Document_And_Entity_Informatio
Document And Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 13, 2013 | |
Document Information [Line Items] | ' | ' |
Entity Registrant Name | 'JetPay Corp | ' |
Entity Central Index Key | '0001507986 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Trading Symbol | 'JTPY | ' |
Entity Common Stock, Shares Outstanding | ' | 11,529,094 |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 30-Sep-13 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
ASSETS | ' | ' |
Cash and cash equivalents | $2,903 | $1,391 |
Restricted cash | 224 | 125 |
Accounts receivable, less allowance for doubtful accounts | 1,771 | 3,069 |
Settlement processing assets | 8,132 | 0 |
Prepaid expenses and other current assets | 872 | 747 |
Current assets before funds held for clients | 13,902 | 5,332 |
Funds held for clients | 45,134 | 44,213 |
Total current assets | 59,036 | 49,545 |
Property and equipment, net | 1,291 | 1,382 |
Goodwill | 30,944 | 30,944 |
Identifiable intangible assets, net of accumulated amortization of $1,680 at September 30, 2013 and $0 at December 31, 2012 | 23,371 | 25,052 |
Deferred financing costs, net of accumulated amortization of $1,520 at September 30, 2013 and $0 at December 31, 2012 | 2,873 | 4,393 |
Other assets | 5,150 | 3,783 |
Cash and cash equivalents held in trust | 0 | 1,948 |
Total assets | 122,665 | 117,047 |
LIABILITIES | ' | ' |
Current portion of long-term debt and derivative liability | 7,698 | 7,479 |
Accounts payable and accrued expenses | 11,115 | 8,284 |
Settlement processing liabilities | 8,132 | 0 |
Deferred revenue | 285 | 470 |
Notes payable to affiliate | 87 | 15 |
Current liabilities before client fund obligations | 27,317 | 16,248 |
Client fund obligations | 45,134 | 44,213 |
Total current liabilities | 72,451 | 60,461 |
Long-term debt, net of current portion | 16,983 | 17,090 |
Derivative liability | 2,330 | 2,110 |
Deferred income taxes | 524 | 524 |
Other liabilities | 1,921 | 2,326 |
Total liabilities | 94,209 | 82,511 |
Common Stock, pending redemption 320,486 shares at December 31, 2012 | 0 | 1,948 |
Commitments and Contingencies | ' | ' |
Stockholders' Equity | ' | ' |
Preferred stock, $0.001 par value Authorized 1,000,000 shares, none issued | 0 | 0 |
Common stock, $0.001 par value Authorized 100,000,000 shares; 11,529,094 and 11,519,094 issued and outstanding at September 30, 2013 and December 31, 2012, respectively (which excludes 320,486 shares pending redemption at December 31, 2012) | 12 | 12 |
Additional paid-in capital | 40,080 | 39,934 |
Accumulated deficit | -11,636 | -7,358 |
Total Stockholders' Equity | 28,456 | 32,588 |
Total Liabilities and Stockholders' Equity | $122,665 | $117,047 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, except Share data, unless otherwise specified | ||
Finite-Lived Intangible Assets, Accumulated Amortization | $1,680 | $0 |
Accumulated Amortization, Deferred Finance Costs | $1,520 | $0 |
Temporary equity, shares outstanding | ' | 320,486 |
Preferred stock, par value (in dollars per share) | $0.00 | $0.00 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 11,529,094 | 11,519,094 |
Common stock, shares outstanding | 11,529,094 | 11,519,094 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended |
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2012 |
Successor [Member] | Successor [Member] | Predecessor [Member] | Predecessor [Member] | |
Processing revenues | $7,813 | $22,794 | $4,799 | $14,165 |
Cost of processing revenues | 5,008 | 13,773 | 3,821 | 10,130 |
Gross profit | 2,805 | 9,021 | 978 | 4,035 |
Selling, general and administrative expenses | 2,544 | 7,538 | 1,145 | 3,552 |
Change in fair value of contingent consideration liability | 10 | -570 | 0 | 0 |
Amortization of intangibles | 560 | 1,680 | 0 | 0 |
Depreciation | 93 | 292 | 41 | 115 |
Operating (loss) income | -402 | 81 | -208 | 368 |
Other expenses (income) | ' | ' | ' | ' |
Interest expense, net | 619 | 1,738 | 128 | 342 |
Amortization of deferred financing costs | 522 | 1,520 | 0 | 0 |
Amortization of debt discounts and conversion options | 383 | 1,116 | 0 | 0 |
Change in fair value of derivative liability | 1,560 | -100 | 0 | 0 |
Other (income) expense | ' | -1 | ' | 0 |
(Loss) income before income taxes | -3,486 | -4,192 | -336 | 26 |
Income tax expense | 27 | 85 | 27 | 81 |
Net loss | ($3,513) | ($4,277) | ($363) | ($55) |
Loss per share (basic and diluted) (in dollars per share) | ($0.30) | ($0.37) | ' | ' |
Weighted average shares outstanding: | ' | ' | ' | ' |
Basic and diluted (in shares) | 11,529,094 | 11,524,881 | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Successor [Member] | Predecessor [Member] | |
Operating Activities | ' | ' |
Net loss | ($4,277) | ($55) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ' | ' |
Depreciation | 292 | 115 |
Stock-based compensation | 110 | 0 |
Amortization of intangibles | 1,680 | 0 |
Provision for losses on receivables | 69 | 134 |
Amortization of deferred financing costs | 1,520 | 0 |
Amortization of debt discounts and conversion options | 1,116 | 0 |
Change in fair value of contingent consideration liability | -570 | 0 |
Change in fair value of derivative liability | -100 | 0 |
Change in operating assets and liabilities | ' | ' |
Restricted cash | -99 | -1,919 |
Accounts receivable | 1,229 | 4 |
Prepaid expenses and other current assets | -125 | 356 |
Other assets | -1,367 | 0 |
Deferred revenue | -185 | 0 |
Accounts payable and accrued expenses | 2,856 | 1,419 |
Net cash provided by operating activities | 2,149 | 54 |
Investing Activities | ' | ' |
Cash and cash equivalents released from Trust | 1,948 | 0 |
Net increase in restricted cash and cash equivalents held to satisfy client fund obligations | -921 | 0 |
Proceeds on sale of property and equipment | 1 | 0 |
Purchase of property and equipment | -201 | -288 |
Net cash provided by (used in) investing activities | 827 | -288 |
Financing Activities | ' | ' |
Payments on long-term debt | -1,102 | -333 |
Trust funds paid to redeeming stockholders | -1,948 | 0 |
Proceeds from notes payable | 41 | 0 |
Net increase in client funds obligations | 921 | 0 |
Proceeds from note payable to shareholders | 552 | 0 |
Proceeds from note payable to affiliate | 72 | 0 |
Distributions to members | 0 | -357 |
Net cash used in financing activities | -1,464 | -690 |
Net increase (decrease) in cash and cash equivalents | 1,512 | -924 |
Cash and cash equivalents, beginning | 1,391 | 2,217 |
Cash and cash equivalents, ending | 2,903 | 1,293 |
Supplement Disclosure of cash flow information: | ' | ' |
Cash paid for interest | 1,307 | 396 |
Cash paid for taxes | 12 | 86 |
Common stock issued as payment for services at fair value | $37 | $0 |
Basis_of_Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2013 | |
Organization Consolidation and Presentation Of Financial Statements Disclosure [Abstract] | ' |
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | ' |
Note 1. Basis of Presentation | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles general accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the condensed consolidated financial statements of JetPay Corporation and its subsidiaries (collectively the “Company” or “JetPay”) as of September 30, 2013. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the operating results for the full year. It is recommended that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and related disclosures for the year ended December 31, 2012 included in the Transition Report on Form 10-K, as amended, filed with the Securities and Exchange Commission (“SEC”) on June 14, 2013. | |
Organization_and_Business_Oper
Organization and Business Operations | 9 Months Ended |
Sep. 30, 2013 | |
Limited Liability Company Or Limited Partnership, Business Organization and Operations [Abstract] | ' |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | ' |
Note 2. Organization and Business Operations | |
Effective August 2, 2013, Universal Business Payment Solutions Acquisition Corporation changed its name to Jetpay Corporation with the filing of its Amended and Restated Certificate of Incorporation. The Company’s ticker symbol on the Nasdaq Capital Market (“NASDAQ”) changed from “UBPS” to “JTPY” effective August 12, 2013. The name Jetpay Corporation describes the Company as being in the payment processing business, providing fast, safe, and secure payments. | |
The Company currently operates in one business segment, the Payment Processing Segment, which consists of two operating or reporting units: JetPay, LLC which is an end-to-end processor of credit and debit card and ACH payment transactions to businesses with a focus on those processing internet transactions and recurring billings and AD Computer Corporation (doing business as JetPay Payroll Services) (“ADC”), which is a full-service payroll and related payroll tax payment processor. The Company also operates JetPay Card Services, a division which is focused on providing low-cost money management and payment services to un-banked and under-banked employees of our business customers. The Company entered these businesses upon consummation of the acquisitions of JetPay, LLC and ADC on December 28, 2012 (the “Completed Transactions”). See Note 3.Business Acquisitions. | |
The Company was incorporated in Delaware on November 12, 2010 as a blank check company whose objective was to acquire, through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more operating businesses. Until December 28, 2012, the Company’s efforts were limited to organizational activities, its initial public offering (the “Offering”) and the search for suitable business acquisition transactions. | |
Effective December 28, 2012, the Company changed its fiscal year end from September 30 to December 31. The consolidated financial statements as of December 31, 2012 and the three and nine months ended September 30, 2013 include the accounts of JetPay and its wholly owned subsidiaries, JetPay, LLC and ADC. All significant inter-company transactions and balances have been eliminated in consolidation. JetPay, LLC is considered the predecessor company and accordingly, their results of operations are included within the Statement of Operations for the three and nine months ended September 30, 2012, which are included within this Quarterly Report on Form 10-Q. ADC’s results of operations are included in the Company’s consolidated financial statements post-acquisition. The results of operations for the three and nine months ended September 30, 2012, prior to consummation of the ADC and JetPay, LLC acquisitions, consisted largely of transaction costs and are not presented as they were deemed immaterial. | |
Business_Acquisitions
Business Acquisitions | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Business Combinations [Abstract] | ' | |||||||
Business Combination Disclosure [Text Block] | ' | |||||||
Note 3. Business Acquisitions | ||||||||
On December 28, 2012, JetPay Merger Sub, LLC merged with and into JetPay, LLC, with JetPay, LLC surviving such merger. In connection with the closing, the Company paid approximately $6.9 million in cash to WLES, LP (“WLES”), JetPay, LLC’s sole member, and issued a $2.3 million unsecured promissory note to WLES. This promissory note was recorded at its fair value of $1.49 million. Additionally, the Company issued 3,666,667 shares of its common stock, par value $0.001 (“Common Stock”), to WLES, 3,333,333 of which were deposited in an escrow account to secure certain obligations of WLES. See Note 11. Commitments and Contingencies. The stock consideration was valued at $19.25 million at the date of acquisition. The cash consideration payable to JetPay, LLC was also subject to certain adjustments relating to the net working capital, cash and indebtedness of JetPay, LLC and its subsidiaries. In addition to the consideration paid at closing, WLES, through December 28, 2017, is entitled to receive 833,333 shares of the Common Stock if the trading price of the Common Stock is at least $8.00 per share for any 20 trading days out of a 30 trading day period and $5,000,000 in cash if the trading price of the Common Stock is at least $9.50 per share for any 20 trading days out of a 30 trading day period. This cash and stock contingent consideration was valued at $1.54 million at the date of acquisition based on utilization of option pricing models and was recorded as a non-current liability for $700,000 and as additional paid-in capital for $840,000 at December 31, 2012, respectively. The fair value of the cash contingent consideration was $130,000 at September 30, 2013. See Note 4. Summary of Significant Accounting Policies. The acquisition of JetPay, LLC provides the Company a base operation for providing merchant card processing services and the ability to cross-market to its merchant card processing services to its ADC payroll client base. | ||||||||
On December 28, 2012, ADC Merger Sub, Inc. merged with and into ADC, with ADC surviving such merger. In connection with the closing, the Company paid $16.0 million in cash and issued 1.0 million shares of its Common Stock to the stockholders of ADC valued at $5.25 million at the date of acquisition. Additionally, the Company paid consideration of $324,000 related to working capital and tax adjustments. On the 24 month anniversary of the closing of the transaction, the ADC stockholders are entitled to receive an additional $2.0 million in cash consideration. The $2.0 million of deferred consideration was recorded as a non-current liability as of the date of acquisition at $1.49 million representing the estimated fair value of this future payment utilizing a 16% discount rate. The acquisition of ADC provides a base operation to the Company for providing payroll and related payroll tax processing and payment services to its clients and provides the Company the ability to cross-market its payroll payment services to its JetPay, LLC customer base. | ||||||||
The allocation of the purchase price and the estimated fair market values of the assets acquired and liabilities assumed are shown below (in thousands): | ||||||||
Cash | $ | 1,151 | ||||||
Accounts receivable | 3,069 | |||||||
Prepaid expenses and other assets | 4,763 | |||||||
Property and equipment, net | 1,382 | |||||||
Funds held for clients | 44,213 | |||||||
Goodwill | 30,944 | |||||||
Identifiable intangible assets | 25,052 | |||||||
Total assets acquired | 110,574 | |||||||
Accounts payable and accrued expenses | 4,969 | |||||||
Client fund obligations | 44,213 | |||||||
Deferred tax liability | 524 | |||||||
Promissory notes | 8,663 | |||||||
Total liabilities assumed | 58,369 | |||||||
Net assets acquired | $ | 52,205 | ||||||
Assets acquired and liabilities assumed in the Completed Transactions were recorded on the Company’s Consolidated Balance Sheets as of the respective acquisition date based upon their estimated fair values at such date. The results of operations of businesses acquired by the Company have been included in the statements of operations since their date of acquisition. The Company deemed the business combinations to have been completed as of December 31, 2012 in that the results of operations post December 28, 2012 to December 31, 2012 were immaterial. The excess of the purchase price over the estimated fair values of the underlying identifiable assets acquired and liabilities assumed were allocated to goodwill. | ||||||||
Unaudited pro forma results of operations information for the three and nine months ended September 30, 2012 as if the Company and the entities described above had been combined on January 1, 2012 follow. The pro forma results include estimates and assumptions which management believes are reasonable. The pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combinations had been in effect on the dates indicated, or which may result in the future. | ||||||||
Unaudited Pro Forma Results of Operations | ||||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2012 | September 30, 2012 | |||||||
(in thousands) | ||||||||
Revenues | $ | 7,595 | $ | 23,189 | ||||
Operating (loss) income | $ | -386 | $ | 323 | ||||
Net Loss | $ | -1,343 | $ | -2,479 | ||||
Net Loss per share (Basic and Diluted) | $ | -0.12 | $ | -0.22 | ||||
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
Accounting Policies [Abstract] | ' | |||||||||||||
Significant Accounting Policies [Text Block] | ' | |||||||||||||
Note 4. Summary of Significant Accounting Policies | ||||||||||||||
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. | ||||||||||||||
Use of Estimates | ||||||||||||||
The accompanying financial statements have been prepared in accordance with US GAAP and pursuant to the accounting and disclosure rules and regulations of the SEC. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the Company’s financial statements. Such estimates include, but are not limited to, the value of purchase consideration of acquisitions; valuation of accounts receivable, goodwill, intangible assets, and other long-lived assets; legal contingencies; and assumptions used in the calculation of stock-based compensation and in the calculation of income taxes. Actual results may differ from these estimates under different assumptions or conditions. | ||||||||||||||
Revenue Recognition and Deferred Revenue | ||||||||||||||
The Company recognizes revenue in general when the following criteria have been met: persuasive evidence of an arrangement exists, a customer contract or purchase order exists and the fees are fixed and determinable, no significant obligations remain and collection of the related receivable is reasonably assured. Allowances for chargebacks, discounts and other allowances are estimated and recorded concurrent with the recognition of revenue and are primarily based on historic rates. | ||||||||||||||
Revenues from the Company’s credit and debit card processing operations are recognized in the period services are rendered as the Company processes credit and debit card transactions for its merchant customers or for merchant customers of its Independent Sales Organization (“ISO”) clients. The majority of the Company’s revenue within its credit and debit card processing business is comprised of transaction-based fees, which typically constitute a percentage of dollar volume processed, or a fee per transaction processed. In the case where the Company is only the processor of transactions, it charges transaction fees only and record these fees as revenues. In the case of merchant contracts or contracts with ISOs for whom it processes credit and debit card transactions for the ISO’s merchant customers, revenue is primarily comprised of fees charged to the merchant, as well as a percentage of the processed sale transaction. The Company’s contracts in most instances involve three parties: the Company, the merchant, and the sponsoring bank. Under certain of these sales arrangements, the Company’s sponsoring bank collects the gross revenue from the merchants, pays the interchange fees and assessments to the credit card associations, collects their fees and pays the Company a net residual payment representing the Company’s fee for the services provided. Accordingly, under these arrangements, the Company records the revenue net of interchange, credit card association assessments and fees and the sponsoring bank’s fees. Effective June 1, 2013, a portion of the Company’s merchant contract and ISO merchant customer credit and debit card transactions business was transferred to a new sponsoring bank whereby the Company is billed directly for certain fees by the credit card associations and the processing bank. In this instance, revenues and cost of revenues include the credit card association fees and assessments and the sponsoring bank’s fees which are billed to the Company and for which it assumes credit risk. The impact of this change resulted in an increase in revenues and cost of revenues of approximately $724,000 and $1,029,000 in the three and nine months ended September 30, 2013, respectively. In all instances, the Company recognizes processing revenues net of interchange fees, which are assessed to its merchant and ISO merchant customers on all processed transactions. Interchange rates and fees are not controlled by the Company. The Company effectively functions as a clearing house collecting and remitting interchange fee settlement on behalf of issuing banks, debit networks, credit card associations and their processing customers. Additionally, the Company’s direct merchant customers have the liability for any charges properly reversed by the cardholder. In the event, however, that the Company is not able to collect such amount from the merchants due to merchant fraud, insolvency, bankruptcy or any other reason, it may be liable for any such reversed charges. The Company requires cash deposits, guarantees, letters of credit and other types of collateral by certain merchants to minimize any such contingent liability, and it also utilizes a number of systems and procedures to manage merchant risk. The Company has historically experienced losses due to chargebacks resulting from merchant defaults. | ||||||||||||||
Revenues from the Company’s payroll processing operation is recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured. Certain processing services are provided under annual service arrangements with revenue recognized over the service period based on when the efforts and costs are expended. The Company’s service revenue is largely attributable to payroll-related processing services where the fees are based on a fixed amount per processing period or a fixed amount per processing period plus a fee per employee or transaction processed. The revenue earned from delivery service for the distribution of certain client payroll checks and reports is included in processing revenue, and the costs for delivery are included in selling, general, and administrative expenses on the Consolidated Statements of Operations. | ||||||||||||||
Interest on funds held for clients is earned primarily on funds that are collected from clients before due dates for payroll tax administration services and for employee payment services, and invested until remittance to the applicable tax or regulatory agencies or client employee. These collections from clients are typically remitted from 1 to 30 days after receipt, with some items extending to 90 days. The interest earned on these funds is included in total revenue on the Consolidated Statements of Operations because the collecting, holding, and remitting of these funds are critical components of providing these services. | ||||||||||||||
Reserve for Chargeback Losses | ||||||||||||||
Disputes between a cardholder and a merchant periodically arise as a result of, among other things, cardholder dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the purchase price is refunded to the customer through the merchant’s bank and charged to the merchant. If the merchant has inadequate funds, JetPay, LLC must bear the credit risk for the full amount of the transaction. JetPay, LLC evaluates the risk for such transactions and estimates the potential loss for chargebacks based primarily on historical experience and records a loss reserve accordingly. JetPay, LLC believes its reserve for chargeback losses is adequate to cover both the known probable losses and the incurred but not yet reported losses at the balance sheet dates. Chargeback reserves totaling $247,000 and $200,000 were recorded as of September 30, 2013 and December 31, 2012, respectively. | ||||||||||||||
Fair Value of Financial Instruments | ||||||||||||||
The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, settlement processing assets and liabilities, receivables, prepaid expenses, accounts payable, accrued expenses and deferred revenue, approximated fair value as of the balance sheet date presented, because of the relatively short maturity dates on these instruments. The carrying amounts of the financing arrangements approximate fair value as of the balance sheet date presented, because interest rates on these instruments approximate market interest rates after consideration of stated interest rates, anti-dilution protection and associated warrants. | ||||||||||||||
Accounts Receivable | ||||||||||||||
The Company’s accounts receivable are due from its merchant credit card and its payroll customers. Credit is extended based on evaluation of customers’ financial condition and, generally, collateral is not required. Payment terms vary and amounts due from customers are stated in the financial statements net of an allowance for doubtful accounts. Accounts which are outstanding longer than the payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivables when they are deemed uncollectible. | ||||||||||||||
Settlement Processing Assets and Obligations | ||||||||||||||
Funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. Depending on the type of transaction, either the credit card interchange system or the debit network is used to transfer the information and funds between the sponsoring bank and card issuer to complete the link between merchants and card issuers. In certain of our processing arrangements, merchant funding primarily occurs after the sponsoring bank receives the funds from the card issuer through the card networks creating a net settlement obligation on the Company’s balance sheet. In a limited number of other arrangements, the sponsoring bank funds the merchants before it receives the net settlement funds from the card networks, creating a net settlement asset on the Company’s balance sheet. Additionally, certain of the Company’s sponsoring banks collect the gross revenue from the merchants, pay the interchange fees and assessments to the credit card associations, collect their fees for processing and pays the Company a net residual payment representing the Company’s fees for the services. In these instances, the Company does not reflect the related settlement processing assets and obligations in its consolidated balance sheet. | ||||||||||||||
Timing differences in processing credit and debit card and ACH transactions, as described above, interchange expense collection, merchant reserves, sponsoring bank reserves, and exception items result in settlement processing asset and obligations. Settlement processing assets consist primarily of our receivable from merchants for the portion of the discount fee related to reimbursement of the interchange expense, our receivable from the processing bank for transactions we have funded merchants in advance of receipt of card association funding, merchant reserves held, sponsoring bank reserves and exception items, such as customer chargeback amounts receivable from merchants. Settlement processing obligations consist primarily of merchant reserves, our liability to the processing bank for transactions for which we have received funding from the members but have not funded merchants and exception items. | ||||||||||||||
Property and Equipment | ||||||||||||||
Property and equipment acquired in the Company’s recent business acquisitions have been recorded at estimated fair value. The Company records all other property and equipment acquired in the normal course of business at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, which are generally as follows: leasehold improvements – shorter of economic life or initial term of the related lease; machinery and equipment – 5 to 15 years; and furniture and fixtures – 5 to 10 years. Significant additions or improvements extending assets’ useful lives are capitalized; normal maintenance and repair costs are expensed as incurred. | ||||||||||||||
Impairment of Long–Lived Assets | ||||||||||||||
The Company periodically reviews the carrying value of its long-lived assets held and used at least annually or when events and circumstances warrant such a review. If significant events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. Cash flow projections are sometimes based on a group of assets, rather than a single asset. If cash flows cannot be separately and independently identified for a single asset, the Company determines whether impairment has occurred for the group of assets for which it can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, it measures any impairment by comparing the fair value of the asset group to its carrying value. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded. | ||||||||||||||
Goodwill | ||||||||||||||
Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company’s business combinations. The Company performs a goodwill impairment test on at least an annual basis. Application of the goodwill impairment test requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company will conduct its annual goodwill impairment test as of December 31 of each year or more frequently if indicators of impairment exist. The Company periodically analyzes whether any such indicators of impairment exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include a sustained significant decline in our stock price and market capitalization, a significant adverse change in legal factors or in the business climate, unanticipated competition and/or slower expected growth rates, adverse actions or assessments by a regulator, among others. The Company compares the fair value of its reporting unit to its respective carrying value, including related goodwill. Future changes in the industry could impact the results of future annual impairment tests. There can be no assurance that future tests of goodwill impairment will not result in impairment charges. | ||||||||||||||
Identifiable Intangible Assets | ||||||||||||||
Identifiable intangible assets consist primarily of customer relationships, software costs, and tradenames. Certain tradenames are considered to have indefinite lives, and as such, are not subject to amortization. These assets are tested for impairment using undiscounted cash flow methodology annually and whenever there is an impairment indicator. Estimating future cash flows requires significant judgment and projections may vary from cash flows eventually realized. Several impairment indicators are beyond the Company’s control, and determining whether or not they will occur cannot be predicted with any certainty. Customer relationships, tradenames, and software costs are amortized on a straight-line or accelerated basis over their respective assigned estimated useful lives. | ||||||||||||||
Loss per share | ||||||||||||||
Basic loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. The dilutive effect of the conversion option in the $10 million Secured Convertible Promissory Notes Payable of 2,040,816 shares at September 30, 2013 and potential issuable shares related to the conversion option within the Ten Lords, Ltd. Promissory Note Payable of 1,000,000 shares, a total of 3,040,816 shares, have been excluded from the loss per share calculation for the three and nine months ended September 30, 2013 in that the assumed conversion of the options would be anti-dilutive. | ||||||||||||||
Derivative Financial Instruments | ||||||||||||||
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company does review the terms of the convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. | ||||||||||||||
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges recorded within other expense (income), using the effective interest method. | ||||||||||||||
Fair value measurements | ||||||||||||||
The Company accounts for fair value measurements in accordance with ASC Topic No. 820, Fair Value Measurements and Disclosures, (“Topic No. 820”) which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. | ||||||||||||||
ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC Topic 820 are described below: | ||||||||||||||
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | |||||||||||||
Level 2 | Applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. | |||||||||||||
Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). | |||||||||||||
The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC Topic 820, assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement. | ||||||||||||||
Fair Value at December 31, 2012 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
(in thousands) | ||||||||||||||
Derivative liabilities | $ | 2,110 | $ | - | $ | - | $ | 2,110 | ||||||
Contingent consideration | $ | 1,540 | $ | - | $ | - | $ | 1,540 | ||||||
Totals | $ | 3,650 | $ | - | $ | - | $ | 3,650 | ||||||
Fair Value at September 30, 2013 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
(in thousands) | ||||||||||||||
Derivative liabilities | $ | 2,330 | $ | - | $ | - | $ | 2,330 | ||||||
Contingent consideration | $ | 970 | $ | - | $ | - | $ | 970 | ||||||
Totals | $ | 3,300 | $ | - | $ | - | $ | 3,300 | ||||||
The following table sets forth a summary of the change in fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis (in thousands): | ||||||||||||||
Three | Nine | |||||||||||||
Months | Months | |||||||||||||
Ended | Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2013 | |||||||||||||
Beginning balance | $ | 1,730 | $ | 3,650 | ||||||||||
Change in fair value of derivative liability | $ | 1,560 | $ | 220 | ||||||||||
Change in fair value of contingent cash consideration | $ | 10 | $ | -570 | ||||||||||
Totals | $ | 3,300 | $ | 3,300 | ||||||||||
In connection with the debt proceeds received under the $10 million secured convertible notes (the “Notes”), the Company recorded a derivative liability of $2.11 million on its consolidated balance sheet at December 28, 2012 related to the conversion feature embedded in the Notes. The fair value of the derivative liability is classified within Level 3 of the fair value hierarchy because it is valued using pricing models that incorporate management assumptions that cannot be corroborated with observable market data. The fair value at September 30, 2013 of $2.33 million was determined using a binomial option pricing valuation model with the following assumptions: risk free interest rate: 0.16 %; dividend yield: 0%; expected life of the option to convert of 1.25 years; and volatility: 23.8%. The change in fair value of this derivative liability of $1.56 million and $220,000 for the three and nine months ended September 30, 2013, respectively, is recorded within other expenses (income) in the Company’s consolidated statements of operations. | ||||||||||||||
Additionally, in connection with a promissory note payable to Ten Lords, Ltd., assumed in the acquisition of JetPay, LLC, the Company recorded a short-term derivative liability of $320,000 which was included in the current portion of long-term debt and derivative liability in the accompanying balance sheets. The fair value of this derivative liability at September 30, 2013 was $0 and was determined using the following assumptions: risk free interest rate: 0.09 %; dividend yield: 0%; expected life of the option to convert of .03 years; and volatility: 11.5%. The expected life of the option to convert of .03 years reflects the early payment of this debt on October 11, 2013. The change in fair value of this derivative liability of $0 and $320,000 for the three and nine months ended September 30, 2013, respectively, is recorded within other expenses (income) in the Company’s consolidated statements of operations. | ||||||||||||||
In addition to the consideration paid upon closing of the JetPay, LLC acquisition, WLES, through December 28, 2017, is entitled to receive 833,333 shares of Common Stock if the trading price of the Common Stock is at least $8.00 per share for any 20 trading days out of a 30 trading day period and $5,000,000 in cash if the trading price of the Common Stock is at least $9.50 per share for any 20 trading days out of a 30 trading day period. This contingent consideration was valued at $1.54 million at the date of acquisition based on utilization of option pricing models and is recorded as a non-current liability for $700,000 and as additional paid-in capital for $840,000 at December 31, 2012. The stock-based component value of $840,000 as recorded at December 28, 2012, the JetPay, LLC acquisition date, remains unchanged at September 30, 2013 as a result of this component being recorded as equity. The fair value at September 30, 2013 of the cash-based contingent consideration, valued at $130,000, was determined using a binomial option pricing model. The following assumptions were utilized in the September 2013 calculations: risk free interest rate: 1.11 %; dividend yield: 0%; term of contingency of 4.25 years; and volatility: 28.0 %. | ||||||||||||||
The fair value of the Common Stock was derived from the per share price of recent sales of the Company’s common stock at the valuation date. Management determined that the results of its valuation are reasonable. The expected life represents the remaining contractual term of the derivative. The volatility rate was developed based on analysis of the historical volatility rates of similarly situated companies (using a number of observations that was at least equal to or exceeded the number of observations in the life of the derivative financial instrument at issue). The risk free interest rates were obtained from publicly available US Treasury yield curve rates. The dividend yield is zero because the Company has not paid dividends and does not expect to pay dividends in the foreseeable future. | ||||||||||||||
Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the financial instrument. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department with support from the Company’s outside consultants and which are approved by the Chief Financial Officer. Level 3 financial liabilities consists of a derivative liability and contingent consideration related to the JetPay, LLC acquisition for which there are no current markets such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy will be analyzed each period based on changes in estimates or assumptions and recorded as appropriate. Level 3 fair value items disclosed above arose on December 28, 2012 with the consummation of the Completed Transactions. | ||||||||||||||
The Company uses either a binomial option pricing model or the Black-Scholes option valuation model to value Level 3 financial liabilities at inception and on subsequent valuation dates. These models incorporate transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. | ||||||||||||||
A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement. Changes in the values of derivative liabilities are recorded in change in fair value of derivative liabilities within other expense (income) on the Company’s consolidated statements of operations. | ||||||||||||||
As of September 30, 2013, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy. | ||||||||||||||
In accordance with the provisions of ASC 815, Derivatives and Hedging Activities, the Company presented its derivative liability at fair value on its balance sheet, with the corresponding change in fair value recorded in the Company’s statement of operations for the applicable reporting periods. | ||||||||||||||
Income taxes | ||||||||||||||
The Company accounts for income taxes under ASC 740, Income Taxes, (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryovers. Deferred income tax expense (benefit) represents the change during the period in the deferred income tax assets and deferred income tax liabilities. In establishing the provision for income taxes and determining deferred income tax assets and liabilities, the Company makes judgments and interpretations based on enacted laws, published tax guidance and estimates of future earnings. ASC 740 additionally requires a valuation allowance to be established when, based on available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. | ||||||||||||||
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is required to file income tax returns in the United States (federal) and in various state and local jurisdictions. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The Company believes that its income tax positions and deductions would be sustained upon examination and does not anticipate any adjustments that would result in material changes to its financial position. | ||||||||||||||
The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as interest expense and as a component of selling, general and administrative expense, respectively. There were no amounts accrued for penalties or interest as of or during the three and nine months ended September 30, 2013. Management does not expect any significant changes in its unrecognized tax benefits in the next year. | ||||||||||||||
Subsequent Events | ||||||||||||||
Management evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, Management did not identify any recognized or non-recognized subsequent events, other than those discussed in Note 13 –Subsequent Events, which would have required an adjustment or disclosure in the financial statements. See Note 13 –Subsequent Events below. | ||||||||||||||
Recent Accounting Pronouncements | ||||||||||||||
In July 2012, the Financial Accounting Standards Board (“FASB”) issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This new accounting standard simplifies how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, early adoption is permitted. The adoption of this standard did not have a material impact on the Company’s consolidated financial position and results of operations. | ||||||||||||||
The FASB has issued ASU No. 2013-11, Income Taxes (Topic 740):Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations. | ||||||||||||||
Cash_and_Cash_Equivalents_Held
Cash and Cash Equivalents Held in Trust Account | 9 Months Ended |
Sep. 30, 2013 | |
Cash and Cash Equivalents [Abstract] | ' |
Cash and Cash Equivalents Disclosure [Text Block] | ' |
Note 5. Cash and Cash Equivalents Held in Trust Account | |
Cash and cash equivalents in the trust account established upon consummation of the Company’s initial public offering consisted of $1.95 million in a “held as cash” account at December 31, 2012 and were disbursed to the redeeming stockholders on January 2, 2013. | |
Property_and_Equipment_net_of_
Property and Equipment, net of Accumulated Depreciation | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property, Plant and Equipment Disclosure [Text Block] | ' | ||||||||
Note 6. Property and Equipment, net of Accumulated Depreciation | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(in thousands) | |||||||||
Leasehold improvements | $ | 312 | $ | 275 | |||||
Equipment | 487 | 442 | |||||||
Furniture and Fixtures | 194 | 176 | |||||||
Computer Software | 392 | 334 | |||||||
Vehicles | 198 | 155 | |||||||
Total property and equipment | 1,583 | 1,382 | |||||||
Less: Accumulated depreciation | -292 | - | |||||||
Property and equipment, net | $ | 1,291 | $ | 1,382 | |||||
Depreciation expense was $92,700 and $291,800 for the three and nine months ending September 30, 2013 (Successor), respectively, and $41,100 and $115,000 for the three and nine months ended September 30, 2012, respectively, (Predecessor). | |||||||||
Accounts_Payable_and_Accrued_E
Accounts Payable and Accrued Expenses | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Payables and Accruals [Abstract] | ' | |||||||
Accounts Payable and Accrued Liabilities Disclosure [Text Block] | ' | |||||||
Note 7. Accounts Payable and Accrued Expenses | ||||||||
Accounts payable and accrued expenses consist of the following (in thousands): | ||||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Trade accounts payable | $ | 3,003 | $ | 2,852 | ||||
Contingency accrual | 2,136 | 2,136 | ||||||
Accrued compensation | 969 | 956 | ||||||
ACH clearing liability | 1,019 | 529 | ||||||
Related party payables | 141 | 285 | ||||||
Accrued agent commissions | 743 | 344 | ||||||
Other | 3,104 | 1,182 | ||||||
Total | $ | 11,115 | $ | 8,284 | ||||
LongTerm_Debt_and_Notes_Payabl
Long-Term Debt and Notes Payable | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Debt Disclosure [Abstract] | ' | |||||||
Debt Disclosure [Text Block] | ' | |||||||
Note 8. Long-Term Debt and Notes Payable | ||||||||
Long-term debt and notes payable consist of the following: | ||||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Successor | Successor | |||||||
(in thousands) | ||||||||
Secured convertible notes payable to various note holders, interest rate of 12.0% payable quarterly, notes maturing December 31, 2014, collateralized by a first lien security interest in the equity interests of JetPay, LLC. Note amount excludes unamortized discount for conversion option and derivative liability of $1.38 million and $2.11 million at September 30, 2013 and December 31, 2012, respectively. | $ | 8,623 | $ | 7,890 | ||||
Promissory note payable to Ten Lords, Ltd., interest rate of 6.25% through December 28, 2012 (predecessor), 9.5% from December 29, 2012 through September 26, 2013 and 13.5% from September 26 to December 28, 2013 payable in monthly payments of principal and interest of $63,809 with a final principal payment of $5.85 million due on December 28, 2013. Note amount includes a fair value premium of $45,500 and $180,000 at September 30, 2013 and December 31, 2012, respectively, as well as an unamortized discount for conversion option and derivative liability of $81,600 and $320,000 at September 30, 2013 and December 31, 2012, respectively. | 5,847 | 6,180 | ||||||
Term loan payable to Metro Bank, interest rate of 4.0% payable in monthly principal payments of $107,143 plus interest, maturing December 28, 2019, collateralized by the assets and equity interests of AD Computer Corporation and Payroll Tax Filing Services, Inc. | 8,036 | 9,000 | ||||||
Unsecured promissory note payable to WLES, interest rate of 5.0% payable quarterly, note principal due on December 31, 2017. Note amount excludes unamortized fair value discount of $742,000 and $845,900 at September 30, 2013 and December 31, 2012, respectively. | 1,589 | 1,486 | ||||||
Unsecured promissory notes payable to stockholders, interest rate of 4% payable at maturity, note principal due July 31, 2014. See Note 12. Related Party Transactions. | 552 | - | ||||||
Various other debt instruments related to equipment at JetPay, LLC and vehicles at ADC. | 34 | 13 | ||||||
24,681 | 24,569 | |||||||
Less current portion | -7,698 | -7,479 | ||||||
$ | 16,983 | $ | 17,090 | |||||
The Metro Bank term loan agreement requires the Company to provide Metro Bank with annual financial statements within 120 days of the Company’s year-end and quarterly financial statement within 60 days after the end of each quarter. The Metro agreement also contains certain annual financial covenants which the Company was in compliance with as of September 30, 2013. | ||||||||
Maturities of long-term debt are as follows: 2013 – $7.7 million; 2014 – $11.3 million; 2015 – $1.3 million; 2016 – $1.3 million; 2017 – $3.6 million and $1.6 million thereafter. | ||||||||
Stockholders_Equity
Stockholders' Equity | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Stockholders' Equity Note [Abstract] | ' | |||||||
Stockholders' Equity Note Disclosure [Text Block] | ' | |||||||
Note 9. Stockholders’ Equity | ||||||||
Common Stock | ||||||||
On April 26, 2013, the Company issued 10,000 shares of common stock, with a fair value of approximately $37,400, as compensation to a consultant for services rendered. | ||||||||
Preferred Stock | ||||||||
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. | ||||||||
As of September 30, 2013 and December 31, 2012, there were no shares of preferred stock issued or outstanding. | ||||||||
Stock-Based Compensation | ||||||||
Stock-based compensation to employees is measured based on the fair value of the award on the date of the grant, and is recognized as an expense over the employee’s requisite service period. | ||||||||
At a meeting of the Company’s stockholders held on July 31, 2013 (the “Meeting”), the Company’s stockholders approved the adoption of the Company’s 2013 Stock Incentive Plan (the “Plan”). The Company granted 325,000 stock options under the Plan during the three months ended September 30, 2013 all at an exercise price of $3.10 per share. The grant date fair value of the options was determined to be approximately $451,000 using the Black-Scholes pricing model. Significant assumptions used in the valuation include expected term of 5.75 to 6.00 years, expected volatility of 44.98% to 45.17%, risk free interest rate of 1.93%, and expected dividend yield of 0%. Aggregated stock-based compensation expense for the nine months ended September 30, 2013 was $110,000. Unrecognized compensation expense as of September 30, 2013, relating to non-vested common stock options is approximately $341,000 and is expected to be recognized through 2016. At September 30, 2013, no options have been exercised or forfeited. | ||||||||
Expected term: The Company’s expected term is based on the period the options are expected to remain outstanding. The Company estimated this amount utilizing the “Simplified Method” in that the Company does not have sufficient historical experience to provide a reasonable basis to estimate an expected term. | ||||||||
Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant. | ||||||||
Volatility: The Company calculates the volatility of the stock price based on historical value and corresponding volatility of the Company’s peer group stock price for a period consistent with the stock option expected term. | ||||||||
Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future. | ||||||||
A summary of stock option activity for the nine months ended September 30, 2013 is presented below: | ||||||||
Exercise Price | ||||||||
Number of Options | Weighted Average | |||||||
Outstanding at December 31, 2012 | - | $ | - | |||||
Granted | 325,000 | 3.1 | ||||||
Forfeited | - | - | ||||||
Exercised | - | - | ||||||
Outstanding at September 30, 2013 | 325,000 | $ | 3.1 | |||||
Exercisable at September 30, 2013 | 73,958 | $ | 3.1 | |||||
The weighted average remaining life of options outstanding at September 30, 2013 was 9.9 years. The aggregate intrinsic value of the exercisable options at September 30, 2013 was approximately $26,600. | ||||||||
Income_Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2013 | |
Income Tax Disclosure [Abstract] | ' |
Income Tax Disclosure [Text Block] | ' |
Note 10. Income Taxes | |
The Company recorded income tax expense of $27,000 in both the three months ended September 30, 2013 and 2012 (Predecessor), respectively, and $85,000 and $81,000 in the nine months ended September 30, 2013 and 2012 (Predecessor), respectively. Income tax expense reflects the recording of state income taxes. The effective tax rates are approximately (0.8)% and (8.0)% for the three months ended September 30, 2013 and 2012, respectively, and (2.0)% and 312.0% for the nine months ended September 30, 2013 and 2012, respectively. The effective rate differs from the federal statutory rate for each year, primarily due to state and local income taxes and changes to the valuation allowance. It is management’s belief that significant uncertainty exists with respect to future realization of the deferred tax assets, and has, therefore, adjusted its valuation allowance against deferred tax assets by $1.3 million and $1.8 million in the three and nine months ended September 30, 2013, respectively. | |
No provision for federal income taxes has been made for Predecessor since these taxes are the responsibility of the individual members of the Predecessor. However, Predecessor is subject to and pays the Texas Margin Tax which is considered to be an income tax in accordance with the provisions of the Income Taxes Topic in FASB, ASC and the associated interpretations. There are no significant temporary differences associated with the Texas Margin Tax, and therefore, Predecessor has not recognized deferred taxes in the three or nine months ended September 30, 2012. | |
As of September 30, 2013, the Company had cumulative U.S. federal and state net operating loss carryovers (“NOLs”) of approximately $10.1 million. These NOLs, if not utilized, expire at various times through 2032. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change in control. Management will be performing a preliminary evaluation as to whether a change in control has taken place. | |
In assessing the realization of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, Management believes that significant uncertainty exists with respect to future realization of the deferred tax assets, and has, therefore, increased its valuation allowance against deferred tax assets by $1.8 million in the nine months ended September 30, 2013, $2.24 million in the three months ended December 31, 2012, $213,000 in the year ended September 30, 2012 and $36,000 in the period November 12, 2010 through September 30, 2011, with a total valuation allowance of $4.3 million at September 30, 2013, representing the amount of its deferred income tax assets in excess of the Company’s deferred income tax liabilities. The deferred tax liability related to goodwill that is amortizable for tax purpose (“Intangibles”) will not reverse until such time, if any, that the goodwill, which is considered to be an asset with an indefinite life for financial reporting purposes, becomes impaired or sold. Due to the uncertain timing of this reversal, the temporary difference cannot be considered as future taxable income for purposes of determining a valuation allowance. Therefore, the deferred tax liability related to tax deductible goodwill Intangibles cannot be considered when determining the ultimate realization of deferred tax assets. | |
Commitments_and_Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments and Contingencies Disclosure [Text Block] | ' |
Note 11. Commitments and Contingencies | |
On January 16, 2013, the Company received notice that EarlyBirdCapital had commenced arbitration proceedings (the “Claim”) against the Company with the International Centre for Dispute Resolution. The Claim alleges that the Company breached a Letter Agreement, dated as of May 9, 2011, with EarlyBirdCapital by failing to pay a cash fee of $2,070,000 and reimburse EarlyBirdCapital for certain expenses upon the closing of the Completed Transactions on December 28, 2012. As a result of such breach, EarlyBirdCapital is seeking damages of approximately $2.14 million plus interest and attorney’s fees and expenses. The Company has filed a $4.0 million counter claim against EarlyBirdCapital for damages. This matter was the subject of an arbitration proceeding held on November 11 and November 12, 2013. It is not possible at this time to predict the outcome of the Arbitration Proceeding. Although the Company intends to vigorously defend the Claim, an accrual of approximately $2.14 million has been recorded in SG&A expenses in the three months ended December 31, 2012. | |
On August 23, 2013, the Company received notice that JetPay Merchant Services, LLC (“JPMS”) was a party in a lawsuit brought by MSC Cruises, a former customer. Merrick Bank Corporation (“Merrick”) is a co-defendant in the lawsuit. MSC Cruises is claiming approximately $2 million in damages and alleges that JPMS breached its agreement with MSC by charging fees not specified in the agreement. The Company believes that the basis of the suit regarding JetPay Merchant Services, LLC is groundless and intends to defend it vigorously. | |
On or about March 13, 2012, a merchant of JetPay, LLC, Direct Air, abruptly ceased operations. As a result, Merrick, JetPay, LLC’s sponsor with respect to this particular merchant, has incurred chargebacks in excess of $25 million. Chargebacks related to Direct Air were minimal during the nine months ended September 30, 2013. Under an agreement between Merrick and JetPay, LLC, JetPay, LLC may be obligated to indemnify Merrick for any realized losses from such chargebacks. JetPay, LLC has recorded a loss for all chargebacks in excess of the $25 million, a $250,000 deductible on a related insurance policy and legal fees charged to JetPay, LLC by Merrick all totaling $1,947,000 in 2012. Additionally, legal fees totaling approximately $597,000 were charged against JetPay, LLC’s cash reserve account by Merrick in the nine months ended September 30, 2013. JetPay, LLC has received correspondence from Merrick of its intention to seek recovery for all unrecovered chargebacks, but JetPay, LLC is currently not a party to any litigation from Merrick regarding this matter. The loss is insured through a Chartis Insurance Policy for chargeback loss that names Merrick as the primary insured. The policy has a limit of $25 million. The deductible for the policy is $250,000. Merrick and JetPay, LLC have entered into a Forbearance Agreement pertaining to the Direct Air chargeback issue. The Direct Air situation has also caused other unexpected expenses, such as higher professional fees and fees for chargeback processing. Currently all chargebacks up to $25 million are being absorbed by Merrick and therefore are not changed to the JetPay, LLC balance sheet; however, JetPay, LLC may be liable to Merrick under the terms of the agreement between the parties for these chargebacks. Also pursuant to the terms of such agreement, Merrick has forced JetPay, LLC to maintain increased cash reserves in order to provide additional security for its obligations arising from the Direct Air situation. Merrick continues to hold approximately $5.04 million of total reserves as of September 30, 2013, $4.7 million of which was directly related to the Direct Air matter. These reserves are recorded in Other Assets. On August 7, 2013, JPMS, a wholly owned subsidiary of JetPay, LLC and indirect wholly owned subsidiary of the Company, together with WLES, L.P., (collectively, the “Plaintiffs”), filed suit in the U.S. District Court for the Northern District of Texas, Dallas Division, against Merrick, Royal Group Services, LTD, LLC and Gregory Richmond (collectively, the “Defendants”). The suit alleges that Merrick and Gregory Richmond (an agent of Royal Group Services) represented to JPMS that insurance coverage was arranged through Chartis Specialty Insurance Company (“Chartis”) to provide coverage for JPMS against potential chargeback losses related to certain of JPMS’s merchant customers, including Southern Sky Air Tours, d/b/a Direct Air. The complaint alleges that JPMS paid commission/premiums to Merrick relating to the Chartis insurance policy as well as several causes of action against the Defendants, including violation of state insurance codes, negligence, fraud, breach of duty and breach of contract. Also, in August 2013, JPMS, JetPay, LLC, and JetPay ISO filed the second amendment to a previously filed complaint against Merrick in the United States District Court for the District of Utah, adding to its initial complaint several causes of action related to actions Merrick allegedly took during the transitioning to a new sponsoring bank in June 2013. Additionally, subsequent to transitioning of JetPay, LLC’s processing in June 2013 to a new sponsoring bank as an alternative to Merrick, Merrick invoiced the Company for legal fees incurred totaling approximately $718,600. The Company does not believe it has responsibility to reimburse Merrick for these legal fees and intends to vigorously dispute these changes. Accordingly, the Company has not recorded an accrual for these legal fees as of September 30, 2013. | |
As partial protection against any potential losses, the Company required that, upon closing of the Completed Transactions, 3,333,333 shares of Common Stock that was to be paid to WLES as part of the JetPay, LLC purchase price be placed into an escrow account with JPMorgan Chase as the trustee. The Escrow Agreement for the account names Merrick, the Company, and WLES as parties, If JetPay, LLC suffers any liability to Merrick Bank as a result of the Direct Air matter, these shares are to be used in partial or full payment for any such liability, with any remaining shares delivered to WLES. If JetPay, LLC is found to have any liability to Merrick because of this issue, and these shares do not have sufficient value to fully cover such liability, the Company may be responsible for this JetPay, LLC liability. | |
The Company is a party to various other legal proceedings related to its ordinary business activities. In the opinion of the Company’s management, none of these proceedings are material in relation to our results of operations, liquidity, cash flows, or financial condition. | |
At September 30, 2013, a letter of credit was outstanding for $100,000 as collateral with respect to a front-end processing relationship with a credit card company. Additionally, on August 21, 2013, a letter of credit for $1.9 million was issued and remains outstanding at September 30, 2013 as a reserve with respect to JetPay, LLC’s processing relationship with Wells Fargo Bank, N.A. | |
Related_Party_Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2013 | |
Related Party Transactions [Abstract] | ' |
Related Party Transactions Disclosure [Text Block] | ' |
Note 12. Related Party Transactions | |
From December 2010 through December 2012, the Company issued a series of principal amount unsecured promissory notes to UBPS Services, LLC (“UBPS Services”), an entity controlled by Mr. Shah, CEO and Chairman of the Company, totaling $425,880. These notes were non-interest bearing and, except for $15,000, were paid upon consummation of the Completed Transactions on December 28, 2012. Additionally, in February 2013 and June 2013, the Company issued unsecured promissory notes to UBPS Services for $72,000 and $60,000, respectively. The June 7, 2013 promissory note matures on July 31, 2014 and bears interest at an annual rate of 4%. The February 2013 promissory note is non-interest bearing. Total outstanding notes to UBPS Services at September 30, 2013 were $147,000. The notes were repaid on October 15, 2013. All such transactions were approved upon resolution and review by the Company’s Audit Committee of the terms of the notes to ensure that such terms were no less favorable to the Company than those that would be available with respect to such transactions from unaffiliated third parties. | |
On June 7, 2013, the Company issued an unsecured promissory note to Trent Voigt, Chief Executive Officer of JetPay, LLC, in the amount of $491,693. The note matures on July 31, 2014 and bears interest at an annual rate of 4%. The transaction was approved upon resolution and review by the Company’s Audit Committee of the terms of the note to ensure that such terms were no less favorable to the Company than those that would be available with respect to such transactions from unaffiliated third parties. | |
ADC’s headquarters are located in Center Valley, Pennsylvania and consist of approximately 22,500 square feet leased from C. Nicholas Antich and Carol A. Antich. Mr. Antich is the President of ADC. The rent is approximately $40,000 per month with annual 4% increases, on a net basis. The office lease has an initial 10-year term expiring May 31, 2016. Rent expense under this lease was $125,300 and $367,750 for the three and nine months ended September 30, 2013, respectively. | |
PTFS shares office space and related facilities with Serfass & Cremia, LLC, the accounting firm of which Joel E. Serfass, a previous shareholder of PTFS, is a member. Such office space consists of 4,300 square feet, located on one floor of a multi-tenant building in Bethlehem, Pennsylvania. Pursuant to a cost sharing agreement among PTFS, Joel E. Serfass and Serfass & Cremia, LLC, PTFS pays an 85% share of the total expenses of operating such facilities (which total expenses include office rental, equipment rental, telephone, utilities, maintenance, repairs and other operating costs and a 15% administrative fee payable to Joel E. Serfass), which amounted to $8,216 and $24,648 for the three and nine months ended September 30, 2013, respectively. The cost sharing agreement is terminable by any party with a 90 day notice. | |
JetPay, LLC retains a backup center in Sunnyvale, Texas consisting of 1,600 square feet, rented for approximately $3,000 per month from JT Holdings, an entity controlled by Trent Voigt, Chief Executive Officer of JetPay, LLC. The terms of the lease are commercial. Rent expense was $9,000 and $30,000 for both the three and nine months ended September 30, 2013 and 2012, respectively. | |
The above transactions with respect to ADC, PTFS and JetPay, LLC were approved prior to the acquisition of ADC, PTFS and JetPay, LLC. Going forward, all related party transactions with respect to such entities will be reviewed and approved by the Company’s Audit Committee to ensure that the terms of such transactions are no less favorable to the Company than those that would be available with respect to such transactions from unaffiliated third parties. | |
At the closing of the acquisition of ADC, funds were paid to the ADC stockholders as a result of a preliminary working capital calculation. Prepaid expenses at December 31, 2012 included a receivable from the stockholders of ADC of $450,776 for an overpayment related to this preliminary calculation. The funds were repaid to the Company in February 2013. | |
In connection with the closing of the JetPay, LLC acquisition, the Company entered into a Note and Indemnity Side Agreement with JP Merger Sub, LLC, WLES and Trent Voigt (the “Note and Indemnity Side Agreement”) dated as of December 28, 2012. Pursuant to the Note and Indemnity Side Agreement, the Company agreed to issue a promissory note in the amount of $2,331,369 in favor of WLES. Interest accrues on amounts due under the note at a rate of 5% per annum, and is payable quarterly. The note is due in full on December 31, 2017. The note can be prepaid in full or in part at any time without penalty. As partial consideration for offering the note, the Company and JP Merger Sub, LLC agreed to waive certain specified indemnity claims against WLES and Mr. Voigt to the extent the losses under such claims do not exceed $2,331,369. | |
Subsequent_Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2013 | |
Subsequent Events [Abstract] | ' |
Subsequent Events [Text Block] | ' |
Note 13. Subsequent Events | |
On October 11, 2013 the Company issued 33,333 shares of Series A Convertible Preferred Stock, par value $0.001 (“Series A Preferred”) to Flexpoint Fund II, L.P. (“Flexpoint”) for an aggregate of $10 million less certain agreed-upon reimbursable expenses of Flexpoint (the “Initial Closing”) pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”) entered into on August 22, 2013. Under the Securities Purchase Agreement, the Company agreed to sell to Flexpoint, and Flexpoint agreed to purchase, upon satisfaction of certain conditions, up to 134,000 shares of Series A Preferred for an aggregate purchase price of up to $40 million. The proceeds of this initial $10 million investment was used to retire the Ten Lords, Ltd. note payable of $5.87 million maturing in December 2013 with the remainder to be used for general corporate purposes. | |
The Series A Preferred is convertible into shares of the Company’s common stock, par value $0.001. Any holder of Series A Preferred may at any time convert such holder’s shares of Series A Preferred into that number of shares of Common Stock equal to the number of shares of Series A Preferred being converted multiplied by $300 and divided by the then-applicable conversion price, initially $3.00. The conversion price of the Series A Preferred is subject to downward adjustment upon the occurrence of certain events | |
The Company’s obligation to issue and sell, and Flexpoint’s obligation to purchase, the Preferred Stock is divided into three separate tranches: Tranche A, Tranche B and Tranche C. Tranche A consists of $10 million worth of shares of Preferred Stock that was issued on October 11, 2013. Tranche B consists of up to $10 million worth of shares of Preferred Stock, which Flexpoint will be obligated to purchase, subject to satisfaction of certain conditions, from the Company if the Company is able to consummate a redemption any time after December 1, 2014 and prior to December 29, 2014 of the secured convertible notes that were issued pursuant to a Secured Convertible Note Agreement, dated December 28, 2012, the Company entered into with Special Opportunities Fund, Inc., R8 Capital Partners, LLC, Bulldog Investors General Partnership, Ira Lubert, Mendota Insurance Company and American Services Insurance Company, Inc. Tranche C consists of up to $20 million worth of shares of Preferred Stock, plus any amounts not purchased under Tranche B, which Flexpoint has the option to purchase at any time until the third anniversary of the Initial Closing. The shares of Preferred Stock issuable with respect to Tranche A, Tranche B and Tranche C all have a purchase price of $300 per share. | |
The Preferred Stock will have an initial liquidation preference of $600 per share (subject to adjustment for any stock split, stock dividend or other similar proportionate reduction or increase of the authorized number of shares of Common Stock) and will rank senior to the Company’s Common Stock with respect to distributions of assets upon the Company’s liquidation, dissolution or winding up. Holders of Preferred Stock will have the right to request redemption of any shares of Preferred Stock issued at least five years prior to the date of such request by delivering written notice to the Company at the then applicable liquidation value per share, unless holders of a majority of the outstanding Preferred Stock elect to waive such redemption request on behalf of all holders of Preferred Stock. | |
Upon the occurrence of an Event of Noncompliance, the holders of a majority of the Preferred Stock may demand immediate redemption of all or a portion of the Preferred Stock at the then-applicable liquidation value. Such holders may also exercise a right to have the holders of the Preferred Stock elect a majority of the Board by increasing the size of the Board and filling such vacancies. Such right to control a minimum majority of the Board would exist for so long as the Event of Noncompliance was continuing. An “Event of Noncompliance” shall have occurred if: i) the Company fails to make any required redemption payment with respect to the Preferred Stock; ii) the Company breaches the Securities Purchase Agreement after the Initial Closing, and such breach has not been cured with thirty days after receipt of notice thereof; iii) the Company or any subsidiary makes an assignment for the benefit of creditors, admits its insolvency or is the subject of an order, judgment or decree adjudicating such entity as insolvent, among other similar actions; iv) a final judgment in excess of $5,000,000 is rendered against the Company or any subsidiary that is not discharged within 60 days thereafter; or v) an event of default has occurred under either the Secured Convertible Note Agreement or the Loan and Security Agreement, dated as of December 28, 2012 by and among ADC, PTFS and Metro Bank, and such event of default has not been cured within thirty days after receipt of notice thereof. | |
On October 11, 2013, Arthur F. Ryan, a member of the Board, tendered his resignation effective as of October 11, 2013 for personal reasons. Mr. Ryan had served on the Board since February 2011. Additionally, in conjunction with the initial closing under the Securities Purchase Agreement, Flexpoint was entitled to appoint two directors to the Company’s board of directors. Flexpoint designed Donald L. Edwards and Steven M. Michienzi as its nominees to the Company’s board of directors (the “Board”). The Board appointed Messrs. Edwards and Michienzi to serve as directors on the Board effective October 11, 2013. | |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
Accounting Policies [Abstract] | ' | |||||||||||||
Use of Estimates, Policy [Policy Text Block] | ' | |||||||||||||
Use of Estimates | ||||||||||||||
The accompanying financial statements have been prepared in accordance with US GAAP and pursuant to the accounting and disclosure rules and regulations of the SEC. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the Company’s financial statements. Such estimates include, but are not limited to, the value of purchase consideration of acquisitions; valuation of accounts receivable, goodwill, intangible assets, and other long-lived assets; legal contingencies; and assumptions used in the calculation of stock-based compensation and in the calculation of income taxes. Actual results may differ from these estimates under different assumptions or conditions. | ||||||||||||||
Revenue Recognition, Deferred Revenue [Policy Text Block] | ' | |||||||||||||
Revenue Recognition and Deferred Revenue | ||||||||||||||
The Company recognizes revenue in general when the following criteria have been met: persuasive evidence of an arrangement exists, a customer contract or purchase order exists and the fees are fixed and determinable, no significant obligations remain and collection of the related receivable is reasonably assured. Allowances for chargebacks, discounts and other allowances are estimated and recorded concurrent with the recognition of revenue and are primarily based on historic rates. | ||||||||||||||
Revenues from the Company’s credit and debit card processing operations are recognized in the period services are rendered as the Company processes credit and debit card transactions for its merchant customers or for merchant customers of its Independent Sales Organization (“ISO”) clients. The majority of the Company’s revenue within its credit and debit card processing business is comprised of transaction-based fees, which typically constitute a percentage of dollar volume processed, or a fee per transaction processed. In the case where the Company is only the processor of transactions, it charges transaction fees only and record these fees as revenues. In the case of merchant contracts or contracts with ISOs for whom it processes credit and debit card transactions for the ISO’s merchant customers, revenue is primarily comprised of fees charged to the merchant, as well as a percentage of the processed sale transaction. The Company’s contracts in most instances involve three parties: the Company, the merchant, and the sponsoring bank. Under certain of these sales arrangements, the Company’s sponsoring bank collects the gross revenue from the merchants, pays the interchange fees and assessments to the credit card associations, collects their fees and pays the Company a net residual payment representing the Company’s fee for the services provided. Accordingly, under these arrangements, the Company records the revenue net of interchange, credit card association assessments and fees and the sponsoring bank’s fees. Effective June 1, 2013, a portion of the Company’s merchant contract and ISO merchant customer credit and debit card transactions business was transferred to a new sponsoring bank whereby the Company is billed directly for certain fees by the credit card associations and the processing bank. In this instance, revenues and cost of revenues include the credit card association fees and assessments and the sponsoring bank’s fees which are billed to the Company and for which it assumes credit risk. The impact of this change resulted in an increase in revenues and cost of revenues of approximately $724,000 and $1,029,000 in the three and nine months ended September 30, 2013, respectively. In all instances, the Company recognizes processing revenues net of interchange fees, which are assessed to its merchant and ISO merchant customers on all processed transactions. Interchange rates and fees are not controlled by the Company. The Company effectively functions as a clearing house collecting and remitting interchange fee settlement on behalf of issuing banks, debit networks, credit card associations and their processing customers. Additionally, the Company’s direct merchant customers have the liability for any charges properly reversed by the cardholder. In the event, however, that the Company is not able to collect such amount from the merchants due to merchant fraud, insolvency, bankruptcy or any other reason, it may be liable for any such reversed charges. The Company requires cash deposits, guarantees, letters of credit and other types of collateral by certain merchants to minimize any such contingent liability, and it also utilizes a number of systems and procedures to manage merchant risk. The Company has historically experienced losses due to chargebacks resulting from merchant defaults. | ||||||||||||||
Revenues from the Company’s payroll processing operation is recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured. Certain processing services are provided under annual service arrangements with revenue recognized over the service period based on when the efforts and costs are expended. The Company’s service revenue is largely attributable to payroll-related processing services where the fees are based on a fixed amount per processing period or a fixed amount per processing period plus a fee per employee or transaction processed. The revenue earned from delivery service for the distribution of certain client payroll checks and reports is included in processing revenue, and the costs for delivery are included in selling, general, and administrative expenses on the Consolidated Statements of Operations. | ||||||||||||||
Interest on funds held for clients is earned primarily on funds that are collected from clients before due dates for payroll tax administration services and for employee payment services, and invested until remittance to the applicable tax or regulatory agencies or client employee. These collections from clients are typically remitted from 1 to 30 days after receipt, with some items extending to 90 days. The interest earned on these funds is included in total revenue on the Consolidated Statements of Operations because the collecting, holding, and remitting of these funds are critical components of providing these services. | ||||||||||||||
Contingent Liability Reserve Estimate, Policy [Policy Text Block] | ' | |||||||||||||
Reserve for Chargeback Losses | ||||||||||||||
Disputes between a cardholder and a merchant periodically arise as a result of, among other things, cardholder dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the purchase price is refunded to the customer through the merchant’s bank and charged to the merchant. If the merchant has inadequate funds, JetPay, LLC must bear the credit risk for the full amount of the transaction. JetPay, LLC evaluates the risk for such transactions and estimates the potential loss for chargebacks based primarily on historical experience and records a loss reserve accordingly. JetPay, LLC believes its reserve for chargeback losses is adequate to cover both the known probable losses and the incurred but not yet reported losses at the balance sheet dates. Chargeback reserves totaling $247,000 and $200,000 were recorded as of September 30, 2013 and December 31, 2012, respectively. | ||||||||||||||
Fair Value of Financial Instruments, Policy [Policy Text Block] | ' | |||||||||||||
Fair Value of Financial Instruments | ||||||||||||||
The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, settlement processing assets and liabilities, receivables, prepaid expenses, accounts payable, accrued expenses and deferred revenue, approximated fair value as of the balance sheet date presented, because of the relatively short maturity dates on these instruments. The carrying amounts of the financing arrangements approximate fair value as of the balance sheet date presented, because interest rates on these instruments approximate market interest rates after consideration of stated interest rates, anti-dilution protection and associated warrants. | ||||||||||||||
Receivables, Policy [Policy Text Block] | ' | |||||||||||||
Accounts Receivable | ||||||||||||||
The Company’s accounts receivable are due from its merchant credit card and its payroll customers. Credit is extended based on evaluation of customers’ financial condition and, generally, collateral is not required. Payment terms vary and amounts due from customers are stated in the financial statements net of an allowance for doubtful accounts. Accounts which are outstanding longer than the payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivables when they are deemed uncollectible. | ||||||||||||||
Unsettled Merchant Accounts [Policy Text Block] | ' | |||||||||||||
Settlement Processing Assets and Obligations | ||||||||||||||
Funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. Depending on the type of transaction, either the credit card interchange system or the debit network is used to transfer the information and funds between the sponsoring bank and card issuer to complete the link between merchants and card issuers. In certain of our processing arrangements, merchant funding primarily occurs after the sponsoring bank receives the funds from the card issuer through the card networks creating a net settlement obligation on the Company’s balance sheet. In a limited number of other arrangements, the sponsoring bank funds the merchants before it receives the net settlement funds from the card networks, creating a net settlement asset on the Company’s balance sheet. Additionally, certain of the Company’s sponsoring banks collect the gross revenue from the merchants, pay the interchange fees and assessments to the credit card associations, collect their fees for processing and pays the Company a net residual payment representing the Company’s fees for the services. In these instances, the Company does not reflect the related settlement processing assets and obligations in its consolidated balance sheet. | ||||||||||||||
Timing differences in processing credit and debit card and ACH transactions, as described above, interchange expense collection, merchant reserves, sponsoring bank reserves, and exception items result in settlement processing asset and obligations. Settlement processing assets consist primarily of our receivable from merchants for the portion of the discount fee related to reimbursement of the interchange expense, our receivable from the processing bank for transactions we have funded merchants in advance of receipt of card association funding, merchant reserves held, sponsoring bank reserves and exception items, such as customer chargeback amounts receivable from merchants. Settlement processing obligations consist primarily of merchant reserves, our liability to the processing bank for transactions for which we have received funding from the members but have not funded merchants and exception items. | ||||||||||||||
Property, Plant and Equipment, Policy [Policy Text Block] | ' | |||||||||||||
Property and Equipment | ||||||||||||||
Property and equipment acquired in the Company’s recent business acquisitions have been recorded at estimated fair value. The Company records all other property and equipment acquired in the normal course of business at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, which are generally as follows: leasehold improvements – shorter of economic life or initial term of the related lease; machinery and equipment – 5 to 15 years; and furniture and fixtures – 5 to 10 years. Significant additions or improvements extending assets’ useful lives are capitalized; normal maintenance and repair costs are expensed as incurred. | ||||||||||||||
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | ' | |||||||||||||
Impairment of Long–Lived Assets | ||||||||||||||
The Company periodically reviews the carrying value of its long-lived assets held and used at least annually or when events and circumstances warrant such a review. If significant events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. Cash flow projections are sometimes based on a group of assets, rather than a single asset. If cash flows cannot be separately and independently identified for a single asset, the Company determines whether impairment has occurred for the group of assets for which it can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, it measures any impairment by comparing the fair value of the asset group to its carrying value. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded. | ||||||||||||||
Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block] | ' | |||||||||||||
Goodwill | ||||||||||||||
Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company’s business combinations. The Company performs a goodwill impairment test on at least an annual basis. Application of the goodwill impairment test requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company will conduct its annual goodwill impairment test as of December 31 of each year or more frequently if indicators of impairment exist. The Company periodically analyzes whether any such indicators of impairment exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include a sustained significant decline in our stock price and market capitalization, a significant adverse change in legal factors or in the business climate, unanticipated competition and/or slower expected growth rates, adverse actions or assessments by a regulator, among others. The Company compares the fair value of its reporting unit to its respective carrying value, including related goodwill. Future changes in the industry could impact the results of future annual impairment tests. There can be no assurance that future tests of goodwill impairment will not result in impairment charges. | ||||||||||||||
Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block] | ' | |||||||||||||
Identifiable Intangible Assets | ||||||||||||||
Identifiable intangible assets consist primarily of customer relationships, software costs, and tradenames. Certain tradenames are considered to have indefinite lives, and as such, are not subject to amortization. These assets are tested for impairment using undiscounted cash flow methodology annually and whenever there is an impairment indicator. Estimating future cash flows requires significant judgment and projections may vary from cash flows eventually realized. Several impairment indicators are beyond the Company’s control, and determining whether or not they will occur cannot be predicted with any certainty. Customer relationships, tradenames, and software costs are amortized on a straight-line or accelerated basis over their respective assigned estimated useful lives. | ||||||||||||||
Earnings Per Share, Policy [Policy Text Block] | ' | |||||||||||||
Loss per share | ||||||||||||||
Basic loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. The dilutive effect of the conversion option in the $10 million Secured Convertible Promissory Notes Payable of 2,040,816 shares at September 30, 2013 and potential issuable shares related to the conversion option within the Ten Lords, Ltd. Promissory Note Payable of 1,000,000 shares, a total of 3,040,816 shares, have been excluded from the loss per share calculation for the three and nine months ended September 30, 2013 in that the assumed conversion of the options would be anti-dilutive. | ||||||||||||||
Derivatives, Policy [Policy Text Block] | ' | |||||||||||||
Derivative Financial Instruments | ||||||||||||||
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company does review the terms of the convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. | ||||||||||||||
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges recorded within other expense (income), using the effective interest method. | ||||||||||||||
Fair Value Measurement, Policy [Policy Text Block] | ' | |||||||||||||
Fair value measurements | ||||||||||||||
The Company accounts for fair value measurements in accordance with ASC Topic No. 820, Fair Value Measurements and Disclosures, (“Topic No. 820”) which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. | ||||||||||||||
ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC Topic 820 are described below: | ||||||||||||||
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | |||||||||||||
Level 2 | Applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. | |||||||||||||
Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). | |||||||||||||
The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC Topic 820, assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement. | ||||||||||||||
Fair Value at December 31, 2012 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
(in thousands) | ||||||||||||||
Derivative liabilities | $ | 2,110 | $ | - | $ | - | $ | 2,110 | ||||||
Contingent consideration | $ | 1,540 | $ | - | $ | - | $ | 1,540 | ||||||
Totals | $ | 3,650 | $ | - | $ | - | $ | 3,650 | ||||||
Fair Value at September 30, 2013 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
(in thousands) | ||||||||||||||
Derivative liabilities | $ | 2,330 | $ | - | $ | - | $ | 2,330 | ||||||
Contingent consideration | $ | 970 | $ | - | $ | - | $ | 970 | ||||||
Totals | $ | 3,300 | $ | - | $ | - | $ | 3,300 | ||||||
The following table sets forth a summary of the change in fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis (in thousands): | ||||||||||||||
Three | Nine | |||||||||||||
Months | Months | |||||||||||||
Ended | Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2013 | |||||||||||||
Beginning balance | $ | 1,730 | $ | 3,650 | ||||||||||
Change in fair value of derivative liability | $ | 1,560 | $ | 220 | ||||||||||
Change in fair value of contingent cash consideration | $ | 10 | $ | -570 | ||||||||||
Totals | $ | 3,300 | $ | 3,300 | ||||||||||
In connection with the debt proceeds received under the $10 million secured convertible notes (the “Notes”), the Company recorded a derivative liability of $2.11 million on its consolidated balance sheet at December 28, 2012 related to the conversion feature embedded in the Notes. The fair value of the derivative liability is classified within Level 3 of the fair value hierarchy because it is valued using pricing models that incorporate management assumptions that cannot be corroborated with observable market data. The fair value at September 30, 2013 of $2.33 million was determined using a binomial option pricing valuation model with the following assumptions: risk free interest rate: 0.16 %; dividend yield: 0%; expected life of the option to convert of 1.25 years; and volatility: 23.8%. The change in fair value of this derivative liability of $1.56 million and $220,000 for the three and nine months ended September 30, 2013, respectively, is recorded within other expenses (income) in the Company’s consolidated statements of operations. | ||||||||||||||
Additionally, in connection with a promissory note payable to Ten Lords, Ltd., assumed in the acquisition of JetPay, LLC, the Company recorded a short-term derivative liability of $320,000 which was included in the current portion of long-term debt and derivative liability in the accompanying balance sheets. The fair value of this derivative liability at September 30, 2013 was $0 and was determined using the following assumptions: risk free interest rate: 0.09 %; dividend yield: 0%; expected life of the option to convert of .03 years; and volatility: 11.5%. The expected life of the option to convert of .03 years reflects the early payment of this debt on October 11, 2013. The change in fair value of this derivative liability of $0 and $320,000 for the three and nine months ended September 30, 2013, respectively, is recorded within other expenses (income) in the Company’s consolidated statements of operations. | ||||||||||||||
In addition to the consideration paid upon closing of the JetPay, LLC acquisition, WLES, through December 28, 2017, is entitled to receive 833,333 shares of Common Stock if the trading price of the Common Stock is at least $8.00 per share for any 20 trading days out of a 30 trading day period and $5,000,000 in cash if the trading price of the Common Stock is at least $9.50 per share for any 20 trading days out of a 30 trading day period. This contingent consideration was valued at $1.54 million at the date of acquisition based on utilization of option pricing models and is recorded as a non-current liability for $700,000 and as additional paid-in capital for $840,000 at December 31, 2012. The stock-based component value of $840,000 as recorded at December 28, 2012, the JetPay, LLC acquisition date, remains unchanged at September 30, 2013 as a result of this component being recorded as equity. The fair value at September 30, 2013 of the cash-based contingent consideration, valued at $130,000, was determined using a binomial option pricing model. The following assumptions were utilized in the September 2013 calculations: risk free interest rate: 1.11 %; dividend yield: 0%; term of contingency of 4.25 years; and volatility: 28.0 %. | ||||||||||||||
The fair value of the Common Stock was derived from the per share price of recent sales of the Company’s common stock at the valuation date. Management determined that the results of its valuation are reasonable. The expected life represents the remaining contractual term of the derivative. The volatility rate was developed based on analysis of the historical volatility rates of similarly situated companies (using a number of observations that was at least equal to or exceeded the number of observations in the life of the derivative financial instrument at issue). The risk free interest rates were obtained from publicly available US Treasury yield curve rates. The dividend yield is zero because the Company has not paid dividends and does not expect to pay dividends in the foreseeable future. | ||||||||||||||
Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the financial instrument. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department with support from the Company’s outside consultants and which are approved by the Chief Financial Officer. Level 3 financial liabilities consists of a derivative liability and contingent consideration related to the JetPay, LLC acquisition for which there are no current markets such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy will be analyzed each period based on changes in estimates or assumptions and recorded as appropriate. Level 3 fair value items disclosed above arose on December 28, 2012 with the consummation of the Completed Transactions. | ||||||||||||||
The Company uses either a binomial option pricing model or the Black-Scholes option valuation model to value Level 3 financial liabilities at inception and on subsequent valuation dates. These models incorporate transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. | ||||||||||||||
A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement. Changes in the values of derivative liabilities are recorded in change in fair value of derivative liabilities within other expense (income) on the Company’s consolidated statements of operations. | ||||||||||||||
As of September 30, 2013, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy. | ||||||||||||||
In accordance with the provisions of ASC 815, Derivatives and Hedging Activities, the Company presented its derivative liability at fair value on its balance sheet, with the corresponding change in fair value recorded in the Company’s statement of operations for the applicable reporting periods. | ||||||||||||||
Income Tax, Policy [Policy Text Block] | ' | |||||||||||||
Income taxes | ||||||||||||||
The Company accounts for income taxes under ASC 740, Income Taxes, (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryovers. Deferred income tax expense (benefit) represents the change during the period in the deferred income tax assets and deferred income tax liabilities. In establishing the provision for income taxes and determining deferred income tax assets and liabilities, the Company makes judgments and interpretations based on enacted laws, published tax guidance and estimates of future earnings. ASC 740 additionally requires a valuation allowance to be established when, based on available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. | ||||||||||||||
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is required to file income tax returns in the United States (federal) and in various state and local jurisdictions. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The Company believes that its income tax positions and deductions would be sustained upon examination and does not anticipate any adjustments that would result in material changes to its financial position. | ||||||||||||||
The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as interest expense and as a component of selling, general and administrative expense, respectively. There were no amounts accrued for penalties or interest as of or during the three and nine months ended September 30, 2013. Management does not expect any significant changes in its unrecognized tax benefits in the next year. | ||||||||||||||
Subsequent Events, Policy [Policy Text Block] | ' | |||||||||||||
Subsequent Events | ||||||||||||||
Management evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, Management did not identify any recognized or non-recognized subsequent events, other than those discussed in Note 13 –Subsequent Events, which would have required an adjustment or disclosure in the financial statements. See Note 13 –Subsequent Events below. | ||||||||||||||
New Accounting Pronouncements, Policy [Policy Text Block] | ' | |||||||||||||
Recent Accounting Pronouncements | ||||||||||||||
In July 2012, the Financial Accounting Standards Board (“FASB”) issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This new accounting standard simplifies how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, early adoption is permitted. The adoption of this standard did not have a material impact on the Company’s consolidated financial position and results of operations. | ||||||||||||||
The FASB has issued ASU No. 2013-11, Income Taxes (Topic 740):Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations. | ||||||||||||||
Business_Acquisitions_Tables
Business Acquisitions (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Business Combinations [Abstract] | ' | |||||||
Schedule of Purchase Price Allocation [Table Text Block] | ' | |||||||
The allocation of the purchase price and the estimated fair market values of the assets acquired and liabilities assumed are shown below (in thousands): | ||||||||
Cash | $ | 1,151 | ||||||
Accounts receivable | 3,069 | |||||||
Prepaid expenses and other assets | 4,763 | |||||||
Property and equipment, net | 1,382 | |||||||
Funds held for clients | 44,213 | |||||||
Goodwill | 30,944 | |||||||
Identifiable intangible assets | 25,052 | |||||||
Total assets acquired | 110,574 | |||||||
Accounts payable and accrued expenses | 4,969 | |||||||
Client fund obligations | 44,213 | |||||||
Deferred tax liability | 524 | |||||||
Promissory notes | 8,663 | |||||||
Total liabilities assumed | 58,369 | |||||||
Net assets acquired | $ | 52,205 | ||||||
Schedule of Condensed Income Statement [Table Text Block] | ' | |||||||
The pro forma results include estimates and assumptions which management believes are reasonable. The pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combinations had been in effect on the dates indicated, or which may result in the future. | ||||||||
Unaudited Pro Forma Results of Operations | ||||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2012 | September 30, 2012 | |||||||
(in thousands) | ||||||||
Revenues | $ | 7,595 | $ | 23,189 | ||||
Operating (loss) income | $ | -386 | $ | 323 | ||||
Net Loss | $ | -1,343 | $ | -2,479 | ||||
Net Loss per share (Basic and Diluted) | $ | -0.12 | $ | -0.22 | ||||
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
Accounting Policies [Abstract] | ' | |||||||||||||
Significant Accounting Policies [Table Text Block] | ' | |||||||||||||
The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC Topic 820, assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement. | ||||||||||||||
Fair Value at December 31, 2012 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
(in thousands) | ||||||||||||||
Derivative liabilities | $ | 2,110 | $ | - | $ | - | $ | 2,110 | ||||||
Contingent consideration | $ | 1,540 | $ | - | $ | - | $ | 1,540 | ||||||
Totals | $ | 3,650 | $ | - | $ | - | $ | 3,650 | ||||||
Fair Value at September 30, 2013 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
(in thousands) | ||||||||||||||
Derivative liabilities | $ | 2,330 | $ | - | $ | - | $ | 2,330 | ||||||
Contingent consideration | $ | 970 | $ | - | $ | - | $ | 970 | ||||||
Totals | $ | 3,300 | $ | - | $ | - | $ | 3,300 | ||||||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] | ' | |||||||||||||
The following table sets forth a summary of the change in fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis (in thousands): | ||||||||||||||
Three | Nine | |||||||||||||
Months | Months | |||||||||||||
Ended | Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2013 | |||||||||||||
Beginning balance | $ | 1,730 | $ | 3,650 | ||||||||||
Change in fair value of derivative liability | $ | 1,560 | $ | 220 | ||||||||||
Change in fair value of contingent cash consideration | $ | 10 | $ | -570 | ||||||||||
Totals | $ | 3,300 | $ | 3,300 | ||||||||||
Property_and_Equipment_net_of_1
Property and Equipment, net of Accumulated Depreciation (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property, Plant and Equipment [Table Text Block] | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(in thousands) | |||||||||
Leasehold improvements | $ | 312 | $ | 275 | |||||
Equipment | 487 | 442 | |||||||
Furniture and Fixtures | 194 | 176 | |||||||
Computer Software | 392 | 334 | |||||||
Vehicles | 198 | 155 | |||||||
Total property and equipment | 1,583 | 1,382 | |||||||
Less: Accumulated depreciation | -292 | - | |||||||
Property and equipment, net | $ | 1,291 | $ | 1,382 | |||||
Accounts_Payable_and_Accrued_E1
Accounts Payable and Accrued Expenses (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Payables and Accruals [Abstract] | ' | |||||||
Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] | ' | |||||||
Accounts payable and accrued expenses consist of the following (in thousands): | ||||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Trade accounts payable | $ | 3,003 | $ | 2,852 | ||||
Contingency accrual | 2,136 | 2,136 | ||||||
Accrued compensation | 969 | 956 | ||||||
ACH clearing liability | 1,019 | 529 | ||||||
Related party payables | 141 | 285 | ||||||
Accrued agent commissions | 743 | 344 | ||||||
Other | 3,104 | 1,182 | ||||||
Total | $ | 11,115 | $ | 8,284 | ||||
LongTerm_Debt_and_Notes_Payabl1
Long-Term Debt and Notes Payable (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Debt Disclosure [Abstract] | ' | |||||||
Schedule of Long-term Debt Instruments [Table Text Block] | ' | |||||||
Long-term debt and notes payable consist of the following: | ||||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Successor | Successor | |||||||
(in thousands) | ||||||||
Secured convertible notes payable to various note holders, interest rate of 12.0% payable quarterly, notes maturing December 31, 2014, collateralized by a first lien security interest in the equity interests of JetPay, LLC. Note amount excludes unamortized discount for conversion option and derivative liability of $1.38 million and $2.11 million at September 30, 2013 and December 31, 2012, respectively. | $ | 8,623 | $ | 7,890 | ||||
Promissory note payable to Ten Lords, Ltd., interest rate of 6.25% through December 28, 2012 (predecessor), 9.5% from December 29, 2012 through September 26, 2013 and 13.5% from September 26 to December 28, 2013 payable in monthly payments of principal and interest of $63,809 with a final principal payment of $5.85 million due on December 28, 2013. Note amount includes a fair value premium of $45,500 and $180,000 at September 30, 2013 and December 31, 2012, respectively, as well as an unamortized discount for conversion option and derivative liability of $81,600 and $320,000 at September 30, 2013 and December 31, 2012, respectively. | 5,847 | 6,180 | ||||||
Term loan payable to Metro Bank, interest rate of 4.0% payable in monthly principal payments of $107,143 plus interest, maturing December 28, 2019, collateralized by the assets and equity interests of AD Computer Corporation and Payroll Tax Filing Services, Inc. | 8,036 | 9,000 | ||||||
Unsecured promissory note payable to WLES, interest rate of 5.0% payable quarterly, note principal due on December 31, 2017. Note amount excludes unamortized fair value discount of $742,000 and $845,900 at September 30, 2013 and December 31, 2012, respectively. | 1,589 | 1,486 | ||||||
Unsecured promissory notes payable to stockholders, interest rate of 4% payable at maturity, note principal due July 31, 2014. See Note 12. Related Party Transactions. | 552 | - | ||||||
Various other debt instruments related to equipment at JetPay, LLC and vehicles at ADC. | 34 | 13 | ||||||
24,681 | 24,569 | |||||||
Less current portion | -7,698 | -7,479 | ||||||
$ | 16,983 | $ | 17,090 | |||||
Stockholders_Equity_Tables
Stockholders' Equity (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Stockholders' Equity Note [Abstract] | ' | |||||||
Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block] | ' | |||||||
A summary of stock option activity for the nine months ended September 30, 2013 is presented below: | ||||||||
Exercise Price | ||||||||
Number of Options | Weighted Average | |||||||
Outstanding at December 31, 2012 | - | $ | - | |||||
Granted | 325,000 | 3.1 | ||||||
Forfeited | - | - | ||||||
Exercised | - | - | ||||||
Outstanding at September 30, 2013 | 325,000 | $ | 3.1 | |||||
Exercisable at September 30, 2013 | 73,958 | $ | 3.1 | |||||
Business_Acquisitions_Details
Business Acquisitions (Details) (USD $) | Sep. 30, 2013 |
In Thousands, unless otherwise specified | |
Cash | $1,151 |
Accounts receivable | 3,069 |
Prepaid expenses and other assets | 4,763 |
Property and equipment, net | 1,382 |
Funds held for clients | 44,213 |
Goodwill | 30,944 |
Identifiable intangible assets | 25,052 |
Total assets acquired | 110,574 |
Accounts payable and accrued expenses | 4,969 |
Client fund obligations | 44,213 |
Deferred tax liability | 524 |
Promissory notes | 8,663 |
Total liabilities assumed | 58,369 |
Net assets acquired | $52,205 |
Business_Acquisitions_Details_
Business Acquisitions (Details 1) (Consolidated Entities [Member], USD $) | 3 Months Ended | 9 Months Ended |
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2012 | Sep. 30, 2012 |
Consolidated Entities [Member] | ' | ' |
Revenues | $7,595 | $23,189 |
Operating (loss) income | -386 | 323 |
Net Loss | ($1,343) | ($2,479) |
Net Loss per share (Basic and Diluted) (in dollars per share) | ($0.12) | ($0.22) |
Business_Acquisitions_Details_1
Business Acquisitions (Details Textual) (USD $) | 3 Months Ended | 9 Months Ended | 0 Months Ended | 0 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 28, 2012 | Dec. 31, 2012 | Dec. 28, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | |
Adc [Member] | Adc [Member] | Wles [Member] | Wles [Member] | Wles [Member] | ||||
Business Acquisition, Cost of Acquired Entity, Cash Paid | ' | ' | ' | $16,000,000 | ' | $6,900,000 | ' | ' |
Business Acquisition Contingent Consideration Potential Cash Receipt | ' | ' | ' | ' | ' | ' | 130,000 | ' |
Common stock issued for acquisitions (in shares) | ' | ' | ' | 1,000,000 | ' | 3,666,667 | 833,333 | ' |
Business Acquisition Common Share Price (in dollars per share) | $9.50 | $9.50 | ' | ' | ' | ' | $8 | ' |
Common stock issued for acquisitions | 5,000,000 | 8 | ' | 5,250,000 | ' | 19,250,000 | ' | ' |
Escrow Deposit | ' | ' | ' | ' | ' | 3,333,333 | ' | ' |
Business Acquisition, Purchase Price Allocation, Working Capital | ' | ' | ' | 324,000 | ' | ' | ' | ' |
Business Acquisition, Purchase Price Allocation, Additional, Cash Consideration | ' | ' | ' | 2,000,000 | ' | ' | ' | ' |
Business Acquisition, Purchase Price Allocation, Noncurrent Liabilities | ' | ' | ' | ' | 2,000,000 | ' | ' | ' |
Business Acquisition, Contingent Consideration, At Fair Value, Noncurrent | ' | ' | ' | ' | ' | ' | ' | 700,000 |
Fair Value Inputs, Discount Rate | ' | ' | ' | 16.00% | ' | ' | ' | ' |
Business Acquisition, Cost of Acquired Entity, Notes Issued | ' | ' | ' | ' | ' | 2,300,000 | ' | ' |
Business Acquisition, Cost of Acquired Entity Notes Issued Fair Value | ' | ' | ' | 1,490,000 | ' | 1,490,000 | ' | ' |
Contingent Consideration Classified As Equity, Fair Value Disclosure | 970,000 | 970,000 | 1,540,000 | ' | ' | ' | ' | 1,540,000 |
Business Acquisition Contingent Consideration Share Component Value | ' | ' | ' | ' | ' | $840,000 | ' | $840,000 |
Common Stock, Par Or Stated Value Per Share | $0.00 | $0.00 | $0.00 | ' | ' | ' | ' | ' |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Derivative liabilities | $2,330,000 | $2,110,000 |
Contingent consideration | 970,000 | 1,540,000 |
Totals | 3,300,000 | 3,650,000 |
Fair Value, Inputs, Level 1 [Member] | ' | ' |
Derivative liabilities | 0 | 0 |
Contingent consideration | 0 | 0 |
Totals | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ' | ' |
Derivative liabilities | 0 | 0 |
Contingent consideration | 0 | 0 |
Totals | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | ' | ' |
Derivative liabilities | 2,330,000 | 2,110,000 |
Contingent consideration | 970,000 | 1,540,000 |
Totals | $3,300,000 | $3,650,000 |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Details 1) (Fair Value, Inputs, Level 3 [Member], USD $) | 3 Months Ended | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 |
Fair Value, Inputs, Level 3 [Member] | ' | ' |
Beginning balance | $1,730 | $3,650 |
Change in fair value of derivative liability | 1,560 | 220 |
Change in fair value of contingent cash consideration | 10 | -570 |
Totals | $3,300 | $3,300 |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies (Details Textual) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 0 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 28, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | |
Fair Value, Inputs, Level 3 [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Inputs, Level 3 [Member] | Machinery and Equipment [Member] | Machinery and Equipment [Member] | Furniture and Fixtures [Member] | Furniture and Fixtures [Member] | Ten Lords Ltd [Member] | Ten Lords Ltd [Member] | Ten Lords Ltd [Member] | Ten Lords Ltd [Member] | Ten Lords Ltd [Member] | Wles [Member] | Wles [Member] | Wles [Member] | ||||
Maximum [Member] | Minimum [Member] | Maximum [Member] | Minimum [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Inputs, Level 3 [Member] | ||||||||||||
Reserve for Losses and Loss Adjustment Expenses | $247,000 | $247,000 | $200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Property, Plant and Equipment, Useful Life | ' | ' | ' | ' | ' | ' | '15 years | '5 years | '10 years | '5 years | ' | ' | ' | ' | ' | ' | ' | ' |
Shares Issuable Upon Conversion Debt Instrument | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,040,816 | ' | ' | ' | ' | ' | ' |
Shares Issuable Upon Conversion Debt Instrument 1 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,000,000 | 10,000,000 | ' | ' | ' | ' | ' | ' |
Weighted Average Number of Shares, Contingently Issuable | 3,040,816 | 3,040,816 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair Value Assumptions, Risk Free Interest Rate | ' | 0.16% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.09% | ' | ' | 1.11% | ' |
Fair Value Assumptions, Expected Dividend Rate | ' | 0.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.00% | ' | ' | 0.00% | ' |
Fair Value Assumptions, Expected Term | ' | '1 year 3 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '11 days | ' | ' | '4 years 3 months | ' |
Fair Value Assumptions, Expected Volatility Rate | ' | 23.80% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 11.50% | ' | ' | 28.00% | ' |
Common stock issued for acquisitions (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,666,667 | 833,333 | ' |
Derivative Liability, Fair Value, Net | 2,330,000 | 2,330,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Contingent consideration | 970,000 | 970,000 | 1,540,000 | 970,000 | 970,000 | 1,540,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,540,000 |
Proceeds from Convertible Debt | ' | ' | 10,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Liabilities, Fair Value Disclosure | 3,300,000 | 3,300,000 | 3,650,000 | 3,300,000 | 3,300,000 | 3,650,000 | ' | ' | ' | ' | ' | ' | 0 | 0 | 320,000 | ' | ' | ' |
Change in fair value of derivative liability | ' | ' | ' | -1,560,000 | -220,000 | ' | ' | ' | ' | ' | ' | ' | 0 | 320,000 | ' | ' | ' | ' |
Business Acquisition Contingent Consideration Share Component Value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 840,000 | ' | 840,000 |
Business Acquisition, Contingent Consideration, At Fair Value, Noncurrent | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 700,000 |
Increase In Revenues And Cost Of Revenues | 724,000 | 1,029,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Share Price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $9.50 |
Stock Issued During Period, Value, Acquisitions | 5,000,000 | 8 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 19,250,000 | ' | ' |
Business Acquisition Contingent Consideration Potential Cash Receipt | $130,000 | $130,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash_and_Cash_Equivalents_Held1
Cash and Cash Equivalents Held in Trust Account (Details Textual) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Cash and cash equivalents held in Trust | $0 | $1,948 |
Property_and_Equipment_net_of_2
Property and Equipment, net of Accumulated Depreciation (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Total property and equipment | $1,583 | $1,382 |
Less: Accumulated depreciation | -292 | 0 |
Property and equipment, net | 1,291 | 1,382 |
Leasehold Improvements [Member] | ' | ' |
Total property and equipment | 312 | 275 |
Equipment [Member] | ' | ' |
Total property and equipment | 487 | 442 |
Furniture and Fixtures [Member] | ' | ' |
Total property and equipment | 194 | 176 |
Computer Software [Member] | ' | ' |
Total property and equipment | 392 | 334 |
Vehicles [Member] | ' | ' |
Total property and equipment | $198 | $155 |
Property_and_Equipment_net_of_3
Property and Equipment, net of Accumulated Depreciation (Details Textual) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended |
Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | |
Predecessor [Member] | Predecessor [Member] | Successor [Member] | Successor [Member] | |
Depreciation, Depletion and Amortization, Nonproduction | $41,100 | $115,000 | $92,700 | $291,800 |
Accounts_Payable_and_Accrued_E2
Accounts Payable and Accrued Expenses (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Trade accounts payable | $3,003 | $2,852 |
Contingency accrual | 2,136 | 2,136 |
Accrued compensation | 969 | 956 |
ACH clearing liability | 1,019 | 529 |
Related party payables | 141 | 285 |
Accrued agent commissions | 743 | 344 |
Other | 3,104 | 1,182 |
Total | $11,115 | $8,284 |
LongTerm_Debt_and_Notes_Payabl2
Long-Term Debt and Notes Payable (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Less current portion | ($7,698) | ($7,479) |
Long-term Debt, Excluding Current Maturities | 16,983 | 17,090 |
Successor [Member] | ' | ' |
Long-term Debt | 24,681 | 24,569 |
Less current portion | -7,698 | -7,479 |
Long-term Debt, Excluding Current Maturities | 16,983 | 17,090 |
Successor [Member] | Note Holders [Member] | ' | ' |
Long-term Debt | 8,623 | 7,890 |
Successor [Member] | Ten Lords Ltd [Member] | ' | ' |
Long-term Debt | 5,847 | 6,180 |
Successor [Member] | Metro Bank [Member] | ' | ' |
Long-term Debt | 8,036 | 9,000 |
Successor [Member] | Wles [Member] | ' | ' |
Long-term Debt | 1,589 | 1,486 |
Successor [Member] | StockHolders [Member] | ' | ' |
Long-term Debt | 552 | 0 |
Successor [Member] | JetPay And ADC [Member] | ' | ' |
Long-term Debt | $34 | $13 |
LongTerm_Debt_and_Notes_Payabl3
Long-Term Debt and Notes Payable (Details Textual) (USD $) | 0 Months Ended | 9 Months Ended | 9 Months Ended | 12 Months Ended | 9 Months Ended | |||||||||
Dec. 28, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | |
Stockholders [Member] | Note Holders [Member] | Note Holders [Member] | Ten Lords Ltd [Member] | Ten Lords Ltd [Member] | Ten Lords Ltd [Member] | Metro Bank [Member] | Wles [Member] | Wles [Member] | Wles [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Inputs, Level 3 [Member] | |||
Predecessor [Member] | Predecessor [Member] | Predecessor [Member] | Ten Lords Ltd [Member] | Ten Lords Ltd [Member] | ||||||||||
Debt Instrument, Interest Rate During Period | ' | ' | 4.00% | 12.00% | ' | ' | ' | 6.25% | 4.00% | 5.00% | ' | ' | ' | ' |
Debt Instrument, Maturity Date | 31-Dec-17 | ' | 31-Jul-14 | 31-Dec-14 | ' | ' | ' | ' | 28-Dec-19 | 31-Dec-17 | ' | ' | ' | ' |
Debt Instrument On Unamortized Discount and Derivative Liability | ' | ' | ' | $1,380,000 | $2,110,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Interest Rate Terms | ' | ' | ' | ' | ' | '9.5% from December 29, 2012 through September 26, 2013 and 13.5% from September 26 to December 28, 2013 payable in monthly payments of principal | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Periodic Payment, Interest | ' | ' | ' | ' | ' | ' | 63,809 | ' | 107,143 | ' | ' | ' | ' | ' |
Debt Instrument, Annual Principal Payment | ' | ' | ' | ' | ' | ' | 5.85 | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Unamortized Premium | ' | ' | ' | ' | ' | 45,500 | 180,000 | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Unamortized Discount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 742,000 | 845,900 | 81,600 | 320,000 |
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months | ' | 7,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Long-term Debt, Maturities, Repayments of Principal in Year Two | ' | 11,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Long-term Debt, Maturities, Repayments of Principal in Year Three | ' | 1,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Long-term Debt, Maturities, Repayments of Principal in Year Four | ' | 1,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Long-term Debt, Maturities, Repayments of Principal in Year Five | ' | 3,600,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Long-term Debt, Maturities, Repayments of Principal after Year Five | ' | $1,600,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Annual Financial Statement Submission To Bank Term | ' | 'within 120 days of the Companys year-end | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Quarterly Financial Statement Submission To Bank Term | ' | 'within 60 days after the end of each quarter | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stockholders_Equity_Details
Stockholders' Equity (Details) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Options outstanding at December 31, 2012 - Number of Options (in shares) | 0 |
Granted - Number of Options (in shares) | 325,000 |
Forfeited - Number of Options (in shares) | 0 |
Exercised - Number of Options (in shares) | 0 |
Options outstanding at September 30, 2013 - Number of Options (in shares) | 325,000 |
Options exercisable at September 30, 2013 - Number of Options (in shares) | 73,958 |
Options outstanding - at December 31, 2012 Weighted Average Exercise Price (in dollars per share) | $0 |
Granted - Weighted Average Exercise Price (in dollars per share) | $3.10 |
Forfeited - Weighted Average Exercise Price (in dollars per share) | $0 |
Exercised - Weighted Average Exercise Price (in dollars per share) | $0 |
Options outstanding at September 30, 2013 - Weighted Average Exercise Price (in dollars per share) | $3.10 |
Options exercisable at September 30, 2013 - Weighted Average Exercise Price (in dollars per share) | $3.10 |
Stockholders_Equity_Details_Te
Stockholders' Equity (Details Textual) (USD $) | 9 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Apr. 26, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | |
Consultant Service [Member] | Consultant Service [Member] | Stock Incentive Plan [Member] | Stock Incentive Plan [Member] | Stock Incentive Plan [Member] | Stock Incentive Plan [Member] | |||
Successor [Member] | Maximum [Member] | Minimum [Member] | ||||||
Preferred Stock, Shares Authorized | 1,000,000 | 1,000,000 | ' | ' | ' | ' | ' | ' |
Preferred Stock, Par or Stated Value Per Share | $0.00 | $0.00 | ' | ' | ' | ' | ' | ' |
Preferred stock, shares issued | 0 | 0 | ' | ' | ' | ' | ' | ' |
Preferred Stock, Shares Outstanding | 0 | 0 | ' | ' | ' | ' | ' | ' |
Common stock, shares issued | 11,529,094 | 11,519,094 | ' | 10,000 | ' | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term | '9 years 10 months 24 days | ' | ' | ' | ' | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 325,000 | ' | ' | ' | 325,000 | ' | ' | ' |
ShareBasedCompensationSharesAuthorizedUnderStockOptionPlansExercisePrice | ' | ' | ' | ' | $3.10 | ' | ' | ' |
Stock Issued During Period, Value, Stock Options Exercised | ' | ' | ' | ' | ' | $451,000 | ' | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Remaining Contractual Term | ' | ' | ' | ' | ' | ' | '6 years | '5 years 9 months |
Share-based Goods and Nonemployee Services Transaction, Valuation Method, Expected Volatility Rate | ' | ' | ' | ' | ' | ' | 45.17% | 44.98% |
Share-based Goods and Nonemployee Services Transaction, Valuation Method, Risk Free Interest Rate | ' | ' | ' | ' | ' | 1.93% | ' | ' |
Share-based Goods and Nonemployee Services Transaction, Valuation Method, Expected Dividend Rate | ' | ' | ' | ' | ' | 0.00% | ' | ' |
Allocated Share-based Compensation Expense | ' | ' | ' | ' | ' | 110,000 | ' | ' |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options | ' | ' | ' | ' | 341,000 | 341,000 | ' | ' |
Stock Issued During Period, Value, New Issues | ' | ' | 37,400 | ' | ' | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value | $26,600 | ' | ' | ' | ' | ' | ' | ' |
Income_Taxes_Details_Textual
Income Taxes (Details Textual) (USD $) | 3 Months Ended | 9 Months Ended | 11 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2011 | Sep. 30, 2012 | |
Valuation Allowance, Deferred Tax Asset, Change in Amount | ' | $2,240,000 | ' | $1,800,000 | ' | $36,000 | $213,000 |
Deferred Tax Assets, Operating Loss Carryforwards, State and Local | 10,100,000 | ' | ' | 10,100,000 | ' | ' | ' |
Income Tax Reconciliation, Change in Deferred Tax Assets Valuation Allowance | 1,300,000 | ' | ' | 1,800,000 | ' | ' | ' |
Deferred Tax Assets, Valuation Allowance | 4,300,000 | ' | ' | 4,300,000 | ' | ' | ' |
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate | 0.80% | ' | 8.00% | 2.00% | 312.00% | ' | ' |
Operating Loss Carryforwards | 0 | ' | ' | 0 | ' | ' | ' |
Predecessor [Member] | ' | ' | ' | ' | ' | ' | ' |
Valuation Allowance, Deferred Tax Asset, Change in Amount | $27,000 | ' | 27,000 | $85,000 | 81,000 | ' | ' |
Commitments_and_Contingencies_
Commitments and Contingencies (Details Textual) (USD $) | 1 Months Ended | 9 Months Ended | 0 Months Ended | 9 Months Ended | 12 Months Ended | 9 Months Ended | |||
Aug. 31, 2013 | Sep. 30, 2013 | Aug. 21, 2013 | Dec. 31, 2012 | Dec. 28, 2012 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | |
Early Bird Capital Inc [Member] | Early Bird Capital Inc [Member] | Merrick Bank [Member] | Merrick Bank [Member] | Jp Morgan Chase [Member] | |||||
Common Stock [Member] | |||||||||
Fees and Commissions | ' | ' | ' | ' | $2,070,000 | ' | ' | ' | ' |
Loss Contingency, Damages Sought, Value | 2,000,000 | 4,000,000 | ' | ' | ' | ' | ' | ' | ' |
Accounts Payable and Accrued Liabilities | ' | ' | ' | 2,140,000 | ' | 2,140,000 | ' | ' | ' |
Merchant Chargeback's | ' | ' | ' | ' | ' | ' | 25,000,000 | 25,000,000 | ' |
Cash Reserves | ' | 5,040,000 | ' | ' | ' | ' | 4,700,000 | ' | ' |
Loss Contingency, Loss in Period | ' | ' | ' | ' | ' | ' | ' | 250,000 | ' |
Legal Fees | ' | 718,600 | ' | ' | ' | ' | 597,000 | 1,947,000 | ' |
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | 3,333,333 |
Accounts Payable and Accrued Liabilities | ' | ' | ' | 2,140,000 | ' | 2,140,000 | ' | ' | ' |
Letters of Credit Outstanding, Amount | ' | $100,000 | $1,900,000 | ' | ' | ' | ' | ' | ' |
Related_Party_Transactions_Det
Related Party Transactions (Details Textual) (USD $) | 0 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Dec. 28, 2012 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
sqft | sqft | |||||||
Loan advances received prior to repayments | ' | ' | ' | ' | ' | ' | ' | $425,880 |
Notes Payable, Related Parties, Current | ' | 147,000 | ' | ' | ' | 147,000 | ' | 15,000 |
Area of Land | ' | 22,500 | ' | ' | ' | 22,500 | ' | ' |
Operating Leases, Rent Expense | ' | 125,300 | ' | ' | ' | 367,750 | ' | ' |
Payments for Rent | ' | 9,000 | ' | ' | 30,000 | 9,000 | 30,000 | ' |
Notes Issued | ' | ' | 60,000 | 72,000 | ' | ' | ' | ' |
Monthly Rent Expense | ' | ' | ' | ' | ' | 40,000 | ' | ' |
Lease Rent Annual Increase Percentage | ' | ' | ' | ' | ' | 4.00% | ' | ' |
Lease Term | ' | ' | ' | ' | ' | '10 years | ' | ' |
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | 4.00% | ' | ' | ' | 4.00% | ' | ' |
Debt Instrument, Face Amount | 2,331,369 | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Maturity Date | 31-Dec-17 | ' | ' | ' | ' | ' | ' | ' |
Jt Holdings [Member] | ' | ' | ' | ' | ' | ' | ' | ' |
Area of Land | ' | 1,600 | ' | ' | ' | 1,600 | ' | ' |
Payments for Rent | ' | ' | ' | ' | ' | 3,000 | ' | ' |
Adc Stockholders [Member] | ' | ' | ' | ' | ' | ' | ' | ' |
Receivable from Stockholders Towards Overpayment | ' | 450,776 | ' | ' | ' | 450,776 | ' | ' |
PTFS [Member] | ' | ' | ' | ' | ' | ' | ' | ' |
Area of Land | ' | 4,300 | ' | ' | ' | 4,300 | ' | ' |
Operating Leases, Rent Expense | ' | 8,216 | ' | ' | ' | 24,648 | ' | ' |
Percentage Of Share Of Total Expenses Payable | ' | ' | ' | ' | ' | 85.00% | ' | ' |
Administrative Fee Percentage | ' | ' | ' | ' | ' | 15.00% | ' | ' |
Trent Voigt [Member] | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Interest Rate, Stated Percentage | ' | 4.00% | ' | ' | ' | 4.00% | ' | ' |
Debt Instrument, Face Amount | ' | $491,693 | ' | ' | ' | $491,693 | ' | ' |
Subsequent_Events_Details_Text
Subsequent Events (Details Textuals) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 |
Subsequent Event [Member] | Ten Lords Ltd [Member] | Series A Preferred Stock [Member] | Series A Preferred Stock [Member] | Tranche A [Member] | Tranche B [Member] | Tranche C [Member] | |||
Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | |||||
Convertible Preferred Stock Converted to Other Securities | ' | ' | ' | ' | ' | $33,333 | ' | ' | ' |
Preferred Stock, No Par Value | ' | ' | ' | ' | ' | $0.00 | ' | ' | ' |
Preferred Stock, Shares Issued | 0 | 0 | ' | ' | 134,000 | ' | ' | ' | ' |
Preferred Stock, Value, Issued | 0 | 0 | ' | ' | ' | 10,000,000 | 10,000,000 | ' | ' |
Payments for (Proceeds from) Investments, Total | ' | ' | ' | 10,000,000 | ' | ' | ' | ' | ' |
Repayments of Notes Payable | ' | ' | ' | 5,870,000 | ' | ' | ' | ' | ' |
Convertible Preferred Stock Multiplied By | ' | ' | ' | ' | ' | 300 | ' | ' | 300 |
Convertible Preferred Stock Price Per Share | ' | ' | ' | ' | ' | 3 | ' | ' | ' |
PreferencialPayment | ' | ' | 600 | ' | ' | ' | ' | ' | ' |
Dissolution Payment | ' | ' | $20,000,000 | ' | ' | ' | ' | ' | ' |
Period To Be Discharged | ' | ' | 60 | ' | ' | ' | ' | ' | ' |
Common Stock, Par Or Stated Value Per Share | $0.00 | $0.00 | ' | ' | ' | ' | ' | ' | ' |
Preferred Stock, Capital Shares Reserved for Future Issuance | ' | ' | ' | ' | ' | ' | 10,000,000 | 10,000,000 | 10,000,000 |