3. ACQUISITIONS

Thoughtcorp, Inc. — On May 23, 2012, the Company acquired substantially all of the assets and assumed certain liabilities of Thoughtcorp, Inc., a Toronto-based software solutions provider (“Thoughtcorp”). The acquisition is intended to expand the Company’s geographic footprint within North America, and complement its global delivery capabilities with expertise in areas such as Agile Development, Enterprise Mobility and Business Intelligence. In addition, Thoughtcorp brings significant telecommunications expertise, and is also expected to expand and enhance the Company’s offering within the Financial and Retail verticals.

The purchase price was comprised of approximately $7,497 paid in cash and 217,274 shares of common stock with a fair value of $3,607 at the acquisition date. Half of these shares were placed in escrow for a period of 18 months as a security for the indemnification obligations of the sellers under the asset purchase agreement. Additionally, the Company issued to the sellers 217,272 shares of non-vested (“restricted”) common stock contingent on their continued employment with the Company (Note 12). These shares have an estimated value of $3,607 and will be recorded as stock-based compensation expense over an associated service period of two years. A deferred tax asset has been recognized for the tax effect of the fair value of the portion of the shares that were placed in escrow.

The purchase price was allocated to the assets acquired based on their related fair values, as follows:


Cash and cash equivalents	$	1,111
Trade receivables and other current assets		2,484
Property and equipment		92
Deferred tax asset		1,348
Acquired intangible assets		5,296
Goodwill		2,935

Total assets acquired		13,266

Accounts payable and accrued expenses		461
Assumed shareholder and director loans		1,290
Deferred revenue and other liabilities		411

Total liabilities assumed		2,162

Net assets acquired	$	11,104

The Company performed a valuation analysis to determine the fair values of certain intangible assets of Thoughtcorp as of the acquisition date. As part of the valuation process, the excess earnings method was used to determine the value of customer relationships. Fair values of trade name and non-competition agreements were determined using the relief from royalty and discounted earnings methods, respectively. The Company expects approximately $9,580 of tax goodwill. Of this amount 75% is deductible at 7% per annum on a declining basis.

The following table presents the estimated fair values and useful lives of intangible assets acquired:


	May 23, 2012		Weighted Average Useful Life (in years)
Customer relationships	$	2,810		15
Trade names		2,014		5
Non-competition agreements		472		5

Total	$	5,296

The above estimated fair values of the assets acquired and liabilities assumed are provisional and based on information available as of the acquisition date to estimate the fair values of the assets acquired and liabilities assumed. The Company believes such information provides a reasonable basis for estimating the fair values but the Company is waiting for additional information necessary to finalize those amounts, particularly with respect to the estimated fair values of intangible assets and deferred income taxes. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the Thoughtcorp acquisition date.

Included in consolidated statements of income for the three and nine months ended September 30, 2012 are $2,793 and $3,886 of revenues, respectively, and $199 and $185 of net losses of the acquiree, respectively.

Total acquisition-related post-combination compensation expense recognized for the three and nine month ended September 30, 2012 was $516 and $736, respectively, and is presented within selling, general and administrative expenses. Total acquisition-related costs were $9 and $375 and are presented within selling, general and administrative expenses for the three and nine months ended September 30, 2012, respectively.

Pro forma results of operations for the Thoughtcorp acquisition completed during the nine months ended September 30, 2012 have not been presented because the effects of the acquisition were not material to the Company’s consolidated results of operations.