ACQUISITIONS

The Company’s acquisitions allow it to expand into desirable geographic locations, complement its existing vertical markets, increase revenue and create new service offerings. Acquisitions were settled in cash and/or stock where a portion of the settlement price may have been deferred. For some transactions, purchase agreements contain contingent consideration in the form of an earnout obligation.

2015 Acquisitions

NavigationArts — On July 10, 2015, the Company acquired all of the outstanding equity of NavigationArts, Inc. and its subsidiary, NavigationArts, LLC (collectively “NavigationArts”). The U.S.-based NavigationArts provided digital consulting, architecture and content solutions and was regarded as a leading user-experience agency. The acquisition of NavigationArts added approximately 90 design consultants to the Company’s headcount. In connection with the NavigationArts acquisition the Company paid $28,747 as cash consideration, of which $2,670 was placed in escrow for a period of 18 months as security for the indemnification obligations of the sellers under the terms of the stock purchase agreement. In the first quarter of 2016, the Company decided to make a 338(h)(10) election to treat the NavigationArts acquisition as an asset purchase for tax purposes. As a result, during the second quarter of 2016 the Company paid an additional $1,797 to the sellers of NavigationArts, as provided for in the stock purchase agreement. The acquired goodwill that is deductible for tax purposes was $23,794 as of the date of the acquisition.

AGS — On November 16, 2015, the Company acquired all of the outstanding equity of Alliance Consulting Global Holdings, Inc including its wholly-owned direct and indirect subsidiaries Alliance Global Services, Inc., Alliance Global Services, LLC, companies organized under the laws of the U.S., and Alliance Global Services IT India, a company organized under the laws of India (collectively, “AGS”). AGS provided software product development services and test automation solutions and had multiple locations in the United States and India. The acquisition of AGS added 1,151 IT professionals to the Company’s headcount in the United States and India. In connection with the AGS acquisition the Company paid $51,717 as cash consideration, of which $5,000 was placed in escrow for a period of 15 months as security for the indemnification obligations of the sellers under the terms of the stock purchase agreement.

The following is a summary of the estimated fair values of the net assets acquired at the date of each respective acquisition as originally reported during the year 2015 and at December 31, 2016:



	NavigationArts				AGS				Total
	As Originally Reported		Final as of September 30, 2016		As Originally Reported		Final as of December 31, 2016		As Originally Reported		Final as of December 31, 2016
Cash and cash equivalents	$	1,317	$	1,317	$	1,727	$	1,727	$	3,044	$	3,044
Accounts receivable and other current assets	3,920		3,920		10,600		9,934		14,520		13,854
Property and equipment and other long-term assets	230		230		1,665		1,600		1,895		1,830
Deferred tax assets	—		—		4,996		5,722		4,996		5,722
Acquired intangible assets	1,500		2,800		10,000		22,700		11,500		25,500
Goodwill	23,822		23,794		33,815		24,454		57,637		48,248
Total assets acquired	30,789		32,061		62,803		66,137		93,592		98,198
Accounts payable and accrued expenses	871		871		3,087		2,760		3,958		3,631
Bank loans and other long-term liabilities	—		—		—		295		—		295
Deferred revenue	50		50		1,049		1,049		1,099		1,099
Due to employees	596		596		3,010		2,342		3,606		2,938
Deferred tax liabilities	525		—		3,800		7,974		4,325		7,974
Total liabilities assumed	2,042		1,517		10,946		14,420		12,988		15,937
Net assets acquired	$	28,747	$	30,544	$	51,857	$	51,717	$	80,604	$	82,261

As of December 31, 2016, and during the period since the date of each respective acquisition up through December 31, 2016, or the date purchase accounting was finalized, as applicable, the Company made updates to the initially reported acquired balances and has finalized the valuation of the balances of NavigationArts and AGS. For NavigationArts, finalization of the purchase price allocation included adjustments to intangible assets to reflect the results of a final valuation report as well as certain adjustments made to goodwill and deferred tax liabilities as a result of the 338(h)(10) election to treat the NavigationArts acquisition as an asset purchase for tax purposes, increasing net assets acquired by $1,797. For AGS the Company made adjustments to goodwill, intangible assets, deferred taxes and working capital, resulting in a decrease of $140 to the net assets acquired, as well as reclassified certain liabilities out of accrued expenses into a separate category.

The adjustments identified above did not significantly impact our previously reported net income of prior periods and, as such, prior period amounts have not been retrospectively adjusted.

The following table presents the estimated fair values and useful lives of intangible assets acquired during the year ended December 31, 2015:



	NavigationArts			AGS
	Weighted Average Useful Life (in years)	Amount		Weighted Average Useful Life (in years)	Amount
Customer relationships	10	$	2,800	10	$	22,700
Total		$	2,800		$	22,700

2014 Acquisitions

The following table discloses details of purchase price consideration of each of the 2014 acquisitions:



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	—	—	$	—	$	—	$	2,403	$	1,022	$	1,825	$	—	$	5,250	$	1,825
Jointech	April 30, 2014	—	89,552	—		2,788		10,000		4,000		15,000		5,000		36,788		20,000
GGA*	June 6, 2014	—	—	—		—		14,892		—		11,400		—		26,292
Great Fridays	October 31, 2014	—	—	—		—		10,777		—		1,173		—		11,950		1,173
		—	89,552	$	—	$	2,788	$	38,072	$	5,022	$	29,398	$	5,000	$	80,280

* Earn-out for GGA had no maximum limit. The determination period ended as of December 31, 2014.

Common shares issued in connection with acquisitions, if applicable, are valued at closing market prices as of the effective date of the applicable acquisition. The maximum potential earnout payables 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 earnout payables, 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 records any subsequent changes in the fair value of the earnout obligations in its consolidated income from operations. Please see Note 17 for discussion of significant inputs and assumptions relating to the earnout obligations. All earnout obligations for these acquisitions have been settled.

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 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 deferred consideration consisting partly of 9,154 restricted shares of Company common stock. During the first quarter of 2015, the Company issued 16,349 restricted shares of Company common stock to Netsoft for achieving certain performance targets (collectively with the Netsoft Closing Shares, the “Netsoft Employment Shares”). The Netsoft Employment Shares 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 were recorded as stock-based compensation expense over an associated service period of three years (Note 14). The acquired goodwill that is deductible for tax purposes was $924 as of the date of the acquisition: this amount excludes additional tax deductible amounts resulting from vesting of the employment shares.

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 issued 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, during the second quarter of 2015, the Company issued 83,057 restricted shares of Company common stock to Jointech for achieving certain performance targets (collectively with the Jointech Closing Shares, the “Jointech Employment Shares”). The Jointech Employment Shares 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).

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 262,277 shares of the Company common stock to the former owners of GGA as consideration for future services (the “GGA Closing Shares”). Furthermore, during the second quarter of 2015, the Company issued 233,753 restricted shares of Company common stock to the former owners of GGA for achieving certain performance targets (collectively with the GGA Closing Shares, the “GGA Employment Shares”). The GGA Employment Shares 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). The acquired goodwill that is deductible for tax purposes was $7,306 as of the date of the acquisition; this amount excludes additional tax deductible amounts resulting from vesting of the employment shares.

Great Fridays — On October 31, 2014, the Company acquired all of the outstanding equity 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 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, during the second quarter of 2015, subject to attainment of specified performance targets, the Company issued to the former owners of Great Fridays 10,092 shares of the Company common stock (collectively with Great Fridays Closing Shares, the “GF Employment Shares”). The GF Employment Shares 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).

The following is a summary of the 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, 2015:



	Netsoft				Jointech				GGA				Great Fridays				Total
	As Originally Reported		Final as of March 31, 2015		As Originally Reported		Final as of June 30, 2015		As Originally Reported		Final as of June 30, 2015		As Originally Reported		Final as of December 31, 2015		As Originally Reported		Final as of December 31, 2015
Cash and cash equivalents	$	—	$	—	$	871	$	871	$	—	$	—	$	259	$	259	$	1,130	$	1,130
Trade receivables and other current assets	788		788		784		784		5,157		5,377		1,825		1,825		8,554		8,774
Property and equipment and other long-term assets	52		52		338		338		444		306		262		262		1,096		958
Deferred tax assets	351		—		—		—		4,463		—		—		—		4,814		—
Acquired intangible assets	1,700		1,700		25,744		15,312		10,959		16,000		5,747		200		44,150		33,212
Goodwill	2,776		2,779		11,033		23,758		6,496		7,306		6,947		11,262		27,252		45,105
Total assets acquired	5,667		5,319		38,770		41,063		27,519		28,989		15,040		13,808		86,996		89,179
Accounts payable and accrued expenses	69		69		728		728		2,593		2,593		872		807		4,262		4,197
Deferred revenue	—		—		—		—		—		104		317		317		317		421
Due to employees	—		—		1,254		1,254		—		—		624		624		1,878		1,878
Deferred tax liabilities	—		—		—		2,293		—		—		1,200		110		1,200		2,403
Total liabilities assumed	69		69		1,982		4,275		2,593		2,697		3,013		1,858		7,657		8,899
Net assets acquired	$	5,598	$	5,250	$	36,788	$	36,788	$	24,926	$	26,292	$	12,027	$	11,950	$	79,339	$	80,280

As of December 31, 2015 the fair values of the assets acquired and liabilities assumed and the related purchase price allocation for the 2014 acquisitions have been finalized.

As of December 31, 2015, and during the period since the date of each respective acquisition up through December 31, 2015, or the date purchase accounting was finalized, as applicable, the Company made updates to the initially reported acquired balances and has finalized the valuation of the balances of Netsoft, Jointech, GGA and Great Fridays. For Netsoft, the deferred tax assets and goodwill were adjusted decreasing the net assets acquired by $348. For Jointech, intangible assets were adjusted to reflect the final fair value of intangible assets acquired and a deferred tax liability was established, both increasing goodwill with no change to the net assets acquired. For GGA, the final working capital adjustment was completed, deferred tax assets were netted with additional recognized deferred tax liabilities and additional accounts receivable and deferred revenue were recognized. In addition, intangible assets and property and equipment were adjusted to reflect the final fair value of the assets acquired. These adjustments resulted in an overall increase to goodwill and increased the net assets acquired by $1,366. For Great Fridays, the value of the intangible assets and associated deferred tax liabilities were reduced based on the final fair value estimates of acquired intangible assets, which increased goodwill. These adjustments resulted in a decrease in net assets acquired by $77.

The adjustments identified above did not significantly impact our previously reported net income of prior periods and, as such, prior period amounts have not been retrospectively adjusted.

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	$	15,000	10	$	16,000	3	$	200
Trade names	—	—		2	312		—	—		—	—
Total		$	1,700		$	15,312		$	16,000		$	200

As of December 31, 2016, the companies acquired during 2015 and 2014 have been significantly integrated into the Company and as such, it is not possible to precisely report their individual post-acquisition results of operations.