2.	ACQUISITIONS

Netsoft – On March 5, 2014, the Company acquired substantially all of the assets and assumed certain liabilities of Netsoft Holdings, LLC, a 15-year old company specializing in delivering high-value business and complex IT solutions to healthcare and health insurance companies (“Netsoft”). Concurrently with this transaction, the Company also purchased substantially all of the assets of an Armenia-based Ozsoft, LLC.

The purchase price was comprised of approximately $5,598 payable with $2,419 in cash upon closing, $1,400 in cash payable upon a 12-month anniversary of March 5, 2014 (the “Closing Date”), and contingent consideration payable in cash, which was valued at $1,825 and was recorded as a liability at the date of acquisition. The contingent consideration payable, if any, is capped at $1,825 and will be based on the formula tied to the EBITDA of Netsoft, as defined in the Asset Purchase Agreement, for the twelve months following the acquisition (the “Earn-Out EBITDA”).

The Company estimated the contingent consideration based on the expected growth of Netsoft during the earn-out period. As of March 5, 2014, the preliminary purchase consideration paid to acquire Netsoft was as follows:

	Amount
Cash paid at Closing	$	2,419
Working capital adjustment		(46	)
Deferred consideration payable in cash		1,400
Contingent consideration payable in cash		1,825
Total preliminary consideration	$	5,598

In addition, the Company issued to the sellers 2,289 shares of non-vested (“restricted”) common stock contingent on their continued employment with the Company (the “Closing Shares”). These shares have an estimated value of $84 and will be recorded as stock-based compensation expense over an associated service period of three years. The Company also agreed to issue additional shares of restricted stock as part of the earn-out payment. Following the first anniversary of the closing date, the company will calculate the excess of the Earn-Out EBITDA over an estimated amount and issue up to 16,349 shares of restricted stock (the “Earn-Out Shares”). The Earn-Out Shares, if issued, will be subject to the same terms and conditions as the Closing Shares. As of March 5, 2014, the estimated fair value of the Earn-Out shares was $598 and will be recorded as stock-based compensation expense over an associated service period of three years.

All of the Closing Shares, as well as $256 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.

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

	Amount
Trade receivables and other current assets	$	788
Property and equipment		52
Deferred tax asset		351
Goodwill and acquired intangible assets		4,476
Total assets acquired		5,667
Accounts payable and accrued expenses		69
Total liabilities assumed		69
Net assets acquired	$	5,598

The above estimated fair values of the assets acquired and liabilities assumed are provisional and based on the information that was available as of the acquisition date to estimate the fair values of the assets acquired and liabilities assumed. As of March 31, 2014, a balance of $4,476 represented an aggregate value of the acquired intangible assets and goodwill arising from the acquisition of Netsoft and was presented within goodwill on the Company’s condensed consolidated balance sheets. The Company estimates potential value of the acquired intangible assets to be in the range of 35% to 50% of the aggregate balance and is waiting for additional information necessary to finalize the estimated fair values of intangible assets, deferred income taxes, and other amounts. 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 Netsoft acquisition date.

Included in consolidated statements of income and comprehensive income for the three months ended March 31, 2014, were $367 and $76 of revenues and net income of the acquiree, respectively.Total acquisition-related costs were $68 and are presented within selling, general and administrative expenses for the three months ended March 31, 2014.

Pro forma results of operations for the Netsoft acquisition were not presented because the effects of the acquisition were not material to the Company’s consolidated results of operations.