Selected Balance Sheet Accounts

12 Months Ended

Dec. 31, 2019

Balance Sheet Related Disclosures [Abstract]

Selected Balance Sheet Accounts

Property and equipment consist of the following:

	As of December 31,
	2019			2018
	(in thousands)
Computer software and hardware	$	12,804		$	11,393
Capitalized internal use software		5,878			6,228
Furniture and equipment		1,743			1,743
Leasehold improvements		1,613			1,613
		22,038			20,977
Less—Accumulated depreciation and amortization		(18,689	)		(17,796	)
Property and equipment, net	$	3,349		$	3,181

As of December 31, 2019, and 2018, capitalized internal use software, net of amortization, was $0.6 million and $1.2 million, respectively.  Depreciation and amortization expense related to property and equipment was $1.6 million for the year ended December 31, 2019.  Of this amount, $0.9 million was recorded in cost of revenues and $0.7 million was recorded in operating expenses for the year ended December 31, 2019. Depreciation and amortization expense related to property and equipment was $2.0 million for the year ended December 31, 2018.  Of this amount, $1.2 million was recorded in cost of revenues and $0.8 million was recorded in operating expenses for the year ended December 31, 2018. Depreciation and amortization expense related to property and equipment was $1.9 million for the year ended December 31, 2017.  Of this amount, $1.1 million was recorded in cost of revenues and $0.8 million was recorded in operating expenses for the year ended December 31, 2017.

The Company amortizes specifically identified definite-lived intangible assets using the straight-line method over the estimated useful lives of the assets.  

On October 5, 2017, the Company and DealerX Partners, LLC, a Florida limited liability company (“DealerX”), entered into a Master License and Services Agreement (“DealerX License Agreement”). Pursuant to the terms of the DealerX License Agreement, AutoWeb was granted a perpetual license to access and use DealerX’s proprietary platform and technology for targeted, online marketing. DealerX was to operate the platform for AutoWeb and provide enhancements to and support for the DealerX platform for at least an initial five-year period (“Platform Support Obligations”), however the Company terminated the Platform Support Obligations effective November 2, 2018, and as a result, recorded an impairment charge.

The transaction consideration consisted of: (i) $8.0 million in cash paid to DealerX upon execution of the DealerX License Agreement and (ii) the right to 710,856 shares of the Company’s common stock, par value $0.001 per share, representing approximately 5% of the Company’s outstanding Common Stock as of the date the parties entered into the DealerX License Agreement (“Market Capitalization Shares”) if on or before October 5, 2022: (i) AutoWeb’s market capitalization averages at least $225.0 million over a consecutive 90-day period or (ii) there is a change in control of AutoWeb that reflects a market capitalization of at least $225.0 million. If the Market Capitalization Shares are issued to DealerX, DealerX’s obligation to continue to support the platform (“Platform Support Obligations”) will continue in perpetuity. Alternatively, upon the occurrence of certain events prior to the issuance of the Market Capitalization Shares, AutoWeb may elect to make an additional lump-sum payment of $12.5 million (“Alternative Cash Payment”) in order to extend DealerX’s Platform Support Obligations in perpetuity. If the Alternative Cash payment were made, DealerX’s contingent right to receive the Market Capitalization Shares would be terminated. The fair value of the Market Capitalization Shares was calculated at $2.5 million. At the transaction date, the Company recorded approximately $10.5 million as a definite-lived intangible asset which was amortized over its expected useful life of seven years.

The Company makes judgments about the recoverability of purchased intangible assets with definite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with definite lives is measured by comparing the carrying amount of the asset to the future undiscounted cashflows the asset is expected to generate. In the third quarter of 2018, the Company performed an analysis of its planned future use of two intangible assets in the licenses and customer relationships asset groups. As a result of realignment activities finalized in the third quarter, the Company made a determination that the Company’s use of certain assets would not be continued as originally planned. Accordingly, the Company performed further analysis to quantitatively determine the amount of impairment for each of these intangible assets as of September 30, 2018.

An assessment was performed on the DealerX License intangible asset, whereby lead generation and acquisition cost, amongst other things, was compared to alternate sources of lead generation available to the Company. As a result of the Company’s analysis, the Company concluded that the effectiveness of the platform was not in-line with the enhanced consumer-to-client matchmaking that the Company is seeking and made the decision in the third quarter to terminate DealerX’s Platform Support Obligations, significantly impacting the usability of the asset by the Company. Accordingly, the Company recorded impairment charges of $9.0 million in connection with the impairment of this long-lived asset with the expense recorded in Cost of revenues-impairment on the Company’s Consolidated Condensed Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2018.

A quantitative analysis was performed by the Company in 2018 on its customer relationship intangible assets, whereby it examined available data, namely historical activity and cashflows resulting from the customer relationships of previous acquisitions, in concert with projected future use of acquired customer relationships within the parameters of the Company’s future strategic plans. As a result of this analysis, the Company determined there to be impairment of $1.6 million related to customer relationship intangible assets acquired in a 2015 acquisition for which projected cashflows did not support the carrying values. Additionally, the Company determined that the estimated useful life of these customer relationship intangible assets had changed from 10 years to 5 years. This change in estimate will impact amortization expense in future periods as amortization will be accelerated over the remaining estimated useful life of this asset due to the change in estimate.

The Company’s intangible assets will be amortized over the following estimated useful lives (in thousands):

		December 31, 2019							December 31, 2018
Intangible Asset	Estimated Useful Life	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Trademarks/trade names/licenses/ domains	3 – 7 years	$	16,589	$	(15,442	)	$	1,147	$	16,589	$	(14,914	)	$	1,675
Customer relationships	2 - 5 years		19,563		(18,800	)		763		19,563		(15,544	)		4,019
Developed technology	5-7 years		8,955		(5,961	)		2,994		8,955		(4,873	)		4,082
		$	45,107	$	(40,203	)	$	4,904	$	45,107	$	(35,331	)	$	9,776

		December 31, 2019						December 31, 2018
Indefinite-lived Intangible Asset	Estimated Useful Life	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Domain	Indefinite	$	2,200	$	—	$	2,200	$	2,200	$	—	$	2,200

Amortization expense is included in “Cost of revenues” and “Depreciation and amortization” in the Statements of Operations and Comprehensive Income (Loss).  Amortization expense was $4.9 million, $8.1 million and $5.7 million in 2019, 2018 and 2017, respectively. Amortization expense for 2018 includes $1.6 million related to the above-mentioned customer relationship impairment. The $9.0 million impairment related to DealerX was recorded to Cost of revenues - impairment. Amortization expense for intangible assets for the next five years is as follows:

Year	Amortization Expense
	(in thousands)
2020	$	2,371
2021		1,499
2022		902
2023		86
2024		46
	$	4,904

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 whenever events or circumstances indicate that the carrying value of such assets may not be recoverable.  The Company impaired goodwill by $5.1 million and $37.7 million during the years ended December 31, 2018 and 2017, respectively.

As of December 31, 2019, and 2018, accrued expenses and other current liabilities consisted of the following:

	As of December 31,
	2019		2018
	(in thousands)
Accrued employee related benefits	$	1,004	$	3,125
Other accrued expenses and other current liabilities:
Other accrued expenses		1,264		1,346
Amounts due to customers		355		424
Other current liabilities		1,239		434
Total other accrued expenses and other current liabilities		2,858		2,204
Total accrued expenses and other current liabilities	$	3,862	$	5,329

In connection with the acquisition of AutoUSA, LLC (“AutoUSA”) on January 13, 2014, the Company issued a convertible subordinated promissory note for $1.0 million (“AutoUSA Note”) to AutoNationDirect.com, Inc.  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 included 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 plus accrued interest was paid in full on January 31, 2019.