Selected Balance Sheet Accounts

3 Months Ended

Mar. 31, 2015

Selected Balance Sheet Accounts [Abstract]

Selected Balance Sheet Accounts

Property and Equipment.  Property and equipment consists of the following:

	March 31,			December 31,
	2015			2014
	(in thousands)
Computer software and hardware and capitalized internal use software	$	13,290		$	12,990
Furniture and equipment		1,275			1,271
Leasehold improvements		957			957
		15,522			15,218
Less – Accumulated depreciation and amortization		(13,501	)		(13,314	)
Property and equipment, net	$	2,021		$	1,904

The Company periodically reviews long-lived assets to determine if there are any impairment indicators.  The Company assesses the impairment of these assets, or the need to accelerate amortization, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company’s judgments regarding the existence of impairment indicators are based on legal factors, market conditions and operational performance of our long-lived assets.  If such indicators exist, the Company evaluates the assets for impairment based on the estimated future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. Should the carrying amount of an asset exceed its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value. Fair value is generally determined based on a valuation process that provides an estimate of the fair value of these assets using a discounted cash flow model, which includes assumptions and estimates.

Concentration of Credit Risk and Risks Due to Significant Customers.  Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are primarily maintained with two high credit quality financial institutions in the United States. Deposits held by banks exceed the amount of insurance provided for such deposits. These deposits may be redeemed upon demand.

 Accounts receivable are primarily derived from fees billed to Dealers and Manufacturers.  The Company generally requires no collateral to support its accounts receivables and maintains an allowance for bad debts for potential credit losses.

The Company has a concentration of credit risk with its automotive industry related accounts receivable balances, particularly with Urban Science Applications (which represents Acura, Audi, Honda, Nissan, Infiniti, Mercedes Benz, Smart, Subaru, Toyota, Volkswagen and Volvo), General Motors and Ford Direct. During the first three months of 2015, approximately 30% of the Company’s total revenues were derived from these three customers, and approximately 44%, or $8.6 million of gross accounts receivables, related to these three customers at March 31, 2015.

During the first three months of 2014, approximately 31% of the Company’s total revenues were derived from General Motors, Urban Science Applications and Kia Corporation, and approximately 35%, or $5.7 million of gross accounts receivables, related to these three customers at March 31, 2014.

Intangible Assets.  The Company amortizes specifically identified intangible assets using the straight-line method over the estimated useful lives of the assets. In connection with the acquisitions of Cyber, Advanced Mobile and AutoUSA, the Company identified $9.7 million of intangible assets.  The Company’s intangible assets will be amortized over the following estimated useful lives:

		March 31, 2015							December 31, 2014
Intangible Asset	Estimated Useful Life	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
			(in thousands)
Trademarks/trade names/licenses/domains	5 years	$	6,574	$	(5,692	)	$	882	$	6,574	$	(5,594	)	$	980
Software and publications	3 years		1,300		(1,300	)		—		1,300		(1,300	)		—
Customer relationships	2-5 years		5,074		(2,898	)		2,176		5,074		(2,696	)		2,378
Employment/non- compete agreements	5 years		700		(541	)		159		700		(500	)		200
Developed technology	5 years		820		(246	)		574		820		(205	)		615
		$	14,468	$	(10,676	)	$	3,791	$	14,468	$	(10,295	)	$	4,173

Amortization expense for the remainder of the year and for the next five years is as follows:

Year	Amortization Expense
	(in thousands)
2015	$	1,012
2016		942
2017		926
2018		879
2019		32
	$	3,791

Goodwill.  Goodwill represents the excess of the purchase price over the fair value of net assets acquired.  Goodwill is not amortized and is assessed annually for impairment or earlier, when events or circumstances indicate that the carrying value of such assets may not be recoverable.  The Company did not record impairment related to goodwill as of March 31, 2015 and December 31, 2014.

As of March 31, 2015, goodwill consisted of the following (in thousands):

Goodwill as of December 31, 2014	$	20,948
Current year activity		—
Goodwill as of March 31, 2015	$	20,948

Accrued Expenses and Other Current Liabilities.  Accrued expenses and other current liabilities consisted of the following:

	March 31,		December 31,
	2015		2014
	(in thousands)
Compensation and related costs	$	1,827	$	5,149
Professional fees and other accrued expenses		3,964		3,383
Amounts due to customers		291		267
Other current liabilities		558		696
Total accrued expenses and other current liabilities	$	6,640	$	9,495

Convertible notes payable.  In connection with the acquisition of Cyber, the Company issued a convertible subordinated promissory note for $5.0 million (“Cyber Convertible Note”) to the sellers.  The fair value of the Cyber Convertible Note as of the Cyber Acquisition Date was $5.9 million.  This valuation was estimated using a binomial option pricing method.  Key assumptions used by the Company's outside valuation consultants in valuing the Cyber Convertible Note included a market yield of 15.0% and stock price volatility of 77.5%.  As the Cyber Convertible Note was issued with a substantial premium, the Company recorded the premium as additional paid-in capital.  Interest is payable at an annual interest rate of 6% in quarterly installments.  The entire outstanding balance of the Cyber Convertible Note is to be paid in full on September 30, 2015.  At any time after September 30, 2013, the holders of the Cyber Convertible Note may convert all or any part, but in 40,000 minimum share increments, of the then outstanding and unpaid principal of the Cyber Convertible Note into fully paid shares of the Company’s common stock at a conversion price of $4.65 per share (as adjusted for stock splits, stock dividends, combinations and other similar events).  The right to convert the Cyber Convertible Note into common stock of the Company is accelerated in the event of a change in control of the Company.  In the event of default, the entire unpaid balance of the Cyber Convertible Note will become immediately due and payable and will bear interest at the lower of 8% per year and the highest legal rate permissible under applicable law.

In connection with the acquisition of AutoUSA, the Company issued the AutoUSA Note to the Seller.  The fair value of the AutoUSA Note as of the AutoUSA Acquisition Date was $1.3 million.  This valuation was estimated using a binomial option pricing method.  Key assumptions used by the Company's outside valuation consultants in valuing the AutoUSA Note include a market yield of 1.6% and stock price volatility of 65.0%.  As the AutoUSA Note was issued with a substantial premium, the Company recorded the premium as additional paid-in capital.  Interest is payable at an annual interest rate of 6% in quarterly installments.  The entire outstanding balance of the AutoUSA Note is to be paid in full on January 31, 2019.  At any time after January 31, 2017, the holder of the AutoUSA Note may convert all or any part, but at least 30,600 shares, of the then outstanding and unpaid principal of the AutoUSA Note into fully paid shares of the Company's common stock at a conversion price of $16.34 per share (as adjusted for stock splits, stock dividends, combinations and other similar events).  The right to convert the AutoUSA Note into common stock of the Company is accelerated in the event of a change in control of the Company.  In the event of default, the entire unpaid balance of the AutoUSA Note will become immediately due and payable and will bear interest at the lower of 8% per year and the highest legal rate permissible under applicable law.