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Acquisitions
 12 Months Ended
Mar. 31, 2015
Business Combinations [Abstract]  
Acquisition
3.  Acquisitions
 
Apollo Palliative Services LLC and Affiliates Acquisitions
 
On October 27, 2014, AMM made an initial capital contribution of $613,889 (the “Initial Contribution”) to ApolloMed Palliative (“APS”) in exchange for 51% of the membership interests of ApolloMed Palliative. ApolloMed Palliative used the Initial Contribution, in conjunction with funds contributed by other investors in ApolloMed Palliative, to finance the closing payments for the acquisitions described immediately below. In connection with this arrangement, the Company entered into a consulting agreement with one of ApolloMed Palliative’s members. The consulting agreement has a 6 year term, and provides for the member to receive $15,000 in cash per month, and for the member to be eligible to receive stock-based awards under the Company’s 2013 Equity Incentive Plan as determined by the Company’s Board of Directors. Immediately prior to closing the transactions described below, and as condition precedent to ApolloMed Palliative closing the transactions, the selling equity owners in each transaction described below contributed specific equity interests to ApolloMed Palliative in return for interests in ApolloMed Palliative pursuant to contributions agreements.
 
Best Choice Hospice Care LLC
 
Subject to the terms and conditions of that certain Membership Interest Purchase Agreement (the “BCHC Agreement”), dated October 27, 2014, by and among ApolloMed Palliative, the Company, the members of BCHC, and BCHC, ApolloMed Palliative agreed to purchase all of the remaining membership interests in BCHC for $900,000 in cash and $230,862 of equity consideration in APS, subject to reduction if BCHC’s working capital was less than $145,000 as of the closing of the transaction. APS agreed to pay a contingent payment of up to a further $400,000 (the “BCHC Contingent Payment”) to one seller and one employee of BCHC. The BCHC Contingent Payment will be paid in two installments of $100,000 to each of the seller and the employee within sixty days of each of the first and second anniversaries of the transaction, and is contingent upon, as of each applicable date, the seller’s and the employee’s employment, as applicable, continuing or having been terminated without cause and, for the employee, meeting certain productivity targets. The Company absolutely, unconditionally and irrevocably guaranteed payment of the BCHC Contingent Payment if ApolloMed Palliative fails to make any payment. The contingent payments were accounted for as post-combination compensation consideration and will be accrued ratably over the two year term of the agreement. As of March 31, 2015, $109,848 has been expensed and is included in accounts payable and accrued liabilities.
 
The Company accounted for the acquisition as a business combination using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the purchase date and be recorded on the balance sheet. The process for estimating the fair values of identifiable intangible assets involves the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The value of the 16% equity interest in APS of $230,862 was determined by aggregating the fair value of BCHC and HCHHA “refer below” which are the only assets in APS and applying the 16% ownership interest in APS to the aggregated amount. The acquisition-date fair value of the consideration transferred was as follows:
 
Cash consideration
 
$
900,000
 
Fair value of equity consideration
 
 
230,862
 
Working capital adjustment
 
 
(106,522)
 
 
 
$
1,024,340
 
 
Transaction costs are not included as a component of consideration transferred and were expensed as incurred. The related transaction costs expensed for the year ended March 31, 2015 were approximately $110,000 and are included in general and administrative expenses in the consolidated statements of operations.
 
Under the acquisition method of accounting, the total purchase price was allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values, with the remainder allocated to goodwill. Goodwill is deductible for tax purposes. The final allocation of the total purchase price to the net assets acquired and liabilities assumed and included in the Company’s consolidated balance sheet at March 31, 2015 is as follows:
 
Cash and cash equivalents
 
$
77,020
 
Accounts receivable
 
 
253,193
 
Prepaid expenses and other current assets
 
 
467
 
Property and equipment
 
 
7,130
 
Identifiable intangible assets
 
 
532,000
 
Goodwill
 
 
398,467
 
Total assets acquired
 
 
1,268,277
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
 
243,937
 
Total liabilities assumed
 
 
243,937
 
Net assets acquired
 
$
1,024,340
 
  
 The intangible assets acquired consisted of the following:
 
 
 
Life
(yrs.)
 
Additions
 
Medicare license
 
 
Indefinite
 
$
462,000
 
Trade name
 
 
5
 
 
51,000
 
Non-compete agreements
 
 
5
 
 
19,000
 
 
 
 
 
 
 
532,000
 
 
The fair value of the Medicare license was determined based on the present value of a five year projected opportunity cost of not being able to operate with a Medicare license using a discount rate of 13%. The trade name was computed using the relief from royalty method, assuming a 1% royalty rate, and the non-compete agreements were valued using a with-and-without method.
  
Holistic Health Home Health Care Inc.
 
Subject to the terms and conditions of that certain Stock Purchase Agreement (the “HCHHA Agreement”), dated October 27, 2014, by and among ApolloMed Palliative, the sole shareholder of HCHHA, and HCHHA, ApolloMed Palliative agreed to purchase all of the remaining shares of HCHHA for $300,000 in cash and $43,286 of equity consideration in APS, subject to reduction if HCHHA’s working capital was less than $50,000 as of the closing of the transaction. ApolloMed Palliative agreed to pay a contingent payment of up to a further $150,000 (the “HCHHA Contingent Payment”). The HCHHA Contingent Payment will be paid in two installments of $75,000 to the seller within sixty days of each of the first and second anniversaries of the transaction, and is contingent upon, as of each applicable date, the seller’s employment continuing or having been terminated without cause and the seller meeting certain productivity targets. The contingent payments were accounted for as compensation consideration and will be accrued ratably over the term of the agreement. As of March 31, 2015, $41,245 has been expensed and is included in accounts payable and accrued liabilities.
 
The Company accounted for the acquisition as a business combination using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the purchase date and be recorded on the balance sheet. The process for estimating the fair values of identifiable intangible assets involves the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The value of the 3% equity interest in APS of $43,286 was determined by aggregating the fair value of BCHC and HCHHA which are the only assets in APS and applying the 3% ownership interest in APS to the aggregated amount. The acquisition-date fair value of the consideration transferred was as follows:
 
Cash consideration
 
$
300,000
 
Fair value of equity consideration
 
 
43,286
 
Working capital adjustment
 
 
(21,972)
 
 
 
$
321,314
 
 
Transaction costs are not included as a component of consideration transferred and were expensed as incurred. The related transaction costs expensed for the year ended March 31, 2015 were approximately $16,000 and are included in general and administrative expenses in the consolidated statements of operations.
 
Under the acquisition method of accounting, the total purchase price was allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values, with the remainder allocated to goodwill. Goodwill is not deductible for tax purposes. The final allocation of the total purchase price to the net assets acquired and liabilities assumed and included in the Company’s consolidated balance sheet at March 31, 2015 is as follows:
 
Cash and cash equivalents
 
$
(37,087)
 
Accounts receivable
 
 
149,599
 
Property and equipment
 
 
3,035
 
Identifiable intangible assets
 
 
284,000
 
Goodwill
 
 
268,989
 
Total assets acquired
 
 
668,536
 
Accounts payable and accrued liabilities
 
 
232,570
 
Deferred tax liability
 
 
114,652
 
Total liabilities assumed
 
 
347,222
 
Net assets acquired
 
 
321,314
 
 
The intangible assets acquired consisted of the following:
 
 
 
Life
(yrs.)
 
Additions
 
Medicare license
 
 
Indefinite
 
$
242,000
 
Trade name
 
 
5
 
 
38,000
 
Non-compete agreements
 
 
5
 
 
4,000
 
 
 
 
 
 
$
284,000
 
 
The fair value of the Medicare license was determined based on the present value of a five year projected opportunity cost of not being able to operate with a Medicare License using a discount rate of 16.0%. The trade name was computed using the relief from royalty method, assuming a 1% royalty rate, and the non-compete agreements were valued using a with-and-without method.
 
SCHC
 
On July 22, 2014, pursuant to a Stock Purchase Agreement dated as of July 21, 2014 (the “Purchase Agreement”) by and among the SCHC, a Medical Corporation that provides professional medical services in Los Angeles County, California, the shareholders of SCHC (the “Sellers”) and a Company affiliate, SCHC Acquisition, A Medical Corporation (the “Affiliate”), solely owned by Dr. Warren Hosseinion as physician shareholder and the Chief Executive Officer of the Company, the Affiliate acquired all of the outstanding shares of capital stock of SCHC from the Sellers. The purchase price for the shares was (i) $2,000,000 in cash, (ii) $428,391 to pay off and discharge certain indebtedness of SCHC (iii) warrants to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $10.00 per share and (iv) a contingent amount of up to $1,000,000 payable, if at all, in cash. The acquisition was funded by an intercompany loan from AMM, which also provided an indemnity in favor of one of the Sellers relating to certain indebtedness of SCHC that remained outstanding following the closing of the acquisition. Following the acquisition of SCHC, the Affiliate was merged with and into SCHC, with SCHC being the surviving corporation. The indebtedness of SCHC was paid off following the acquisition and did not remain outstanding as of December 31, 2014.
 
In connection with the acquisition of SCHC, AMM entered into a management services agreement with the Affiliate on July 21, 2014. As a result of the Affiliate’s merger with and into SCHC, SCHC is now the counterparty to this management services agreement and bound by its terms. Pursuant to the management services agreement, AMM will manage all non-medical services for SCHC, will have exclusive authority over all non-medical decision making related to the ongoing business operations of SCHC, and is the primary beneficiary of SCHC, and the financial statements of SCHC will be consolidated as a variable interest entity with those of the Company from July 21, 2014.
 
The Company accounted for the acquisition as a business combination using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the purchase date and be recorded on the balance sheet. The process for estimating the fair values of identifiable intangible assets involves the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The acquisition-date fair value of the consideration transferred was as follows:
 
Cash consideration
 
$
2,428,391
 
Fair value of warrant consideration
 
 
132,000
 
 
 
$
2,560,391
 
 
The fair value of the warrant consideration of $132,000 was classified as equity. and was determined using the Black-Scholes option pricing model using the following inputs: share price of $5.40 (adjusted for a lack of control discount), exercise price of $1.00, expected term of 4 years, volatility of 54% and a risk free interest rate of 1.35%.
 
A contingent payment obligation of $1,000,000 was considered a post-combination transaction and therefore it will be recorded as post-combination compensation expense over the term of the arrangement and not as purchase consideration. The compensation expense will be accrued in each reporting period based upon achievement of certain physician productivity measures through June 30, 2016. Approximately $375,000 has been expensed during the year-ended March 31, 2015 of which $125,000 is included in accounts payable and accrued liabilities as of March 31, 2015.
 
Transaction costs are not included as a component of consideration transferred and were expensed as incurred. The related transaction costs expensed for the year ended March 31, 2015 were approximately $124,000, and are included in general and administrative expenses in the consolidated statements of operations.
 
Under the acquisition method of accounting, the total purchase price was allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values, with the remainder allocated to goodwill. Goodwill is not deductible for tax purposes. The final allocation of the total purchase price to the net assets acquired and liabilities assumed and included in the Company’s consolidated balance sheet at March 31, 2015 is as follows:
 
Cash and cash equivalents
 
$
264,601
 
Accounts receivable
 
 
750,433
 
Receivable from affiliate
 
 
67,714
 
Prepaid expenses and other current assets
 
 
82,430
 
Property and equipment
 
 
607,315
 
Identifiable intangible assets
 
 
416,000
 
Goodwill
 
 
922,734
 
Other assets
 
 
66,762
 
Total assets acquired
 
 
3,177,989
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
 
134,426
 
Note payable to financial institution
 
 
463,582
 
Deferred tax liability
 
 
19,590
 
Total liabilities assumed
 
 
617,598
 
 
 
 
 
 
Net assets acquired
 
$
2,560,391
 
  
The intangible assets acquired consisted of the following:
 
 
 
Life
(yrs.)
 
Additions
 
 
 
 
 
 
 
 
 
Network relationships
 
 
5
 
$
220,000
 
Trade name
 
 
5
 
 
102,000
 
Non-compete agreements
 
 
3
 
 
94,000
 
 
 
 
 
 
$
416,000
 
 
The network relationships were valued using the multi-period excess earnings method based on projected revenue and earnings over a 5 year period. The trade name was computed using the relief from royalty method, assuming a 1% royalty rate, and the non-compete agreements were valued using a with-and-without method.
 
AKM
 
In May 2014, AMM entered into a management services agreement with AKM Acquisition Corp, Inc. (“AKMA”), a newly-formed provider of physician services and an affiliate of the Company owned by Dr. Warren Hosseinion as a physician shareholder, to manage all non-medical services for AKMA. AMM has exclusive authority over all non-medical decision making related to the ongoing business operations of AKMA and is the primary beneficiary; consequently, AMM consolidated the revenue and expenses of AKMA from the date of execution of the management services agreements. On May 30, 2014, AKMA entered into a stock purchase agreement (the “AKM Purchase Agreement”) with the shareholders of AKM Medical Group, Inc. (“AKM”), a Los Angeles, CA-based independent practice association. Immediately following the closing, AKMA merged with and into AKM, with AKM being the surviving entity and assuming the rights and obligations under the management services agreement. Under the AKM Purchase Agreement all of the issued and outstanding shares of capital stock of AKM were acquired for approximately $280,000, of which $140,000 was paid at closing and $136,822 (the “Holdback Liability”) is payable, if at all, subject to the outcome of incurred but not reported risk-pool claims and other contingent claims that existed at the acquisition date.
 
Under the AKM Purchase Agreement, former shareholders of AKM are entitled to be paid the Holdback Amount of up to approximately $376,000 within 6 months of the Closing Date. No later than 30 days after the six month period, AKM will prepare a closing statement which will state the actual cash position (as defined) (“Actual Cash Position”) of AKM. If the actual cash position of AKM is less than $461,104 (the “Target Amount”), the former shareholders of AKM will pay the difference between the Target Amount and the Actual Cash Position, which will be deducted from the Holdback Amount, but in no case will exceed the amount previously paid to the former shareholders of AKM in connection with the transaction. If the Actual Cash Position exceeds the Target Amount, then that difference will be added to the Holdback Amount. Any indemnification payment made by the former shareholders of AKM will also be paid from the Holdback Amount; if the Holdback Amount is insufficient, the former shareholders of AKM are liable for paying the balance, which cannot exceed amounts previously paid to the former shareholders of AKM under the AKM Purchase Agreement. The Company determined the fair value was determined based on the cash consideration discounted at the Company's cost of debt.
 
The Company accounted for the acquisition as a business combination using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the purchase date and be recorded on the balance sheet. The process for estimating the fair values of identifiable intangible assets involves the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates.  The acquisition-date fair value of the consideration transferred was as follows:
 
Cash consideration
 
$
140,000
 
Holdback consideration paid to seller
 
 
140,000
 
Working capital adjustment paid to seller
 
 
236,236
 
Total purchase consideration
 
$
516,236
 
 
Under the acquisition method of accounting, the total purchase price was allocated to AKM’s net tangible assets based on their estimated fair values as of the closing date, with the remainder allocated to goodwill. Goodwill is not deductible for tax purposes. The allocation of the total purchase price to the net assets acquired and included in the Company’s consolidated balance sheet is as follows:
    
Cash consideration
 
$
140,000
 
Holdback consideration
 
 
376,236
 
Total consideration
 
$
516,236
 
 
 
 
 
 
Cash and cash equivalents
 
$
356,359
 
Marketable securities
 
 
389,094
 
Accounts receivable
 
 
31,193
 
Prepaid expenses and other assets
 
 
26,311
 
Intangibles
 
 
213,000
 
Goodwill
 
 
83,943
 
Accounts payable and accrued liabilities
 
 
(40,439)
 
Deferred tax liability
 
 
(84,847)
 
Medical payables
 
 
(458,378)
 
Net assets acquired
 
$
516,236
 
 
The intangible assets acquired consisted of the following:
 
 
 
Life
(yrs.)
 
Additions
 
 
 
 
 
 
 
 
Payor relationships
 
5
 
$
107,000
 
Trade name
 
4
 
 
66,000
 
Non-compete agreements
 
3
 
 
40,000
 
 
 
 
 
$
213,000
 
 
Transaction costs are not included as a component of consideration transferred and were expensed as incurred. The related transaction costs expensed for the year ended March 31, 2015 were approximately $37,000.
 
Pro Forma Financial Information
 
The results of operations for BCHC, HCHHA, AKM and SCHC are included in the consolidated statements of operations from the acquisition date of each. The pro forma results of operations are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisitions occurred at the beginning of the years presented or the results which may occur in the future. The following unaudited pro forma results of operations for the year ended March 31, 2015 assume the BCHC, HCHHA, AKM and SCHC acquisitions had occurred on April 1, 2014:
 
 
 
Year Ended
March 31, 2015
 
 
 
(unaudited)
 
Net revenue
 
$
37,036,240
 
Net loss
 
$
(2,244,224)
 
Basic and diluted loss per share
 
$
(0.46)
 
 
From the applicable closing date to March 31, 2015, revenues and net loss related to AKM, SCHC, BCHC and HCHHA included the accompanying consolidated statements of operations were $7,149,889 and $(568,269), respectively.
 
Medical Clinic Acquisitions
 
During the year ended January 31, 2014, ACC entered into three medical clinic acquisitions from third parties not affiliated with one another, as follows:
 
Whittier 
 
On September 1, 2013, ACC acquired certain assets, excluding working capital, of a medical clinic in the Los Angeles, California area (“Whittier”). The Company accounted for the acquisition as a business combination using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the purchase date and be recorded on the balance sheet. The process for estimating the fair values of identifiable intangible assets involves the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates.
 
Under the acquisition method of accounting, the total purchase price is allocated to Whittier’s net tangible and intangible assets based on their estimated fair values as of the closing date. The allocation of the total purchase price to the net assets acquired is included in our consolidated balance sheet. The acquisition-date fair value of the consideration transferred and the total purchase consideration allocated to the acquisition of the net tangible and intangible assets based on their estimated fair values were as of the closing date as follows:
 
Cash consideration
 
$
100,000
 
Fair value of promissory note due to seller
 
 
145,000
 
Total purchase consideration
 
$
245,000
 
 
 
 
 
 
Property and equipment
 
$
10,000
 
Exclusivity Agreement
 
 
40,000
 
Noncompete Agreement
 
 
20,000
 
Goodwill
 
 
175,000
 
Total fair value of assets acquired
 
$
245,000
 
 
The acquired intangible assets consists of an exclusivity agreement principally relating to an independent practice association and a non-compete agreement with the selling physician. The weighted-average amortization period for such intangible assets acquired is outlined in the table below:
 
 
 
 
 
 
Weighted-average
 
 
 
Assets
 
Amortization
 
 
 
Acquired
 
Period (years)
 
 
 
 
 
 
 
 
Exclusivity Agreement
 
$
40,000
 
4
 
Noncompete Agreement
 
 
20,000
 
5
 
Total identifiable intangible assets
 
$
60,000
 
 
 
 
Property and equipment fair value was determined using historical cost adjusted for usage and management estimates.
 
The fair value of the exclusivity and non-compete agreements was estimated using the income approach. The income approach uses valuation techniques to convert future amounts to a discounted single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The fair value considered our estimates of future incremental earnings that may be achieved by the intangible assets.
 
The promissory note issued will be paid in installments of $15,000 per month for ten months commencing 90 days from the closing date under a non-interest bearing promissory note to be secured by the assets of the clinic. The Company determined the fair value of the note using an interest rate of 5.45 % per annum to discount future cash flows, which is based on Moody’s Baa-rated corporate bonds at the valuation date.
 
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the acquisition includes benefits that the Company believes will result from gaining additional expertise and intellectual property in the clinical care area and expand the reach of the Company’s Maverick Medical Group IPA. Goodwill is not amortized and is not deductible for tax purposes.
 
Transaction costs are not included as a component of consideration transferred and were expensed as incurred. The related transaction costs expensed for the year ended January 31, 2014 were approximately $7,500.
 
This acquisition was not considered a material business combination.
 
Fletcher 
 
On January 6, 2014, ACC acquired certain assets, excluding working capital, of a medical clinic in the Los Angeles, California area (“Fletcher”). The Company accounted for the acquisition as a business combination using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the purchase date and be recorded on the balance sheet. The process for estimating the fair values of identifiable intangible assets involves the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates.  The acquisition-date fair value of the consideration transferred was as follows:
 
Cash consideration
 
$
75,000
 
Fair value of promissory note due to seller
 
 
73,400
 
Total purchase consideration
 
$
148,400
 
 
Under the acquisition method of accounting, the total purchase price is allocated to Fletcher’s net tangible and intangible assets based on their estimated fair values as of the closing date. The allocation of the total purchase price to the net assets acquired and included in our consolidated balance sheet is as follows:
 
 
Estimated
 
 
Fair
Value
 
Property and equipment
 
 
10,000
 
Noncompete Agreement
 
 
6,000
 
Goodwill
 
 
132,400
 
Total fair value of assets acquired
 
 
148,400
 
 
The acquired intangible assets consisted of an exclusivity agreement principally relating to an independent practice association and a non-compete agreement with the selling physician. The weighted-average amortization period for such intangible assets acquired is outlined in the table below:
 
 
 
 
 
 
Weighted-average
 
 
 
Assets
 
Amortization
 
 
 
Acquired
 
Period (years)
 
 
 
 
 
 
 
 
Noncompete Agreement
 
 
6,000
 
3
 
Total identifiable intangible assets
 
$
6,000
 
 
 
 
Property and equipment fair value was determined using their historical cost adjusted for usage and management estimates.
 
The fair value of the non-compete agreement was estimated using the income approach. The income approach uses valuation techniques to convert future amounts to a single discounted present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The fair value considered our estimates of future incremental earnings that may be achieved by the intangible assets.
 
The promissory note issued will be paid in installments of $15,000 per month for five months commencing April 1, 2014 under a non-interest bearing promissory note to be secured by the assets of the clinic. The Company determined the fair value of the note using an interest rate of 5.30% per annum to discount future cash flows, which is based on Moody’s Baa-rated corporate bonds at the valuation date.
 
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the acquisition includes benefits that the Company believes will result from gaining additional expertise and intellectual property in the clinical care area and expand the reach of the Company’s Maverick Medical Group IPA. Goodwill is not amortized and is not deductible for tax purposes.
 
Transaction costs are not included as a component of consideration transferred and were expensed as incurred. The related transaction costs expensed for the year ended January 31, 2014 were approximately $5,300.
 
Eagle Rock
 
On December 7, 2013 ACC, acquired certain assets, excluding working capital, of a medical clinic in the Los Angeles, California area (“Eagle Rock”). The Company accounted for the acquisition as a business combination using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the purchase date and be recorded on the balance sheet. The process for estimating the fair values of identifiable intangible assets involves the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates.  The acquisition-date fair value of the consideration transferred as of the closing date is as follows:
 
Cash consideration
 
$
75,000
 
Fair value of promissory note due to seller
 
 
81,500
 
Total purchase consideration
 
$
156,500
 
 
Under the acquisition method of accounting, the total purchase price is allocated to Eagle Rock’s net tangible and intangible assets based on their estimated fair values as of the closing date. The allocation of the total purchase price to the net assets acquired and included in our consolidated balance sheet is as follows:
 
 
 
Estimated
 
 
 
Fair Value
 
Noncompete Agreement
 
$
2,400
 
Goodwill
 
 
154,100
 
Total fair value of assets acquired
 
$
156,500
 
 
The acquired intangible assets consists of an exclusivity agreement principally relating to an independent practice association and a non-compete agreement with the selling physician. The weighted-average amortization period for such intangible assets acquired is outlined in the table below:
 
 
 
 
 
 
Weighted-average
 
 
 
Assets
 
Amortization
 
 
 
Acquired
 
Period (years)
 
 
 
 
 
 
 
 
Noncompete Agreement
 
 
2,400
 
3
 
Total identifiable intangible assets
 
$
2,400
 
 
 
 
Property and equipment fair value was determined using their historical cost adjusted for usage and management estimates.
 
The fair value of the non-compete agreement was estimated using the income approach. The income approach uses valuation techniques to convert future amounts to a single discounted present value amount. Our measurement is based on the value indicated by current market expectations about those future amounts. The fair value considered our estimates of future incremental earnings that may be achieved by the intangible assets.
 
The promissory note issued will be paid in installments of $10,000 per month for eight months commencing March 1, 2014 under a non-interest bearing promissory note to be secured by the assets of the clinic. The Company determined the fair value of the note using an interest rate of 5.46 % per annum to discount future cash flows, which is based on based on index of Moody's Baa-rated corporate bonds as of the valuation date.
 
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the acquisition includes benefits that the Company believes will result from gaining additional expertise and intellectual property in the clinical care area and expand the reach of the Company’s Maverick Medical Group IPA. Goodwill is not amortized and is not deductible for tax purposes.
 
Transaction costs are not included as a component of consideration transferred and were expensed as incurred. The related transaction costs expensed for the year ended January 31, 2014 were approximately $5,900.
 
This acquisition is not considered a material business combination.