| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Principles of Consolidation and Reclassifications The consolidated financial statements include the accounts of CardConnect Corp. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain immaterial reclassifications have been made to the prior period statements of operations to place them on a basis comparable with current period presentation. Collectively, unless the context requires otherwise, the consolidated group is referred to as “CardConnect” or the “Company.” Estimates The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, the value of purchase consideration paid for acquisitions, goodwill and intangible asset impairment review, revenue recognition for multiple element arrangements, loss reserves, assumptions used in the calculation of stock-based compensation and in the calculation of income taxes, and certain tax assets and liabilities as well as the related valuation allowances. Actual results could differ from those estimates. Revenue Recognition and Deferred Revenue Card processing revenues are generated by the Company from fees charged to merchants for card-based processing services. Merchants are charged various rates, which are dependent upon various factors including the type of bankcard, card brand, merchant charge volume, the merchant’s industry and the merchant’s risk profile. Fees principally consist of discount fees, which are a percentage of the dollar amount of each credit or debit transaction and transaction fees, which are fixed per transaction. Card processing revenues are also derived from a variety of service fees, including fees for monthly minimum charge volume requirements, statement fees, annual fees, and fees for other miscellaneous services, including handling chargebacks. Card processing revenues are recognized at the time merchant transactions are processed on a gross basis equal to the full amount of the discount charged to the merchant as the Company is the primary obligor and has latitude in establishing price. Discount and other fees related to payment transactions are recognized as revenue at the time the merchants’ transactions are processed. Interchange and pass-through includes interchange fees paid to card-issuing banks and assessments paid to payment card associations. Interchange fees are set by Visa and MasterCard based on transaction processing volume and are recognized at the time merchant transactions are processed. Revenues from sales of the Company’s technology solutions are recognized when they are realized or realizable and earned. Revenue is considered realized and earned when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; and collection of the resulting receivable is reasonably assured. Contractual arrangements are evaluated for indications that multiple element arrangements may exist including instances where more-than-incidental software deliverables are included. Arrangements may contain multiple elements, such as hardware, software products, maintenance, and professional installation and training services. Revenues are allocated to each element based on the selling price hierarchy. The selling price for a deliverable is based on vendor specific objective evidence (“VSOE”) of selling price, if available, third party evidence (“TPE”) if VSOE of selling price is not available, or estimated selling price (“ESP”) if neither VSOE or selling price nor TPE is available. the Company establishes ESP, based on the judgment of CardConnect’s management, considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and the product life cycle. In arrangements with multiple elements, the Company determines allocation of the transaction price at inception of the arrangement based on the relative selling price of each unit of accounting. In multiple element arrangements where more-than-incidental software deliverables are included, the Company applied the residual method to determine the amount of software license revenues to be recognized. Under the residual method, if fair value exists for undelivered elements in a multiple-element arrangement, such fair value of the undelivered elements is deferred with the remaining portion of the arrangement consideration recognized upon delivery of the software license or services arrangement. The Company allocates the fair value of each element of a software related multiple-element arrangement based upon its fair value as determined by VSOE, with any remaining amount allocated to the software license. If evidence of the fair value cannot be established for the undelivered elements of a software arrangement then the entire amount of revenue under the arrangement is deferred until these elements have been delivered or objective evidence can be established. These amounts are included in deferred revenue in the consolidated balance sheets. Cost of Services Cost of services consists of interchange and pass-through and other cost of services. Interchange and pass-through consists of interchange fees, dues and assessment, debit network fees and other pass-through costs. Other cost of services primarily consists of residual payments to independent sales organizations. The residual payments represent commissions paid to sales groups based upon a percentage of the net revenues generated from merchant referrals. Other cost of services also includes merchant supplies and service expenses, bank processing costs and other third-party processing costs directly attributable to payment processing and related services to merchants. Cash and Cash Equivalents For purposes of reporting cash flows, the Company considers cash on hand, checking accounts, and savings accounts to be cash and cash equivalents. At times, the balances in these accounts may exceed federally insured limits. Cash equivalents are defined as financial instruments readily transferrable into cash with an original maturity less than 90 days. Restricted Cash Restricted cash consists of funds held in escrow for payment of dividends on the Company's Series A Preferred Stock, processing-related cash collected from bankcard networks that has not been funded to the Company’s merchants and merchant deposits. Processing-related cash is generally paid to the Company’s merchants within two business days. Merchant deposits are funds held from merchants to offset potential chargebacks, adjustments, and fees. The timing of the payment of these fees is generally within one year. Long-term restricted cash reflects funds held in escrow for payment of dividends on the Company's Series A Preferred Stock that will be paid more than one year from the date of the consolidated balance sheets. Accounts Receivable Accounts receivable consists primarily of amounts due from merchants for discount fees net of interchange fees, monthly statement fees and other merchant revenue, as required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 210-20, Offsetting , on transactions processed during the month ending on the balance sheet date. In addition to receivables for transaction fees the Company charges its merchants for processing transactions, accounts receivable includes amounts resulting from the Company’s practice of advancing interchange fees to most of its merchants during the month. Accounts receivable are typically received within 30 days following the end of each month. Accounts receivable also includes amounts due from sales of the Company’s technology solutions. 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. Management has determined an allowance for doubtful accounts is not necessary as of December 31, 2016 and 2015 . Processing Assets Processing assets consists of amounts due from the bankcard networks. These amounts are recovered the next business day following the date of processing the transaction. Inventory Inventory consists primarily of Point-of-Sale (“POS”) terminal equipment held for sale and is accounted for on a first-in first-out basis and valued at the lower of cost or market price. Inventory was $1,931,102 and $993,595 at December 31, 2016 and 2015 , respectively, and is included in other current assets on the consolidated balance sheets. Property and Equipment Expenditures for new long-lived assets and expenditures which extend the useful lives of existing long-lived assets are capitalized at cost. Property and equipment are recorded at cost less accumulated depreciation and are depreciated over the estimated useful lives of the assets using the straight-line method, except for leasehold improvements, which are depreciated over the shorter of the estimated useful lives of the assets or the remaining lease term. The Company provides depreciation over the estimated useful lives of assets, principally using the straight-line method, as follows: Furniture and fixtures 6 years Computer hardware and software 3 to 5 years Leasehold improvements 5 to 8 years Equipment 5 to 6 years Leasing equipment 5 years Depreciation for tax purposes is provided using various accelerated methods. Fully depreciated assets are removed from the accounts when they are no longer in service. Tenant improvement allowances are deferred and amortized on a straight-line basis over the life of the lease agreement as a reduction to rent expense. Repairs and maintenance, which do not extend the useful lives of the applicable assets, are charged to expense as incurred. Advertising Advertising costs are expensed as incurred. Advertising expense was $87,345 , $54,364 and $42,549 for the years ended December 31, 2016 , 2015 and 2014 , respectively, and are included in general and administrative expenses in the consolidated statements of operations. Goodwill Goodwill represents the excess consideration over the fair values of net assets acquired in business combinations. the Company applies the provisions of FASB Accounting Standards Codification ("ASC") Topic 350, Intangibles—Goodwill and Other (ASC 350) in accounting for its goodwill. The Company tests goodwill for impairment at least annually in the fourth quarter and between annual tests if an event occurs or changes in circumstances suggest a potential decline in the fair value of the reporting unit. A significant amount of judgment is involved in determining if an indicator or change in circumstances relating to impairment has occurred. Such changes may include, among others: a significant decline in expected future cash flows; a significant adverse change in in the business climate; unanticipated competition; and slower growth rates. The Company has the option of performing a qualitative assessment of impairment to determine whether any further quantitative testing for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually and may vary by reporting unit. Factors the Company considers in the qualitative assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of the Company’s reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, sustained decrease in our share price, and other relevant entity-specific events. If the Company determines not to perform the qualitative assessment or if it determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying value, then the Company performs a two-step quantitative test for that reporting unit. In the first step, the fair value of each reporting unit is compared to the reporting unit’s carrying value, including goodwill. If the fair value of a reporting unit is less than its carrying value, the second step of the goodwill impairment test is performed to measure the amount of impairment, if any. In the second step, the fair value of the reporting unit is allocated to the assets and liabilities of the reporting unit as if it had been acquired in a business combination and the purchase price was equivalent to the fair value of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is referred to as the implied fair value of goodwill. The implied fair value of the reporting unit’s goodwill is then compared to the actual carrying value of the goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized for the difference. Significant estimates and assumptions are used in the Company’s goodwill impairment review and include the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units and determining the fair value of each reporting unit. The Company’s assessment of qualitative factors involves significant judgments about expected future business performance and general market conditions. In a quantitative assessment, the fair value of each reporting unit is determined based on a combination of techniques, including the present value of future cash flows, applicable multiples of competitors and multiples from sales of like businesses, and requires us to make estimates and assumptions regarding discount rates, growth rates and our future long-term business plans. Changes in any of these estimates or assumptions could materially affect the determination of fair value and the associated goodwill impairment charge for each reporting unit. The Company has determined that it has two reporting units, card processing services and technology solution services. As of December 31, 2016 and 2015 , the Company performed a qualitative assessment for each of its reporting units. Based on the qualitative assessment, the Company determined that there are no indications that it is more likely than not that the fair value of its reporting units is less than the carrying value. Intangible Assets Intangible assets primarily include residual buyouts, employment agreements, merchant and agent relationships, a service contract, tradenames, internally developed software, and website development costs. Intangible assets, which have been acquired in connection with various acquisitions, are recorded at fair value determined using a discounted cash flow model as of the date of the acquisition. After the fair value of all separately identifiable assets has been estimated in a business combination, goodwill is recorded to the extent the consideration paid for the acquisition exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities. Residual buyouts represent the right to not have to pay a residual to an independent sales agent related to certain future transactions of the agent’s referred merchants. Residual buyout intangible assets are recorded at cost as of the date of acquisition. Employment agreements represent the estimated values of non-solicit and non-compete agreements entered into in business combinations. Trade name intangibles represent the estimated values of trade names acquired in business combinations. Merchant relationships represent the estimated values of card processing revenues acquired in business combinations. Agent relationships represent the estimated values of revenues to be generated from sales agents acquired in business combinations. Service contract intangibles primarily represent the estimated value of the amended and restated merchant processing agreement with First Data Merchant Services Corporation. Technology intangibles represent the estimated values of software, to be sold or licensed, acquired in business combinations. The Company amortizes finite-lived identifiable intangible assets using a method that reflects the pattern in which the economic benefits of the intangible asset are expected to be consumed or otherwise utilized. The estimated useful lives of the Company’s customer-related intangible assets approximate the expected distribution of cash flows generated from each asset. The useful lives of contract-based intangible assets are equal to the terms of the agreement. The assets are amortized over their estimated useful lives, which range from 1 to 18 years. Management evaluates the remaining useful lives and carrying values of the intangible assets at least annually or when events and circumstances warrant such a review, to determine whether significant events or changes in circumstances indicate that a change in the useful life or impairment in value may have occurred. Indicators of impairment monitored by management include reductions in underlying operating cash flows or increases in attrition rates from estimates. To the extent the estimated cash flows exceed the carrying value, no impairment is necessary. If the estimated cash flows are less than the carrying value, an impairment charge is recorded. Refer to Note 5 for discussion of impairment recorded in 2016 , 2015 and 2014 . The Company capitalizes software development costs and website development costs incurred in accordance with ASC 350-40, Internal Use Software . These costs include salaries and related employee benefits. Internally developed software and website development costs capitalized during 2016 , 2015 and 2014 totaled $3,940,519 , $2,627,132 and $3,019,956 , respectively. Amortization of internally developed software and website development costs is recorded on a straight-line basis over an estimated useful life of three years. This useful life is consistent with the time period over which the Company believes it will obtain economic benefit for these assets. Amortization expense relating to these costs totaled $2,766,436 , $2,591,185 and $1,798,432 in 2016 , 2015 and 2014 , respectively. The total unamortized development costs at December 31, 2016 and 2015 were $6,103,667 and $4,973,387 , respectively. Total intangible asset amortization expense was $20,578,530 , $19,174,968 and $18,544,472 for the years ended December 31, 2016 , 2015 and 2014 , respectively. Other Receivables Other receivables are primarily loans to independent contractors or sales organizations who board merchants onto the Company's system in order to fund the growth of these contractors’ businesses. Amounts are payable with interest to the Company. The term of these loans normally does not exceed two years and the loan agreements typically include certain performance covenants. Under the terms of the agreements, the Company preserves the right to hold residual payments due to the contractors in the event that the covenants are not met. In 2016 , the Company wrote-off $337,888 of receivables from one independent contractor, which is recorded in general and administrative expense on the consolidated statements of operations and as agent advance forgiveness in the consolidated statements of cash flows. However, based on the provisions of these arrangements and historical experience, no reserve has been recorded for potential uncollectible amounts at December 31, 2016 . Stock-Based Compensation The Company accounts for grants of stock options to employees in accordance with ASC 718, Compensation—Stock Compensation . This standard requires compensation expense to be measured based on the estimated fair value of the share-based awards on the date of grant and recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. Stock based payments issued to non-employees are recorded at their fair values, are revalued quarterly as the equity instruments vest and are recognized as expense over the related service period in accordance with the provisions of ASC 718 and ASC 505, Equity . The value of each option grant is estimated on the grant date using the Black-Scholes option pricing model. The option pricing model requires the input of highly subjective assumptions, including the grant date fair value of the Company's common stock, expected volatility and risk-free interest rates. To determine the grant date fair value of FTS's common stock prior to the Merger, FTS engaged an outside consultant to prepare a valuation of the stock price on an annual basis, using information provided by management and information obtained from private and public sources. When an observable transaction occurred near the grant date of an option award, such as the purchase of treasury stock, FTS used the observable price to estimate the grant date fair value of the options. Subsequent to the Merger, the Company uses the closing market price of its common stock at the grant date. The Company uses an expected volatility based on the historical volatilities of a group of guideline companies and the "simplified" method for calculating the expected life of its stock options. Stock based payments to non-employees are recognized at fair value on the date of grant and re-measured at each subsequent reporting date through the settlement of the instrument. The risk free interest rates are obtained from publicly available U.S. Treasury yield curve rates. Income Taxes The Company accounts for income taxes under the liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company recognizes a valuation allowance if, based on the weight of available evidence regarding future taxable income, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Regarding the recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, the Company follows a two-step process prescribed by GAAP. The first step for evaluating a tax position involves determining whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities. The second step then requires a company to measure the tax position benefits as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company classifies any interest and penalties on tax liabilities on the consolidated statements of operations as components of other expenses. Processing Liabilities Processing liabilities primarily reflect the differences arising between the amounts the Company receives from the bankcard networks and the amounts funded to the Company’s merchants. Such differences arise from timing differences, merchant reserves and chargeback processing. Except for merchant reserves, the amounts are generally paid within two business days. Disputes between a cardholder and a merchant periodically arise due to cardholder dissatisfaction with merchandise quality or a merchant’s services. These disputes may not be resolved in the merchant’s favor, and, in some cases, the transaction is “charged back” to the merchant. The purchase price is then refunded by the merchant to the cardholder through the respective card-issuing bank. However, in the case of merchant insolvency, bankruptcy or other nonpayment, the Company may be liable for any such charges disputed by cardholders. The Company maintains a deposit from certain merchants as an offset to potential contingent liabilities that are the responsibility of such merchants The merchant reserve balance as of December 31, 2016 and 2015 totaled $986,499 and $422,876 , respectively. Accounting for Preferred Stock The Company classifies its Series A Preferred Stock, issued in connection with the Merger, on its consolidated balance sheets using the guidance in ASC 480-10-S99. The Series A Preferred Stock contains certain provisions that allow the holder to redeem the preferred stock for cash, beginning seven years following the date of issuance, or if certain events occur, such as a change in control. As redemption under these circumstances is not solely within the Company’s control, the Series A Preferred Stock is classified as temporary equity. Fair Value Measurements The Company accounts for fair value measurements in accordance with ASC 820, Fair Value Measurements and Disclosures , which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are: Level 1 — Quoted prices for identical instruments in active markets. Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets. The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, processing assets and liabilities, residuals payable and settlement obligation approximated their fair values as of December 31, 2016 and 2015 , because of the relatively short maturity dates on these instruments. The carrying amount of debt approximates fair value as of December 31, 2016 and 2015 , because interest rates on these instruments approximate market interest rates. Business Combinations Business acquisitions have been recorded using the acquisition method of accounting, and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. After the purchase price has been allocated, goodwill is recorded to the extent the consideration paid for the acquisition exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities. The operating results of an acquisition are included in the Company's consolidated statements of operations from the date of such acquisition. Related Parties Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-dealing markets may not exist. A description of related-party transactions is provided in Note 15. Subsequent Events The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements are issued for potential recognition or disclosure. Recently Adopted Accounting Pronouncements In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting . The ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This amendment is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2016. The Company elected to early adopt this guidance in 2016. As a result of adopting this ASU, the Company recognized excess tax benefits realized from the settlement and exercise of stock options as a component of income tax expense in the consolidated statements of operations, and within income tax cash flows as an operating activity in the consolidated statements of cash flows. The Company has elected to account for forfeitures in compensation cost as they occur, as permitted by this ASU. In April 2015, the FASB issued Accounting Standards Update ("ASU") No. 2015-03 (ASU 2015-03), Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs . This standard amends the existing guidance to require that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the related debt liability instead of as a deferred charge. ASU 2015-03 is effective on a retrospective basis for annual and interim reporting periods beginning after December 15, 2015. The Company adopted this standard in 2016, and as a result, the debt issuance costs incurred in connection with the Merger are included as a reduction of the Company's long-term debt balance on the consolidated balance sheet as of December 31, 2016. The adoption of this standard did not impact the Company's consolidated balance sheet as of December 31, 2015. In August 2015, the FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements . ASU 2015-15 clarified the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. Such costs may be presented in the balance sheet as an asset and subsequently amortized ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The ASU simplifies the balance sheet classification of deferred income taxes under GAAP by requiring that all deferred tax assets and liabilities be classified as non-current. This amendment is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2016. Early adoption is permitted. The new guidance can be applied on either a prospective or retrospective basis. The Company elected to early adopt this guidance and apply it on a prospective basis in 2015. Adoption of this ASU resulted in a reclassification of the Company’s net current deferred tax asset to the net long-term deferred tax liability in our consolidated balance sheet as of December 31, 2015 and 2016. Recently Issued Accounting Pronouncements In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. For public companies, this ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business . This ASU clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public companies, this ASU is effective for annual periods beginning after December 15, 2017, including interim periods wit |
