Business Combinations

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

During the year ended December 31, 2022, the Company closed on five business combinations and one asset acquisition. There were no business combinations or asset acquisitions during the three months ended March 31, 2023.

Practice Acquisitions

For the acquisition of various clinical practices, the Company applied the acquisition method of accounting, where the total purchase price was allocated, or preliminarily allocated, to the tangible and intangible assets acquired and liabilities assumed, based on their fair values as of the acquisition dates.

Perkins Practice Acquisition

On April 30, 2022 ("Perkins Acquisition Date"), the Company acquired certain non-clinical assets of California Oncology of the Central Valley Medical Group, Inc., (the “Perkins Practice”) from Christopher Perkins, M.D. (“Dr. Perkins”). Further, TOI CA acquired certain clinical assets of the Perkins Practice from Dr. Perkins. In conjunction with the acquisition, the Company also entered into a Professional Service Agreement with Oncology Associates of Fresno Medical Group, Inc. Intangible assets of $70 were recognized pursuant to the acquisition in the form of trade names of $2,480 and clinical contracts of $70, with weighted average amortization periods of 10 years and 5 years, respectively. The Company transferred cash consideration of $8,920 and contingent consideration of $2,000 to Dr. Perkins for the purchase. The contingent cash consideration is to be paid in two equal installments on the first and second anniversary of the transaction closing date (April 29, 2023 and 2024, respectively), pending Dr. Perkins' continued employment at that time. The contingent consideration is accounted for as post-combination compensation expense to Dr. Perkins.

The Perkins Practice Acquisition was determined to constitute a business combination in accordance with ASC 805.

Parikh Practice Acquisition

On July 22, 2022 ("Parikh Acquisition Date"), the Company acquired certain non-clinical assets of Nutan K. Parikh, M.D., LTD., (the “Parikh Practice”) from Nutan K. Parikh, M.D. (“Dr. Parikh”). Further, TOI CA acquired certain clinical assets of the Parikh Practice from Dr. Parikh. Intangible assets of $20 were recognized pursuant to the acquisition in the form of clinical contracts with a weighted average amortization period of 3 years. The Company transferred cash consideration of $1,908 and contingent consideration of $400 to Dr. Parikh for the purchase. The contingent cash consideration is to be paid in two equal installments on the first and second anniversary of the transaction closing date (July 22, 2023 and 2024, respectively), pending Dr. Parikh's continued employment at that time. The contingent consideration is accounted for as post-combination compensation expense to Dr. Parikh.

The Parikh Practice Acquisition was determined to constitute a business combination in accordance with ASC 805.

Barreras Practice Acquisition

On August 30, 2022 ("Barreras Acquisition Date"), the Company acquired certain non-clinical assets of Broward Oncology Associates, P.A., (the “Barreras Practice”) from Luis Barreras, M.D. (“Dr. Barreras”). Further, TOI FL acquired certain clinical assets of the Barreras Practice from Dr. Barreras. Intangible assets of $3 were recognized pursuant to the acquisition in the form of clinical contracts with a weighted average amortization period of 5 years. The Company transferred cash consideration of $929 and contingent consideration of $250 to Dr. Barreras for the purchase. The contingent cash consideration is to be paid in two equal installments on the first and second anniversary of the transaction closing date (August 30, 2023 and 2024, respectively), pending Dr. Barreras's continued employment at that time. The contingent consideration is accounted for as post-combination compensation expense to Dr. Barreras.

The Barreras Practice Acquisition was determined to constitute a business combination in accordance with ASC 805.

De La Rosa Costa Practice Acquisition

On October 7, 2022 ("De La Rosa Costa Acquisition Date"), the Company acquired certain non-clinical assets of Pedro De La Rosa Costa, M.D. PA, (the “De La Rosa Costa Practice”) from Pedro U De La Rosa Costa, M.D. (“Dr. De La Rosa Costa”). Further, TOI FL acquired certain clinical assets of the De La Rosa Costa Practice from Dr. De La Rosa Costa. The Company transferred cash consideration of $25 to Dr. De La Rosa Costa for the purchase.

The De La Rosa Costa Practice Acquisition was determined to constitute a business combination in accordance with ASC 805.

Hashimi Practice Acquisition

On November 21, 2022 ("Hashimi Acquisition Date"), the Company acquired certain non-clinical assets of Intercommunity Oncology of Chino Hills, A.P.C., Inc., (the “Hashimi Practice”) from Labib Hashimi, M.D. (“Dr. Hashimi”). Further, TOI CA acquired certain clinical assets of the Hashimi Practice from Dr. Hashimi. Intangible assets of $24 were recognized pursuant to the acquisition in the form of clinical contracts with a weighted average amortization period of 5 years. The Company transferred cash consideration of $445 and contingent consideration of $150 to Dr. Hashimi for the purchase. The contingent cash consideration is to be paid in three equal installments on the first, second, and third anniversary of the transaction closing date (November 21, 2023, 2024, and 2025, respectively), pending Dr. Hashimi's continued employment at that time. The contingent consideration is accounted for as post-combination compensation expense to Dr. Hashimi.

The Hashimi Practice Acquisition was determined to constitute a business combination in accordance with ASC 805.

Summary of Consideration Transferred

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Such assets include synergies we expect to achieve, such as the use of our existing infrastructure to support the added membership, and future economic benefits arising from the assembled workforce. The purchase consideration for the acquisitions has been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired including a residual amount of tax deductible goodwill as noted in the provisional fair value table below.

Acquisition costs amounted to $0 and $76 for the three months ended March 31, 2023 and 2022 respectively, and were recorded as “General and administrative expenses” in the accompanying Condensed Consolidated Statements of Operations.

The following table summarizes the provisional fair values assigned to identifiable assets acquired and liabilities assumed.


	Acquisition
(in thousands)	Perkins		Parikh		Barreras		De La Rosa Costa		Hashimi		Total
Consideration:
Cash	$	8,920	$	1,908	$	929	$	25	$	445	$	12,227
Deferred	—		—		—		—		—		—
Fair value of total consideration transferred	$	8,920	$	1,908	$	929	$	25	$	445	$	12,227

Estimated fair value of identifiable assets acquired and liabilities assumed:
Cash	$	—	$	—	$	—	$	—	$	—	$	—
Accounts receivable	—		—		—		—		—		—
Inventory	408		307		279		—		95		1,089

Property and equipment, net	123		15		23		—		5		166
Operating right of use assets	447		1,118		83		6		88		1,742
Clinical contracts and noncompetes	70		20		3		—		24		117
Trade names	2,480		—		—		—		—		2,480
Goodwill	5,851		1,566		624		25		321		8,387
Total assets acquired	9,379		3,026		1,012		31		533		13,981
Accounts payable	—		—		—		—		—		—
Current portion of operating lease liabilities	135		169		60		6		26		396
Accrued liabilities	12		—		—		—		—		12
Current portion of long term debt	—		—		—		—		—		—
Operating lease liabilities	312		949		23		—		62		1,346
Total liabilities assumed	459		1,118		83		6		88		1,754
Net assets acquired	$	8,920	$	1,908	$	929	$	25	$	445	$	12,227

The establishment of the allocation to goodwill requires the extensive use of accounting estimates and management judgement. The fair values assigned to the assets acquired are based on estimates and assumptions from data that is readily available.

Summary of Unaudited Supplemental Pro Forma Information

The Company recognized $6,373 cumulative revenue and $258 cumulative net loss in its Condensed Consolidated Statement of Operations for the three months ended March 31, 2023 related to clinical practices acquired in prior years.

Sapra Asset Acquisition

On July 1, 2022 ("Sapra Acquisition Date"), the Company acquired certain clinical assets of Ranjan K. Sapra, M.D. (the “Sapra Practice”) from Ranjan K. Sapra, M.D. (“Dr. Sapra”). The Company transferred cash consideration of $1 to Dr. Sapra for the purchase, which was assigned to property and equipment.