ACQUISITIONS

During the year ended December 31, 2014, the Company completed four acquisitions. The acquisitions intend to allow the Company to expand into desirable geographic locations, complement the existing vertical markets, increase the volume of revenue and create new offerings of services currently provided. These acquisitions have been accounted for using the acquisition method for recording business combinations. Acquisitions are settled in cash and/or stock where a portion of the settlement price may be deferred. In some cases, purchase agreements contain contingent consideration in a form of an earnout obligation. The table below discloses respective details of each acquisition.



Name of Acquisition	Effective Date of Acquisition	Common Shares		Fair Value of Common Shares				Cash, Net of Working Capital and Other Adjustments				Recorded Earnout Payable				Total Recorded Purchase Price		Maximum Potential Earnout Payable
Name of Acquisition	Effective Date of Acquisition	Issued	Deferred	Issued		Deferred		Paid		Deferred		Cash		Stock		Total Recorded Purchase Price		Maximum Potential Earnout Payable
		(in shares)		(in thousands)
Netsoft	March 5, 2014	—	—	$	—	$	—	$	2,373	$	1,022	$	1,825	$	—	$	5,220	$	1,825
Jointech	April 30, 2014	—	89,552	—		2,788		10,000		4,000		15,000		5,000		36,788		20,000
GGA (1)	June 6, 2014	—	—	—		—		14,892		—		11,400		—		26,292
Great Fridays	October 31, 2014	—	—	—		—		10,854		—		1,173		—		12,027		1,173
		—	89,552	$	—	$	2,788	$	38,119	$	5,022	$	29,398	$	5,000	$	80,327




(1)	The amount of the maximum potential earnout payable to GGA, if any, is not limited based on the terms of the purchase agreement.

Common shares issued in connection with acquisitions are valued at closing market prices as of the effective date of the respective acquisition. The maximum potential earnouts payable disclosed in the foregoing table represent the maximum amount of additional consideration that could be paid pursuant to the terms of the purchase agreement for the applicable acquisition. The amounts recorded as earnouts payable, which are based upon the estimated future operating results of the acquired businesses within a seven-to twelve-month period subsequent to the acquisition date, are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration in the foregoing table. The Company will record subsequent changes in the fair value of the earnout obligations, if any, in its consolidated income from operations. Please see Note 17 for discussion around significant inputs and assumptions relating to the earnout obligation.

Netsoft — On March 5, 2014, the Company completed an acquisition of substantially all of the assets and assumed certain specific liabilities of U.S.-based healthcare technology consulting firm Netsoft Holdings LLC and Armenia-based Ozsoft, LLC (collectively, “Netsoft”). As a result of this transaction, substantially all of the employees of Netsoft, including approximately 40 IT professionals, accepted employment with the Company. In connection with the Netsoft acquisition, the Company agreed to issue a total of 2,289 restricted shares of Company common stock as consideration for future services to key management and employees of Netsoft (the “Netsoft Closing Shares”). The Company agreed to pay a deferred consideration, partially paid in stock of 9,154 restricted shares of Company common stock. Furthermore, subject to attainment of certain performance targets defined in the purchase agreement, the Company will issue 16,349 restricted shares of Company common stock (collectively with the Netsoft Closing Shares and deferred shares, the “Netsoft Employment Shares”). The Netsoft Employment Shares will vest in equal annual installments over a three-year period starting from the date of acquisition. All unvested shares will be forfeited upon termination of services by the Company for cause or by the employee other than for good reason. The Netsoft Employment Shares had an estimated value of $1,017 at the time of grant and will be recorded as stock-based compensation expense over an associated service period of three years (Note 14). Under the terms of this agreement, all of the Netsoft Closing Shares, as well as $256, were placed in escrow for a period of 18 months as security for the indemnification obligations of the sellers under the asset purchase agreement.

Jointech — On April 30, 2014, the Company acquired all of the outstanding equity of Joint Technology Development Limited, a company organized under the laws of Hong Kong, including its wholly-owned subsidiaries Jointech Software (Shenzhen) Co., Ltd., a company organized under the laws of China, and Jointech Software Pte. Ltd., a company organized under the laws of Singapore (collectively, “Jointech”). Jointech provides strategic technology services to multi-national organizations in investment banking, wealth and asset management. As a result of this transaction, substantially all employees of Jointech, including approximately 216 IT professionals, accepted employment with the Company. In connection with the Jointech acquisition, the Company agreed to issue a total of 89,552 shares of the Company common stock to a former owner of Jointech as consideration for future services on or about the six-month anniversary from the date of acquisition (the “Jointech Closing Shares”). Furthermore, the Company will pay to that former owner up to a maximum of $5,000 in shares of Company common stock determined based on the average closing price per share for the 30-trading day period preceding April 1, 2015 (collectively with the Jointech Closing Shares, the “Jointech Employment Shares”). The Jointech Employment Shares will vest in equal annual installments over a three-year period starting from the date of acquisition. All unvested Jointech Employment Shares will be forfeited upon termination of services for cause by the Company or other than for good reason (as applicable) by either of the two former owners of the acquired business. The aggregate fair value of the Jointech Employment Shares at the date of grant was $7,788 and will be recorded as stock-based compensation expense over an associated service period of three years (Note 14).

Under the terms of the agreement, 15% of the total purchase price, in cash and stock, including the Jointech Employment Shares, was placed in an escrow account for a period of 18 months as security for the indemnification obligations of the sellers under the stock purchase agreement.

GGA — On June 6, 2014, the Company acquired substantially all of the assets and assumed certain specific liabilities of GGA Software Services, LLC, Institute of Theoretical Chemistry, Inc., and GGA’s Russian affiliate (collectively, “GGA”). Established in 1994, GGA develops scientific informatics applications and content databases; creates state-of-the-art algorithms and models; and delivers IT support, maintenance, and QA services to the world’s leading healthcare and life sciences companies. As a result of this transaction, substantially all employees of GGA, including approximately 329 IT professionals and 126 scientists, accepted employment with the Company. In connection with the GGA acquisition, the Company agreed to issue a total of 262,277 shares of the Company common stock to the former owners of GGA as consideration for future services (the “GGA Closing Shares”). Furthermore, subject to attainment of specified performance targets, the Company will issue to the former owners of GGA shares of its common stock based on the formula provided in the purchase agreement (collectively with GGA Closing Shares, the “GGA Employment Shares”). The GGA Employment Shares will vest in equal annual installments over a three-year period starting from the date of acquisition. With respect to each former owner, all unvested shares will be forfeited upon either termination of services by the Company for cause or by the employee other than for good reason. The aggregate fair value of the GGA Employment Shares at the date of grant was $20,655 and will be recorded as stock-based expense over an associated service period of three years (Note 14). Under the terms of the agreement, a total of 102,631 of the GGA Employment Shares were placed into an escrow account as security for the indemnification obligations of the sellers under the asset purchase agreement.

Great Fridays — On October 31, 2014, the Company acquired 100% of the equity interests of Great Fridays Limited and its subsidiaries with intent to expand the Company's product and design service portfolio. Great Fridays Limited, headquartered in Manchester, UK, with offices in London, San Francisco and New York, focuses on bridging the gap between business and design. The acquisition of Great Fridays added approximately 50 creative design professionals to the Company's headcount.

In connection with the Great Fridays acquisition, the Company agreed to issue a total of 90,864 shares of the Company common stock to the former owners of Great Fridays as consideration for future services (the “Great Fridays Closing Shares”). Furthermore, subject to attainment of specified performance targets, the Company will pay the former owners of Great Fridays up to a maximum of 10,092 shares of the Company common stock (collectively with Great Fridays Closing Shares, the “GF Employment Shares”). The GF Employment Shares will vest in equal annual installments over a three-year period starting from the date of acquisition. With respect to each former owner, all unvested shares will be forfeited upon either termination of services by the Company for cause or by the employee other than for good reason. The aggregate fair value of the GF Employment Shares at the date of grant was $4,823 and will be recorded as stock-based compensation expense over an associated service period of three years (Note 14). Under the terms of the agreement, a total of 28,390 of the GF Employment Shares were placed into an escrow account as security for the indemnification obligations of the sellers under the asset purchase agreement.

The following is a summary of the preliminary estimated fair values of the net assets acquired at the date of each respective acquisition during the year ended December 31, 2014 as originally reported in the quarterly condensed consolidated financial statements and at December 31, 2014:



	Netsoft				Jointech				GGA				Great Fridays		Total
	At Originally Reported		At December 31, 2014		As Originally Reported		At December 31, 2014		As Originally Reported		At December 31, 2014		At December 31, 2014		As Originally Reported		At December 31, 2014
Cash and cash equivalents	$	—	$	—	$	871	$	871	$	—	$	—	$	259	$	1,130	$	1,130
Trade receivables and other current assets	788		788		784		784		5,157		5,471		1,825		8,554		8,868
Property and equipment and other long-term assets	52		52		338		338		444		444		262		1,096		1,096
Deferred tax asset	351		—		—		—		4,463		—		—		4,814		—
Acquired intangible assets	1,700		1,700		25,744		22,485		10,959		10,959		5,747		44,150		40,891
Goodwill	2,776		2,749		11,033		17,404		6,496		12,115		6,947		27,252		39,215
Total assets acquired	5,667		5,289		38,770		41,882		27,519		28,989		15,040		86,996		91,200
Accounts payable and accrued expenses	69		69		728		728		2,593		2,593		872		4,262		4,262
Deferred revenue	—		—		—		—		—		104		317		317		421
Due to employees	—		—		1,254		1,254		—		—		624		1,878		1,878
Deferred tax liability	—		—		—		3,112		—		—		1,200		1,200		4,312
Total liabilities assumed	69		69		1,982		5,094		2,593		2,697		3,013		7,657		10,873
Net assets acquired	$	5,598	$	5,220	$	36,788	$	36,788	$	24,926	$	26,292	$	12,027	$	79,339	$	80,327

The above estimated fair values of the assets acquired and liabilities assumed are provisional and based on the information that was available as of the acquisition date and updated for any changes as of December 31, 2014. During the year ended December 31, 2014, the following updates were made to the initially reported balances with some of the adjustments being reported in the third quarter between goodwill and deferred tax accounts.

For Netsoft, the deferred tax asset and goodwill were adjusted and decreased the net assets acquired by $378. For Jointech, intangible assets were adjusted to reflect the results of a preliminary valuation report obtained and a deferred tax liability was established, both increasing goodwill with no change to the net assets acquired. For GGA, additional accounts receivable and deferred revenue were recognized, deferred tax assets were netted with recognized deferred tax liabilities, and the final working capital adjustment was completed, which in aggregate increased the net assets acquired by $1,366.

The Company is gathering additional information necessary to finalize the estimated fair values of intangible assets, deferred income taxes, and other asset and liability amounts. The fair values reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the respective acquisition dates.

The following table presents the estimated fair values and useful lives of intangible assets acquired during the year ended December 31, 2014:



	Netsoft			Jointech			GGA			Great Fridays
	Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount
Customer relationships	10	$	1,700	10	$	22,173	10	$	10,959	10	$	5,747
Trade names	—	—		2	312		—	—		—	—
Total		$	1,700		$	22,485		$	10,959		$	5,747

The following is a summary of revenues, net income and acquisition-related costs included in the consolidated statements of income and comprehensive income for the year ended December 31, 2014:



	For the Year Ended December 31, 2014
	Netsoft			Jointech				GGA			Great Fridays				Total
Revenues	$	5,068		$	13,060			$	19,809		$	1,821			$	39,758
Net Income	806		¹	(3,090		)	²	822		³	(72		)	⁴	(1,534		)
Acquisition-related costs	$	75		$	361			$	325		$	24			$	785


(1)	Included in net income is $252 of stock-based compensation expense related to the Netsoft Employment Shares for the year ended December 31, 2014.


(2)	Included in net income is $1,738 of stock-based compensation expense related to the Jointech Employment Shares for the year ended December 31, 2014.


(3)	Included in net income is $4,322 of stock-based compensation expense related to the GGA Employment Shares for the year ended December 31, 2014.


(4)	Included in net income is $239 of stock-based compensation expense related to the Great Fridays Employment Shares for the year ended December 31, 2014.

Aggregate revenues generated by the acquired companies for the year ended December 31, 2013, were approximately $46.5 million. Pro forma results of operations for the acquisition transactions were not presented because the effects of the acquisitions were not material to the Company’s consolidated results of operation, individually or in the aggregate.