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DIGITAL ALLY HEALTHCARE VENTURE | 9 Months Ended
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Sep. 30, 2021
Digital Ally Healthcare Venture |
DIGITAL ALLY HEALTHCARE VENTURE | NOTE 15. 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 a private medical billing company (the “Healthcare Acquisition”). 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 the Healthcare Acquisition 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 Healthcare Acquisition aggregated $164,630, which was expensed as incurred. Subsequent to the acquisition date, the Company received further information regarding the pursed assets and assumed liabilities. As a result, the initial allocation of the purchase price was adjusted by increasing accounts receivable by $75,000 with a corresponding reduction of goodwill during the three months ended September 30, 2021. The Company accounts for business combinations using the acquisition method. Under the acquisition method, the purchase price of the Healthcare Acquisition has been allocated to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the Healthcare Acquisition. This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing or amounts recognized in our financial statements. The acquisition was structured as stock purchase, therefore the excess purchase price over the fair value of net tangible assets acquired was recorded as goodwill, which will not be amortized for income tax filing purposes. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date. The purchase price of the Healthcare Acquisition was allocated to the tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values at the time of the Healthcare Acquisition. The preliminary fair value of assets acquired and liabilities assumed in the Healthcare Acquisition were as follows: SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS AD LIABILITIES ASSUMED
Description |  | Amount |
Assets acquired: |  |  |  |
Tangible assets acquired, including $13,957 of acquired cash |  | $ | 88,957 |
Goodwill |  |  | 1,125,000 |
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 |
Consideration: |  |  |  |
Cash paid at Healthcare Acquisition date |  | $ | 1,026,509 |
Contingent consideration |  |  | 350,000 |
Total Healthcare Acquisition purchase price |  | $ | 1,376,509 |
On August 31, 2021, Nobility Healthcare completed the acquisition of another private medical billing company (the “Medical Billing Acquisition”). In accordance with the stock purchase agreement, Nobility Healthcare agreed to a non-refundable initial payment (the “Initial Payment Amount”) of $2,270,000. In addition to the Initial Payment Amount, Nobility Healthcare agreed to issue a promissory note to the stockholders of the Medical Billing Acquisition in the principal amount of $650,000 that is subject to an earn-out adjustment. The Company anticipates the earn-out to be paid in full, therefore, the total aggregate purchase price of the Medical Billing Acquisition was determined to be approximately $2,920,000. The total acquisition related costs of the Medical Billing Acquisition aggregated $5,602, which was expensed as incurred. The Company accounts for business combinations using the acquisition method. Under the acquisition method, the purchase price of the Medical Billing Acquisition has been allocated to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the Medical Billing Acquisition. This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing or amounts recognized in our financial statements. The acquisition was structured as stock purchase, therefore the excess purchase price over the fair value of net tangible assets acquired was recorded as goodwill, which will not be amortized for income tax filing purposes. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date. The purchase price of the Medical Billing Acquisition was allocated to the tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values at the time of the Medical Billing Acquisition. The preliminary fair value of assets acquired, and liabilities assumed in the Medical Billing Acquisition were as follows: SCHEDULE OF PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ACQUISITION
Description |  | Amount |
Assets acquired: |  |  |  |
Tangible assets acquired |  | $ | 202,901 |
Goodwill |  |  | 2,920,000 |
Liabilities assumed pursuant to stock purchase agreement |  |  | (202,901 | )
Total assets acquired and liabilities assumed |  | $ | 2,920,000 |
Consideration: |  |  |  |
Cash paid at acquisition date |  | $ | 2,270,000 |
Contingent consideration |  |  | 650,000 |
Total acquisition purchase price |  | $ | 2,920,000 |

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