SYNACOR, INC., 10-K filed on 3/26/2014
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2013
Mar. 25, 2014
Jun. 28, 2013
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
Synacor, Inc. 
 
 
Entity Central Index Key
0001408278 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Non-accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2013 
 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
27,468,539 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 67,388,104 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
CURRENT ASSETS:
 
 
Cash and cash equivalents
$ 36,397 
$ 41,944 
Accounts receivable—net of allowance of $25 and $76
14,569 
15,624 
Deferred income taxes
314 
1,999 
Prepaid expenses and other current assets
1,691 
1,831 
Total current assets
52,971 
61,398 
PROPERTY AND EQUIPMENT—Net
14,085 
11,043 
DEFERRED INCOME TAXES, NON-CURRENT
4,455 
2,527 
OTHER LONG-TERM ASSETS
348 
543 
GOODWILL
1,565 
819 
CONVERTIBLE PROMISSORY NOTE
1,000 
INVESTMENT IN EQUITY INTEREST
365 
TOTAL ASSETS
74,789 
76,330 
CURRENT LIABILITIES:
 
 
Accounts payable
13,573 
14,204 
Accrued expenses and other current liabilities
5,177 
7,328 
Current portion of capital lease obligations
1,946 
2,127 
Total current liabilities
20,696 
23,659 
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS
885 
1,712 
OTHER LONG-TERM LIABILITIES
977 
148 
Total liabilities
22,558 
25,519 
COMMITMENTS AND CONTINGENCIES (Note 7)
   
   
STOCKHOLDERS’ EQUITY:
 
 
Common stock, $0.01 par value—100,000,000 authorized, 27,517,665 issued and 27,198,165 shares outstanding at December 31, 2012 and 27,684,598 issued and 27,365,098 shares outstanding at December 31, 2013
277 
275 
Preferred stock, $0.01 par value—10,000,000 shares authorized, no shares issued and outstanding at December 31, 2012 and 2013
Treasury stock—at cost, 319,500 shares at December 31, 2012 and 2013
(569)
(569)
Additional paid-in capital
102,226 
99,449 
Accumulated deficit
(49,705)
(48,338)
Accumulated other comprehensive income (loss)
(6)
Total stockholders’ equity
52,231 
50,811 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 74,789 
$ 76,330 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 76 
$ 25 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
27,684,598 
27,517,665 
Common stock, shares outstanding
27,365,098 
27,198,165 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Treasury stock, shares
319,500 
319,500 
Consolidated Statements of Operations (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Statement [Abstract]
 
 
 
REVENUE
$ 111,807 
$ 121,981 
$ 91,060 
COSTS AND OPERATING EXPENSES:
 
 
 
Cost of revenue (exclusive of depreciation shown separately below)
59,622 
66,620 
48,661 
Research and development (exclusive of depreciation shown separately below)
28,458 
25,603 
20,228 
Sales and marketing
8,124 
9,120 
8,582 
General and administrative (exclusive of depreciation shown separately below)
11,663 
11,011 
6,879 
Depreciation
4,650 
3,779 
2,667 
Total costs and operating expenses
112,517 
116,133 
87,017 
INCOME (LOSS) FROM OPERATIONS
(710)
5,848 
4,043 
OTHER (EXPENSE) INCOME
(37)
(17)
INTEREST EXPENSE
(193)
(270)
(109)
INCOME (LOSS) BEFORE INCOME TAXES
(940)
5,579 
3,917 
(BENEFIT) PROVISION FOR INCOME TAXES
(134)
1,764 
(6,015)
LOSS IN EQUITY INTEREST
(561)
NET INCOME (LOSS)
(1,367)
3,815 
9,932 
UNDISTRIBUTED EARNINGS ALLOCATED TO PREFERRED STOCKHOLDERS
8,583 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
$ (1,367)
$ 3,815 
$ 1,349 
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:
 
 
 
Basic (in dollars per share)
$ (0.05)
$ 0.16 
$ 0.59 
Diluted (in dollars per share)
$ (0.05)
$ 0.14 
$ 0.45 
WEIGHTED AVERAGE SHARES USED TO COMPUTE NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:
 
 
 
Basic (in shares)
27,306,882 
24,411,194 
2,303,443 
Diluted (in shares)
27,306,882 1
28,097,313 1
21,974,403 1
Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Statement of Comprehensive Income [Abstract]
 
 
 
Net income (loss)
$ (1,367)
$ 3,815 
$ 9,932 
Other comprehensive income:
 
 
 
Change in foreign currency translation adjustment
(6)
Comprehensive income (loss)
$ (1,359)
$ 3,809 
$ 9,932 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock [Member]
Treasury Stock [Member]
Preferred Stock [Member]
Series A Preferred Stock [Member]
Preferred Stock [Member]
Series A-1 Preferred Stock [Member]
Preferred Stock [Member]
Series B Preferred Stock [Member]
Preferred Stock [Member]
Series C Preferred Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income [Member]
Beginning balance at Dec. 31, 2010
$ 10,156 
$ 19 
$ (569)
$ 5,077 
$ 730 
$ 5,401 
$ 17,224 
$ 44,359 
$ (62,085)
$ 0 
Beginning balance, treasury stock, shares at Dec. 31, 2010
 
 
(319,500)
 
 
 
 
 
 
 
Beginning balance, shares at Dec. 31, 2010
 
1,904,153 
 
5,548,508 
570,344 
2,737,500 
2,740,407 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
Issuance of common stock upon initial public offering, net of offering costs
372 
12 
 
 
 
 
 
360 
 
 
Exercise of common stock options, shares
 
1,148,703 
 
 
 
 
 
 
 
 
Conversion of preferred stock to common stock upon initial public offering
920 
 
 
 
 
 
 
920 
 
 
Net income (loss)
9,932 
 
 
 
 
 
 
 
9,932 
 
Ending balance at Dec. 31, 2011
21,380 
31 
(569)
5,077 
730 
5,401 
17,224 
45,639 
(52,153)
Ending balance, treasury stock, shares at Dec. 31, 2011
 
 
(319,500)
 
 
 
 
 
 
 
Ending balance, shares at Dec. 31, 2011
 
3,052,856 
 
5,548,508 
570,344 
2,737,500 
2,740,407 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
Issuance of common stock upon initial public offering, net of offering costs
22,347 
54 
 
 
 
 
 
22,293 
 
 
Issuance of common stock upon initial public offering, net of offering costs, shares
 
5,454,545 
 
 
 
 
 
 
 
 
Conversion of preferred stock to common stock upon initial public offering
174 
 
(5,077)
(730)
(5,401)
(17,224)
28,258 
 
 
Conversion of preferred stock to common stock upon initial public offering, shares
 
17,395,136 
 
(5,548,508)
(570,344)
(2,737,500)
(2,740,407)
 
 
 
Issuance of common stock upon initial public offering, net of offering costs
1,212 
16 
 
 
 
 
 
1,196 
 
 
Exercise of common stock options, shares
 
1,615,128 
 
 
 
 
 
 
 
 
Conversion of preferred stock to common stock upon initial public offering
2,063 
 
 
 
 
 
 
2,063 
 
 
Net income (loss)
3,815 
 
 
 
 
 
 
 
3,815 
 
Other comprehensive income
(6)
 
 
 
 
 
 
 
 
(6)
Ending balance at Dec. 31, 2012
50,811 
275 
(569)
99,449 
(48,338)
(6)
Ending balance, treasury stock, shares at Dec. 31, 2012
(319,500)
 
(319,500)
 
 
 
 
 
 
 
Ending balance, shares at Dec. 31, 2012
 
27,517,665 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
Issuance of common stock upon initial public offering, net of offering costs
195 
 
 
 
 
 
193 
 
 
Exercise of common stock options, shares
166,933 
166,933 
 
 
 
 
 
 
 
 
Conversion of preferred stock to common stock upon initial public offering
2,584 
 
 
 
 
 
 
2,584 
 
 
Net income (loss)
(1,367)
 
 
 
 
 
 
 
(1,367)
 
Other comprehensive income
 
 
 
 
 
 
 
 
Ending balance at Dec. 31, 2013
$ 52,231 
$ 277 
$ (569)
$ 0 
$ 0 
$ 0 
$ 0 
$ 102,226 
$ (49,705)
$ 2 
Ending balance, treasury stock, shares at Dec. 31, 2013
(319,500)
 
(319,500)
 
 
 
 
 
 
 
Ending balance, shares at Dec. 31, 2013
 
27,684,598 
 
 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income (loss)
$ (1,367)
$ 3,815 
$ 9,932 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation
4,650 
3,779 
2,667 
Stock-based compensation expense
2,561 
1,999 
920 
Loss on disposal of property and equipment
35 
11 
Deferred income taxes
(243)
1,557 
(6,083)
Loss in equity interest
561 
Change in assets and liabilities:
 
 
 
Accounts receivable, net
1,055 
(1,288)
(4,682)
Prepaid expenses and other current assets
189 
253 
(45)
Other long-term assets
220 
380 
164 
Accounts payable
(527)
2,335 
4,120 
Accrued expenses and other current liabilities
(2,205)
1,715 
1,709 
Other long-term liabilities
334 
77 
(35)
Net cash provided by operating activities
5,228 
14,657 
8,678 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of property and equipment
(5,920)
(4,269)
(1,848)
Investment of equity interest
(926)
Cash paid for business acquisition
(1,011)
(600)
Purchase of convertible promissory note
(1,000)
Net cash used in investing activities
(8,857)
(4,869)
(1,848)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from sale/leaseback
794 
Repayment on bank financing
(250)
(500)
Repayments on capital lease obligations
(2,121)
(2,336)
(1,719)
Proceeds from exercise of common stock options
195 
1,212 
372 
Proceeds from initial public offering
25,364 
Initial public offering costs
(2,753)
(264)
Net cash (used in) provided by financing activities
(1,926)
21,237 
(1,317)
Effect of exchange rate changes on cash and cash equivalents
(6)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(5,547)
31,019 
5,513 
CASH AND CASH EQUIVALENTS—Beginning of year
41,944 
10,925 
5,412 
CASH AND CASH EQUIVALENTS—End of year
36,397 
41,944 
10,925 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 
 
 
Cash paid for interest
165 
259 
110 
Cash paid for income taxes
140 
134 
82 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
 
 
 
Property and equipment acquired under capital lease obligations and bank financing
1,039 
2,484 
2,185 
Accrual for business acquisition
495 
500 
Accrued property and equipment expenditures
719 
269 
235 
Accrued initial public offering costs
$ 0 
$ 0 
$ 1,042 
The Company and Summary of Significant Accounting Policies
The Company and Summary of Significant Accounting Policies
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Synacor, Inc., together with its consolidated subsidiary (collectively, the “Company”), is a leading provider of start experiences (startpages and homescreens), TV Everywhere, Identity Management and various cloud-based services across multiple devices for cable, satellite, telecom and consumer electronics companies. The Company is also a leading provider of authentication and aggregation solutions enabling the delivery of personalized, online content. The Company's technology allows its customers to package a wide array of personalized, online content and cloud-based services with their high-speed Internet, communications, television and other digital offerings. The Company's customers offer the Company's services under their own brands on Internet-enabled devices such as PCs, tablets, smartphones and connected TVs.

Initial Public Offering—    In February 2012, the Company completed its initial public offering whereby 6,818,170 shares of common stock were sold to the public at a price of $5.00 per share. The Company sold 5,454,545 common shares and selling stockholders sold 1,363,625 common shares. The Company received aggregate proceeds of $25,364 from the initial public offering, net of underwriters’ discounts and commissions but before deducting offering expenses of approximately $3,016.
In connection with the initial public offering in February 2012, the Board of Directors of the Company approved a 1-for-2 reverse stock split of the Company’s common stock. All common shares, stock options, and per share information presented in these financial statements reflect the reverse stock split on a retroactive basis for all periods presented. There was no change in the par value of the Company’s common stock. The ratio by which shares of preferred stock were convertible into shares of common stock was adjusted to reflect the effects of the reverse stock split. In addition, in accordance with their rights and consistent with the conversion rates discussed in Note 8, Equity, all shares of the Company’s outstanding preferred stock were converted into common stock upon the closing of the initial public offering.
Basis of Presentation—The consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiary, Synacor Canada, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Accounts Receivable—The Company records accounts receivable at the invoiced amount and does not charge interest on past due invoices. An allowance for doubtful accounts is maintained to reserve for potentially uncollectible accounts receivable. The Company reviews its accounts receivable from customers which are past due to identify specific accounts with known disputes or collectability issues. In determining the amount of the reserve, the Company makes judgments about the creditworthiness of customers based on ongoing credit evaluations.
Property and Equipment—Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Leasehold improvements
3–10 years
Computer hardware
5 years
Computer software
3 years
Furniture and fixtures
7 years
Other
3–5 years

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the assets.
Long-Lived Assets—The Company reviews the carrying value of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. For purposes of evaluating and measuring impairment, the Company groups a long-lived asset or assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. There has been no material adjustments to long-lived assets in any of the years presented.
Revenue Recognition—The Company derives revenue from two categories: revenue generated from search and display advertising activities and subscriber-based revenue, each of which is described below. Search and display advertising is recorded on a gross basis, which includes the net amount received from Google under the Company’s agreement with Google. The following table shows the revenue in each category for the years ended December 31, 2011, 2012 and 2013 (in thousands):
 
Year Ended December 31,
 
2011
 
2012
 
2013
Search and display advertising
$
72,084

 
$
101,559

 
$
90,447

Subscriber-based
18,976

 
20,422

 
21,360

Total revenue
$
91,060

 
$
121,981

 
$
111,807


The Company uses Internet search and display advertising to generate revenue from the traffic on its start experiences.
In the case of search advertising, the Company has a revenue-sharing relationship with Google, pursuant to which it includes a Google-branded search tool on its start experiences. When a consumer makes a search query using this tool, the Company delivers the query to Google and they return search results to consumers that include advertiser-sponsored links. If the consumer clicks on a sponsored link, Google receives payment from the sponsor of that link and shares a portion of that payment with the Company, which in turn is shared with the applicable customer. The net payment received from Google is recognized as revenue.
Display advertising revenue is generated when consumers view or click on a text, graphic, or video advertisement that was delivered on one of the Company's start experiences. Advertising inventory is filled with advertisements sourced by the Company’s direct sales force, independent advertising sales representatives, and also advertising network partners. Display advertising revenue is calculated on a cost per impression basis, which means the advertiser pays based on the number of times its advertisements appear, or a cost per action basis, which means that an advertiser pays when a consumer performs an action after engaging one of its advertisements, or on a fixed fee basis. Historically, only a small percentage of display advertising has been calculated on a cost per action basis or fixed fee basis.
Subscriber-based revenue represents subscription fees and other fees that the Company receives from customers for the use of its proprietary technology, including the use of, or access to, e-mail, TV Everywhere, security, games and other value added services and paid content. Monthly subscriber levels typically form the basis for calculating and generating subscriber-based revenue. They are generally determined by multiplying a per-subscriber per-month fee by the number of subscribers using the particular services being offered or consumed. In other cases, the fee is fixed. Revenue is recognized from customers as the service is delivered.
Search and display advertising and subscriber-based revenue are recognized when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collectability is reasonably assured.
The Company evaluates its relationship between search and display advertising partners and customers in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-45, Principal Agent Considerations. The Company has determined that the revenue derived from traffic supplied by its customers is reported on a gross basis because Synacor is the primary obligor (the Company is responsible to its customers for fulfilling search and display advertising services and value added and other services), is involved in the service specifications, performs part of the service, has discretion in supplier selection, has latitude in establishing price and bears credit risk.
Cost of Revenue—Cost of revenue consists of revenue sharing, content acquisition costs and co-location facility costs. Revenue sharing consists of amounts accrued and paid to customers for the traffic on their start experience resulting in the generation of search and display advertising revenue. The revenue-sharing agreements with customers are primarily variable payments based on a percentage of the search and display advertising revenue. Content-acquisition agreements may be based on a fixed payment schedule, on the number of subscribers per month, or a combination of both. Fixed-payment agreements are expensed on a straight-line basis over the term defined in the agreement. Agreements based on the number of subscribers are expensed on a monthly basis. Co-location facility costs consist of rent and operating costs for the Company’s data center facilities.
Concentrations of Risk—As of December 31, 2012 and 2013, and for the years ended December 31, 2011, 2012, and 2013 the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows:
 
Accounts Receivable
 
Revenue
 
2012
 
2013
 
2011
 
2012
 
2013
Google
40
%
 
47
%
 
57
%
 
56
%
 
51
%
Display Advertising Partner (1)
N/A

 
11

 
N/A

 
N/A

 
N/A

Note:
(1)
As of December 31, 2012, the accounts receivable of the Display Advertising Partner was less than 10%. For the years ended December 31, 2011, 2012, and 2013 the revenue earned directly from the Display Advertising Partner was less than 10% .
For the years ended December 31, 2011, 2012, and 2013, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to customers for their supply of Internet traffic on the Company's start experiences.
 
Cost of Revenue
 
2011
 
2012
 
2013
Customer A
14
%
 
20
%
 
22
%
Customer B
18

 
13

 
13

Customer C
11

 
17

 
12

Customer D (1)
N/A

 
12

 
11

Note:
(1)
For the year ended December 31, 2011, the revenue share payments received by Customer D were less than 10%.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company places its cash primarily in checking and money market accounts with high credit quality financial institutions, which, at times, have exceeded federally insured limits of $250. Although the Company maintains balances that exceed the federally insured limit, it has not experienced any losses related to these balances and believes credit risk to be minimal.
Research and Development—Research and development expenses consist primarily of compensation related expenses incurred for the development of, enhancements to, and maintenance and operation of the Company’s technology and related infrastructures.
Internal Software Development Costs—Costs incurred during the preliminary project stage for software programs are expensed as incurred. External and internal costs incurred during the application development stage of new software development as well as for upgrades and enhancements for software programs that result in additional functionality are capitalized. In 2011 the Company did not incur significant external or internal costs related to the application development stage. In 2012 and 2013, the Company incurred $778 and $2,987 of combined internal and external costs related to the application development stage. Internal and external training and maintenance costs are expensed as incurred.
Sales and Marketing—Sales and marketing expenses consist primarily of compensation related expenses to the Company’s direct sales and marketing personnel, as well as costs related to advertising, industry conferences, promotional materials, and other sales and marketing programs. Advertising cost is expensed as incurred.
General and Administrative—General and administrative expenses consist primarily of compensation related expenses for executive management, finance, accounting, human resources, and other administrative functions.
    
Earnings (Loss) Per Share—Basic earnings (loss) per share, or EPS, is calculated in accordance with FASB ASC Topic 260, Earnings per Share, and is calculated using the weighted average number of common shares outstanding during each period. Contingently issuable or repurchasable shares are not used in the calculation of basic earnings (loss) per share until the contingency is resolved.
Diluted EPS assumes the conversion, exercise or issuance of all potential common stock equivalents unless the effect is to reduce a loss or increase the income per share. For purposes of this calculation, convertible preferred stock and options are considered to be potential common shares and are only included in the calculation of diluted earnings (loss) per share when their effect is dilutive.
The shares used to compute basic and diluted net income (loss) per share represent the weighted-average common shares outstanding. The Company's preferred stockholders had the right to participate with common stockholders in dividends and unallocated income. Net losses were not allocated to the preferred stockholders. Therefore, when applicable. basic and diluted EPS were computed using the two-class method, under which the Company's undistributed earnings are allocated amongst the common and preferred stockholders.
Stock-Based Compensation—The Company records compensation costs related to stock-based awards in accordance with FASB ASC 718, Compensation—Stock Compensation. Under the fair value recognition provisions of ASC 718, the Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award. Compensation cost is recognized ratably over the requisite service period of the award. The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of stock options granted. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company estimates prevesting forfeitures at the time of grant by analyzing historical data and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The total expense recognized over the vesting period will only be for those awards that ultimately vest. See Note 10, Stock-based Compensation, for additional information on stock-based compensation.
Income Taxes—Deferred income tax assets and liabilities are determined based on temporary differences between the financial statement and income tax bases of assets and liabilities and net operating loss ("NOL") and credit carryforwards using enacted income tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established to the extent necessary to reduce deferred income tax assets to amounts that more likely than not will be realized.
The Company accounts for uncertain tax positions using a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax benefits that meet the more-likely-than-not recognition threshold should be measured as the largest amount of tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2013, there was no accrued interest or penalties related to uncertain tax positions.
Accounting Estimates—The preparation of financial statements in conformity with GAAP in the U.S. requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, actual results may differ from estimated amounts.
Fair Value of Financial Instruments—The carrying amounts of the Company’s capital leases and bank financing approximate fair value of these obligations based upon management’s best estimates of interest rates that would be available for similar debt obligations at December 31, 2012 and 2013.
Investments and Fair Value Measurements—In July 2013, the Company made a $1,000 investment (in the form of a convertible promissory note) in a privately held Delaware corporation called Blazer and Flip Flops, Inc., or B&FF (doing business as The Experience Engine). B&FF is a professional services company whose principals have experience integrating its customers’ systems with their customers’ devices, including smartphones and tablets.
The investment in B&FF is considered an available-for-sale security and is reported on the Company’s consolidated balance sheet as a convertible promissory note.
The provisions of ASC 820, Fair Value Measurements and Disclosures, establishes a framework for measuring the fair value in accounting principles generally accepted in the U.S. and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value as follows:
Level 1—Level 1 inputs are defined as observable inputs such as quoted prices in active markets.
Level 2—Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3—Level 3 inputs are unobservable inputs that reflect the Company’s determination of assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including the Company’s own data.
The Company classifies its investment in B&FF within Level 3 because it is valued using unobservable inputs and at December 31, 2013 the estimated fair value is equal to the purchase price of $1,000.
Acquisitions—In January 2012, the Company acquired the assets of Carbyn, Inc., or Carbyn, an Ontario, Canada-based company. The assets acquired are principally comprised of mobile device software and technology and other intellectual property, which the Company expects to enhance its efforts in the development of next generation web applications for mobile devices. The aggregate purchase price was $1,100 for the acquired assets, of which $600 was paid upon consummation of the acquisition and the remaining $500 was paid in April 2013. In addition, the Company hired seven employees from Carbyn who accepted employment with Synacor Canada, Inc., a wholly-owned subsidiary of the Company. The acquisition and its impact on the balance sheet and results of operations are not material. The purchase price was allocated to the assets acquired based on their respective fair values as of the acquisition date, with the amount exceeding the fair value recorded as goodwill of $819, which is expected to be deductible for tax purposes.
In November 2013, the Company acquired the assets of Teknision, Inc., or Teknision, an Ontario, Canada-based company. Teknision has created a development framework that accelerates the production of home screen and other Android applications. The Company expects to leverage the framework to enable a range of customer applications for Android devices. The Company also expects to enhance its presence in mobile and provide a platform for custom Android launchers and intelligent home screens for wireless carriers and consumer electronics companies. The aggregate purchase price is up to $1,005 for the acquired assets, of which $510 was paid upon consummation of the acquisition and the remaining $495 is due in May 2015 unless such amount is offset in satisfaction of certain indemnification obligations of Teknision. In addition, the Company hired eleven employees from Teknision who accepted employment with Synacor Canada, Inc. The acquisition and its impact on the consolidated financial statements are not material. The purchase price was allocated to the assets acquired based on their respective fair values as of the acquisition date, with the amount exceeding the fair value recorded as goodwill of $746, which is expected to be deductible for tax purposes.
Subsequent Events—The Company reviewed and evaluated subsequent events through the issuance of the date of the Company's consolidated financial statements.
Property and Equipment - Net
Property and Equipment - Net
PROPERTY AND EQUIPMENT—NET
As of December 31, property and equipment, net consisted of the following (in thousands):
 
2012
 
2013
Computer equipment (1)
$
17,630

 
$
19,361

Computer software
3,715

 
4,625

Furniture and fixtures
1,050

 
1,634

Leasehold improvements
732

 
1,044

Work in process (primarily software development costs)
226

 
3,893

Other
173

 
173

 
23,526

 
30,730

Less accumulated depreciation (2)
(12,483
)
 
(16,645
)
Total property and equipment—net
$
11,043

 
$
14,085

Notes:
(1)
Includes equipment under capital lease obligations of approximately $5,882 and $5,289 as of December 31, 2012 and 2013, respectively.
(2)
Includes $1,834 and $2,053 of accumulated depreciation of equipment under capital leases as of December 31, 2012 and 2013, respectively.
Accrued Expenses and Other Current Liabilities
Accrued Expenses and Other Current Liabilities
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
As of December 31, accrued expenses and other current liabilities consisted of the following (in thousands):
 
2012
 
2013
Accrued compensation
$
4,265

 
$
2,787

Accrued content fees
555

 
580

Accrued business acquisition consideration
500

 

Unearned revenue on contracts
297

 
247

Other
1,711

 
1,563

Total
$
7,328

 
$
5,177

Bank Financing
Bank Financing
BANK FINANCING
In September 2013, the Company entered into a new Loan and Security Agreement, or Loan Agreement, with Silicon Valley Bank, or Lender.  The Loan Agreement provides for a $10.0 million secured revolving line of credit with a stated maturity of September 27, 2015.  The credit facility is available for cash borrowings, subject to a formula based upon eligible accounts receivable. As of December 31, 2013, due to the operation of the borrowing formula, $7.5 million was available under the revolving credit line, with no outstanding borrowings.
Borrowings under the Loan Agreement bear interest, at the Company’s election, at an annual rate of either 0.50% above the “prime rate” as published in The Wall Street Journal or LIBOR for the relevant period plus 3.00%.  For LIBOR advances, interest is payable (i) on the last day of a LIBOR interest period or (ii) on the last day of each calendar quarter.  For prime rate advances, interest is payable (a) on the first day of each month and (b) on each date a prime rate advance is converted into a LIBOR advance.
The Company paid a commitment fee of $50 upon the closing of the facility, and must pay quarterly, in arrears, an unused facility fee of 0.50% per annum of the average unused portion of the facility (as determined by the Lender).  Additionally, if the Company terminates the facility prior to the first anniversary of the closing date, the Company must pay the Lender a termination fee of $100 unless the facility is replaced with a new facility from the Lender.
The Company’s obligations to the Lender are secured by a first priority security interest in all our assets, including our intellectual property.  The Loan Agreement contains customary events of default, including non-payment of principal or interest, violations of covenants, material adverse changes, cross-default, bankruptcy and material judgments.  Upon the occurrence of an event of default, the Lender may accelerate repayment of any outstanding balance.  The Loan Agreement also contains certain financial covenants and other agreements that are customary in loan agreements of this type, including restrictions on paying dividends and making distributions to our stockholders.  As of December 31, 2013, the Company was in compliance with the covenants.
Income Taxes
Income Taxes
INCOME TAXES
    
Income (loss) from continuing operations before income taxes included income from domestic operations of $3,917, $5,494, and $(1,120) for the years ended December 31, 2011, 2012, and 2013, and income from foreign operations of $0, $85, and $180 for the years ended December 31, 2011, 2012, and 2013.
The (benefit) provision for income taxes for the years ended December 31, 2011, 2012, and 2013, comprised the following (in thousands):
 
2011
 
2012
 
2013
Current:
 
 
 
 
 
United States Federal
$
47

 
$
151

 
$
16

State
7

 
20

 
22

Foreign
14

 
36

 
71

Total current provision for income taxes
68

 
207

 
109

Deferred:
 
 
 
 
 
United States Federal
1,954

 
1,022

 
(119
)
State
373

 
535

 
(97
)
Foreign
40

 

 
(27
)
Total deferred provision (benefit) for income taxes
2,367

 
1,557

 
(243
)
Less decrease in valuation allowance
(8,450
)
 

 

Net deferred (benefit) provision for income taxes
(6,083
)
 
1,557

 
(243
)
Total (benefit) provision for income taxes
$
(6,015
)
 
$
1,764

 
$
(134
)

    
The income tax effects of significant temporary differences and carryforwards that give rise to deferred income tax assets and liabilities as of December 31, 2012 and 2013 are as follows (in thousands):
 
2012
 
2013
Deferred income tax assets:
 
 
 
Stock and other compensation expense
$
835

 
$
1,516

Net operating losses
2,763

 
2,255

Research and development credits
1,676

 
1,676

Other federal and state carryforwards
375

 
414

Other
71

 
15

Gross deferred tax assets
5,720

 
5,876

Deferred income tax liabilities:
 
 
 
Fixed assets
(566
)
 
(469
)
Other
(1
)
 
(11
)
Gross deferred tax liabilities
(567
)
 
(480
)
Subtotal
5,153

 
5,396

Less unrecognized tax benefit liability related to deferred items
(627
)
 
(627
)
Net deferred tax assets
$
4,526

 
$
4,769

 
 
 
 
Recorded as:
 
 
 
Current deferred tax assets
$
1,999

 
$
314

Non-current deferred tax assets
2,527

 
4,455

Net deferred tax assets
$
4,526

 
$
4,769


A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
 
2011
 
2012
 
2013
Balance—beginning of year
$
244

 
$
26

 
$
627

Additions for tax positions of prior years

 
601

 

Reductions for tax positions of prior years
(218
)
 

 

Balance—end of year
$
26

 
$
627

 
$
627


The tax position at the end of 2011 was primarily related to changes in tax depreciation methods related to fixed assets placed in service in prior years. The tax positions at the end of 2012 and 2013 were primarily related to research and development carryforwards.
If the $627 of unrecognized tax benefits as of December 31, 2013 were recognized, approximately $614 would decrease the effective tax rate in the period in which each of the benefits is recognized. The remaining amount would be offset by the reversal of related deferred tax assets on which an unrecognized tax benefit liability is placed. The Company does not expect any material changes to its unrecognized tax benefits within the next twelve months.
    
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2012 and 2013, penalties and interest were immaterial.

The Company files income tax returns in the U.S. federal jurisdiction as well as many U.S. states and foreign jurisdictions. The tax years 2003 to 2012 remain open to examination by the major jurisdictions in which the Company is subject to tax. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized. The Company is currently not under examination in any major taxing jurisdictions.

The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries, as such earnings are to be reinvested offshore indefinitely. The income tax liability would be insignificant if these earnings were to be repatriated.
Income tax (benefit) expense for the years ended December 2011, 2012, and 2013, differs from the expected income tax (benefit) expense calculated using the statutory U.S. Federal income tax rate as follows (dollars in thousands):
 
2011
 
2012
 
2013
Federal income tax (benefit) expense at statutory rate
$
1,332

 
34
 %
 
$
1,895

 
34
 %
 
$
(320
)
 
(34
)%
State and local taxes—net of federal benefit
251

 
6

 
310

 
6

 
(75
)
 
(8
)
Foreign taxes
54

 
1

 
14

 

 
(3
)
 

Expiration of or changes to federal and state NOLs
(42
)
 
(1
)
 
446

 
8

 

 

Federal research and development credit

 

 
(1,676
)
 
(30
)
 

 

Valuation allowance
(7,959
)
 
(203
)
 

 

 

 

Permanent differences
349

 
9

 
291

 
5

 
264

 
28

Uncertain tax position current activity

 

 
586

 
11

 

 

Other

 

 
(102
)
 
(2
)
 

 

Total
$
(6,015
)
 
(154
)%
 
$
1,764

 
32
 %
 
$
(134
)
 
(14
)%

The Company had federal and state NOL carryforwards of approximately $5,800 and $5,200, respectively, at December 31, 2013. In addition, the Company has approximately $1,900 of NOL carryforwards created by windfall tax benefits relating to stock compensation for which no deferred tax assets have been recorded in accordance with the rules under FASB Statement 123(R). The NOLs will begin to expire in 2027. The Company has weighed the positive and negative evidence and determined that it will more likely than not be able to generate sufficient taxable income in the future to be able to utilize the entire NOL in future periods, and therefore, a valuation allowance is not recorded against the net deferred tax assets as of December 31, 2013.
On September 13, 2013, the US Treasury and IRS issued final Tangible Property Regulations (“TPR”) under IRC Section 162 and IRC Section 263(a). The regulations are not effective until tax years beginning on or after January 1, 2014; however, certain portions may require an accounting method change on a retroactive basis, thus requiring a IRC Section 481(a) adjustment related to fixed and real asset deferred taxes. The accounting rules under ASC 740 treat the release of the regulations as a change in tax law as of the date of issuance and require the Company to determine whether there will be an impact on its financial statements for the year ended December 31, 2013. Any such impact of the final tangible property regulations would affect temporary deferred taxes only and result in a balance sheet reclassification between current and deferred taxes. The Company will continue to monitor the impact of any future changes to the TPR on the Company prospectively.
Information About Segment and Geographic Areas
Information About Segment and Geographic Areas
INFORMATION ABOUT SEGMENT AND GEOGRAPHIC AREAS
Operating segments are components of the Company in which separate financial information is available that is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker for the Company is the Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a total Company basis, accompanied by information about revenue by major service line for purposes of allocating resources and evaluating financial performance. Profitability measures by service line are not routinely prepared or used. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the Company level. Accordingly, the Company has determined that it has a single reporting segment and operating unit structure.
The following table sets forth revenue and long-lived tangible assets by geographic area (in thousands):
 
Years Ended December 31,
 
2011
 
2012
 
2013
Revenue:
 
 
 
 
 
United States
$
90,062

 
$
121,306

 
$
111,122

United Kingdom
998

 
675

 
685

Total revenue
$
91,060

 
$
121,981

 
$
111,807

 
Years Ended December 31,
 
2012
 
2013
Long-lived tangible assets:
 
 
 
United States
$
10,638

 
$
13,825

Netherlands
405

 
260

Total long-lived tangible assets
$
11,043

 
$
14,085

Commitments and Contingencies
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES
Lease Commitments—The Company leases office space and data center space under operating lease agreements and certain equipment under capital lease agreements with interest rates ranging from 3% to 7%.
Rent expense for operating leases was approximately $1,099, $1,529, and $1,692 for 2011, 2012, and 2013, respectively.
Lease commitments as of December 31, 2013 can be summarized as follows (in thousands):
Years Ending
December 31
Operating
Lease Commitments
2014
$
1,478

2015
988

2016
348

2017
191

2018 and thereafter
318

Total lease commitments
$
3,323


Years Ending
December 31
Capital
Lease Commitments
2014
$
2,038

2015
531

2016 and thereafter
390

Gross lease commitment
2,959

Less interest
(128
)
Net lease commitments
$
2,831


Contract Commitments—The Company is obligated to make payments under various contracts with vendors and other business partners, principally for revenue-share and content arrangements. Contract commitments as of December 31, 2013 can be summarized as follows (in thousands):
Years Ending
December 31
Contract
Commitments
2014
$
4,610

2015
1,630

2016
1,080

2017
360

2018 and thereafter

Total contract commitments
$
7,680


Litigation—From time to time, the Company is a party to legal actions. In the opinion of management, the outcome of these matters will not have a material impact on the financial statements of the Company.
Equity
Equity
EQUITY
Common Stock—Effective on February 15, 2012, the Company's board of directors and stockholders approved the Fifth Amended and Restated Certificate of Incorporation. The total number of common shares that the Company is authorized to issue is 100,000,000 with a par value of $0.01 per share.
Preferred Stock Effective on February 15, 2012, the Company's board of directors and stockholders approved the Fifth Amended and Restated Certificate of Incorporation. The total number of preferred shares that the Company is authorized to issue is 10,000,000 with a par value of $0.01 per share. None have been issued to date.

Conversion Prior to the Company's initial public offering, each share of Series A, A-1, B, and C preferred stock was convertible at the option of the holder at any time into common stock. The conversion rate was the quotient obtained by dividing the original issue price of the Series A, A-1, B, or C by the conversion price. Subsequent to the Second Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation, the conversion price was adjusted to effect a conversion of one preferred share into one and one-half common shares, as explained in Note 1, The Company and Summary of Significant Accounting Policies. The conversion price was subject to adjustment as set forth in the restated certificate of incorporation for certain dilutive issuances, splits, and combinations, as therein defined. Conversion was automatic upon either the consent of the holders of 66% of the outstanding shares of preferred stock or the effective date of a firm commitment underwritten public offering of the Company's common stock in which the post-offering valuation on a fully diluted basis was at least $150 million and the proceeds were not less than $25 million. All shares of the Company's outstanding preferred stock were converted into common stock in February 2012 in connection with the Company's initial public offering.
Investment in Equity Interest
Investment in Equity Interest
INVESTMENT IN EQUITY INTEREST
In March 2013, the Company entered into a Joint Venture Agreement, pursuant to which it owns 50% of the outstanding common stock and 100% of the preferred shares of Synacor China, Ltd., or the JV Company. In July 2013 the Company provided $400 in initial funding and $526 in additional funding in December 2013. The Company has agreed to provide up to $1.1 million in additional funding to the JV Company over the following two years. The JV Company will, through its wholly foreign-owned subsidiary in the People's Republic of China (the “PRC”), supply authentication and aggregation solutions for the delivery of online content and services to customers in the PRC.
The investment in the JV Company is being accounted for using the equity method and is classified as an investment in equity interest on the Company’s 2013 consolidated balance sheet. The Company records its share of the results of the JV Company within earnings in equity interest. Because the Company provided nearly all of the capital to form the JV Company, the Company has recorded 100% of the losses incurred by the JV Company within earnings in equity interest in its 2013 consolidated statement of operations. Since acquiring its interest in the JV Company during 2013, the Company has recorded, in retained earnings, cumulative losses in equity interest of $561.
The following tables present summarized financial information for the JV Company:
 
Year Ended December 31,
 
2013
Revenue
$

Loss from operations
(561
)
Net loss
$
(561
)

 
As of December 31,
 
2013
Total assets
$
442

Total liabilities
$
77

Stock-based Compensation
Stock-based Compensation
STOCK-BASED COMPENSATION
The Company recorded $920, $1,999 and $2,561 of stock-based compensation expense for the years ended December 31, 2011, 2012, and 2013, respectively. No income tax deduction is allowed for incentive stock options ("ISOs"). Accordingly, no deferred income tax asset is recorded for the potential tax deduction related to these options. Expense related to stock option grants of non-qualified stock options ("NSOs") result in a temporary difference, which gives rise to a deferred tax asset.
Total stock-based compensation expense included in the accompanying consolidated statements of operations and comprehensive income for the years ended December 31, 2011, 2012, and 2013, is as follows (in thousands):
 
2011
 
2012
 
2013
Research and development
$
295

 
$
523

 
$
1,184

Sales and marketing
203

 
404

 
348

General and administrative
422

 
1,072

 
1,029

Total stock-based compensation expense
$
920

 
$
1,999

 
$
2,561


Equity Incentive Plans— The Company has four stock option plans (the 2000 Stock Plan, the 2006 Stock Plan, the 2012 Equity Incentive Plan, and the Special Purpose Recruitment Plan), which authorize the Company to grant up to 8,170,359 stock options (ISOs and NSOs), stock appreciation rights, restricted stock, restricted stock units (“RSUs”), and performance cash awards. The ISOs and NSOs will be granted at a price per share not less than the fair value of the Company's common stock at the date of grant. Options granted to date generally vest over a four-year period with 25% vesting at the end of one year and the remaining 75% vesting monthly thereafter. Options granted generally are exercisable up to 10 years. The Company began granting RSUs in December 2012, which generally vest over a four year period with 25% vesting at the end of one year and the remaining 75% vesting quarterly thereafter.
Special Purpose Recruitment Plan — During 2013 our shareholders approved the Special Purpose Recruitment Plan from which equity compensation awards are granted to newly-hired employees. One million shares of common stock are reserved for issuance under this plan.
Stock Option Activity—A summary of stock option activity for the year ended December 31, 2013 is as follows:
 
Number of
Stock
Options
 
Weighted
Average
Exercise
Price
 
Aggregate Intrinsic Value (in thousands)
 
Weighted Average Remaining Contractual Term (in years)
Outstanding—January 1, 2013
4,510,807

 
$
4.06

 
 
 
 
Granted
1,622,750

 
3.31

 
 
 
 
Exercised
(166,933
)
 
1.23

 
 
 
 
Forfeited
(196,456
)
 
6.28

 
 
 
 
Outstanding—December 31, 2013
5,770,168

 
3.85

 
$
986

 
7.36
Expected to vest—December 31, 2013
5,314,102

 
3.77

 
$
985

 
7.24
Vested and exercisable—December 31, 2013
2,729,728

 
3.24

 
$
980

 
5.76

    
Aggregate intrinsic value represents the difference between the Company's closing stock price of its common stock and the exercise price of outstanding, in-the-money options. The Company's closing stock price as reported on the NASDAQ as of December 31, 2013 was $2.45. The total intrinsic value of options exercised was approximately $6,461, $7,622 and $194 for the years ended December 31, 2011, 2012, and 2013, respectively. The weighted-average grant date fair value of options granted was $1.89, $3.97 and $1.86 and for the years ended December 31, 2011, 2012, and 2013, respectively.
As of December 31, 2013, total unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested stock options was approximately $6,123 which is expected to be recognized over a weighted-average period of 2.71 years.
The following table summarizes information about outstanding and vested stock options as of December 31, 2013:
Exercise Price
 
Weighted Average Remaining Contractual Term (in years)
 
Number of Options Outstanding
 
Number of Options Vested and Exercisable
$
0.04

 
0.40
 
30,000

 
30,000

0.20

 
1.14
 
189,780

 
189,780

0.93

 
3.29
 
57,387

 
57,387

0.93

 
3.12
 
257,162

 
257,162

2.40

 
9.05
 
143,311

 
27,631

2.47

 
9.85
 
210,000

 

2.52

 
3.89
 
556,505

 
556,505

2.53

 
9.96
 
57,500

 

2.58

 
5.00
 
48,069

 
48,069

2.68

 
6.57
 
124,782

 
92,575

2.69

 
9.72
 
101,500

 

2.88

 
7.16
 
502,314

 
326,776

3.12

 
9.20
 
45,000

 

3.23

 
9.47
 
43,000

 

3.25

 
9.57
 
47,500

 

3.32

 
7.63
 
997,791

 
583,084

3.68

 
9.38
 
926,750

 
8,437

3.70

 
7.85
 
83,802

 
46,579

5.55

 
9.13
 
27,500

 

5.82

 
8.97
 
136,500

 
31,213

5.96

 
8.00
 
418,500

 
203,143

6.71

 
8.80
 
17,500

 
4,933

7.10

 
8.29
 
434,728

 
161,337

7.61

 
8.75
 
206,750

 
63,842

11.14

 
8.40
 
56,187

 
22,975

15.00

 
8.55
 
12,250

 
4,082

15.45

 
8.55
 
38,100

 
14,218

 
 
 
 
5,770,168

 
2,729,728


    
RSU Activity—A summary of RSU activity for the year ended December 31, 2013 is as follows:
 
Number of Shares
 
Weighted-Average Grant Date Fair Value
Unvested—January 1, 2013
50,000

 
5.82

Granted
7,500

 
$
3.68

Released
(12,500
)
 
5.82

Forfeited

 

Unvested—December 31, 2013
45,000

 
$
5.46

Expected to vest —December 31, 2013
38,250

 
$
5.46


As of December 31, 2013, total unrecognized compensation cost, adjusted for estimated forfeitures, related to RSUs was approximately $211, which is expected to be recognized over the next 2.97 years.
    

Stock-Based Compensation Expense—The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation, including the fair value of the Company's common stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of the Company's common stock, a risk-free interest rate, and expected dividends. The Company also estimates forfeitures of unvested stock options. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest. The Company uses the simplified calculation of expected life described in the SEC's Staff Accounting Bulletin No. 107, Share-Based Payment, and volatility is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The Company uses an expected dividend yield of zero, as it does not anticipate paying any dividends in the foreseeable future. Expected forfeitures are based on the
Company's historical experience.
The following table presents the weighted-average assumptions used to estimate the fair value of options granted during the periods presented:     
 
2011
 
2012
 
2013
Volatility
51
%
 
58
%
 
59
%
Expected dividend yield

 

 

Risk-free rate
1.6
%
 
1.4
%
 
1.4
%
Expected term (in years)
6.25

 
6.25

 
6.25

Net Income (Loss) Per Common Share Data
Net Income (Loss) Per Common Share Data
NET INCOME (LOSS) PER COMMON SHARE DATA
Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. The Company’s potential common shares consist of the incremental common shares issuable upon the exercise of stock options, and to a lesser extent, shares issuable upon the release of RSUs. In addition, for the year ended December 31, 2012, the potential common shares included the conversion of preferred stock on an as if converted basis prior to the Company's initial public offering in February 2012. The dilutive effect of these potential common shares is reflected in diluted earnings per share by application of the treasury stock method. The Company considered its preferred stock to be participating securities and, in accordance with the two-class method, earnings allocated to preferred stock and the related number of outstanding shares of preferred stock were excluded from the computation of basic and diluted net income (loss) per common share.
The following table presents the calculation of basic and diluted net income (loss) per share for the years ended December 31, 2011, 2012, and 2013 (in thousands, except share and per share amounts):
 
Year Ended December 31,
 
2011
 
2012
 
2013
Net income (loss)
$
9,932

 
$
3,815

 
$
(1,367
)
Less: Undistributed earnings allocated to preferred stockholders
(8,583
)
 

 

  Net income (loss) attributable to common stockholders
$
1,349

 
$
3,815

 
$
(1,367
)
Weighted-average common shares used to compute net income (loss) per share attributable to common stockholders
2,303,443

 
24,411,194

 
27,306,882

Basic net income (loss) per share
$
0.59

 
$
0.16

 
$
(0.05
)
Diluted net income (loss) per share:
 
 
 
 
 
    Net income (loss)
$
1,349

 
$
3,815

 
$
(1,367
)
    Add: Undistributed earnings allocated to preferred stockholders
8,583

 

 

  Net income (loss) attributable to common stockholders
$
9,932

 
$
3,815

 
$
(1,367
)
    Number of shares used in basic calculation
2,303,443

 
24,411,194

 
27,306,882

    Weighted-average effect of dilutive securities:
 
 
 
 
 
Add:
 
 
 
 
 
    Conversion of preferred stock (as if converted basis)
17,395,136

 
1,948,635

 

    Stock options and RSUs (1)
2,275,824

 
1,737,484

 

Number of shares used in diluted calculation (1)
21,974,403

 
28,097,313

 
27,306,882

Diluted net (loss) income per share attributable to common stockholders
$
0.45

 
$
0.14

 
$
(0.05
)
Note:
(1)
Stock options and RSUs are not included in the calculation of diluted net loss per share for the year ended December 31, 2013 because the Company had a net loss for that year. Accordingly, the inclusion of these equity awards would have had an antidilutive effect on the calculation of diluted loss per share.
The following equivalent shares were excluded from the calculation of diluted net income (loss) per share because their effect would have been antidilutive for the periods presented:
 
Year Ended December 31,

2011
 
2012
 
2013
Antidilutive Equity Awards:
 
 
 
 
 
  Stock options
367,250

 
137,850

 
3,356,358

Total
367,250

 
137,850

 
3,356,358

Employee Benefit Plan
Employee Benefit Plan
EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) profit sharing plan that covers substantially all employees. Under the plan, eligible employees are permitted to contribute a portion of gross compensation not to exceed standard limitations provided by the Internal Revenue Service. The Company maintains the right to match employee contributions; however, no matching contributions were made during the years ended December 31, 2011, 2012, or 2013.
The Company and Summary of Significant Accounting Policies (Policies)
Basis of Presentation—The consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiary, Synacor Canada, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Accounts Receivable—The Company records accounts receivable at the invoiced amount and does not charge interest on past due invoices. An allowance for doubtful accounts is maintained to reserve for potentially uncollectible accounts receivable. The Company reviews its accounts receivable from customers which are past due to identify specific accounts with known disputes or collectability issues. In determining the amount of the reserve, the Company makes judgments about the creditworthiness of customers based on ongoing credit evaluations.
Property and Equipment—Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Leasehold improvements
3–10 years
Computer hardware
5 years
Computer software
3 years
Furniture and fixtures
7 years
Other
3–5 years

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the assets.
Long-Lived Assets—The Company reviews the carrying value of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. For purposes of evaluating and measuring impairment, the Company groups a long-lived asset or assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. There has been no material adjustments to long-lived assets in any of the years presented.
Revenue Recognition—The Company derives revenue from two categories: revenue generated from search and display advertising activities and subscriber-based revenue, each of which is described below. Search and display advertising is recorded on a gross basis, which includes the net amount received from Google under the Company’s agreement with Google. The following table shows the revenue in each category for the years ended December 31, 2011, 2012 and 2013 (in thousands):
 
Year Ended December 31,
 
2011
 
2012
 
2013
Search and display advertising
$
72,084

 
$
101,559

 
$
90,447

Subscriber-based
18,976

 
20,422

 
21,360

Total revenue
$
91,060

 
$
121,981

 
$
111,807


The Company uses Internet search and display advertising to generate revenue from the traffic on its start experiences.
In the case of search advertising, the Company has a revenue-sharing relationship with Google, pursuant to which it includes a Google-branded search tool on its start experiences. When a consumer makes a search query using this tool, the Company delivers the query to Google and they return search results to consumers that include advertiser-sponsored links. If the consumer clicks on a sponsored link, Google receives payment from the sponsor of that link and shares a portion of that payment with the Company, which in turn is shared with the applicable customer. The net payment received from Google is recognized as revenue.
Display advertising revenue is generated when consumers view or click on a text, graphic, or video advertisement that was delivered on one of the Company's start experiences. Advertising inventory is filled with advertisements sourced by the Company’s direct sales force, independent advertising sales representatives, and also advertising network partners. Display advertising revenue is calculated on a cost per impression basis, which means the advertiser pays based on the number of times its advertisements appear, or a cost per action basis, which means that an advertiser pays when a consumer performs an action after engaging one of its advertisements, or on a fixed fee basis. Historically, only a small percentage of display advertising has been calculated on a cost per action basis or fixed fee basis.
Subscriber-based revenue represents subscription fees and other fees that the Company receives from customers for the use of its proprietary technology, including the use of, or access to, e-mail, TV Everywhere, security, games and other value added services and paid content. Monthly subscriber levels typically form the basis for calculating and generating subscriber-based revenue. They are generally determined by multiplying a per-subscriber per-month fee by the number of subscribers using the particular services being offered or consumed. In other cases, the fee is fixed. Revenue is recognized from customers as the service is delivered.
Search and display advertising and subscriber-based revenue are recognized when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collectability is reasonably assured.
The Company evaluates its relationship between search and display advertising partners and customers in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-45, Principal Agent Considerations. The Company has determined that the revenue derived from traffic supplied by its customers is reported on a gross basis because Synacor is the primary obligor (the Company is responsible to its customers for fulfilling search and display advertising services and value added and other services), is involved in the service specifications, performs part of the service, has discretion in supplier selection, has latitude in establishing price and bears credit risk.
Cost of Revenue—Cost of revenue consists of revenue sharing, content acquisition costs and co-location facility costs. Revenue sharing consists of amounts accrued and paid to customers for the traffic on their start experience resulting in the generation of search and display advertising revenue. The revenue-sharing agreements with customers are primarily variable payments based on a percentage of the search and display advertising revenue. Content-acquisition agreements may be based on a fixed payment schedule, on the number of subscribers per month, or a combination of both. Fixed-payment agreements are expensed on a straight-line basis over the term defined in the agreement. Agreements based on the number of subscribers are expensed on a monthly basis. Co-location facility costs consist of rent and operating costs for the Company’s data center facilities.
Concentrations of Risk—As of December 31, 2012 and 2013, and for the years ended December 31, 2011, 2012, and 2013 the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows:
 
Accounts Receivable
 
Revenue
 
2012
 
2013
 
2011
 
2012
 
2013
Google
40
%
 
47
%
 
57
%
 
56
%
 
51
%
Display Advertising Partner (1)
N/A

 
11

 
N/A

 
N/A

 
N/A

Note:
(1)
As of December 31, 2012, the accounts receivable of the Display Advertising Partner was less than 10%. For the years ended December 31, 2011, 2012, and 2013 the revenue earned directly from the Display Advertising Partner was less than 10% .
For the years ended December 31, 2011, 2012, and 2013, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to customers for their supply of Internet traffic on the Company's start experiences.
 
Cost of Revenue
 
2011
 
2012
 
2013
Customer A
14
%
 
20
%
 
22
%
Customer B
18

 
13

 
13

Customer C
11

 
17

 
12

Customer D (1)
N/A

 
12

 
11

Note:
(1)
For the year ended December 31, 2011, the revenue share payments received by Customer D were less than 10%.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company places its cash primarily in checking and money market accounts with high credit quality financial institutions, which, at times, have exceeded federally insured limits of $250. Although the Company maintains balances that exceed the federally insured limit, it has not experienced any losses related to these balances and believes credit risk to be minimal.
Research and Development—Research and development expenses consist primarily of compensation related expenses incurred for the development of, enhancements to, and maintenance and operation of the Company’s technology and related infrastructures.
Internal Software Development Costs—Costs incurred during the preliminary project stage for software programs are expensed as incurred. External and internal costs incurred during the application development stage of new software development as well as for upgrades and enhancements for software programs that result in additional functionality are capitalized. In 2011 the Company did not incur significant external or internal costs related to the application development stage. In 2012 and 2013, the Company incurred $778 and $2,987 of combined internal and external costs related to the application development stage. Internal and external training and maintenance costs are expensed as incurred.
Sales and Marketing—Sales and marketing expenses consist primarily of compensation related expenses to the Company’s direct sales and marketing personnel, as well as costs related to advertising, industry conferences, promotional materials, and other sales and marketing programs. Advertising cost is expensed as incurred.
General and Administrative—General and administrative expenses consist primarily of compensation related expenses for executive management, finance, accounting, human resources, and other administrative functions.
Earnings (Loss) Per Share—Basic earnings (loss) per share, or EPS, is calculated in accordance with FASB ASC Topic 260, Earnings per Share, and is calculated using the weighted average number of common shares outstanding during each period. Contingently issuable or repurchasable shares are not used in the calculation of basic earnings (loss) per share until the contingency is resolved.
Diluted EPS assumes the conversion, exercise or issuance of all potential common stock equivalents unless the effect is to reduce a loss or increase the income per share. For purposes of this calculation, convertible preferred stock and options are considered to be potential common shares and are only included in the calculation of diluted earnings (loss) per share when their effect is dilutive.
The shares used to compute basic and diluted net income (loss) per share represent the weighted-average common shares outstanding. The Company's preferred stockholders had the right to participate with common stockholders in dividends and unallocated income. Net losses were not allocated to the preferred stockholders. Therefore, when applicable. basic and diluted EPS were computed using the two-class method, under which the Company's undistributed earnings are allocated amongst the common and preferred stockholders.
Stock-Based Compensation—The Company records compensation costs related to stock-based awards in accordance with FASB ASC 718, Compensation—Stock Compensation. Under the fair value recognition provisions of ASC 718, the Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award. Compensation cost is recognized ratably over the requisite service period of the award. The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of stock options granted. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company estimates prevesting forfeitures at the time of grant by analyzing historical data and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The total expense recognized over the vesting period will only be for those awards that ultimately vest. See Note 10, Stock-based Compensation, for additional information on stock-based compensation.
Income Taxes—Deferred income tax assets and liabilities are determined based on temporary differences between the financial statement and income tax bases of assets and liabilities and net operating loss ("NOL") and credit carryforwards using enacted income tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established to the extent necessary to reduce deferred income tax assets to amounts that more likely than not will be realized.
The Company accounts for uncertain tax positions using a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax benefits that meet the more-likely-than-not recognition threshold should be measured as the largest amount of tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax expense.
Accounting Estimates—The preparation of financial statements in conformity with GAAP in the U.S. requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, actual results may differ from estimated amounts.
Fair Value of Financial Instruments—The carrying amounts of the Company’s capital leases and bank financing approximate fair value of these obligations based upon management’s best estimates of interest rates that would be available for similar debt obligations at December 31, 2012 and 2013.
Investments and Fair Value Measurements—In July 2013, the Company made a $1,000 investment (in the form of a convertible promissory note) in a privately held Delaware corporation called Blazer and Flip Flops, Inc., or B&FF (doing business as The Experience Engine). B&FF is a professional services company whose principals have experience integrating its customers’ systems with their customers’ devices, including smartphones and tablets.
The investment in B&FF is considered an available-for-sale security and is reported on the Company’s consolidated balance sheet as a convertible promissory note.
The provisions of ASC 820, Fair Value Measurements and Disclosures, establishes a framework for measuring the fair value in accounting principles generally accepted in the U.S. and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value as follows:
Level 1—Level 1 inputs are defined as observable inputs such as quoted prices in active markets.
Level 2—Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3—Level 3 inputs are unobservable inputs that reflect the Company’s determination of assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including the Company’s own data.
The Company classifies its investment in B&FF within Level 3 because it is valued using unobservable inputs and at December 31, 2013 the estimated fair value is equal to the purchase price of $1,000.
Acquisitions—In January 2012, the Company acquired the assets of Carbyn, Inc., or Carbyn, an Ontario, Canada-based company. The assets acquired are principally comprised of mobile device software and technology and other intellectual property, which the Company expects to enhance its efforts in the development of next generation web applications for mobile devices. The aggregate purchase price was $1,100 for the acquired assets, of which $600 was paid upon consummation of the acquisition and the remaining $500 was paid in April 2013. In addition, the Company hired seven employees from Carbyn who accepted employment with Synacor Canada, Inc., a wholly-owned subsidiary of the Company. The acquisition and its impact on the balance sheet and results of operations are not material. The purchase price was allocated to the assets acquired based on their respective fair values as of the acquisition date, with the amount exceeding the fair value recorded as goodwill of $819
The Company and Summary of Significant Accounting Policies (Tables)
Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Leasehold improvements
3–10 years
Computer hardware
5 years
Computer software
3 years
Furniture and fixtures
7 years
Other
3–5 years
As of December 31, property and equipment, net consisted of the following (in thousands):
 
2012
 
2013
Computer equipment (1)
$
17,630

 
$
19,361

Computer software
3,715

 
4,625

Furniture and fixtures
1,050

 
1,634

Leasehold improvements
732

 
1,044

Work in process (primarily software development costs)
226

 
3,893

Other
173

 
173

 
23,526

 
30,730

Less accumulated depreciation (2)
(12,483
)
 
(16,645
)
Total property and equipment—net
$
11,043

 
$
14,085

Notes:
(1)
Includes equipment under capital lease obligations of approximately $5,882 and $5,289 as of December 31, 2012 and 2013, respectively.
(2)
Includes $1,834 and $2,053 of accumulated depreciation of equipment under capital leases as of December 31, 2012 and 2013, respectively.
The following table shows the revenue in each category for the years ended December 31, 2011, 2012 and 2013 (in thousands):
 
Year Ended December 31,
 
2011
 
2012
 
2013
Search and display advertising
$
72,084

 
$
101,559

 
$
90,447

Subscriber-based
18,976

 
20,422

 
21,360

Total revenue
$
91,060

 
$
121,981

 
$
111,807

As of December 31, 2012 and 2013, and for the years ended December 31, 2011, 2012, and 2013 the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows:
 
Accounts Receivable
 
Revenue
 
2012
 
2013
 
2011
 
2012
 
2013
Google
40
%
 
47
%
 
57
%
 
56
%
 
51
%
Display Advertising Partner (1)
N/A

 
11

 
N/A

 
N/A

 
N/A

Note:
(1)
As of December 31, 2012, the accounts receivable of the Display Advertising Partner was less than 10%. For the years ended December 31, 2011, 2012, and 2013 the revenue earned directly from the Display Advertising Partner was less than 10%
For the years ended December 31, 2011, 2012, and 2013, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to customers for their supply of Internet traffic on the Company's start experiences.
 
Cost of Revenue
 
2011
 
2012
 
2013
Customer A
14
%
 
20
%
 
22
%
Customer B
18

 
13

 
13

Customer C
11

 
17

 
12

Customer D (1)
N/A

 
12

 
11

Note:
(1)
For the year ended December 31, 2011, the revenue share payments received by Customer D were less than 10%.
Property and Equipment - Net (Tables)
Schedule of property and equipment
Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Leasehold improvements
3–10 years
Computer hardware
5 years
Computer software
3 years
Furniture and fixtures
7 years
Other
3–5 years
As of December 31, property and equipment, net consisted of the following (in thousands):
 
2012
 
2013
Computer equipment (1)
$
17,630

 
$
19,361

Computer software
3,715

 
4,625

Furniture and fixtures
1,050

 
1,634

Leasehold improvements
732

 
1,044

Work in process (primarily software development costs)
226

 
3,893

Other
173

 
173

 
23,526

 
30,730

Less accumulated depreciation (2)
(12,483
)
 
(16,645
)
Total property and equipment—net
$
11,043

 
$
14,085

Notes:
(1)
Includes equipment under capital lease obligations of approximately $5,882 and $5,289 as of December 31, 2012 and 2013, respectively.
(2)
Includes $1,834 and $2,053 of accumulated depreciation of equipment under capital leases as of December 31, 2012 and 2013, respectively.
Accrued Expenses and Other Current Liabilities (Tables)
Schedule of accrued expenses and other current liabilities
 
2012
 
2013
Accrued compensation
$
4,265

 
$
2,787

Accrued content fees
555

 
580

Accrued business acquisition consideration
500

 

Unearned revenue on contracts
297

 
247

Other
1,711

 
1,563

Total
$
7,328

 
$
5,177

Income Taxes (Tables)
The (benefit) provision for income taxes for the years ended December 31, 2011, 2012, and 2013, comprised the following (in thousands):
 
2011
 
2012
 
2013
Current:
 
 
 
 
 
United States Federal
$
47

 
$
151

 
$
16

State
7

 
20

 
22

Foreign
14

 
36

 
71

Total current provision for income taxes
68

 
207

 
109

Deferred:
 
 
 
 
 
United States Federal
1,954

 
1,022

 
(119
)
State
373

 
535

 
(97
)
Foreign
40

 

 
(27
)
Total deferred provision (benefit) for income taxes
2,367

 
1,557

 
(243
)
Less decrease in valuation allowance
(8,450
)
 

 

Net deferred (benefit) provision for income taxes
(6,083
)
 
1,557

 
(243
)
Total (benefit) provision for income taxes
$
(6,015
)
 
$
1,764

 
$
(134
)
The income tax effects of significant temporary differences and carryforwards that give rise to deferred income tax assets and liabilities as of December 31, 2012 and 2013 are as follows (in thousands):
 
2012
 
2013
Deferred income tax assets:
 
 
 
Stock and other compensation expense
$
835

 
$
1,516

Net operating losses
2,763

 
2,255

Research and development credits
1,676

 
1,676

Other federal and state carryforwards
375

 
414

Other
71

 
15

Gross deferred tax assets
5,720

 
5,876

Deferred income tax liabilities:
 
 
 
Fixed assets
(566
)
 
(469
)
Other
(1
)
 
(11
)
Gross deferred tax liabilities
(567
)
 
(480
)
Subtotal
5,153

 
5,396

Less unrecognized tax benefit liability related to deferred items
(627
)
 
(627
)
Net deferred tax assets
$
4,526

 
$
4,769

 
 
 
 
Recorded as:
 
 
 
Current deferred tax assets
$
1,999

 
$
314

Non-current deferred tax assets
2,527