Selected Balance Sheet Accounts

9 Months Ended

Sep. 30, 2015

Selected Balance Sheet Accounts [Abstract]

Selected Balance Sheet Accounts

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

	September 30,			December 31,
	2015			2014
	(in thousands)
Computer software and hardware and capitalized internal use software	$	14,798		$	12,990
Furniture and equipment		1,306			1,271
Leasehold improvements		965			957
		17,069			15,218
Less – Accumulated depreciation and amortization		(13,970	)		(13,314	)
Property and equipment, net	$	3,099		$	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 the Company’s 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, Scion, Subaru, Toyota, Volkswagen and Volvo), General Motors and Jumpstart Automotive Group. During the first nine months of 2015, approximately 28% of the Company’s total revenues was derived from these three customers, and approximately 35%, or $10.1 million of gross accounts receivables, related to these three customers at September 30, 2015.

During the first nine months of 2014, approximately 28% of the Company’s total revenues was derived from General Motors, Urban Science Applications and Trilogy Smartleads, and approximately 36%, or $6.4 million of gross accounts receivables, related to these three customers at September 30, 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, AutoUSA and Dealix/Autotegrity, the Company identified $20.1 million of intangible assets.  The Company’s intangible assets will be amortized over the following estimated useful lives:

		September 30, 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 – Indefinite	$	8,894	$	(5,896	)	$	2,998	$	6,574	$	(5,594	)	$	980
Software and publications	3 years		1,300		(1,300	)		—		1,300		(1,300	)		—
Customer relationships	2-10 years		12,093		(3,554	)		8,539		5,074		(2,696	)		2,378
Employment/non-compete agreements	5 years		1,240		(726	)		514		700		(500	)		200
Developed technology	1-5 years		1,335		(390	)		945		820		(205	)		615
		$	24,862	$	(11,866	)	$	12,996	$	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	$	560
2016		2,122
2017		1,937
2018		1,663
2019		732
2020		702
	$	7,716

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 September 30, 2015 and December 31, 2014.

As of September 30, 2015, goodwill consisted of the following (in thousands):

Goodwill as of December 31, 2014	$	20,948
Acquisition of Dealix/Autotegrity		11,148
Goodwill as of September 30, 2015	$	32,096

In connection with the Dealix/Autotegrity stock acquisition in Note 4 above, the Company recorded net deferred tax liabilities of $3.7 million and adjusted goodwill by $3.7 million in the quarter ended June 30, 2015.

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

	September 30,		December 31,
	2015		2014
	(in thousands)
Compensation and related costs	$	3,247	$	5,149
Professional fees and other accrued expenses		5,836		3,383
Amounts due to customers		404		267
Other current liabilities		447		696
Total accrued expenses and other current liabilities	$	9,934	$	9,495

Convertible notes payable.  In connection with the acquisition of Cyber, the Company issued the Cyber Note to the sellers.  The fair value of the Cyber 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 Note included a market yield of 15.0% and stock price volatility of 77.5%.  As the Cyber 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 Cyber Note was acquired by Auto Holdings and was converted into 1,075,268 shares of Company common stock on April 27, 2015, as discussed in Note 1.  Upon conversion of the Cyber Note, the Company removed the liability from the Consolidated Balance Sheet.

In connection with the acquisition of AutoUSA, the Company issued the AutoUSA Note to the Seller. For information concerning the fair value of the AutoUSA Note, see Note 4.