Business Combinations and Goodwill

12 Months Ended

Dec. 31, 2020

Alpha Care Medical Group, Inc.

On May 31, 2019, APC and APC-LSMA completed their acquisition of 100% of the capital stock of Alpha Care from Dr. Kevin Tyson for an aggregate purchase price of approximately $45.1 million in cash, subject to post-closing adjustments. As

part of the transaction the Company deposited $2.0 million into an escrow account for potential post-closing adjustments. As of December 31, 2020, no post-closing adjustment is expected to be paid to Dr. Tyson and the full amount of the escrow account is expected to be returned to the Company. As such, the escrow amount is presented within Other receivables in the accompanying consolidated balance sheet.

The following table summarizes the fair values of the assets acquired and liabilities assumed, as of the acquisition date (in thousands):


	Balance Sheet
Assets acquired
Cash and cash equivalents	$	3,569
Accounts receivable, net	10,336
Other current assets	4,675
Network relationship intangible assets	22,636
Goodwill	28,585
Accounts payable	(2,795)
Deferred tax liabilities	(6,334)
Medical liabilities	(15,616)
Net assets acquired	$	45,056

Cash paid	$	45,056

Accountable Health Care, IPA

On August 30, 2019, APC and APC-LSMA, acquired the remaining outstanding shares of capital stock they did not already own (comprising 75%) in Accountable Health Care in exchange for $7.3 million in cash. In addition to the payment of $7.3 million APC assumed all assets and liabilities of Accountable Health Care, including loans payable to NMM and APC of $15.4 million, which has been eliminated upon consolidation. Including the 25% investment valued at $2.4 million already owned by APC the total purchase price was $25.1 million.

The following table summarizes the fair values of the assets acquired and liabilities assumed, as of the

acquisition date (in thousands):


	Balance Sheet
Assets acquired
Cash and cash equivalents	$	582
Accounts receivable, net	5,150
Other current assets	198
Network relationship intangible assets	11,411
Goodwill	23,566
Accounts payable	(3,759)
Medical liabilities	(12,154)
Subordinated loan	(15,327)
Net assets acquired	$	9,667

Less: equity investment contributed	2,417
Cash paid	$	7,250

AMG, a Professional Medical Corporation

The Company also completed one additional acquisition (AMG) on September 10, 2019 for total consideration of $1.6 million, of which $0.4 million was in the form of APC common stock. The business combination did not meet the quantitative thresholds to require separate disclosures based on the Company's consolidated net assets, investments and net income.

Pro Forma Financial Information for All 2019 Acquisitions

The following unaudited pro forma supplemental information is based on estimates and assumptions that ApolloMed believes are reasonable. However, this information is not necessarily indicative of the Company's consolidated results of income in future periods or the results that actually would have been realized if ApolloMed and the acquired businesses had been combined companies during the periods presented. These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2018. This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of ApolloMed and its 2019 acquisitions as if each acquisition had occurred on January 1, 2018 (in thousands except per share data):


	Year Ended December 31, 2019 (unaudited)		Year Ended December 31, 2018 (unaudited)

Revenue	$	658,011	$	726,075
Net income	10,867		58,879
Net income attributable to Apollo Medical Holdings, Inc.	7,310		9,447
EPS - basic	$	0.21	$	0.29
EPS - diluted	$	0.20	$	0.25

The acquisitions were accounted for under the acquisition method of accounting. The fair value of the consideration for the acquired companies were allocated to acquired tangible and intangible assets and liabilities based upon their fair values. The excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired were recorded as goodwill. The determination of the fair value of assets and liabilities acquired requires the Company to make estimates and use valuation techniques when market value is not readily available. The results of operations of the companies acquired have been included in the Company's financial statements from the respective dates of acquisition. Transaction costs associated with business acquisitions were expensed as incurred.

At the time of acquisition, the Company estimates the amount of the identifiable intangible assets based on a valuation and the facts and circumstances available at the time. The Company determines the final value of the identifiable intangible assets as soon as information is available, but not more than 12 months from the date of acquisition.

Goodwill is not deductible for tax purposes.

The following is a summary of goodwill activity for the years ended December 31, 2020 and 2019 (in thousands):


	Amount

Balance at January 1, 2019	$	185,806
Acquisitions	52,699
Balance at December 31, 2019	238,505
Adjustments	548
Balance at December 31, 2020	$	239,053