Variable Interest Entities (VIEs)

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

16.

Variable Interest Entities (VIEs)

A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE.

The Company follows guidance on the consolidation of VIEs that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE. The process for identifying the primary beneficiary of a VIE requires consideration of the factors that indicate a party has the power to direct the activities that most significantly impact the entity’s economic performance, including powers granted to the equity holders, membership in the entity’s governing board and a company’s economic interest in the entity. The Company analyzes its investments and classifies them as either:



a VIE that must be consolidated because the Company is the primary beneficiary or the legal entity is not a VIE and the Company holds the majority voting interest with no significant participative rights available to the other partners; or



a VIE that does not require consolidation and is treated as an equity method investment because the Company is not the primary beneficiary or the legal entity is not a VIE and the Company does not hold the majority voting interest.

As part of the above analysis, if it is determined that the Company has the power to direct the activities that most significantly impact the entity’s economic performance, the Company considers whether or not it has the obligation to absorb losses or rights to receive benefits of the VIE that could potentially be significant to the VIE.

The Company’s VIEs include APC and other immaterial entities.

Assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the VIE.

The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary.

The following table includes assets that can only be used to settle the liabilities of APC and the creditors of APC have no recourse to the Company. These assets and liabilities, with the exception of the investment in a privately held entity that does not report net asset value per share and amounts due to affiliate, which are eliminated upon consolidation with the NMM, are included in the accompanying consolidated balance sheets.

	September 30, 2018		December 31, 2017

Assets

Current assets
Cash and cash equivalents	$	55,971,643	$	54,686,370
Restricted cash – short-term		4,218,176		18,005,661
Fiduciary cash		3,434,409		2,017,437
Investment in marketable securities		1,066,103		1,057,090
Receivables, net		59,994,370		15,183,483
Prepaid expenses and other current assets		1,796,643		1,821,328

Total current assets		126,481,344		92,771,369

Noncurrent assets
Land, property and equipment, net		9,761,142		10,167,689
Intangible assets, net		61,695,254		70,841,907
Goodwill		60,012,316		60,012,316
Loans receivable – related parties		7,500,000		5,000,000
Loan receivable		-		5,000,000
Investment in a privately held entity that does not report net asset value per share		4,725,000		4,320,000
Investments in other entities – equity method		24,122,895		21,903,524
Investment in joint venture – equity method		8,336,920		-
Restricted cash – long-term		745,412		745,235
Other assets		969,487		1,371,664

Total noncurrent assets		177,868,426		179,362,335

Total assets	$	304,349,770	$	272,133,704

Current liabilities
Accounts payable and accrued expenses	$	4,315,861	$	3,625,610
Incentives payable		5,000,000		21,500,000
Fiduciary accounts payable		3,434,409		2,017,437
Medical liabilities		20,711,286		25,186,240
Income taxes payable		1,277,817		1,463,540
Amount due to affiliate		14,650,703		24,889,717
Bank loan		159,906		510,391
Capital lease obligations		100,982		98,738

Total current liabilities		49,650,964		79,291,673

Noncurrent liabilities
Deferred tax liability		29,833,368		20,970,766
Liability for unissued equity shares		1,185,025		1,185,025
Capital lease obligations, net of current portion		542,982		619,001

Total noncurrent liabilities		31,561,375		22,774,792

Total liabilities	$	81,212,339	$	102,066,465

The assets of the Company’s other consolidated VIEs were not considered significant.

As of September 30, 2018 and December 31, 2017, approximately $4,200,000 and $18,000,000, respectively, of restricted cash is related to an amount that, as a result of the Merger between ApolloMed and NMM (see Note 3), was held for distribution to former NMM shareholders.