CANO HEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Dental Excellence and Onsite Dental Relationships
On April 14, 2022, CD Support, LLC (Onsite Dental) acquired Dental Excellence Partners, LLC (DEP), a company
formerly owned by the spouse of the Chief Executive Officer (CEO), and entered into a dental services agreement with the Company. The spouse of the CEO became a minority shareholder of Onsite Dental upon closing of the acquisition.
The Company has various sublease agreements with Onsite Dental. The Company recognized sublease income of approximately $0.3 million and
$0.2 million, during the six months ended June 30, 2022 and 2021, respectively, and $0.2 million and $0.1 million during the three months ended June 30, 2022 and 2021, respectively, which was recorded within the caption
Other Income (Expense) in the accompanying unaudited condensed consolidated statements of operations. As of June 30, 2022, an immaterial amount was due to the Company in relation to these agreements and recorded in the caption
accounts receivable.
On October 9, 2020, the Company entered into a dental services agreement with DEP pursuant to which DEP agreed
to provide dental services for managed care members of the Company. The Company recognized approximately $1.5 million and $1.9 million during the six months ended June 30, 2022 and 2021, respectively, and an immaterial amount and
$1.2 million during the three months Ended June 30, 2022 and 2021. As of June 30, 2022, no balance was due to DEP. Subsequent to Onsite Dental acquiring DEP, the Company entered into a new dental services administration agreement with
Onsite Dental to provide dental services for managed care members of the Company. The Company recognized expenses in the amount of approximately $3.1 million for the three and six months ended June 30, 2022. As of June 30, 2022,
$0.7 million was due to Onsite.
Humana Relationship
In 2020, the Company entered into multi-year agreements with Humana, a managed care organization, agreeing that Humana will be the exclusive
health plan for Medicare Advantage products in certain centers in San Antonio and Las Vegas but allowing services to non-Humana members covered by original Medicare, Medicaid, and commercial health plans in
those centers. Pursuant to the agreements, Humana is obligated to pay the Company an administrative payment in exchange for the Company providing certain care coordination services. The care coordination payments are refundable to Humana on a pro-rata basis if the Company ceases to provide services at the centers within the specified contract term. The Company identified one performance obligation per center to stand-ready to provide care coordination
services to patients and recognizes revenue ratably over the contract term. Care coordination revenue is included in other revenue along with other ancillary healthcare revenues.
In addition, in 2020, the Company and Primary Care (ITC), LLC entered into multi-year agreements with Humana and its affiliates whereby
Primary Care (ITC) Holdings, LLC entered into a note purchase agreement with Humana for a convertible note due October 2022 with an aggregate principal amount of $60.0 million. The note accrued interest at a rate of 8.0% per annum through March
2020 and 10.0% per annum thereafter, payable in kind. The note was convertible to Class A-4 units of Primary Care (ITC) Holdings, LLC at the option of Humana in the event Primary Care (ITC) Holdings, LLC
and affiliates seek to consummate a sale transaction and could be settled in cash at the option of Humana. While the multi-year agreement still exists between the Company and Humana, the note was converted and settled in cash upon the consummation
of the Business Combination on June 3, 2021. As such, as of December 31, 2021 and for the six months ended June 30, 2022, Humana was not a related party due to the repayment of the note.
The multi-year agreements also contain an arrangement for a license fee that is payable by the Company to Humana for the Companys use of
certain Humana owned or leased medical centers to provide health care services. The license fee is a reimbursement to Humana for its costs of owning or leasing and maintaining the clinics, including rental payments, maintenance or repair expenses,
equipment expenses, special assessments, cost of upgrades, taxes, leasehold improvements, and other expenses identified by Humana. The Company recorded $0.5 million and $0.3 million in operating lease expense related to its use of Humana
clinics during the three and six months ended June 30, 2021, respectively..
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