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DIGITAL ALLY HEALTHCARE VENTURE

6 Months Ended

Jun. 30, 2021

NOTE 14. DIGITAL ALLY HEALTHCARE VENTURE

On June 4, 2021, Digital Ally Healthcare, a wholly-owned subsidiary of the Company, entered into a venture with Nobility LLC (“Nobility”), an eight-year old revenue cycle management (“RCM”) company servicing the medical industry, to form Nobility Healthcare, LLC (“Nobility Healthcare”). Digital Ally Healthcare is capitalizing the venture with $13.5 million to support the venture’s business strategy to make acquisitions of RCM companies. Digital Ally Healthcare owns 51% of the venture that entitles it to 51% of the distributable cash as defined in the venture’s operating agreement plus a cumulative preferred return of 10% per annum on its invested capital. Nobility will receive a management fee and 49% of the distributable cash, subordinated to Digital Ally Healthcare’s preferred return.

On June 30, 2021, Nobility Healthcare completed the acquisition of Elite Medical Billing Specialists, Inc, a Michigan limited liability company (“Elite”). In accordance with the stock purchase agreement, Nobility Healthcare agreed to a non-refundable initial payment (the “Initial Payment Amount”) of $850,000. In addition to the Initial Payment Amount, Nobility Healthcare agreed to issue a promissory note to the stockholders of Elite in the principal amount of $350,000 that is subject to an earn-out adjustment. Lastly, included in the agreement, Nobility Healthcare agreed to pay in full the balance due under a promissory note issued by the selling shareholders prior to this agreement, including the principal and accrued interest, totaling $162,552 at the closing date. The Company anticipates the earn-out to be paid in full, therefore, the total aggregate purchase price of Elite was determined to be approximately $1,376,509. The total acquisition related costs of the Elite Acquisition aggregated $164,630, which was expensed as incurred.

The Company accounts for business combinations using the acquisition method. Under the acquisition method, the purchase price of the Elite Acquisition has been allocated to Elite’s acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the Elite Acquisition. This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing or amounts recognized in our financial statements. Our assumptions and estimates are based upon comparable market data and information obtained from the management of Nobility. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

The purchase price of the Elite Acquisition was allocated to Elite’s tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values at the time of the Elite Acquisition. The preliminary fair value of assets acquired and liabilities assumed in the Elite Acquisition were as follows:

Description	Amount
Assets acquired:
Tangible assets acquired, consisting of acquired cash	$	13,957
Goodwill		1,200,000
Liabilities assumed consisting of a promissory note issued by the Selling shareholders which was paid off at closing		162,552
Total assets acquired and liabilities assumed		1,376,509
Cash paid at Elite Acquisition date		1,026,509
Contingent consideration		350,000

Total Elite Acquisition purchase price	$	1,376,509