4. Acquisitions

Jacobs Trading Acquisition

On October 1, 2011, LSI completed its acquisition of the assets of Jacobs Trading, LLC. The acquisition price included an upfront cash payment of $80.0 million, a seller subordinated 5% unsecured note of $40.0 million, which the Company paid in full in November 2012, the issuance of 900,171 shares of restricted stock (valued at $24.5 million by applying a 15% discount to the Company's closing share price on September 30, 2011) and an earn-out payment. The stock consideration contained a restriction that it is not freely tradable for six months following the acquisition date and the Company used the put option analysis method to fair value the stock. Under the terms of the agreement, the earn-out is based on EBITDA earned by Jacobs during the trailing 12 months ending December 31, 2012 and 2013. The Company's estimate of the fair value of the earn-out as of October 1, 2011 was $8.3 million out of a possible total earn out payment of $30.0 million. During 2012, based on the performance of the business and revised projections, the Company accrued an additional $6.2 million for the earn-out. As of September 30, 2012, the fair value of the earn-out was $14.5 million. During the three months ended December 31, 2012, based on the performance of the business and revised projections, the Company accrued an additional $5.1 million and paid out $17.4 million. During the three months ended March 31, 2013, the Company paid out the remaining $2.2 million earn-out out under the 2012 target. Based on the performance of the business and projections in comparison to the elevated earn-out targets for calendar year 2013 relative to the targets for calendar year 2012, the Company believes the fair value of the calendar year 2013 earn-out as of September 30, 2013 is zero.

The total estimated purchase price is allocated to Jacobs' net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of October 1, 2011, the effective date of the acquisition of Jacobs. The purchase price was allocated as follows:

	Consideration Amount
	(in thousands)
Accounts receivable	$	4,710
Inventory		6,059
Prepaid expenses		120
Goodwill		110,226
Vendor contract intangible asset		33,300
Covenants not to compete		2,400
Property and equipment		847
Accounts payable		(1,837	)
Accrued liabilities		(3,101	)

Total consideration	$	152,724

Goodwill, which is deductible for tax purposes due to the asset purchase structure, was created as part of the acquisition as the Company acquired an experienced and knowledgeable workforce. The amount of revenue included in the 2013 and 2014 consolidated statement of operations related to JacobsTrading was $99.8 million and $93.3 million, respectively. The related supplemental pro forma information was not significant and it is impracticable for the Company to determine and disclose the amount of earnings for this acquisition.

GoIndustry Acquisition

In July 2012, the Company completed its purchase of GoIndustry-DoveBid plc, a public limited company incorporated under the laws of England and Wales ("GoIndustry"), for 73 pence per share ($11.6 million). GoIndustry is a global provider of surplus asset management, auction and valuation services operating in over 25 countries in North America, Europe and Asia. The acquisition expands the Company's client roster with leading global manufacturers across the aerospace, consumer packaged goods, electronics, pharmaceutical, technology and transportation industry verticals.

The total purchase price is allocated to GoIndustry's net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of July 1, 2012, the effective date of the acquisition of GoIndustry. Based on management's estimate of the fair value of tangible and intangible assets acquired and liabilities assumed, the purchase price was allocated as follows:

	Consideration Amount
	(in thousands)
Cash	$	10,091
Accounts receivable		3,987
Inventory		297
Prepaid expenses and deposits		1,075
Goodwill		34,152
Brand and technology intangible assets		4,877
Property and equipment		354
Accounts payable		(5,788	)
Accrued liabilities		(11,087	)
Pension liability		(6,468	)
Due to customers		(19,017	)
Other liabilities		(846	)

Total consideration	$	11,627

Goodwill was created as part of the acquisition as the Company acquired an experienced and knowledgeable workforce, of which approximately $5.5 million of the goodwill and all of the intangible assets are expected to be tax deductible, as a result of the structure of the transaction. The amount of revenue included in the 2013 and 2014 consolidated statement of operations related to GoIndustry was $38.6 million and $36.8 million, respectively. The related supplemental pro forma information was not significant and it is impracticable for the Company to determine and disclose the amount of earnings for this acquisition.

National Electronic Service Association (NESA)

On November 1, 2012, the Company acquired the assets and assumed liabilities of National Electronic Service Association (NESA) in an all cash transaction. The acquisition price included an upfront cash payment of approximately $18.3 million and an earn-out payment. Under the terms of the agreement, the earn-out is based on EBITDA earned by NESA during the 36-48 months after closing. EBITDA growth used in the calculation is capped at 20% of prior period. The Company's estimate for the total payout ranges from zero to a maximum of $37.7 million. The Company's estimate of the fair value of the earn-out as of the date of acquisition was $18.0 million. Based upon revised projections, the Company determined that the fair value of the earn-out as of June 30, 2104 was zero and reversed the liability of $18.6 million with a corresponding reduction (credit) in the Acquisition Costs line in the Consolidated Statement of Operations for the year ended September 30, 2014. The Company continues to believe the fair value of the earn-out is zero as of September 30, 2014. NESA is a Canadian provider of returns management, refurbishment and reverse logistics services for high-value consumer products. NESA provides expertise and focused services to Fortune 1000 companies in the management of Consumer Electronics, Telecommunications, and Information Technology products.

Under the acquisition method of accounting, the total estimated purchase price is allocated to NESA's net tangible and intangible assets acquired based on their estimated fair values as of November 1, 2012. Based on management's valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, the purchase price was allocated as follows:

	Consideration Amount
	(in thousands)
Cash	$	3,760
Goodwill		27,009
Vendor contract intangible asset		3,936
Covenants not to compete		1,400
Other intangible asset		225
Property and equipment		234
Accrued liabilities		(204	)

Total consideration	$	36,360

Goodwill was created as part of the acquisition as the Company acquired an experienced and knowledgeable workforce, 75% of which is expected to be tax deductible as a result of the asset purchase structure of the transaction. The amount of revenue from NESA since the acquisition date and related supplemental pro forma information is not significant and it is impracticable for us to determine the amount of earnings for NESA.