As filed with the U.S. Securities and Exchange Commission on January 31, 2023.

Registration No. 333-264654

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

POST-EFFECTIVE AMENDMENT NO. 1 TO

FORM S-1 ON FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CareMax, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		8000		85-0992224
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

1000 NW 57 Court, Suite 400

Miami, FL 33126

(786) 360-4768

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Carlos A. de Solo

Chief Executive Officer

CareMax, Inc.

1000 NW 57 Court, Suite 400

Miami, FL 33126

(786) 360-4768

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Kevin Wirges Chief Financial Officer CareMax, Inc. 1000 NW 57 Court, Suite 400 Miami, FL 33126 (786) 360-4768		Joshua M. Samek, Esq. DLA Piper LLP (US) 200 South Biscayne Boulevard, Suite 2500 Miami, Florida (305) 423-8500

 

 

Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  ☐

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  ☐

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.  ☐

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		☐		Accelerated filer		☒
Non-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 7(a)(2)(B) of the Securities Act.  ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

EXPLANATORY NOTE

CareMax, Inc., a Delaware corporation (“CareMax”, the “Company”, “we”, “our” or “us”), filed a Registration Statement on Form S-1 (File No. 333-264654), with the Securities and Exchange Commission (the “SEC”) on May 4, 2022, which was amended on May 18, 2022 and declared effective by the SEC on May 18, 2022 (as amended, the “Registration Statement”). The Registration Statement related to the offer and sale from time to time by the selling securityholders named therein of up to (A) 63,581,530 shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”), which consisted of (i) an aggregate of 10,000,000 shares of Class A Common Stock (the “Deerfield PIPE Investments”) purchased by Deerfield Partners, L.P. (“Deerfield Partners”) and DFHTA Sponsor LLC (the “Sponsor”) in connection with the Closing (as defined below) on June 8, 2021 (the “Closing Date”), (ii) 18,635,073 shares of Class A Common Stock purchased by certain investors at the Closing (the “Third-Party PIPE Investments,” and together with the Deerfield PIPE Investments, the “PIPE Investments”), (iii) 3,593,750 shares of Class A Common Stock, that were converted into shares of Class A Common Stock from shares of Class B common stock, par value $0.0001 per share (“Class B Common Stock”), on a one-for-one basis at the Closing, (iv) 21,208,092 shares of Class A Common Stock issued as consideration for the Business Combination (as defined below) at Closing, (v) up to 3,200,000 Earnout Shares (as defined below) that may be issued in the form of Class A Common Stock pursuant to the earnout provisions in the Business Combination Agreement (as defined below), (vi) 3,200,000 shares of Class A Common Stock issued pursuant to the earnout provisions in the Business Combination Agreement, (vii) 384,615 shares of Class A Common Stock issued in the SMA Transaction (as defined below) and (viii) 3,360,000 shares of Class A Common Stock purchased by Deerfield Partners as a part of units in our initial public offering, which closed on July 21, 2020 (the “IPO”) and (B) 2,916,667 warrants (the “Private Warrants”) originally issued in a private placement to the Sponsor in connection with the IPO.

In addition, the Registration Statement related to the offer and sale of up to (i) 2,916,667 shares of Class A Common Stock issuable upon the exercise of the Private Warrants and (ii) 2,875,000 shares of Class A Common Stock that are issuable by us upon the exercise of 2,875,000 warrants originally issued in connection with the IPO at an exercise price of $11.50 per share of Class A Common Stock (the “Public Warrants” and together with the Private Warrants, the “Warrants”).

We are filing this Post-Effective Amendment No. 1 to the Registration Statement (this “Amendment”) to (i) convert the Registration Statement on Form S-1 into a registration statement on Form S-3 because we are eligible to use Form S-3; (ii) reflect the closing of the Company’s previously announced acquisition (the “Steward Transaction”) of the Medicare value-based care business of Steward Health Care System (“Steward Value-Based Care”); (iii) include Steward Value-Based Care’s unaudited financial statements as of and for the nine months ended September 30, 2022 and 2021; and (iv) include the unaudited pro forma condensed combined balance sheet of the Company, giving effect to the Steward Transaction, as of September 30, 2022 and the unaudited pro forma condensed combined statement of operations of the Company, giving effect to the Steward Transaction, for the nine months ended September 30, 2022 and the year ended December 31, 2021.

This Amendment contains an updated prospectus relating to the offering and sale of the Class A Common Stock and Warrants which remain unsold under the Registration Statement. No additional securities are registered hereby. All filing fees payable in connection with the registration of the shares of Class A Common Stock and Warrants covered by this Amendment have been previously paid.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS — SUBJECT TO COMPLETION, DATED JANUARY 31, 2023

CareMax, Inc.

Up to 58,657,003 Shares of Class A Common Stock

Up to 5,791,667 Shares of Class A Common Stock Issuable Upon Exercise of Warrants and

Up to 2,916,667 Warrants

 

 

This prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus (the “Selling Securityholders”) of up to (A) 58,657,003 shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”), which consists of (i) an aggregate of 9,993,429 shares of Class A Common Stock (the “Deerfield PIPE Investments”) originally purchased by Deerfield Partners, L.P. (“Deerfield Partners”) and DFHTA Sponsor LLC (the “Sponsor”) in connection with the Closing (as defined below) on June 8, 2021 (the “Closing Date”), (ii) 14,173,876 shares of Class A Common Stock purchased by certain investors at the Closing (the “Third-Party PIPE Investments,” and together with the Deerfield PIPE Investments, the “PIPE Investments”), (iii) 3,136,990 shares of Class A Common Stock, that were converted into shares of Class A Common Stock from shares of Class B common stock par value $0.0001 per share (“Class B Common Stock”) on a one-for-one basis at the Closing, (iv) 21,208,093 shares of Class A Common Stock issued as consideration for the Business Combination (as defined below) at the Closing, (v) up to 3,200,000 Earnout Shares (as defined below) that may be issued in the form of Class A Common Stock pursuant to the earnout provisions in the Business Combination Agreement (as defined below), (vi) 3,200,000 Earnout Shares that were issued in the form of Class A Common Stock pursuant to the earnout provisions in the Business Combination Agreement, (vii) 384,615 shares of Class A Common Stock issued in the SMA Transaction (as defined below) and (viii) 3,360,000 shares of Class A Common Stock purchased by Deerfield Partners as a part of units in our initial public offering, which closed on July 21, 2020 (the “IPO”) and (B) 2,916,667 warrants (the “Private Warrants”) originally issued in a private placement to the Sponsor in connection with the IPO.

In addition, this prospectus relates to the offer and sale of up to (i) 2,916,667 shares of Class A Common Stock issuable upon the exercise of the Private Warrants and (ii) 2,875,000 shares of Class A Common Stock that are issuable by us upon the exercise of 2,875,000 warrants originally issued in connection with the IPO at an exercise price of $11.50 per share of Class A Common Stock (the “Public Warrants” and together with the Private Warrants, the “Warrants”).

Additionally, the shares being registered for resale will constitute a considerable percentage of our public float. Certain of the shares being registered for resale were purchased by the corresponding selling securityholders for prices considerably below the current market price of our common stock. See “Selling Securityholders” beginning on page 33 of this prospectus for the price that the Selling Securityholders paid for the Class A Common Stock and Warrants that are being registered for resale with this prospectus.

With respect to our warrants, we do not believe it is likely that a warrant holder would elect to exercise its warrants when our common stock is trading below $11.50. See “Use of Proceeds” on page 31 of this prospectus for further details.

The Selling Securityholders may offer, sell or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of Class A Common Stock or any warrants, except with respect to amounts received by us upon the exercise of any such warrants. We will bear all costs, expenses and fees in connection with the registration of these securities, including with regard to compliance with state securities or “blue sky” laws. The Selling Securityholders will bear all commissions and discounts, if any, attributable to their sale of shares of Class A Common Stock or warrants. See “Plan of Distribution” beginning on page 57 of this prospectus.

Our Class A Common Stock and Public Warrants are listed on the Nasdaq Global Select Market under the symbols “CMAX” and “CMAXW,” respectively. On January 30, 2023, the last reported sales price of our Class A Common Stock was $4.36 per share and the last reported sales price of our Public Warrants on January 30, 2023 was $0.6175 per warrant.

We are an “emerging growth company” and “smaller reporting company” under applicable federal securities laws and are subject to reduced public company reporting requirements. Investing in our securities involves risks. See “Risk Factors” beginning on page 5.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The date of this prospectus is                            , 2023.

TABLE OF CONTENTS

 

		Page
ABOUT THIS PROSPECTUS			i
CERTAIN DEFINED TERMS			ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			iv
PROSPECTUS SUMMARY			1
THE OFFERING			3
RISK FACTORS			5
STEWARD VALUE-BASED CARE FINANCIAL INFORMATION			6
UNAUDITED PRO FORMA FINANCIAL INFORMATION			19
USE OF PROCEEDS			31
DETERMINATION OF OFFERING PRICE			32
SELLING SECURITYHOLDERS			33
DESCRIPTION OF SECURITIES			42
PLAN OF DISTRIBUTION			57
U.S. FEDERAL INCOME TAX CONSIDERATIONS			60
LEGAL MATTERS			67
EXPERTS			67
WHERE YOU CAN FIND ADDITIONAL INFORMATION			67
INCORPORATION BY REFERENCE			67
INDEX TO FINANCIAL STATEMENTS			F-1

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus. This prospectus also relates to the issuance by us of the shares of Class A Common Stock issuable upon the exercise of any Warrants. We will receive proceeds from any exercise of the Warrants for cash.

Neither we nor the Selling Securityholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. A prospectus supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus, any applicable prospectus supplement and any related free writing prospectus together with the additional information to which we refer you to in the sections of this prospectus entitled “Where You Can Find Additional Information” and “Incorporation by Reference.”

On the Closing Date, Deerfield Healthcare Technology Acquisitions Corp. (“DFHT”), a Delaware corporation, completed the transactions contemplated by that certain Business Combination Agreement, dated as of December 18, 2020 (the “Business Combination Agreement”), by and among DFHT, the entities listed in Annex I to the Business Combination Agreement, IMC Holdings, LP, a Delaware limited partnership (“IMC Parent”), CareMax Medical Group, L.L.C., a Florida limited liability company (“CMG”), IMC Medical Group Holdings, LLC, a Delaware limited liability company (“IMC”), and, solely for the limited purposes specified therein, Deerfield Partners, pursuant to which DFHT acquired (a) 100% of the equity interests in CMG and (b) 100% of the equity interests in IMC, with CMG and IMC becoming wholly owned subsidiaries of the combined company. The transactions contemplated by the Business Combination Agreement and the related financing transactions collectively are referred to herein as the “Business Combination.”

Immediately upon the completion of the Business Combination (the “Closing”), DFHT as the registrant changed its name to “CareMax, Inc.”

Unless the context otherwise requires, the terms “we,” “us,” “our,” “CareMax” and the “Company” refer to CareMax, Inc. and its consolidated subsidiaries following the Closing and references to “DFHT” refer to Deerfield Healthcare Technology Acquisitions Corp. at or prior to the Closing. All references herein to the “Board” refer to the board of directors of the Company.

 

i

CERTAIN DEFINED TERMS

Unless the context indicates otherwise, the following terms have the following meanings when used in this prospectus:

“Amended and Restated Bylaws” means the amended and restated bylaws of the Company, dated June 8, 2021.

“Amended and Restated Charter” means the third amended and restated certificate of incorporation of the Company, dated June 8, 2021.

“Amended and Restated Registration Rights Agreement” means the Amended and Restated Registration Rights Agreement, dated as of December 18, 2020, by and between the Company and certain investors, as amended.

“C.G.D.” means C.G.D. Investment Group, Inc.

“CMG Earnout Shares” means up to an additional 3,500,000 shares of Class A Common Stock payable to the CMG Sellers, subject to certain post-Closing conditions.

“CMG Sellers” means O.M., C.G.D, Joseph N. De Vera, Inc., NKP Caremax, LLC and Mouquin Trotter, Inc.

“Code” means the Internal Revenue Code of 1986, as amended.

“Deerfield Management” means Deerfield Management Company, L.P., a Delaware series limited partnership (Series C) and its affiliates.

“DGCL” means the General Corporation Law of the State of Delaware.

“Earnout Shares” means the CMG Earnout Shares and the IMC Earnout Shares.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Founder Shares” means the shares of Class B Common Stock initially purchased by the Sponsor in a private placement prior to the IPO and the shares of Class A Common Stock that were issued upon the automatic conversion of the shares of Class B Common Stock at the time of the Closing.

“IMC” means IMC Medical Group Holdings, LLC, a Delaware corporation, and its subsidiaries.

“IMC Earnout Shares” means up to an additional 2,900,000 shares of Class A Common Stock payable to IMC Parent, subject to certain post-Closing conditions.

“Initial Stockholders” means the Sponsor and its executive officers and directors, who were the holders of the Founder Shares prior to the IPO.

“Interamerican” means Interamerican Medical Center Group, LLC, an indirect wholly-owned subsidiary of the Company.

“Merger Agreement” means that certain Agreement and Plan of Merger, by and among (i) the Company, (ii) Sparta Merger Sub I Inc., a Delaware corporation and wholly-owned subsidiary of the Company, (iii) Sparta Merger Sub II Inc., a Delaware corporation and wholly-owned subsidiary of the Company, (iv) Sparta Merger

 

ii

Sub III Inc., a Delaware corporation and wholly-owned subsidiary of the Company, (v) Sparta Merger Sub I LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company, (vi) Sparta Merger Sub II LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company, (vii) Sparta Merger Sub III LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company, (viii) Sparta Sub Inc., a Delaware corporation, (ix) SNCN Holdco Inc. a Delaware corporation, (x) SICN Holdco Inc. a Delaware corporation, (xi) Sparta Holding Co. LLC, a Delaware limited liability company and (xii) Steward Health Care System LLC, a Delaware limited liability company.

“Nasdaq” means The Nasdaq Stock Market.

“O.M.” means O.M. Investment Group, Inc.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Selling Securityholders” means the selling securityholders covered by this prospectus.

“SMA Shares” means the 384,615 shares of Class A Common Stock issued to SMA Seller as partial consideration for the SMA Transaction.

“SMA Transaction” means the acquisition of 100% of the issued and outstanding equity interests of Senior Medical Associates, LLC, a Florida limited liability company (“SMA”), and Stallion Medical Management, LLC, a Florida limited liability company (“SMM” and together with SMA, the “SMA Entities”), pursuant to that certain securities purchase agreement, dated as of March 8, 2021 (the “SMA Purchase Agreement”), by and among Interamerican, the SMA Entities and Mohsin Jaffer (the “SMA Seller”).

“Steward Earnout Share Consideration” means the shares of CareMax Class A Common Stock that the Company will issue upon 100,000 Medicare lives from and/or attributable to the Steward Seller Parties’ Medicare network participating in risk-based, value-based care arrangements contracted through the Company with a Medical Expense Ratio of less than 85% for two consecutive calendar quarters.

“Steward Initial Share Consideration” means the 23,500,000 shares of CareMax Class A Common Stock delivered at the closing of the Steward Transaction.

“Steward Seller Parties” means Sparta Holding Co. LLC and Steward Health Care System LLC.

“Steward Share Consideration” means the Steward Earnout Share Consideration and the Steward Initial Share Consideration.

“Steward Targets” means, collectively, SICN Holdco Inc., SNCN Holdco Inc., Sparta Sub Inc., Steward National Care Network, Inc. (n/k/a/ Steward National Care Network, LLC), Steward Integrated Care Network, Inc. and Steward Accountable Care Network, Inc. (n/k/a Steward Accountable Care Network, LLC).

“Steward Transaction” means the acquisition of the Medicare value-based care business of Steward Health Care System, pursuant to the previously announced agreement and plan of merger, dated May 31, 2022.

“Steward Value-Based Care” means the Medicare value-based care business of Steward Health Care System.

“Units” means the units sold in the IPO, each of which consisted of one share of Class A Common Stock and one-fifth of one warrant.

 

iii

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Forward-looking statements provide the Company’s current expectations or forecasts of future events, and include statements the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. These statements are based on management’s current beliefs and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Although we believe our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “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 contained in this registration statement include, but are not limited to, statements about:

 

•

the impact of the focus on providing CareOptimize software to affiliated practices of our managed services organization (“MSO”) to further improve financial, clinical and quality outcomes from the affiliated providers;

 

•

the impact of CareOptimize software on the financial, clinical and quality outcomes of affiliated providers;

 

•

the future financial performance of the Company, including any projected financial information;

 

•

expansion plans and opportunities, including any expected acquisitions or the opening of any new medical centers;

 

•

our growth strategy, including organic growth of members or Medicare members, or otherwise, and growth by acquisition, and our ability to realize expected results following the Steward Transaction;

 

•

the future economic benefits, outcomes and patient experiences we expect from our care mode; and

 

•

the anticipated benefits of the acquisition of Steward Value-Based Care.

These forward-looking statements are based on information available as of the date of this registration statement, and current expectations, forecasts and assumptions, and involve a number of 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.

In addition, statements that we “believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this registration statement, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete involve a number of assumptions and limitations. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should not place undue reliance on these forward-looking statements. 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:

 

•

risks that the Steward Transaction disrupts current operations of the Company and potential difficulties in Company employee retention as a result of the Steward Transaction;

 

iv

•

risks related to diverting management’s attention from the Company’s ongoing business operations;

 

•

the failure to realize anticipated benefits of the Steward Transaction or to realize estimated pro forma results and underlying assumptions;

 

•

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 operation;

 

•

our ability to grow and manage growth profitably, maintain relationships with customers, compete within our industry and retain our key employees;

 

•

our ability to integrate acquired businesses, including the ability to implement business plans, forecasts, and other expectations after the completion of the Steward Transaction;

 

•

our ability to complete acquisitions and to open new centers and the timing of such acquisitions and openings;

 

•

the viability of our growth strategy, including both organic and de novo growth and growth by acquisition, and our ability to realize expected results, as well as our ability to access the capital necessary for such growth;

 

•

our ability to attract new patients;

 

•

the dependence of our revenue and operations on a limited number of key payors;

 

•

the risk of termination, non-renewal or renegotiation of the Medicare Advantage (“MA”) contracts held by the health plans with which we contract, or the termination, non-renewal or renegotiation of our contracts with those plans;

 

•

the impact on our business from changes in the payor mix of our patients and potential decreases in our reimbursement rates;

 

•

our ability to manage our growth effectively, execute our business plan, maintain high levels of service and patient satisfaction and adequately address competitive challenges;

 

•

the impact of restrictions contained in certain of our agreements on our current and future operations;

 

•

competition from primary care facilities and other healthcare services providers;

 

•

competition for physicians and nurses, and shortages of qualified personnel;

 

•

the impact on our business of reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program, including the MA program and other programs governing accountable care organizations;

 

•

the impact on our business of state and federal efforts to reduce Medicaid spending;

 

•

a shift in payor mix to Medicare payors as well as an increase in the number of Medicaid patients may result in a reduction in the average rate of reimbursement;

 

•

our assumption under most of our agreements with health plans of some or all of the risk that the cost of providing services will exceed our compensation;

 

•

risks associated with estimating the amount of revenues and refund liabilities that we recognize under our risk agreements with health plans;

 

•

the impact on our business of security breaches, loss of data, or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;

 

•

the impact of our existing or future indebtedness and any associated debt covenants on our business and growth prospects;

 

•

the impact on our business of disruptions in our disaster recovery systems or management continuity planning;

 

v

•

the potential adverse impact of legal proceedings and litigation;

 

•

the impact of reductions in the quality ratings of the health plans we serve;

 

•

our ability to maintain and enhance our reputation and brand recognition;

 

•

our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;

 

•

our ability to obtain, maintain and enforce intellectual property protection for our technology;

 

•

the potential adverse impact of claims by third parties that we are infringing on or otherwise violating their intellectual property rights;

 

•

our ability to protect the confidentiality of our trade secrets, know-how and other internally developed information;

 

•

the impact of any restrictions on our use of or ability to license data or our failure to license data and integrate third-party technologies;

 

•

our ability to protect data, including personal health data, and maintain our information technology systems from cybersecurity breaches and data leakage;

 

•

our ability to adhere to all of the complex government laws and regulations that apply to our business;

 

•

our reliance on strategic relationships with third-parties to implement our growth strategy;

 

•

the impact on our business if we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting U.S. healthcare reform;

 

•

that estimates of market opportunity and forecasts of market and revenue growth included in the prospectus may prove to be inaccurate, if at all;

 

•

our operating results and stock price may be volatile;

 

•

risks associated with estimating the amount of revenues that we recognize under our risk agreements with health plans;

 

•

our ability to navigate rules and regulations that govern our licensing and certification, as well as credentialing processes with private payors, before we can receive reimbursement for their services;

 

•

our ability to develop and maintain proper and effective internal control over financial reporting; and

 

•

other risks and uncertainties indicated in this registration statement, including those under “Risk Factors” herein, and other filings that have been made or will be made with the SEC.

 

 

vi

 

1

 

2

 

3

 

4

RISK FACTORS

Investing in our securities involves risks. You should carefully review the risk factors below, the risk factors contained under the heading “Risk Factors” in our most recent Annual Report on Form 10-K and any risk factors that we may describe in our Quarterly Reports on Form 10-Q, or Current Reports on Form 8-K filed subsequently, which risk factors are incorporated by reference in this prospectus, the information contained under the heading “Cautionary Note Regarding Forward-Looking Statements” in this prospectus or under any similar heading in any applicable prospectus supplement or in any document incorporated herein or therein by reference, any specific risk factors discussed under the caption “Risk Factors” in any applicable prospectus supplement or in any document incorporated herein or therein by reference and the other information contained in, or incorporated by reference in, this prospectus or any applicable prospectus supplement before making an investment decision. The risks and uncertainties described in our SEC filings are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may also harm our business. If any such risks and uncertainties actually occur, our business, financial condition, results of operations, cash flows and prospects could be materially and adversely affected, the market price of our Common Stock and/or Public Warrants could decline, and you could lose all or part of your investment. See “Where You Can Find Additional Information,” “Incorporation by Reference” and “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to the Steward Transaction

The issuance of the Steward Share Consideration has resulted, and may in the future result, in dilution to our stockholders and may adversely affect us, including the market price of our securities.

The Steward Initial Share Consideration, which consisted of 23,500,000 shares of Class A Common Stock and was approximately 21% of the Company’s Class A Common Stock issued and outstanding as of the closing date of the Steward Transaction, resulted in a significant, immediate dilution to the Company’s stockholders. Additionally, upon the issuance of the Steward Earnout Share Consideration, there will be significant additional dilution to the Company’s stockholders, and even in the event that the Steward Earnout Share Consideration is not issued, the potential for the issuance of the Steward Earnout Share Consideration may negatively affect the trading price of the Company’s securities in anticipation of such dilution. Additionally, the dilution caused by the Steward Share Consideration could, among other things, limit the ability of our current stockholders to influence management of the Company.

Certain of the equityholders who received Steward Share Consideration are subject to lockup provisions that restrict the sale of the Class A Common Stock by such persons in excess of 4% of the total outstanding Class A Common Stock immediately following the closing of the Steward Transaction for one year, subject to certain exceptions, but sales of a substantial number of the shares issued as Steward Share Consideration in the public market, or the perception that such sales may occur, could adversely affect the market price of our securities, notwithstanding such lockup provisions.

The acquisition of Steward Value-Base Care may be more difficult, costly, or time-consuming than expected, and we may not realize the anticipated benefits of the Steward Transaction.

To realize the anticipated benefits from the Steward Transaction, we must successfully integrate and combine our business with that of Steward Value-Based Care. If we are not able to successfully achieve these objectives, the anticipated benefits of the Steward Transaction may not be realized fully or at all or may take longer to realize than expected. In addition, the actual benefits of the Steward Transaction could be less than anticipated, and integration may result in additional unforeseen expenses. In addition, we and Steward Value-Based Care operated independently until the completion of the Steward Transaction. It is possible that the integration process could result in the loss of one or more key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect each company’s ability to maintain relationships with doctors, patients, and employees or to achieve the anticipated benefits of the Steward Transaction. Integration efforts between the companies may also divert management attention and resources. These integration matters could have an adverse effect on CareMax for an undetermined period after completion of the Steward Transaction.

 

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STEWARD VALUE-BASED CARE FINANCIAL INFORMATION

For information about Steward Value-Based Care’s operations and financial condition, see (i) the audited combined financial statements of Steward Value-Based Care for the fiscal years ended December 31, 2021 and 2020 and the related notes thereto, which are incorporated by reference herein, (ii) the unaudited combined financial statements of Steward Value-Based Care for the three and nine months ended September 30, 2022 included elsewhere in this prospectus, and (iii) the unaudited pro forma condensed combined financial information, and the related notes thereto, of CareMax as of and for the nine months ended September 30, 2022 and for the fiscal year ended December 31, 2021, included elsewhere in this prospectus.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of Steward Value-Based Care

The following discussion and analysis summarize the significant factors affecting the consolidated operating results, financial condition, liquidity, capital resources and cash flows of Steward Value-Based Care as of and for the periods presented below. The following discussion and analysis should be read in conjunction with Steward Value-Based Care’s financial statements, and the related notes thereto included elsewhere in this prospectus, in addition to the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Overview

Steward Value-Based Care is a highly integrated physician network and managed care contracting business comprising more than 6,800 providers, including approximately 1,800 primary care physicians and approximately 5,000 specialty providers. Operating one of the largest accountable care organizations (“ACOs”) in the United States, Steward Value-Based Care participates in multiple Medicare value-based programs including Medicare Shared Savings Program (“MSSP”), Medicare Advantage (“MA”) and direct contracting entity (“DCE”) contracts.

Sparta Holding Co. LLC, which was formed for the purpose of holding the equity interests of Steward Value-Based Care, signed the Merger Agreement on May 31, 2022, which contemplated the sale to CareMax of Steward Value-Based Care, including its MSSP, MA, and DCE contracts. Effective November 10, 2022, CareMax completed the Steward Transaction and acquired Steward Value-Based Care.

Prior to the closing of the Steward Transaction, Steward Value-Based Care was part of Steward Health Care System LLC (“SHCS”). SHCS also operates two additional value-based businesses, commercial and Medicaid.

Value-based care requires population health management of attributed members. In MSSP and DCE, member attribution is based on historical medical experience of the patient, and in MA, attribution is based on primary care physician selection by the patient. Value-based care organizations must have a critical mass of attributed membership to achieve economies of scale on population health operations as well as to manage the risk.

Steward Value-Based Care’s estimated attributed membership as of September 30, 2022 was as follows:

 

MSSP members			107,013
DCE members			9,105
MA members			49,746
Total members			165,846

Steward Value-Based Care derives its revenue primarily from the following programs:

 

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Medicare Shared Savings Program

The MSSP is sponsored by the Center for Medicare and Medicaid Services (“CMS”). The MSSP allows ACO participants to receive a share of cost savings they generate in connection with the management of costs and quality of medical services rendered to Medicare beneficiaries. Payments to ACO participants, if any, are calculated annually and paid once a year by CMS on cost savings generated by the ACO participant relative to the ACO participants’ CMS benchmark. Under the MSSP, an ACO must meet certain qualifications to receive the full amount of its allocable cost savings or they either receive nothing or are responsible for shared losses. The MSSP rules require CMS to develop a benchmark for savings to be achieved by each ACO if the ACO is to receive shared savings. An ACO that meets the MSSP’s quality performance standards will be eligible to receive a share of the savings to the extent its assigned beneficiary medical expenditures are below the medical expenditure benchmark provided by CMS. A Minimum Savings Rate (“MSR”), which varies depending on the number of beneficiaries assigned to the ACO, must be achieved before the ACO can receive a 75% share of the savings if quality performance standards are met. Once the MSR is surpassed, all the savings below the benchmark provided by CMS will be shared with the ACO.

MSSP quality measures typically function as an all-or-nothing gating for any earned surpluses in a given year (i.e., if the minimum quality thresholds are not met, the entire surplus earnings are forfeited). While Steward Value-Based Care believes the quality targets are currently achievable, CMS has broad discretion to change the measure thresholds in future performance years. Given the gating methodology, Steward Value-Based Care closely monitors any changes to the MSSP quality program and develops mitigation programs and initiatives to respond to these changes.

Steward Value-Based Care requested a reconsideration review of the results of the 2021 performance year after receiving the final 2021 unembargoed settlement notice in August 2022. On September 13, 2022, Steward Value-Based care submitted a formal notice requesting a reconsideration to CMS and contested the results of settlement on grounds that the regional trend used to calculate Steward Value-Based Care’s 2021 benchmark was not reflective of the severity and case mix of Steward Value-Based Care’s beneficiaries due to a significant flaw in the 2021 MSSP risk score methodology. As a result, Steward Value-Based Care’s benchmark amount was much lower than the true amount needed to treat Steward Value-Based Care’s patients which negatively impacted Steward Value-Based Care’s shared savings. Steward Value-Based Care believes the socioeconomic, racial, and ethnic disparities in the communities Steward Value-Based Care serves were not sufficiently contemplated in the model and were further exacerbated by the pandemic.

On December 14, 2022, Steward Value-Based Care received the response to their reconsideration review from CMS, whereby the review was dismissed. The resolution of this review did not have a material adverse effect on Steward Value-Base Care’s business, financial condition, operating results or cash flows.

Direct Contracting Entity Program

The DCE program is sponsored by the Center for Medicare and Medicaid Innovation (CMMI). Like MSSP, DCE participants receive a share in the cost savings they generate in connection with the management of costs and quality of medical services rendered to Medicare beneficiaries. Beginning in 2022, Steward Value-Based Care elected to participate in the professional track of the standard DCE model. The DCE model includes three voluntary payment model options which allow participants to take on risk and earn rewards by providing them with choices related to cash flows, beneficiary alignment and benefits enhancements. In addition to the annual settlement in the fourth quarter of the subsequent performance year, Steward Value-Based Care also receives monthly payments from CMMI during the performance year, which are reconciled against the final annual settlement. The DCE program will be retired on December 31, 2022, and replaced with the ACO Realizing Equity, Access, and Community Health (“ACO REACH”) program. Steward Value-Based Care had approximately 9,100 DCE members as of September 30, 2022. Effective January 1, 2023, Steward Value-Based Care intends to transition the DCE participants into the ACO REACH program, which retains many of the features of the DCE model including compensation.

 

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Medicare Advantage

MA is a type of health insurance plan that provides Medicare benefits to people who qualify for Medicare through private commercial insurers. In a MA plan, a private insurance company provides coverage for inpatient hospital (Part A) and outpatient (Part B) services. Typically, the plan also includes prescription drug (Part D) coverage as well as other additional benefits such as dental. While specifics of contracts with commercial insurers might differ, the overall arrangements under MA are similar, whereby Steward Value-Based Care enters into agreements with payors to manage the cost and quality of a defined range of healthcare services for the members enrolled in that individual payor’s MA health plan. Steward Value-Based Care is entitled to shared savings or shared losses depending on metrics negotiated and for taking on partial financial risk for the attributed beneficiaries. Some MA arrangements also require Steward Value-Based Care to provide care coordination services under which it is paid a per-member, per-month (“PMPM”) rate for each member who is attributed by the payor to Steward Value-Based Care.

STEWARD VALUE-BASED CARE FINANCIAL INFORMATION

The following table presents Steward Value-Based Care’s revenues by type for the indicated time periods:

 

($ in thousands)		Three Months Ended September 30, 2022				Three Months Ended September 30, 2021				Nine Months Ended September 30, 2022				Nine Months Ended September 30, 2021				Twelve Months Ended December 31, 2021				Twelve Months Ended December 31, 2020
Risk contract revenue		$	22,551			$	12,577			$	29,415			$	51,224			$	66,250			$	7,624
Other revenue		$	349			$	254			$	1,115			$	805			$	2,014			$	1,754
Total revenue		$	22,900			$	12,831			$	30,530			$	52,029			$	68,264			$	9,378

The following table presents Steward Value-Based Care’s revenues by payor for the indicated time periods:

 

($ in thousands)		Three Months Ended September 30, 2022				Three Months Ended September 30, 2021				Nine Months Ended September 30, 2022				Nine Months Ended September 30, 2021				Twelve Months Ended December 31, 2021				Twelve Months Ended December 31, 2020
Government- based payors		$	21,189			$	9,579			$	26,184			$	45,106			$	63,493			$	5,909
MA payors		$	1,711			$	3,252			$	4,346			$	6,923			$	4,771			$	3,469
Total revenue		$	22,900			$	12,831			$	30,530			$	52,029			$	68,264			$	9,378

Key Factors Affecting Steward Value-Based Care’s Performance

Attributed Membership

Steward Value-Based Care has attributed membership for which it takes risk, through participation in MSSP, MA and DCE sponsored programs. Attributed membership in the MSSP and DCE programs are a function of the physician network within the ACO that is submitted to CMS/CMMI prior to the performance year. As of January 1, 2023, Compass Medical in Massachusetts (approximately 8,500 MSSP members as of September 30, 2022) will no longer participate in the MSSP program through Steward Value-Based Care.

Programs with Payors

Steward Value-Based Care derives its revenue primarily from the MSSP through a value-based risk program sponsored by CMS. The MSSP holds Steward Value-Based Care accountable for managing costs and quality of medical services rendered to attributed Medicare beneficiaries and, in return, allows it to share in either the cost savings or deficits it generates.

 

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Effectively Manage the Cost of Care for Patients

The incentives in Steward Value-Based Care’s managed care contracts and Medicare programs require it to prudently manage the medical expense and quality of care for its patients. Steward Value-Based Care’s community care model leverages SHCS’s integrated delivery system and integrated value-based care model to manage population health and drive improvements in the efficiency and quality of care provided to its members. Steward Value-Based Care’s patients, however, retain the freedom to seek care at emergency rooms or hospitals; Steward Value-Based Care does not restrict their access to care.

Distributions

Steward Value-Based Care makes certain payments to its affiliated providers based on the provider’s performance within Steward Value-Based Care’s distribution model. The model measures provider’s performance on specific quality, patient experience, engagement and care coordination measures and is intended to optimize performance within MSSP, MA and DCE contracts. Distributions to providers are made 1-2 times per year and typically made 6-12 months after the risk performance year. Attributed membership in MSSP and DCE is a function of the physician network within the ACO that is submitted to CMS/CMMI prior to the performance year.

COVID-19

The COVID-19 pandemic continues to create high uncertainty and unpredictability in total medical expense trends, patient behavior in consuming health care services, and CMS/CMMI’s programmatic changes. Steward Value-Based Care is particularly exposed to the regulatory response to future pandemic impacts. In 2020 and 2021, the extreme and uncontrollable circumstances policy was in effect which mitigated these risks (e.g., quality thresholds were lowered), however, this policy may not be enacted in future pandemics or additional spikes in COVID-19. Steward Value-Based Care will continue to monitor the COVID-19 pandemic as well as resulting legislative and regulatory changes to manage its response and assess and mitigate potential adverse impacts to its business.

Management of Healthcare Costs

Steward Value-Based Care’s results of operations depend in large part on its ability to accurately predict and effectively manage healthcare costs through effective alignment with providers of care to its members, medical management and health and wellness programs, innovative programs and its ability to maintain or achieve improvement in its Centers for Medicare and Medicaid Services Star ratings. Several economic factors related to healthcare costs, such as regulatory mandates of coverage as well as direct-to-consumer advertising by providers and pharmaceutical companies, have a direct impact on the volume of care consumed by members. The potential effect of escalating healthcare costs, including increases in unit costs and utilization resulting from the aging of the population and other demographics, the impact of epidemics and pandemics, as well as advances in medical technology, may impose further risks to Steward Value-Based Care’s ability to profitably manage total medical expense and may have a material adverse impact on its results of operations.

Regulatory Trends and Uncertainties

Federal and state governments have enacted, and may continue to enact, legislation and regulations in response to the COVID-19 pandemic that have had, and Steward Value-Based Care expects will continue to have, a significant impact on health benefits, consumer eligibility for public programs and cash flows for all of its lines of business.

 

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Components of Results of Operations

Revenue

Medicare revenue. Steward Value-Based Care’s revenue consists primarily of the annual earned surplus settlement from participation in MSSP. Revenue is recorded in each performance year based on estimates of the MSSP settlement that are derived using a third-party actuary and historical claims data provided by CMS. Revenue is adjusted in future periods as new information becomes available and CMS finalizes the MSSP settlement for the performance year.

Operating Expenses

Salaries, wages and fringe benefits. Steward Value-Based Care’s salaries, wages and fringe benefits consist primarily of population health staffing expenses including nurse care manager and performance liaisons.

General and administrative expenses. Steward Value-Based Care’s general and administrative expenses consist primarily of payments to providers of information technology services, professional services and consulting services.

Distribution expenses. Steward Value-Based Care’s distribution expenses consist primarily of performance-based bonus payments to providers who are affiliated with Steward Value-Based Care and have attributed membership in MSSP, MA and DCE contracts.

Results of Operations

Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

The following table sets forth Steward Value-Based Care’s consolidated statements of operations data for the periods indicated:

 

($ in thousands)		Three Months Ended September 30, 2022				% of revenue				Three Months Ended September 30, 2021				% of revenue				$ Change				% Change
Revenue:
Medicare revenue		$	22,900				100.0	%		$	12,831				100	%		$	10,069				78.5	%
Total revenue			22,900				100.0	%			12,831				100	%			10,069				78.5	%
Operating expenses:
Salaries, wages and fringe benefits			2,070				-9	%			3,036				-23.7	%			(966	)			-31.80	%
General and administrative expenses			698				-3	%			2,542				-19.8	%			(1,844	)			-72.50	%
Distribution expenses			5,583				-24.4	%			3,731				-29.1	%			1,852				49.6	%
Depreciation and amortization			—				0	%			6				0	%			(6	)			-100.00	%
Total expenses			8,351				-36.5	%			9,315				-72.6	%			(964	)			-10.30	%
Income from operations			14,549				63.5	%			3,516				27.4	%			11,033				313.8	%
Income tax expense			427				-1.9	%			159				-1.2	%			268				168.6	%
Net income		$	14,122				61.7	%		$	3,357				26.2	%		$	10,765				320.7	%

Medicare revenue. Medicare revenue was $22.9 million for the three months ended September 30, 2022, an increase of $10.1 million, or 78.5%, compared to $12.8 million for the three months ended September 30, 2021. During the third quarter of 2022, most of the increase was driven by a year-to-date true-up of Steward Value-Based Care’s 2022 MSSP and DCE performance as a result of revised estimates.

 

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Salaries, wages and fringe benefits. Salaries, wages and fringe benefits were $2.1 million for the three months ended September 30, 2022, a decrease of $1.1 million, or 31.8%, compared to $3.0 million for the three months ended September 30, 2021. The decrease was due to reduced corporate allocations. Corporate allocations are based upon membership in MSSP and other non-Medicare programs. In addition to the reduction in corporate allocation percentage, we also decreased employee headcount in the three months ended September 30, 2022.

General and administrative expenses. General and administrative expenses were $0.7 million for the three months ended September 30, 2022, a decrease of $1.8 million, or 72.5%, compared to $2.5 million for the three months ended September 30, 2021. The decrease was due to reduced corporate allocations. In addition to the reduction in corporate allocation percentage, the Company experienced a reduction in vendor costs, as certain vendors were terminated in the three months ended September 30, 2022.

Distribution expenses. Distribution expenses were $5.6 million for the three months ended September 30, 2022, an increase of $1.9 million, or 49.6%, compared to $3.7 million for the three months ended September 30, 2021. The increase was primarily attributable to revenue adjustments related to performance obligations satisfied in prior periods. Steward Value-Based Care recognized a $2.2 million decrease in distribution expenses for the three months ended September 30, 2022 related to MSSP performance obligations satisfied in prior periods. In addition, Steward Value-Based Care recognized a $3.1 million increase in distribution expenses for the three months ended September 30, 2021 related to MSSP performance obligations satisfied in prior periods.

Depreciation and amortization. Depreciation and amortization did not change significantly for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Intangible assets were fully amortized as of December 31, 2021.

Income tax expense. Income tax expense was $0.4 million for the three months ended September 30, 2022, an increase of $0.2 million, or 168.6%, compared to $0.2 million of income tax expense for the three months ended September 30, 2021. Steward Value-Based Care’s effective tax rate was 1.9% and 1.2% for the three months ended September 30, 2022 and 2021, respectively. Steward Value-Based Care’s effective tax rate for the three months ended September 30, 2022 and 2021 differs from the federal statutory income tax rate primarily due to the full valuation allowance recorded on its net federal and state deferred tax assets. The tax provision for the three months ended September 30, 2021 is primarily comprised of state taxes and income taxes on the amount of taxable income unable to be offset by net operating losses due to the 80% limitation under the Tax Cuts and Jobs Act.

Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

The following table sets forth Steward Value-Based Care’s consolidated statements of operations data for the periods indicated:

 

($ in thousands)		Nine Months Ended September 30, 2022				% of revenue				Nine Months Ended September 30, 2021				% of revenue				$ Change				% Change
Revenue:
Medicare revenue		$	30,530				100	%		$	52,029				100	%		$	(21,499	)			-41.3	%
Total revenue			30,530				100	%			52,029				100	%			(21,499	)			-41.3	%
Operating expenses:
Salaries, wages and fringe benefits			6,654				-21.8	%			8,283				-15.9	%			(1,629	)			-19.7	%
General and administrative expenses			4,664				-15.3	%			7,671				-14.7	%			(3,007	)			-39.2	%
Distribution expenses			13,571				-44.5	%			14,330				-27.5	%			(759	)			-5.3	%

 

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($ in thousands)		Nine Months Ended September 30, 2022				% of revenue				Nine Months Ended September 30, 2021				% of revenue				$ Change				% Change
Depreciation and amortization			—				0	%			19				0	%			(19	)			-100.0	%
Total expenses			24,889				-81.5	%			30,303				-58.20	%			(5,414	)			-17.9	%
Income from operations			5,641				18.5	%			21,726				41.80	%			(16,085	)			-74.0	%
Income tax expense			427				-1.4	%			1,118				-2.10	%			(691	)			-61.8	%
Net income		$	5,214				17.1	%		$	20,608				39.60	%		$	(15,394	)			-74.7	%

Medicare revenue. Medicare revenue was $30.5 million for the nine months ended September 30, 2022, a decrease of $21.5 million, or 41.3%, compared to $52.0 million for the nine months ended September 30, 2021. During the second quarter of 2022, Steward Value-Based Care received the 2021 performance year annual settlement notice from CMS for MSSP and recognized a reduction to revenue of approximately $13.1 million for the nine months ended September 30, 2022. Steward Value-Based Care recognized a total reduction to revenue of $15.1 million for the nine months ended September 30, 2022, of which $13.1 million was related to the aforementioned 2021 MSSP settlement and the remaining balance of $2.0 million was related to MA performance obligations satisfied in prior periods. In addition, Steward Value-Based Care recognized a total increase to revenue of $16.1 million for the nine months ended September 30, 2021, from MSSP performance obligations satisfied in prior periods.

Salaries, wages and fringe benefits. Salaries, wages and fringe benefits were $6.7 million for the nine months ended September 30, 2022, a decrease of $1.6 million, or 19.7%, compared to $8.3 million for the nine months ended September 30, 2021. The decrease was due to reduced corporate allocations. Corporate allocations are based upon membership in MSSP and other non-Medicare programs. During the nine months ended September 30, 2022, membership in MSSP decreased and membership increased in other non-Medicare programs.

General and administrative expenses. General and administrative expenses were $4.7 million for the nine months ended September 30, 2022, a decrease of $3.0 million, or 39.2%, compared to $7.7 million for the nine months ended September 30, 2021. The decrease was due to reduced corporate allocations partially offset by transaction costs related to the Steward Transaction incurred in the nine months ended September 30, 2022. Corporate allocations are based upon membership in MSSP and other non-Medicare programs. Membership in MSSP decreased and membership increased in other non-Medicare programs.

Distribution expenses. Distribution expenses were $13.6 million for the nine months ended September 30, 2022, a decrease of $0.7 million, or 5.3%, compared to $14.3 million for the nine months ended September 30, 2021. The decrease was primarily attributable to revenue adjustments related to performance obligations satisfied in prior periods. Steward Value-Based Care recognized a $2.2 million decrease in distribution expenses for the nine months ended September 30, 2022, related to MSSP performance obligations satisfied in prior periods. The decrease was partially offset by a $2.7 million increase primarily attributable to the decrease in Medicare operating expense. In addition, Steward Value-Based Care recognized a $3.1 million increase in distribution expenses for the nine months ended September 30, 2021, related to MSSP performance obligations satisfied in prior periods. Distributions are a function of Medicare revenue less pre-distribution operating expenses, including salaries, wages, fringe benefits and general and administrative expenses. Lower pre-distribution operating expenses result in higher distribution expenses for affiliated physicians.

Depreciation and amortization. Depreciation and amortization did not change significantly for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. Intangible assets were fully amortized as of December 31, 2021.

 

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Income tax expense. There was $0.4 million of income tax expense recognized for the nine months ended September 30, 2022, a decrease of $0.7 million, or 61.8%, compared to $1.1 million of income tax expense for the nine months ended September 30, 2021. There was no income tax expense recognized for the nine months ended September 30, 2022, because Steward Value-Based Care had a pre-tax loss due to the prior year revenue adjustment. Steward Value-Based Care’s effective tax rate was 0.0% and 5.3% for the nine months ended September 30, 2022, and 2021, respectively. Steward Value-Based Care’s effective tax rate for the nine months ended September 30, 2022, and 2021 differs from the federal statutory income tax rate primarily due to the full valuation allowance recorded on its net federal and state deferred tax assets. The tax provision for the nine months ended September 30, 2021, is primarily comprised of state taxes and income taxes on the amount of taxable income unable to be offset by net operating losses due to the 80% limitation under the Tax Cuts and Jobs Act.

Twelve Months Ended December 31, 2021, compared to Twelve Months Ended December 31, 2020

The following table sets forth Steward Value-Based Care’s consolidated statements of operations data for the periods indicated:

 

($ in thousands)		Twelve Months Ended December 31, 2021				% of revenue				Twelve Months Ended December 31, 2020				% of revenue				$ Change				% Change
Revenue:
Medicare revenue		$	68,264				100	%		$	9,378				100	%		$	58,886				627.9	%
Total revenue			68,264				100	%			9,378				100	%			58,886				627.9	%
Operating expenses:
Salaries, wages and fringe benefits			11,539				-16.9	%			10,641				-113.5	%			898				8.4	%
General and administrative expenses			8,235				-12.1	%			14,636				-156.1	%			(6,401	)			-43.7	%
Distribution expenses			20,265				-29.7	%			27,142				-289.4	%			(6,877	)			-25.3	%
Depreciation and amortization			25				0	%			25				-0.3	%			—				0	%
Total expenses			40,064				-58.7	%			52,444				-559.2	%			(12,380	)			-23.6	%
Income (loss) from operations			28,200				41.3	%			(43,066	)			-459.2	%			71,266				165.5	%
Income tax expense			1,307				-1.9	%			2,237				23.9	%			(930	)			-41.6	%
Net income (loss)		$	26,893				39.4	%		$	(45,303	)			-483.1	%		$	72,196				159.4	%

Medicare revenue. Medicare revenue was $68.3 million for the twelve months ended December 31, 2021, an increase of $58.9 million, or 627.9%, compared to $9.4 million for the twelve months ended December 31, 2020. This increase was primarily driven by revenue recognized from performance obligations satisfied in a prior period. There was $17.6 million of revenue recognized during the twelve months ended December 31, 2021, and a reduction to revenue of $27.5 million recognized during the twelve months ended December 31, 2020 from performance obligations satisfied in prior periods.

Salaries, wages and fringe benefits. Salaries, wages and fringe benefits were $11.5 million for the twelve months ended December 31, 2021, an increase of $0.9 million, or 8.4%, compared to $10.6 million for the twelve months ended December 31, 2020. In the twelve months ended December 31, 2020, there were significant furloughs and terminations due to the impact of COVID-19. Furloughed employees returned and the work force was expanded in 2021, resulting in an increased expense.

 

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General and administrative expenses. General and administrative expenses were $8.2 million for the twelve months ended December 31, 2021, a decrease of $6.4 million, or 43.7%, compared to $14.6 million for the twelve months ended December 31, 2020. The decrease was due to reduced corporate allocations. Corporate allocations are based upon membership in MSSP and other non-Medicare programs. Membership in MSSP decreased and membership increased in other non-Medicare programs.

Distribution expenses. Distribution expenses were $20.3 million for the twelve months ended December 31, 2021, a decrease of $6.8 million, or 25.3%, compared to $27.1 million for the twelve months ended December 31, 2020. The decrease was due to lower distribution expenses for SHCS hospitals and employed physicians. Net distribution expenses are impacted by payments to SHCS hospitals and employed physicians and cost savings in the Medicare programs.

Depreciation and amortization. Depreciation and amortization did not change significantly for the twelve months ended December 31, 2021, compared to the twelve months ended December 31, 2020. Intangible assets were fully amortized as of December 31, 2021.

Income tax expense. Income tax expense was $1.3 million for the twelve months ended December 31, 2021, a decrease of $0.9 million, or 41.6%, compared to $2.2 million for the twelve months ended December 31, 2020. Steward Value-Based Care’s effective tax rates were 4.6% and (5.2%) for the twelve months ended December 31, 2021 and 2020, respectively. The difference between income tax expense derived by applying the federal statutory income tax rate to Steward Value-Based Care’s income before income taxes primarily relates to the valuation allowance recognized on deferred tax assets.

Liquidity and Capital Resources

Overview

As of September 30, 2022, Steward Value-Based Care had working capital of $60.2 million. Steward Value-Based Care’s principal sources of liquidity have been its operating cash flows and transfers from its parent company. Steward Value-Based Care has used these funds to meet its capital requirements, which consist of salaries, wages, fringe benefits, general and administrative expenses and distribution expenses. Steward Value-Based Care’s future capital expenditure requirements will depend on many factors, including the pace and scale of its expansion in new and existing markets, patient volume, and revenue growth rates. Steward Value-Based Care believes that its expected operating cash flows and, if necessary, transfers from its parent company, will continue to be sufficient to fund its operations and growth strategies for at least the next 12 months from the issuance of these financial statements.

The Impact of COVID-19

In January 2020, the Secretary of the U.S. Department of Health and Human Services declared a national public health emergency due to a novel strain of coronavirus. In March 2020, the World Health Organization declared the outbreak of COVID-19, a disease caused by this coronavirus, a pandemic.

Where applicable, the impact resulting from the COVID-19 pandemic during the nine months ended September 30, 2022 and the year ended December 31, 2021, have been considered. Steward Value-Based Care’s operations were scaled back significantly, and on-site staffing was reduced. CMS adjusted the quality reporting requirements for MSSP which mitigated a negative financial impact to Steward Value-Based Care. As part of the Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”), companies were allowed to defer the deposit and payment of their share of Social Security taxes. As of September 30, 2022 and December 31, 2021, Steward Value-Based Care had $0.2 million and $0.2 million, respectively of deferred 2020 payments outstanding, included in “Accrued compensation and benefits” within the combined balance sheets. There are no other material impacts to the business from the COVID-19 pandemic. Management is actively monitoring the impact of the global pandemic on its financial condition, liquidity, operations, industry, and workforce.

 

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Cash Flows

The following table summarizes Steward Value-Based Care’s cash flows for the periods presented:

 

($ in thousands)		Nine Months Ended September 30, 2022				Nine Months Ended September 30, 2021
Net cash provided by (used in) operating activities		$	(19,773	)		$	32,600
Net cash provided by (used in) investing activities		$	—			$	—
Net cash provided by (used in) financing activities		$	19,773			$	(32,600	)

Operating Activities. Net cash used in operating activities for the nine months ended September 30, 2022 was $19.8 million, compared to $32.6 million provided by operating activities for the nine months ended September 30, 2021, a decrease of $52.8 million. The primary driver of the change was a $25.0 million improvement in working capital offset by a $15.4 million decrease in net income from operations. Working capital for the nine months ended September 30, 2022 was driven by a $32.2 million change in accounts receivable offset by a $7.3 million change in distribution liabilities and accounts payable and accrued expenses. Working capital changes are influenced by the timing of collections from CMS and commercial payers and the timing of distributions to affiliated providers.

Investing Activities. Steward Value-Based Care did not have any investing activities for the nine months ended September 30, 2022 or the nine months ended September 30, 2021.

Financing Activities. Net cash provided by financing activities for the nine months ended September 30, 2022 was $19.8 million compared to $32.6 million provided by financing activities during the nine months ended September 30, 2021. The amount of net cash provided by financing activities represents the net transfers from Steward Value-Based Care’s parent company.

 

($ in thousands)		Twelve Months Ended December 31, 2021				Twelve Months Ended December 31, 2020
Net cash provided by (used in) operating activities		$	19,012			$	(30,599	)
Net cash provided by (used in) investing activities		$	—			$	—
Net cash provided by (used in) financing activities		$	(19,012	)		$	30,599

Operating Activities. Net cash provided by operating activities for the twelve months ended December 31, 2021 was $19.0 million, compared to $30.6 million used in operating activities for the twelve months ended December 31, 2020, an increase of $49.6 million. The primary driver of the change is a $72.2 million increase in net income from operations offset by a $22.6 million decrease in working capital. Working capital decreased due to a $30.3 million change in accounts receivable offset by a $9.3 million change in distribution liabilities. Working capital changes are influenced by the timing of collections from CMS and commercial payers and the timing of distributions to affiliated providers.

Investing Activities. Steward Value-Based Care did not have any investing activities for the twelve months ended December 31, 2021 or the twelve months ended December 31, 2020.

Financing Activities. Net cash used in financing activities for the twelve months ended December 31, 2021 was $19.0 million compared to $30.6 million provided by financing activities during the twelve months ended December 31, 2020. The amount of net cash used in or provided by financing activities represents the net transfers to or from Steward Value-Based Care’s parent company, respectively.

 

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Contractual Obligations and Commitments

To meet the requirements of the MSSP and participate in a two-sided model, Steward Value-Based Care entered into an arrangement with HUB International New England for a surety bond. The premium paid for the surety bond is recognized as prepaid expenses and is expensed over the life of the bond. In the second quarter of 2022, Steward Value-Based Care received approval from CMS to reduce its surety bond used to secure its ability to repay CMS for any shared savings losses from $23.3 million to $6.2 million.

Off-Balance Sheet Arrangements

Steward Value-Based Care did not have any off-balance sheet arrangements as of September 30, 2022.

Critical Accounting Policies and Estimates

The discussion and analysis of Steward Value-Based Care’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions, impacting Steward Value-Based Care’s reported results of operations and financial condition.

Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of assets and liabilities and the recognition of income and expenses. Management considers these accounting policies to be critical accounting policies. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. The significant accounting policies which Steward Value-Based Care believe are the most critical to aid in fully understanding and evaluating its reported financial results are described below. Refer to Note 2 Summary of Significant Accounting Policies to the combined financial statements of Steward Value-Based Care for more detailed information regarding Steward Value-Based Care’s critical accounting policies.

Revenue

Steward Value-Based Care derives its revenue primarily from MSSP, DCE and MA arrangements, of which, management has concluded meet all of the criteria to be considered contracts under ASC Topic 606, Revenue from Contracts with Customers. The promised services under Steward Value-Based Care’s MSSP, DCE and MA arrangements are to manage population health services for beneficiaries for a given performance period. As part of these arrangements, Steward Value-Based Care stands ready to manage the population health services throughout the performance period.

Settlements with third-party payors for retroactive adjustments due to risk adjustment, finalization of surplus sharing, or claim audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price. Steward Value-Based Care estimates the variable consideration that constitutes the transaction price of these arrangements by utilizing a third-party actuary who uses a variety of data sets provided by CMS, including historical claims from 2016 to present, benchmark and member assignment reports, and Quarterly Expenditure (QEXPU) reports, to project benchmark and total medical expenditures. Specifically, benchmarks by region are developed based on the member level cost and assignment information provided by CMS as part of their quarterly reporting, and expenditures by region are based on the expenditures for attributed members as reported in the monthly claims and claim line feed (CCLF) files from CMS. As Steward Value-Based Care’s performance obligation is met over time, revenue is recorded in each performance year using its estimation methods and consideration is made that it is probable that a significant reversal will not

 

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occur once any uncertainty associated with the variable consideration is subsequently resolved. Since Steward Value-Based Care has determined it only has one performance obligation under each of these arrangements, it allocates the full transaction price towards each arrangement’s individual performance obligation. Steward Value-Based Care settles with third-party payors for each performance year in the fourth quarter of the subsequent performance year. Estimated settlements are adjusted in the period when new information becomes available, or as years are settled or are no longer subject to such audits, reviews and investigations. Steward Value-Based Care recognizes revenue on a net basis as it does not control the services prior to transferring control to the customer.

Accounts Receivable

Receivables primarily consist of amounts due under risk contracts with various payors. Receivables due under risk contracts are recorded monthly based on reports received from payors and management’s estimate of risk adjustment payments to be received in subsequent periods for open performance years. Receivables are recorded and stated at the amount expected to be collected and probable that a significant reversal will not occur subsequently. As of September 30, 2022 and December 31, 2021, CMS comprised 94% and 94% of accounts receivable, respectively, and Steward Value-Based Care had no reserve for uncollectible amounts based on historical collectability of the business.

Distribution

Steward Value-Based Care has certain amounts payable to its affiliated providers that represent potential performance-based distributions pursuant to the participating provider agreements which have not yet been paid. The distributions payable amounts are recorded monthly based on a function of Steward Value-Based Care’s net income before certain non-operating expenses, depreciation, amortization and any distribution expense. Payments to Steward Value-Based Care’s affiliated providers are typically made 6-12 months after the risk performance year based on Steward Value-Based Care’s proprietary distribution model which measures provider’s performance on specific quality, patient experience, engagement and care coordination measures. Steward Value-Based Care also made distribution payments to certain of Parent’s affiliates in the same performance year that the amount was incurred. For the three months ended September 30, 2022 and 2021, Steward Value-Based Care made distribution expense payments of $4.0 million and $2.6 million to affiliates of its parent company, respectively. For the nine months ended September 30, 2022 and 2021, Steward Value-Based Care made distribution expense payments of $12.0 million and $7.4 million to affiliates of its parent company, respectively. For the twelve months ended December 31, 2021 and 2020, Steward Value-Based Care made distribution expense payments of $9.9 million and $27.0 million to affiliates of its parent company, respectively.

Intangible Assets

Intangible assets consist of amortizable intangible assets. Amortizable intangible assets include contracts and licenses and are amortized over five years. Amortizable intangible assets are reviewed for impairment whenever circumstances indicate that the carrying amount of an asset may not be recoverable. The gross carrying value of Steward Value-Based Care’s intangible assets was $127 thousand as of September 30, 2022 and December 31, 2021. The intangible assets were fully amortized as of December 31, 2021.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses primarily consist of consulting and general insurance accruals.

Income Taxes

Steward Value-Based Care accounts for income taxes under the provisions of ASC Topic 740, Income Taxes (“ASC 740”), which requires Steward Value-Based Care to utilize the asset and liability method. Income taxes as

 

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presented in Steward Value-Based Care’s financial statements attribute current and deferred income taxes of SHCS to Steward Value-Based Care’s financial statements in a manner that is systematic, rational and consistent with ASC 740. Accordingly, Steward Value-Based Care’s income tax provision was prepared following the separate return method. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of the assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. Steward Value-Based Care reduces its deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that it will not realize some portion or all of the deferred tax assets. Steward Value-Based Care considers relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes its financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities, and tax carrybacks, as well as an evaluation of currently available information about future years.

Steward Value-Based Care recognizes and measures uncertain tax positions and records tax benefits when it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. At each period-end, it is necessary for Steward Value-Based Care to make certain estimates and assumptions to compute the provision for income taxes, including allocations of certain transactions to different tax jurisdictions, amounts of permanent and temporary differences, the likelihood of deferred tax assets being recovered and the outcome of contingent tax risks. These estimates and assumptions are revised as new events occur, more experience is acquired, and additional information is obtained. The effect of these revisions is recorded in income tax expense or benefit in the period in which they become known.

Recent Accounting Pronouncements

See Note 2 to the combined financial statements of Steward Value-Based Care included or incorporated by reference in this prospectus for the impact of new accounting standards.

Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact Steward Value-Based Care’s financial position due to adverse changes in financial market prices and rates. Steward Value-Based Care’s market risk exposure is primarily a result of exposure due to potential changes by CMS in services and inflation. Steward Value-Based Care does not have cash and cash equivalents, marketable debt securities or debt that are subject to market risk due to changes in interest rates. Steward Value-Based Care does not use derivative financial instruments in the normal course of business or for speculative or trading purposes.

 

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information is based on the historical financial statements of CareMax and Steward Value-Based Care and has been prepared to illustrate the effect of the Steward Transaction.

The unaudited pro forma condensed combined financial information reflects the acquisition method of accounting in accordance with Accounting Standard Codification (“ASC”) 805, Business Combinations (“ASC 805”), on the basis of CareMax as the accounting acquiror and Steward Value-Based Care as the accounting acquiree and gives effect to the Steward Transaction, in the case of the statement of operations information, as though the transaction had occurred as of January 1, 2021 and, in the case of the balance sheet information, as though the transaction had occurred as of September 30, 2022. Under the acquisition method of accounting, the assets acquired and liabilities assumed of Steward Value-Based Care will be recorded by CareMax at their estimated fair values as of the date the Steward Transaction was completed. These unaudited pro forma condensed combined financial statements reflect the Steward Transaction based upon the estimated preliminary valuations. Actual fair values will be determined as of the effective date of the Steward Transaction and, therefore, may differ from those reflected in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only and is based on assumptions and estimates considered appropriate by CareMax’s management; however, it is not necessarily indicative of the results of operations and financial position that would have been achieved had the pro forma events taken place on the dates indicated, or of the future consolidated results of operations or of the financial position of the combined company. The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X and has been derived from and should be read in conjunction with the audited and unaudited historical financial statements of Steward Value-Based Care and CareMax and the notes thereto included or incorporated by reference in this prospectus.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2022

(in thousands)

 

		Historical								Transaction Accounting Adjustments
		CareMax				Steward Value-Based Care (Note 2)				Financing Adjustments (4)				Steward Transaction Adjustments				Notes (Note 3)				Pro Forma
ASSETS
CURRENT ASSETS
Cash		$	53,315			$	—			$	67,049				$(95,049)				(1	)		$	25,315
Accounts receivable, net			85,766				78,489				—				—								164,255
Inventory			911				—				—				—								911
Prepaid expenses			21,653				31				—				—								21,684
Risk settlements due from providers			537				—				—				—								537
Total Current Assets			162,183				78,520				67,049				(95,049	)							212,703
Property and equipment, net			18,125				—				—				—								18,125
Goodwill			465,058				—				—				256,576				(2	)			721,634
Intangible assets, net			48,166				—				—				113,300				(2	)			161,466
Deferred debt issuance costs			2,644				—				—				—								2,644
Other assets			11,258				—				—				—								11,258
Total Assets		$	707,433			$	78,520			$	67,049			$	274,827							$	1,127,829
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	13,422			$	—			$	—			$	—							$	13,422
Accrued expenses			16,630				6,898				—				—								23,528
Risk settlements due to providers			50				11,440				—				—								11,490
Current portion of long-term debt			159				—				—				—								159
Other current liabilities			3,485				—				—				4,599				(3	)			8,084
Total Current Liabilities			33,745				18,338				—				4,599								56,682
Derivative warrant liabilities			11,851				—				—				—								11,851
Long-term debt, less current portion			184,253				—				67,049				—				(4	)			251,302
Other liabilities			8,379				—				—				203,775				(5	)			212,154
Total Liabilities			238,228				18,338				67,049				208,374								531,989
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock			—				—				—				—								—
Class A common stock			9				—				—				2				(6	)			11
Additional paid-in-capital			517,393				—				—				134,418				(6	)			651,811
Retained (deficit) earnings			(48,197	)			60,182				—				(67,967	)			(7	)			(55,982	)
Total Stockholders’ Equity			469,205				60,182				—				66,453								595,840
Total Liabilities and Stockholders’ Equity		$	707,433			$	78,520			$	67,049			$	274,827							$	1,127,829

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

(in thousands)

 

		Historical								Transaction Accounting Adjustments
		CareMax				Steward Value-Based Care (Note 2)				Financing Adjustments (4)				Steward Transaction Adjustments				Notes (Note 3)				Pro Forma
Revenue
Medicare risk-based revenue		$	373,677			$	—			$	—			$	—							$	373,677
Medicaid risk-based revenue			59,914				—				—				—								59,914
Other revenue			33,278				30,530				—				—								63,808
Total revenue			466,869				30,530				—				—								497,399
Operating expenses
External provider costs			320,104				13,571				—				—								333,675
Cost of care			87,925				—				—				—								87,925
Sales and marketing			7,955				—				—				—								7,955
Corporate, general and administrative			58,728				11,318				—				—								70,046
Depreciation and amortization			14,538				—				—				12,905				(8	)			27,443
Acquisition related costs			3,549				—				—				—								3,549
Total operating expenses			492,799				24,889				—				12,905								530,593
Operating loss			(25,930	)			5,641				—				(12,905	)							(33,194	)
Interest expense			(11,700	)			—				(6,331	)			—				(9	)			(18,031	)
Gain on remeasurement of warrant liabilities			(3,476				—				—				—								(3,476	)
Loss on extinguishment of debt			(6,172	)			—				—				—								(6,172	)
Other income (expense), net			(420	)			—				6,331				—				(10	)			5,911
Loss before income tax			(47,698	)			5,641				—				(12,905	)							(54,962	)
Income tax (provision) benefit			(532	)			(427	)			—				3,265				(11	)			2,306
Net loss		$	(48,230	)		$	5,214			$	—			$	(9,640	)						$	(52,656	)
																						0
Weighted average basic shares outstanding			87,415,801				N/A				—				23,500,000				(12	)			110,915,801
Weighted average diluted shares outstanding			87,415,801				N/A				—				23,500,000				(12	)			110,915,801
Net loss per share
Basic		$	(0.55	)			N/A			$					N/A							$	(0.47	)
Diluted		$	(0.55	)			N/A			$					N/A							$	(0.47	)

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021

(in thousands)

 

		Historical								Transaction Accounting Adjustments
		CareMax				Steward Value-Based Care (Note 2)				Financing Adjustments (4)				Steward Transaction Adjustments				Notes (Note 3)				Pro Forma
Revenue
Medicare risk-based revenue		$	233,282			$	—			$	—			$	—							$	233,282
Medicaid risk-based revenue			46,493				—				—				—								46,493
Other revenue			15,987				68,264				—				—								84,251
Total revenue			295,762				68,264				—				—								364,026
Operating expenses
External provider costs			206,747				20,265				—				—								227,012
Cost of care			57,566				—				—				—								57,566
Sales and marketing			4,955				—				—				—								4,955
Corporate, general and administrative			40,579				19,774				—				—								60,353
Depreciation and amortization			13,216				25				—				17,207				(8	)			30,448
Acquisition related costs			1,522				—				—				10,422				(7	)			11,944
Total operating expenses			324,585				40,064				—				27,629								392,278
Operating (loss) income			(28,822	)			28,200				—				(27,629	)							(28,251	)
Interest expense			(4,492	)			—				(8,441	)			—				(9	)			(12,933	)
Gain on remeasurement of warrant liabilities			20,757				—				—				—								20,757
Gain on remeasurement of contingent earnout consideration			5,794				—				—				—								5,794
Loss on disposal of fixed assets			(50	)			—				—				—								(50	)
Gain on extinguishment of debt			1,630				—				—				—								1,630
Other expenses			(1,333	)			—				8,441				—				(10	)			7,108
(Loss) income before income tax			(6,516	)			28,200				—				(27,629	)							(5,945	)
Income tax (provision) benefit			(159	)			(1,307	)			—				6,990				(11	)			5,524
Net (loss) income		$	(6,675	)		$	26,893			$	—			$	(20,639	)						$	(421	)
Weighted average basic shares outstanding			52,620,980				N/A				—				23,500,000				(12	)			76,120,980
Weighted average diluted shares outstanding			52,620,980				N/A				—				23,500,000				(12	)			76,120,980
Net (loss) income per share
Basic		$	(0.13	)			N/A			$	—				N/A							$	(0.01	)
Diluted		$	(0.13	)			N/A			$	—				N/A							$	(0.01	)

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

 

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Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 1—Basis of Presentation

This unaudited pro forma financial information was prepared using the acquisition method of accounting in accordance with ASC 805, with CareMax as the accounting acquirer, and is derived from the unaudited CareMax and Steward Value-Based Care financial statements for the nine months ended September 30, 2022 and audited CareMax and Steward Value-Based Care financial statements for the year ended December 31, 2021.

The pro forma financial information has been prepared by CareMax for illustrative and informational purposes only in accordance with Article 11 of Regulation S-X. These pro forma financial statements are subject to finalization of the purchase price accounting and analysis of tax implications of the Steward Transaction and related adjustments. Accordingly, pro forma financial information is not necessarily indicative of what CareMax’s combined statement of operations or combined balance sheet would have been had the Steward Transaction and adjustments been completed as of the dates indicated or will be for any future periods.

The acquisition method of accounting uses the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective, and it is possible that the application of reasonable judgment could develop different assumptions, resulting in a range of alternative estimates using the same facts and circumstances. The allocation of the estimated consideration is preliminary and is pending finalization of various estimates, inputs and analyses. Since this pro forma financial information has been prepared based on preliminary estimates of consideration and fair values attributable to the Steward Transaction, the actual amounts eventually recorded for the acquisition method of accounting, including identifiable intangibles and goodwill, may differ materially from the information presented.

Consideration which CareMax has transferred or expects to transfer to acquire Steward Value-Based Care has been attributed to the assets acquired and liabilities assumed based upon management’s preliminary estimate of what their respective fair values would be as of the date of the Steward Transaction.

At this preliminary stage, the estimated identifiable finite-lived intangible assets include the value of risk contracts and provider network. These finite-lived intangible assets are amortized over their estimated useful lives.

Goodwill represents the excess of the estimated purchase price over the estimated fair value of Steward Value-Based Care’s assets and liabilities, including the fair value of the estimated identifiable finite-lived intangible assets described above. Goodwill will not be amortized, but will be subject to periodic impairment testing. The calculation of goodwill and other identifiable intangible assets could be materially impacted by changing fair value measurements.

Under ASC 805, acquisition-related transaction costs are not included as a component of consideration transferred, but are accounted for as expenses in the period in which the costs are incurred.

Note 2—Reclassification and Conforming Accounting Policies

At this time, CareMax is not aware of any material differences in accounting policies and financial statement classifications that would have a material impact on the pro forma financial information.

CareMax is in the process of evaluating Steward Value-Based Care’s accounting policies to determine whether there are material differences that require modification or reclassification of Steward Value-Based Care’s

 

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revenues, expenses, assets or liabilities to conform to CareMax’s accounting policies and classifications. As a result, CareMax may identify differences between the accounting policies of CareMax and Steward Value-Based Care that, when conformed, could have a material impact on the pro forma financial information.

Certain balances and transactions presented in the historical financial statements of Steward Value-Based Care included within the unaudited pro forma condensed combined financial information have been reclassified to conform to the presentation of CareMax financial statements as indicated in the tables below.

 

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Steward Value-Based Care Condensed Consolidated Balance Sheet

Reclassifications as of September 30, 2022 (a)

(in thousands)

 

		As per unaudited historical financial statements				Reclassifications				As reclassified
CURRENT LIABILITIES
Accounts payable		$	—			$	—			$	—
Accrued expenses			—				6,898				6,898
Accounts payable and accrued expenses			6,255				(6,255	)			—
Accrued compensation and benefits			643				(643	)			—
Distribution liabilities			11,440				(11,440	)			—
Risk settlements due to providers			—				11,440				11,440
Current portion of long-term debt			—				—				—
Other current liabilities			—				—				—
Total Current Liabilities			18,338				—				18,338
STOCKHOLDERS’ EQUITY
Preferred stock			—				—				—
Class A common stock			—				—				—
Additional paid-in-capital			—				—				—
Net parent investment			60,182				(60,182	)			—
Retained earnings			—				60,182				60,182
Total Stockholders’ Equity			60,182				—				60,182

 

(a)	No reclassifications to assets were identified.

 

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