| Summary of significant accounting policies (Policies) | 12 Months Ended |
| Dec. 31, 2016 |
| Summary of significant accounting policies | |
| Use of estimates | Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
On an on‑going basis, the Company evaluates its estimates, including those related to the accounts receivable allowance, recoverability of goodwill, intangibles and other long‑lived assets, and other assets and liabilities; the useful lives of intangible assets, property and equipment, capitalized software development costs; assumptions used to calculate stock‑based compensation expense including volatility, expected life and forfeiture rate; and income taxes (including recoverability of deferred taxes), among others. The Company bases its estimates on historical experience and on other various 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. |
| Revenue recognition | Revenue recognition
The Company derives revenue principally through fees earned under fixed contractual arrangements with customers who use our international payment and multi‑currency processing services. The Company has two revenue streams:
Multi‑currency processing services revenue
Multi‑currency processing services revenue is the foreign currency transaction fee earned on processing and converting of a credit or debit card transaction from one currency into another currency. Multi‑currency transaction processing services revenue is recognized upon settlement of the transaction.
Payment processing services revenue
The Company follows the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) topic 605‑45 Revenue Recognition—Principal Agent Consideration , in determining its payment processing services revenue reporting. Generally, where the Company has merchant portability, credit risk and ultimate responsibility for the merchant, revenue is reported at the time of settlement on a gross basis equal to the full amount of the discount charged to the merchant. This amount may include interchange paid to card issuing banks and assessments paid to payment card associations.
Payment processing services revenue is transaction based and priced either as a fixed fee per transaction or calculated based on a percentage of the transaction value. The fees are charged for processing services provided in facilitating the sale of goods and services by means of credit, debit and prepaid cards and other electronic payments and do not include the gross sales price paid by the ultimate buyer. Payment processing services revenue is recognized upon settlement of the transaction.
Our revenue is presented net of a provision for sales credits, which is estimated based on historical results and established in the period in which services are provided. As of the periods presented, there were no such provisions. |
| Cash and cash equivalents | Cash and cash equivalents
Cash and cash equivalents consist of cash and highly liquid investments purchased with original maturity of three months or less. |
| Restricted cash | Restricted cash
Restricted cash is primarily held by either processing partners where the Company holds a share of underwriting risk and for other potential liabilities under processing or by the Company on behalf of an automated clearing house, or ACH, transaction processing customer. The long‑term portion of restricted cash is contractually required to be held by some of the Company’s processing partners and will remain restricted as long as the associated contracts are effective. As such, the Company classifies these portions as long-term. |
| Translation of non-U.S. currencies | Translation of non-U.S. currencies
The translation of assets and liabilities denominated in foreign currency into U.S. Dollars is made at the prevailing rate of exchange at the balance sheet date. Revenue and expenses are translated at the average exchange rates during the period. Translation adjustments are reflected in accumulated other comprehensive loss on our consolidated balance sheets, while gains and losses resulting from foreign currency transactions are included in our consolidated statements of operations. Amounts resulting from foreign currency transactions included in our statement of operations were a gain $24,000 and losses of $0.4 million and $0.2 million for the years ended December 31, 2016, 2015 and 2014, respectively. |
| Allowance for doubtful accounts | Allowance for doubtful accounts
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make payments due to the Company. The amount of the allowance is based on historical experience and our analysis of the accounts receivable balance outstanding. While credit losses have historically been within the Company’s expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past. If the financial condition of our customers were to deteriorate, resulting in their inability to make payments, additional allowances may be required which would result in an additional expense in the period that this determination was made. The Company has included an allowance for doubtful accounts of approximately $0.1 million for the years ended December 31, 2016 and 2015. |
| Property, equipment and depreciation | Property, equipment and depreciation
Property and equipment are stated at cost less accumulated depreciation, which is provided for by charges to income over the estimated useful lives of the assets using the straight‑line method. Maintenance and repairs, which do not improve or extend the useful life of the respective asset, are charged to operating expenses as incurred. Upon sale or other disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount, less proceeds from disposal, is charged or credited to income. |
| Software development costs and amortization | Software development costs and amortization
The Company capitalizes costs of materials, consultants and payroll and payroll‑related costs incurred by employees involved in developing internal use computer software during the application development stage. Costs incurred during the preliminary project and post‑implementation stages are charged to processing and service costs, which are included in cost of revenue as incurred. Software development costs are amortized to processing and service costs, which are included in cost of revenue on a straight‑line basis over estimated useful lives of approximately three to five years. The Company performs periodic reviews to ensure that unamortized software costs remain recoverable from expected future cash flows. Capitalized software development costs, net, were $4.2 million and $4.0 million as of December 31, 2016 and 2015, respectively. Amortization expense totaled $1.2 million, $1.9 million and $1.7 million for the years ended December 31, 2016, 2015 and 2014, respectively. |
| Goodwill, intangibles and long-lived assets | Goodwill, intangibles and long‑lived assets
Goodwill represents the excess of the cost over the fair value of net tangible and identified intangible assets of acquired businesses. Goodwill amounts are assigned to reporting units at the time of acquisition and are adjusted for any subsequent significant transfers of business between reporting units. We assess the impairment of goodwill annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We perform the impairment tests of goodwill at our reporting unit level, which is one level below our operating segments. We first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The qualitative factors include economic environment, business climate, market capitalization, operating performance, competition, and other factors. We may proceed directly to the two-step quantitative test without performing the qualitative test. The goodwill impairment test consists of a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test is not required. The second step, if required, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. The fair value of a reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. If the carrying amount of the reporting unit's goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess.
We use a projected discounted cash flow model to determine the fair value of a reporting unit. This discounted cash flow method for determining goodwill may be different from the fair value that would result from an actual transaction between a willing buyer and a willing seller. Projections such as discounted cash flow models are inherently uncertain and accordingly, actual future cash flows may differ materially from projected cash flows.
Management judgment is required in developing the assumptions for the discounted cash flow model. These assumptions include revenue growth rates, profit margins, future capital expenditures, working capital needs, expected foreign currency rates, discount rates and terminal values. The discount rates used are compiled using independent sources, current trends in similar businesses and other observable market data. Changes to these rates might result in a change in the valuation and determination of the recoverability of goodwill. For example, an increase in the discount rate used to discount cash flows will decrease the computed fair value. Our impairment tests resulted in excessive fair value over book value ranging from 61% to 67% for our reporting unit. In order to estimate the fair value of goodwill, we may engage a third party to assist management with the valuation.
To validate the reasonableness of the reporting unit fair values, we reconcile the aggregate fair values of the reporting units to the enterprise market capitalization. In performing the reconciliation we may, depending on the volatility of the market value of our stock price, use either the stock price on the valuation date or the average stock price over a range of dates around the valuation date.
The entire goodwill balance as of December 31, 2016 is attributable to the acquisition of BPS. We did not record any impairment of goodwill for the three years ended December 31, 2016.
We evaluate long-lived assets, including property and equipment, capitalized software and finite-lived intangible assets for potential impairment on an individual asset basis or at the lowest level asset grouping for which cash flows can be separately identified. Long-lived asset impairments are assessed whenever changes in circumstances could indicate that the carrying amounts of those productive assets exceed their projected undiscounted cash flows. When it is determined that impairment exists, the related asset group is written down to its estimated fair market value. The determination of future cash flows and the estimated fair value of long-lived assets, involve significant estimates on the part of management. In order to estimate the fair value of a long-lived asset, we may engage a third party to assist management with the valuation. For the year ended December 31, 2016, we did not record any impairment of long-lived assets. For the year ended December 31, 2015, we recorded an impairment of capitalized software costs of $0.3 million.
Our process for assessing potential triggering events may include, but is not limited to, analysis of the following:
·
any sustained decline in our stock price below book value;
·
results of our goodwill impairment test;
·
sales and operating trends affecting products and groupings;
·
the impact of current and future operating results;
·
any losses of key acquired customer relationships; and
·
changes to or obsolescence of acquired technology, data, and trademarks.
We also evaluate the remaining useful life of our long-lived assets on a periodic basis to determine whether events or circumstances warrant a revision to the remaining estimated amortization period. |
| Due to merchants | Due to merchants
Due to merchants represents funds collected on behalf of all the Company’s acquired merchants using the Planet Payment Gateway ACH product or funds collected on behalf of directly acquired merchants as security deposits. The ACH funds are generally held for an average of three days before payment to the merchant. |
| Income taxes | Income taxes
Management is required to make estimates related to our income tax provision in each of the jurisdictions in which we operate. This process involves estimating our current tax exposures, as well as making judgments regarding the recoverability of deferred tax assets in each jurisdiction. Deferred tax assets and liabilities reflect the tax effects of losses, credits and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Management assesses the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent management believes that recovery is not likely, a valuation allowance must be established. To the extent management establishes a valuation allowance or increases this allowance in a period, an increase to expense within the provision for income taxes in the consolidated statements of income may result.
Our policy is to recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements on a particular tax position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The amount of unrecognized tax benefits is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the tax authorities, new information obtained during a tax examination, or resolution of an examination. We recognize both accrued interest and penalties, where appropriate, related to unrecognized tax benefits in income tax expense. Our overall effective tax rate is subject to fluctuations because of changes in the geographic mix of earnings, changes to statutory tax rates and tax laws, and because of the impact of various tax audits and assessments, as well as generation of tax credits and for increases and decreases in the Company’s valuation allowances.
Refer to footnote 12 for further information. |
| Concentration of credit risk | Concentration of credit risk
The Company’s assets that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and receivables from clients. The Company places some of its cash, cash equivalents, and restricted cash with financial banking institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company also maintains cash balances at foreign banking institutions, which are not insured by the FDIC.
The Company maintains an allowance for uncollectible accounts receivable based on expected collectability and performs ongoing credit evaluations of customers’ financial condition.
The Company’s accounts receivable concentrations of 10% and greater are as follows:
December 31,
2016
2015
Customer A
%
%
Customer B
*
Customer H
*
(*)
The Company’s revenue concentrations of 10% and greater are as follows:
Year ended December 31,
2016
2015
2014
Customer A
%
%
%
Customer G
*
*
Customer H
*
*
(*) |
| Net income per share | Net income per share
The Company computes net income per share in accordance with ASC 260, Earnings per Share (“ASC topic 260”). Under ASC topic 260, securities that contain rights to receive non‑forfeitable dividends (whether paid or unpaid) are participating securities and should be included in the two‑class method of computing earnings per share. The Company’s preferred stockholders are entitled to participate in dividends and earnings when, and if, dividends are declared on the common stock. As such, the Company calculates net income per share using the two-class method.
The two‑class method is an earnings formula that treats a participating security as having rights to dividends that otherwise would have been available to common and preferred stockholders based on their respective rights to receive dividends. Losses are not allocated to the preferred stockholders for computing net loss per share under the two‑class method because the preferred stockholders do not have contractual obligations to share in the losses of the Company.
Basic earnings per share is calculated by dividing net income, adjusted for amounts allocated to participating securities under the two‑class method, if applicable, by the weighted-average number of common stock outstanding during the period.
Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares of the Company’s common stock outstanding, assuming dilution, during the period. The diluted earnings per share calculation assumes (i) all stock options and warrants which are in the money are exercised at the beginning of the period and (ii) each issue or series of issues of potential common stock are considered in sequence from the most dilutive to the least dilutive. That is, dilutive potential common stock with the lowest “earnings add‑back per incremental share” shall be included in dilutive earnings per share before those with higher earnings add back per incremental share.
The following table sets forth the computation of basic and diluted net income per share:
Year ended December 31,
2016
2015
2014
Numerator:
Net income
$
$
$
Amounts allocated to participating preferred stockholders under the two-class method
Net income applicable to common stockholders (basic and dilutive)
$
$
$
Denominator:
Weighted-average common stock outstanding (basic)
Common equivalent shares from options and warrants to purchase common stock
Weighted-average common stock outstanding (diluted)(1)
Basic net income per share applicable to common stockholders
$
$
$
Diluted net income per share applicable to common stockholders(1)
$
$
$
(1)
In accordance with ASC 260‑10‑45‑48 for the years ended December 31, 2016, 2015 and 2014, the Company has excluded 0.4 million, 1.0 million and 1.3 million, respectively, of contingently issued restricted shares from diluted weighted-average common stock outstanding as the contingencies (a) were not satisfied at the reporting date nor (b) would have been satisfied if the reporting date was at the end of the contingency period.
The following table sets forth the weighted-average securities outstanding that have been excluded from the diluted net income per share calculation because the effect would have been anti‑dilutive:
Year ended December 31,
2016
2015
2014
Stock options
Restricted stock awards
Warrants
—
—
Convertible preferred stock(1)
Total anti-dilutive securities
(1)
Diluted net income per share increases when convertible preferred stock is included in the required sequence in the diluted earnings per share computation. As such, convertible preferred stock is excluded from the computation of diluted earnings per share for the years ended December 31, 2016, 2015 and 2014. |
| Stock-based compensation expense and assumptions | Stock‑based compensation expense and assumptions
Stock‑based compensation expense is measured at the grant date based on fair value and recognized as an expense over the requisite service period, net of an estimated forfeiture rate.
The following summarizes stock‑based compensation expense recognized by income statement classification:
Year ended December 31,
2016
2015
2014
Processing and service costs
$
$
$
Selling, general and administrative expenses
Restructuring charges
—
Total stock-based compensation expense
$
$
$
The following summarizes stock‑based compensation expense recognized by type:
Year ended December 31,
2016
2015
2014
Stock options
$
$
$
Restricted stock awards
Total stock-based compensation expense
$
$
$
For the years ended December 31, 2016, 2015 and 2014, stock‑based compensation expense included capitalized stock-based compensation of approximately $0.1 million per year.
A summary of the unamortized stock‑based compensation expense and associated weighted-average remaining amortization periods is presented below:
December 31, 2016
December 31, 2015
Unamortized
Weighted-average
Unamortized
Weighted-average
stock-based
remaining
stock-based
remaining
compensation
amortization period
compensation
amortization period
expense
(in years)
expense
(in years)
Stock options
$
$
Restricted stock awards
Stock‑based compensation expense assumptions and vesting requirements
Determining the appropriate fair value model and calculating the fair value of stock-based awards require the input of highly subjective assumptions, including the expected life, expected stock price volatility, and the number of expected stock-based awards that will be forfeited prior to the completion of the vesting requirements. The Company uses the Black-Scholes Option Pricing Model to determine the fair value of stock option awards, the fair-market value of the Company’s common stock on the date the award is approved to measure fair value for service-based and performance-based restricted stock awards, and binomial lattice-based valuation pricing models to value its market condition awards.
Expected life
Due to the Company’s limited public company history, the expected life for the Company’s stock‑based awards granted was determined based on the “simplified” method under the provisions of ASC 718‑10, Compensation—Stock Compensation .
Expected stock price volatility
We estimate the expected volatility using a time-weighted average of the Company’s historical volatility in combination with the historical volatility of similar entities whose common shares are publicly traded. For every 5% increase or decrease in expected stock price volatility, total stock-based compensation expense for stock option awards granted in 2016 would have changed by approximately $10,000.
Risk‑free interest rate and dividend yield
The risk‑free interest rates used for the Company’s stock‑based awards granted were the U.S. Treasury zero‑coupon rates for bonds matching the expected life of a stock‑based award on the date of grant.
The expected dividend yield is not applicable as the Company has not paid any dividends and intends to retain any future earnings for use in its business.
Vesting requirements
Options granted to employees generally vest 1/3rd of the amount of shares subject to each option on each 12‑month anniversary from the vesting commencement date over a three year period and expire ten years from the grant date.
Restricted stock awards are earned upon the achievement of certain performance targets and/or other vesting conditions.
On an annual basis, the Company’s Board of Directors are granted either stock options or restricted stock awards. A director’s annual grant vests and becomes exercisable as to 1/12th of the shares each month from the vesting commencement date for option awards, or 12-months from the grant date in the case of a restricted stock award. A director’s initial grant vests and becomes exercisable as to 1/3rd of the shares on the 12‑month anniversary from the vesting commencement date and then 1/36th of the shares each month thereafter, such that the grant vests in full after three years. All directors’ options expire ten years from the grant date.
The Company’s 2000 Stock Incentive Plan allows for acceleration of the vesting of outstanding options granted upon the occurrence of certain events related to change of control, merger, and the sale of substantially all of our assets or liquidation of the company, at the discretion of the Company’s Board of Directors. The Company’s 2006 Equity Incentive Plan provides that if outstanding options are not assumed or replaced by a successor corporation, options shall immediately vest as to 100% of the shares at such time and on such conditions as the Company’s Board of Directors shall determine. The Company’s 2012 Equity Incentive Plan provides that if outstanding options are not assumed or replaced by successor corporations options shall immediately vest as to 100% of the shares (and any applicable right of repurchase shall fully lapse prior to relevant event).
Fair value inputs
The fair market value of each stock option award granted has been estimated on the grant date using the Black‑Scholes Option Pricing Model with the following assumptions:
Year ended December 31,
2016
2015
2014
Expected life (in years)
5.50
5.41
-
6.00
5.88
-
6.02
Expected volatility (percentage)
35.61
-
35.85
35.11
-
39.57
38.48
-
41.98
Risk-free interest rate (percentage)
1.14
-
1.39
1.52
-
1.94
1.77
-
2.02
Expected dividend yield
—
—
—
For all option grants the Company’s Board of Directors set the exercise price of stock options based on a price per share not less than the fair value of our common stock on the date of grant. |
| Long-term incentive restricted stock agreements assumptions and vesting requirements | Long‑term incentive restricted stock agreements assumptions and vesting requirements
On July 26, 2011, the Company made a restricted stock grant of 915,000 shares of the Company’s common stock to Philip Beck pursuant to a Long‑Term Incentive Restricted Stock Agreement. The agreement provides that (1) upon a corporate transaction, certain unvested shares accelerate and become vested, and (2) upon Mr. Beck’s involuntary termination, certain unvested shares shall remain outstanding and become vested only at such time as the performance goals applicable to such unvested shares are satisfied.
The 915,000 shares vest in four separate tranches, each with a different long‑term performance goal. In February 2014, the Company entered into a separation agreement with Philip Beck and in accordance with the incentive agreement the Company exercised its repurchase option of 35%, or 320,250, of the restricted shares at the price of $1.00 in the aggregate. On December 31, 2014, the first tranche of 198,250 of the remaining awards expired unvested as the performance condition was not achieved. The remaining 396,500 shares awards expire December 31, 2017 and are subject to vest based on the following:
·
Performance condition award consisting of 30,550 shares that vest based upon the achievement of adjusted EBITDA (as will be defined in the Company’s earnings releases for the relevant periods) per fully diluted share greater than or equal to $0.64 per share for any fiscal year concluding after the date of the restricted stock grant and on or prior to the expiration date. The fair value is $19,552.
·
Performance condition award consisting of 304,850 shares that vest based upon the achievement of adjusted EBITDA (as will be defined in the Company’s earnings releases for the relevant periods) per fully diluted share greater than or equal to $0.71 per share for any fiscal year concluding after the date of the restricted stock grant and on or prior to the expiration date. The fair value is $216,444.
·
Market condition award consisting of 61,100 shares that vest based upon the fair market value of the Company’s stock being greater than or equal to $12.00 per share for 75 consecutive trading days in the United States for any period of time beginning after the date of the restricted stock grant and concluding on or prior to the expiration date. The fair value is $3,640.
In accordance with ASC 718‑10, the Company valued the performance condition and market condition awards using the Black‑Scholes and binomial lattice models, respectively. The fair values of the performance condition awards are based upon the closing price of shares of the Company’s common stock that trade on AIM under the symbol “PPTR” on the date of grant. The total fair value of all three tranches of the performance condition awards is $0.3 million (adjusted for the exercise of the repurchase, noted above), of which no amounts have been expensed as it was not deemed probable that the performance conditions would be satisfied based on the financial assessment as of December 31, 2016. The Company will reassess the probability of achieving each performance condition metric at each reporting period. The total fair value of the market condition award is $3,640. Given the inconsequential nature of the amount, the Company recorded the entire expense at the time of grant. The expense related to the market condition award is not reversed even if the market conditions are not satisfied.
On June 27, 2014 and on August 15, 2014, the Company made a restricted stock grant of 325,000 and 250,000 shares of our common stock, respectively, to certain employees pursuant to the Company’s 2012 Equity Incentive Plan.
These shares would have become vested if, prior to December 31, 2015, the closing price of the Company’s common stock on NASDAQ is at least $6.00 per share for 30 consecutive trading days, or if the Company completed a change of control transaction of at least $6.00 per share, or the fair market value of the Company’s common stock immediately following such change of control transaction is at least $6.00 per share. During the year ended December 31, 2014, 125,000 of these shares were forfeited due to a termination of an employee. The remaining 450,000 shares expired unvested on December 31, 2015 as the market conditions were not achieved. The total fair value of the market condition award was $5,735 and $1,023. Given the inconsequential nature of the amount, we recorded the entire expense at the time of grant.
During the second and third quarters of 2014, 205,830 restricted stock awards with a grant date fair value of $0.5 million were granted to certain employees and members of the Board of Directors of the Company. The final number of vested shares is subject to service-based vesting conditions. These grants were valued using the fair-market value of the Company’s common stock on the date the awards were approved. Expense is recorded on a straight-line basis from the date of the grant over the applicable service period of 36 months for employees and 12 months for the Board of Directors.
During the year ended December 31, 2015, 152,835 restricted stock awards with a grant fair value of $0.3 million were granted to certain employees and members of the Board of Directors of the Company. These grants were valued using the fair-market value of the Company’s common stock on the date the awards were approved. The final number of vested shares is subject to service-based vesting conditions. Expense is recorded on a straight-line basis from the date of the grant over the applicable service period of 36 months for employees and 12 months for the Board of Directors.
During the third quarter of 2015, the Company granted 300,000 restricted stock awards to certain officers of the Company. These 300,000 shares vest in four tranches.
·
The first three tranches consist of 75,000 shares which expire May 1, 2018. Vesting is contingent on satisfying a combination of market and service based conditions. The market condition shall be satisfied any time after the grant and before the expiration date if the Company’s stock price on NASDAQ is greater than or equal to $4.00 per share for either seven consecutive trading days, or any ten trading days over a consecutive thirty-five day period. Once such stock price is achieved the market condition shall be forever satisfied, even in the event that it subsequently falls below $4.00 per share, and in such event, the vesting of shares shall be subject only to the vesting schedule. All shares will be forfeited if the aforementioned market condition is not achieved by the expiration date. The first three tranches of the award were valued at $0.1 million.
·
The fourth tranche consists of 225,000 shares which expire December 31, 2017. Vesting is contingent on satisfying either a market or performance based condition. The market condition shall be satisfied at any time after the grant and before the expiration date if the Company’s stock on NASDAQ is greater than or equal to $3.50 per share for seven consecutive trading days, or any ten trading days over a consecutive thirty-five day period, or if the Company achieves Adjusted EBITDA of not less than $18.0 million in respect of any fiscal year ending on or prior to December 31, 2017. Once the aforementioned stock price or Adjusted EBITDA performance conditions are achieved, all shares in this tranche will immediately vest. All such shares will be forfeited if the aforementioned stock price or performance conditions are not achieved by the expiration date. The market and performance condition were valued separately at $0.3 million and $0.6 million, respectively. During the second quarter of 2016, these shares vested as the market condition was achieved. The market condition was valued at $0.3 million, of which $0.2 million was expensed as of March 31, 2016 and an additional $0.1 million was expensed as of June 30, 2016.
During the third quarter of 2015, the Company also granted 300,000 restricted stock awards to a certain officer of the Company. These 300,000 shares vest in three tranches. The first two tranches expire May 1, 2017; vesting terms are consistent with the terms of the first three tranches of the grant described above. The third tranche expires December 31, 2017; vesting terms are consistent with the terms of the fourth tranche of the grant described above. The first two tranches of the award were valued at $0.1 million. The market and performance condition of the third tranche of the award were valued separately at $0.3 million and $0.6 million, respectively. During the second quarter of 2016, 225,000 shares vested as the market condition was achieved. The market condition was valued at $0.4 million, of which $0.3 million was expensed as of March 31, 2016 and an additional $0.1 million was expensed as of June 30, 2016.
In accordance with ASC 718-10, the Company valued the market condition and performance conditions on the 2015 restricted stock awards using binomial lattice-based and Black-Scholes valuation pricing models, respectively, using the following assumptions:
Market Condition
Performance Condition
Expected life (in years)
0.85 - 2.74
Expected volatility (percentage)
29.97 - 31.36
Risk-free interest rate (percentage)
0.88 - 0.99
Expected dividend yield
—
—
For the market condition awards the expense will be recorded on a straight-line basis over the derived service period for each tranche. For the awards with both the market condition and performance condition, if the performance condition is achieved prior to the stock price target, the expense is trued up to the value of the performance condition. The expense related to the market condition portion of the award is not reversed even if the market conditions are not satisfied. As of December 31, 2015, no amounts have been expensed in relation to the performance condition of the award as it was not deemed probable that the performance conditions would be satisfied.
For further information on the Company’s equity plans, please refer to Note 13. |
| Fair value measurements | Fair value measurements
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used to measure fair value are prioritized into a three‑level fair value hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:
·
Level 1—Fair value measurements of the asset or liability using observable inputs such as quoted prices in active markets for identical assets and liabilities;
·
Level 2—Fair value measurements of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
·
Level 3—Fair value measurements of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability.
The Company’s cash and cash equivalents balances are residing in cash operating accounts and are not invested in money market funds or an equivalent. The Company’s debt relates to its borrowings under its revolving credit facility. Our borrowings under our credit facility approximate fair value due to the debt bearing fluctuating market interest rates. The Company’s remaining asset and liability accounts are reflected in the consolidated financial statement at cost which approximates fair value because of the short‑term nature of these items. |
| Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss)
Other Comprehensive income (loss) includes all changes in equity from non-owner sources. All the activity in other comprehensive income (loss) relates to foreign currency translation adjustments. The Company accounts for other comprehensive income (loss) in accordance with ASC 220, Comprehensive Income . |
| Recent accounting pronouncements | Recent accounting pronouncements
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new guidance includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a company’s contracts with customers. The original effective date of ASU 2014-09 of January 1, 2017 has been delayed until January 1, 2018. Early adoption is not permitted before the original effective date. The standard allows for either retrospective application to each reporting period presented or retrospective application with the cumulative effect of initially applying this update recognized at the date of initial application. Through the use of various data gathering methods, the Company is categorizing the types of sales for our business units for the purpose of comparing how we currently recognize revenue for the purpose of quantifying the impact, if any, that this ASU will have on our consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU No. 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in ASU No. 2016-02 is permitted for all entities. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. While the Company is currently evaluating the effect ASU 2016-02 will have on the condensed consolidated financial statements and disclosures, the adoption of this ASU will result in a significant increase to the Company’s stated assets and liabilities.
In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-08”). The amendments in ASU 2016-08 do not change the core principle of the guidance. The amendments clarify the implementation guidance on principal versus agent considerations. The update suggests that entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The effective date and transition requirements for the amendments in ASU 2016-08 are the same as the effective date and transition requirements of ASU 2014-09. Through the use of various data gathering methods, the Company is categorizing the types of sales for our business units for the purpose of comparing how we currently recognize revenue for the purpose of quantifying the impact, if any, that this ASU will have on our consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation—Stock Compensation (Topic 718) (“ASU No. 2016-09”). This update is part of the FASB’s Simplification Initiative, which simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. The Company will adopt ASU 2016-09 in the first quarter of 2017. We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.
In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-10”). The amendments in this update do not change the core principle of the guidance. The amendments in this update clarify the identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The amendments in this update clarify that contractual provisions that, explicitly or implicitly, require an entity to transfer control of additional goods or services to a customer should be distinguished from contractual provisions that, explicitly or implicitly, define the attributes of a single promised license. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of update ASU 2014-09. Through the use of various data gathering methods, the Company is categorizing the types of sales for our business units for the purpose of comparing how we currently recognize revenue for the purpose of quantifying the impact, if any, that this ASU will have on our consolidated financial statements.
In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-12”), in which the FASB finalized the guidance in the new revenue standard on collectibility, noncash consideration, presentation of sales tax, and transition. The amendments are intended to address implementation issues that were raised by stakeholders and discussed by the Revenue Recognition Transition Resource Group, and provide additional practical expedients. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of update ASU 2014-09. Through the use of various data gathering methods, the Company is categorizing the types of sales for our business units for the purpose of comparing how we currently recognize revenue for the purpose of quantifying the impact, if any, that this ASU will have on our consolidated financial statements.
In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230) (“ASU 2016-15”), which intends to reduce diversity in practice in how certain cash receipts and cash payments are presented in the statement of cash flows. ASU 2016-15 clarifies that the classification of cash activity relates to debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate and bank-owned life insurance policies, distributions received from equity-method investments and beneficial interests in securitization transactions. The new standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The early adoption of the provisions of ASU No. 2016-15 did not materially impact the Company's financial condition, results of operations or cash flows.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230) (“ASU 2016-18”), to address the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. ASU 2016-18 requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The new standard is effective fiscal years beginning after December 15, 2017, and interim periods within those fiscal periods. Early adoption is permitted, including adoption in an interim period. We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.
In December 2016, the FASB issued Accounting Standards Update No. 2016-19, Technical Corrections and Improvements (“ASU 2016-19”), to simplify Accounting Standards Codification updates for technical corrections, clarifications, and minor improvements. The amendments in this new standard do not require transition guidance and is effective upon issuance of this Update. We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.
In December 2016, the FASB issued Accounting Standards Update No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”) to increase stakeholders’ awareness of the proposals and to expedite improvements to Update 2014-09. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of update ASU 2014-09. We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350) (“ASU 2017-04”), to simplify how all companies assess goodwill for impairment by eliminating Step 2 from the goodwill impairment test. All companies will perform their annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize a goodwill impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value. If the fair value exceeds the carrying amount, no impairment should be recorded. Any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect a material impact on our financial condition, financial statements or accounting policies from the adoption of this guidance. |
