3. Acquisitions of Businesses

During 2019, 2018 and 2017, the Company acquired a majority interest in the following multi-clinic physical therapy practices:

Acquisition	Date	% Interest Acquired			Number of Clinics

	2019
September 2019 Acquisition	September 30, 2019		67	%		11

	2018
August 2018 Acquisition	August 31		70	%		4

	2017
January 2017 Acquisition	January 1		70	%		17
May 2017 Acquisition	May 31		70	%		4
June 2017 Acquisition	June 30		60	%		9
October 2017 Acquisition	October 31		70	%		9

On September 30, 2019, the Company acquired a 67% interest in an eleven-clinic physical therapy practice. The purchase price for the 67% interest was $12.4 million, of which $12.1 million was paid in cash and $0.3 million in a seller note that is payable in two principal installments totaling $150,000 each, plus accrued interest in September 2020 and September 2021. The note accrues interest at 5.0% per annum.

On April 11, 2019, the Company acquired a company that is a provider of industrial injury prevention services. The acquired company specializes in delivering injury prevention and care, post offer employment testing, functional capacity evaluations and return-to-work services. It performs these services across a network of 45 states including onsite at eleven client locations. The business was then combined with Briotix Health, the Company’s industrial injury prevention operation, increasing the Company’s ownership position in the Briotix Health partnership to approximately 76.0%. The purchase price for the acquired company was $22.9 million ($23.6 million less cash acquired of $0.7 million), which consisted of $18.9 million in cash, (of which $0.5 million will be paid to certain shareholders), and a $4.0 million seller note. The note accrues interest at 5.5% and the principal and accrued interest is payable, on April 9, 2021.

The results of operations of the acquired clinics have been included in the Company’s consolidated financial statements since the date of their respective acquisition. The Company intends to continue to pursue additional acquisition opportunities, develop new clinics and open satellite clinics.

The purchase price for the 2019 acquisitions has been preliminarily allocated as follows (in thousands):

	IIPS*			Clinic Practice			Total
Cash paid, net of cash acquired ($900)	$	18,427		$	12,170		$	30,597
Payable to shareholders of seller		486			-			486
Seller note		4,000			300			4,300
Total consideration	$	22,913		$	12,470		$	35,383

Estimated fair value of net tangible assets acquired:
Total current assets	$	1,907		$	697		$	2,604
Total non-current assets		611			3,028			3,639
Total liabilities		(1,504	)		(2,846	)		(4,350	)
Net tangible assets acquired	$	1,014		$	879		$	1,893
Referral relationships		1,500			1,500			3,000
Non-compete		590			700			1,290
Tradename		2,500			1,600			4,100
Goodwill		17,309			14,021			31,330
Fair value of non-controlling interest (classified as redeemable non-controlling interests)		-			(6,230	)		(6,230	)
	$	22,913		$	12,470		$	35,383

* Industrial injury prevention services

On August 31, 2018, the Company acquired a 70% interest in a four-clinic physical therapy practice. The purchase price for the 70% interest was $7.3 million in cash and $0.4 million in a seller note that is payable in two principal installments totaling $200,000 each, plus accrued interest. The first installment was paid in cash in August 2019 and the second installment remains payable in August 2020.

On April 30, 2018, the Company acquired a 65% interest in another business in the industrial injury prevention sector. The aggregate purchase price for the 65% interest was $8.6 million in cash and $400,000 in a seller note that was paid on April 30, 2019. On April 30, 2018, the Company combined its two businesses. After the combination, the Company owned a 59.45% interest in the combined business, Briotix Health. See discussion above regarding an additional acquisition on April 30, 2019 in the industrial injury prevention business.

In addition, during 2018, the Company, through several of its majority owned Clinic Partnerships, acquired five separate clinic practices. These practices operate as satellites of the existing Clinic Partnership. The aggregate purchase price was $1.0 million inclusive of cash of $850,000 and a note payable of $150,000. The note accrued interest at 4.5% and the principal and accrued interest, was paid in cash on August 31, 2019.

The purchase price for the 2018 acquisitions were allocated as follows (in thousands):

Cash paid, net of cash acquired ($372)	$	16,367
Seller notes		950
Total consideration	$	17,317

Estimated fair value of net tangible assets acquired:
Total current assets	$	1,633
Total non-current assets		305
Total liabilities		(525	)
Net tangible assets acquired	$	1,413
Referral relationships		2,926
Non-compete		298
Tradename		990
Goodwill		19,835
Fair value of non-controlling interest (classified as redeemable non-controlling interests)		(8,145	)
	$	17,317

On January 1, 2017, the Company acquired a 70% interest in a seventeen-clinic physical therapy practice. The purchase price for the 70% interest was $10.7 million in cash and $0.5 million in a seller note that was payable in two principal installments totaling $250,000 each, plus accrued interest. The first installment was paid in January 2018 and the second installment in January 2019.

On May 31, 2017, the Company acquired a 70% interest in a four-clinic physical therapy practice. The purchase price for the 70% interest was $2.3 million in cash and $250,000 in a seller note that was payable in two principal installments totaling $125,000 each, plus accrued interest. The first installment was paid in May 2018 and the second installment in May 2019.

On June 30, 2017, the Company acquired a 60% interest in a nine-clinic physical therapy practice. The purchase price for the 60% interest was $15.8 million in cash and $0.5 million in a seller note that was payable in two principal installments totaling $250,000 each, plus accrued interest. The first installment was paid in June 2018 and the second installment in June 2019.

On October 31, 2017, the Company acquired a 70% interest in a nine-clinic physical therapy practice and two management contracts with third party providers. The purchase price for the 70% interest was $4.0 million in cash and $0.5 million in a seller note that was payable in two principal installments totaling $250,000 each, plus accrued interest. The first installment was paid in October 2018 and the second installment in October 2019.

Also, in 2017, the Company purchased the assets and business of two physical therapy clinics in separate transactions. One clinic was consolidated with an existing clinic and the other operates as a satellite clinic of one of the existing partnerships.

The purchase price for the 2017 acquisitions were allocated as follows (in thousands):

Cash paid, net of cash acquired ($2,297)	$	36,682
Seller notes		2,150
Total consideration	$	38,832
Estimated fair value of net tangible assets acquired:
Total current assets	$	5,853
Total non-current assets		1,527
Total liabilities		(2,865	)
Net tangible assets acquired	$	4,515
Referral relationships		4,250
Non-compete		660
Tradename		6,850
Goodwill		46,722
Fair value of non-controlling interest (classified as redeemable non-controlling interests)		(13,883	)
Fair value of non-controlling interest (originally classified as mandatorily redeemable non-controlling interests)		(10,282	)
	$	38,832

The finalized purchase prices plus the fair value of the non-controlling interests for the acquisition in 2018 and 2017 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, i.e. trade names, referral relationships and non-compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For the acquisitions in 2019, the Company is in the process of completing its formal valuation analysis to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed. Thus, the final allocation of the purchase price may differ from the preliminary estimates used at December 31, 2019 based on additional information obtained and completion of the valuation of the identifiable intangible assets. Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments to goodwill. The Company does not expect the adjustments to be material.

For the acquisitions in 2019, the values assigned to the referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. For referral relationships, the amortization period is 11.0 years. For non-compete agreements, the amortization period is 6.0 years. The values assigned to tradenames are tested annually for impairment.

For the acquisitions in 2018 and 2017, the values assigned to the referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. For referral relationships, the weighted average amortization period was 10.54 and 10.10 years at December 31, 2018 and December 31, 2017, respectively. For non-compete agreements, the weighted average amortization period was 6.00 and 5.16 years at December 31, 2018 and December 31, 2017, respectively. Generally, the values assigned to tradenames are tested annually for impairment.

For the 2019, 2018 and 2017 acquisitions, total current assets primarily represent patient accounts receivable. Total non-current assets are fixed assets, primarily equipment, used in the practices.

The consideration paid for each of the acquisitions was derived through arm’s length negotiations. Funding for the cash portions was derived from proceeds from the Company’s revolving credit facility. The results of operations of the acquisitions have been included in the Company’s consolidated financial statements since their respective date of acquisition. Unaudited proforma consolidated financial information for the acquisitions in 2019, 2018 and 2017 acquisitions have not been included as the results, individually and in the aggregate.