NOTE 4—ACQUISITION

Saugatuck Technology Acquisition

On August 7, 2015 (the “Saugatuck Acquisition Date”), the Company executed an Asset Purchase Agreement (the “Saugatuck Agreement”) by and among Saugatuck Technology Inc. (“Saugatuck”), ISG Information Services Group Americas, Inc. a wholly-owned subsidiary of ISG (“Buyer”), and the other parties thereto and consummated the acquisition of substantially all of the assets, and assumption of certain current liabilities, excluding debt and employee loans of Saugatuck.

Saugatuck is a subscription-based research and analyst firm that provides C-level executives and technology business leaders with objective insights on the key market trends and emerging technologies that are driving business transformation and growth. This acquisition gives us a solid platform on which to build a strong analyst capability. Saugatuck’s deep intellectual capital, respected analytical and forecasting capabilities, and influential market insights and opinions are the perfect complement to our growing Cloud, Digital and Automation consulting practices.

Under the terms of the Saugatuck Agreement, we acquired the specified assets for aggregate cash and stock consideration of $0.7 million (net of cash received) consisting of $0.5 million in cash and $0.2 million in stock at closing. In addition, Saugatuck is eligible to receive a minimum of $0 and a maximum of up to $1.3 million of earn-out payments for fiscal years 2015-2018 if certain revenue targets are met, payable in a combination of cash and stock.

The following table summarizes the consideration transferred to acquire Saugatuck and the amounts of identified assets acquired and liabilities assumed as of the Saugatuck Acquisition Date:

The preliminary allocable purchase price consists of the following:

Cash	$	600
Restricted stock*	150
Contingent consideration	986


Total allocable purchase price	$	1,736

*33,784 shares at $4.44 at close of market on August 7, 2015.

Recognized amounts of identifiable assets acquired and liabilities assumed as of the Saugatuck Acquisition Date:

Cash	$	63
Accounts receivable	137
Other assets	4
Intangible assets	989
Accrued expenses and other	(564		)


Net assets acquired	$	629


Goodwill(1)	$	1,107

(1)

Goodwill of approximately $1.1 million acquired in the acquisition is deductible for tax purposes.

Costs associated with this acquisition are included in the selling, general and administrative expenses in the condensed consolidated statement of comprehensive income and totaled $0.1 million during the nine months ended September 30, 2015. This business combination was accounted for under the acquisition method of accounting, and as such, the aggregate purchase price was allocated on a preliminary basis to the assets acquired and liabilities assumed based on estimated fair values as of the closing dates. The purchase price allocations will be finalized after the completion of the valuation of certain intangible assets and any adjustments to the preliminary purchase price allocations are not expected to have a material impact on the Company’s results of operations. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:

	Purchase Price Allocation		Asset Life
Amortizable intangible assets:
Customer relationships	$	984	15 years
Non-compete	5		3 years

Total intangible assets	$	989

The Condensed Consolidated Financial Statements include the results of Saugatuck acquisition subsequent to the closing. Had the acquisition occurred as of January 1, 2014, the impact on the Company’s results of operations would not have been material.