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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
FORM 10-Q
__________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to
Commission File Number: 001-39289
cano-20220630_g1.jpg
__________________________________________
Cano Health, Inc.
(Exact name of registrant as specified in its charter)
__________________________________________

Delaware
(State or other jurisdiction of incorporation or organization)

9725 NW 117th Avenue, Miami, FL
(Address of principal executive offices)

98-1524224
(IRS Employer Identification No.)

33178
(Zip Code)
(855) 226-6633
(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, $0.0001 par value per shareCANOThe New York Stock Exchange
Warrants to purchase one share of Class A common stock, each at an exercise price of $11.50 per shareCANO/WSThe New York Stock Exchange

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 ☒ No ☐

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 ☒ No ☐

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     ☒
Non-accelerated filer     ☐
Accelerated filer         ☐
Smaller reporting company    
Emerging growth company    

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of August 5, 2022 the registrant had 231,917,186 shares of Class A common stock outstanding and 253,974,171 shares of Class B common stock outstanding.





Table of Contents
Page
PART I FINANCIAL INFORMATION
2
PART II. OTHER INFORMATION


i











CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about:

our ability to recognize the benefits of the Business Combination (as defined herein) and our other recent acquisitions, which may be affected by, among other things, competition and our ability to grow and manage growth profitability;
our financial and business performance;
changes in our strategy, future operations, financial position, estimated revenues, forecasts, projected costs, prospects and plans;
changes in applicable laws or regulations, including with respect to health plans and payors and our relationships with such plans and payors, and provisions that impact Medicare and Medicaid programs;
our ability to realize expected results with respect to patient membership, revenue and earnings;
our ability to grow market share in existing markets or enter into new markets and success of acquisitions;
our ability to predict and control our medical claims expense ratio;

the risk that we may not be able to procure sufficient space as we continue to grow and open additional medical centers;
our predictions about the need for our wellness centers after the coronavirus disease 2019 ("COVID-19 pandemic"), including the attractiveness of our offerings and member retention rates;
competition in our industry, the advantages of our products and technology over competing products and technology existing in the market, and competitive factors including with respect to technological capabilities, cost and scalability;
the impact of the COVID-19 pandemic or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide on our business, financial condition and results of operations and the actions we may take in response thereto;
our future capital requirements and sources and uses of cash;
our business, expansion plans and opportunities;
our ability to access new capital through sales of shares of our Class A common stock or issuance of indebtedness, which may harm our liquidity and / or our ability to grow our business;

anticipated financial performance, including gross margin, and the expectation that our future results of operations will fluctuate on a quarterly basis for the foreseeable future;
our expected capital expenditures, cost of revenue and other future expenses, and the sources of funds to satisfy liquidity needs;
our ability to maintain proper and effective internal controls;
our ability to predict changes to the DCE and ACO program as it relates to benchmarks and shared savings;
our ability to implement remediation plans to address the material weaknesses that are described in Part I, Item 4. of this Quarterly Report on Form 10-Q; and
the outcome of any known and unknown litigation and regulatory proceedings.

ii





These forward-looking statements are based on information available to us at the time of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

the ability to maintain the listing of our Class A common stock and warrants on the New York Stock Exchange ("NYSE");
the price of our securities may be volatile due to a variety of factors, including the volatility in capital markets, changes in the competitive and highly regulated industries in which we operate, variations in performance across competitors, changes in laws and regulations affecting our business and changes in our capital structure;

the risk of downturns in the economy and the possibility of rapid change in the highly competitive industry in which we operate;
the risk that we will need to raise additional capital to execute our business plan, which may not be available on acceptable terms or at all; and
the risk that we experience difficulties in managing our growth and expanding operations.

















iii



CANO HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in thousands, except share and per share data)June 30, 2022December 31, 2021
Assets
Current assets:
Cash, cash equivalents and restricted cash$47,847 $163,170 
Accounts receivable, net of unpaid service provider costs 200,990 133,433 
Prepaid expenses and other current assets38,466 20,632 
Total current assets287,303 317,235 
Property and equipment, net106,198 85,261 
Operating lease right-of-use assets168,554 132,173 
Goodwill777,163 769,667 
Payor relationships, net561,733 576,648 
Other intangibles, net234,127 248,973 
Other assets6,327 13,582 
Total assets$2,141,405 $2,143,539 
Liabilities and stockholders' equity
Current liabilities:
Current portion of notes payable$6,444 $6,493 
Current portion of finance lease liabilities1,561 1,295 
Current portion of contingent consideration198 3,123 
Accounts payable and accrued expenses (Related parties comprised $1,475 and $144 as of June 30, 2022 and December 31, 2021, respectively)
69,419 80,829 
Current portions due to sellers4,317 17,357 
Current portion of operating lease liabilities20,726 15,275 
Other current liabilities 39,390 36,664 
Total current liabilities142,055 161,036 
Notes payable, net of current portion and debt issuance costs914,890 915,266 
Long term portion of operating lease liabilities157,408 122,935 
Warrant liabilities22,807 80,144 
Long term portion of finance lease liabilities2,923 2,181 
Contingent consideration27,800 35,300 
Other liabilities 32,525 28,109 
Total liabilities1,300,408 1,344,971 
Stockholders’ Equity
Shares of Class A common stock $0.0001 par value (6,000,000,000 shares authorized and 218,028,952 and 180,113,551 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)
22 18 
Shares of Class B common stock $0.0001 par value (1,000,000,000 shares authorized and 264,527,434 and 297,385,981 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)
27 30 
Additional paid-in capital495,642 397,443 
Accumulated deficit(83,433)(78,760)
Total Stockholders' Equity before non-controlling interests412,258 318,731 
Non-controlling interests428,739 479,837 
Total Stockholders' Equity840,997 798,568 
Total Liabilities and Stockholders' Equity $2,141,405 $2,143,539 
The accompanying Notes are an integral part of these Condensed Financial Statements

4

CANO HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except share and per share data)2022202120222021
Revenue:
Capitated revenue (Related parties comprised $0 and $128,394, in the three months ended June 30, 2022 and 2021, respectively, and $0 and $308,204, in the six months ended June 30, 2022 and 2021, respectively)
$655,493 $329,484 $1,329,844 $590,841 
Fee-for-service and other revenue (Related parties comprised $0 and $219, in the three months ended June 30, 2022 and 2021, respectively, and $0 and $631, in the six months ended June 30, 2022 and 2021, respectively)
33,880 14,097 63,671 27,342 
Total revenue689,373 343,581 1,393,515 618,183 
Operating expenses:
Third-party medical costs (Related parties comprised $0 and $115,975, in the three months ended June 30, 2022 and 2021, respectively, and $0 and $249,819, in the six months ended June 30, 2022 and 2021, respectively)
541,317 291,816 1,077,097 486,862 
Direct patient expense (Related parties comprised $3,064 and $58, in the three months ended June 30, 2022 and 2021, respectively, and $4,518 and $1,488, in the six months ended June 30, 2022 and 2021, respectively)
52,647 35,607 113,323 69,844 
Selling, general, and administrative expenses (Related parties comprised $3,305 and $1,840, in the three months ended June 30, 2022 and 2021, respectively, and $5,452 and $3,763, in the six months ended June 30, 2022 and 2021, respectively)
106,179 47,159 202,849 82,168 
Depreciation and amortization expense19,836 7,945 38,872 13,791 
Transaction costs and other (Related parties comprised $0, $1,465, in the three months ended June 30, 2022 and 2021, respectively, and $0 and $1,483, in the six months ended June 30, 2022 and 2021, respectively)
6,207 16,114 14,583 25,068 
Change in fair value of contingent consideration(5,764)(496)(10,425)(211)
Total operating expenses720,422 398,145 1,436,299 677,522 
Income (loss) from operations(31,049)(54,564)(42,784)(59,339)
Other income and expense:
Interest expense(13,134)(9,714)(26,418)(20,340)
Interest income2 1 3 2 
Loss on extinguishment of debt (13,225)(1,428)(13,225)
Change in fair value of warrant liabilities30,175 39,215 57,337 39,215 
Other income (expenses)251 (25)530 (25)
Total other income17,294 16,252 30,024 5,627 
The accompanying Notes are an integral part of these Condensed Financial Statements

5

CANO HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

Net income (loss) before income tax expense(13,755)(38,312)(12,760)(53,712)
Income tax expense (benefit)809 (2,023)1,889 (1,309)
Net income (loss)$(14,564)$(36,289)$(14,649)$(52,403)
Net income (loss) attributable to non-controlling interests(9,231)(40,844)(9,976)(56,958)
Net income (loss) attributable to Class A common stockholders$(5,333)$4,555 $(4,673)$4,555 
Net income (loss) per share attributable to Class A common stockholders, basic$(0.03)$0.03 $(0.02)$0.03 
Net income (loss) per share attributable to Class A common stockholders, diluted$(0.03)$(0.06)$(0.03)$(0.06)
Weighted-average shares outstanding:
Basic210,053,037 167,134,853 200,783,129 166,691,634 
Diluted474,580,471 168,884,315 465,310,563 167,571,198 
The accompanying Notes are an integral part of these Condensed Financial Statements

6

CANO HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY / MEMBERS' CAPITAL
(UNAUDITED)
Three Months Ended June 30, 2022 and 2021

(in thousands, except shares)Members' CapitalClass A SharesClass B SharesAdditional Paid-in CapitalAccumulated DeficitNon-Controlling InterestsTotal Equity
SharesAmountSharesAmountSharesAmount
BALANCE—March 31, 2022— $— 205,026,367 $20 276,722,704 $28 $464,262 $(78,100)$451,567 $837,777 
Stock-based compensation expense— — — 17,783 — — 17,783 
Issuance of Class A common stock upon vesting of restricted stock units— — 807,315 1 (5,086)5,085  
Exchange of Class B common stock for Class A common stock— — 12,195,270 1 (12,195,270)(1)18,682 — (18,682) 
Net income (loss)— — — (5,333)(9,231)(14,564)
BALANCE—June 30, 2022— $— 218,028,952 $22 264,527,434 $27 $495,642 $(83,433)$428,739 $840,997 

(in thousands, except shares)Members' CapitalClass A SharesClass B SharesAdditional Paid-in CapitalNotes ReceivableAccumulated DeficitNon-Controlling InterestsTotal Equity
SharesAmountSharesAmountSharesAmount
BALANCE—March 31, 202114,629,533 $157,662 — $— — $— $ $(135)$(123,943)$— $33,584 
Retrospective application of reverse recapitalization292,214,129 (157,631)— — — — 157,631 — — —  
ADJUSTED BALANCE—March 31, 2021306,843,662 31     157,631 (135)(123,943) 33,584 
Net loss prior to business combination— — — — — — — — (49,102)— (49,102)
Business combination and PIPE financing(306,843,662)(31)166,243,491 17 306,843,662 31 169,093 — 112,306 491,677 773,093 
Stock-based compensation expense— — — — — — 3,609 — — — 3,609 
Issuance of common stock for acquisitions— — 4,055,698 — — — 60,000 — — — 60,000 
Impact of transactions affecting non-controlling interests— — — — — — (34,094)— — 34,094  
Notes receivable - related parties— — — — — — — (1)— — (1)
Net income (loss)— — — — — — — — 4,552 8,258 12,810 
BALANCE—June 30, 2021  170,299,189 $17 306,843,662 $31 — 356,239 $(136)$(56,187)$534,029 $833,993 

The accompanying Notes are an integral part of these Condensed Financial Statements

7

CANO HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY / MEMBERS' CAPITAL
(UNAUDITED)
Six Months Ended June 30, 2022 and 2021

(in thousands, except shares)Members' CapitalClass A SharesClass B SharesAdditional Paid-in CapitalAccumulated DeficitNon-Controlling InterestsTotal Equity
SharesAmountSharesAmountSharesAmount
BALANCE—December 31, 2021— $— 180,113,551 $18 297,385,981 $30 $397,443 $(78,760)$479,837 $798,568 
Stock-based compensation expense— — — — — — 31,600 — — 31,600 
Issuance of Class A common stock upon vesting of restricted stock units— — 807,315 1 — — (5,086)— 5,085  
Issuance of common stock for acquisitions— — 2,857,167 — — — 15,771 — — 15,771 
Exchange of Class B common stock for Class A common stock— — 32,858,547 3 (32,858,547)(3)51,765 — (51,765) 
Employee Stock Purchase Plan Issuance— — 1,392,372 — — — 9,707 — — 9,707 
Impact of transactions affecting non-controlling interests— — — — — — (5,558)— 5,558  
Net income (loss)— — — — — — — (4,673)(9,976)(14,649)
BALANCE—June 30, 2022— $— 218,028,952 $22 264,527,434 $27 $495,642 $(83,433)$428,739 $840,997 

The accompanying Notes are an integral part of these Condensed Financial Statements

8

CANO HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY / MEMBERS' CAPITAL
(UNAUDITED)
(in thousands, except shares)Members' CapitalClass A SharesClass B SharesAdditional Paid-in CapitalNotes ReceivableAccumulated DeficitNon-Controlling InterestsTotal Equity
SharesAmountSharesAmountSharesAmount
BALANCE—December 31, 202014,629,533 $157,591 — $— — $— $ $(134)$(107,832)$— $49,625 
Retrospective application of reverse recapitalization292,214,129 (157,560)— — — — 157,560 — — —  
ADJUSTED BALANCE—December 31, 2020306,843,662 31     157,560 (134)(107,832) 49,625 
Net loss prior to business combination— — — — — — — — (65,213)— (65,213)
Business combination(306,843,662)(31)166,243,491 17 306,843,662 31 169,093 — 112,306 491,677 773,093 
Stock-based compensation expense— — — — — — 3,680 — — — 3,680 
Issuance of common stock for acquisitions— — 4,055,698 — — — 60,000 — — — 60,000 
Impact of transactions affecting non-controlling interests— — — — — — (34,094)— — 34,094  
Notes receivable - related parties— — — — — — — (2)— (2)
Net income (loss)— — — — — — — — 4,552 8,258 12,810 
BALANCE—June 30, 2021 $ 170,299,189 $17 306,843,662 $31 $356,239 $(136)$(56,187)$534,029 $833,993 
The accompanying Notes are an integral part of these Condensed Financial Statements

9

CANO HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

Six Months Ended
June 30,
(in thousands)20222021
Cash Flows from Operating Activities:
Net loss$(14,649)$(52,403)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense38,872 13,791 
Change in fair value of contingent consideration (10,425)(211)
Change in fair value of warrant liabilities(57,337)(39,215)
Loss on extinguishment of debt1,428 13,225 
Amortization of debt issuance costs1,570 8,541 
Non-cash lease expense3,642  
Stock-based compensation31,600 3,680 
Changes in operating assets and liabilities:
Accounts receivable, net (67,557)(6,441)
Other assets7,158 (5,925)
Prepaid expenses and other current assets(17,834)(16,341)
Interest accrued due to sellers100 957 
Accounts payable and accrued expenses (Related parties comprised $1,331 and $111 for the six months ended June 30, 2022 and 2021, respectively)
(9,362)14,426 
Other liabilities (Related parties comprised $0 and $1,242 for the six months ended June 30, 2022 and 2021, respectively)
10,621 7,816 
Net cash provided by (used in) operating activities(82,173)(58,100)
Cash Flows from Investing Activities:
Purchase of property and equipment (Related parties comprised $3,567 and $2,864 for the six months ended June 30, 2022 and 2021, respectively)
(20,431)(7,730)
Acquisitions of subsidiaries including non-compete intangibles, net of cash acquired(4,995)(614,394)
Payments to sellers(3,847)(23,963)
Net cash provided by (used in) investing activities(29,273)(646,087)
Cash Flows from Financing Activities:
Business combination and PIPE financing 935,362 
Payments of long-term debt(3,222)(402,572)
Debt issuance costs(88)(11,274)
Proceeds from long-term debt 295,000 
Proceeds from delayed draw term loan 175,000 
Repayments of delayed draw term loan (2,350)
Proceeds from insurance financing arrangements2,529 1,702 
Payments of principal on insurance financing arrangements(1,380)(993)
Principal payments under finance leases(679)(64)
Repayment of equipment loans(261)(154)
Employee stock purchase plan withholding tax payments(776) 
Net cash provided by (used in) financing activities(3,877)989,657 
Net increase (decrease) in cash, cash equivalents and restricted cash(115,323)285,470 
Cash, cash equivalents and restricted cash at beginning of year163,170 33,807 
Cash, cash equivalents and restricted cash at end of period$47,847 $319,277 
The accompanying Notes are an integral part of these Condensed Financial Statements

10

CANO HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Supplemental cash flow information:
Interest paid27,670 11,925 
Income taxes paid82  
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange of lease liabilities50,297  
Issuance of class A common stock for acquisitions15,771 60,000 
Contingent consideration in connection with acquisitions 9,600 
Due to sellers in connection with acquisitions3,533 295 
Addition to construction in process funded through accounts payable3,580  
Humana Affiliate Provider clinic leasehold improvements
2,928 2,864 
Employee stock purchase plan issuance9,707  
Capital lease obligations entered into for property and equipment 52 
Equipment loan obligations entered into for property and equipment 183 

The accompanying Notes are an integral part of these Condensed Financial Statements

11

CANO HEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.    NATURE OF BUSINESS AND OPERATIONS

Nature of Business

Cano Health, Inc. (“Cano Health”, or the “Company”), formerly known as Primary Care (ITC) Intermediate Holdings, LLC (“PCIH”), provides value-based medical care for its members through a network of primary care physicians across the U.S. and Puerto Rico. The Company focuses on providing high-touch population health and wellness services to Medicare Advantage, Medicare Global and Professional Direct Contracting Entity ("DCE"), Medicare patients under Accountable Care Organizations ("ACO") and Medicaid capitated members, particularly in underserved communities by leveraging a proprietary technology platform to deliver high-quality health care services. The Company also operates pharmacies in the network for the purpose of providing a full range of managed care services to its members.

On June 3, 2021 (the “Closing Date”), Jaws Acquisition, Corp. (“Jaws”), consummated the previously announced business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement, dated as of November 11, 2020 (as amended, the “Business Combination Agreement”) by and among Jaws, Jaws Merger Sub, LLC, a Delaware limited liability company (“Merger Sub”), PCIH, and PCIH’s sole member, Primary Care (ITC) Holdings, LLC (“Seller”). Upon the closing of the Business Combination, Jaws was reincorporated in the State of Delaware and changed its name to "Cano Health, Inc."

Unless the context requires, "the Company", "we", "us", and "our" refer, for periods prior to the completion of the Business Combination, to PCIH and its consolidated subsidiaries, and for periods upon or after the completion of the Business Combination, to Cano Health, Inc. and its consolidated subsidiaries, including PCIH, and its subsidiaries.

Pursuant to the Business Combination Agreement, on the Closing Date, Jaws contributed cash to PCIH in exchange for 69.0 million common limited liability company units of PCIH ("PCIH Common Units") equal to the number of shares of Jaws' Class A ordinary shares outstanding on the Closing Date as well as 17.25 million Class B ordinary shares owned by Jaws Sponsor, LLC (the "Sponsor"). In connection with the Business Combination, the Company issued 306.8 million shares of the Company’s Class B common stock to existing shareholders of PCIH. The Company also issued 80.0 million shares of the Company’s Class A common stock in a private placement for $800.0 million (the "PIPE Investors").

Following the consummation of the Business Combination, substantially all of the Company’s assets and operations are held and conducted by PCIH and its subsidiaries. As the Company is a holding company with no material assets other than its ownership of PCIH Common Units and its managing member interest in PCIH, the Company has no independent means of generating revenue or cash flow. The Company’s ability to pay taxes and pay dividends depend on the financial results and cash flows of PCIH and the distributions it receives from PCIH. The Company’s only assets are equity interests in PCIH, which represented a 35.1% and 45.2% controlling ownership as of the Closing Date and June 30, 2022, respectively. Certain members of PCIH who retained their common unit interests in PCIH held the remaining 64.9% and 54.8% non-controlling ownership interests as of the Closing Date and June 30, 2022, respectively. These members hold economic interest in PCIH through PCIH Common Units and a corresponding number of non-economic Class B common stock, which enables the holder to one vote per share.

Our organizational structure following the completion of the Business Combination is commonly referred to as an umbrella partnership-C (or Up-C) corporation structure. This organizational structure allowed the Seller, the former sole owner and managing member of PCIH, to retain its equity ownership in PCIH, an entity that is classified as a partnership for U.S. federal income tax purposes, in the form of PCIH Common Units. The former stockholders of Jaws and the PIPE Investors who, prior to the Business Combination, held Class A ordinary shares or Class B ordinary shares of Jaws, by contrast, received equity ownership in Cano Health, Inc., a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes.

Subject to the terms and conditions set forth in the Business Combination Agreement, the Seller and its equity holders received aggregate consideration with a value equal to $3,534.9 million, which consisted of (i) $466.5 million of cash and (ii) $3,068.4 million of Cano Health, Inc.'s common stock or 306.8 million shares of Class B common stock based on a reference stock price of $10.00 per share.

12

CANO HEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Following the closing of the Business Combination, Class A stockholders owned direct controlling interests in the combined results of PCIH and Cano Health, Inc. while the Seller as the sole Class B stockholder owned indirect economic interests in PCIH shown as non-controlling interests in the unaudited condensed consolidated financial statements of Cano Health, Inc. The indirect economic interests are held by the Seller in the form of PCIH Common Units that can be redeemed for Class A common stock together with the cancellation of an equal number of shares of Class B common stock in Cano Health, Inc. The non-controlling interests will decrease over time as shares of Class B common stock and PCIH Common Units are exchanged for shares of Class A common stock in Cano Health, Inc.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The portion of an entity not wholly-owned by the Company is presented as non-controlling interests. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company.

The Company has interests in various entities and considers itself to control an entity if it is the majority owner of or has voting control over such entity. The Company also assesses control through means other than voting rights (“variable interest entities” or “VIEs”) and determines which business entity is the primary beneficiary of the VIE. The Company consolidates VIEs when it is determined that the Company is the primary beneficiary of the VIE. Included in the consolidated results of the Company are Cano Health Texas, PLLC, Cano Health Nevada, PLLC, Cano Health California, PC and Cano Health Illinois, PLLC (collectively, the "Physicians Groups"), which the Company has concluded are VIEs. All material intercompany accounts and transactions have been eliminated in consolidation.

Risks and Uncertainties

As of June 30, 2022, the Company’s coverage area is primarily in the State of Florida. Given this concentration, the Company is subject to adverse economic, regulatory, or other developments in the State of Florida that could have a material adverse effect on the Company’s financial conditions and operations. In addition, federal, state and local laws and regulations concerning healthcare affect the healthcare industry. The Company’s long-term success is dependent on the ability to successfully generate revenues; maintain or reduce operating costs; obtain additional funding when needed; and ultimately, achieve profitable operations. The Company is not able to predict the content or impact of future changes in laws and regulations affecting the healthcare industry; however, management believes that its existing cash position, along with expected cash generation through operations and revolving line of credit, will be sufficient to fund operating and capital expenditure requirements through at least twelve months from the date of issuance of these unaudited condensed consolidated financial statements.

Basis of Presentation

These Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2022 and 2021, the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021, and the Condensed Consolidated Balance Sheet at June 30, 2022 are unaudited and, in the opinion of our management, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation. Our interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K ("Form 10-K") filed with the U.S. Securities and Exchange Commission (the "SEC") on March 14, 2022.

The Company was deemed the accounting acquirer in the Business Combination of Jaws based on an analysis of the criteria outlined in Accounting Standards Codification ("ASC") Topic 805, "Business Combinations" ("ASC 805"), as the Company’s former owner retained control after the Business Combination. Refer to Note 1, "Nature of Business", for details surrounding the Business Combination. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of the Company issuing stock for the net assets of Jaws, accompanied by a recapitalization. The net assets of Jaws were stated at historical cost, with no goodwill or other intangible assets recorded.

While Jaws was the legal acquirer in the Business Combination, because the Company was deemed the accounting acquirer, the historical financial statements of PCIH became the historical financial statements of the combined company upon
13

CANO HEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
the consummation of the Business Combination. As a result, the unaudited condensed consolidated financial statements reflect the historical operating results of PCIH prior to the Business Combination, the combined results of Jaws and the Company following the close of the Business Combination, the assets and liabilities of the Company at their historical cost, and the Company’s equity structure for all periods presented.

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year presentation. Such reclassifications impacted the classification of: inventory, current and long-term portion of equipment loans, due to seller, accounts payable and accrued expenses and current and long-term deferred revenue. These reclassifications had no impact on net loss as previously presented.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company described its significant accounting policies in Note 2 to the audited consolidated financial statements for the year ended December 31, 2021 included in its Form 10-K. During the six months ended June 30, 2022, there were no significant changes to those accounting policies.

Recent Accounting Pronouncements 

Adoption of New Accounting Standards

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The guidance provides optional expedients and exceptions related to certain contract modifications and hedging relationships that reference the London Interbank Offered Rate ("LIBOR") or another rate that is expected to be discontinued. The guidance was effective upon issuance and generally can be applied to applicable contract modifications and hedge relationships prospectively through December 31, 2022. The Company elected to use the practical expedients within the standard when accounting for a portion of the amendment to the term loan. The adoption did not impact net income.

3.    REVENUE AND ACCOUNTS RECEIVABLE

The Company’s revenue streams for the three and six months ended June 30, 2022 and 2021 were as follows:


Three Months Ended June 30,
20222021
(in thousands)Revenue $Revenue %Revenue $Revenue %
Capitated revenue
  Medicare$602,613 87.4 %$284,974 82.8 %
  Other capitated revenue52,880 7.6 %44,510 13.0 %
Total capitated revenue655,493 95.0 %329,484 95.8 %
Fee-for-service and other revenue
  Fee-for-service9,701 1.4 %4,389 1.3 %
  Pharmacy12,759 1.9 %8,217 2.4 %
  Other11,420