Selected Balance Sheet Accounts

6 Months Ended

Jun. 30, 2017

Selected Balance Sheet Accounts [Abstract]

Selected Balance Sheet Accounts

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

	June 30, 2017			December 31, 2016
	(in thousands)
Computer software and hardware	$	12,106		$	12,027
Capitalized internal use software		5,467			5,359
Furniture and equipment		1,619			1,332
Leasehold improvements		1,422			1,139
		20,614			19,857
Less—Accumulated depreciation and amortization		(16,110	)		(15,427	)
Property and Equipment, net	$	4,504		$	4,430

The Company periodically reviews the value of 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 an undiscounted 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, Subaru, Toyota, Volkswagen and Volvo), Media.net Advertising and General Motors. During the first six months of 2017, approximately 30% of the Company’s total revenues was derived from these three customers, and approximately 38%, or $10.0 million of gross accounts receivables, related to these three customers at June 30, 2017. During the first six months of 2016, approximately 27% of the Company’s total revenues was derived from General Motors, Urban Science Applications and Ford Direct, and approximately 43%, or $12.8 million of gross accounts receivables, related to these three customers at June 30, 2016.

Intangible Assets.  The Company amortizes specifically identified definite-lived intangible assets using the straight-line method over the estimated useful lives of the assets.  The Company’s intangible assets will be amortized over the following estimated useful lives (in thousands):

		June 30, 2017							December 31, 2016
Definite-lived Intangible Asset	Estimated Useful Life		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Trademarks/trade names/licenses/domains	3 – 6 years	$	5,519	$	(3,322	)	$	2,197	$	9,294	$	(6,756	)	$	2,538
Software and publications	3 years		1,300		(1,300	)		—		1,300		(1,300	)		—
Customer relationships	2 - 10 years		19,563		(9,004	)		10,559		19,563		(7,454	)		12,109
Employment/non-compete agreements	1-5 years		1,510		(1,449	)		61		1,510		(1,273	)		237
Developed technology	5-7 years		8,955		(2,937	)		6,018		8,955		(2,256	)		6,699
		$	36,847	$	(18,012	)	$	18,835	$	40,622	$	(19,039	)	$	21,583

		June 30, 2017								December 31, 2016
Indefinite-lived Intangible Asset	Estimated Useful Life	Gross		Accumulated Amortization			Net				Gross	Accumulated Amortization				Net
Trademark	Indefinite	$	2,200		$	—		$	2,200	$	2,200		$	—	$	2,200

Amortization expense is included in “Cost of revenues” and “Depreciation and amortization” in the Unaudited Consolidated Condensed Statements of Operations.  Amortization expense was $1.4 million and $2.7 million for the three and six months ended June 30, 2017, respectively. Amortization expense was $1.4 million and $2.8 million for the three and six months ended June 30, 2016, respectively.

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

Year	Amortization Expense
	(in thousands)
2017	$	2,618
2018		5,028
2019		3,655
2020		2,224
2021		2,116
2022		1,518
Thereafter		1,676
	$	18,835

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 June 30, 2017 and December 31, 2016.

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

	June 30, 2017		December 31, 2016
	(in thousands)
Accrued employee-related benefits	$	2,065	$	4,530
Other accrued expenses and other current liabilities:
Other accrued expenses and current liabilities		7,016		7,849
Amounts due to customers		482		466
Total other accrued expenses and other current liabilities		7,498		8,315
Total accrued expenses and other current liabilities	$	9,563	$	12,845

Convertible Notes Payable.  In connection with the acquisition of AutoUSA, 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 is to be paid in full on January 31, 2019.  The holder of the AutoUSA Note may at any time 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).  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.