3. Acquisition

On September 1, 2013 ACC acquired certain assets, excluding working capital, of a medical clinic in Los Angeles, California. We accounted for the acquisition as a business combination using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the purchase date and be recorded on the balance sheet. The process for estimating the fair values of identifiable intangible assets involves the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. Transaction costs are not included as a component of consideration transferred and were expensed as incurred. The related transaction costs expensed for the three months and nine months ended October 31, 2013 were approximately $10,000.

The acquisition-date fair value of the consideration transferred consisted of the following items:

Cash consideration	$	100,000
Promissory note due to seller		125,000
Total purchase consideration	$	225,000

Fair Value Estimate of Asset Acquired and Liability Assumed

The total purchase consideration is allocated to the acquisition of the net tangible and intangible assets based on their estimated fair values as of the closing date. The allocation of the total purchase price to the net assets acquired is as follows:

Goodwill	$	225,000
Total fair value of assets acquired		225,000
Promissory note, net		125,000
Net assets acquired	$	100,000

Property and equipment fair value was determined using their historical cost adjusted for usage and management estimates.

The promissory note issued will be paid in installments of $15,000 per month for ten months commencing 90 days from the closing date under a non-interest bearing promissory note to be secured by the assets of the clinic. The Company determined the fair value of the note using an interest rate of 26.3% per annum to discount future cash flows, which is based on the cost of recent debt issuances of Apollo (Note 5).

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the acquisition includes benefits that the Company believes will result from gaining additional expertise and intellectual property in the clinical care area and expand the reach of its Maverick Medical Group IPA. Goodwill is not amortized and is not deductible for tax purposes.

We do not consider this acquisition to be a material business combination and, therefore, have not disclosed the pro forma results of operations as required for material business combinations.

The recorded purchase price amounts are preliminary and subject to change as we are awaiting additional information related to acquired intangible assets and note discount. The effects of final adjustments, if any, on the purchase price allocation are not expected to be material.