Acquisitions

On Assignment, Inc.

In December 2013, the Company acquired the operating assets of On Assignment, Inc.’s Allied Healthcare Staffing division for an aggregate purchase price of $28,700,000, subject to certain post-closing adjustments. Excluded from the transaction were the accounts receivable, accounts payable and accrued compensation of the business being acquired. The Company used $24,673,000 in cash on hand and $4,500,000 from borrowings under its current revolver facility with Bank of America, N.A. to pay the purchase price and approximately $473,000 in transaction costs. Subsequent to December 31, 2013, an immaterial post-closing adjustment was made. However, the purchase price is subject to potential adjustment downward contingent upon retention of certain contracts as defined in the agreement, which will be resolved by the end of the Company's second quarter of 2014. The Company does not expect any further adjustment.

Pursuant to the Asset Purchase Agreement, the Company will be working with the seller to assume 15 leases and sublet 7 leases related to its branch offices. As of the date of this filing, 4 leases have been assumed by the Company representing $383,765 of operating lease future payments.

The Company believes the acquisition complements its current nurse and allied staffing business segment by: (1) adding new skillsets to its traditional staffing offerings, (2) expanding its local branch network, which will allow it to expand its local market presence and its MSP business, (3) diversifying its customer base into the local ambulatory care and smaller local healthcare facilities, which the Company believes will provide more balance between its large volume based customers and its local retail market.

The Allied Healthcare business has 84 branch-based employees and makes placements in more than 125 specialties from 23 branch offices.

The acquisition has been accounted for in accordance with FASB ASC Topic 805-Business Combination, using the purchase method. The results of the acquisition's operations have been included in the consolidated statements of operations since December 2, 2013, the date of the acquisition. On Assignment's allied staffing services have been included with the Company's nurse and allied staffing business segment. The Company's nurse and allied staffing business segment results in 2013 included $3,407,193 of revenue and $295,251 in contribution income (as defined in Note 16 - Segment Information) from the acquisition.

The following table summarizes the approximate fair values of the assets acquired and liabilities assumed. The Company used a third-party appraiser to determine the fair value and estimated useful lives of acquired assets and liabilities.



Other current assets	$	61,837
Property and equipment	160,921
Goodwill	14,553,798
Other intangible assets	14,000,000
Other assets	52,444
Total assets acquired	28,829,000

Accrued employee compensation and benefits	111,789
Total liabilities assumed	111,789

Net assets acquired	$	28,717,211

Based on the final independent third-party appraisal, the Company assigned the following values to intangible and other identifiable assets: $10,400,000 to customer relations with an estimated useful life of 16 years, $3,400,000 to database with an estimated useful life of 10 years, and $200,000 to non-compete agreements with a useful life of 5 years. The remaining excess of purchase price over the fair value of net assets acquired $14,553,798 and was recorded as goodwill, which is expected to be deductible for tax purposes. Additional acquisition-related costs of approximately $473,000 were incurred and are reflected as acquisition costs on the Company's consolidated statement of operations for the year ended December 31, 2013.

The following unaudited pro forma financial information approximates the consolidated results of operations of the Company as if the On Assignment acquisition had occurred as of January 1, 2012, after giving effect to certain adjustments, including additional interest expense on the amount the Company borrowed on the date of the transaction. These results are not necessarily indicative of future results as they do not include incremental investments in support functions, an estimate of any impact on interest expense resulting from the operating cash flow of the acquired business, among other adjustments that could be made in the future but are not factually supportable on the date of the transaction.



	Year Ended December 31,
	2013			2012
	(unaudited, amounts in thousands)

Revenue from services	$	476,456		$	482,142

Net income (loss)	$	(50,336	)	$	(40,543	)

Net income (loss) per common share - basic	$	(1.62	)	$	(1.31	)

Net income (loss) per common share - diluted	$	(1.62	)	$	(1.31	)

MDA Holdings, Inc.

In September 2008, the Company completed the acquisition of substantially all of the assets of privately-held MDA Holdings, Inc. and its subsidiaries and all of the outstanding stock of a subsidiary of MDA Holdings, Inc. (collectively, MDA). Part of the cash paid at closing was held in escrow to cover any post-closing liabilities (Indemnification Escrow).

During the year ended December 31, 2010, approximately $3,541,000 was released to the seller from the Indemnification Escrow account leaving a balance of approximately $3,566,000 at December 31, 2013 and 2012. The escrow will be released upon full satisfaction of certain tax matters and the resolution of indemnity claims. The transaction also included an earnout provision based on 2008 and 2009 performance criteria. This contingent consideration was not related to the sellers’ employment. In the second quarter 2009, the Company paid approximately $6,748,000 related to the 2008 performance. In the second quarter of 2010, the Company paid approximately $12,826,000 related to the 2009 performance, satisfying all earnout amounts potentially due to the seller in accordance with the asset purchase agreement. Earnout payments were allocated to goodwill as additional purchase price, in accordance with the Business Combinations Topic of the FASB ASC.