Note 1 – Description of Business and Basis of Presentation

USMD Holdings, Inc. ("Holdings") is a Delaware corporation formed on May 7, 2010 to facilitate the business combination of USMD Inc., a Texas corporation ("USMD"), Urology Associates of North Texas, LLP, a Texas limited liability partnership ("UANT"), and UANT Ventures, L.L.P., a Texas limited liability partnership ("Ventures"). Holdings was a dormant company with limited activity until July 2011. On August 19, 2010, Holdings, USMD, Ventures and UANT entered into a Contribution and Purchase Agreement (such agreement, the "Original Contribution Agreement," and such transaction, the "Contribution"). Immediately prior to the Contribution, a subsidiary of Ventures would merge with and into UANT, resulting in UANT's becoming a wholly-owned subsidiaries of Ventures, and certain of the USMD shareholders will contribute all or a portion of their shares of USMD common stock to Ventures in order to become partners in Ventures. When the Contribution is consummated, Ventures would contribute its assets, which would include its equity interests in USMD and UANT, and the USMD shareholders who continue to own shares of USMD common stock, would contribute those USMD shares to Holdings in exchange for shares of Holdings common stock. Holdings described the Contribution in its Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the "SEC") on December 23, 2010 (File No. 333-171386) and declared effective by the SEC on July 25, 2011. On August 23, 2011, the shareholders of USMD and the partners of Ventures voted on and approved the Original Contribution Agreement.

On December 1, 2011 and December 15, 2011, Ventures and Holdings entered into definitive agreements (the "Merger Agreements") with The Medical Clinic of North Texas, P.A., a Texas professional association ("MCNT") and Impel Management Services, L.L.C., a Texas limited liability company ("Impel"), respectively. The Merger Agreements provide that subsidiaries of Ventures will merge with and into each of MCNT and Impel (the "Mergers") as part of the Contribution, resulting in each of MCNT and Impel becoming wholly-owned subsidiaries of Ventures. In exchange for their equity interests in MCNT and Impel, the owners of MCNT and Impel will receive partnership interests in Ventures.

As a result of these Merger Agreements, on February 9, 2012, Holdings, USMD, UANT and Ventures entered into an amendment to the Original Contribution Agreement (the "Amendment") to reflect, among other changes, that Ventures will contribute to Holdings in addition to its equity interests in USMD and UANT, its equity interests in MCNT and Impel as part of the Contribution. Holdings expects the Contribution to close in mid-2012.

Holdings' financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP").

Note 1 – Description of Business

USMD Inc. and its wholly-owned subsidiaries ("USMD" or the "Company") provide finance, revenue cycle, centralized business office, clinical, operational and business development services, or a selection of these management services to healthcare providers. USMD owns and operates three healthcare management subsidiaries– Mat-RX Development, L.L.C. ("USMD Hospital Division"), USMD Cancer Treatment Centers, L.L.C. ("USMD CTC Division') and U.S. Lithotripsy, L.P. ("USMD Lithotripsy Division") –that were formed principally to establish, invest in or acquire, operate and/or manage acute-care hospitals, cancer treatment centers and lithotripsy service providers. USMD is a holding company that owns, either directly or through a wholly-owned subsidiary, 100% of the following subsidiaries:

The Company has one reportable segment – the management of health care providers who deliver care in hospitals, freestanding healthcare facilities and physician offices.