116,391)(1,029,225)
PROVISION FOR INCOME TAXES (412)— (928)— 
NET LOSS(37,289)(65,329)(117,319)(1,029,225)
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NON-CONTROLLING INTEREST(23,993)(54,156)(85,008)(853,125)
NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST$(13,296)$(11,173)$(32,311)$(176,100)
NET LOSS PER SHARE (Note 9):
Basic$(0.12)$(0.27)$(0.37)$(4.24)
Diluted$(0.12)$(0.27)$(0.41)$(4.27)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Note 9):
Basic114,19841,57988,01041,579
Diluted312,679243,036288,379241,263
See accompanying notes to condensed consolidated financial statements.

P3 Health Partners Inc. | Q3 2023 Form 10-Q | 5

P3 HEALTH PARTNERS INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY
(in thousands)
(unaudited)
Redeemable
Non-controlling
Interest
Class A Common StockClass V Common Stock
Additional
Paid in Capital
Accumulated
Deficit
Total Stockholders’
Equity
SharesAmountSharesAmount
STOCKHOLDERS’ EQUITY, December 31, 2021$1,790,617 41,579$196,554$20 $312,946 $(39,418)$273,552 
Vesting of Class V common stock awards— — 549— — — — 
Equity-based compensation11,711 — — — — — 
Net loss(50,213)— — — (10,577)(10,577)
STOCKHOLDERS’ EQUITY, March 31, 20221,752,115 41,579197,10320 312,946 (49,995)262,975 
Vesting of Class V common stock awards— — 4,320— — — — 
Equity-based compensation3,716 — — — — — 
Net loss(748,756)— — — (154,350)(154,350)
STOCKHOLDERS’ EQUITY, June 30, 20221,007,075 41,579201,42320 312,946 (204,345)108,625 
Vesting of Class V common stock awards— — 107— — — — 
Equity-based compensation1,784 — — — — — 
Fair value adjustment to redeemable non-controlling interests19,375 — — (19,375)— (19,375)
Net loss(54,156)— — — (11,174)(11,174)
STOCKHOLDERS’ EQUITY, September 30, 2022
$974,078 41,579$201,530$20 $293,571 $(215,519)$78,076 
Redeemable
Non-controlling
Interest
Class A Common StockClass V Common Stock
Additional
Paid in Capital
Accumulated
Deficit
Total Stockholders’
Equity
SharesAmountSharesAmount
STOCKHOLDERS’ EQUITY, December 31, 2022$516,805 41,579$201,592$20 $315,375 $(309,545)$5,854 
Cumulative adjustment due to adoption of new credit loss standard(124)— — — — (26)(26)
Vesting of Class V common stock awards— — 275 — — — — 
Equity-based compensation291 — — 686 — 686 
Net loss(43,249)— — — (9,199)(9,199)
STOCKHOLDERS’ EQUITY, March 31, 2023473,723 41,579201,86720 316,061 (318,770)(2,685)
Exchanges of redeemable non-controlling interest for Class A common stock— 3,362— (3,362)— — — — 
Equity-based compensation291 — — 740 — 740 
Fair value adjustment to redeemable non-controlling interest330,617 — — (330,617)— (330,617)
Remeasurement adjustment to redeemable non-controlling interest resulting from ownership changes(119,630)— — 119,630 — 119,630 
Private placement, net of offering costs— 69,157— 86,575 — 86,582 
Net loss(17,766)— — — (9,816)(9,816)
STOCKHOLDERS’ EQUITY, June 30, 2023667,235 114,09811 198,50520 192,389 (328,586)(136,166)
Exchanges of redeemable non-controlling interest for Class A common stock— 151— (151)— — — — 
Equity-based compensation105 — — 2,146 — 2,146 
Restricted stock unit awards issued in satisfaction of executive transaction bonuses— — — 5,000 — 5,000 
Fair value adjustment to redeemable non-controlling interest(330,617)— — 330,617 — 330,617 
Remeasurement adjustment to redeemable non-controlling interest resulting from ownership changes358 — — (358)— (358)
Net loss(23,993)— — — (13,296)(13,296)
STOCKHOLDERS’ EQUITY, September 30, 2023
$313,088 114,249 $11 198,354 $20 $529,794 $(341,882)$187,943 
See accompanying notes to condensed consolidated financial statements.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 6

P3 HEALTH PARTNERS INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(117,319)$(1,029,225)
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation and amortization65,041 65,287 
Equity-based compensation4,259 17,211 
Goodwill impairment— 851,456 
Amortization of original issue discount and debt issuance costs405 — 
Accretion of contingent consideration113 291 
Mark-to-market adjustment of stock warrants327 (3,386)
Premium deficiency reserve (9,361)(10,116)
Changes in assets and liabilities:  
Health plan receivable(45,258)(31,247)
Clinic fees, insurance, and other receivable5,275 (1,623)
Prepaid expenses and other current assets(429)3,462 
Other long-term assets(1,214)— 
Accounts payable, accrued expenses, and other current liabilities2,758 4,560 
Accrued payroll2,405 1,054 
Health plan settlements payable21,814 (1,922)
Claims payable4,290 32,747 
Accrued interest7,092 3,885 
Operating lease liability(348)3,501 
Net cash used in operating activities(60,150)(94,065)
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property and equipment(2,039)(2,283)
Acquisitions, net of cash acquired— (5,500)
Net cash used in investing activities(2,039)(7,783)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Proceeds from long-term debt, net of original issuance discount14,101 — 
Proceeds from private placement offering, net of offering costs paid87,244 — 
Repayment of short-term and long-term debt— (3,625)
Payment of debt issuance costs(173)— 
Net cash provided by (used in) financing activities101,172 (3,625)
Net change in cash and restricted cash38,983 (105,473)
Cash and restricted cash, beginning of period18,457 140,834 
Cash and restricted cash, end of period$57,440 $35,361 
See accompanying notes to condensed consolidated financial statements.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 7

P3 HEALTH PARTNERS INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Organization
Note 2: Going Concern and Liquidity
Note 3: Significant Accounting Policies
Note 4: Recent Accounting Pronouncements
Note 5: Fair Value Measurements and Hierarchy
Note 6: Property and Equipment
Note 7: Intangible Assets
Note 8: Debt
Note 9: Net Loss per Share
Note 10: Redeemable Non-controlling Interest
Note 11: Segment Reporting
Note 12: Commitments and Contingencies
Note 13: Variable Interest Entities
Note 14: Capitalization
Note 15: Subsequent Events
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 8

Note 1: Organization
Description of Business
P3 Health Partners Inc. (“P3”), f/k/a Foresight Acquisition Corp., is a patient-centered and physician-led population health management company and, for accounting purposes, the successor to P3 Health Group Holdings, LLC and its subsidiaries (collectively, “P3 LLC,” and together with P3, the “Company”).
P3 LLC 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 programs. Medicare Advantage 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.
On December 3, 2021, (the “Closing Date”), P3 and P3 LLC consummated a series of business combinations pursuant to which, among other things, P3 LLC merged with and into FAC Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub”) (the “P3 Merger”), with Merger Sub as the surviving company, which was renamed P3 LLC, and FAC-A Merger Sub Corp., a Delaware corporation and a wholly owned subsidiary of P3, FAC-B Merger Sub Corp., a Delaware corporation and a wholly owned subsidiary of the P3 (together with FAC-A Merger Sub Corp., the “Merger Corps”) merged with and into CPF P3 Blocker-A, LLC, a Delaware limited liability company, CPF P3 Blocker-B, LLC a Delaware limited liability company (together with CPF P3 Blocker-A, LLC, the “Blockers”), with the Blockers as the surviving entities and wholly owned subsidiaries of P3 (collectively, the “Business Combinations”). Upon completion of the Business Combinations (the “Closing”), the Company was organized in an “Up-C” structure in which P3 directly owned approximately 17.1% of the common units of P3 LLC (“Common Units”) and became the sole manager of P3 LLC. Following the Closing, substantially all of the Company’s assets are held and operations are conducted by P3 LLC, and P3’s only assets are equity interests in P3 LLC.
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. The Company is also responsible for the credentialing of its providers, processing and payment of claims, and the establishment of a provider network for certain health plans.
In addition to the Company’s contracts with health plans, 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.
Note 2: Going Concern and Liquidity
The accompanying unaudited interim condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced losses since its inception and had net losses of $37.3 million and $65.3 million for the three months ended September 30, 2023 and 2022, respectively, and $117.3 million and $1,029.2 million for the nine months ended September 30, 2023 and 2022, respectively. Such losses were primarily the result of goodwill impairment loss with respect to the nine months ended September 30, 2022, net increases in certain noncash expenses including equity-based compensation and mark-to-market adjustments for warrants and premium deficiency reserves, as well as costs incurred in adding new members, building relationships with physician partners and payors, and developing new services. The Company anticipates operating losses and negative cash flows to continue for the foreseeable future as it continues to grow membership.
As of September 30, 2023 and December 31, 2022, the Company had $52.6 million and $17.5 million, respectively, in unrestricted cash and cash equivalents available to fund future operations. The Company’s capital requirements will depend on many factors, including the pace of the Company’s growth, its ability to manage medical
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 9

costs, the maturity of its members, and its ability to raise capital. The Company may need to use available capital resources and/or raise additional capital earlier than currently anticipated. When the Company pursues additional debt and/or equity financing, there can be no assurance that such financing will be available on terms commercially acceptable to the Company. If the Company is unable to obtain additional funding when needed, it will need to curtail planned activities in order to reduce costs, which will likely have an unfavorable effect on the Company’s ability to execute on its business plan, and have an adverse effect on its business, results of operations, and future prospects. As a result of these matters, substantial doubt exists about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. The accompanying unaudited interim condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Note 3: Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of the U.S. Securities and Exchange Commission (“SEC”) Regulation S-X. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2022. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations dealing with interim financial statements.
Management believes the accompanying condensed consolidated financial statements reflect all adjustments of a normal recurring nature necessary for a fair presentation of periods presented. The consolidated operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or for any other future annual or interim period.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and all significant intercompany transactions and balances have been eliminated.
The Company periodically evaluates entities for consolidation either through ownership of a majority voting interest, or through means other than voting interest, in accordance with the Variable Interest Entity (“VIE”) accounting model. This evaluation includes a qualitative review of the design of the entity, its organizational structure, including decision making ability and financial agreements, as well as a quantitative review. The Company consolidates a VIE when it has a variable interest that provides it with a controlling financial interest in the VIE, referred to as the primary beneficiary of the VIE.
As the sole managing member of P3 LLC, P3 has the right to direct the most significant activities of P3 LLC and the obligation to absorb losses and receive benefits. 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. Accordingly, P3 identifies itself as the primary beneficiary of P3 LLC and began consolidating P3 LLC as of the Closing Date resulting in a non-controlling interest related to the Common Units held by members other than P3. Additionally, as more fully described in Note 13 “Variable Interest Entities,” P3 LLC is the primary beneficiary of the following physician practices (collectively, the “Network”):
Kahan, Wakefield, Abdou, PLLC
Bacchus, Wakefield, Kahan, PC
P3 Health Partners Professional Services P.C.
P3 Medical Group, P.C.
P3 Health Partners California, P.C. (f/k/a Omni IPA Medical Group, Inc.)
Comprehensive Loss
Comprehensive loss includes net loss to common stockholders as well as other changes in equity that result from transactions and economic events other than those with stockholders. There was no difference between comprehensive loss and net loss to common stockholders for the periods presented.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 10

Use of Estimates
The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that could affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to allowance for credit losses, revenue recognition, the liability for unpaid claims, equity-based compensation, premium deficiency reserves (“PDR”), fair value and impairment recognition of long-lived assets (including intangibles), fair value of liability classified instruments, and judgments related to deferred income taxes. The Company bases its estimates on the best information available at the time, its experiences, and various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Significant Accounting Policies
A description of the Company’s significant accounting policies is included in the audited consolidated financial statements within Annual Report on Form 10-K for the year ended December 31, 2022. No changes to significant accounting policies have occurred since December 31, 2022, with the exception of those detailed below.
Revenue Recognition
The Company categorizes revenue based on various factors such as the nature of contracts as follows:
Revenue TypeThree Months Ended
September 30, 2023
% of Total Three Months Ended
September 30, 2022
% of Total
(dollars in thousands)
Capitated revenue$285,153 98.9 %$243,988 98.3 %
Other patient service revenue:   
Clinic fees and insurance1,246 0.4 1,957 0.8 
Care coordination / management fees1,784 0.6 1,730 0.7 
Incentive fees168 0.1 585 0.2 
Total other patient service revenue3,198 1.1 4,272 1.7 
Total revenue$288,351 100.0 %$248,260 100.0 %
Revenue TypeNine Months Ended
September 30, 2023
% of TotalNine Months Ended
September 30, 2022
% of Total
(dollars in thousands)
Capitated revenue$909,473 98.9 %$780,775 98.7 %
Other patient service revenue:   
Clinic fees and insurance3,890 0.4 4,103 0.5 
Shared risk— — 55 — 
Care coordination / management fees5,699 0.6 4,413 0.6 
Incentive fees452 0.1 1,912 0.2 
Total other patient service revenue10,041 1.1 10,483 1.3 
Total revenue$919,514 100.0 %$791,258 100.0 %
During the three months ended September 30, 2023 and 2022, four health plan customers each accounted for 10% or more of total revenue and collectively comprised 58% and 65% of the Company’s total revenue, respectively. During each of the nine months ended September 30, 2023 and 2022, four health plan customers each accounted for 10% or more of total revenue and collectively comprised 61% and 67% of the Company’s total revenue, respectively. Three health plan
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 11

customers accounted for 10% or more of total health plan receivable each as of September 30, 2023 and December 31, 2022.
Reclassifications
Certain amounts in the accompanying condensed consolidated financial statements and accompanying notes have been reclassified to be consistent with the current period presentation. These reclassifications had no impact on the Company’s financial condition, results of operations, or net cash flows.
Note 4: Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”)
Accounting Standards Update (“ASU”) 2016-13 introduced a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new current expected credit losses model generally calls for the immediate recognition of all expected credit losses and applies to loans, accounts and trade receivables as well as other financial assets measured at amortized cost, loan commitments and off-balance sheet credit exposures, debt securities and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The new guidance replaced the current incurred loss model for measuring expected credit losses, requires expected losses on available for sale debt securities to be recognized through an allowance for credit losses rather than as reductions in the amortized cost of the securities, and provides for additional disclosure requirements. In April 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-04, which, among other amendments, allowed for certain policy elections and practical expedients related to accrued interest on financial instruments. In May 2019, the FASB issued ASU 2019-05, which granted targeted transition relief by allowing entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost. In November 2019, the FASB issued ASU 2019-10 and ASU 2019-11, which addressed certain aspects of the guidance related to effective dates, expected recoveries, troubled debt restructurings, accrued interest receivables, and financial assets secured by collateral. ASU 2016‑13 is effective for fiscal years beginning after December 15, 2022. The Company adopted ASU 2016-13 and related amendments as of January 1, 2023 on a modified retrospective basis. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements and related disclosures.
Recent Accounting Pronouncements Not Yet Adopted
ASU 2023-06, Disclosure Improvements: Codification Amendments In Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”)
ASU 2023-06 clarifies or improves disclosure and presentation requirements on a variety of topics and aligns the requirements in the FASB accounting standards codification (the “Codification”) with the SEC’s regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments in this update should be applied prospectively. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. The Company is evaluating the effect ASU 2023-06 will have on its financial statements and related disclosures.
ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”)
ASU 2021-08 requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts as if it had originated the contracts. The amendments in this update are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. Upon adoption, the Company will apply this guidance to future business combinations.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 12

ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”)
ASU 2020-06 eliminates two of the three models in ASC 470-20 that require issuers to separately account for embedded conversion features and eliminates some of the requirements for equity classification in ASC 815-40-25 for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and generally requires them to include the effect of potential share settlement for instruments that may be settled in cash or shares. It is effective for annual periods beginning after December 15, 2023, and interim periods therein. Early adoption is permitted, but the Company must adopt the guidance as of the beginning of a fiscal year. The Company is evaluating the effect ASU 2020-06 will have on its financial statements and related disclosures.
Note 5: Fair Value Measurements and Hierarchy
Information about the Company’s financial liabilities measured at fair value on a recurring basis is presented below:
Level 1Level 2Level 3Total
(in thousands)
Warrant liability as of September 30, 2023$1,793 $— $51 $1,844 
Warrant liability as of December 31, 2022$1,477 $— $40 $1,517 
The key Level 3 inputs into the option pricing model related to the private placement warrants to purchase Class A common stock were as follows:
September 30, 2023December 31, 2022
Volatility80.0%55.0%
Risk-free interest rate4.8%4.1%
Exercise price$11.50 $11.50 
Expected term3.2 years3.9 years
The following tables set forth a summary of changes in the fair value of the Company’s private placement warrants to purchase Class A common stock, which are considered to be Level 3 fair value measurements:
Nine Months Ended September 30,
20232022
(in thousands)
Beginning balance$40 $502 
Mark-to-market adjustment11 (280)
Ending balance$51 $222 
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 13

Note 6: Property and Equipment
The Company’s property and equipment balances consisted of the following:
September 30, 2023December 31, 2022
(in thousands)
Leasehold improvements$1,658 $1,810 
Furniture and fixtures1,164 1,262 
Computer equipment and software3,694 3,206 
Medical equipment1,102 1,067 
Software (development in process)3,877 3,460 
Vehicles654 618 
Other1,557 37 
13,706 11,460 
Less: accumulated depreciation(4,346)(2,621)
Property and equipment, net$9,360 $8,839 
Total depreciation of property and equipment was $0.5 million and $0.7 million for the three months ended September 30, 2023 and 2022, respectively, and $1.8 million for each of the nine months ended September 30, 2023 and 2022.
Note 7: Intangible Assets
Intangible assets, net consisted of the following:
September 30, 2023December 31, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(in thousands)
Indefinite lived intangible assets:
Medical licenses$700 $— $700 $700 $— $700 
Definite lived intangible assets:
Customer relationships684,000 (125,400)558,600 684,000 (74,100)609,900 
Trademarks148,635 (27,866)120,769 148,635 (16,704)131,931 
Payor contracts4,700 (823)3,877 4,700 (470)4,230 
Provider network4,800 (871)3,929 4,800 (511)4,289 
Total$842,835 $(154,960)$687,875 $842,835 $(91,785)$751,050 
Amortization of intangible assets was $21.1 million for each of the three months ended September 30, 2023 and 2022 and $63.2 million and $63.4 million for the nine months ended September 30, 2023 and 2022, respectively.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 14

Note 8: Debt
Long-term debt consisted of the following:
 September 30, 2023December 31, 2022
(in thousands)
Repurchase promissory note, interest paid at 11.0%, due June 2026
$15,000 $15,000 
Term loan facility, interest paid at 12.0%, due December 2025
65,000 65,000 
Unsecured promissory note, interest paid at 14.0%, due May 2026
29,102 15,000 
Long-term debt, gross109,102 95,000 
Less: unamortized debt issuance costs and original issue discount(850)(579)
108,252 94,421 
Less: current portion of long-term debt— — 
Long-term debt, net$108,252 $94,421 
The Company was in compliance with its covenants under the term loan facility and the unsecured promissory note as of September 30, 2023; however, there can be no assurance that the Company will be able to maintain compliance with these covenants in the future or that the lenders under the term loan facility and the unsecured promissory note or the lenders of any future indebtedness the Company may incur will grant any waiver or forbearance with respect to such covenants that we may request in the future.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 15

Note 9: Net Loss per Share
The following table provides the computation of basic and diluted net loss per share:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(in thousands, except per share data)
Numerator–basic:
Net loss attributable to Class A common stockholders–basic$(13,296)$(11,173)$(32,311)$(176,100)
Numerator–diluted:
Net loss attributable to Class A common stockholders–basic$(13,296)$(11,173)$(32,311)$(176,100)
Effective of dilutive securities:
Shares of Class V common stock(23,993)(54,156)(85,008)(853,125)
Net loss attributable to Class A common stockholders–diluted$(37,289)$(65,329)$(117,319)$(1,029,225)
Denominator–basic:
Weighted average Class A common shares outstanding–basic114,198 41,579 88,010 41,579 
Net loss per share attributable to Class A common stockholders–basic$(0.12)$(0.27)$(0.37)$(4.24)
Denominator–diluted:
Weighted average Class A common shares outstanding–basic114,198 41,579 88,010 41,579 
Weighted average effect of dilutive securities:
Shares of Class V common stock198,481 201,457 200,369 199,684 
Weighted average shares outstanding–diluted312,679 243,036 288,379 241,263 
Net loss per share attributable to Class A common stockholders–diluted$(0.12)$(0.27)$(0.41)$(4.27)
Shares of Class V common stock do not share in the earnings or losses of P3 Health Partners, Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted net income per share for Class V common stock under the two-class method is not required. The following table presents potentially dilutive securities excluded from the computation of diluted net loss per share for the periods presented because their effect would have been anti-dilutive.
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(in thousands)
Stock warrants (1)
81,938 10,819 81,938 10,819 
Stock options (1)
5,867 2,134 5,867 2,134 
Restricted stock units (1)
4,690 — 4,690 — 
Restricted stock awards (1)
250 — 250 — 
Shares of Class V common stock (2)
— 494 — 494 
Total92,745 13,447 92,745 13,447 
____________________
(1)Represents the number of instruments outstanding at the end of the period. Application of the treasury stock method would reduce this amount if they had a dilutive effect and were included in the computation of diluted net loss per share.
(2)Shares of Class V common stock at the end of the period, including shares tied to unvested Common Units, are considered potentially dilutive shares of Class A common stock under the application of the if-converted method.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 16

Note 10: Redeemable Non-controlling Interest
Non-controlling interest represents the portion of P3 LLC that the Company controls and consolidates but does not own (i.e., the Common Units held directly by the equity holders other than the Company).
The ownership of the Common Units is summarized as follows:
September 30, 2023December 31, 2022
Units (in thousands)Ownership %Units (in thousands)Ownership %
P3 Health Partners Inc.s ownership of Common Units
114,24936.5 %41,57917.1 %
Non-controlling interest holders ownership of Common Units
198,35463.5 %201,59282.9 %
Total Common Units312,603100.0 %243,171100.0 %
During the nine months ended September 30, 2023, there were an aggregate of 3.5 million shares of Class A common stock issued to P3 LLC members in connection with such members’ redemptions of an equivalent number of Common Units and corresponding cancellation and retirement of an equivalent number of Class V common stock. Such retired shares of Class V common stock may not be reissued. The redemptions occurred pursuant to the terms of the P3 LLC Amended & Restated Limited Liability Agreement dated as of the Closing Date (“P3 LLC A&R LLC Agreement”). There was no Common Unit exchange or redemption activity during the nine months ended September 30, 2022.
As of September 30, 2023, there was no remeasurement adjustment recorded as the fair value of redeemable non-controlling interest (i.e., based on the five-day volume weighted average price of a share of Class A common stock) was lower than the carrying value. As of September 30, 2022, a remeasurement adjustment of $19.4 million was recorded as the fair value of redeemable non-controlling interest was higher than the carrying value. The offset of the fair value adjustment was recorded to additional paid in capital.
Note 11: Segment Reporting
The Company’s operations are organized under one reportable segment. The Chief Executive Officer, who is the Company’s CODM, manages the Company’s operations and reviews financial information on a consolidated basis. Decisions regarding resource allocation and assessment of profitability are based on the Company’s responsibility to deliver high quality primary medical care services to its patient population. For the periods presented, all the Company’s revenue was earned in the United States. Likewise, all the Company’s long-lived assets were located in the United States.
Note 12: Commitments and Contingencies
In 2021, a discrepancy was identified in the service agreement with one of the Company’s health plans resulting in a renegotiation of the agreement. In January 2023, the renegotiation was settled and the Company reflected the known settlement of $5.0 million within health plan settlements payable as of December 31, 2022. The remaining settlement balance of $3.5 million is recorded within health plan settlements payable as of September 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 Health Partners Inc. | Q3 2023 Form 10-Q | 17

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, 2023December 31, 2022
(in thousands)
ASSETS
Cash$9,313 $1,759 
Clinic fees, insurance and other receivable201 1,178 
Prepaid expenses and other current assets1,424 121 
Property and equipment, net16 44 
Other long-term assets98 — 
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 liabilities916 262 
Accrued payroll2,862 1,885 
Claims payable6,109 — 
Other long-term liabilities886 — 
Due to consolidated entities of P346,049 36,025 
TOTAL LIABILITIES61,925 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,
2023202220232022
(in thousands)
Revenue$9,024 $13,594 $29,374 $39,463 
Expense11,364 15,732 36,886 46,709 
Net loss$(2,340)$(2,138)$(7,512)$(7,246)
Note 14: Capitalization
March 2023 Private Placement
On April 6, 2023, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”), dated March 30, 2023 with the purchasers named therein (the “Purchasers”), which included certain affiliated entities of Chicago Pacific Founders GP, L.P., a Delaware limited partnership (“CPF”), and the Company’s Chief Medical Officer and member of the Company’s board of directors, the Company issued 79.9 million units at a price of approximately $1.12 per unit for institutional investors, and a purchase price of approximately $1.19 per unit for employees and consultants. Each unit consists of one share of Class A common stock and 0.75 of a warrant to purchase one share of Class A common stock at an exercise price of $1.13. Certain institutional investors elected to receive pre-funded warrants to purchase Class A common stock in lieu of a portion of their Class A common stock. In total, the Company sold (i) an aggregate of 69.2 million shares of its Class A common stock (the “Shares”), (ii) warrants to purchase an aggregate of 59.9 million shares of Class A common stock (the “Common Warrants”), and (iii) pre-funded warrants to purchase an aggregate of 10.8 million shares of Class A common stock (the “Pre-Funded Warrants” and, together with the Common Warrants, the “Warrants”) for
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 18

aggregate proceeds of $86.6 million, net of $2.9 million in offering costs (collectively, the “March 2023 Private Placement”). The Warrants were recorded as equity-classified financial instruments.
Registration Rights Agreement
On April 6, 2023, in connection with the Purchase Agreement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers. Pursuant to the Registration Rights Agreement, the Company agreed to prepare a registration statement for purposes of registering the resale of the Shares and shares of common stock issuable upon exercise of the Warrants, which was filed with the SEC on May 2, 2023 and declared effective by the SEC on June 14, 2023. The Registration Rights Agreement also contains certain shelf takedown and piggyback rights.
The Company has also agreed, among other things, to indemnify the Purchasers, their officers, directors, members, employees and agents, successors and assigns under the registration statement from certain liabilities and to pay all fees and expenses incident to the Company’s obligations under the Registration Rights Agreement.
Letter Agreement with CPF
On April 6, 2023, in connection with the Purchase Agreement, the Company entered into a letter agreement (the “Letter Agreement”) with CPF, Chicago Pacific Founders GP III, L.P., a Delaware limited partnership (“CPF GP III”) (on behalf of the funds of which CPF is the general partner, certain funds of which CPF GP III is the general partner) and/or certain of their affiliated entities and funds (collectively, the “CPF Parties”). The Letter Agreement provides, pursuant to certain stipulations, that CPF will be entitled to designate one additional independent member of the Company’s board of directors and that CPF will be entitled to certain information rights and protective provisions. As of the date of the issuance of these condensed consolidated financial statements, CPF has not exercised its right to designate a director under the terms of the Letter Agreement. CPF Parties also agreed to a standstill restriction from the date of the closing of the March 2023 Private Placement to June 30, 2024 that limits the ownership of the CPF Parties to 49.99% of the Company’s Class A common stock and Class V common stock.
RSU Transaction Bonuses
In August 2023, the Company granted an aggregate of 2.5 million restricted stock units (“RSUs”) pursuant to the P3 Health Partners Inc. 2021 Incentive Award Plan to the Company’s Chief Executive Officer and Chief Medical Officer (collectively, the “Executives”) in full satisfaction of the “Second Bonus” earned by each Executive during the year ended December 31, 2022 pursuant to the terms of the Transaction Bonus Agreements, dated May 2022, entered into between each Executive and the Company and P3 Health Group Management, LLC in connection with the consummation of the Business Combinations (together, the “RSU Transaction Bonuses”). The Second Bonus of $5.0 million in the aggregate was recorded within accrued payroll on the condensed consolidated balance sheet as of December 31, 2022. The RSUs were fully vested at the time of grant. The fair value of the RSUs granted was $5.6 million based on the closing price of one share of Class A common stock of $2.22 on the grant date, $0.6 million of which was recorded in equity-based compensation during the three and nine months ended September 30, 2023. Each RSU represents a right to receive one share of Class A common stock. The RSUs will be settled in Class A common stock on the earlier of (i) December 31, 2023 and (ii) the closing of the Company’s first underwritten offering and sale of common stock.
Note 15: Subsequent Events
During October 2023, an aggregate of 0.6 million shares of Class A common stock were issued to P3 LLC members in connection with such members’ redemptions of an equivalent number of Common Units and corresponding cancellation and retirement of an equivalent number of Class V common stock. Such retired shares of Class V common stock may not be reissued. The redemptions occurred pursuant to the terms of the P3 LLC A&R LLC Agreement.

P3 Health Partners Inc. | Q3 2023 Form 10-Q | 19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is intended to provide the reader with an understanding of our business, including an overview of our results of operations and liquidity and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q, as well as our audited financial statements and related notes and in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties. Our actual results may differ materially from those anticipated in any forward-looking statements as a result of many factors, including those set forth under “Cautionary Statement Regarding Forward-Looking Statements,” in Part II, Item 1A. “Risk Factors” and elsewhere in this Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any periods in the future.
Overview
P3 is a patient-centered and physician-led population health management company. We strive to offer superior care to all those in need. We believe that the misaligned incentives in the fee-for-service (“FFS”) healthcare payment model and the fragmentation between physicians and care teams has led to sub-optimal clinical outcomes, limited access, high spending and unnecessary variability in the quality of care. We believe that a platform such as ours, which helps to realign incentives and focuses on treating the full patient, is uniquely positioned to address these healthcare challenges.
We have leveraged the expertise of our management team’s more than 20 years of experience in population health management, to build our “P3 Care Model.” The key attributes that differentiate P3 include: 1) patient-focused model, 2) physician-led model, and 3) our broad delegated model. Our model operates by entering into arrangements with payors providing for monthly payments to manage the total healthcare needs of members attributed to our primary care physicians. In tandem, we enter into arrangements directly with existing physician groups or independent physicians in the community to join our value-based (“VBC”) care network. In our model, physicians are able to retain their independence and entrepreneurial spirit, while gaining access to the tools, teams and technologies that are key to success in a VBC model, all while sharing in the savings from successfully improving the quality of patient care and reducing costs.
We operate in the $829 billion Medicare market, which covers approximately 65 million eligible lives as of 2021. Our core focus is the MA market, which makes up approximately 48% of the overall Medicare market, or nearly 28 million Medicare eligible lives in 2022. Medicare beneficiaries may enroll in an MA plan, under which payors contract with the Centers for Medicare & Medicaid Services (“CMS”) to provide a defined range of healthcare services that are comparable to Medicare FFS (which is also referred to as “traditional Medicare”).
We predominantly enter into capitated contracts with the nation’s largest health plans to provide holistic, comprehensive healthcare to MA members. Under the typical capitation arrangement, we are entitled to per member per month (“PMPM”) fees from payors to provide a defined range of healthcare services for MA health plan members attributed to our primary care physicians (“PCPs”). These PMPM fees comprise our capitated revenue and are determined as a percent of the premium (“POP”) payors receive from CMS for these members. Our contracted recurring revenue model offers us highly predictable revenue, and rewards us for providing high-quality care rather than driving a high volume of services. In this capitated arrangement, our goals are well-aligned with payors and patients alike—the more we improve health outcomes, the more profitable we will be over time.
Under this capitated contract structure, we are generally responsible for all members’ medical costs across the care continuum, including, but not limited to emergency room and hospital visits, post-acute care admissions, prescription drugs, specialist physician spend and primary care spend. Keeping members healthy is our primary objective. When they need medical care, delivery of the right care in the right setting can greatly impact outcomes.
When our members need care outside of our network of PCPs, we utilize a number of tools including network management, utilization management and claims processing to ensure that the appropriate quality care is provided.
Our company was formed in 2017 and our first at-risk contract became effective on January 1, 2018. We have demonstrated an ability to rapidly scale, primarily entering markets with our affiliate physician model, and expanding to a PCP network of approximately 2,700 physicians, in 18 markets (counties) across five states in just over five years of operations as of September 30, 2023. As of September 30, 2023, our PCP network served approximately 105,600 at-risk MA members.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 20

COVID-19 and Macroeconomic Update
There is continued uncertainty about the scope, duration, severity, trajectory, and lasting impact of COVID-19. Due to our recurring contracted revenue model, the COVID-19 pandemic has not historically had a material impact on our revenue. Nearly 99% of the Company’s total revenue during the nine months ended September 30, 2023 is recurring, consisting of fixed monthly PMPM capitation payments received from MA health plans.
Because of the nature of capitation arrangements, the full impact of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial condition until future periods. The full extent to which COVID-19 will directly or indirectly impact our future results of operations and financial condition will depend on multiple factors. Such factors include, but are not limited to, the scope and duration of any future stay-at-home practices and business closures and restrictions, government-imposed or recommended suspensions of elective procedures, and expenses required for supplies and personal protective equipment. Because of these factors, management may not be able to fully estimate the length or severity of the impact of the pandemic on our business. However, management will continue to closely evaluate and monitor the nature and extent of these potential impacts to our business, results of operations and liquidity. The long-term medical impact of COVID-19 infections remain a concern that our medical leadership team continues to closely monitor.
Key Factors Affecting our Performance
Growing Medicare Advantage Membership on Our Platform
Membership and revenue are tied to the number of members attributed to our physician network by our payors. We believe we have multiple avenues to serve additional members, including through:
Growth in membership under our existing contracts and existing markets:
Patients who are attributed to our physician network who (a) age into Medicare and elect to enroll in MA or (b) elect to convert from Medicare FFS to MA.
Adding new contracts (either payor contracts or physician contracts) in existing markets.
Adding new contracts (either payor contracts or physician contracts) in adjacent and new markets.
Growing Existing Contract Membership
As new patients age-in to Medicare and enroll in MA through our payors, they become attributed to our network of physicians with little incremental cost to us.
In addition to age-ins, Medicare eligible patients can change their enrollment selections during select periods throughout the year. Our sales and marketing teams actively work with local community partners to connect with Medicare eligible patients and make them aware of their healthcare choices and the services that we offer with our VBC model, including greater access to their physicians and customized care plans catered to their needs. The ultimate effect of our marketing efforts is increased awareness of P3 and additional patients choosing us as their primary care provider. We believe that our marketing efforts also help to grow our payor partners’ membership base as we grow our own patient base and help educate patients about their choices on Medicare, further aligning our model with that of healthcare payors.
Growing Membership in Adjacent and New Markets
Our affiliate model allows us to quickly and efficiently enter into new and adjacent markets in two ways: (1) partnering with payors and (2) partnering with providers. Because our model honors the existing patient-provider relationship, we are able to deploy our care model around existing physicians in a given a market. By utilizing the local healthcare infrastructure, we can quickly build a network of PCPs to serve the healthcare needs of contracted members.
Our business development and managed care teams maintain an active pipeline of new partnership opportunities for both providers and payors. These potential opportunities are developed through significant inbound interest and the deep relationships our team has developed with their more than 20 years of experience in the VBC space and our proactive assessment of expansion markets. When choosing a market to enter, we make our decision on a county-by-county basis
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 21

across the United States. We look at various factors including: (i) population size, (ii) payor participants and concentration, (iii) health system participants and concentration, and (iv) competitive landscape.
When entering a new market, we supplement the existing physician network with local market leadership teams and support infrastructure to drive the improvement in medical cost and quality. When entering an adjacent market, we are able to leverage the investments we previously made to have a faster impact on our expanded footprint. As of September 30, 2023, we operate in 18 markets, markets being counties, across five states.
Growing Membership in Existing Markets
Once established in a market, we have an opportunity to efficiently expand both our provider and payor contracts. Given the benefits PCPs experience from joining our P3 Care Model, which offers providers the teams, tools and technologies to better support their patient base, we often experience growth in our affiliate network after entering a market. Because of the benefits, we have also historically experienced high retention with our affiliate providers. From 2018 through September 30, 2023, we experienced a 98% physician retention rate in our affiliate provider network. By expanding our affiliate provider network and adding new physicians to the P3 network, we can quickly increase the number of contracted at-risk members under our existing health plan arrangements.
Additionally, by expanding the number of contracted payors, we can leverage our existing infrastructure to quickly increase our share of patients within our physician network.
Growing Capitated Revenue Per Member
Medicare pays capitation using a risk adjusted model, which compensates payors based on the health status, or acuity, of each individual member. Payors with higher acuity members receive a higher payment and those with lower acuity members receive a lower payment. Moreover, some of our capitated revenue also includes adjustments for performance incentives or penalties based on the achievement of certain clinical quality metrics as contracted with payors. Given the prevalence of FFS arrangements, our patients often have historically not participated in a VBC model, and therefore their health conditions are poorly documented. Through the P3 Care Model, we determine and assess the health needs of our patients and create an individualized care plan consistent with those needs. We capture and document health conditions as a part of this process. We expect that our PMPM revenue will continue to improve the longer members participate in our care model as we better understand and assess their health status (acuity) and coordinate their medical care.
Effectively Managing Member Medical Expense
Our medical claims expense is our largest expense category, representing 85% of our total operating expenses for the nine months ended September 30, 2023. We manage our medical costs by improving our members access to healthcare. Our care model focuses on maintaining health and leveraging the primary care setting as a means of avoiding costly downstream healthcare costs, such as emergency department visits and acute hospital inpatient admissions. The power of our model is reflected in the relative performance of our network when compared to local FFS benchmarks.
Achieving Operating Efficiencies
As a result of our affiliate model and ability to leverage our existing local and national infrastructure, we generate operating efficiencies at both the market and enterprise level. Our local corporate, general and administrative expense, which includes our local leadership, care management teams and other operating costs to support our markets, are expected to decrease over time as a percentage of revenue as we add members to our existing contracts, grow membership with new payor and physician contracts, and our revenue subsequently increases. Our corporate general and administrative expenses at the enterprise level include resources and technology to support payor contracting, quality, data management, delegated services, finance and legal functions. While we expect our absolute investment in our enterprise resources to increase over time, we expect our investment will decrease as a percentage of revenue when we are able to leverage our infrastructure across a broader group of at-risk members. We expect our corporate, general and administrative expenses to increase in absolute dollars in the future as we continue to invest to support growth of our business, as well as due to the costs required to operate as a public company, including insurance coverage, investments in internal audit, investor relations and financial reporting functions, fees paid to the Nasdaq Stock Market, and increased legal and audit fees.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 22

Impact of Seasonality
Our operational and financial results reflect some variability depending upon the time of year in which they are measured. This variability is most notable in the following areas:
At-Risk Member Growth. While new members are attributed to our platform throughout the year, we experience the largest portion of our at-risk member growth during the first quarter. Contracts with new payors typically begin on January 1, at which time new members become attributed to our network of physicians. Additionally, new members are attributed to our network on January 1, when plan enrollment selections made during the prior Annual Enrollment Period from October 15 through December 7 of the prior year take effect.
Revenue Per Member. Our revenue is based on percentage of premium we have negotiated with our payors as well as our ability to accurately and appropriately document the acuity of a member’s health status. We experience some seasonality with respect to our per member revenue as it will generally decline over the course of the year. In January of each year, CMS revises the risk adjustment factor for each patient based upon health conditions documented in the prior year, leading to an overall increase in per-patient revenue. As the year progresses, our per-patient revenue declines as new patients join us typically with less complete or accurate documentation (and therefore lower risk-adjustment scores) and patients with more severe acuity profiles (and, therefore, higher per member revenue rates) expire.
Medical Costs. Medical expense is driven by utilization of healthcare services by our attributed membership. Medical expense will vary seasonally depending on a number of factors, including the weather and the number of business days. Certain illnesses, such as the influenza virus, are far more prevalent during colder months of the year, which will result in an increase in medical expenses during these time periods. We would therefore expect to see higher levels of per-member medical expense in the first and fourth quarters. Business days can also create year-over-year comparability issues if one year has a different number of business days compared to another.
Non-GAAP Financial Measures and Key Performance Metrics
We use certain financial measures, which are not calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”), as well as key performance metrics, to supplement our consolidated financial statements. The measures set forth below should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures and key performance metrics as used by us may not be comparable to similarly titled measures used by other companies. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. The presentation of non-GAAP financial measures and key performance metrics provides additional information to investors regarding our results of operations that our management believes is useful for identifying trends, analyzing and benchmarking the performance of our business.
Non-GAAP Financial Measures
Adjusted EBITDA
The key non-GAAP metric we utilize to measure our profitability and performance is Adjusted EBITDA. We present Adjusted EBITDA because we believe it helps investors understand underlying trends in our business and facilitates an understanding of our operating performance from period to period because it facilitates a comparison of our recurring core business operating results.
By definition, EBITDA consists of net income (loss) before interest, income taxes, depreciation, and amortization. We define Adjusted EBITDA as EBITDA, further adjusted to exclude the effect of certain supplemental adjustments, such as mark-to-market warrant gain/loss, premium deficiency reserves, equity-based compensation expense, and certain other items that we believe are not indicative of our core operating performance. Our definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements.
Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP. It is unaudited and should not be considered an alternative to, or more meaningful than, net income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, debt principal repayments, and other expenses defined above, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 23

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to Adjusted EBITDA set forth below and not rely on any single financial measure to evaluate our business.
The following table sets forth a reconciliation of our net loss, the most directly comparable GAAP metric, to Adjusted EBITDA:
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(in thousands)
Net loss$(37,289)$(65,329)$(117,319)$(1,029,225)
Interest expense, net4,002 2,963 11,939 8,418 
Depreciation and amortization expense21,721 21,815 65,041 65,287 
Provision for income taxes412 — 928 — 
Mark-to-market of stock warrants(755)2,568 327 (3,386)
Premium deficiency reserve(12,489)(7,302)(9,361)(10,116)
Equity-based compensation2,251 1,784 4,259 17,211 
Transaction and other related costs(1)
— 1,844 70 10,956 
Goodwill impairment— — — 851,456 
Other(2)
(185)1,350 2,868 1,499 
Adjusted EBITDA loss$(22,332)$(40,307)$(41,248)$(87,900)
_____________________
(1)Transaction and other related costs during the nine months ended September 30, 2023 consisted of legal fees incurred related to acquisition-related litigation.
(2)Other during the three and nine months ended September 30, 2023 consisted of (i) interest income offset by (ii) cybersecurity incident loss with respect to the nine months ended September 30, 2023, (iii) restructuring and other charges, including severance and benefits paid to employees pursuant to workforce reduction plans with respect to the nine months ended September 30, 2023, (iv) the disposition of our Pahrump operations, (v) expenses for third-party consultants to assist us with the development, implementation, and documentation of new and enhanced internal controls and processes for compliance with Sarbanes-Oxley Section 404(b) with respect to the nine months ended September 30, 2023, (vi) a legal settlement outside of the ordinary course of business with respect to the nine months ended September 30, 2023, and (vii) valuation allowance on our notes receivable.
Medical Margin
Medical margin is a non-GAAP financial metric. We present medical margin because we believe it helps investors understand underlying trends in our business and facilitates an understanding of our operating performance from period to period by facilitating a comparison of our recurring core business operating results.
Medical margin represents the amount earned from capitation revenue after medical claims expenses are deducted. Medical claims expenses represent costs incurred for medical services provided to our members. As our platform grows and matures over time, we expect medical margin to increase in absolute dollars; however, medical margin PMPM may vary as the percentage of new members brought onto our platform fluctuates. New membership added to the platform is typically dilutive to medical margin PMPM.
Medical margin should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using medical margin on a supplemental basis. You should review the reconciliation of gross profit to medical margin set forth below and not rely on any single financial measure to evaluate our business.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 24

The following table presents our medical margin:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(in thousands)
Capitated revenue$285,153 $243,988 $909,473 $780,775 
Less: medical claims expense(248,918)(235,065)(783,497)(725,267)
Medical margin$36,235 $8,923 $125,976 $55,508 
Effective for the quarter ended June 30, 2023, we modified the method by which we reconcile medical margin. Previously, we reconciled medical margin to operating loss as the most directly comparable measure calculated in accordance with GAAP. In the current period and on a go-forward basis we will reconcile to gross profit as we have determined that gross profit is the most directly comparable GAAP measure. The change does not impact the medical margin calculation, and this change has no material impact on key performance indicators or other metrics.

The following table sets forth a reconciliation of our gross profit, the most directly comparable GAAP metric, to medical margin:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(in thousands)
Gross profit$9,131 $(6,517)$52,453 $3,212 
Other patient service revenue(3,198)(4,272)(10,041)(10,483)
Other medical expense30,302 19,712 83,564 62,779 
Medical margin$36,235 $8,923 $125,976 $55,508 
Key Performance Metrics
We monitor the following operating metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.
Gross Profit
Gross profit represents the amount earned from total operating revenue less the sum of: (i) medical claims expenses and (ii) other medical expenses including physician compensation expense related to surplus sharing and bonuses and other direct medical expenses incurred to improve care for our members. We believe this metric provides insight into the economics of the P3 Care Model, as it includes all medical claims expense associated with our members’ care as well as partner compensation and additional medical costs we incur as part of our aligned partnership model. Other medical expenses are largely variable and proportionate to the level of surplus in each respective market, among other cost factors.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 25

The following table presents our gross profit:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(in thousands)
Total operating revenue$288,351 $248,260 $919,514 $791,258 
Less: medical claims expense(248,918)(235,065)(783,497)(725,267)
Less: other medical expense(30,302)(19,712)(83,564)(62,779)
Gross profit$9,131 $(6,517)$52,453 $3,212 
At-Risk Membership
At-risk membership represents the approximate number of Medicare Advantage members for whom we receive a fixed percentage of premium under capitation arrangements as of the end of a particular period. We had 105,600 and 101,000 at-risk members as of September 30, 2023 and 2022, respectively.
Affiliate Primary Care Physicians
Affiliate primary care physicians represent the approximate number of primary care physicians included in our affiliate network, with whom members may be attributed under our capitation arrangements, as of the end of a particular period. We had 2,700 and 2,800 primary care physicians as of September 30, 2023 and 2022, respectively.
Platform Support Costs
Our platform support costs, which include regionally-based support personnel and other operating costs to support our markets, are expected to decrease over time as a percentage of revenue as our physician partners add members and our revenue grows. Our operating expenses at the enterprise level include resources and technology to support payor contracting, clinical program development, quality, data management, finance, and legal functions. We exclude costs related to the operations of our owned medical clinics and wellness centers.
The table below represents costs to support our markets and enterprise functions, which are included in corporate, general and administrative expenses:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(dollars in thousands)
Platform support costs$25,932 $30,378 $78,583 $86,321 
% of total operating revenue%12 %%11 %
Key Components of Results of Operations
Revenue
Capitated revenue. We contract with health plans using an at-risk model. Under the at-risk model, we are responsible for the cost of all covered health care services provided to members assigned by the health plans to the Company in exchange for a fixed payment, which generally is a POP based on health plans’ premiums received from CMS. Through this capitation arrangement, we stand ready to provide assigned Medicare Advantage members all their medical care via our directly employed and affiliated physician/specialist network.
The premiums health plans receive are determined via a competitive bidding process with CMS and are based on the costs of care in local markets and the average utilization of services by patients enrolled. Medicare pays capitation using a “risk adjustment model,” which compensates providers based on the health status (acuity) of each individual patient. Medicare Advantage plans with higher acuity patients receive higher premiums. Conversely, Medicare Advantage plans with lower acuity patients receive lesser premiums. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after final data is
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 26

compiled. As premiums are adjusted via this risk adjustment model (using a Risk Adjustment Factor, “RAF”), our PMPM payments change commensurately with how our contracted Medicare Advantage plans’ premiums change with CMS.
The transaction price for these contracts is variable as it primarily includes PMPM fees, which can fluctuate throughout the course of the year based on the acuity of each individual enrollee. In certain contracts, PMPM fees also include adjustments for items such as performance incentives or penalties based on the achievement of certain clinical quality metrics as contracted with payors. Capitated revenue is recognized based on an estimated PMPM transaction price to transfer the service for a distinct increment of the series and is recognized net of projected acuity adjustments and performance incentives or penalties as we can reasonably estimate the ultimate PMPM payment of those contracts. We recognize revenue in the month in which attributed members are entitled to receive healthcare benefits during the contract term. The capitation amount is subject to possible retroactive premium risk adjustments based on the member's individual acuity.
Other patient service revenue. Other patient service revenue is comprised primarily of encounter-related fees to treat patients outside of our at-risk arrangements at company owned clinics. Other patient service revenue also includes ancillary fees earned under contracts with certain payors for the provision of certain care coordination and other care management services. These services are provided to patients covered by these payors regardless of whether those patients receive their care from our directly employed or affiliated medical groups.
Operating Expense
Medical expense. Medical expenses primarily include costs of all covered services provided to members by non-P3 employed providers. This also includes an estimate of the cost of services that have been incurred, but not yet reported (“IBNR”). IBNR is recorded as claims payable on the accompanying condensed consolidated balance sheets. Estimates for incurred claims are based on historical enrollment and cost trends while also taking into consideration operational changes. Future and actual results typically differ from estimates. Differences could result from an overall change in medical expenses per member, changes in member mix or simply due to the addition of new members. IBNR estimates are made on an accrual basis and adjusted in future periods as required. To the extent we revise our estimates of incurred but not reported claims for prior periods up or down, there would be a correspondingly favorable or unfavorable effect on our current period results that may or may not reflect changes in long term trends in our performance.
Premium deficiency reserve. Premium deficiency reserves (“PDR”) are recognized when it is probable that expected future health care costs and maintenance costs under a group of existing contracts will exceed anticipated future premiums and stop-loss insurance recoveries on those contracts. PDR represents the advance recognition of a probable future loss in the current period’s financial statements.
Corporate, general and administrative expense. Corporate, general and administrative expenses include employee-related expenses, including salaries and related costs and equity-based compensation for our executive, technology infrastructure, operations, clinical and quality support, finance, legal, and human resources departments. In addition, general and administrative expenses include all corporate technology and occupancy costs.
Sales and marketing expense. Sales and marketing expenses consist of costs related to patient and provider marketing and community outreach. These expenses capture all costs for both our local and enterprise sales and marketing efforts.
Depreciation and amortization expense. Depreciation expense is associated with our property and equipment, including leasehold improvements, computer equipment and software, furniture and fixtures, and internally developed software. Amortization expense is associated with definite lived intangible assets, including trademarks and tradenames, customer contracts, provider network agreements, and payor contracts.
Goodwill impairment. During the nine months ended September 30, 2022, we recorded a $851.5 million goodwill impairment charge due to the presence of certain macroeconomic and financial market conditions, industry-specific considerations, our performance, and the sustained decrease in the price of our Class A common stock. We do not have any goodwill as of December 31, 2022.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 27

Other Income (Expense)
Interest expense, net. Interest expense primarily consists of interest on our term loan facility and unsecured promissory note and amortization of debt issuance costs and original issue discount.
Mark-to-market of stock warrants. Mark-to-market of stock warrants consists of the change in the fair value on the revaluation of warrant liabilities associated with our public and private placement Class A common stock warrants.
Other. Other consists of gains and losses resulting from other transactions.
Income Taxes
P3 LLC is treated as a partnership for U.S. federal and most applicable state and local income tax jurisdictions. As a partnership, P3 LLC is generally not subject to U.S. federal, state and local income taxes. Any taxable income or loss generated by P3 LLC is passed through to and included within the taxable income or loss of its members, including us, on a pro rata basis. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss generated by P3 LLC.
Non-controlling Interest
We consolidate the financial results of P3 LLC and report a non-controlling interest on our consolidated statements of operations, representing the portion of net income or loss attributable to the non-controlling interest. The weighted average ownership percentages during the period are used to calculate the net income or loss attributable to P3 Health Partners Inc. and the non-controlling interest.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 28

Results of Operations
The following table sets forth our condensed consolidated statements of operations data for the periods indicated. Amounts may not sum due to rounding.
Three Months Ended
September 30, 2023
% of RevenueThree Months Ended
September 30, 2022
% of Revenue
(dollars in thousands)
Operating revenue:
Capitated revenue$285,153 99 %$243,988 98 %
Other patient service revenue3,198 4,272 
Total operating revenue288,351 100 248,260 100 
Operating expense:
Medical expense279,220 97 254,777 103 
Premium deficiency reserve(12,489)(4)(7,302)(3)
Corporate, general and administrative expense33,065 11 37,863 15 
Sales and marketing expense654 — 1,118 — 
Depreciation and amortization21,721 21,815 
Total operating expense322,171 112 308,271 124 
Operating loss(33,820)(12)(60,011)(24)
Other income (expense):
Interest expense, net(4,002)(1)(2,963)(1)
Mark-to-market of stock warrants755 — (2,568)(1)
Other190 — 213 — 
Total other expense(3,057)(1)(5,318)(2)
Loss before income taxes(36,877)(13)(65,329)(26)
Provision for income taxes(412)— — — 
Net loss(37,289)(13)(65,329)(26)
Net loss attributable to redeemable non-controlling interest(23,993)(8)(54,156)(22)
Net loss attributable to controlling interest$(13,296)(5)%$(11,173)(5)%
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 29

Nine Months Ended
September 30, 2023
% of RevenueNine Months Ended
September 30, 2022
% of Revenue
(dollars in thousands)
Operating revenue:
Capitated revenue$909,473 99 %$780,775 99 %
Other patient service revenue10,041 10,483 
Total operating revenue919,514 100 791,258 100 
Operating expense:
Medical expense867,061 94 788,046 100 
Premium deficiency reserve(9,361)(1)(10,116)(1)
Corporate, general and administrative expense97,931 11 117,560 15 
Sales and marketing expense2,512 — 3,391 — 
Goodwill impairment— — 851,456 108 
Depreciation and amortization65,041 65,287 
Total operating expense1,023,184 111 1,815,624 229 
Operating loss(103,670)(11)(1,024,366)(129)
Other income (expense):
Interest expense, net(11,939)(1)(8,418)(1)
Mark-to-market of stock warrants(327)— 3,386 — 
Other(455)— 173 — 
Total other income (expense)(12,721)(1)(4,859)(1)
Loss before income taxes(116,391)(13)(1,029,225)(130)
Provision for income taxes(928)— — — 
Net loss(117,319)(13)(1,029,225)(130)
Net loss attributable to redeemable non-controlling interest(85,008)(9)(853,125)(108)
Net loss attributable to controlling interest$(32,311)(4)%$(176,100)(22)%
Comparison of the Three Months Ended September 30, 2023 and 2022
Revenue
Three Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Capitated revenue$285,153 $243,988 $41,165 17 %
Other patient service revenue3,198 4,272 (1,074)(25)%
Total operating revenue$288,351 $248,260 $40,091 16 %
Capitated revenue was $285.2 million for the three months ended September 30, 2023, an increase of $41.2 million, or 17%, compared to capitated revenue of $244.0 million for the three months ended September 30, 2022. This increase was primarily driven by a 12% increase in capitated revenue rates, due to increased premiums from patients with a higher average level of acuity, and 5% increase in the total number of at-risk members from 101,000 at September 30, 2022 to 105,600 at September 30, 2023, which was in part a result of our participation in the Accountable Care Organization Realizing Equity, Access, and Community Health (“ACO REACH”) model, which began January 1, 2023. Capitated revenue was approximately 99% and 98% of total revenue for the three months ended September 30, 2023 and 2022, respectively.
Other patient service revenue was $3.2 million for the three months ended September 30, 2023, a decrease of $1.1 million, or 25%, compared to other patient service revenue of $4.3 million for the three months ended September 30, 2022. Other patient service revenue was approximately 1% and 2% of total revenue for the three months ended September 30, 2023 and 2022, respectively.
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Operating Expense
Medical Expense
Three Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Medical expense$279,220 $254,777 $24,443 10 %
Medical expense was $279.2 million for the three months ended September 30, 2023, an increase of $24.4 million, or 10%, compared to medical expense of $254.8 million for the three months ended September 30, 2022. This increase was primarily driven by an increase in the total number of at-risk members year-over-year resulting from our participation in the ACO REACH Model, which began January 1, 2023 and a new health plan contract as of April 1, 2023, partially offset by the termination and conversion of certain health plans from at-risk to upside-only risk.
Premium Deficiency Reserve
Three Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Premium deficiency reserve$(12,489)$(7,302)$(5,187)71 %
Premium deficiency reserve was a benefit of $12.5 million for the three months ended September 30, 2023, an increase of $5.2 million, or 71%, compared to a benefit of $7.3 million for the three months ended September 30, 2022. The change was due to management’s assessment of expected future losses in 2023.
Corporate, General and Administrative Expense
Three Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Corporate, general and administrative expense$33,065 $37,863 $(4,798)(13)%
Corporate, general, and administrative expense was $33.1 million for the three months ended September 30, 2023, a decrease of $4.8 million, or 13%, compared to corporate, general and administrative expense of $37.9 million for the three months ended September 30, 2022. The decrease was primarily due to a $5.3 million decrease in professional fees supporting our operations as a public company.

P3 Health Partners Inc. | Q3 2023 Form 10-Q | 31

Other Income (Expense)
Three Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Other income (expense):
Interest expense, net$(4,002)$(2,963)$(1,039)35 %
Mark-to-market of stock warrants755 (2,568)3,323 (129)%
Other190 213 (23)(11)%
Total other expense$(3,057)$(5,318)$2,261 (43)%
Interest expense, net was $4.0 million for the three months ended September 30, 2023, an increase of $1.0 million, or 35.1%, compared to interest expense of $3.0 million for the three months ended September 30, 2022. This increase was primarily due to interest associated with the Company’s unsecured promissory note issued in December 2022.
Comparison of the Nine Months Ended September 30, 2023 and 2022
Revenue
Nine Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Capitated revenue$909,473 $780,775 $128,698 16 %
Other patient service revenue10,041 10,483 (442)(4)%
Total operating revenue$919,514 $791,258 $128,256 16 %
Capitated revenue was $909.5 million for the nine months ended September 30, 2023, an increase of $128.7 million, or 16%, compared to capitated revenue of $780.8 million for the nine months ended September 30, 2022. This increase was primarily driven by a 11% increase in capitated revenue rates, due to increased premiums from patients with a higher average level of acuity, and a 5% increase in the total number of at-risk members from 101,000 at September 30, 2022 to 105,600 at September 30, 2023, which was in part a result of our participation in the ACO REACH model, which began January 1, 2023. Capitated revenue was approximately 99% of total revenue for each of the nine months ended September 30, 2023 and 2022.
Other patient service revenue was $10.0 million for the nine months ended September 30, 2023, a decrease of $0.4 million, or 4%, compared to other patient service revenue of $10.5 million for the nine months ended September 30, 2022. Other patient service revenue was approximately 1% of total revenue for each of the nine months ended September 30, 2023 and 2022.
Operating Expense
Medical Expense
Nine Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Medical expense$867,061 $788,046 $79,015 10 %
Medical expense was $867.1 million for the nine months ended September 30, 2023, an increase of $79.0 million, or 10%, compared to medical expense of $788.0 million for the nine months ended September 30, 2022. This increase was primarily driven by an increase in the total number of at-risk members year-over-year resulting from our participation in the ACO REACH Model, which began January 1, 2023, and a new health plan contract as of April 1, 2023, partially offset by the termination and conversion of certain health plans from at-risk to upside-only risk.
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Premium Deficiency Reserve
Nine Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Premium deficiency reserve$(9,361)$(10,116)$755 %
Premium deficiency reserve was a benefit of $9.4 million for the nine months ended September 30, 2023, an increase of $0.8 million, or 7%, compared to a benefit of $10.1 million for the nine months ended September 30, 2022. The change was due to management’s assessment of expected future losses in 2023.
Corporate, General and Administrative Expense
Nine Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Corporate, general and administrative expense$97,931 $117,560 $(19,629)(17)%
Corporate, general, and administrative expense was $97.9 million for the nine months ended September 30, 2023, a decrease of $19.6 million, or 17%, compared to corporate, general and administrative expense of $117.6 million for the nine months ended September 30, 2022. The decrease was primarily due to decreases of $13.0 million in equity-based compensation expense, $2.8 million in salary and related expense, and $2.5 million in professional fees supporting our operations as a public company.
Other Income (Expense)
Nine Months Ended September 30,Change
20232022Amount%
(dollars in thousands)
Other income (expense):
Interest expense, net$(11,939)$(8,418)$(3,521)42 %
Mark-to-market of stock warrants(327)3,386 (3,713)(110)%
Other(455)173 (628)(363)%
Total other income (expense)$(12,721)$(4,859)$(7,862)162 %
Interest expense, net was $11.9 million for the nine months ended September 30, 2023, an increase of $3.5 million, or 41.8%, compared to interest expense of $8.4 million for the nine months ended September 30, 2022. This increase was primarily due to interest associated with the Company’s unsecured promissory note issued in December 2022.
Other expense was $0.5 million for the nine months ended September 30, 2023, which consisted primarily of a cybersecurity incident loss of $1.0 million offset by an increase in interest income on our notes receivable of $0.5 million.
Liquidity and Capital Resources
P3 Health Partners Inc. is a holding company and has no material assets other than its ownership of equity interests in P3 LLC. As such, we have no independent means of generating revenue or cash flow, and our ability to pay taxes, make payments under the Tax Receivable Agreement (“TRA”), and to pay dividends will depend on the financial results and cash flows of P3 LLC and the distributions received from P3 LLC. Deterioration in the financial condition, earnings or cash flow of P3 LLC for any reason could limit or impair P3 LLC’s ability to pay such distributions. Additionally, to the extent that we need funds and P3 LLC is restricted from making such distributions under applicable law or regulation or under the terms of any financing arrangements, or P3 LLC is otherwise unable to provide such funds, it
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 33

could materially adversely affect our liquidity and financial condition. It is anticipated that the distributions we will receive from P3 LLC may, in certain periods, exceed the actual tax liabilities and obligations to make payments under the TRA.
Cash Sources
To date, we have financed our operations principally through the cash we obtained as a result of the business combinations in the fourth quarter of 2021, private placements of our equity securities, payments from our payors, issuances of promissory notes, and borrowings under our term loan facility. We generate cash from our operations, generally from our contracts with payors. We generate cash primarily from our contracts with payors. As of September 30, 2023, we had cash and restricted cash of $57.4 million.
The Company has experienced losses since its inception and net losses of $37.3 million and $117.3 million for the three and nine months ended September 30, 2023, respectively. We expect to continue to incur operating losses and generate negative cash flows from operations for the foreseeable future due to the strong growth we have experienced over the last five years and the investments we intend to make in expanding our business, which will require up-front expenses. Our future capital requirements will depend on many factors, including the pace of our growth, ability to manage medical costs, the maturity of our members, and our ability to raise capital. We may need to raise additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing and to the extent we are unsuccessful at doing so, we may need to adjust our growth trajectory to accommodate our capital needs and look for additional ways to generate cost efficiencies.
March 2023 Private Placement
On April 6, 2023, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”), dated March 30, 2023 with the purchasers named therein (the “Purchasers”), which included certain affiliated entities of Chicago Pacific Founders GP, L.P., a Delaware limited partnership (“CPF”) and our Chief Medical Officer and member of our board of directors, we issued 79.9 million units at a price of approximately $1.12 per unit for institutional investors, and a purchase price of approximately $1.19 per unit for employees and consultants. Each unit consists of one share of Class A common stock and 0.75 of a warrant to purchase one share of Class A common stock at an exercise price of $1.13. Certain institutional investors elected to receive pre-funded warrants to purchase Class A common stock in lieu of a portion of their Class A common stock. In total, we sold (i) an aggregate of 69.2 million shares of our Class A common stock (the “Shares”), (ii) warrants to purchase an aggregate of 59.9 million shares of Class A common stock (the “Common Warrants”), and (iii) pre-funded warrants to purchase an aggregate of 10.8 million shares of Class A common stock (the “Pre-Funded Warrants” and, together with the Common Warrants, the “Warrants”) to the Purchasers for aggregate proceeds of approximately $86.6 million, net of offering costs of approximately $2.9 million (collectively, the “March 2023 Private Placement”). See Note 14 “Capitalization” to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q for additional information about the March 2023 Private Placement.
Term Loan
In November 2020, the Company entered a Term Loan and Security Agreement with CRG Servicing, LLC (as amended, the “Term Loan Agreement”) providing for funding of up to $100 million (the “Term Loan Facility”). The Term Loan Facility’s maturity date is December 31, 2025. As of September 30, 2023, we had $65.0 million of borrowings outstanding under the Term Loan Facility, and remaining availability under the Term Loan Facility ended upon termination of the commitment period on February 28, 2022. Interest is payable at 12.0% per annum on a quarterly cycle (in arrears), which began on March 31, 2021. In March 2021, we elected to pay interest at 8.0% with the remaining interest at 4.0% being added to principal as paid in-kind (“PIK”) for a period of three years (or 12 payments).
We are required to remain in compliance with financial covenants such as minimum liquidity of $5.0 million and annual minimum revenue levels. In addition, the Term Loan Agreement restricts our ability and the ability of our subsidiaries to, among other things, incur indebtedness and liens. On an annual basis, we must post a minimum amount of annual revenue equal to $525.0 million in 2023; $585.0 million in 2024 and $650.0 million in 2025. The maturity date may be accelerated as a remedy under the certain default provisions in the Term Loan Agreement, or in the event a mandatory prepayment event occurs.
In connection with the issuance of the VGS Promissory Note (defined below) and entry into the Subordination Agreement (defined below), on December 13, 2022, we entered into an amendment to the Term Loan Agreement to permit the issuance of the VGS Promissory Note and the entry into the Subordination Agreement.
P3 Health Partners Inc. | Q3 2023 Form 10-Q | 34

VGS Promissory Note
On December 13, 2022, we entered into a financing transaction with VBC Growth SPV LLC (“VGS”) which included the issuance an unsecured promissory note (the “VGS Promissory Note”) to VGS and the entry into a warrant agreement and the Subordination Agreement (defined below). The VGS Promissory Note provided for funding of up to $40.0 million. The maturity date of the VGS Promissory Note is May 19, 2026. As of September 30, 2023, we had $29.1 million of borrowings outstanding under the VGS Promissory Note, and remaining availability under the VGS Promissory Note ended upon termination of the commitment period on February 3, 2023. We paid VGS an up-front fee of 1.5% and will pay a back-end fee at the time the VGS Promissory Note is paid as follows: (i) if paid from July 1, 2023 through December 31, 2023, 6.75% and (ii) if paid on January 1, 2024 or later, 9.0%. Interest is payable at 14.0% per annum on a quarterly cycle (in arrears) beginning March 31, 2023. We may elect to pay interest of 6.0% in kind and 8.0% in cash, subject to certain limitations.
The VGS Promissory Note may be prepaid, at our option, either in whole or in part, without penalty or premium, at any time and from time to time, subject to the payment of the back-end fee; provided that prepayments must be in increments of at least $2.0 million. The VGS Promissory Note provides for mandatory prepayments with the proceeds of certain asset sales, and the Lender has the right to demand payment in full upon (i) a change of control of the Company and (ii) certain qualified financings (as defined in the VGS Promissory Note).
The VGS Promissory Note restricts our ability to, among other things, incur indebtedness and liens, and make investments and restricted payments. The maturity date may be accelerated as a remedy under the certain default provisions in the agreement, or in the event a mandatory prepayment event occurs.
In connection with the issuance of the VGS Promissory Note, we also entered into a subordination agreement, dated as of December 13, 2022 (the “Subordination Agreement”) with VGS which subordinates VGS’s right of payment under the VGS Promissory Note to the right of payment and security interests of the lenders under the Term Loan Facility. Under the terms of the Subordination Agreement, we will be required to pay all interest under the VGS Promissory Note in-kind. The VGS Promissory Note may be prepaid, at our option, either in whole or in part, without penalty or premium subject to certain conditions.
As of September 30, 2023, we were in compliance with the covenants under our Term Loan Facility and VGS Promissory Note; however, there can be no assurance that we will be able to maintain compliance with these covenants in the future or that the lenders under the term loan facility and unsecured promissory note or the lenders of any future indebtedness we may incur will grant any waiver or forbearance with respect to such covenants that we may request in the future.
Repurchase Promissory Note
In June 2019, we issued a share repurchase promissory note to a former equity investor for $15.0 million, which was subsequently amended in November 2020 (as amended, the “Repurchase Promissory Note”). The Repurchase Promissory Note automatically matures and is due and payable on the earlier of June 30, 2026, a change in control transaction, or an underwritten primary public offering, each as defined in the agreement. The Repurchase Promissory Note accrues PIK interest of 11.0% per year. The principal balance, accrued interest, and an exit fee of $0.6 million are due at maturity.
Cash Uses
Our primary uses of cash include payments for medical expenses, administrative expenses, cost associated with our care model, debt service, and capital expenditures. Final reconciliation and receipts of amounts due from payors are typically settled in arrears.
Pursuant to our election under Section 754 of the Internal Revenue Code (the “Code”), we expect to obtain an increase in our share of the tax basis in the net assets of P3 LLC when its units are redeemed or exchanged. We intend to treat any redemptions and exchanges of P3 LLC units as direct purchases of the units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that we would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent the tax basis is allocated to those capital assets.
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In connection with the Business Combinations, we entered into a TRA that provides for the payment by us of 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of P3 LLC resulting from any redemptions or exchanges of P3 LLC, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the “TRA Payments”). We expect to benefit from the remaining 15% of any tax benefits that we may actually realize.
The estimation of a liability under the TRA is, by its nature, imprecise and subject to significant assumptions regarding a number of factors, including (but not limited to) the amount and timing of taxable income generated by the Company each year as well as the tax rate then applicable. As a result of the Business Combinations, we may recognize an estimated liability under the TRA of approximately $530.0 million if all P3 Equityholders redeem or exchange their Common Units for Class A common stock or cash at the earliest possible date permitted under the P3 LLC A&R LLC Agreement and assuming (a) the generation of sufficient future taxable income, (b) a trading price of $10 per share of Class A common stock at the time of the redemption or exchange, (c) a constant corporate combined U.S. federal and state income tax rate of 23.89% and (d) no material changes in tax law. The TRA liability is estimated to be $7.5 million as of September 30, 2023. Due to the Company’s history of losses, the Company has not recorded tax benefits associated with the increase in tax basis as a result of the Business Combinations. As a result, the Company determined that payments to TRA holders are not probable and no TRA liability has been recorded as of September 30, 2023.
As non-controlling interest holders exercise their right to exchange their units in P3 LLC, a TRA liability may be recorded based on 85% of the estimated future tax benefits that the Company may realize as a result of increases in the tax basis of P3 LLC. The amount of the increase in the tax basis, the related estimated tax benefits, and the related TRA liability to be recorded will depend on the price of the Company’s Class A common stock at the time of the relevant redemption or exchange.
Outside of the aforementioned, and any routine transactions made in the ordinary course of business, there have been no significant changes to our material cash requirements as disclosed in our 2022 Form 10-K.
Liquidity and Going Concern
As of the date of this Form 10-Q, we believe that our existing cash resources are not sufficient to support planned operations for at least the next year from the issuance of this Form 10-Q. As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern within one year after the date the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q are issued. In evaluating our ability to continue as a going concern, we considered our current projections of future cash flows, current financial condition, sources of liquidity, debt obligations for at least one year from the date of issuance of the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q, and whether we have the ability to meet our obligations. This evaluation of our cash resources available over the next year from the date of issuance of the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q does not take into consideration the potential mitigating effect of our ongoing efforts to raise capital or management’s plans that have not been fully implemented or the many factors that determine our capital requirements, including the pace of our growth, ability to manage medical costs and the maturity of our members. We continue to explore raising additional capital through a combination of debt financing and equity issuances. If we raise funds by issuing debt securities or preferred stock, or by incurring loans, these forms of financing would have rights, preferences, and privileges senior to those of holders of our common stock. If we raise capital through the issuance of additional equity, such sales and issuance would dilute the ownership interests of the existing holders of our Class A common stock. The availability and the terms under which we may be able to raise additional capital could be disadvantageous, and the terms of debt financing or other non-dilutive financing may involve restrictive covenants and dilutive financing instruments, which could place significant restrictions on our operations. Macroeconomic conditions and credit markets could also impact the availability and cost of potential future debt financing. There can be no assurances that any additional debt, other non-dilutive and/or equity financing would be available to us on favorable terms, or potentially at all. We expect to continue to incur net losses, comprehensive losses, and negative cash flows from operating activities in accordance with our operating plan. If we are unable to obtain additional funding when needed, we will need to curtail planned activities in order to reduce costs, which will likely have an unfavorable effect on our ability to execute on our business plan, and have an adverse effect on our business, results of operations, and future prospects.
The unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q have been prepared assuming we will continue as a going concern and do not include any adjustments that might result from the outcome of these uncertainties.
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Cash Flows
The following table summarizes our cash flows:
Nine Months Ended September 30,
20232022
(in thousands)
Net cash used in operating activities$(60,150)$(94,065)
Net cash used in investing activities(2,039)(7,783)
Net cash provided by (used in) financing activities101,172 (3,625)
Net change in cash38,983 (105,473)
Cash at beginning of period18,457 140,834