BUSINESS COMBINATIONS 2018 Acquisition ABILITY Network, Inc. On April 2, 2018, the Company completed the acquisition (the ABILITY Acquisition) of Butler Group Holdings, Inc., a Delaware corporation, and its wholly-owned subsidiaries, including, without limitation, ABILITY Network Inc., a Delaware corporation (ABILITY), for aggregate consideration of $1.19 billion in cash and restricted shares of the Companys Class A common stock (the Purchase Price). ABILITY is a leading cloud-based Software-as-a-service (SaaS) technology company helping to simplify the administrative and clinical complexities of healthcare. Through the my ABILITY  software platform, an integrated set of cloud-based applications for providers, ABILITY provides core connectivity, administrative, clinical, and quality analysis, management, and performance improvement capabilities to more than 44,000 acute, post-acute and ambulatory point-of-care provider facilities. The extensive datasets, on-demand compute capability, advanced analytics, and broad healthcare ecosystem connectivity enabled by the Inovalon ONE  Platform are expected to provide a significant expansion of application offerings within the my ABILITY  software platform while also expanding the nature and reach of high-value solutions for Inovalons existing payer, pharma, and device client-base. The combination of Inovalon and ABILITY creates a vertically integrated cloud-based platform empowering the achievement of real-time, value-based care from payers, manufacturers, and diagnostics all the way to the patients point of care. A summary of the final composition of the stated Purchase Price and fair value of the stated Purchase Price is as follows (in thousands): Purchase Price $ 1,220,800 Working capital adjustment (630 ) Shareholder payable adjustment 880 Subtotal 1,221,050 Fair value adjustments: Restricted stock marketability discount (30,000 ) Total fair value purchase price $ 1,191,050 The final composition of the fair value of the consideration transferred is as follows (in thousands): Cash $ 1,107,220 Issuance of Class A common stock 70,000 Contingent consideration 14,460 Working capital adjustment (630 ) Total fair value purchase price $ 1,191,050 The ABILITY Acquisition was accounted for using the acquisition method of accounting under ASC No. 805, Business Combinations , which requires that assets acquired and liabilities assumed are recognized at their estimated fair values. The excess of the aggregate consideration over the estimated fair values has been allocated to goodwill. In addition, ASC No. 805 requires that the consideration transferred be measured at the closing date of the ABILITY Acquisition at the then-current market prices. The Company finalized the Purchase Price allocation as of March 31, 2019. The following table summarizes the net assets acquired and liabilities assumed (in thousands): Preliminary Fair Value Cash and cash equivalents $ 23,850 Accounts receivable 16,739 Income tax receivable (2) 688 Prepaid expenses and other current assets 3,025 Property and equipment 3,095 Goodwill (1)(2) 770,949 Intangible assets (1) 490,000 Other assets 1,252 Accounts payable and accrued expenses (6,863 ) Deferred revenue (7,000 ) Other current liabilities (507 ) Other liabilities (5,291 ) Deferred tax liabilities (2) (98,887 ) Total consideration transferred $ 1,191,050 ______________________________________ (1) The Company allocated a portion of the goodwill associated with the ABILITY Acquisition to the Inovalon reporting unit based on expected revenue synergies. As a result, the fair value of the customer relationships intangible asset was adjusted by $23.0 million . (2) The Company recognized a net purchase accounting adjustment of $1.8 million resulting in a decrease to goodwill. This adjustment was driven by a $7.5 million decrease to deferred tax liabilities primarily attributable to the tax impact related to the reduction to the fair value of the customer relationships intangible assets and an adjustment to income tax receivable of $0.2 million . These reductions to goodwill were partially offset by a $5.0 million increase in deferred tax liabilities related to tax basis goodwill and provision-to-return tax adjustments from ABILITYs 2017 tax return filings and an adjustment of $0.9 million to the shareholder payable attributable to the ABILITY Acquisition. The amounts attributed to identified intangible assets are summarized in the table below (in thousands): Estimated Useful Life Preliminary Fair Value Measurement Period Adjustments Adjusted Preliminary Fair Value Customer relationships 13 years $ 408,000 $ (23,000 ) $ 385,000 Technology 13 years 86,000  86,000 Tradenames 17 years 19,000  19,000 Total intangible assets $ 513,000 $ (23,000 ) $ 490,000 Acquisition-related costs were expensed as incurred. For the twelve months ended December 31, 2018, the Company incurred acquisition-related costs of $6.5 million . Acquisition-related costs are recognized within General and administrative expenses in the accompanying consolidated statements of operations. The following table presents revenue and loss before taxes of ABILITY since the acquisition date, April 2, 2018, included in the consolidated statements of operations for the year ended December 31, 2018 (in thousands): Total Revenue $ 113,578 Loss before taxes $ (3,902 ) The following pro forma financial information is based on Inovalons and ABILITYs historical consolidated financial statements as adjusted to give effect to pro forma events that are (1) directly attributable to the ABILITY Acquisition, (2) factually supportable, and (3) with respect to the unaudited pro forma combined statements of operations, expected to have a continuing impact on the combined results. The pro forma adjustments include, but are not limited to: (i) amortization of acquired intangible assets, (ii) net increase to interest expense resulting from the extinguishment of the 2014 Credit Facilities and historical ABILITY debt, borrowings under the 2018 Term Facility and the amortization of related debt issuance costs, and (iii) elimination of non-recurring acquisition and integration-related expenses. The following pro forma financial information is unaudited and gives effect to the transactions as if they had occurred on January 1, 2017 (in thousands): Year ended December 31, 2018 2017 Revenue $ 565,040 $ 589,197 Loss before taxes $ (56,016 ) $ (5,554 ) The unaudited pro forma revenue and loss before taxes was prepared for informational purposes only based on estimates and assumptions that the Company believes to be reasonable and is not necessarily indicative of the results of operations that would have occurred if the ABILITY Acquisition had been completed on the date indicated nor of the future financial position or results of operations following completion of the ABILITY Acquisition. 2017 Acquisition ComplexCare Solutions On July 6, 2017, the Company completed the acquisition of ComplexCare Solutions, Inc. and ComplexCare Solutions IPA, LLC (together, CCS). CCS is a company which provides technology-enabled interventions and member engagement coordination services for a number of payers and employers throughout the United States. The fair value included in the consolidated financial statements, in conformity with ASC No. 820, Fair Value Measurements and Disclosures , represent the Companys best estimates and valuations. The final purchase price was allocated to identifiable assets acquired and liabilities assumed based upon valuation procedures performed to-date. The Company acquired all of the capital stock of CCS for approximately $4.5 million in cash and the settlement of an existing payable to CCS of $2.3 million . The Company acquired approximately $9.8 million of assets, including approximately $1.5 million of cash, and approximately $3.9 million of liabilities. The net assets acquired exceeded the consideration paid by approximately $1.4 million , and as such the Company recorded a bargain purchase gain in general and administrative expenses.