Washington, D.C. 20549
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨TRANSITION REPORT PURSUANT TO SECTION 13 September 30, 2023
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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98-1515192 | ||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer
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3401 Mallory Lane, Suite 210 Franklin, Tennessee | 37067 | ||||
(Address of | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | Accelerated filer | o | |||||||||||||
Smaller reporting company | o | ||||||||||||||
o |
As
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2020
TABLE OF CONTENTS
Page | ||||||||
i
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
March 31, 2020 | December 31, 2019 | |||||||
(unaudited) | ||||||||
ASSETS | | |||||||
Current assets - cash | $ | 63,370 | $ | — | ||||
Deferred offering costs | 587,515 | 100,346 | ||||||
TOTAL ASSETS | $ | 650,885 | $ | 100,346 | ||||
LIABILITIES AND SHAREHOLDER’S EQUITY (DEFICIT) | | |||||||
Current liabilities | | |||||||
Accrued offering costs | $ | 343,516 | $ | 100,346 | ||||
Advance from related party | — | 17,631 | ||||||
Promissory note – related party | 300,000 | — | ||||||
Total Current Liabilities | 643,516 | 117,977 | ||||||
| ||||||||
Commitments | ||||||||
Shareholder’s Equity (Deficit) | | |||||||
Preferred shares, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding | — | — | ||||||
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; none issued and outstanding | — | — | ||||||
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 20,700,000 shares issued and outstanding as of March 31, 2020(1) | 2,070 | — | ||||||
Additional paid-in capital | 22,930 | — | ||||||
Accumulated deficit | (17,631 | ) | (17,631 | ) | ||||
Total Shareholder’s Equity (Deficit) | 7,369 | (17,631 | ) | |||||
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY (DEFICIT) | $ | 650,885 | $ | 100,346 |
The accompanying notes are an integral part of
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2020
(Unaudited)
Formation and operating costs | $ | — | ||
Net Loss | $ | — | ||
Weighted average shares outstanding, basic and diluted | 14,043,956 | |||
Basic and diluted net loss per ordinary share | $ | (0.00 | ) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY (DEFICIT)
THREE MONTHS ENDED MARCH 31, 2020
(Unaudited)
Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholder’s (Deficit) | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
Balance – January 1, 2020 | 1 | $ | — | $ | — | $ | (17,631 | ) | $ | (17,631 | ) | |||||||||
Cancellation of Class B ordinary share | (1 | ) | — | — | — | — | ||||||||||||||
Issuance of Class B ordinary shares to Sponsor(1) | 20,700,000 | 2,070 | 22,930 | — | 25,000 | |||||||||||||||
Net loss | — | — | — | — | — | |||||||||||||||
Balance – March 31, 2020 (unaudited) | 20,700,000 | $ | 2,070 | $ | 22,930 | $ | (17,631 | ) | $ | 7,369 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. II
CONDENSED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2020
(Unaudited)
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of Class B ordinary shares to Sponsor | 25,000 | |||
Repayment of advances from related parties | (17,631 | ) | ||
Proceeds from promissory note - related party | 300,000 | |||
Payment of offering costs | (243,999 | ) | ||
Net cash provided by financing activities | 63,370 | |||
Net Change in Cash | 63,370 | |||
Cash – Beginning | — | |||
Cash – Ending | $ | 63,370 | ||
Non-cash investing and financing activities: | ||||
Deferred offering costs included in accrued offering costs | $ | 248,170 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
NOTES TO CONDENSED FINANCIAL
MARCH 31, 2020
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Social Capital Hedosophia Holdings Corp. III (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on October 18, 2019. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”).
Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus on businesses in the technology industries primarily located in the United States. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2020, the Company had not commenced any operations. All activity for the period from October 18, 2019 (inception) through March 31, 2020 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 10,933,333 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to SCH Sponsor III LLC (the “Sponsor”), generating gross proceeds of $16,400,000, which is described in Note 4.
Transaction costs amounted to $44,156,346 consisting of $14,400,000 of underwriting fees, $28,980,000 of deferred underwriting fees and $776,346 of other offering costs. In addition, $1,663,066 of cash was held outside of the Trust Account, as defined below, and is available for working capital purposes.
Following the closing of the Initial Public Offering on April 24, 2020, an amount of $828,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) located in the United States and invested in U.S. government securities, within the meaning set forth inof Section 2(a)(16)27A of the Investment CompanySecurities Act of 1940,1933, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
The Company will provide the holders of the public shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their public shares upon the completion of the Business Combination, either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account, calculated as of two business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations. The per-share amount to be distributed to the Public Shareholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
5
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
The Company will proceed with a Business Combination only if the Company has net tangible assets, after payment of the deferred underwriting commission, of at least $5,000,001 upon such completion of a Business Combination and, if the Company seeks shareholder approval, it receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who attend and vote and a general meeting of the Company. If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”"Securities Act"), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination and to waive its redemption rights with respect to any such shares in connection with a shareholder vote to approve a Business Combination or seek to sell any shares to the Company in a tender offer in connection with a Business Combination. Additionally, subject to the immediately succeeding paragraph, each public shareholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.
Notwithstanding the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules, a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 1321E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"). All statements contained in this document other than statements of historical fact, including statements regarding our future results of operations, financial position, market size and opportunity, our business strategy and plans, the factors affecting our performance and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "should," "would," "can," "expect," "project," "outlook," "forecast," "objective," "plan," "potential," "seek," "grow," "target," "if," and the negative or plural of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including the risk factors described in our filings with the Securities and Exchange Commission (the "SEC"), will be restricted. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from redeeming its sharestime to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this document may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements contained in this document involve a number of judgments, risks and uncertainties, including, without limitation, risks related to:
foregoing list of judgments, risks, and uncertainties that may cause actual results to differ materially from those in the forward-looking statements may not be complete. You should not rely upon forward-looking statements as predictions of future events. The Sponsor has agreed (a)events and circumstances reflected in the forward-looking statements may not be achieved or occur or may be materially different from what we expect. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to waive its redemption rights with respectupdate any of these forward-looking statements after the date of this document or to conform these statements to actual results or revised expectations.
September 30, 2023 (Unaudited) | December 31, 2022 | ||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 299,014 | $ | 103,791 | |||||||
Short-term investments | 14,830 | 41,457 | |||||||||
Investment securities, available-for-sale (Amortized cost: 2023: $197,766; 2022: $193,300) | 196,381 | 189,498 | |||||||||
Investment securities, held-to-maturity (Fair value: 2023: $6,692; 2022: $15) | 6,896 | 15 | |||||||||
Accrued retrospective premiums | 15,646 | 20,387 | |||||||||
Other receivables | 14,760 | 23,596 | |||||||||
Healthcare receivables | 52,073 | 70,607 | |||||||||
Non-Insurance performance year receivable | 185,404 | — | |||||||||
Non-Insurance receivable | 64,228 | 52,955 | |||||||||
Surety bonds and deposits | 50,209 | 100,502 | |||||||||
Prepaid expenses | 15,226 | 18,146 | |||||||||
Other assets, current | 1,033 | 4,043 | |||||||||
Total current assets | 915,700 | 624,997 | |||||||||
Investment securities, available-for-sale (Amortized cost: 2023: $105,087; 2022: $142,940) | 101,400 | 137,368 | |||||||||
Investment securities, held-to-maturity (Fair value: 2023: $673; 2022: $636) | 792 | 742 | |||||||||
Property and equipment, net | 4,572 | 5,753 | |||||||||
Operating lease right-of-use assets | 3,620 | 4,025 | |||||||||
Goodwill and other intangible assets | 19,190 | 20,000 | |||||||||
Other assets, non-current | 14,523 | 15,735 | |||||||||
Total assets | $ | 1,059,797 | $ | 808,620 |
September 30, 2023 (Unaudited) | December 31, 2022 | ||||||||||
Liabilities and Stockholders' Equity | |||||||||||
Current liabilities | |||||||||||
Unpaid claims | $ | 114,415 | $ | 141,947 | |||||||
Due to related parties, net | 1,251 | 1,566 | |||||||||
Non-Insurance performance year obligation, current | 254,419 | 73,844 | |||||||||
Non-Insurance payable | 182,435 | 148,191 | |||||||||
Accounts payable and accrued expenses | 35,296 | 32,445 | |||||||||
Accrued salaries and benefits | 24,333 | 23,962 | |||||||||
Deferred revenue | 103,295 | — | |||||||||
Operating lease liabilities | 1,668 | 1,827 | |||||||||
Premium deficiency reserve | 683 | 7,239 | |||||||||
Other liabilities, current | 901 | 486 | |||||||||
Total current liabilities | 718,696 | 431,507 | |||||||||
Long-term operating lease liabilities | 3,292 | 4,033 | |||||||||
Other liabilities, non-current | 15,957 | 16,193 | |||||||||
Total liabilities | 737,945 | 451,733 | |||||||||
Commitments and Contingencies (Note 14) | |||||||||||
Stockholders' equity | |||||||||||
Class A Common Stock, $0.0001 par value; 2,500,000,000 shares authorized at September 30, 2023 and December 31, 2022; 399,374,685 and 383,998,718 issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 38 | 37 | |||||||||
Class B Common Stock, $0.0001 par value; 500,000,000 shares authorized at September 30, 2023 and December 31, 2022; 87,867,732 and 94,394,852 issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 9 | 9 | |||||||||
Additional paid-in capital | 2,428,101 | 2,319,157 | |||||||||
Accumulated other comprehensive loss | (5,072) | (9,374) | |||||||||
Accumulated deficit | (2,089,322) | (1,946,433) | |||||||||
Less: Treasury stock, at cost; 7,096,160 and 2,072,752 shares held at September 30, 2023 and December 31, 2022, respectively | (11,902) | (6,509) | |||||||||
Total stockholders' equity | 321,852 | 356,887 | |||||||||
Total liabilities and stockholders' equity | $ | 1,059,797 | $ | 808,620 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||||||||
Premiums earned, net (Net of ceded premiums of $106 and $116, for the three months ended September 30, 2023 and 2022, respectively; net of ceded premiums of $341 and $354 for the nine months ended September 30, 2023 and 2022, respectively) | $ | 301,230 | $ | 267,892 | $ | 932,699 | $ | 814,566 | |||||||||||||||||||||||||||||||||
Non-Insurance revenue | 176,038 | 585,311 | 575,311 | 1,757,579 | |||||||||||||||||||||||||||||||||||||
Other income | 4,798 | 3,614 | 15,459 | 5,751 | |||||||||||||||||||||||||||||||||||||
Total revenues | 482,066 | 856,817 | 1,523,469 | 2,577,896 | |||||||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||
Net medical claims incurred | 418,959 | 839,799 | 1,328,403 | 2,560,307 | |||||||||||||||||||||||||||||||||||||
Salaries and benefits | 60,567 | 70,142 | 193,211 | 209,724 | |||||||||||||||||||||||||||||||||||||
General and administrative expenses | 41,747 | 47,832 | 141,588 | 152,569 | |||||||||||||||||||||||||||||||||||||
Premium deficiency reserve expense (benefit) | 392 | (27,476) | (6,556) | (82,428) | |||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 557 | 616 | 1,835 | 2,028 | |||||||||||||||||||||||||||||||||||||
Restructuring costs | 1,313 | — | 7,870 | — | |||||||||||||||||||||||||||||||||||||
Total operating expenses | 523,535 | 930,913 | 1,666,351 | 2,842,200 | |||||||||||||||||||||||||||||||||||||
Loss from operations | (41,469) | (74,096) | (142,882) | (264,304) | |||||||||||||||||||||||||||||||||||||
Interest expense | — | 404 | 7 | 1,197 | |||||||||||||||||||||||||||||||||||||
Amortization of notes and securities discounts | — | 9 | — | 27 | |||||||||||||||||||||||||||||||||||||
Loss (gain) on investment | — | 980 | — | (10,187) | |||||||||||||||||||||||||||||||||||||
Net loss | $ | (41,469) | $ | (75,489) | $ | (142,889) | $ | (255,341) | |||||||||||||||||||||||||||||||||
Per share data: | |||||||||||||||||||||||||||||||||||||||||
Net loss per share attributable to Class A and Class B common stockholders – basic and diluted (1) | $ | (0.09) | $ | (0.16) | $ | (0.30) | $ | (0.54) | |||||||||||||||||||||||||||||||||
Weighted average number of common shares outstanding | |||||||||||||||||||||||||||||||||||||||||
Basic and diluted weighted average number of Class A and Class B common shares and common share equivalents outstanding (1) | 480,770,283 | 477,690,204 | 480,921,520 | 475,609,571 | |||||||||||||||||||||||||||||||||||||
Net unrealized gain (loss) on available-for-sale investments | 1,643 | (2,407) | 4,302 | (8,826) | |||||||||||||||||||||||||||||||||||||
Comprehensive loss | $ | (39,826) | $ | (77,896) | $ | (138,587) | $ | (264,167) |
Convertible Preferred Stock | Class A Common Stock | Class B Common Stock | Treasury Stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive income (loss) | Noncontrolling interest | Total stockholders' equity (deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | — | $ | — | 352,645,626 | $ | 34 | 118,206,768 | $ | 12 | 14,730 | $ | (147) | $ | 2,154,187 | $ | (1,616,738) | $ | (1,934) | $ | 3,903 | $ | 539,317 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in accounting policy | — | — | — | — | — | — | — | — | — | 723 | — | — | 723 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted balance, beginning of period | — | $ | — | 352,645,626 | $ | 34 | 118,206,768 | $ | 12 | 14,730 | $ | (147) | $ | 2,154,187 | $ | (1,616,015) | $ | (1,934) | $ | 3,903 | $ | 540,040 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issuance for exercise of stock options, net of early exercise liability | — | — | 151,620 | — | — | — | — | — | 331 | — | — | — | 331 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | 40,640 | — | — | — | 40,640 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested restricted stock units | — | — | 396,883 | — | 1,677,873 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested performance stock units | — | — | 8,951 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized holdings gain on investment securities, available for sale | — | — | — | — | — | — | — | — | — | — | (5,324) | — | (5,324) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion from Class B Common Stock to Class A Common Stock | — | — | 25,436,433 | 3 | (25,436,433) | (3) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired | — | — | — | — | — | — | 1,879,063 | (5,939) | — | — | — | — | (5,939) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock under Employee Stock Purchase Plan | — | — | 214,797 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derecognition of noncontrolling interest | — | — | — | — | — | — | — | — | — | — | — | (3,903) | (3,903) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (75,490) | — | — | (75,490) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | — | $ | — | 378,854,310 | $ | 37 | 94,448,208 | $ | 9 | 1,893,793 | $ | (6,086) | $ | 2,195,158 | $ | (1,691,505) | $ | (7,258) | $ | — | $ | 490,355 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issuance for exercise of stock options, net of early exercise liability | — | — | 4,016,336 | — | — | — | — | — | 563 | — | — | — | 563 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | 41,927 | — | — | — | 41,927 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested restricted stock units | — | — | 84,928 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized holdings gain on investment securities, available for sale | — | — | — | — | — | — | — | — | — | — | (1,095) | — | (1,095) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired | — | — | — | — | — | — | 37,744 | (105) | — | — | — | — | (105) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (104,362) | — | — | (104,362) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | — | $ | — | 382,955,574 | $ | 37 | 94,448,208 | $ | 9 | 1,931,537 | $ | (6,191) | $ | 2,237,648 | $ | (1,795,867) | $ | (8,353) | $ | — | $ | 427,283 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issuance for exercise of stock options, net of early exercise liability | — | — | 190,052 | — | — | — | — | — | 408 | — | — | — | 408 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | 42,641 | — | — | — | 42,641 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested RSUs and PSUs | — | — | 438,063 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury Stock | — | — | (110,411) | — | — | — | 110,411 | (276) | — | — | — | — | (276) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized holdings gain on investment securities, available-for-sale | — | — | — | — | — | — | — | — | — | — | (2,407) | — | (2,407) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion from Class A Common Stock to Class B Common Stock | — | — | 316 | — | (316) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (75,489) | — | — | (75,489) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2022 | — | $ | — | 383,473,594 | $ | 37 | 94,447,892 | $ | 9 | 2,041,948 | $ | (6,467) | $ | 2,280,697 | $ | (1,871,356) | $ | (10,760) | $ | — | $ | 392,160 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock | Class A Common Stock | Class B Common Stock | Treasury Stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive income (loss) | Noncontrolling interest | Total stockholders' equity (deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | — | $ | — | 383,998,718 | $ | 37 | 94,394,852 | $ | 9 | 2,072,752 | $ | (6,509) | $ | 2,319,157 | $ | (1,955,582) | $ | (9,374) | $ | — | $ | 347,738 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in accounting policy | — | — | — | — | — | — | — | — | — | 9,149 | — | — | 9,149 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted balance, beginning of period | — | $ | — | 383,998,718 | $ | 37 | 94,394,852 | $ | 9 | 2,072,752 | $ | (6,509) | $ | 2,319,157 | $ | (1,946,433) | $ | (9,374) | $ | — | $ | 356,887 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issuance for exercise of stock options, net of early exercise liability | — | — | 1,240 | — | — | — | — | — | 848 | — | — | — | 848 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | 38,617 | — | — | — | 38,617 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested restricted stock units | — | — | 5,390,973 | — | 1,773,104 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized holdings gain on investment securities, available for sale | — | — | — | — | — | — | — | — | — | — | 2,343 | — | 2,343 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion from Class B Common Stock to Class A Common Stock | — | — | 7,672,463 | — | (7,672,463) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired | — | — | (2,933,721) | — | — | — | 2,933,721 | (2,982) | — | — | — | — | (2,982) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (72,606) | — | — | (72,606) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | — | $ | — | 394,129,673 | $ | 37 | 88,495,493 | $ | 9 | 5,006,473 | $ | (9,491) | $ | 2,358,622 | $ | (2,019,039) | $ | (7,031) | $ | — | $ | 323,107 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issuance for exercise of stock options, net of early exercise liability | — | — | 1,241 | — | — | — | — | — | 270 | — | — | — | 270 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | 36,108 | — | — | — | 36,108 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested restricted stock units | — | — | 1,180,084 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized holdings gain on investment securities, available for sale | — | — | — | — | — | — | — | — | — | — | 316 | — | 316 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion from Class B Common Stock to Class A Common Stock | — | — | 627,761 | — | (627,761) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired | — | — | (439,241) | — | — | — | 439,241 | (417) | — | — | — | — | (417) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Common Stock under Employee Stock Purchase Plan | — | — | 271,152 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (28,814) | — | — | (28,814) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2023 | — | $ | — | 395,770,670 | $ | 37 | 87,867,732 | $ | 9 | 5,445,714 | $ | (9,908) | $ | 2,395,000 | $ | (2,047,853) | $ | (6,715) | $ | — | $ | 330,570 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issuance for exercise of stock options, net of early exercise liability | — | — | 76,156 | — | — | — | — | — | 31 | — | — | — | 31 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | 33,070 | — | — | — | 33,070 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested restricted stock units | — | — | 5,178,305 | 1 | — | — | — | — | — | — | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized holdings gain on investment securities, available for sale | — | — | — | — | — | — | — | — | — | — | 1,643 | — | 1,643 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury Stock | — | — | (1,650,446) | — | — | — | 1,650,446 | (1,994) | — | — | — | — | (1,994) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (41,469) | — | — | (41,469) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2023 | — | $ | — | 399,374,685 | $ | 38 | 87,867,732 | $ | 9 | 7,096,160 | $ | (11,902) | $ | 2,428,101 | $ | (2,089,322) | $ | (5,072) | $ | — | $ | 321,852 |
Nine Months Ended September 30, | |||||||||||||||||
2023 | 2022 | ||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||
Net loss | $ | (142,889) | $ | (255,341) | |||||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||||||||
Depreciation and amortization expense | 1,835 | 2,028 | |||||||||||||||
Amortization of notes and securities discounts and debt issuance costs | — | 27 | |||||||||||||||
Stock-based compensation expense | 107,795 | 125,211 | |||||||||||||||
Accretion, net of amortization | (3,096) | (730) | |||||||||||||||
Net realized losses on investment securities | (20) | 18 | |||||||||||||||
Gain on investment | — | (10,187) | |||||||||||||||
Premium deficiency reserve | (6,556) | (82,428) | |||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||
Accrued retrospective premiums | 4,741 | 21,029 | |||||||||||||||
Other receivables | 8,836 | (8,803) | |||||||||||||||
Surety bonds and deposits | 20,601 | 769 | |||||||||||||||
Prepaid expenses | 2,920 | (8,407) | |||||||||||||||
Other assets | 4,227 | (19,263) | |||||||||||||||
Healthcare receivables | 18,534 | (10,844) | |||||||||||||||
Non-Insurance receivable | (11,273) | — | |||||||||||||||
Operating lease right-of-use assets | 405 | 1,750 | |||||||||||||||
Unpaid claims | (27,847) | 1,013 | |||||||||||||||
Accounts payable and accrued expenses | 2,851 | 9,606 | |||||||||||||||
Accrued salaries and benefits | 371 | 4,489 | |||||||||||||||
Deferred revenue | 103,295 | 96,358 | |||||||||||||||
Other liabilities | 179 | (1,005) | |||||||||||||||
Performance year obligation | (4,829) | 33,057 | |||||||||||||||
Non-Insurance payable | 34,244 | 109,359 | |||||||||||||||
Operating lease liabilities | (900) | (2,264) | |||||||||||||||
Net cash provided by (used in) operating activities | 113,424 | 5,442 | |||||||||||||||
Cash flows from investing activities: | |||||||||||||||||
Purchases of short-term investments, available-for-sale, and held-to-maturity securities | (142,359) | (276,848) | |||||||||||||||
Proceeds from sales of short-term investments and available-for-sale securities | 60,436 | 9,710 | |||||||||||||||
Proceeds from maturities of short-term investments, available-for-sale, and held-to-maturity securities | 139,122 | 350,455 | |||||||||||||||
Purchases of property and equipment | (848) | (590) | |||||||||||||||
Acquisition of Character Biosciences, Inc. Series A preferred shares | — | (250) | |||||||||||||||
Net cash provided by investing activities | 56,351 | 82,477 | |||||||||||||||
Cash flows from financing activities: | |||||||||||||||||
Issuance of common stock, net of early exercise liability | 1,149 | 1,302 | |||||||||||||||
Treasury stock acquired | (5,393) | (6,320) | |||||||||||||||
Net cash used in financing activities | (4,244) | (5,018) | |||||||||||||||
Net increase in cash, cash equivalents, and restricted cash | 165,531 | 82,901 | |||||||||||||||
Cash, cash equivalents, and restricted cash, beginning of period | 186,213 | 299,968 | |||||||||||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 351,744 | $ | 382,869 | |||||||||||||
Reconciliation of cash and cash equivalents and restricted cash | |||||||||||||||||
Cash and cash equivalents | $ | 299,014 | $ | 382,869 | |||||||||||||
Restricted cash | 52,730 | — | |||||||||||||||
Total cash, cash equivalents, and restricted cash | $ | 351,744 | $ | 382,869 | |||||||||||||
Supplemental disclosure of non-cash activities | |||||||||||||||||
Performance year receivable | $ | (185,404) | $ | (585,901) | |||||||||||||
Performance year obligation | 185,404 | 585,901 | |||||||||||||||
Right-of-use assets obtained in exchange for lease liabilities | — | 642 | |||||||||||||||
Recognition of equity method investments and preferred stock | — | 8,644 | |||||||||||||||
Derecognition of noncontrolling interest | — | 3,903 | |||||||||||||||
Conversion of Character Biosciences, Inc. convertible note to preferred stock | — | 250 |
The Company will have until April 24, 2022 (the “Combination Period”) to consummate a Business Combination. However, ifinformation following the Company has not completed a Business Combination within the Combination Period,aforementioned paragraph, the Company will (i) cease allrefer to its participation in ACO REACH Model or the Company's participation in the predecessor DC Model as ACO REACH Model henceforth.
6
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a third party (other than the Company’s independent auditors) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent auditors), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
presentation
The accompanying All material intercompany balances and transactions have been eliminated in consolidating these financial statements. Investments over which the Company exercise significant influence, but do not control, are accounted for using the applicable accounting treatment based on the nature of the investment. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on April 23, 2020, as well as the Company’s Current Reports on Form 8-K, as filed with the SEC on April 24, 2020 and April 30, 2020. The interim results for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxyaudited consolidated financial statements and exemptions fromrelated notes to the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of usingincluded in the extended transition period difficult or impossible because of the potential differences in accounting standards used.
7
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
estimates
Makingvaluation of the Company's investment securities, goodwill and other intangible assets, reinsurance, premium deficiency reserve, warrants, stock-based compensation, recoveries from third parties for coordination of benefits, ACO REACH Benchmark, specifically cost trend and risk score estimates that can develop over time, and final determination of medical cost adjustment pools.
September 30, 2023 | As Reported | As computed excluding anticipated net investment income | Effect of Change | |||||||||||
(in thousands) | ||||||||||||||
Premium deficiency reserve | $ | 683 | $ | 1,154 | $ | (471) | ||||||||
Total current liabilities | 718,696 | 719,167 | $ | (471) | ||||||||||
Total liabilities | 737,945 | 738,416 | $ | (471) | ||||||||||
Accumulated deficit | (2,089,322) | (2,089,793) | $ | 471 | ||||||||||
Total stockholders' equity | 321,852 | 321,381 | $ | 471 | ||||||||||
Total liabilities and stockholders' equity | $ | 1,059,797 | $ | 1,059,797 | $ | — |
December 31, 2022 | As Reported | Effect of Change | As Adjusted | |||||||||||
(in thousands) | ||||||||||||||
Premium deficiency reserve | $ | 16,388 | $ | (9,149) | $ | 7,239 | ||||||||
Total current liabilities | 440,656 | (9,149) | 431,507 | |||||||||||
Total liabilities | 460,882 | (9,149) | 451,733 | |||||||||||
Accumulated deficit | (1,955,582) | 9,149 | (1,946,433) | |||||||||||
Total stockholders' equity | 347,738 | 9,149 | 356,887 | |||||||||||
Total liabilities and stockholders' equity | $ | 808,620 | $ | — | $ | 808,620 |
December 31, 2021 | As Reported | Effect of Change | As Adjusted | |||||||||||
(in thousands) | ||||||||||||||
Premium deficiency reserve | $ | 110,628 | $ | (723) | $ | 109,905 | ||||||||
Total current liabilities | 372,624 | (723) | 371,901 | |||||||||||
Total liabilities | 411,487 | (723) | 410,764 | |||||||||||
Accumulated deficit | (1,616,738) | 723 | (1,616,015) | |||||||||||
Total stockholders' equity | 539,317 | 723 | 540,040 | |||||||||||
Total liabilities and stockholders' equity | $ | 950,804 | $ | — | $ | 950,804 |
Three Months Ended September 30, 2023 | As Reported | As computed excluding anticipated net investment income | Effect of Change | |||||||||||
(in thousands) | ||||||||||||||
Premium deficiency reserve expense (benefit) | $ | 392 | $ | (1,527) | $ | 1,919 | ||||||||
Total operating expenses | 523,535 | $ | 521,616 | $ | 1,919 | |||||||||
Loss from operations | (41,469) | $ | (39,550) | $ | (1,919) | |||||||||
Net loss | $ | (41,469) | $ | (39,550) | $ | (1,919) | ||||||||
Per share data: | ||||||||||||||
Net loss per share attributable to Class A and B common stockholders - basic and diluted | $ | (0.09) | $ | (0.08) | $ | (0.01) |
Three Months Ended September 30, 2022 | As Reported | Effect of Change | As Adjusted | |||||||||||
(in thousands) | ||||||||||||||
Premium deficiency reserve expense (benefit) | $ | (27,657) | $ | 181 | $ | (27,476) | ||||||||
Total operating expenses | 930,732 | 181 | 930,913 | |||||||||||
Loss from operations | (73,915) | (181) | (74,096) | |||||||||||
Net loss | $ | (75,308) | $ | (181) | $ | (75,489) | ||||||||
Per share data: | ||||||||||||||
Net loss per share attributable to Class A and B common stockholders - basic and diluted | $ | (0.16) | $ | — | $ | (0.16) |
Nine Months Ended September 30, 2023 | As Reported | As computed excluding anticipated net investment income | Effect of Change | |||||||||||
(in thousands) | ||||||||||||||
Premium deficiency reserve expense (benefit) | $ | (6,556) | $ | (15,234) | $ | 8,678 | ||||||||
Total operating expenses | 1,666,351 | 1,657,673 | $ | 8,678 | ||||||||||
Loss from operations | (142,882) | (134,204) | $ | (8,678) | ||||||||||
Net loss | $ | (142,889) | $ | (134,211) | $ | (8,678) | ||||||||
Per share data: | ||||||||||||||
Net loss per share attributable to Class A and B common stockholders - basic and diluted | $ | (0.30) | $ | (0.28) | $ | (0.02) |
Nine Months Ended September 30, 2022 | As Reported | Effect of Change | As Adjusted | |||||||||||
(in thousands) | ||||||||||||||
Premium deficiency reserve expense (benefit) | $ | (82,971) | $ | 543 | $ | (82,428) | ||||||||
Total operating expenses | 2,841,657 | 543 | $ | 2,842,200 | ||||||||||
Loss from operations | (263,761) | (543) | $ | (264,304) | ||||||||||
Net loss | $ | (254,798) | $ | (543) | $ | (255,341) | ||||||||
Per share data: | ||||||||||||||
Net loss per share attributable to Class A and B common stockholders - basic and diluted | $ | (0.54) | $ | — | $ | (0.54) |
Cashassumptions change. The amendments also simplify the amortization of deferred acquisition costs and Cash Equivalents
add new disclosure requirements about the assumptions used to measure liabilities and the potential impact to future cash flows. The amendments related to the liability for future policy benefits for traditional and limited-payment contracts and deferred acquisition costs are to be applied to contracts in force at the beginning of the earliest period presented, with an option to apply such amendments retrospectively with a cumulative-effect adjustment to the opening balance of retained earnings at the earliest period presented. The amendments for market risk benefits are to be applied retrospectively. ASU 2020-11 is effective for public entities for periods beginning after December 15, 2022. The Company considers all short-termadopted this standard on January 1, 2023. The adoption of ASU 2018-12 and related amendments did not have a material impact on the Company's financial statements.
September 30, 2023 | Amortized cost | Accumulated unrealized gains | Accumulated unrealized losses | Fair value | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Investment securities, held-to-maturity | ||||||||||||||||||||||||||
U.S. government and government agencies and authorities | $ | 7,688 | $ | — | $ | (323) | $ | 7,365 | ||||||||||||||||||
Investment securities, available-for-sale | ||||||||||||||||||||||||||
U.S. government and government agencies and authorities | 195,029 | 1 | (4,505) | 190,525 | ||||||||||||||||||||||
Corporate debt securities | 107,824 | 12 | (580) | 107,256 | ||||||||||||||||||||||
Total held-to-maturity and available-for-sale investment securities | $ | 310,541 | $ | 13 | $ | (5,408) | $ | 305,146 |
December 31, 2022 | Amortized cost | Accumulated unrealized gains | Accumulated unrealized losses | Fair value | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Investment securities, held-to-maturity | ||||||||||||||||||||||||||
U.S. government and government agencies and authorities | $ | 757 | $ | — | $ | (106) | $ | 651 | ||||||||||||||||||
Investment securities, available-for-sale | ||||||||||||||||||||||||||
U.S. government and government agencies and authorities | 237,457 | 10 | (9,000) | 228,467 | ||||||||||||||||||||||
Corporate debt | 98,783 | 38 | (422) | 98,399 | ||||||||||||||||||||||
Total held-to-maturity and available-for-sale investment securities | $ | 336,997 | $ | 48 | $ | (9,528) | $ | 327,517 |
September 30, 2023 | Held-to-maturity | Available-for-sale | ||||||||||||||||||||||||
Amortized cost | Fair value | Amortized cost | Fair value | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Due within one year | $ | 6,896 | $ | 6,692 | $ | 197,766 | $ | 196,381 | ||||||||||||||||||
Due after one year through five years | 681 | 588 | 105,087 | 101,400 | ||||||||||||||||||||||
Due after five years through ten years | — | — | — | — | ||||||||||||||||||||||
Due after ten years | 111 | 85 | — | — | ||||||||||||||||||||||
Total | $ | 7,688 | $ | 7,365 | $ | 302,853 | $ | 297,781 |
Three Months Ended September 30, | Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 1,944 | $ | 1,428 | $ | 5,978 | $ | 1,567 | ||||||||||||||||||||||||||||||||||||
Short-term investments | 605 | 879 | 1,920 | 1,001 | ||||||||||||||||||||||||||||||||||||||||
Investment securities | 1,840 | 543 | 5,322 | 1,057 | ||||||||||||||||||||||||||||||||||||||||
Investment income, net | $ | 4,389 | $ | 2,850 | $ | 13,220 | $ | 3,625 |
September 30, 2023 | Less than 12 months | Greater than 12 months | Total | |||||||||||||||||||||||||||||||||||
Fair value | Unrealized loss | Fair value | Unrealized loss | Fair value | Unrealized loss | |||||||||||||||||||||||||||||||||
(in thousands, except number of positions) | ||||||||||||||||||||||||||||||||||||||
U.S. government and government agencies and authorities | $ | 39,425 | $ | (163) | $ | 160,305 | $ | (4,671) | $ | 199,730 | $ | (4,834) | ||||||||||||||||||||||||||
Corporate debt securities | 91,165 | (532) | 9,874 | (42) | 101,039 | (574) | ||||||||||||||||||||||||||||||||
Total | $ | 130,590 | $ | (695) | $ | 170,179 | $ | (4,713) | $ | 300,769 | $ | (5,408) | ||||||||||||||||||||||||||
Number of positions | 109 | 38 | 147 |
December 31, 2022 | Less than 12 months | Greater than 12 months | Total | |||||||||||||||||||||||||||||||||||
Fair value | Unrealized loss | Fair value | Unrealized loss | Fair value | Unrealized loss | |||||||||||||||||||||||||||||||||
(in thousands, except number of positions) | ||||||||||||||||||||||||||||||||||||||
U.S. government and government agencies and authorities | $ | 64,261 | $ | (958) | $ | 147,757 | $ | (8,148) | $ | 212,018 | $ | (9,106) | ||||||||||||||||||||||||||
Corporate debt securities | 78,292 | (422) | — | — | 78,292 | (422) | ||||||||||||||||||||||||||||||||
Total | $ | 142,553 | $ | (1,380) | $ | 147,757 | $ | (8,148) | $ | 290,310 | $ | (9,528) | ||||||||||||||||||||||||||
Number of positions | 92 | 24 | 116 |
Deferred Offering Costs
Offering costs consist2022.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||
Proceeds from sales of investment securities | $ | — | $ | 3,829 | $ | 60,436 | $ | 9,710 | ||||||||||||||||||||||||||||||||||||
Proceeds from maturities of investment securities | 32,240 | 60,000 | 139,122 | 350,455 | ||||||||||||||||||||||||||||||||||||||||
Gross realized gains | — | — | 39 | 5 | ||||||||||||||||||||||||||||||||||||||||
Gross realized losses | — | (2) | (19) | (23) | ||||||||||||||||||||||||||||||||||||||||
Net realized losses | $ | — | $ | (2) | $ | 20 | $ | (18) |
September 30, 2023 | Level 1 | Level 2 | Level 3 | Total fair value | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
U.S. government and government agencies | $ | — | $ | 190,525 | $ | — | $ | 190,525 | ||||||||||||||||||
Corporate debt securities | — | 107,256 | — | 107,256 | ||||||||||||||||||||||
Warrants receivable | — | — | 900 | 900 | ||||||||||||||||||||||
Total assets at fair value | $ | — | $ | 297,781 | $ | 900 | $ | 298,681 |
December 31, 2022 | Level 1 | Level 2 | Level 3 | Total fair value | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
U.S. government and government agencies | $ | — | $ | 228,467 | $ | — | $ | 228,467 | ||||||||||||||||||
Corporate debt securities | — | 98,399 | — | 98,399 | ||||||||||||||||||||||
Warrants receivable | — | — | 900 | 900 | ||||||||||||||||||||||
Total assets at fair value | $ | — | $ | 326,866 | $ | 900 | $ | 327,766 | ||||||||||||||||||
Warrants receivable | Total | ||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Balance, December 31, 2022 | $ | 900 | $ | 900 | |||||||||||||||||||
Receipts | — | — | |||||||||||||||||||||
Settlements | — | — | |||||||||||||||||||||
Transfers in | — | — | |||||||||||||||||||||
Transfers out | — | — | |||||||||||||||||||||
Total realized losses (gains) | — | — | |||||||||||||||||||||
Balance, September 30, 2023 | $ | 900 | $ | 900 |
Nine Months Ended September 30, | 2023 | 2022 | ||||||||||||
(in thousands) | ||||||||||||||
Gross and net balance, beginning of period (1) | $ | 137,395 | $ | 136,317 | ||||||||||
Incurred related to: | ||||||||||||||
Current year | 750,705 | 773,530 | ||||||||||||
Prior years | (7,689) | (36,149) | ||||||||||||
Total incurred | 743,016 | 737,381 | ||||||||||||
Paid related to: | ||||||||||||||
Current year | 646,322 | 649,223 | ||||||||||||
Prior years | 120,859 | 89,055 | ||||||||||||
Total paid | 767,181 | 738,278 | ||||||||||||
Gross and net balance, end of period (1)(2) | $ | 113,230 | $ | 135,420 |
Income Taxes
transaction, the Company owned approximately 25.46% of Character Biosciences. As a result, the Company reassessed its interest in Character Biosciences and determined that while Character Biosciences is a VIE, the Company is not considered as the primary beneficiary of the VIE because it does not have the power, through voting or similar rights and the license agreements, to direct the activities of Character Biosciences that most significantly impact Character Biosciences' economic performance.
September 30, 2023 | Shares Authorized Under Plans | Shares Outstanding Under Plans | Shares Remaining Under Plans | |||||||||||||||||
2014 Plan | 54,402,264 | 34,864,267 | N/A | |||||||||||||||||
2020 Plan | 58,521,709 | 43,767,670 | 5,193,626 | |||||||||||||||||
2020 MIP | 33,426,983 | 26,741,587 | — | |||||||||||||||||
Inducement Plan | 11,000,000 | 5,536,822 | 2,131,783 |
December 31, 2022 | Shares Authorized Under Plans | Shares Outstanding Under Plans | Shares Remaining Under Plans | |||||||||||||||||
2014 Plan | 54,402,264 | 36,378,558 | N/A | |||||||||||||||||
2020 Plan | 31,884,272 | 29,805,319 | 242,473 | |||||||||||||||||
2020 MIP | 33,426,983 | 30,084,285 | — | |||||||||||||||||
Inducement Plan | 11,000,000 | 11,000,000 | — |
Three Months Ended September 30, | 2023 | 2022 | ||||||||||||
(in thousands) | ||||||||||||||
Stock options | $ | 559 | $ | 1,051 | ||||||||||
RSUs | 20,603 | 19,499 | ||||||||||||
PRSUs | 11,851 | 21,903 | ||||||||||||
ESPP | 57 | 188 | ||||||||||||
Total compensation cost recognized for stock-based compensation plans | $ | 33,070 | $ | 42,641 |
Nine Months Ended September 30, | 2023 | 2022 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Stock options | $ | 2,648 | $ | 3,530 | ||||||||||||||||
RSUs | 62,539 | 54,782 | ||||||||||||||||||
PRSUs | 42,444 | 66,461 | ||||||||||||||||||
ESPP | 164 | 435 | ||||||||||||||||||
Total compensation cost recognized for stock-based compensation plans | $ | 107,795 | $ | 125,208 |
Number of stock options | Weighted-average exercise price | ||||||||||
Outstanding, January 1, 2023 | 1,364,822 | $ | 8.88 | ||||||||
Granted during 2023 | — | — | |||||||||
Exercised | — | — | |||||||||
Forfeited | (341,734) | 8.88 | |||||||||
Outstanding, September 30, 2023 | 1,023,088 | $ | 8.88 |
Number of stock options | Weighted-average exercise price | ||||||||||
Outstanding, January 1, 2023 | 25,631,686 | $ | 2.35 | ||||||||
Granted during 2023 | — | — | |||||||||
Exercised | (78,637) | 1.14 | |||||||||
Forfeited | (1,437,790) | 2.42 | |||||||||
Outstanding, September 30, 2023 | 24,115,259 | $ | 2.72 |
Number of RSUs | Weighted-average grant date fair value per share | |||||||||||||
Outstanding, January 1, 2022 | 21,294,841 | $ | 14.60 | |||||||||||
Granted during 2022 | 30,094,480 | 2.62 | ||||||||||||
Released | (4,518,984) | 14.31 | ||||||||||||
Forfeited | (1,460,459) | 5.31 | ||||||||||||
Outstanding, September 30, 2022 | 45,409,878 | $ | 6.99 | |||||||||||
Outstanding, January 1, 2023 | 49,617,199 | $ | 6.48 | |||||||||||
Granted during 2023 | 23,443,658 | 1.00 | ||||||||||||
Released | (12,568,029) | 6.58 | ||||||||||||
Forfeited | (4,947,831) | 3.12 | ||||||||||||
Outstanding, September 30, 2023 | 55,544,997 | $ | 4.45 |
Nine months ended September 30, 2023 | ||||||||
Expected volatility (1) | 40.7 | % | ||||||
Risk-free interest rate (2) | 0.5 | |||||||
Dividend yield (3) | — |
Number of PRSUs | Weighted-average grant date fair value per share | |||||||||||||
Non-vested, January 1, 2022 | 27,818,524 | $ | 9.58 | |||||||||||
Granted during 2022 | — | — | ||||||||||||
Vested | (13,264) | 8.90 | ||||||||||||
Forfeited | (265,306) | 9.11 | ||||||||||||
Non-vested at September 30, 2022 | 27,539,954 | $ | 9.58 | |||||||||||
Non-vested, January 1, 2023 | 29,945,235 | $ | 8.92 | |||||||||||
Granted during 2023 | 1,294,247 | 0.94 | ||||||||||||
Vested | (958,951) | 1.23 | ||||||||||||
Forfeited | (55,665) | 5.48 | ||||||||||||
Non-vested at September 30, 2023 | 30,224,866 | $ | 8.83 |
Nine months ended September 30, 2023 | ||||||||
Weighted-average risk-free interest rate | 5.4 | % | ||||||
Expected term (in years) | 0.50 | |||||||
Expected volatility | 69.8 | % |
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.zero. The Company recognizes accrued interestbelieves that at September 30, 2023, it had no material uncertain tax positions. Interest and penalties related to unrecognized tax benefits asexpense (benefits) are recognized in income tax expense. expense, when applicable.
Three Months Ended September 30, | |||||||||||
2023 | 2022 | ||||||||||
(in thousands, except per share and share amounts) | |||||||||||
Net loss | $ | (41,469) | $ | (75,489) | |||||||
Net loss attributable to Common Stockholders | (41,469) | (75,489) | |||||||||
Basic and diluted weighted average number of common shares and common share equivalents outstanding | 480,770,283 | 477,690,204 | |||||||||
Net loss per share attributable to Common Stockholders—basic and diluted | $ | (0.09) | $ | (0.16) |
Nine Months Ended September 30, | |||||||||||||||||
2023 | 2022 | ||||||||||||||||
(in thousands, except per share and share amounts) | |||||||||||||||||
Net loss | $ | (142,889) | $ | (255,341) | |||||||||||||
Net loss attributable to Common Stockholders | (142,889) | (255,341) | |||||||||||||||
Basic and diluted weighted average number of common shares and common share equivalents outstanding | 480,921,520 | 475,609,571 | |||||||||||||||
Net loss per share attributable to Common Stockholders—basic and diluted | $ | (0.30) | $ | (0.54) |
Three Months Ended September 30, | |||||||||||
2023 | 2022 | ||||||||||
Options to purchase common stock | 25,138,347 | 27,373,475 | |||||||||
RSUs | 55,544,997 | 45,409,878 | |||||||||
PRSUs | 30,224,866 | 27,539,954 | |||||||||
Total anti-dilutive shares excluded from computation of net loss per share | 110,908,210 | 100,323,307 |
Nine Months Ended September 30, | |||||||||||||||||
2023 | 2022 | ||||||||||||||||
Options to purchase common stock | 25,138,347 | 27,373,475 | |||||||||||||||
RSUs | 55,544,997 | 45,409,878 | |||||||||||||||
PRSUs | 30,224,866 | 27,539,954 | |||||||||||||||
Total anti-dilutive shares excluded from computation of net loss per share | 110,908,210 | 100,323,307 |
The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The CARES Act includes several significant business tax provisions that,Hindenburg Article, which discussed, among other things, would eliminatean inquiry by the taxable income limitU.S. Attorney's Office for certain net operating losses (“NOL) and allow businessesthe Eastern District of Pennsylvania relating to, carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss rules, accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest limitation under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and Jobs Act tax provisions. The Company does not believe that the CARES Act will have a significant impact on Company's financial position or statement of operations.
Net Loss per Ordinary Share
Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 2,700,000 ordinary shares, that were subject to forfeiture if the over-allotment option was not exercised by the underwriters (see Note 7). At March 31, 2020 and December 31, 2019, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted loss per common share is the same as basic loss per share for the period presented.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
8
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 82,800,000 Units, which includes the full exercise by the underwriter of its option to purchase an additional 10,800,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one Class A ordinary share and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at an exercise price of $11.50 per whole share (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 10,933,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $16,400,000. Each Private Placement Warrant is exercisable for one Class A Share at a price of $11.50 per share, subject to adjustment (see Note 7). The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In October 2019, the Company issued one ordinary share to the Sponsor for no consideration. On January 21, 2020, the Company cancelled the one share issued in October 2019 and the Sponsor purchased 17,250,000 Founder Shares for an aggregate purchase price of $25,000. On April 21, 2020, the Company effected a share capitalization, resulting in 20,700,000 Founder Shares issued and outstanding as of such date. All share and per-share amounts have been retroactively restated to reflect the share capitalization. The Founder Shares will automatically convert into Class A ordinary shares on the first business day following the completion of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to certain adjustments, as described in Note 7.
The Founder Shares included an aggregate of up to 2,700,000 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the number of Founder Shares would collectively represent 20% of the Company’s issued and outstanding shares upon the completion of the Initial Public Offering. As a result of the underwriters’ election to fully exercise their over-allotment option, no Founder Shares are subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Class B ordinary shares or Class A ordinary shares received upon conversion thereof (together, “Founder Shares”) until the earlier of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
9
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
Advances – Related Party
The Sponsor advanced the Company an aggregate of $17,631 to cover expenses related to the Initial Public Offering. The advances were non-interest bearing and due on demand. Advances in the aggregate amount of $17,631 were repaid in February 2020.
Promissory Note — Related Party
On January 21, 2020, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company borrowed an aggregate principal amount of $300,000, which amount was outstanding as of March 31, 2020. The note was non-interest bearing and payable on the earlier of (i) June 30, 2020 and (ii) the completion of the Initial Public Offering. The borrowings outstanding under the note in the amount of $300,000 were repaid upon the consummation of the Initial Public Offering on April 24, 2020.
Administrative Support Agreement
The Company entered into an agreement whereby, commencing on April 21, 2020, the Company will pay an affiliate of the Sponsor up to $10,000 per month for office space, administrative and support services. Upon completion of a Business Combination or its liquidation, the Company will cease paying these monthly fees.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, orthings, certain of the Company’s officersarrangements with providers participating in its network and directors may, but are not obligated to, loanprograms, and Clover Assistant, was the subject of the Company’s Current Report on Form 8-K dated February 5, 2021.
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on April 21, 2020, the holdersMiddle District of Tennessee: Bond v. Clover Health Investments, Corp. et al., Case No. 3:21-cv-00096 (M.D. Tenn.); Kaul v. Clover Health Investments, Corp. et al., Case No. 3:21-cv-00101 (M.D. Tenn.); Yaniv v. Clover Health Investments, Corp. et al., Case No. 3:21-cv-00109 (M.D. Tenn.); and Tremblay v. Clover Health Investments, Corp. et al., Case No. 3:21-cv-00138 (M.D. Tenn.). The complaints assert violations of sections 10(b) and 20(a) of the Founder Shares, Private Placement WarrantsExchange Act and warrants that may be issued upon conversionRule 10b-5 promulgated under the Exchange Act. The Kaul action asserts additional claims under sections 11 and 15 of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A ordinary shares). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However,The complaints generally relate to allegations published in the registration rights agreement providesHindenburg Article. The complaints seek unspecified damages on behalf of all persons and entities who purchased or acquired Clover securities during the class period (which begins on October 6, 2020, and, depending on the complaint, ends on February 3, 2021, or February 4, 2021), as well as certain other costs. In April 2021, the Middle District of Tennessee class actions were consolidated under Bond v. Clover Health Investments, Corp. et al., Case No. 3:21-cv-00096 (M.D. Tenn.) as the lead case. On June 28, 2021, the plaintiffs filed an amended complaint, which also generally relates to allegations published in the Hindenburg Article, but adds, among other things, allegations from confidential witnesses who purport to be former employees of the Company. The Company moved to dismiss the amended complaint on August 28, 2021; that motion was denied on February 28, 2022. On February 14, 2023, the court granted the plaintiffs' motion for class certification.
Underwriting Agreement
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $28,980,000second and third actions were filed in the aggregate.United States District Court for the Middle District of Tennessee and are captioned Sun v. Garipalli, et al., Case No. 3:21-cv-00311 (M.D. Tenn.), and Luthra v. Garipalli, et al., Case No. 3:21-cv-00320 (M.D. Tenn.). The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the termscomplaints assert violations of section 14(a) of the underwriting agreement.
Financial Advisory Fee
Exchange Act, breach of fiduciary duty, and aiding and abetting a breach of fiduciary duty. The underwriters agreed to reimburse the Company for an amount equal to 10%Sun action also asserts unjust enrichment, abuse of the discount paid to the underwriters for financial advisory services provided by Connaught (UK) Limited in connection with the Initial Public Offering,control, gross mismanagement, waste of which $1,440,000 was paid at the closing of the Initial Public Offeringcorporate assets, and up to $2,898,000 will be payable at the time of the closing of a Business Combination.
10
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
NOTE 7. SHAREHOLDER’S EQUITY
Preferred Shares — The Company is authorized to issue 5,000,000 preference shares with a par value of $0.0001. The Company’s board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The board of directors will be able to, without shareholder approval, issue preferred shares with voting and other rights that could adversely affect the voting power and other rights of the holders of the ordinary shares and could have anti-takeover effects. At March 31, 2020 and December 31, 2019, there were no preference shares issued or outstanding.
Common Stock
Class A Ordinary Shares — The Company is authorized to issue 500,000,000 Class A ordinary shares, with a par value of $0.0001 per share. Holders of Class A ordinary shares are entitled to one vote for each share. At March 31, 2020 and December 31, 2019, there were no Class A ordinary shares issued or outstanding.
Class B Ordinary Shares — The Company is authorized to issue 50,000,000 Class B ordinary shares, with a par value of $0.0001 per share. Holders of the Class B ordinary shares are entitled to one vote for each share. At March 31, 2020 and December 31, 2019, there were 20,700,000 Class B ordinary shares issued and outstanding.
Only holders of the Class B ordinary shares will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law.
The Class B Shares will automatically convert into Class A ordinary shares on the first business day following the completion of the Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which Founder Shares will convert into Class A ordinary shares will be adjusted (subject to waiver by holders of a majority of the Class B ordinary shares) so that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of the ordinary shares issued and outstanding upon completion of the Initial Public Offering plus the number of Class A ordinary shares and equity-linked securities issued or deemed issued in connection with a Business Combination (net of redemptions), excluding any Class A ordinary shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued to the Sponsor.
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years from the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statementcontribution under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No Public Warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
11
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement registering the issuance, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the Public Warrants. The Company will use it commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of the Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A ordinary shares are, at the time of any exercise of a Public Warrant, not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9)section 11(f) of the Securities Act, and sections 10(b) and 21D of the Exchange Act. The complaints name certain current and former officers and directors as defendants. They seek unspecified damages and an order requiring Clover to take certain actions to enhance Clover's corporate governance policies and procedures.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00. Once the Public Warrants become exercisable,industry, the Company may redeembe assessed, up to prescribed limits, for certain obligations to the Public Warrants:
Redemptionpolicyholders and claimants of warrants wheninsolvent insurance companies that write the price per Class A ordinary share equalssame line or exceeds $10.00. Oncelines of business as the Public Warrants become exercisable,Company.
IfGlobal and whenProfessional Direct Contracting of the Public Warrants become redeemable byCenters for Medicare & Medicaid Services ("CMS"), which utilizes a structured model intended to reduce expenditures and preserve or enhance quality of care for people with Medicare fee-for-service ("FFS"). CMS redesigned the DC Model and renamed the model the ACO Realizing Equity, Access, and Community Health (REACH) Model ("ACO REACH Model") effective January 1, 2023. As a participating entity in the DC Model, referred to as the ACO REACH Model at January 1, 2023, with a global risk arrangement, the Company assumes the Company may exerciseresponsibility of guaranteeing the performance of its redemption right even if itcare network. The ACO REACH Model is unableintended to register or qualifyreduce administrative burden and support a focus on complex, chronically ill patients. The Company's operations in connection with the underlying securitiesACO REACH Model is included in the Non-Insurance operating segment. See Note 16 (Operating Segments) for sale under all applicable state securities laws.
The exercise price and number of ordinary shares issuable upon exerciseadditional information.
12
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
In addition, if (x)a number of variables that are not reasonable for the Company issuesto estimate, such as, but not limited to, risk ratings and benchmark trends that have an inestimable impact on the estimate of future payments.
September 30, 2023 | December 31, 2022 | |||||||||||||
(in thousands) | ||||||||||||||
Non-Insurance performance year receivable | $ | 185,404 | $ | — | ||||||||||
Non-Insurance performance year obligation (1) | 254,419 | 73,844 | ||||||||||||
(1) This obligation represents the consideration due to providers, net of the shared savings or loss for the period and amortization of the liability. |
Nine months ended September 30, 2023 | Nine months ended September 30, 2022 | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Amortization of the Non-Insurance performance year receivable | $ | (556,211) | $ | (1,757,702) | ||||||||||||||||
Amortization of the Non-Insurance performance year obligation | 556,211 | 1,757,702 | ||||||||||||||||||
Non-Insurance revenue | 575,311 | 1,757,579 |
Insurance | Non-Insurance | Corporate/Other | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||
Three months ended September 30, 2023 | (in thousands) | |||||||||||||||||||||||||||||||
Premiums earned, net (net of ceded premiums of $106) | 301,230 | — | — | — | 301,230 | |||||||||||||||||||||||||||
Non-Insurance revenue | — | 176,038 | — | — | 176,038 | |||||||||||||||||||||||||||
Other income | 3,338 | (478) | 14,696 | (12,758) | 4,798 | |||||||||||||||||||||||||||
Intersegment revenues | — | — | 43,335 | (43,335) | — | |||||||||||||||||||||||||||
Net medical claims incurred | 236,533 | 183,173 | 4,691 | (5,438) | 418,959 | |||||||||||||||||||||||||||
Gross profit (loss) | 68,035 | (7,613) | 53,340 | (50,655) | 63,107 | |||||||||||||||||||||||||||
Total assets | 464,942 | 374,817 | 905,477 | (685,439) | 1,059,797 | |||||||||||||||||||||||||||
Insurance | Non-Insurance | Corporate/Other | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||
Nine months ended September 30, 2023 | (in thousands) | |||||||||||||||||||||||||||||||
Premiums earned, net (net of ceded premiums of $341) | 932,699 | — | — | — | 932,699 | |||||||||||||||||||||||||||
Non-Insurance revenue | — | 575,311 | — | — | 575,311 | |||||||||||||||||||||||||||
Other income | 7,192 | 1,266 | 44,466 | (37,465) | 15,459 | |||||||||||||||||||||||||||
Intersegment revenues | — | — | 112,220 | (112,220) | — | |||||||||||||||||||||||||||
Net medical claims incurred | 753,877 | 573,566 | 11,821 | (10,861) | 1,328,403 | |||||||||||||||||||||||||||
Gross profit (loss) | 186,014 | 3,011 | 144,865 | (138,824) | 195,066 | |||||||||||||||||||||||||||
Total assets | 464,942 | 374,817 | 905,477 | (685,439) | 1,059,797 |
Insurance | Non-Insurance | Corporate/Other | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||
Three months ended September 30, 2022 | (in thousands) | |||||||||||||||||||||||||||||||
Premiums earned, net (net of ceded premiums of $116) | 267,892 | — | — | — | 267,892 | |||||||||||||||||||||||||||
Non-Insurance revenue | — | 585,311 | — | — | 585,311 | |||||||||||||||||||||||||||
Other income | 957 | 457 | 15,494 | (13,294) | 3,614 | |||||||||||||||||||||||||||
Intersegment revenues | — | — | 29,954 | (29,954) | — | |||||||||||||||||||||||||||
Net medical claims incurred | 231,211 | 609,650 | 1,980 | (3,042) | 839,799 | |||||||||||||||||||||||||||
Gross profit (loss) | 37,638 | (23,882) | 43,468 | (40,206) | 17,018 | |||||||||||||||||||||||||||
Total assets | 476,025 | 715,672 | 859,637 | (493,655) | 1,557,679 | |||||||||||||||||||||||||||
Insurance | Non-Insurance | Corporate/Other | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||
Nine months ended September 30, 2022 | (in thousands) | |||||||||||||||||||||||||||||||
Premiums earned, net (net of ceded premiums of $354) | 814,566 | — | — | — | 814,566 | |||||||||||||||||||||||||||
Non-Insurance revenue | — | 1,757,579 | — | — | 1,757,579 | |||||||||||||||||||||||||||
Other income | 1,448 | 477 | 58,334 | (54,508) | 5,751 | |||||||||||||||||||||||||||
Intersegment revenues | — | — | 76,119 | (76,119) | — | |||||||||||||||||||||||||||
Net medical claims incurred | 746,612 | 1,815,771 | 7,155 | (9,231) | 2,560,307 | |||||||||||||||||||||||||||
Gross profit (loss) | 69,402 | (57,715) | 127,298 | (121,396) | 17,589 | |||||||||||||||||||||||||||
Total assets | 476,025 | 715,672 | 859,637 | (493,655) | 1,557,679 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Gross profit | $ | 63,107 | $ | 17,018 | $ | 195,066 | $ | 17,589 | ||||||||||||||||||||||||
Salaries and benefits | 60,567 | 70,142 | 193,211 | 209,724 | ||||||||||||||||||||||||||||
General and administrative expenses | 41,747 | 47,832 | 141,588 | 152,569 | ||||||||||||||||||||||||||||
Premium deficiency reserve benefit | 392 | (27,476) | (6,556) | (82,428) | ||||||||||||||||||||||||||||
Depreciation and amortization | 557 | 616 | 1,835 | 2,028 | ||||||||||||||||||||||||||||
Restructuring costs | 1,313 | — | 7,870 | — | ||||||||||||||||||||||||||||
Interest expense | — | 404 | 7 | 1,197 | ||||||||||||||||||||||||||||
Amortization of notes and securities discounts | — | 9 | — | 27 | ||||||||||||||||||||||||||||
Loss (gain) on investment | — | 980 | — | (10,187) | ||||||||||||||||||||||||||||
Net loss | $ | (41,469) | $ | (75,489) | $ | (142,889) | $ | (255,341) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2023 | |||||||||||||||||
(in thousands) | |||||||||||||||||
Employee termination benefits | $ | 58 | $ | 4,620 | |||||||||||||
Vendor related costs | 1,245 | 3,166 | |||||||||||||||
Other | 10 | 84 | |||||||||||||||
Total Restructuring costs | $ | 1,313 | $ | 7,870 |
The Private Placement Warrants are identical to the Public Warrants underlying the Units soldaccrued expenses in the Initial Public Offering, except thatCondensed Consolidated Balance Sheets. The liability recorded reflects the Private Placement Warrants andCompany's best estimate, which may be revised in subsequent periods as the Class A ordinary shares issuable uponrestructuring progresses. The restructuring costs are recorded within the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable as described above so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable byCorporate/Other operating segment. In addition, the Company incurred costs related to software impairment, these costs are recognized within Depreciation and exercisable by such holders on the same basis as the Public Warrants.
NOTE 8. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Other than as described in these financial statements, the Company did not identify any subsequent events that would have required adjustment or disclosureamortization in the financial statements.
Employee Termination Benefits | Vendor related costs | Other | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Liability as of December 31, 2022 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Charges | 4,620 | 3,166 | 84 | 7,870 | ||||||||||||||||||||||
Cash payments | (2,893) | (1,043) | (84) | (4,020) | ||||||||||||||||||||||
Liability as of September 30, 2023 | $ | 1,727 | $ | 2,123 | $ | — | $ | 3,850 | ||||||||||||||||||
Total cumulative costs incurred as of September 30, 2023 | $ | 4,620 | $ | 3,166 | $ | 84 | $ | 7,870 |
the investee company or commit additional funding. third party claims, including, but not limited to, negligence, recklessness, willful misconduct, fraud, or otherwise wrongful act or omission with respect to our obligations under the applicable agreements. Sheet ArrangementsITEMMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSReferences in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Social Capital Hedosophia Holdings Corp. III. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to SCH Sponsor III LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.Special Note Regarding Forward-Looking StatementsThis Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations” regardingOperationsCompany’sinterim unaudited condensed consolidated financial position, business strategystatements and notes thereto for the nine months ended September 30, 2023, contained in this Quarterly Report on Form 10-Q (the "Form 10-Q") and the plansconsolidated financial statements and objectives of managementnotes thereto for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would”the year ended December 31, 2022, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and variations thereof and similar words and expressions are intended to identify such forward-looking statements. SuchExchange Commission (the "SEC") on March 1, 2023 (the "2022 Form 10-K"). This discussion contains forward-looking statements relateand involves numerous risks and uncertainties, including, but not limited to, future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussedthose described in the forward-looking statements. For information identifying important factors that could cause actual"Risk Factors" section of the 2022 Form 10-K. Actual results tomay differ materially from those anticipatedcontained in any forward-looking statements. See "Cautionary Note Regarding Forward-Looking Statements" for additional information. Unless the context otherwise requires, references in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" to "we," "us," "our," "Clover," "Clover Health," and the "Company" mean the business and operations of Clover Health Investments, Corp. and its consolidated subsidiaries.forward-looking statements, pleaseGlobal and Professional Direct Contracting Model ("DC Model") of the Centers for Medicare and Medicaid Services ("CMS"), which transitioned to the Accountable Care Organization Realizing Equity, Access, and Community Health Model ("ACO REACH Model" or "ACO REACH") in January 2023. Our DCE assumes full risk (i.e., 100.0% shared savings and shared losses) for the total cost of care of aligned Medicare fee-for-service ("FFS") beneficiaries (the "Non-Insurance Beneficiaries" and, collectively with the members, "Lives under Clover Management" or the "beneficiaries"). Through our Direct Contracting operations, we focus on leveraging Clover Assistant to enhance healthcare delivery, reduce expenditures, and improve care for our Non-Insurance Beneficiaries. At the beginning of January 2023, we had approximately 605 contracted participant providers who manage primary care for our Non-Insurance Beneficiaries in 13 states. Additionally, at the beginning of January 2023, we had approximately 1,540 preferred providers and preferred facilities in our ACO REACH network. At September 30, 2023, we had approximately 615 contracted participant providers who manage primary care for our Non-Insurance Beneficiaries in 12 states. Additionally, at September 30, 2023, we had approximately 1,555 preferred providers and preferred facilities in our ACO REACH network. Our participation in the DC Model has enabled us to move beyond the MA market and serve the Medicare fee-for-service ("FFS") market, which is the largest segment of Medicare. We believe that expanding into the FFS market is not only a strategic milestone for Clover but also demonstrates the scalability of Clover Assistant.Risk Factors sectionCompany's participation in the predecessor DC Model as ACO REACH Model.final prospectusplan operation functions in support of its Medicare Advantage members pursuant to a master services agreement. In addition to the arrangement with UST HealthProof, the Company also announced a recently conducted reduction in force to better align its Selling, General, and Administrative cost structure with its revenue base. For the three and nine months ended September 30, 2023 the Company recorded $1.3 million and $7.9 million of restructuring charges related to these business transformation initiatives, which consisted of employee termination benefits, vendor related costs, and other costs. Refer to Note 18 “Restructuring costs” of the notes to interim unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.its Initial Public Offering filedmeasurement year 2022, impacting the 2025 payment year. This represents a 0.5 Star rating decrease for both plans. In the calendar year 2024, the Company will be paid on the basis of 3.5 Stars for both our PPO and HMO plans, which ratings were previously awarded.SEC2024 performance year, we again expect a reduction in the number of ACO REACH participating physicians, which will also result in a decrease in beneficiaries.April 29, 2020. The Company’s securities filings can be accessedtwo reportable operating segments: Insurance and Non-Insurance. Through our Insurance segment, we provide PPO and HMO plans to Medicare Advantage members in several states. Our Non-Insurance segment consists of our operations in connection with our participation in the ACO REACH Model. All other clinical services and all corporate overhead not included in the reportable segments are included within Corporate/Other.Nine Months Ended September 30, 2023 2022 Total Total (Premium and expense amounts in thousands, except PMPM amounts) Insurance members at period end (#) 81,275 N/A 88,136 N/A Premiums earned, gross $ 933,040 $ 1,252 $ 814,920 $ 1,050 Premiums earned, net 932,699 1,251 814,566 1,049 Insurance medical claim expense incurred, gross 754,422 1,012 747,250 962 Insurance net medical claims incurred 753,877 1,011 746,612 962 80.9 % N/A 91.7 % N/A Medical care ratio, net 80.8 N/A 91.7 N/A EDGAR sectionapplicable amount divided by member months in the given period. Member months represents the number of months members are enrolled in a Clover Health plan in the period.SEC’s websitefollowing calendar year. We view our number of members and associated PMPM premiums earned and medical claim expenses, in the aggregate and on a PMPM basis, as useful metrics to assess our financial performance; member growth and retention aligns with our mission, drives our Total revenues, expands brand awareness, deepens our market penetration, creates additional opportunities to inform our data-driven insights to improve care and decrease medical claim expenses, and generates additional data to continue to improve the functioning of Clover Assistant. Among other things, the longer a member is enrolled in one of our insurance plans, the more data we collect and synthesize and the more actionable insights we generate. We believe these data-driven insights lead to better care delivery as well as improved identification, documentation and management of members' chronic conditions, helping to lower PMPM medical claim expenses.www.sec.gov. Exceptreducing expenditures and preserving or enhancing the quality of care for our Non-Insurance Beneficiaries.Nine months ended September 30, 2023 2023 2022 Total Total (Revenue and claims amounts in thousands, except PBPM amounts) Non-Insurance Beneficiaries at period end 51,528 N/A 166,432 N/A Non-Insurance revenue $ 575,311 $ 1,209 $ 1,757,579 $ 1,148 Non-Insurance net medical claims incurred 573,566 1,206 1,815,771 1,186 99.7 % N/A 103.3 % N/A expressly requiredNon-Insurance net medical claims incurred divided by applicable securities law,Non-Insurance revenues.Company disclaimsfirst of the month, for the full calendar month, regardless of whether eligibility is lost during the course of the month.intentionshared savings or obligationshared loss agreements with providers.updatecapture and analyze data over time to generate actionable insights for returning beneficiaries to improve care and reduce medical expenses.Three Months Ended September 30, 2023 2023 2022 ($) (%) (in thousands) Revenues Premiums earned, net (Net of ceded premiums of $106 and $116 for the three months ended September 30, 2023 and 2022, respectively) $ 301,230 $ 267,892 $ 33,338 12.4 % Non-Insurance revenue 176,038 585,311 (409,273) (69.9) Other income 4,798 3,614 1,184 32.8 Total revenues 482,066 856,817 (374,751) (43.7) Operating expenses Net medical claims incurred 418,959 839,799 (420,840) (50.1) Salaries and benefits 60,567 70,142 (9,575) (13.7) General and administrative expenses 41,747 47,832 (6,085) (12.7) Premium deficiency reserve benefit 392 (27,476) 27,868 (101.4) Depreciation and amortization 557 616 (59) (9.6) Restructuring costs 1,313 — 1,313 * Total operating expenses 523,535 930,913 (407,378) (43.8) Loss from operations (41,469) (74,096) 32,627 (44.0) Interest expense — 404 (404) * Amortization of notes and securities discount — 9 (9) * Loss on investment — 980 (980) * Net loss $ (41,469) $ (75,489) $ 34,020 (45.1) % revise any forward-looking statements whetherprior period amount is zero or the amount for the line item changed from a gain to a loss (or vice versa) and thus yields a result that is not meaningful.new information, future events or otherwise.OverviewWe are a blank check company incorporatedthe 3.0 to 3.5 star rating effective January 1, 2023 and an increase in the Cayman Islands on October 18, 2019 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt.The issuance of additional ordinary shares or preferred shares in a business combination:●may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares;●may subordinate the rights of holders of ordinary shares if preferred shares are issued with rights senior to those afforded our ordinary shares;●could cause a change of control if a substantial number of our ordinary shares is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present directors and officers;●may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us;●may adversely affect prevailing market prices for our units, ordinary shares and/or warrants; and●may not result in adjustment to the exercise price of our warrants.Similarly, if we issue debt or otherwise incur significant indebtedness, it could result in:●default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;●acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;●our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;●our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;●our inability to pay dividends on our ordinary shares;●using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;●limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;●increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and●limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.Results of OperationsWe have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through March 31, 2020 were organizational activities and those necessary to prepare for the Initial Public Offering, described below. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We expect that we will incur increased expensesrisk adjustment revenue driving favorability as a result of beingthe Company focusing on member retention.public company (fordecrease in the number of our aligned Non-Insurance Beneficiaries from 166,432 at September 30, 2022, to 51,528 at September 30, 2023 primarily driven by the strategic reduction in Non-insurance Beneficiaries which occurred during the 2023 performance year.financial reporting,fees incurred.and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.Forduring the three months ended March 31, 2020, we had2022, and for the three months ended September 30, 2022 recorded a loss on investment of $1.0 million, which is attributable to its proportionate share of the loss on equity of that entity during that period. Prior to the first quarter of 2022, this entity was consolidated on Clover's financial statements, and therefore the Company did not recognize a loss or gain on investment. In accordance with ASC 323, for the year ended December 31, 2022, the Company recognized the proportionate share of Character Bioscience's net losses up to the investment carrying amount. At December 31, 2022, the Company discontinued applying the equity method to account for our common stock interest in Character Biosciences as its net losses exceeded the investment carrying amount. The equity method investment in Character Biosciences was reduced to zero and no activityfurther losses were recorded in the statementCompany's interim unaudited condensed consolidated financial statements as Clover did not guarantee obligations of operations.Nine Months Ended
September 30,2023 2022 ($) (%) (in thousands) Revenues Premiums earned, net (Net of ceded premiums of $341 and $354 for the nine months ended September 30, 2023 and 2022, respectively) $ 932,699 $ 814,566 $ 118,133 14.5 % Non-Insurance revenue 575,311 1,757,579 (1,182,268) (67.3) Other income 15,459 5,751 9,708 168.8 Total revenues 1,523,469 2,577,896 (1,054,427) (40.9) Operating expenses Net medical claims incurred 1,328,403 2,560,307 (1,231,904) (48.1) Salaries and benefits 193,211 209,724 (16,513) (7.9) General and administrative expenses 141,588 152,569 (10,981) (7.2) Premium deficiency reserve benefit (6,556) (82,428) 75,872 (92.0) Depreciation and amortization 1,835 2,028 (193) (9.5) Restructuring costs 7,870 — 7,870 * Total operating expenses 1,666,351 2,842,200 (1,175,849) (41.4) Loss from operations (142,882) (264,304) 121,422 (45.9) Interest expense 7 1,197 (1,190) (99.4) Amortization of notes and securities discount — 27 (27) * Gain on investment — (10,187) 10,187 * Net loss $ (142,889) $ (255,341) $ 112,452 (44.0) % AsMarchour overall business strategy. We continually forecast and manage our cash, investments, working capital balances, and capital structure to meet the short-term and long-term obligations of our businesses while seeking to maintain liquidity and financial flexibility.2020,2022, we had cash, cash equivalents, restricted cash, and investments of $63,370. Until$555.3 million. Of this total, $327.6 million was specifically related to available-for-sale and held-to-maturity investment securities. Our cash equivalents and investment securities consist primarily of money market funds, U.S. government debt securities, and corporate debt securities.consummationparent company, Clover Health Investments, Corp., and unregulated subsidiaries were $308.2 million and $331.7 million, respectively. This decrease at the parent company primarily reflects operating expenses. We operate as a holding company in a highly regulated industry. As such, we may receive dividends and administrative expense reimbursements from our subsidiaries, two of which are subject to regulatory restrictions. We continue to maintain significant levels of aggregate excess statutory capital and surplus in our state-regulated insurance subsidiaries. Cash, cash equivalents, and investments at the parent company, Clover Health Investments, Corp., were $166.7 million and $238.0 million at September 30, 2023 and December 31, 2022, respectively. Our unregulated subsidiaries held $141.5 million and $93.7 million of cash, cash equivalents, restricted cash, and investments at September 30, 2023 and December 31, 2022, respectively.Initial Public Offering,maximum amounts calculated under any applicable formula would be permitted. State insurance regulatory authorities that have jurisdiction over the payment of dividends by our onlyregulated insurance subsidiary may in the future adopt statutory provisions more restrictive than those currently in effect.Nine Months Ended September 30, 2023 2022 (in thousands) Cash Flows Data: Net cash provided by (used in) operating activities $ 113,424 $ 5,442 Net cash provided by investing activities 56,351 82,477 Net cash used in financing activities (4,244) (5,018) Increase (decrease) in cash, cash equivalents, and restricted cash $ 165,531 $ 82,901 liquidityoperating cash flows is capitated payments from CMS. Our primary uses of cash from operating activities are payments for medical benefits and payments of operating expenses.an initial purchase$113.4 million, which reflects a Net loss of ordinary shares by the Sponsor and loans from our Sponsor.Subsequent$142.9 million. Non-cash activities included a $107.8 million charge to the endStock-based compensation expense, approximately $6.6 million of amortization of the quarterly2023 Premium deficiency reserve. A prepayment of $103.3 million was received during the period coveredfrom CMS for October 2023. Payments due to CMS related to our Non-Insurance operations increased by this Quarterly Report, on April 24, 2020, we consummated$34.2 million.Initial Public Offeringnine months ended September 30, 2022, Net cash used in operating activities was $5.4 million, which reflects a Net loss of 82,800,000 Units, inclusive$255.3 million. Non-cash activities included a $125.2 million charge to Stock-based compensation expense, $82.4 million amortization of the underwriters’ election to fully exercise their option to purchase an additional 10,800,000 Units, at2022 Premium deficiency reserve, and a price of $10.00 per Unit, generating gross proceeds of $828,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 10,933,333 Private Placement Warrants to the Sponsor at a price of $1.50 per Private Placement Warrant generating gross proceeds of $16,400,000.Following the Initial Public Offering, the exercise of the over-allotment option in full and the sale of the Private Placement Warrants, a total of $828,000,000 was placed in the Trust Account, and we had $1,663,066 of cash held outside of the Trust Account, after payment of costs$10.2 million Gain on investment related to the Initial Public Offering, and available forchange in the equity structure of Clover Therapeutics. Payments due to CMS related to our Non-Insurance operations increased by $109.4 million. Change in our working capital purposes. We incurred $44,156,346included an increase in transaction costs, including $14,400,000Unpaid claims of underwriting fees, $28,980,000$1.0 million.deferred underwriting fees$56.4 million was primarily due to $199.6 million provided from the sale and $776,346maturity of other costs.We intendinvestment securities. This was offset by $142.4 million used to use substantially allpurchase investments.funds heldacquisition of $5.4 million in Treasury stock.Trust Account, including any amounts representing interest earned on the Trust Account, excluding deferred underwriting commissions, to complete our Business Combination. 2022 Form 10-K.may withdraw interestbelieve that funds from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Accountprojected future operating cash flows, cash, cash equivalents, and investments will be used as workingsufficient for future operations and commitments, and for capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.We intend to useother strategic transactions, over at least the funds held outsidenext 12 months.Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locationsrecognition of prospective target businesses or their representatives or owners, review corporate documents and material agreementsa performance guarantee of prospective target businesses, structure, negotiate and complete a Business Combination.In order to fund working capital deficiencies or finance transaction costs$254.4 million in connection with a Business Combination,the Company's participation in the ACO REACH Model and (2) operating lease obligations of $5.0 million. These commitments are associated with contracts that were enforceable and legally binding at September 30, 2023, and that specified all significant terms, including fixed or minimum serves to be used, fixed, minimum, or variable price provisions, and the approximate timing of the actions under the contracts. There were no other material cash requirements from known contractual obligations and commitments at September 30, 2023. For additional information regarding our Sponsor or an affiliateremaining estimated contractual obligations and commitments, see Note 12 (Notes and Securities Payable), Note 15 (Leases), Note 21 (Commitments and Contingencies), and Note 22 (Non-Insurance) to the consolidated financial statements included in the 2022 Form 10-K.our Sponsor or certain of our officersbusiness, we enter into agreements, with various parties (providers, vendors, consultants, etc.), with varying scope and directors may, but are not obligatedterms, pursuant to loan us funds as may be required. If we complete a Business Combination,which we may repay such loaned amounts out ofagree to defend, indemnify, and hold harmless the proceeds of the Trust Account released to us. In the eventother parties from any claim, demand, loss, lawsuit, settlement, judgment, fine, or other liability, and all related expenses that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceedsaccrue therefrom (including reasonable attorneys' fees), arising from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.50 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. sheet financing arrangementsWe have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2020. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.Contractual obligationslong-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliateoff-balance sheet arrangements, as defined by applicable regulations of the SponsorSEC, that are reasonably likely to have a monthly fee of $10,000 for office space, administrative and support services, provided to the Company. We began incurring these fees on April 22, 2020 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company’s liquidation.The underwriters are entitled to a deferred fee of $0.35 per unit,current or $28,980,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.Critical Accounting PoliciesThe preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.Recent accounting pronouncementsManagement does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have afuture material effect on our condensedfinancial condition, results of operations, liquidity, capital expenditures, or capital resources.
ITEMQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKAsQuantitative and Qualitative Disclosures About Market RiskMarch 31, 2020, we were noteconomic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in equity prices, interest rates, foreign currency exchange rates and commodity prices. Our Condensed Consolidated Balance Sheets include assets and liabilities with estimated fair values that are subject to any market orrisk. Our primary market risk has been interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amountsrisk associated with investments in the Trust Account,instruments with fixed maturities. We do not have been invested in certain U.S. government securities with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest ratecommodity risk.
We are also exposed to credit risk on our investment portfolio. We manage the exposure to credit risk in our portfolio by investing in high quality securities and diversifying our holdings.
Controls and Procedures all potential future conditions.ITEMCONTROLS AND PROCEDURESand procedures are controls and other procedures that are designed to ensurewith the objective of ensuring that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periodsperiod specified in the SEC’sSEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and proceduresare also designed to ensurewith the objective of ensuring that such information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officerthe chief executive officer and Chief Financial Officer,chief financial officer, as appropriate to allow timely decisions regarding required disclosure.Evaluation Our management evaluated, with the participation of Disclosure Controlsour current chief executive officer and ProceduresAs required by Rules 13a-15 and 15d-15 underchief financial officer (our "Certifying Officers"), the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures at September 30, 2023, pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as of March 31, 2020.amended (the "Exchange Act"). Based upon theirthat evaluation, our Chief Executive OfficerCertifying Officers concluded that, at September 30, 2023, our disclosure controls and Chief Financial Officer concludedprocedures were effective.(as definedwill prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in Rules 13a-15 (e)all disclosure controls and 15d-15 (e)procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under the Exchange Act) were effective.Overover Financial ReportingDuring the most recently completed fiscal quarter, there has beenchangechanges in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting. - OTHER INFORMATION
ITEMLEGAL PROCEEDINGS.None.
Risk FactorsITEMRISK FACTORS. that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus for our Initial Public Offering filed with the SEC on April 23, 2020. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report,final prospectusClass A common stock price does not satisfyThe NASDAQ Stock Market LLC (“NASDAQ”) minimum price requirement, our Class A common stock may be subject to delisting from NASDAQ.Initial Public Offering filed withClass A common stock of at least $1.00 per share for a minimum of 10 consecutive business days (subject to Nasdaq’s staff discretion in certain instances). We cannot guarantee that our stock price will satisfy the SEC$1.00 per share requirement or otherwise meet Nasdaq’s continued listing requirements. Therefore, our Class A common stock may in the future be subject to delisting. If our Class A common stock is delisted, this would, among other things, substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for us and would have an adverse impact on April 23, 2020. We may disclose changes to such factors or disclose additional factors from time to time inthe trading, liquidity, and market price of our future filings with the SEC.Class A common stock.
ITEMUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.On April 24, 2020, we consummated our Initial Public OfferingUnregistered Sales of 82,800,000 Units, inclusiveEquity Securities and Use of 10,800,000 Units sold to the underwriters upon the election to fully exercise their over-allotment option, at a price of $10.00 per Unit, generating total gross proceeds of $828,000,000. Each Unit consists of one Class A ordinary share of the Company, par value $0.0001 per share, and one-third of one redeemable warrant of the Company. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share Ordinary Share for $11.50 per share, subject to adjustment. Credit Suisse acted as the sole book-running manager. The securities sold in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-236776 and 333-237777). The registration statements became effective on April 21, 2020.Simultaneously with the consummation of the Initial Public Offering, and the exercise of the over-allotment option in full and the sale of the Private Placement Warrants, we consummated a private placement of 10,933,333 Private Placement Warrants to our Sponsor at a price of $1.50 per Private Placement Warrant, generating total proceeds of $16,400,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.The Private Placement Warrants are identical to the warrants sold as part of the Units in the Initial Public Offering except that, so long as they are held by the Sponsor or its permitted transferees: (1) they will not be redeemable by us (except in certain redemption scenarios when the price per Class A ordinary share equals or exceeds $10.00 (as adjusted)); (2) they (including the Class A ordinary shares issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after the completion of our Business Combination; (3) they may be exercised by the holders on a cashless basis; and (4) they (including the Class A ordinary Shares issuable upon exercise of these warrants) are entitled to registration rights.Of the gross proceeds received from the Initial Public Offering and the full exercise of the option to purchase additional Units, $828,000,000 was placed in the Trust Account.We paid a total of $14,400,000 in underwriting discounts and commissions and $776,346 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $28,980,000 in underwriting discounts and commissions.For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Defaults Upon Senior SecuritiesITEMDEFAULTS UPON SENIOR SECURITIES.
Mine Safety DisclosuresITEMMINE SAFETY DISCLOSURES.
ITEMOTHER INFORMATION.None.18ITEMEXHIBITS.The followingExhibits and Financial Statement Schedulesare filed as part of, or incorporated by reference into,to this Quarterly Report on Form 10-Q.10-Q is set forth below:No.Description of Exhibit3.1Amended and Restated Memorandum and Articles of Association of the Company.(1)Description31.1* 31.2* 32.1**32.1†32.2**32.2†101.INS*101.INSInline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.CAL*101.SCHInline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.SCH*101.DEFXBRL Taxonomy Extension Schema Document101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB*101.LABInline XBRL Taxonomy Extension LabelsLabel Linkbase Document101.PRE*101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document *Filed herewith.**104Furnished.(1)Previously filed as an exhibit to our Current Report on Form 8-K filed on April 24, 2020 and incorporated by reference herein.Cover Page Interactive Data File (embedded within the Inline XBRL document)
_____________SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP. IIICLOVER HEALTH INVESTMENTS, CORP. Date: June 4, 2020/s/ Chamath PalihapitiyaDate: November 6, 2023 Name:By:Chamath Palihapitiya/s/ Andrew ToyTitle:Andrew Toy Chief Executive Officer (Principal Executive Officer) Date: November 6, 2023 By: (Principal Executive Officer)/s/ Scott J. LefflerScott J. Leffler Date: June 4, 2020/s/ Steven TrieuName:Steven TrieuTitle:Chief Financial Officer (Principal (Principal Financial Officer and Principal Accounting Officer)