2. Business Combinations

Anomalous Networks, Inc.

On January 10, 2012 (the “Anomalous Acquisition Date”), the Company entered into a Share Purchase Agreement (the “Anomalous Purchase Agreement”) with Anomalous Networks Inc., a corporation incorporated under the laws of Canada (“Anomalous”), and the shareholders of Anomalous, under which the Company agreed to purchase all of the outstanding equity of Anomalous (the “Anomalous Share Purchase”). This acquisition reflects the Company’s strategy to broaden its suite of offerings and to provide real-time telecommunication expense management capabilities. On the same day, the Anomalous Share Purchase was effected in accordance with the terms of the Anomalous Purchase Agreement with the Company acquiring all of the outstanding equity of Anomalous for aggregate consideration of (i) approximately $3,500,000 in cash paid at the closing, (ii) $979,000 in cash payable on the first anniversary of the closing, (iii) 165,775 unregistered shares of the Company’s common stock and (iv) 132,617 unvested and unregistered shares of the Company’s common stock with vesting based on achievement of revenue targets relating to sales of Anomalous products and services for periods through January 31, 2013. The Company paid the full $979,000 of deferred cash consideration in January 2013. In March 2013, the 132,617 unvested and unregistered shares of the Company’s common stock were cancelled and retired.

Anomalous Purchase Price Allocation

The allocation of the total purchase price of Anomalous’ net tangible and identifiable intangible assets was based upon the estimated fair value of those assets as of January 10, 2012. In accordance with Accounting Standards Classification (“ASC”) 805, Business Combinations, the Company valued the 165,775 of unregistered shares of common stock by using the closing price of the Company’s common stock on the NASDAQ Global Market on the acquisition date and applying a 20% marketability discount to the fair value of the unregistered shares. The marketability discount was applied since the unregistered shares were subject to a lock-up period of one year. The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	3,521
Common stock	1,984
Deferred cash consideration	1,495
	$	7,000
Allocation of Purchase Consideration:
Current assets	$	1,140
Property and equipment	47
Other assets	10
Identifiable intangible assets	2,857
Goodwill	4,477
Total assets acquired	8,531
Accounts payable and accrued expenses	(394		)
Deferred taxes	(767		)
Deferred revenue	(370		)
	$	7,000

The goodwill and identifiable intangible assets related to the Anomalous acquisition are not tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Technology	$	2,017	5.0
Non-compete covenants	553		2.0
Customer relationships	236		4.0
Tradenames	51		3.0
Total intangible assets	$	2,857

ttMobiles Limited

On February 21, 2012 (the “ttMobiles Acquisition Date”), the Company entered into a Share Purchase Agreement (the “ttMobiles Purchase Agreement”), with the holders of all of the issued share capital of ttMobiles Limited, a private limited company incorporated in England (“ttMobiles”), under which the Company agreed to purchase all of the issued share capital of ttMobiles (the “ttMobiles Share Purchase”). On the same day, the ttMobiles Share Purchase was effected in accordance with the terms of the ttMobiles Purchase Agreement, with the Company acquiring all of the outstanding equity of ttMobiles for aggregate consideration of (i) £4.0 million in cash paid at the closing, and (ii) £1.5 million in cash payable on the first anniversary of the closing (the “Deferred Consideration”). The Company paid the £1.5 million of Deferred Consideration in February 2013.

ttMobiles Purchase Price Allocation

The allocation of the total purchase price of ttMobiles’ net tangible and identifiable intangible assets was based upon the estimated fair value of those assets as of February 21, 2012. The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	6,359
Deferred cash consideration	2,315
	$	8,674
Allocation of Purchase Consideration:
Current assets	$	2,469
Property and equipment	188
Identifiable intangible assets	4,288
Goodwill	3,557
Total assets acquired	10,502
Accounts payable and accrued expenses	(848		)
Deferred taxes	(954		)
Deferred revenue	(26		)
	$	8,674

The goodwill and identifiable intangible assets related to the ttMobiles acquisition are not tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	2,606	9.0
Technology	1,178		5.0
Tradenames	388		4.0
Non-compete covenants	116		2.0
Total intangible assets	$	4,288

Symphony Teleca Services, Inc.

On August 8, 2012, the Company entered into an Asset Purchase Agreement (the “Symphony Purchase Agreement”) with Symphony Teleca Services, Inc., a Delaware corporation (“Symphony”), under which the parties agreed to the purchase by the Company of Symphony’s telecommunications expense management business (the “TEM Business”) through an asset purchase (the “Symphony Acquisition”). As part of the Symphony Acquisition and also on August 8, 2012, a newly formed subsidiary of the Company, Tangoe India Softek Services Private Limited, an Indian private limited company (“Tangoe India”), entered into a Business Purchase Agreement (the “Indian Purchase Agreement”) with Symphony Services Corporation (India) Private Limited (“Symphony India”) with respect to the purchase of certain assets and hiring of employees of the acquired business located in India. On the same day, the Symphony Acquisition was effected in accordance with the terms of the Symphony Purchase Agreement. At the closing of the Symphony Acquisition, the Company acquired the TEM Business for net consideration of $40.2 million, subject to certain adjustments (the “Cash Purchase Price”), payable as described below, plus an earn-out payable in the amount of up to $4.0 million based on achievement of revenue targets for the acquired business for periods through June 30, 2013. The Cash Purchase Price, after giving effect to certain adjustments, is payable as follows: (i) approximately $29.2 million in cash paid at the closing, (ii) approximately $4.4 million in cash payable on the six-month anniversary of the closing, which includes $2.5 million related to the Indian Purchase Agreement, and (iii) approximately $6.4 million in cash payable on the one-year anniversary of the closing. The Company made the six-month anniversary payment of $4.4 million in February 2013. As part of the Symphony Acquisition, the Company acquired a balance sheet for the TEM Business, which included net assets of approximately $5.4 million. The full installment due on August 8, 2013 of approximately $6.4 million, and amounts that become payable under the earn-out are subject to set-off rights of the Company with respect to indemnities given by Symphony under the Symphony Purchase Agreement. Among other things, these indemnity obligations relate to representations and warranties given by Symphony under the Symphony Purchase Agreement and by Symphony India under the Indian Purchase Agreement. Certain of the indemnities are subject to limitations, including a threshold and deductible, certain caps and limited survival periods. During a post-closing transition period that lasted through February 2013, Symphony and Symphony India provided to the Company certain transition services pending completion of the opening of certain Tangoe India facilities, the procurement of certain Indian tax registrations and the subsequent transfer to Tangoe India of the Indian assets and employees being hired. These services included making available to the Company on a continuing basis the services previously provided by Symphony India to the TEM Business.

Symphony Purchase Price Allocation

The allocation of the total purchase price of Symphony’s net tangible and identifiable intangible assets was based upon management’s preliminary estimate of the fair values of those assets taking into account all relevant information available. Actual amounts for each of the fair values of the assets acquired and liabilities assumed may vary. The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill.

The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	29,208
Deferred cash consideration	10,942
	$	40,150

Allocation of Purchase Consideration:
Current assets	$	5,777
Property and equipment	602
Identifiable intangible assets	13,790
Goodwill	20,936
Total assets acquired	41,105
Accounts payable and accrued expenses	(335		)
Deferred revenue	(620		)
	$	40,150

The goodwill and identifiable intangible assets related to the Symphony’s acquisition are tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	9,680	9.0
Technology	4,050		5.0
Tradename	60		3.0
Total identifiable intangible assets	$	13,790

Unaudited Pro Forma Results

The following table presents the unaudited pro forma results of the Company for the three months ended March 31, 2012 and 2013 as if the acquisitions of Anomalous and ttMobiles occurred at the beginning of 2012. Due to the inability of the Company to anticipate and estimate on a forward-looking basis incremental costs allocated to the Symphony TEM Business by Symphony and the uncertainty and difficulty of calculating the specific costs required to meaningfully present the effects of the acquisition and the costs of operating the Symphony TEM Business, the Company has not included the Symphony TEM Business in the unaudited pro forma results for the three months ended March 31, 2012 below. The unaudited pro forma revenue for the Symphony TEM Business was $5.1 million for the three months ended March 31, 2012. The unaudited pro forma revenue for the Symphony TEM Business for the three months ended March 31, 2012 is not included in the unaudited pro forma results below. These results are not intended to reflect the actual operations of the Company had these acquisitions occurred at January 1, 2012.

	Three Months Ended
	March 31,
(in thousands, except per share amounts)	2012		2013

Revenue	$	35,981	$	44,860
Operating income	557		936
Net income	166		1,125
Basic income per common share	$	0.00	$	0.03

Diluted income per common share	$	0.00	$	0.03