Related Party Transactions

12 Months Ended

Dec. 31, 2016

16. Related Party Transactions

We are a party to three agreements with companies controlled by a non-management investor in the Company:

•

During the fiscal years ended December 31, 2016, 2015, and 2014, the Company purchased software development services pursuant to a technology services agreement with DevFactory FZ-LLC, in the amount of $2.3 million, $2.1 million, and $2.1 million, respectively. In January 2014, the Company issued 1,803,574 shares of common stock to this company in connection with the amendment of such technology services agreement and took a noncash charge of $11.2 million recorded in research and development expenses. The Company has an outstanding purchase commitment in 2017 for software development services pursuant to a technology services agreement in the amount of $2.5 million. The agreement has an initial term that expires on December 31, 2017, with an option for either party to renew annually for up to five years. For years after 2017, the purchase commitment amount for software development services will be equal to the prior year purchase commitment increased (decreased) by the percentage change in total revenue for the prior year as compared to the preceding year. For example, if 2017 total revenues increase by 10% as compared to 2016 total revenues, then the 2018 purchase commitment will increase by approximately $250,000 from the 2017 purchase commitment amount to approximately $2.8 million. At December 31, 2016 and 2015, amounts included in accounts payable owed to this company totaled $0.6 million and $0.7 million, respectively.


•	In 2016, the Company purchased approximately $1.8 million in services from Crossover, Inc. While there are no purchase commitments with this company, the Company continues to use their services in 2017.

•

On March 14, 2016, Upland completed its purchase of substantially all of the assets of HipCricket, Inc., a cloud-based mobile messaging software provider, and completed the transfer of its EPM Live product business. Prior to the transaction, HipCricket was owned by an affiliate of ESW Capital, LLC, which is a shareholder of Upland. Raymond James & Co. provided a fairness opinion to Upland in connection with the transaction. Refer to Note 3 for a description of the transaction. Relating to this transaction, the Company is providing certain transition services to and receiving certain transition services from the affiliate. The cost offsets earned by the Company for these services during the twelve months ended December 31, 2016 totaled $706,000 and the fees owed to the affiliate by the Company for these services during the twelve months ended December 31, 2016 totaled $112,000.

When the Company receives requested services as detailed by statements of work pursuant to the software development agreement, it determines whether such software development costs should be capitalized as either internally-used software or software to be sold or otherwise marketed. If such costs are not capitalizable, the Company expenses such costs as the services are received. If the Company anticipates that it will not utilize the full amount of the annual minimum fee, the estimated unused portion of the annual minimum fee is expensed at that time.

The Company has an arrangement with a former subsidiary to provide management, human resource/payroll and administrative services, for which the company received fees during 2016 totaled $360,000 and are expected to be similar in 2017.