Acquisitions

During the nine months ended September 30, 2014, we entered into three transactions supporting our entry into the urgent and primary care market. A summary of the acquisitions is as follows (in thousands):



Acquisition Activity
Business Acquired	State	Site Count	Date of Closing	Net Assets Acquired		Consideration paid in Cash		Consideration in Debt
CorrectMed, LLC	Georgia	2	May 8, 2014	$	2,680	$	2,180	$	500
Bay Walk-In Clinic, Inc.	Florida	2	August 29, 2014	2,158		1,500		658
Mid-South Urgent Care, Inc.	Alabama	3	September 12, 2014	1,500		1,350		150

On May 8, 2014, our wholly-owned subsidiary ACSH Urgent Care of Georgia, LLC, or ACSH Georgia, purchased from CorrectMed, LLC and other sellers substantially all of the assets used in the operation of two urgent care centers located in Locust Grove, Georgia and Decatur, Georgia. The aggregate purchase price was $2.7 million, with $2.2 million paid in cash at closing and the remainder paid by delivery of a promissory note in the principal amount of $500,000. The note bears interest at a fixed rate of 5% per annum. The note matures on May 8, 2015, and all principal and interest is due and payable on that date. The principal amount of the note may be increased or decreased by a working capital adjustment as set forth in the purchase agreement.

On August 29, 2014, our wholly-owned subsidiary ACSH Urgent Care of Florida, LLC, or ACSH Florida, purchased from Bay Walk-In Clinic, Inc. and other sellers substantially all the assets used in the operation of two urgent care centers located in Panama City and Panama City Beach, Florida. The aggregate purchase price was $2.2 million, with $1.5 million paid in cash at closing and the remainder paid by the delivery of three promissory notes in the aggregate principal amount of $700,000. One promissory note in the amount of $200,000 bears simple interest at a rate of 5% per annum. Payment of principal and interest on the note is due in two installments: $110,000 is due and payable on August 29, 2015, and $105,000 is due and payable on August 29, 2016. The principal amount of the note may be increased or decreased by a purchase price adjustment as set forth in the purchase agreement. Another promissory note also in the principal amount of $200,000 bears simple interest at a fixed rate of 5% per annum. Payment of principal and interest on this note is due in 24 equal, monthly installments of $8,776.51 beginning on September 30, 2014. The principal amount of this note may be increased or decreased by a purchase price adjustment as set forth in the purchase agreement. A third promissory note in the principal amount of $300,000 is non-interest bearing and is due and payable in 30 equal monthly installments of $10,000 each, beginning on September 30, 2014. Subsequent to the transaction, the promissory notes were reduced approximately $41,900 related primarily to imputed interest and other items. The total consideration is to be adjusted after closing based on, among other things, actual working capital levels.

On September 12, 2014, our wholly-owned subsidiary ACSH Urgent Care Holdings, LLC or ACSH Urgent Care, purchased from Jason C. Junkins, M.D. all of the issued and outstanding shares of common stock of Mid-South Urgent Care, Inc., which operates an urgent care, walk-in medical business at three urgent care centers located in Alabama. The aggregate purchase price for the transaction was $1.5 million (subject to certain adjustments set forth in the purchase agreement), with $1.35 million paid in cash at closing and the remainder paid by delivery of a promissory note in the principal amount of $150,000. The note is payable in two equal principal installments of $75,000, plus accrued interest at the rate of 5% per annum, on the first and second annual anniversaries of the closing date.

These transactions are being accounted for using the acquisition method of accounting for business combinations in accordance with GAAP. Under this method, the total consideration transferred to consummate the acquisition is being allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition. The acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired and liabilities assumed. Accordingly, the allocation of the consideration transferred in the consolidated financial statements is preliminary and will be adjusted upon completion of the final working capital adjustments and valuation of the assets acquired and liabilities assumed. The final valuation for each acquisition is expected to be completed as soon as practicable but no later than 12 months after the closing date of the acquisition.

The following table summarizes the consideration paid for the acquisitions consummated during the nine months ended September 30, 2014 and presents the preliminary allocation of these amounts to the net tangible and identifiable intangible assets based on the estimated fair values as of the respective acquisition dates. The consideration paid has been adjusted, and may be subject to further adjustment under the respective purchase agreements on account of, among other things, working capital levels existing as of the acquisition dates. These allocations require the significant use of estimates and are based on the information that was available to management at the time these consolidated financial statements were prepared. The amounts in the table below are presented in thousands.



Acquisition Activity
	CorrectMed, LLC			Bay Walk-In Clinic, Inc.			Mid-South Urgent Care, Inc.			Total
Accounts receivable	$	221		$	153		$	147		$	521
Other current assets	27			—			25			52
Property and equipment	1,124			35			178			1,337
Identifiable intangible assets	297			357			408			1,062
Goodwill	1,948			1,690			1,184			4,822
Total assets acquired	3,617			2,235			1,942			7,794
Other liabilities assumed	(937		)	(77		)	(442		)	(1,456		)
Net assets acquired	$	2,680		$	2,158		$	1,500		$	6,338

The goodwill and other identifiable intangible assets generated from the CorrectMed and Bay Walk-In transactions are deductible for federal income tax purposes. The goodwill and other identifiable intangible assets generated from the Mid-South Urgent Care transaction are not deductible for federal income tax purposes. The Company recorded a deferred tax liability of approximately $227,000 related to the non-deductibility and the basis differences on acquired assets. As a result, the deferred tax asset valuation allowance was reduced $227,000, which is reflected as an income tax benefit on the Consolidated Statement of Operations for the three and nine months ended September 30, 2014.

Approximately $30,000 and $260,000 of transaction costs were incurred related to these acquisition during the three and nine months ended September 30, 2014, respectively. In addition, the Company incurred approximately $43,000 and $206,000 of transaction costs related to other acquisition activity during the three and nine months ended September 30, 2014, respectively.

The following table provides certain pro forma financial information for the Company as if the acquisition of the assets of CorrectMed had occurred on January 1, 2013. Pro forma information for Bay Walk-In and Mid-South Urgent Care was not included as meaningful quarterly data was not attainable.



(in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenues	$	6,452		$	7,301		$	18,555		$	23,416
Net loss	(1,507		)	(1,234		)	(4,608		)	(4,394		)

Loss per basic and diluted common share	$	(0.22	)	$	(0.22	)	$	(0.73	)	$	(0.77	)