|9 Months Ended|
Sep. 30, 2019
|Business Combinations [Abstract]|
Note 5 – Acquisitions
Purchase Agreement Re Jamestown Regional Medical Center
On June 1, 2018, the Company acquired a business engaging in acute hospital care located in Jamestown, Tennessee under an asset purchase agreement. The acquisition also included a separate physician practice referred to as Mountain View Physician Practice, Inc. This acquisition was made as part of the Company’s business plan to acquire and operate clusters of rural hospitals.
Pursuant to the asset purchase agreement, by and among the Company and Jamestown TN Medical Center, Inc., and HMA Fentress County Hospital, LLC, Jamestown HMA Physician Management, LLC and CHS/Community Health Systems, Inc. (the “Sellers”), the purchase price paid for the transaction was an aggregate of $635,096, which includes closing costs of $35,735, legal costs of approximately $115,000, and other diligence related costs, which were expensed in 2018.
The fair value of the purchase consideration paid to the Sellers was allocated to the net tangible and intangible assets acquired. The Company accounted for the acquisition as a business combination under U.S. GAAP. In accordance with the acquisition method of accounting under ASC Topic 805, “Business Combinations,” (“ASC 805”) the assets acquired, and liabilities assumed were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company.
The fair value of the assets acquired, net of the liabilities assumed, was approximately $8.2 million. The excess of the aggregate fair value of the net tangible assets acquired over the purchase price was $7.6 million and has been treated as a gain on bargain purchase in accordance with ASC 805.
The following table shows the allocation of the purchase price of Jamestown Regional Medical Center to the acquired identifiable assets acquired, and liabilities assumed:
As reflected in the table above, the total value of intangible assets acquired in the Jamestown acquisition was $504,806, which included a certificate of need valued at $259,443 and a non-compete intangible asset valued at $245,363. The certificate of need has an indefinite life. During the year ended December 31, 2018, the Company determined that the fair value of the non-compete intangible asset, which was being amortized over two years, was fully impaired and, accordingly, the Company recorded an impairment of approximately $0.2 million in December 31, 2018.
Purchase Agreement re Jellico Community Hospital and CarePlus Center
Effective March 5, 2019, the Company acquired certain assets related to Jellico Community Hospital and CarePlus Center. Jellico Community Hospital is a fully operational 54-bed acute care facility that offers comprehensive services, including diagnostic imaging, radiology, surgery (general, gynecological and vascular), nuclear medicine, wound care and hyperbaric medicine, intensive care, emergency care and physical therapy. The CarePlus Center offers sophisticated testing capabilities and compassionate care, all in a modern, patient-friendly environment. Services include diagnostic imaging services, x-ray, mammography, bone densitometry, computed tomography (CT), ultrasound, physical therapy and laboratory services on a walk-in basis.
The purchase price was $658,537. This purchase price was made available by Mr. Diamantis, a director of the Company. The total cost of the acquisition is estimated to be $908,537, including $250,000 of diligence, legal and other costs associated with the acquisition. The acquisition costs were fully expensed in 2019.
The preliminary fair value of the purchase consideration paid to the sellers was allocated to the net tangible and intangible assets acquired. The Company accounted for the acquisition as a business combination under U.S. GAAP. In accordance with the acquisition method of accounting under ASC 805 the assets acquired, and liabilities assumed were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company.
The Company is currently undertaking a valuation study to determine the fair value of the assets acquired. The preliminary estimated fair value of the assets acquired, net of the liabilities assumed, was approximately $0.9 million. The excess of the aggregate fair value of the net tangible assets acquired over the purchase price is currently estimated to be $0.3 million and has been treated as a gain on bargain purchase in accordance with ASC 805. The gain is primarily due to the value of the intangible assets acquired. In addition, the provisional amounts used for the purchase price allocation are subject to adjustments for a period not to exceed one year from the acquisition date. As a result, upon completion of a valuation study, the gain on bargain purchase presented below may be increased or decreased. The preliminary purchase price allocation was based, in part, on management’s knowledge of hospital operations.
The following table shows the preliminary allocation of the purchase price of Jellico Community Hospital and CarePlus Center to the acquired identifiable assets acquired, and liabilities assumed:
The following presents the unaudited pro-forma combined results of operations of the Company and Jamestown Regional Medical Center and Jellico Community Hospital and CarePlus Center as if the acquisitions had occurred on January 1, 2018. The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisitions been completed as of January 1, 2018 or to project potential operating results as of any future date or for any future periods.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef