On July 22, 2014, the Company’s registration statement on Form S-1 was declared effective by the SEC, and on July 23, 2014, the Company sold 4,080,000 shares of common stock to the public at $5.00 per share in its IPO. The common stock began trading on the NASDAQ Capital Market under the ticker symbol “MTBC.”

 

On July 28, 2014, the Company received the proceeds of the IPO and consummated the acquisition of the assets of three Acquired Businesses. The aggregate purchase price for the Acquired Businesses amounted to approximately $17.5 million based on the IPO price of $3.89 per share, consisting of cash in the amount of approximately $11.3 million, and 1,684,096 shares of common stock with a fair value of approximately $6.2 million based on the IPO price, subject to subsequent adjustments.

With respect to Omni, following the closing date an upward purchase price adjustment may be made to the cash consideration payable to Omni with respect to revenue from new customers who executed one-year contracts prior to the closing, in an amount not to exceed the revenues generated by Omni during the 12 month period preceding the closing from customers that are not in good standing as of the closing date. In no event will the adjustment amount to more than 5% of the purchase price.

 

The Company has recorded its preliminary accounting for this acquisition in accordance with accounting guidance on business combinations. Based on our experience with our prior acquisitions, the Company believes that the primary intangible assets of value will be customer contracts and customer relationships and non-compete agreements. Our preliminary estimates show that the acquisitions will result in a portion of each purchase price allocated to goodwill due to the following: (i) the Acquired Businesses are being purchased at higher multiples to their trailing revenues, (ii) more employees of each Acquired Business will be retained following the acquisitions as compared to acquisitions completed in prior years and (iii) a higher weighted average cost of capital reflecting the increased cost of capital implied by the lower IPO price.

 

For the three Acquired Businesses, management has made a preliminary fair value estimate of the tangible and intangible assets acquired and liabilities assumed. The preliminary fair value adjustment to equity is based on our estimate of revenues at the time of acquisition and our estimate of customer retention rates, which drive the contingent portion of the purchase price, as discussed further below. These preliminary fair value estimates will differ from the final valuation, once we have received the valuation report of a third-party specialist; and this difference could be material.

 

The Company recorded $73,394 and $138,988 of acquisition-related costs for the three and six months ended June 30, 2014, respectively, which are included in the condensed consolidated statements of operations within general and administrative expenses.

 

The purchase price of the acquisitions has been preliminarily allocated to the net tangible and definite-lived intangible assets acquired (customer contracts and relationships and covenants not to compete) with the remainder recorded as goodwill on the basis of estimated fair values. The preliminary allocation is presented in the table below. The accounting for the acquisition of the Acquired Business is incomplete as of the date of this filing, pending review of the closing balance sheets of the Acquired Business and receipt of the report of a third-party valuation specialist that will assist the Company in valuing the acquired assets.

  

Preliminary Purchase Price Allocation											Total Acquired
		Omni			Practicare			CastleRock			Businesses
		(in thousands)
Cash consideration		$	6,554		$	2,394		$	2,339		$	11,287
Common stock			4,018			1,138			1,395			6,551
Fair value adjustment			(106)			(177)			(19)			(302)
Net common stock			3,912			961			1,376			6,249
Total purchase price		$	10,466		$	3,355		$	3,715		$	17,536
Net tangible assets acquired		$	156		$	100		$	10		$	266
Intangible assets			6,807			2,506			2,779			12,092
Goodwill			3,503			749			926			5,178
Total preliminary purchase price allocation		$	10,466		$	3,355		$	3,715		$	17,536

 

The pro forma information below represents condensed consolidated results of operations as if the acquisition of Metro Medical and the Acquired Businesses all occurred on January 1, 2013. The pro forma information has been included for comparative purposes and is not indicative of results of operations of the Company had the acquisitions occurred at January 1, 2013, nor is it necessarily indicative of future results.

 

Pro Forma with Acquired Businesses		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2014			2013			2014			2013
Total revenue		$	7,760,782		$	8,266,878		$	15,250,042		$	16,350,666
Net Income (loss)			(110,621)			(367,854)			(553,650)			(876,369)
Net loss per share		$	(0.02)		$	(0.07)		$	(0.11)		$	(0.17)

 

On August 14, 2014 the Company repaid the entire $1,215,000 outstanding balance on its revolving line of credit with TD Bank.