Disposition of Buyer Platform

On August 7, 2017, the Company announced the sale of its buyer platform to Taptica for total consideration of $50,000, subject to adjustment for working capital. The proceeds include $1,000 for the right to use the name, “Tremor Video, DSP,” for a period of 18 months following the closing. The Company will recognize the $1,000 in other income within the Consolidated Statements of Operations ratably over the 18-month period. The sale of the buyer platform represented a strategic change to shift the focus of the Company’s business exclusively on offering its seller platform. Accordingly, the results of the buyer platform have been classified as a discontinued operation in the consolidated financial statements for all periods presented. Following the disposition, the Company entered into an arms-length commercial agreement with Taptica pursuant to which they may purchase video inventory on the seller platform. In connection with the transaction, we entered into a transition services agreement, pursuant to which we agreed to provide certain services to Taptica through December 31, 2017. The transaction services agreement was amended to extend certain of the services through April 30, 2018.

In connection with the closing of the transaction, the Company recognized a gain on sale of discontinued operations, net of tax of $14,626. Included in the measurement of the gain were estimates for the income taxes due on the gain and the additional cash consideration expected from the buyer related to a closing date net working capital sales price adjustment. The Company is finalizing such net working capital sales price adjustment with the buyer as provided for in the sales agreement. The Company has included its estimated amount due from the buyer for the closing date net working capital sales price adjustment in accounts receivable as of December 31, 2017. The final net working capital sales price adjustment, as determined through the established process outlined in the sales agreement, may be materially different from the Company’s estimates. The impact of any probable changes in the net working capital adjustment will be recorded as an adjustment to the gain on sale from discontinued operations in the period such change occurs. Additionally, the income taxes associated with the gain will be impacted by the final allocation of the sales price, which must be agreed to with the buyer as required in the sales agreement and may be materially different from the Company’s estimates. The impact of any changes in estimated income taxes on the gain will be recorded as an adjustment to the gain on sale from discontinued operations in the period such change in estimate occurs. The Company expects the net working capital sales price adjustment and the income tax on the gain to be finalized by the end of first quarter 2018.

The following table presents a reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operation to the amounts presented separately in the Company’s Consolidated Balance Sheet:



	December 31,
	2016
Accounts receivable, net of allowance for doubtful accounts	$	49,598
Prepaid expenses and other current assets	572
Current assets of discontinued operations	$	50,170

Property & equipment, net of accumulated depreciation	$	2,515
Intangible assets, net of accumulated amortization	5,378
Goodwill	4,530
Other assets	276
Non-current assets of discontinued operations	$	12,699

Accounts payable and accrued expenses	$	31,693
Other current liabilities	5
Capital leases, short-term	362
Current liabilities of discontinued operations	$	32,060

Deferred rent, long-term	76
Capital leases	760
Non-current liabilities of discontinued operations	$	836

The following table presents a reconciliation of the major financial lines constituting the results of operations for discontinued operations to the income (loss) from discontinued operations, net of income taxes, presented separately in the Consolidated Statements of Operations:



	Years Ended
	2017		2016			2015

Revenue	$	88,255	$	137,640		$	164,226
Cost of revenue	53,486		88,277			98,321
Gross profit	34,769		49,363			65,905

Operating expenses:
Technology and development	7,594		14,084			15,409
Sales and marketing	16,149		26,064			35,038
General administrative	547		941			396
Depreciation and amortization	3,174		5,419			6,168
Impairment charges	—		—			22,665
Total operating expenses	27,464		46,508			79,676

Income (loss) from discontinued operations	7,305		2,855			(13,771		)

Interest and other (expense), net	—		—			—
Income (loss) from discontinued operations before income taxes	7,305		2,855			(13,771		)
Provision (benefit) for income taxes	4		(48		)	283
Income (loss) from discontinued operations, net of income taxes	7,301		2,903			(14,054		)

Gain on sale of discontinued operation before income taxes	14,958		—			—
Provision for income taxes	332		—			—
Gain on sale of discontinued operation, net of income taxes	14,626		—			—

Income (loss) from discontinued operations, net of income taxes	$	21,927	$	2,903		$	(14,054	)

The following table presents supplemental cash flow information of the discontinued operations:



	Years Ended
	2017		2016		2015

Non-cash adjustments to net cash from operating activities:
Depreciation and amortization	$	3,174	$	5,419	$	6,168
Stock based compensation expense	673		1,414		1,551
Cash used in investing activities:
Capital expenditures	$	475	$	—	$	—