Certain businesses and assets of Prospect Medical Holdings, Inc. (“Prospect”)

On July 1, 2025, the Company, and its affiliates, acquired substantially all the assets of certain direct and indirect subsidiaries of PHP Holdings, LLC, such as Prospect Medical Group and Prospect Medical Systems, and all of the outstanding equity interests of Prospect Health Plan, Inc., and FRMC, pursuant to the Asset and Equity Purchase Agreement, dated November 8, 2024 (such assets and equity collectively, “Prospect”). Prospect is a physician-centric, risk-bearing healthcare company that operates an integrated healthcare delivery platform, enabling a network of over 11,000 providers to participate in value-based care arrangements and empowering them to deliver accessible, high-quality care to patients in a cost-effective manner. Prospect enables providers to deliver payer-agnostic, patient-centered care across Medicare Advantage, Medicaid, and Commercial lines of business. Prospect also operates a California Restricted Knox-Keene-licensed health plan, a management services organization, a specialty pharmacy, and a fully-accredited acute care hospital. The acquisition significantly expanded the Company’s provider network and enhanced our ability to offer increased access, quality, and value to our members.

As of December 31, 2025, the Company incurred $19.6 million of acquisition-related costs associated with the transaction. The Company has recorded these costs as general and administrative expenses within the accompanying consolidated statements of income. The purchase price for the acquisition was $674.9 million. To finance the acquisition, the Company borrowed $707.3 million from a five-year delayed draw term loan credit facility. See Note 10 — “Credit Facility and Bank Loans” for further information on the Company’s debt.

The Company is currently finalizing its valuation of the acquired assets and liabilities. Preliminary amounts have been recorded and are subject to change, primarily for accounts that include the use of estimates, such as medical liabilities, collectability of receivables, accrued expenses, and tax liabilities. The final purchase price allocation may result in adjustments to the amounts presented.

The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed at the acquisition date (in thousands):


	Prospect
Purchase consideration:	$	674,902

Assets:
Cash and cash equivalents	$	124,835
Receivables		86,170
Other receivables		1,329
Prepaid expenses and other current assets		7,684
Loan receivable		794
Property and equipment		37,512
Intangible assets		193,500
Goodwill		442,887
Loans receivable, non-current		278
Operating lease right-of-use assets		4,535
Other assets		6,126
Total assets acquired	$	905,650

Liabilities:
Accounts payable and accrued expenses	$	93,290
Medical liabilities		124,076
Operating lease liabilities		1,772
Other liabilities		646
Deferred tax liability		5,300
Operating lease liabilities, net of current portion		2,763
Other long-term liabilities		2,901
Total liabilities assumed	$	230,748

Total net assets acquired	$	674,902

On March 31, 2024, a wholly owned subsidiary of the Company acquired a 25% equity interest in I Health, an MSO, and accounted for the investment under the equity method. The transaction included a call option, which was amended in May 2025 for the Company to purchase an additional 37.5% equity interest from and after March 31, 2025, and the remaining 37.5% from and after March 31, 2026 (“I Health Call Option”). See Note 21 — “Fair Value Measurements of Financial Instruments” for additional information on the I Health Call Option. On July 1, 2025, the Company exercised the first call option to purchase an additional 37.5% equity interest in I Health, resulting in 62.5% ownership. The Company became the primary beneficiary with a majority controlling interest and accounted for the acquisition as a step acquisition, recognizing $6.3 million of goodwill. The Company used a weighted income and market approach to measure the fair value of the equity interest before the acquisition. Total consideration was $7.1 million, including a $0.5 million cash payment, the $6.2 million fair value of the previously held call option, $4.3 million equity method investment, and $6.1 million of noncontrolling interest, offset by the effective settlement of the $10.0 million note payable to I Health.

The acquisitions were accounted for under the acquisition method of accounting. The fair value of the consideration for the acquired companies was allocated to acquired tangible and intangible assets and liabilities based on their fair values. The excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill is primarily attributable to the scale, skill sets, operations, and synergies from the acquisitions, which can be leveraged to expand our network and enhance the value and quality of care the Company provides to our members. Of the total goodwill recognized from the acquisitions that closed in 2025, $251.3 million was assigned to the Care Partners segment, $56.6 million was assigned to the Care Delivery segment, and $141.3 million was assigned to the Care Enablement segment. Transaction costs associated with business acquisitions are expensed as they are incurred.

At the time of acquisition, the Company estimates the amount of assets, including identifiable intangible assets, and liabilities based on a valuation and the facts and circumstances available at the time. The Company determines the final values of assets, including identifiable intangible assets, and liabilities as soon as information is available, but no later than one year from the date of acquisition.

The total amount of goodwill that is expected to be deductible for tax purposes is $396.1 million for acquisitions closed in 2025, subject to certain limitations. The Company had no impairment of its goodwill for the years ended December 31, 2025 and 2024.

Measurement period adjustments for the year ended December 31, 2025, impacted receivables, net; other receivables; accounts payable and accrued expenses; and medical liabilities for Advanced Health Management Systems, L.P. (“AHMS”) and Collaborative Health Systems, LLC, Golden Triangle Physician Alliance, and Heritage Physician Networks (collectively, “CHS”). As of December 31, 2025, the Company has finalized the purchase price allocations for all 2024 acquisitions.

On December 31, 2024, the Company converted its loan receivable with DWGAS to acquire certain assets of a subsidiary of DWGAS, which was accounted for as a business combination. The loan receivable balance was $5.2 million, which included the principal and unpaid interest. The acquisition provides the Company with a provider network in the Hawaii market. The purchase price consisted of the outstanding principal and unpaid interest of the loan.

On October 4, 2024, the Company and its affiliated professional entity acquired all of the outstanding membership interests relating to CHS. CHS partners with independent providers in caring for over 129,000 Medicare members across 17 states. CHS provides comprehensive support for its physician partners by providing management services, risk contracting, and population health capabilities, including actionable data and other tools, to deliver care coordination and closure of gaps in care. CHS provides additional services to secure and deliver favorable value-based contracts with commercial and other health plans. Total consideration for the acquisition was $47.5 million, consisting of $35.3 million cash funded upon the close date, $6.9 million due to the seller based on estimated working capital adjustments, contingent consideration fair valued at $5.2 million, and $0.1 million of replacement restricted stock awards. See Note 21 — “Fair Value Measurements of Financial Instruments” for additional information on contingent consideration.

On July 1, 2024, the Company, through its consolidated VIE, purchased 100% of the equity interest in Airline Complete. Airline Complete is a primary care clinic located in Texas. The purchase price consisted of cash funded on July 1, 2024.

On March 31, 2024, the Company, through its wholly owned subsidiary, purchased all of the outstanding general and limited partnership interests of AHMS. AHMS’s wholly owned subsidiary operates a Restricted Knox-Keene licensed health plan in Los Angeles, California. Total consideration for the acquisition was $60.9 million, consisting of $63.9 million cash funded upon the close date and $3.0 million due from the seller based on estimated working capital adjustments.

On March 29, 2024, the Company, through its consolidated VIE, acquired certain assets of PCCCV, a professional medical corporation operating in Central California. Total consideration for the acquisition was approximately $10.5 million, consisting of cash funded upon the close date and contingent consideration, fair valued at $2.5 million on the date of acquisition.

On January 31, 2024, the Company, through its consolidated VIE, acquired certain assets of CFC. CFC is an RBO that manages the healthcare of members in the Los Angeles, California, area and serves patients across Medicare, Medicaid, and Commercial payers. Total consideration was $121.0 million, consisting of $91.0 million cash funded upon the close date as per the purchase agreement, $22.0 million of the Company’s common stock, resulting in the issuance of 631,712 shares of common stock, and contingent consideration, fair valued at $8.0 million on the date of acquisition (“CFC contingent consideration”). See Note 21 — “Fair Value Measurements of Financial Instruments” for additional information on contingent consideration.

On January 1, 2024, the Company acquired 95% of the equity interest in ADSC. ADSC is a diagnostic and surgical center that also provides ambulatory surgery services. The total consideration consisted of cash funded upon the close of the transaction and contingent consideration with a fair value of $3.6 million on the date of acquisition (“ADSC contingent consideration”). See Note 21—“Fair Value Measurements of Financial Instruments” for additional information on contingent consideration.

The following table summarizes the finalized purchase price allocation of the fair value of assets acquired and liabilities assumed related to acquisitions that closed in 2024 (in thousands):


	CHS		AHMS			CFC		Others (1)		Net Total

Total purchase consideration:
Cash paid	$	35,322	$	63,935		$	90,998	$	15,000	$	205,255
Purchase price due to (from) seller		6,944		(2,995	)		—		—		3,949
Contingent consideration		5,154		—			8,026		6,161		19,341
Common stock issued and replacement awards		118		—			21,952		—		22,070
Conversion of promissory note		—		—			—		5,175		5,175
	$	47,538	$	60,940		$	120,976	$	26,336	$	255,790


	CHS			AHMS		CFC		Others (1)		Net Total

Assets:
Cash and cash equivalents	$	4,556		$	33,950	$	16,674	$	3,515	$	58,695
Investment in marketable securities (2)		—			—		—		30		30
Receivables		102,447			11,007		6,530		—		119,984
Other receivables		36,766			—		3,375		—		40,141
Prepaid expenses and other current assets		356			36		—		11		403
Property and equipment		—			—		—		823		823
Intangible assets		14,200			23,600		28,000		6,338		72,138
Goodwill		9,161			25,571		83,571		16,357		134,660
Income tax receivable		—			—		—		1		1
Investments in other entities – equity method		3,121			—		—		—		3,121
Restricted cash		—			300		—		—		300
Total assets acquired	$	170,607		$	94,464	$	138,150	$	27,075	$	430,296

Liabilities:
Accounts payable and accrued expenses	$	69,258		$	13,001	$	2,487	$	303	$	85,049
Medical liabilities		53,889			14,093		14,663		—		82,645
Income taxes payable		—			—		24		—		24
Deferred tax liability		—			6,430		—		8		6,438
Non-controlling interest		(78	)		—		—		428		350
Total liabilities assumed	$	123,069		$	33,524	$	17,174	$	739	$	174,506

Total net assets acquired	$	47,538		$	60,940	$	120,976	$	26,336	$	255,790

(1)

Others consist of estimated fair values of the assets acquired, net of cash acquired, related to ADSC, PCCCV, Airline Complete, and DWGAS.

(2)

Included in prepaid expense and other current assets on the consolidated balance sheet.