Business Combinations | Business CombinationsAcquisition of Iora On September 1, 2021 ("Acquisition Date"), 1Life acquired all outstanding equity and capital stock of Iora Health, a human-centered, value-based primary care group with built-for-purpose technology focused on serving the Medicare population, for an aggregate purchase consideration of $1,424,836, which was paid through the issuance of 1Life common shares with a fair value of $1,313,312, in part by cash of $62,881, and in part by stock options of Iora assumed by 1Life towards pre-combination services of $48,643. The acquisition was accounted for as a business combination. Subsequent to the Acquisition Date, the Company recorded $2,370 decrease to goodwill during the measurement period in the first quarter of 2022. The preliminary purchase price allocations resulted in $1,117,913 of goodwill and $363,031 of acquired identifiable intangible assets related to Iora trade name and contracts in existing geographies valued using the income method. Goodwill recorded in the acquisition is not expected to be deductible for tax purposes. Goodwill was primarily attributable to the planned growth in new geographies, synergies expected to be achieved in the combined operations of 1Life and Iora, and assembled workforce of Iora. The acquisition expanded the Company's reach to become a premier national human-centered, technology-powered, value-based primary care platform across all age groups. The acquisition allows the Company to participate in At-Risk arrangements with Medicare Advantage payers and CMS, in which the Company is responsible for managing a range of healthcare services and associated costs of its members. Preliminary Purchase Price Allocation The purchase price components are summarized in the following table: Consideration in 1Life common stock (1) $ 1,313,312 Cash consideration (2) 62,881 Stock options of Iora assumed by 1Life towards pre-combination services (3) 48,643 Total Purchase Price $ 1,424,836 (1) Represents the fair value of 53,583 shares of 1Life common stock transferred as consideration consisting of 53,146 shares issued and 437 shares to be issued to former Iora shareholders for outstanding Iora capital stock based on 77,687 Iora shares with the Exchange Ratio of 0.69 for a share of Iora and 1Life's stock price of $24.51 as of the closing date. The fair value of the 53,583 shares transferred as consideration was determined on the basis of the closing market price of the Company's common stock one business day prior to the Acquisition Date. (2) Included in the cash consideration are: • $5,993 for the settlement of vested phantom stock awards and cash bonuses contingent on the completion of the merger. Iora's unvested phantom stock awards, to the extent they relate to post-combination services, will be paid out and expensed as they vest subsequent to the acquisition and will be treated as stock-based compensation expense. • $30,253 of loans made by the Company to Iora prior to the Acquisition Date. • $5,391 of repayment of the existing Silicon Valley Bank (“SVB”) loan, which was not legally assumed as part of the merger. • The remainder of the cash consideration primarily relates to transaction expenses incurred by Iora and paid by the Company as of the closing date. (3) Represents the fair value of Iora’s equity awards assumed by 1Life for pre-combination services. Pursuant to the terms of the merger agreement, Iora’s outstanding equity awards that are vested and unvested as of the effective time of the merger were replaced by 1Life equity awards with the same terms and conditions. The vested portion of the fair value of 1Life’s replacement equity awards issued represents consideration transferred, while the unvested portion represents post-combination compensation expense based on the vesting terms of the equity awards. The awards that include a provision for accelerated vesting upon a change of control are included in the vested consideration. The fair value of the stock options of Iora assumed by 1Life was determined by using a Black-Scholes option pricing model with the applicable assumptions as of the Acquisition Date. The fair value of the unvested stock awards, for which post-combination service is required, will be recorded as share-based compensation expense over the respective vesting period of each award. See Note 10, "Stock-Based Compensation". The following table presents the preliminary purchase price allocation recorded in the Company's unaudited condensed consolidated balance sheet as of the Acquisition Date: Cash and cash equivalents acquired $ 17,808 Accounts receivable, net 20,451 Prepaid expenses and other current assets 3,043 Restricted cash 2,069 Property and equipment, net 29,565 Right-of-use assets 70,249 Intangible assets, net 363,031 Other assets (1) 7,405 Total assets 513,621 Accounts payable 1,974 Accrued expenses 9,819 Deferred revenue, current 5,989 Operating lease liabilities, current 6,617 Operating lease liabilities, non-current 63,558 Deferred revenue, non-current 24,316 Deferred income taxes 80,537 Other non-current liabilities (1) 13,888 Total liabilities 206,698 Net assets acquired 306,923 Estimated Merger Consideration 1,424,836 Estimated goodwill attributable to Merger $ 1,117,913 (1) Included in the other assets was an escrow asset of $2,875 related to 1Life common stock held by a third-party escrow agent to be released to the former stockholders of Iora, less any amounts that would be necessary to satisfy any then pending and unsatisfied or unresolved claim for indemnification for any 1Life indemnifiable loss pursuant to the indemnity provisions of the Merger Agreement. A corresponding indemnification liability of $9,600 was recorded in other non-current liabilities in the Company's unaudited condensed consolidated balance sheet. During the three months ended March 31, 2022, a reduction in escrow asset and indemnification liability of $1,013 and $3,383, respectively was recorded as part of the measurement period adjustment. The indemnification asset is subject to remeasurement at each reporting date due to changes to the underlying value of the escrow shares until the shares are released from escrow, with the remeasurement adjustment reported in the Company's condensed consolidated statement of operations as interest and other expense. During the three months ended March 31, 2022, the fair value of the escrow asset had reduced and the unrealized loss recorded was $2,277 for the period. The Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the preliminary estimates of fair values, which were determined primarily using the income method based on estimates and assumptions made by management at the time of the Iora acquisition and are subject to change during the measurement period which is not expected to exceed one year. The primary tasks that are required to be completed include valuation of certain assets and liabilities, including any related tax impacts. Any adjustments to the preliminary purchase price allocation identified during the measurement period will be recognized in the period in which the adjustments are determined. The Company recognized a net deferred tax liability of $80,537 in this business combination that is included in long-term liabilities in the accompanying condensed consolidated balance sheet. This primarily related to identified intangible assets recorded in acquisition for which there is no tax basis. Identifiable intangible assets are comprised of the following: Preliminary Fair Value Estimated Useful Life (in years) Intangible Asset: Medicare Advantage contracts - existing geographies $ 298,000 9 CMS Direct Contracting contract - existing geographies 52,000 9 Trade name: Iora 13,031 3 Total $ 363,031 Net tangible assets were valued at their respective carrying amounts as of the Acquisition Date, which approximated their fair values. Medicare Advantage contracts and CMS Direct Contracting contract represent the At-Risk arrangements that Iora has with Medicare Advantage plans or directly with CMS. Trade names represent the Company’s right to the Iora trade names and associated design. Loan Agreement Under the Merger Agreement, 1Life and Iora have also entered into a Loan and Security Agreement on June 21, 2021. See Note 15 "Note Receivable" for more details. Iora had an existing credit facility with SVB, which is referred to as the SVB Facility. The SVB facility of $5,391 was repaid on September 1, 2021, of which $50 is related to the prepayment penalty. Repayment of the existing SVB loan is accounted for as part of the acquisition purchase consideration. Supplemental Unaudited Pro Forma Information The following unaudited pro forma financial information summarizes the combined results of operations for 1Life and Iora as if the companies were combined as of the beginning of fiscal year 2020. The unaudited pro forma information includes transaction and integration costs, adjustments to amortization and depreciation for intangible assets and property and equipment acquired, stock-based compensation costs and tax effects. The table below reflects the impact of material adjustments to the unaudited pro forma results for the three months ended March 31, 2021 that are directly attributable to the acquisition: Three Months Ended March 31, Material Adjustments 2021 (Decrease) / increase to expense as result of transaction costs $ (3,237) (Decrease) / increase to expense as result of amortization and depreciation expenses 11,541 (Decrease) / increase to expense as a result of stock-based compensation costs 698 (Decrease) / increase to expense as result of changes in tax effects $ (4,909) The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our condensed consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2020 or the results of our future operations of the combined businesses. Three Months Ended March 31, 2021 Revenue $ 183,620 Net Loss $ (62,374) Other Acquisitions In 2021, the Company completed three other acquisitions for $9,908 of total cash consideration. The acquisitions were each accounted for as business combinations. The Company does not consider these acquisitions to be material, individually or in aggregate, to the Company’s condensed consolidated financial statements. The purchase price allocations resulted in $5,880 of goodwill and $3,921 of acquired identifiable intangible assets related to customer relationships valued using the income method. Intangible assets are being amortized over their respective useful lives of three |