Mergers and Acquisitions (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Business Acquisitions, by Acquisition

Total estimated purchase consideration consisted of the following:

Equity consideration (1)	$	61,092,050
Estimated fair value of ApolloMed preferred stock held by NMM (2)		19,118,000
Estimated fair value of NMM’s noncontrolling interest in APAACO (3)		5,129,000
Estimated fair value of the outstanding ApolloMed stock options (4)		187,333
Total estimated purchase consideration	$	85,526,383

(1)

Equity consideration

Immediately following the Effective Time, pre-Merger ApolloMed stockholders continued to hold an aggregate of 6,109,205 shares of ApolloMed common stock.

(2)

Estimated fair value of ApolloMed’s preferred shares held by NMM

NMM currently owns all the shares of ApolloMed Series A preferred stock and Series B preferred stock, which was acquired prior to the Merger. As part of the Merger, the ApolloMed Series A preferred stock and Series B preferred stock is remeasured at fair value and included as part of the consideration transferred to ApolloMed. The fair value of the Series A preferred stock and Series B preferred stock is reflective of the liquidation preferences, claims of priority and conversion option values thereof. In aggregate, the Series A preferred stock and Series B preferred stock were valued to be $19,118,000. The valuation methodology was based on an Option Pricing Method ("OPM") which utilized the observable publicly traded common stock price in valuing the Series A preferred stock and the Series B preferred stock within the context of the capital structure of the Company. OPM assumptions included an expected term of 2 years, volatility rate of 37.9%, and a risk-free rate of 1.8%. The fair value of the liquidation preference for the Series A preferred stock and the Series B preferred stock was determined to be $12,745,000 and the fair value of the conversion option was determined to be $6,373,000 or an aggregate total fair value of $19,118,000.

(3)

Estimated fair value of NMM’s 50% share of APA ACO Inc.

Prior to the Merger, APAACO was owned 50% by ApolloMed and 50% NMM. NMM’s noncontrolling interest in APAACO has been remeasured at fair value as of the closing date and is added to the consideration transferred to ApolloMed as a result of NMM relinquishing its equity investment in APAACO in order to obtain control of ApolloMed. The fair value of NMM’s noncontrolling interest in APAACO has been estimated to be $5,129,000 using the discounted cash flow method and NMM recorded a gain on investment for the same amount to reflect the fair value of this investment prior the Merger.

(4)

Estimated fair value of the ApolloMed outstanding stock options

The estimated fair value of the outstanding ApolloMed stock options is included in consideration transferred in accordance with ASC 805. The outstanding ApolloMed stock options are expected to vest in conjunction with the Merger due to a pre-existing change-of-control provision associated with the awards. There is no future service requirement.

Business Combonation, Equity consideration

Number of shares of the combined company that would be owned by pre-Merger ApolloMed stockholders ⁽¹⁾		6,109,205
Multiplied by the price per share of ApolloMed’s common stock ⁽²⁾	$	10.00
Equity consideration	$	61,092,050

(1)

Represents the number of shares of the combined company that pre-Merger ApolloMed stockholders would own at closing of the Merger.

(2)

Represents the closing price of ApolloMed’s common stock on December 8, 2017.

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of ApolloMed, the accounting acquiree, are recorded at the Merger date fair values and added to those of NMM, the accounting acquirer. The following table sets forth the preliminary allocation of the purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed of ApolloMed and MMG (see “MMG Transaction” below), with the excess recorded as goodwill:

Assets acquired
Cash and cash equivalents	$	36,367,555
Accounts receivable, net		7,261,588
Other receivables		3,211,028
Prepaid expenses		249,193
Property, plant and equipment, net		1,114,332
Restricted cash		745,220
Fair value of intangible assets acquired		14,984,000
Deferred tax assets		1,387,961
Other assets		217,241
Total assets acquired	$	65,538,118
Liabilities assumed
Accounts payable and accrued liabilities	$	8,632,893
Medical liabilities		39,353,540
Line of credit		25,000
Convertible note payable, net		5,376,215
Convertible note payable - related party		9,921,938
Noncontrolling interest		3,142,000
Total liabilities assumed and noncontrolling interest	$	66,451,586
Net liabilities assumed	$	(913,468)
Goodwill	$	86,439,851

Business Acquisition, Pro Forma Information

The pro forma combined historical results, as if ApolloMed had been acquired as of January 1, 2016 and 2017, are estimated as follows (unaudited):

	Year Ended December 31, 2017		Year Ended December 31, 2016
Net revenues	$	478,873,780	$	358,180,435
Net income attributable to Apollo Medical Holdings, Inc.	$	9,982,706	$	1,072,357
Weighted average common shares outstanding:
Basic		25,525,786		24,673,081
Earnings per share:
basic	$	0.39	$	0.04
Weighted average common shares outstanding:
diluted		28,661,735		27,970,431
Earnings per share:
diluted	$	0.35	$	0.04

APCN-ACO Inc [Member]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The final allocation of the total purchase price to the net assets acquired is summarized as follows:

Investments in other entities – cost method	$	25,000
Identifiable intangible asset - member relationships		1,738,000
Goodwill		1,679,849

Total assets acquired		3,442,849

Deferred tax liability		(367,849)

Total liabilities assumed		(367,849)

Net assets acquired	$	3,075,000

AP-ACO [Member]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The final allocation of the total purchase price to the net assets acquired is summarized as follows:

Identifiable intangible asset - member relationships	$	1,497,000
Goodwill		1,192,968

Total assets acquired		2,689,968

Deferred tax liability		(609,968)

Total liabilities assumed		(609,968)

Net assets acquired	$	2,080,000