10. ACQUISITIONS

Darwin Zone, S.A.

On May 16, 2014, the Company acquired 100% of the shares of Darwin Zone, S.A. (“Darwin”) for $2.4 million in cash, (including the effect of working capital adjustments). Darwin, a provider of digital marketing solutions, is included in the Company’s Global Language and Content (“GLC”) operating segment. The acquisition expands the Company’s delivery model for cost efficient digital marketing solutions in the Central America region.

The total acquisition date fair value of the consideration transferred was estimated at $2.4 million. The assets and liabilities associated with Darwin were recorded at their fair values as of the acquisition date and the amounts as follows:


Cash	$	36
Accounts receivable and unbilled receivables		698
Other current assets		115
Property and equipment, net		206
Intangible assets		824
Goodwill		988

Total assets		2,867
Accounts payable		(222	)
Other liabilities		(249	)

Total consideration transferred	$	2,396

Intangible assets acquired totaling $0.8 million include customer relationships of $0.7 million, a non-compete agreement executed by a key employee (“the Non-Competition Agreement”) of $0.1 million and a trade name of $44 thousand.

The estimated fair value attributed to the customer relationships was determined based upon a discounted cash flow forecast. Cash flows were discounted at a rate of 16%. The fair value of the customer relationships will be amortized over a period of 5 years on a straight-line basis, which approximates the pattern in which the economic benefits of the acquired customer list are expected to be realized. The fair value of the Non-Competition Agreement will be amortized over 5 years on a straight-line basis, which approximates the pattern in which the economic benefits of the non-compete agreement is expected to be realized.

Goodwill represents the excess of the purchase price over the fair values of the net tangible and intangible assets acquired and is primarily the result of expected synergies. None of the goodwill or identifiable intangibles associated with this transaction will be deductible for tax purposes.

Transaction costs related to this acquisition were approximately $0.1 million during the six months ended June 30, 2014 and are included in restructuring, impairment and other charges in the Company’s condensed consolidated statement of operations.

Since the date of the acquisition, May 16, 2014, the Company has recorded $0.5 million of revenue attributable to Darwin within its consolidated financial statements. The proforma results of operations including Darwin as if it were acquired at the beginning of all periods presented were not material to the consolidated operating results of the Company in either period presented.

E5 Global Holdings, Inc.

On October 2, 2013, the Company acquired 100% of the shares of E5 Global Holdings, Inc. (“E5”), a U.S.-based privately-held provider of application development and testing solutions with a track record of providing secure, high-quality testing services using a China-based delivery model. The acquisition enables the Company to expand its presence in China, meet growing demand for integrated onshore and offshore solutions and access E5’s long-standing relationships with clients in the hospitality and financial services industries. The results of operations of E5 are included in the Company’s results of operations from the date of acquisition. E5 is included in the Company’s GES operating segment.

The Company made an initial cash payment of approximately $1.4 million at closing with an additional $0.2 million of deferred purchase consideration due on the first anniversary of the closing date. Under the terms of the purchase agreement, the former owners of E5 would also be eligible to receive additional cash consideration up to $2.2 million, contingent on the fulfillment of certain revenue-based financial conditions during the two years ended September 30, 2015. Using a discounted cash flow method, the Company recorded an estimated liability related to the earn-out of $0.3 million as of the acquisition date and as of March 31, 2014. On June 30, 2014, the Company and the former owners agreed to the early release of the $0.2 million of deferred consideration. The parties also agreed to satisfaction in full of the Company’s obligations with respect to any contingent payments that may become due in the future in exchange for payment, on June 30, 2014, of $0.2 million to the former owners. As a result of the early payment of the contingent payment for $0.2 million, the Company recorded $0.1 million reduction in expense in restructuring, impairment and other charges in the Company’s condensed consolidated statement of operations.