3. Acquisitions

On July 14, 2016, Innodata’s MediaMiser subsidiary completed the acquisition of Agility from PR Newswire under an asset purchase agreement for a cash consideration of $4.1 million.

Agility is a leading global media contact database and media monitoring platform that helps customers target key influencers, amplify content and measure impact. The solution is offered as software-as-a-service (SaaS).

MediaMiser acquired Agility to foster growth in North America and Europe by bolstering MediaMiser’s media intelligence solutions and media databases, improving its media outreach capabilities, and delivering stronger, more data-powered media intelligence to clients. With the acquisition of Agility, MediaMiser is now one of only a handful of companies able to offer a global media contact dataset with integrated workflows for distribution, monitoring and measurement.

As this acquisition was effective on July 14, 2016, the results of operations of Agility are included in the condensed consolidated financial statements for the period beginning July 14, 2016. The transaction has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The excess of the purchase price over the net assets acquired was recorded as goodwill.

The Company has obtained third party valuations of certain intangible assets. The following table summarizes (in thousands) the preliminary purchase price allocation for the acquisition:

	Amount
Accounts receivable	$	795
Media contact database		3,610
Developed technology		994
Tradenames and trademarks		310
Total identifiable assets acquired		5,709

Accounts payable and accrued expenses		176
Accrued salaries, wages and related benefits		63
Deferred revenues		2,560
Income and other taxes		97
Total liabilities assumed		2,896
Net identifiable assets acquired		2,813
Goodwill	1,239
Net assets acquired	$	4,052

The estimated fair value of the media contact database and tradenames and trademarks intangible assets was determined using the “relief from royalty method” under the income approach, which is a valuation technique that provides an estimate of the fair value of an asset based on the cost savings that are available through ownership of the asset by the avoidance of paying royalties to license the use of the asset from another owner. The estimated fair value of the developed technology was determined based on the cost approach, which measures the value by the cost to reconstruct or replace the platform with another of like utility. Some of the more significant assumptions inherent in the development of these asset valuations include the projected revenue associated with the asset, the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, as well as other factors. The discount rate used to arrive at the present value of the media contact database and tradenames and trademarks at the acquisition date, was 13.5%. The remaining useful lives of the media contact database, developed technology, and tradenames and trademarks were based on historical product development cycles, the projected rate of technology migration, a market participant’s use of these intangible assets and the pattern of projected economic benefit of these intangible assets.

The amounts assigned to the media contact database, developed technology, tradenames and trademarks are amortized over the estimated useful life of 10 years.

The Company funded the purchase price from its available cash on hand. Transaction expenses amounted to $0.1 million and have been expensed.

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2015 (amount in thousands, except per share amounts). The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time or that may result in the future.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Revenues:
As reported	$	16,060	$	15,135	$	47,400	$	43,000
Proforma	$	16,280	$	16,410	$	50,900	$	46,650

Net income (loss) attributable to Innodata Inc. and Subsidiaries:
As reported	$	(2,766)	$	406	$	(4,541)	$	(2,233)
Proforma	$	(2,721)	$	389	$	(4,205)	$	(2,299)

Basic and diluted net income (loss) per share:
As reported	$	(0.11)	$	0.02	$	(0.18)	$	(0.09)
Proforma	$	(0.11)	$	0.02	$	(0.16)	$	(0.09)