Form: 8-K

Current report filing

May 6, 2020

Documents

Exhibit 99.1

 

APOLLO MEDICAL HOLDINGS, INC.

 

SUMMARY OF UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

 

 

Overview

 

The following unaudited pro forma consolidated financial information is presented to give effect to the sale (the “Sale”), on April 30, 2020, by Universal Care Acquisition Partners, LLC, a Delaware limited liability company (“UCAP”) to Bright Health Company of California, Inc., a California corporation (“Bright”), of all of UCAP’s shares of capital stock in Universal Care, Inc., a California corporation doing business as Brand New Day ("Universal"). The transaction was previously described in the Current Report on Form 8-K filed on January 7, 2020, by Apollo Medical Holdings, Inc., a Delaware corporation (the “Company”), with the U.S. Securities and Exchange Commission (the “SEC”). For a discussion of the consideration paid to UCAP in connection with the Sale, please refer to the Current Report on Form 8-K to which this Exhibit 99.1 is attached.

 

UCAP has a 48.9% ownership interest in Universal (the “Percentage Interest”). UCAP is a wholly-owned subsidiary of Allied Physicians of California, a Professional Medical Corporation dba Allied Pacific of California IPA (“APC”), and both are consolidated variable interest entities of the Company. As set forth in the Company’s definitive proxy statement filed with the SEC on July 31, 2019 (the “Proxy Statement”), the Percentage Interest is an “Excluded Asset” that remains solely for the benefit of APC and its shareholders. As such, any proceeds or gain on the sale of APC’s indirect ownership interest in Universal will have no impact on the Series A Dividend payable by APC to AP-AMH Medical Corporation as described in the Proxy Statement and consequently the sale will not affect net income attributable to the Company.

 

Basis of preparation

 

The following unaudited pro forma consolidated financial information was based on and derived from the Company’s historical consolidated financial statements, adjusted for those amounts which were determined to be directly attributable to the Sale that are factually supportable in accordance with U.S. generally accepted accounting principles, which are subject to change and interpretation. Actual adjustments may also differ materially from the information presented. In addition, the unaudited pro forma consolidated financial information is based upon available information and assumptions that management considers to be reasonable, and such assumptions have been made solely for purposes of developing such unaudited pro forma consolidated financial information for illustrative purposes in compliance with the disclosure requirements of the SEC. The unaudited pro forma consolidated financial information is not necessarily indicative of what the financial position or income statement results would have actually been had the Sale occurred on the date indicated. In addition, this unaudited pro forma consolidated financial information should not be considered to be indicative of the Company’s future consolidated financial performance and income statement results.

 

The unaudited pro forma consolidated financial information should be read in conjunction with (i) the accompanying notes to the unaudited pro forma consolidated financial information; and (ii) the Company’s historical consolidated financial statements and accompanying notes in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC on March 16, 2020.

 

The following unaudited pro forma consolidated financial information is being presented to give effect to the Sale by reflecting the Company’s results as if the Sale had occurred on January 1, 2019 and does not assume any interest income on cash proceeds:

 

 

 

APOLLO MEDICAL HOLDINGS, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2019

 

 

          Pro Forma          
    As Reported (A)     Adjustment       Pro Forma  
Assets                          
                           
Current assets                          
Cash and cash equivalents   $ 103,189,328     $ 69,242,988   (B)   $ 172,432,316  
Restricted cash     75,000       —         75,000  
Investment in marketable securities     116,538,673       —         116,538,673  
Receivables, net     11,003,563       —         11,003,563  
Receivables, net – related parties     48,136,313       —         48,136,313  
Other receivables     16,885,448       21,515,994   (B)     38,401,442  
Prepaid expenses and other current assets     10,315,093       —         10,315,093  
Loans receivable     6,425,000       —         6,425,000  
Loans receivable - related parties     16,500,000       (16,500,000 ) (C)     —  
                           
Total current assets     329,068,418       74,258,982         403,327,400  
                           
Noncurrent assets                          
Land, property and equipment, net     12,129,901       —         12,129,901  
Intangible assets, net     103,011,849       —         103,011,849  
Goodwill     238,505,204       —         238,505,204  
Loans receivable – related parties     —       —         —  
Investments in other entities – equity method     28,427,455       (1,438,199 ) (D)     26,989,256  
Investments in privately held entities     896,000       33,251,997   (B)     34,147,997  
Restricted cash     746,104       —         746,104  
Operating lease right-of-use assets     14,247,727       —         14,247,727  
Other assets     1,680,689       —         1,680,689  
                           
Total noncurrent assets     399,644,929       31,813,798         431,458,727  
                           
Total assets   $ 728,713,347     $ 106,072,780       $ 834,786,127  

 

 

 

 

APOLLO MEDICAL HOLDINGS, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2019

             

 

          Pro Forma          
    As Reported (A)     Adjustment       Pro Forma  
Liabilities, Mezzanine Equity and Shareholders’ Equity                          
                           
Current liabilities                          
Accounts payable and accrued expenses   $ 27,279,579     $ —       $ 27,279,579  
Fiduciary accounts payable     2,027,081       —         2,027,081  
Medical liabilities     58,724,682       —         58,724,682  
Income taxes payable     4,528,867       22,275,284   (F)     26,804,151  
Bank loan     —       —         —  
Dividend payable     271,279       —         271,279  
Finance lease liabilities     101,741       —         101,741  
Operating lease liabilities     2,990,686       —         2,990,686  
Current portion of long term debt     9,500,000       —         9,500,000  
                           
Total current liabilities     105,423,915       22,275,284         127,699,199  
                           
Noncurrent liabilities                          
Lines of credit - related party     —       —         —  
Deferred tax liability     18,269,448       —         18,269,448  
Liability for unissued equity shares     —       —         —  
Finance lease liabilities, net of current portion     415,519       —         415,519  
Operating lease liabilities, net of current portion     11,372,597       —         11,372,597  
Long-term debt, net of current portion and deferred financing costs     232,172,134       —         232,172,134  
                           
Total noncurrent liabilities     262,229,698       —         262,229,698  
                           
Total liabilities     367,653,613       22,275,284         389,928,897  
                           
Mezzanine equity                          
Noncontrolling interest in Allied Physicians of California, a Professional Medical Corporation ("APC")     168,724,586       83,797,496         252,522,082  
                           
Shareholders’ equity                          
Series A Preferred stock, par value $0.001; 5,000,000 shares authorized (inclusive of Series B Preferred stock); 1,111,111 issued and zero outstanding     —       —         —  

 

 

 

APOLLO MEDICAL HOLDINGS, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2019

 

          Pro Forma          
    As Reported (A)     Adjustment       Pro Forma  
Series B Preferred stock, par value $0.001; 5,000,000 shares authorized (inclusive of Series A Preferred stock); 555,555 issued and zero outstanding     —       —         —  
Common stock, par value $0.001; 100,000,000 shares authorized, 35,908,057 and 34,578,040 shares outstanding, excluding 17,458,810 and 1,850,603 Treasury shares, at December 31, 2019 and 2018, respectively     35,908       —         35,908  
Additional paid-in capital     159,608,293       —         159,608,293  
Retained earnings     31,904,748       —         31,904,748  
      191,548,949       —         191,548,949  
                           
Noncontrolling interest     786,199       —         786,199  
                           
Total shareholders’ equity     192,335,148       —         192,335,148  
                           
Total liabilities, mezzanine equity and shareholders’ equity   $ 728,713,347     $ 106,072,780       $ 834,786,127  

 

 

 

 

APOLLO MEDICAL HOLDINGS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2019

                       

 

          Pro Forma          
    As Reported (A)     Adjustment       Pro Forma  
Revenue                          
Capitation, net   $ 454,168,024     $ —       $ 454,168,024  
Risk pool settlements and incentives     51,097,661       —         51,097,661  
Management fee income     34,668,358       —         34,668,358  
Fee-for-service, net     15,475,264       —         15,475,264  
Other income     5,208,790       —         5,208,790  
                           
Total revenue     560,618,097       —         560,618,097  
                           
Operating expenses                          
Cost of services     467,804,899       —         467,804,899  
General and administrative expenses     41,482,375       —         41,482,375  
Depreciation and amortization     18,280,198       —         18,280,198  
Provision for doubtful accounts     (1,363,363 )     —         (1,363,363 )
Impairment of goodwill and intangible assets     1,994,000       —         1,994,000  
                           
Total expenses     528,198,109       —         528,198,109  
                           
Income from operations     32,419,988       —         32,419,988  
                           
Other (expense) income                          
(Loss) income from equity method investments     (6,900,859 )     106,072,780   (E)     99,171,921  
Interest expense     (4,733,256 )     —         (4,733,256 )
Interest income     2,023,873       —         2,023,873  
Other income     3,030,203       —         3,030,203  
                           
Total other (expense) income, net     (6,580,039 )     106,072,780         99,492,741  
                           
Income before provision for income taxes     25,839,949       106,072,780         131,912,729  
                           
Provision for income taxes     8,166,632       22,275,284   (F)     30,441,916  
                           
Net income     17,673,317       83,797,496         101,470,813  
                           
Net income attributable to noncontrolling interests     3,556,772       83,797,496         87,354,268  
                           
Net income attributable to Apollo Medical Holdings, Inc.   $ 14,116,545     $ —       $ 14,116,545  
                           

 

 

 

 

APOLLO MEDICAL HOLDINGS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2019

 

          Pro Forma          
    As Reported (A)     Adjustment       Pro Forma  
Earnings per share – basic   $ 0.41     $ —       $ 0.41  
                           
Earnings per share – diluted   $ 0.39     $ —       $ 0.39  
                           
Weighted average shares of common stock outstanding – basic     34,708,429       34,708,429         34,708,429  
                           
Weighted average shares of common stock outstanding – diluted     36,403,279       36,403,279         36,403,279  

 

 

This unaudited pro forma consolidated financial information should be read in conjunction with the accompanying footnotes.

 

 

 

 

APOLLO MEDICAL HOLDINGS, INC.

 

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

 

 

The Company's unaudited pro forma consolidated financial information as of December 31, 2019 and for the year ended December 31, 2019 include the following adjustments:

 

(A) As reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC on March 16, 2020.

 

(B) Pro Forma adjustments includes receipt of cash consideration, shares of Bright Health, Inc.’s preferred stock, and the following escrowed amounts to the extent such escrowed amounts have not been offset or reserved for claims: (i) cash consideration of approximately $15.6 million, plus (ii) non-cash consideration consisting of shares of Bright Health, Inc.’s preferred stock having a stipulated value of approximately $5.9 million.

 

(C) Pro Forma adjustments includes repayment of indebtedness owed to APC.

 

(D) Pro Forma adjustments includes return of investment resulting from the sale of all of UCAP’s shares of capital stock in Universal. UCAP’s shares of capital stock in Universal have been treated as an equity method investments and, as such, there were no discontinued operations in connection with such sale.

 

(E) Represents the pro forma adjustment of the gain resulting from the sale of all of UCAP’s shares of capital stock in Universal on income from investments.

 

(F) Represents the tax impact on the pro forma adjustment of the gain resulting from the sale of all of UCAP’s shares of capital stock in Universal on income from investments.