10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to              

Commission file number 001-35699

PLANET PAYMENT, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	13-4084693
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

670 Long Beach Boulevard Long Beach, New York	11561
(Address of Principal Executive Offices)	(Zip Code)

(516) 670-3200

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☐	Accelerated Filer ☒
Non-Accelerated Filer ☐	Smaller Reporting Company ☐
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐ Yes ☒  No

As of October 31, 2016,  there were 48,902,496 shares of the registrant’s common stock outstanding.

Planet Payment, Inc.

Report on Form 10-Q

For the Quarterly Period Ended September 30, 2016

Table of Contents

		Page
Part I.	Financial Information	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015	3
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and 2015 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
Part II.	Other Information	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 6.	Exhibits	34
Signatures		35

Planet Payment®, iPAY® and Pay in Your Currency®, as well as our logo, are registered trademarks of Planet Payment, and Multi-Currency Pricing™ is an additional trademark of Planet Payment. All other service marks, trademarks and trade names appearing in this report are the property of their respective owners.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Planet Payment, Inc.

Condensed Consolidated Balance Sheets

	As of		As of
	September 30,		December 31,
	2016		2015
		(unaudited)
Current assets:
Cash and cash equivalents	$	7,440,864	$	14,675,515
Restricted cash		3,887,288		5,050,147
Accounts receivable, net of allowances of $0.1 million as of September 30, 2016 and December 31, 2015		6,641,993		6,406,496
Prepaid expenses and other assets		1,761,184		1,800,566
Total current assets		19,731,329		27,932,724
Other assets:
Restricted cash		551,054		551,917
Property and equipment, net		1,321,342		1,811,619
Software development costs, net		4,177,879		3,964,454
Intangible assets, net		981,279		1,378,264
Goodwill		294,844		286,852
Deferred tax asset and other long-term assets		8,270,540		8,581,082
Total other assets		15,596,938		16,574,188
Total assets	$	35,328,267	$	44,506,912
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	446,946	$	306,520
Accrued expenses		4,459,360		6,438,600
Due to merchants		4,068,506		5,240,427
Current portion of capital leases		206,873		290,911
Total current liabilities		9,181,685		12,276,458
Long-term liabilities:
Long-term debt		9,916,000		—
Other long-term liabilities		1,107,982		1,666,938
Total long-term liabilities		11,023,982		1,666,938
Total liabilities		20,205,667		13,943,396
Commitments and contingencies (Note 8)
Stockholders’ equity:
Convertible preferred stock—10,000,000 shares authorized as of September 30, 2016 and December 31, 2015, $0.01 par value: Series A—2,243,750 issued and 1,535,398 outstanding as of September 30, 2016 and 2,243,750 issued and outstanding as of December 31, 2015; $6,141,592 and $8,975,000 aggregate liquidation preference as of September 30, 2016 and December 31, 2015, respectively		15,354		22,438
Common stock—250,000,000 shares authorized as of September 30, 2016 and December 31, 2015, $0.01 par value, and 59,230,684 issued and 48,855,330 shares outstanding as of September 30, 2016, and 56,191,389 issued and 52,585,503 shares outstanding as of December 31, 2015		592,307		561,914
Treasury stock, at cost, 10,375,354 shares and 3,605,886 shares as of September 30, 2016 and December 31, 2015, respectively		(31,726,486)		(7,883,012)
Additional paid-in capital		109,870,586		106,741,026
Accumulated other comprehensive loss		(529,197)		(510,445)
Accumulated deficit		(63,099,964)		(68,368,405)
Total stockholders’ equity		15,122,600		30,563,516
Total liabilities and stockholders’ equity	$	35,328,267	$	44,506,912

The accompanying notes are an integral part of these financial statements.

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Planet Payment, Inc.

Condensed Consolidated Statements of Income (unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Revenue:
Net revenue	$	13,621,239	$	12,618,413	$	40,409,128	$	37,434,542
Operating expenses:
Cost of revenue:
Payment processing service fees		2,781,289		2,692,090		8,207,202		7,871,179
Processing and service costs		2,878,088		3,776,232		9,902,879		10,399,830
Total cost of revenue		5,659,377		6,468,322		18,110,081		18,271,009
Selling, general and administrative expenses		5,222,560		5,657,740		15,908,166		14,840,844
Restructuring charges		229,121		283,726		354,389		283,726
Total operating expenses		11,111,058		12,409,788		34,372,636		33,395,579
Income from operations		2,510,181		208,625		6,036,492		4,038,963
Other income (expense):
Interest expense		(88,669)		(10,372)		(186,366)		(38,815)
Interest income		428		392		1,250		1,183
Other income		93,016		—		93,016		—
Total other income (expense), net		4,775		(9,980)		(92,100)		(37,632)
Income from operations before provision for income taxes		2,514,956		198,645		5,944,392		4,001,331
Provision for income taxes		(289,543)		(92,674)		(675,951)		(308,406)
Net income	$	2,225,413	$	105,971	$	5,268,441	$	3,692,925
Basic net income per share applicable to common stockholders	$	0.04	$	0.00	$	0.10	$	0.06
Diluted net income per share applicable to common stockholders	$	0.04	$	0.00	$	0.09	$	0.06
Weighted-average common stock outstanding (basic)		49,179,596		51,360,758		49,848,634		52,985,106
Weighted-average common stock outstanding (diluted)		51,254,223		52,384,391		52,002,249		53,611,968

The accompanying notes are an integral part of these financial statements.

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Planet Payment, Inc.

Condensed Consolidated Statements of Comprehensive Income (unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Net income	$	2,225,413	$	105,971	$	5,268,441	$	3,692,925
Foreign currency translation adjustment		(11,530)		(65,265)		(18,752)		(262,084)
Total comprehensive income	$	2,213,883	$	40,706	$	5,249,689	$	3,430,841

The accompanying notes are an integral part of these financial statements.

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Planet Payment, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

	Nine Months Ended
	September 30,
	2016		2015
Cash flows from operating activities:
Net income	$	5,268,441	$	3,692,925
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		1,498,358		1,197,741
Depreciation and amortization expense		2,083,655		2,175,220
Provision for doubtful accounts		62,675		7,403
Disposal of property and equipment		500		—
Gain on insurance settlement		—		(517,930)
Changes in operating assets and liabilities:
Decrease (increase) in settlement assets		1,160,869		(322,982)
(Increase) decrease in accounts receivables, prepaid expenses and other current assets		(258,790)		1,184,851
Decrease (increase) in other long-term assets		310,542		(131,588)
(Decrease) increase in accounts payable and accrued expenses		(3,062,995)		559,792
(Decrease) increase in due to merchants		(1,169,931)		323,105
Other		(44,740)		(133,242)
Net cash provided by operating activities		5,848,584		8,035,295
Cash flows from investing activities:
Decrease (increase) in restricted cash		2,853		(27,651)
Decrease in merchant reserves		(1,990)		(92,169)
Purchase of property and equipment		(156,165)		(175,570)
Capitalized software development		(999,733)		(828,393)
Purchase of intangible assets		(16,299)		(16,500)
Net cash used for investing activities		(1,171,334)		(1,140,283)
Cash flows from financing activities:
Proceeds from issuance of common stock		2,287,990		1,203,750
Principal payments on capital lease obligations		(272,417)		(404,884)
Borrowings under credit facility		13,916,000		—
Repayments under credit facility		(4,000,000)		—
Purchase of treasury stock		(23,843,474)		(4,567,501)
Net cash used for financing activities		(11,911,901)		(3,768,635)
Effect of exchange rate changes on cash and cash equivalents(*)		—		—
Net (decrease) increase in cash and cash equivalents		(7,234,651)		3,126,377
Cash and cash equivalents at beginning of period		14,675,515		9,837,791
Cash and cash equivalents at end of period	$	7,440,864	$	12,964,168
Supplemental disclosure:
Cash paid for:
Interest	$	165,252	$	36,585
Income taxes		744,911		539,520
Non-cash investing and financing activities:
Common stock issued for preferred stock conversion		21,629		—
Common stock issued for stock options exercised		98		—
Assets acquired under capital leases		122,630		156,129
Accrued capitalized hardware, software and fixed assets		75,870		39,158
Capitalized stock-based compensation		21,625		27,245

(*)For the nine months ended September 30, 2016 and 2015, the effect of exchange rate changes on cash and cash equivalents was immaterial.

The accompanying notes are an integral part of these financial statements.

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Planet Payment, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Business description and basis of presentation

Business description

Planet Payment, Inc. together with its wholly-owned subsidiaries (“Planet Payment,” the “Company,” “we,” or “our”) is a provider of international payment and transaction processing and multi­currency processing services. The Company provides its services to approximately 197,000 active merchant locations in 23 countries and territories across the Asia- Pacific region, the Americas, the Middle East, Africa and Europe, primarily through its acquiring bank and processor customers, as well as through its own direct sales force. The Company provides banks and their merchants with innovative services to accept, process and reconcile electronic payments. The Company’s point-of-sale multi-currency payment processing services are designed for merchants in the retail, restaurant, and hospitality environments. We also provide payment services for e-commerce and mail and telephone order merchants. Our point-of-sale and e-commerce services help merchants sell more goods and services to consumers, and are integrated within the payment card transaction process enabling its acquiring customers to process and reconcile payment transactions in multiple currencies, geographies and channels. The Company’s ATM services provide its acquirers with additional processing capabilities to help them increase revenue and improve customer satisfaction. The Company also offers non-financial transaction processing services that allow merchants to offer a range of commercial services including pre-paid mobile phone top-up and bill payments using the same point-of-sale devices deployed to accept payment cards. The Company is a registered third party processor with the major card associations and operates in accordance with industry standards, including the Payment Card Industry, or PCI, Security Council’s Data Security Standards.

Basis of presentation

The unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying unaudited condensed consolidated interim financial statements include the accounts of Planet Payment, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

Unaudited condensed consolidated interim financial information

The accompanying unaudited condensed consolidated interim financial statements as of September 30, 2016 and for the periods ended September 30, 2016 and 2015 have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, which are normal and recurring, necessary for a fair presentation of the statement of operations, financial position and cash flows. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. Operating results for the interim period ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.  The December 31, 2015 balance sheet information has been derived from the audited financial statements at that date. Certain information and disclosures normally included in annual consolidated financial statements have been omitted pursuant to the rules and regulation of the Securities and Exchange Commission (“SEC”).

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2. Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.  The new guidance includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a company’s contracts with customers.  The original effective date of ASU 2014-09 of January 1, 2017 has been delayed until January 1, 2018.  Early adoption is not permitted before the original effective date.  The standard allows for either retrospective application to each reporting period presented or retrospective application with the cumulative effect of initially applying this update recognized at the date of initial application.  The Company is currently evaluating the effect ASU 2014-09 will have on the Company’s condensed consolidated financial statements and disclosures.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU No. 2016-02”).  The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in ASU No. 2016-02 is permitted for all entities.  A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the effect ASU 2016-02 will have on the Company’s condensed consolidated financial statements and disclosures.

In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-08”). The amendments in ASU 2016-08 do not change the core principle of the guidance. The amendments clarify the implementation guidance on principal versus agent considerations.   The update suggests that entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The effective date and transition requirements for the amendments in ASU 2016-08 are the same as the effective date and transition requirements of ASU 2014-09.  We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation—Stock Compensation (Topic 718) (“ASU No. 2016-09”).  This update is part of the FASB’s Simplification Initiative, which simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.

In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-10”). The amendments in this update do not change the core principle of the guidance. The amendments in this update clarify the identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.  The amendments in this update clarify that contractual provisions that, explicitly or implicitly, require an entity to transfer control of additional goods or services to a customer should be distinguished from contractual provisions that, explicitly or implicitly, define the attributes of a single promised license.  The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of update ASU 2014-09.  The Company is currently evaluating the effect ASU 2016-10 will have on the Company’s condensed consolidated financial statements and disclosures.

In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-12”), in which the FASB finalized the guidance in the new revenue standard on collectibility, noncash consideration, presentation of sales tax, and transition.  The amendments are intended to address implementation issues that were raised by stakeholders and discussed by the Revenue Recognition Transition Resource Group, and

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provide additional practical expedients.  The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of update ASU 2014-09.  We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15,  Statement of Cash Flows (Topic 230) (“ASU 2016-15”), which intends to reduce diversity in practice in how certain cash receipts and cash payments are presented in the statement of cash flows.  ASU 2016-15 clarifies that the classification of cash activity relates to debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate and bank-owned life insurance policies, distributions received from equity-method investments and beneficial interests in securitization transactions.  The new standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, provided that all of the amendments are adopted in the same period.  The early adoption of the provisions of ASU No. 2016-15 did not materially impact the Company's financial condition, results of operations or cash flows.

3. Concentration of credit risk

The Company’s assets that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and receivables from clients. The Company places some of its cash, cash equivalents, and restricted cash with financial banking institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company also maintains cash balances at foreign banking institutions, which are not insured by the FDIC.

The Company maintains an allowance for uncollectible accounts receivable based on expected collectability and performs ongoing credit evaluations of customers’ financial condition.

The Company’s accounts receivable concentrations of 10% and greater are as follows:

	As of		As of
	September 30,		December 31,
	2016		2015
Customer A	16	%	15	%
Customer B	13		*
Customer C	12		*
Customer H	*		11

* Less than 10% accounts receivable concentration.

The Company’s revenue concentrations of 10% and greater are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Customer A	16	%	17	%	16	%	19	%
Customer G	14		*		12		*
Customer H	*		13		*		*

* Less than 10% revenue concentration.

a

4. Net income per share

The Company computes net income per share in accordance with ASC 260, Earnings per Share (“ASC topic 260”). Under ASC topic 260, securities that contain rights to receive non-forfeitable dividends (whether paid or unpaid) are participating securities and should be included in the two-class method of computing earnings per share. The Company’s preferred stockholders are entitled to participate in dividends and earnings when, and if, dividends are declared on the common stock. As such, the Company calculates net income per share using the two-class method. The two-class

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method is an earnings formula that treats a participating security as having rights to dividends that otherwise would have been available to common and preferred stockholders based on their respective rights to receive dividends. Losses are not allocated to the preferred stockholders for computing net loss per share under the two-class method because the preferred stockholders do not have contractual obligations to share in the losses of the Company.

Basic earnings per share is calculated by dividing net income, adjusted for amounts allocated to participating securities under the two-class method, if applicable, by the weighted average number of common stock outstanding during the period.

Diluted earnings per share is calculated by dividing net income by the weighted average number of shares of the Company’s common stock outstanding, assuming dilution, during the period. The diluted earnings per share calculation assumes (i) all stock options and warrants which are in the money are exercised at the beginning of the period and (ii) each issue or series of issues of potential common stock are considered in sequence from the most dilutive to the least dilutive. That is, dilutive potential common stock with the lowest “earnings add-back per incremental share” shall be included in dilutive earnings per share before those shares with higher earnings add back per incremental share.

The following table sets forth the computation of basic and diluted net income per share:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Numerator:
Net income	$	2,225,413	$	105,971	$	5,268,441	$	3,692,925
Amounts allocated to participating preferred stockholders under the two-class method		(196,868)		(12,284)		(466,065)		(428,090)
Net income applicable to common stockholders (basic and dilutive)	$	2,028,545	$	93,687	$	4,802,376	$	3,264,835
Denominator:
Weighted-average common stock outstanding (basic)		49,179,596		51,360,758		49,848,634		52,985,106
Common equivalent shares from options and warrants to purchase common stock		2,074,627		1,023,633		2,153,615		626,862
Weighted-average common stock outstanding (diluted)(1)		51,254,223		52,384,391		52,002,249		53,611,968
Basic net income per share applicable to common stockholders	$	0.04	$	0.00	$	0.10	$	0.06
Diluted net income per share applicable to common stockholders(1)	$	0.04	$	0.00	$	0.09	$	0.06

(1) In accordance with ASC 260-10-45-48, for the three and nine months ended September 30, 2016 and 2015, the Company excluded 396,500 and 1,446,500, respectively, of contingently-issued restricted shares from diluted weighted average common stock outstanding as the contingencies were neither (a) satisfied at the reporting date nor (b) would have been satisfied if the reporting date was at the end of the contingency period.

The following table sets forth the weighted average securities outstanding that have been excluded from the diluted net income per share calculation because the effect would have been anti-dilutive:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Stock options	—	3,588,862	581,665	5,096,019
Restricted stock awards	—	—	23,574	98,147
Convertible preferred stock(1)	4,688,237	6,851,144	5,493,407	6,851,144
Total anti-dilutive securities	4,688,237	10,440,006	6,098,646	12,045,310

(1) Diluted net income per share increases when convertible preferred stock is included in the required sequence in the diluted earnings per share computation. As such, convertible preferred stock is excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2016 and 2015.

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5. Stock-based compensation expense

Stock-based compensation expense is measured at the grant date based on fair value, and recognized as an expense over the requisite service period, net of an estimated forfeiture rate.

During the first quarter of 2016, 0.8 million stock options were granted to certain employees of the Company, with a grant fair value of $0.7 million. The actual number of shares that will be issued upon exercise of the options is subject to the achievement of service-based vesting conditions.  Stock-based compensation expense is recorded on a straight line basis from the date of the grant over the requisite service period of 36 months. 

During the second quarter of 2016, 0.1 million restricted stock awards with a grant fair value of $0.2 million were granted to certain members of the Company’s Board of Directors.  The final number of vested shares is subject to service-based vesting conditions.  Stock-based compensation expense is recorded on a straight line basis from the date of the grant over the requisite service period of 12 months.

During the second quarter of 2016, 0.5 million shares of the 2015 restricted stock awards granted to certain officers of the Company vested.  The market condition was achieved as the Company’s volume weighted average price on NASDAQ was greater than or equal to $3.50 per share for seven consecutive trading days, or any ten trading days over a consecutive thirty-five day period. The market condition was valued at $0.7 million, of which $0.5 million was expensed as of March 31, 2016 and an additional $0.2 million was expensed during the three months ended June 30, 2016.

The following summarizes stock-based compensation expense recognized by income statement classification:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Processing and service costs	$	35,051	$	43,030	$	134,112	$	143,611
Selling, general and administrative expenses		282,408		656,197		1,364,246		1,017,206
Restructuring charges		—		36,924		—		36,924
Total stock-based compensation expense	$	317,459	$	736,151	$	1,498,358	$	1,197,741

The following summarizes stock-based compensation expense recognized by type:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Stock options	$	217,537	$	528,249	$	766,766	$	783,954
Restricted stock awards		99,922		207,902		731,592		413,787
Total stock-based compensation expense	$	317,459	$	736,151	$	1,498,358	$	1,197,741

6. Property and equipment

Property and equipment, net consist of the following:

	Estimated			As of		As of
	useful life			September 30,		December 31,
	(in years)			2016		2015
Equipment	2	-	7	$	1,008,798	$	958,175
Computer hardware	3	-	5		3,409,750		3,266,233
Furniture and fixtures	5	-	7		227,851		192,565
Leasehold improvements	3	-	10		786,637		746,336
Total property and equipment, gross					5,433,036		5,163,309
Less: Accumulated depreciation and amortization					(4,111,694)		(3,351,690)
Property and equipment, net				$	1,321,342	$	1,811,619

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Property and equipment depreciation and amortization expense is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Depreciation and amortization expense	$	328,181	$	164,538	$	768,740	$	489,010

Included in depreciation and amortization expense for the three and nine months ended September 30, 2016 is $0.2 million and $0.3 million, respectively, of expense related to the acceleration of amortization on certain assets due to exiting a floor in the Company’s corporate location before the end of the lease term.  The cease use date is  October 1, 2016.  For additional information on the Company’s restructuring charges disclosure, refer to Note 14.

7. Goodwill and intangible assets

The change in carrying amount of goodwill for the nine months ended September 30, 2016 is as follows:

Goodwill, gross, as of December 31, 2015	$	286,852
Impact of change in Euro exchange rate		7,992
Accumulated impairment losses as of September 30, 2016		—
Goodwill, net, as of September 30, 2016	$	294,844

The entire goodwill balance is assigned to the payment processing services segment.

Intangible assets are recorded at estimated fair value and are amortized ratably over their estimated useful lives to processing and service costs, which are included in cost of revenue.

The gross book value, accumulated amortization and amortization periods of intangible assets are as follows:

	As of September 30, 2016						As of December 31, 2015						Amortization
	Gross book		Accumulated		Net book		Gross book		Accumulated		Net book		period
	value		amortization		value		value		amortization		value		(in years)
Trademarks and patents	$	1,202,666	$	(538,214)	$	664,452	$	1,184,612	$	(472,914)	$	711,698	15	-	21
Technology		2,455,406		(2,138,579)		316,827		2,388,852		(1,722,286)		666,566	5
Intangible assets, net	$	3,658,072	$	(2,676,793)	$	981,279	$	3,573,464	$	(2,195,200)	$	1,378,264

Amortization expense related to intangible assets is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Amortization expense	$	143,692	$	143,599	$	431,710	$	431,388

8. Commitments and contingencies

Employment agreements

Pursuant to employment agreements with certain employees, the Company had a commitment to pay severance of approximately $1.2 million as of September 30, 2016 and $0.9 million as of December 31, 2015, in the event of an involuntary termination, as defined in the employment agreements. Additionally, in the event of termination upon a change of control, as defined in the agreements, the Company had a commitment to pay severance of approximately $1.2 million as of September 30, 2016 and $1.1 million as of December 31, 2015.

Contingent liabilities

In instances where the Company is acting as the merchant acquirer, the Company bears a risk that a merchant may engage in fraud by submitting for payment certain credit card transactions that may have been manipulated, are fictitious, or are otherwise not bona fide. Similarly, the Company bears the risk that a merchant becomes insolvent, owing money

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to cardholders. To the extent that such fraud or insolvency occurs in circumstances where the Company is liable to make good on any resultant losses, this could affect the Company’s operating results and cash flows. The Company has required certain merchants to post cash reserves of approximately $0.9 million with the sponsoring bank against such liabilities and has itself paid the acquirer a reserve of $0.3 million in connection therewith, which is included in long-term “Restricted cash” on the condensed consolidated balance sheets. In addition, the Company holds merchant reserves of approximately $2.2 million. This reserve amount is included in “Restricted cash” with an offset in “Due to merchants.” Under FASB ASC 460, Guarantees, the Company evaluates its ultimate risk and records an estimate of potential loss for chargeback’s related to merchant fraud and processing errors based upon an assessment of actual historical fraud rates and errors in processing compared to recent bank card processing volume levels.  No contingent liability has been recorded as of September 30, 2016 and December 31, 2015, as the risk of material loss is considered remote. The Company monitors these contingent liabilities on a quarterly basis and will provide for a reserve if deemed necessary.

Outstanding litigation

From time to time, the Company’s operating entities may be involved in legal proceedings in the ordinary course of business. While any litigation contains an element of uncertainty, the Company has no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of the Company.

Acquiring bank sponsorship agreement

In order to offer merchant acquiring services for Visa and MasterCard transactions, the Company must be sponsored by a financial institution that is a principal member of the Visa and MasterCard networks.

The Company entered into a five-year agreement with a sponsoring bank effective September 1, 2013. The Company was required to pay minimum annual sponsorship transaction fees of $0.3 million in year one.  The minimum fees escalate each subsequent year with minimum fees of $0.5 million due in year five for total minimum fees of $1.8 million to be paid over the term of the agreement.  Sponsorship fees are recorded to payment processing service fees cost of sales with the total agreement minimum of $1.8 million recognized on a straight line basis over the term of the agreement.

Pursuant to the agreement, the Company is liable for all losses incurred by the sponsoring bank with respect to the activities of its merchants sponsored under the agreement.  No contingent liability has been recorded as of September 30, 2016 as the risk of material loss is considered remote based on historical information.  The Company monitors this contingent liability on a quarterly basis and will provide for a reserve if deemed necessary.   

9. Credit Facility

On June 10, 2015, the Company entered into a $10.0 million secured revolving credit facility (the “Credit Facility”) with Citizens Bank, N.A. (“Citizens”) pursuant to a Credit and Security Agreement by and among the Company, certain affiliates thereof as borrowers or guarantors, and Citizens (the “Credit Agreement”). 

On January 28, 2016, the Company entered into a Second Amendment to Credit and Security Agreement with Citizens and certain subsidiary affiliates of the Company as borrowers and/or guarantors (the “Amendment”). The Amendment amends the Credit Agreement and provides for an increase in the Company’s line of credit (the “Line of Credit”) with Citizens from $10.0 million to $20.0 million.  The Line of Credit is secured by substantially all of the Company’s personal property, including the Company’s intellectual property and that of its subsidiaries that are borrowers or guarantors.  The interest rate applicable to committed borrowings is tied to LIBOR plus a margin of 2.5%.  The Credit Agreement also provides for a letter of credit sub-facility of up to $2.0 million. The Credit Agreement contains customary affirmative and negative covenants, including, among others, financial covenants based on the Company’s leverage and fixed charge coverage ratios, as well as an obligation to maintain a minimum availability requirement of at least $5.0 million in the aggregate of cash and availability under the line of credit.  The Credit Facility will provide funds for general corporate purposes and repurchases of issued and outstanding capital stock of the Company.  The Credit Facility matures on December 31, 2020 and is payable in full upon maturity. 

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On April 12, 2016, the Company borrowed approximately $13.9 million under the Credit Facility. Subsequently, on April 26, 2016, the Company repaid $4.0 million on the Credit Facility. As of September 30, 2016, the Company had $9.9 million outstanding under the Credit Facility and was in compliance with all financial covenants contained in the Credit Agreement.

10. Convertible preferred stock

On April 11, 2016, 708,352 shares of Series A Preferred Stock were converted into 2,162,907 shares of common stock at a conversion ratio of approximately 3.05 shares of common stock per share of Series A Preferred Stock.  As of September 30, 2016, the remaining preferred stock consists of 1,535,398 shares designated (and issued) as Series A Preferred Stock, and 1,756,250 shares which are undesignated (and unissued). Each issued share of Series A Preferred Stock is convertible into approximately 3.05 shares of common stock, for a total of 4,688,237 shares of common stock.

For additional information on the Company’s convertible preferred stock disclosure, refer to Note 9 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

11. Accrued expenses

The following are the components of accrued expenses:

	As of		As of
	September 30,		December 31,
	2016		2015
Bonus	$	307,292	$	710,739
Deferred revenue(*)		753,787		688,418
Deferred incentive(**)		600,000		950,000
Other(***)		2,798,281		4,089,443
Total accrued expenses	$	4,459,360	$	6,438,600

(*)Current deferred revenue will be recognized as revenue ratably over the next 12 months.  As of September 30, 2016, included in the balance sheet classification “Other long-term liabilities” is the non-current portion of deferred revenue in the amount of $0.7 million. The long-term portion of deferred revenue balance as of December 31, 2015 was approximately $0.6 million.

(**)As of September 30, 2016, the Company recorded approximately $0.6 million in short-term incentives in relation to future obligations under a contract. As of September 30, 2016 and December 31, 2015, included in the balance sheet classification “Other long-term liabilities” is the non‑current portion of these incentives of approximately $0.2 million and $0.7 million, respectively.    

(***)As of September 30, 2016 and December 31, 2015, included in “other” were third party referral commissions of approximately $0.5 million and $1.6 million, respectively. No other amount included in “Other” exceeded 10% of total current liabilities.

12. Segment information

General information

The segment and geographic information provided in the table below is being reported consistent with the Company’s method of internal reporting. Operating segments are defined as components of an enterprise for which separate financial information is available and which is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM reviews net revenue and gross profit by service by geographical region. The Company operates in two reportable segments: multi-currency processing services and payment processing services.

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Information about revenue, profit and assets

The CODM evaluates performance and allocates resources based on net revenue and gross profit of each segment. For purposes of analyzing segments, gross profit of the multi-currency processing services segment is equal to net revenue less multi-currency cost of sales of $0.5 million and $1.0 million, which is included in “processing and services costs” for the three months ended September 30, 2016 and 2015, respectively, and $1.9 million and $2.3 million for the nine months ended September 30, 2016 and 2015, respectively. The gross profit for the payment processing services segment includes net revenue of the segment less the cost of revenue component “payment processing services fees,” which includes interchange and card network fees and assessments. Net revenue and gross profit by geographical region is based upon where the transaction originated. Lastly, the Company does not evaluate performance or allocate resources using segment asset data. Long-lived assets are primarily located in the Americas and Europe and as of September 30, 2016 and December 31, 2015, long-lived asset amounts are $6.8 million and $7.4 million, respectively.

The Company conducts its business primarily in three geographical regions: Asia-Pacific (“APAC”); the Americas; and Europe, Middle East and Africa (“EMEA”). The following table provides revenue concentration by geographic region. Analysis of revenue by segment and geographical region and reconciliations to consolidated revenue, gross profit, and income before the provision for income taxes are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Net Revenue:
APAC	$	3,962,539	$	3,573,478	$	11,541,521	$	11,836,523
The Americas		2,634,887		1,870,722		7,264,448		5,114,772
EMEA		1,578,050		2,348,129		5,962,345		6,584,488
Total multi-currency processing services revenue		8,175,476		7,792,329		24,768,314		23,535,783
Payment processing services revenue		5,445,763		4,826,084		15,640,814		13,898,759
Net revenue	$	13,621,239	$	12,618,413	$	40,409,128	$	37,434,542
Gross Profit:
APAC	$	3,942,457	$	3,547,202	$	11,467,607	$	11,741,027
The Americas		2,470,294		1,761,686		6,766,889		4,799,928
EMEA		1,229,358		1,450,650		4,636,893		4,662,273
Total multi-currency processing services gross profit		7,642,109		6,759,538		22,871,389		21,203,228
Payment processing services gross profit		2,664,474		2,133,994		7,433,612		6,027,578
Total reportable segment gross profit		10,306,583		8,893,532		30,305,001		27,230,806
Corporate allocated cost of sales		2,344,721		2,743,441		8,005,954		8,067,273
Total gross profit	$	7,961,862	$	6,150,091	$	22,299,047	$	19,163,533
Income from operations before provision for income taxes:
Total gross profit	$	7,961,862	$	6,150,091	$	22,299,047	$	19,163,533
Selling, general and administrative expenses		5,222,560		5,657,740		15,908,166		14,840,844
Restructuring charges		229,121		283,726		354,389		283,726
Income from operations		2,510,181		208,625		6,036,492		4,038,963
Interest expense		(88,669)		(10,372)		(186,366)		(38,815)
Interest income		428		392		1,250		1,183
Other income		93,016		—		93,016		—
Total other income (expense), net		4,775		(9,980)		(92,100)		(37,632)
Income from operations before provision for income taxes	$	2,514,956	$	198,645	$	5,944,392	$	4,001,331

Payment processing services revenue and gross profit are the result of transactions that primarily originated in the Americas. For the three months ended September 30, 2016, Customer B and Customer G had revenue concentration of 14% and 35%, respectively, and for the nine months ended September 30, 2016, Customer B and Customer G had revenue concentration of 15% and 30%, respectively.  For the three months ended September 30, 2015, Customer B and Customer G had revenue concentration of 15% and 24%, respectively, and for the nine months ended September 30, 2015, Customer B and Customer G had revenue concentration of 15% and 22%, respectively.

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“Corporate allocated cost of sales” includes expenses of running its platform infrastructure including: Internet connectivity, hosting and data storage expenses, amortization expenses of capitalized software development costs, compensation and related benefits of its technology personnel and a portion of general overhead expenses.

Concentration of revenue by customer by geographical region:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Multi-currency processing services revenue:
APAC:
Customer A	56	%	59	%	56	%	59	%
The Americas:
Customer D	22		*		22		10
Customer E	*		10		*		13
Customer F	*		19		*		19
Customer I	15		*		12		*
Customer J	15		*		11		*
EMEA:
Customer C	58		27		61		48
Customer H	37		72		37		52

(*)Less than 10% revenue concentration.

13. Stock Repurchases

Stock repurchase program

In 2014 and 2015, the Board of Directors authorized a total repurchase of $13.5 million of the Company’s outstanding shares of common stock.  

As of March 9, 2016, the total amount of common stock repurchased under the program was 4.9 million shares for an aggregate price of $11.5 million and $2.0 million remained available for repurchase under the program.  As of March 10, 2016, the stock repurchase program was suspended in connection with the tender offer. On August 2, 2016, the Board of Directors reinstated the Company’s share repurchase program and expanded the authorization by an incremental $4.0 million, bringing its total current authorization to $6.0 million.

From August 2, 2016 to September 30, 2016, the Company repurchased approximately 1.6 million shares of common stock for an aggregate price of $6.0 million.  As of September 30, 2016, the total amount of common stock repurchased under the program was 6.5 million shares for an aggregate price of $17.5 million and there is currently no availability under the program.     

Tender offer

On March 10, 2016, the Board of Directors authorized the Company to commence a modified “Dutch auction” tender offer to repurchase up to $15.0 million of its outstanding shares of common stock at a tender price of not less than $3.20 per share or greater than $3.60 per share. The tender offer commenced on March 14, 2016 and expired on April 11, 2016. On April 12, 2016, the Company paid $14.2 million, including transaction costs, to repurchase approximately 3.9 million shares at a tender price of $3.60 per share. The repurchased shares of common stock became treasury shares of the Company.  

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14. Restructuring charges

During the second quarter of 2016, the Company incurred total restructuring charges of approximately $125,000, of which approximately $100,000 represents the accelerated amortization of certain assets due to exiting a floor in its corporate location before the end of the lease term.  The remaining amount represents the cash components of severance and benefits paid during the period.

During the third quarter of 2016, the Company incurred total restructuring charges of approximately $229,000, of which approximately $150,000 represents the accelerated amortization of certain assets due to exiting a floor in its corporate location before the end of the lease term. The cease use date is October 1, 2016. The remaining amount represents the cash components of severance and benefits paid during the period. 

15. Subsequent event

On November 1, 2016, the Company’s Board of Directors authorized the repurchase of up to $10.0 million of the Company’s outstanding shares of common stock. 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve substantial risks and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding our expectations, beliefs, intentions, strategies, future operations, future financial position, future revenue, projected expenses and plans and objectives of management. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “should,” “could,” “can,” “predict,” “potential,” “continue,” “objective,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These forward-looking statements reflect our current views about future events and involve known risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievement to be materially different from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section entitled “Item 1A - Risk Factors” included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. We refer to Planet Payment, Inc. together with its wholly-owned subsidiaries as “Planet Payment,” the “Company,” “we,” or “our.”

Business overview

Planet Payment is a provider of international payment and transaction processing and multi-currency processing services. We provide our services to approximately 197,000 active merchant locations in 23 countries and territories across the Asia-Pacific region, the Americas, the Middle East, Africa and Europe, primarily through our acquiring bank and processor customers, as well as through our own direct sales force. We provide banks and their merchants with innovative services to accept, process and reconcile electronic payments. Our point-of-sale multi-currency payment processing services are designed for merchants in the retail, restaurant, and hospitality environments. We also provide payment services for e-commerce and mail and telephone order merchants. Our point-of-sale and e-commerce services help merchants sell more goods and services to consumers, and are integrated within the payment card transaction process, enabling our acquiring customers to process and reconcile payment transactions in multiple currencies, geographies and channels. Our ATM services provide our acquirers with additional processing capabilities to help them increase revenue and improve customer satisfaction.  We also offer non-financial transaction processing services that allow merchants to offer a range of commercial services including pre-paid mobile phone top-up and bill payments using the same point-of-sale devices deployed to accept payment cards. We are a registered third-party processor with the major card associations and operate in accordance with industry standards, including the Payment Card Industry, or PCI, Security Council’s Data Security Standards.

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To ensure our long-term success and the success of our customers:

· we invest in new services and in enhancing our processing platform to facilitate more convenient and innovative payment methods, mobile payments and e-commerce; as well as the processing of non-financial transactions such as mobile phone top-up; and

· we continually work to improve the speed, efficiency, security and performance of our platform and our payments and transaction processing services to enhance the reliability of our global processing infrastructure and protect the security of cardholder information.

Key trends

Our financial results have been and we believe will continue to be impacted by positive trends in the international payment processing industry, including the global shift toward electronic-based methods of payments and away from paper-based methods of payment, the increasing levels of international travel and commerce and the rapid adoption of e-commerce on a global scale. Our results are impacted by the changes in levels of international spending using electronic methods, and as a result, negative trends in the global economy and other factors which negatively impact international travel may negatively impact the growth in total transaction volume processed using our platform. The global economy has been undergoing a period of economic uncertainty and stock markets are experiencing high levels of volatility, and it is difficult to predict how long this uncertainty and volatility will continue.

We plan to grow our business by increasing the use of our services by the merchants of our existing acquiring bank and processor customers adding new acquiring bank and processor customers and expanding into new geographies and business sectors. If we are successful in increasing our share of this currently addressable market, we would expect our revenue to continue to grow. In addition, based on the positive trends in the international payment processing industry noted above, we anticipate that as and when more payments are made using electronic methods, such as those that we offer, our revenue would also increase.

Key metrics

Our management relies on certain performance indicators to manage and assess our business. The key performance indicators set forth below help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational efficiencies. We believe that improvements in these metrics will result in improvements in our financial performance over time. We monitor our non-GAAP financial measures and other business statistics as a measure of operating performance in addition to net income and the other measures included in our consolidated financial statements.

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The following is a table consisting of non-GAAP financial measures and certain other business statistics that management monitors:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
KEY METRICS:
Total active merchant locations (at period end)(1)		196,534			109,376			196,534			109,376
Total settled transactions processed(2)		45,471,822			62,035,730			144,543,770			162,932,550
Total settled dollar volume processed(3)	$	2,005,105,612		$	2,055,804,097		$	6,031,361,269		$	6,060,474,546
Adjusted EBITDA (non-GAAP)(4)	$	3,748,476		$	1,927,020		$	9,808,047		$	7,658,726
Capitalized expenditures	$	404,653		$	279,098		$	1,269,692		$	1,086,866
Multi-currency processing services key metrics:
Active merchant locations (at period end)(1)		125,598			37,495			125,598			37,495
Settled transactions processed(5)		4,182,779			3,547,406			12,344,961			10,622,859
Settled dollar volume processed(6)	$	652,029,363		$	687,490,018		$	2,040,828,647		$	1,986,796,246
Average net mark-up percentage on settled dollar volume processed(7)		1.25	%		1.11	%		1.21	%		1.15	%
Payment processing services key metrics:
Active merchant locations (at period end)(1)		72,488			73,532			72,488			73,532
Payment processing services revenue(8)	$	5,445,764		$	4,826,084		$	15,640,815		$	13,898,759
Settled transactions processed(9)		41,520,262			58,592,942			132,751,262			152,632,914
Settled dollar volume processed(10)	$	1,392,081,077		$	1,380,707,538		$	4,089,927,472		$	4,108,006,782

(1) We consider a merchant location to be active as of a date if the merchant completed at least one revenue-generating transaction at the location during the 90-day period ending on such date.  The total number of active merchant locations exceeds the total number of merchants, as merchants may have multiple locations. As of September 30, 2016 and 2015, there were 1,552 and 1,651 active merchant locations, respectively, included in both multi-currency and payment processing active merchant locations but are not included in total active merchant locations, in order to eliminate counting these locations twice.

(2) Represents total settled transactions (excluding other transaction types such as authorizations and rate look-ups).

(3) Represents total settled dollar volume processed through both our multi-currency and payment processing services.

(4) We define Adjusted EBITDA as GAAP net income adjusted to exclude (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) stock-based compensation expense and (6) certain other items management believes affect the comparability of operating results. Please see “—Adjusted EBITDA” below for more information and for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

(5) Represents settled transactions processed using our multi-currency processing services (excluding other transaction types such as authorizations and rate look-ups).

(6) Represents the total settled dollar volume processed using our multi-currency processing services.

(7) Represents the average net foreign currency mark-up percentage earned on settled dollar volume processed using our multi-currency processing services. The average net mark-up percentage on settled dollar volume processed is calculated by taking total multi-currency processing services net revenue ($8.2 million and $7.6 million for the three months ended September 30, 2016 and 2015, respectively, and $24.7 million and $22.9 million for the nine months

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ended September 30, 2016 and 2015, respectively) and dividing by settled dollar volume processed (see footnote 6 above).  For purposes of calculating “Average net mark-up percentage on settled dollar volume processed,” multi-currency processing services revenue includes revenue related to multi-currency transactions only.

(8) Represents revenue earned and reported on payment processing services.

(9) Represents settled transactions processed using our payment processing services (excluding other transaction types such as authorizations and rate look-ups).

(10) Represents the total settled dollar volume processed using our payment processing services.

Adjusted EBITDA

This discussion includes information about Adjusted EBITDA that is not prepared in accordance with GAAP. Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP measure is included below.

Adjusted EBITDA is a non-GAAP financial measure that represents GAAP net income (loss) adjusted to exclude (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) stock-based compensation expense and (6) certain other items management believes affect the comparability of operating results.

Management believes that Adjusted EBITDA, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management team in connection with our executive compensation.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:

· Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

· Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

· although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

· non-cash compensation is and will remain a key element of our long-term incentive compensation for our employees, although we exclude it from Adjusted EBITDA when evaluating our ongoing performance for a particular period; and

· Adjusted EBITDA does not include the impact of certain charges or gains resulting from matters we consider not to be indicative of our ongoing operations.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as a supplement to our GAAP results.

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The following table sets forth the reconciliation of Adjusted EBITDA to net income, our most directly comparable financial measure in accordance with GAAP:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
ADJUSTED EBITDA:
Net income	$	2,225,413	$	105,971	$	5,268,441	$	3,692,925
Interest expense		88,669		10,372		186,366		38,815
Interest income		(428)		(392)		(1,250)		(1,183)
Provision for income taxes		289,543		92,674		675,951		308,406
Depreciation and amortization		598,699		735,442		1,825,792		2,175,220
Stock-based compensation expense		317,459		699,227		1,498,358		1,160,817
Restructuring charges		229,121		283,726		354,389		283,726
Adjusted EBITDA (non-GAAP)	$	3,748,476	$	1,927,020	$	9,808,047	$	7,658,726

Components of operating results

Sources of revenue

We derive our revenue principally through transaction fees earned under fixed contractual arrangements with customers who use our international payment and multi-currency processing services. We operate the business in two reportable segments:

· Multi-currency processing services revenue.  Revenue derived from foreign currency transaction fees earned on processing and converting a credit or debit card transaction from one currency into another currency. Foreign currency transaction fees earned under our agreements with our multi-currency processing services customers have traditionally been based on a fixed percentage applied to the net foreign currency margin earned, after deducting any merchant revenue and other contractual costs.  Also included are fees for non-transactional services.

· Payment processing services revenue.  Revenue derived from transaction fees earned on processing services provided in facilitating the sale of goods and services by means of credit and debit cards and other electronic payments, the processing of certain non-financial transactions and professional services fees related to the payment processing business.

Geographic and customer concentration

We conduct our business primarily in three geographical regions: Asia-Pacific, or APAC; the Americas; and Europe, Middle East and Africa, or EMEA. The following table provides multi-currency processing services revenue concentration by geographical region. Revenue by region is based upon where the transaction originated. We conduct our payment processing services primarily in North America.

Analysis of revenue by segment and geographical region:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Revenue:
APAC	$	3,962,539	$	3,573,478	$	11,541,521	$	11,836,523
The Americas		2,634,887		1,870,722		7,264,448		5,114,772
EMEA		1,578,050		2,348,129		5,962,345		6,584,488
Total multi-currency processing services revenue		8,175,476		7,792,329		24,768,314		23,535,783
Payment processing services revenue		5,445,763		4,826,084		15,640,814		13,898,759
Net revenue	$	13,621,239	$	12,618,413	$	40,409,128	$	37,434,542

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A significant portion of our revenue is derived from agreements with a limited number of customers. Specifically, for the three months ended September 30, 2016, subsidiaries of Customer A and Customer G represented approximately 16% and 14% of our revenue, respectively.  For the nine months ended September 30, 2016, subsidiaries of Customer A and Customer G represented approximately 16% and 12% of our revenue, respectively.    

Operating expenses

Cost of revenue.  Cost of revenue primarily consists of two categories: (1) payment processing services fees, which includes payment processing transactions fees such as sponsorship fees, interchange and card association fees and assessments; and (2) processing and service costs, which include certain expenses related to the multi-currency processing segment, expenses of running our platform infrastructure, including: internet connectivity, hosting and data storage expenses, amortization expense on acquired intangibles and capitalized software development costs, compensation and related benefits and a portion of general overhead expenses.

Selling, general and administrative expenses.  Selling, general and administrative expenses consist primarily of compensation and related benefits, facility costs, public company costs and professional service fees for our sales, marketing, customer service, administrative functions, and a portion of general overhead expenses.

We allocate overhead such as occupancy, telecommunication charges and depreciation expense based on headcount, as we believe this to be the most accurate measure. As a result, a portion of general overhead expenses is reflected in both our cost of revenue and selling, general and administrative expenses.

Other (expense) income, net.  Other (expense) income, net, primarily consists of non-operating income as well as interest expense related to our credit facility and capital leases.

Critical accounting policies and estimates

The discussion and analysis of our financial condition and results of our operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP.  GAAP requires us to make certain estimates and judgments that affect the reported amounts and the disclosure in our financial statements.  We base our estimates on historical experience, future trends and other assumptions we believe to be reasonable under the circumstances.  Because these accounting policies require significant judgment, our actual results may differ materially from our estimates.

Our critical accounting policies are those that we believe are both important to the portrayal of our financial condition and results of operations and that involve difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The estimates are based on historical experience and on various assumptions about the ultimate outcome of future events. Our actual results may differ from these estimates if unforeseen events occur or should the assumptions used in the estimation process differ from actual results. Management believes there have been no material changes to the critical accounting policies discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2015.

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Results of operations

The following tables set forth our condensed consolidated results of operations for the periods presented and as a percentage of our net revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2016				2015				2016				2015
			% of				% of				% of				% of
	$ amount		revenue		$ amount		revenue		$ amount		revenue		$ amount		revenue
Revenue:
APAC	$	3,962,539	29.1	%	$	3,573,478	28.3	%	$	11,541,521	28.5	%	$	11,836,523	31.6	%
The Americas		2,634,887	19.3			1,870,722	14.8			7,264,448	18.0			5,114,772	13.7
EMEA		1,578,050	11.6			2,348,129	18.6			5,962,345	14.8			6,584,488	17.6
Total multi-currency processing services revenue		8,175,476	60.0			7,792,329	61.7			24,768,314	61.3			23,535,783	62.9
Payment processing services revenue		5,445,763	40.0			4,826,084	38.3			15,640,814	38.7			13,898,759	37.1
Net revenue		13,621,239	100.0			12,618,413	100.0			40,409,128	100.0			37,434,542	100.0
Operating expenses:
Cost of revenue:
Payment processing services fees		2,781,289	20.4			2,692,090	21.3			8,207,202	20.3			7,871,179	21.0
Processing and service costs		2,878,088	21.1			3,776,232	29.9			9,902,879	24.5			10,399,830	27.8
Total cost of revenue		5,659,377	41.5			6,468,322	51.2			18,110,081	44.8			18,271,009	48.8
Selling, general and administrative expenses		5,222,560	38.3			5,657,740	44.8			15,908,166	39.4			14,840,844	39.6
Restructuring charges		229,121	1.7			283,726	2.2			354,389	0.9			283,726	0.8
Total operating expenses		11,111,058	81.5			12,409,788	98.2			34,372,636	85.1			33,395,579	89.2
Income from operations		2,510,181	18.5			208,625	1.8			6,036,492	14.9			4,038,963	10.8
Other income (expense):
Interest expense		(88,669)	(0.7)			(10,372)	(0.1)			(186,366)	(0.5)			(38,815)	(0.1)
Interest income		428	0.0			392	0.0			1,250	0.0			1,183	0.0
Other income		93,016	0.7			—	—			93,016	0.2			—	—
Total other income (expense), net		4,775	0.0			(9,980)	(0.1)			(92,100)	(0.3)			(37,632)	(0.1)
Income from operations before provision for income taxes		2,514,956	18.5			198,645	1.7			5,944,392	14.6			4,001,331	10.7
Provision for income taxes		(289,543)	(2.1)			(92,674)	(0.7)			(675,951)	(1.7)			(308,406)	(0.8)
Net income	$	2,225,413	16.4	%	$	105,971	1.0	%	$	5,268,441	12.9	%	$	3,692,925	9.9	%

Comparison of the three months ended September 30, 2016 and 2015

Revenue

	Three Months Ended
	September 30,				Variance
	2016		2015		Amount		Percent
APAC	$	3,962,539	$	3,573,478	$	389,061	11	%
The Americas		2,634,887		1,870,722		764,165	41
EMEA		1,578,050		2,348,129		(770,079)	(33)
Total multi-currency processing services revenue		8,175,476		7,792,329		383,147	5
Payment processing services revenue		5,445,763		4,826,084		619,679	13
Net revenue	$	13,621,239	$	12,618,413	$	1,002,826	8	%

Net revenue increased $1.0 million, or 8%, to $13.6 million for the three months ended September 30, 2016 from $12.6 million for the three months ended September 30, 2015.  These changes are described below.

Multi-currency processing services revenue

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APAC multi-currency processing services revenue.  APAC multi-currency processing services revenue increased $0.4 million, or 11%, to $4.0 million for the three months ended September 30, 2016 from $3.6 million for the three months ended September 30, 2015. The increase in APAC multi-currency processing services revenue was driven by changes in the following key business metrics:

	Three Months Ended
	September 30,						Variance
	2016			2015			Amount			Percent
APAC multi-currency processing active merchant locations (at period end)		18,579			15,088			3,491		23	%
APAC multi-currency processing settled transactions processed		1,769,260			1,592,544			176,716		11
APAC multi-currency processing settled dollar volume processed	$	353,100,508		$	328,675,347		$	24,425,161		7
APAC average net mark-up % on settled dollar volume processed		1.12	%		1.09	%		0.03	%	3

The 7%  increase in settled dollar volume processed resulted in a $0.3 million increase to revenue and the 3% increase in average net mark-up percentage on settled dollar volume processed resulted in a $0.1 million increase to revenue.  The 7% increase in settled dollar volume processed was due to the 23% increase in active merchant location along with the continuous rollout of ATMs with CIMB in Malaysia.    

The Americas multi-currency processing services revenue.  The Americas multi-currency processing services revenue increased $0.7 million, or 41%, to $2.6 million for the three months ended September 30, 2016 from $1.9 million for the three months ended September 30, 2015.  The increase in the Americas multi-currency processing services revenue was driven by changes in the following key business metrics:

	Three Months Ended
	September 30,						Variance
	2016			2015			Amount			Percent
The Americas multi-currency processing active merchant locations (at period end)		92,416			10,796			81,620		756	%
The Americas multi-currency processing settled transactions processed		1,192,938			920,186			272,752		30
The Americas multi-currency processing settled dollar volume processed	$	128,571,038		$	97,770,470		$	30,800,568		32
The Americas average net mark-up % on settled dollar volume processed		2.04	%*		1.74	%*		0.30	%	17	%

(*)For purposes of calculating “Average net mark-up percentage on settled dollar volume processed,” multi-currency processing services revenue includes revenue related to multi-currency transactions only.

The 32% increase in settled dollar volume processed resulted in a $0.6 million increase to revenue and a  17% increase in average net mark-up percentage on settled dollar volume processed resulted in a $0.3 million increase to revenue.  These increases were offset by a decrease in revenues earned on non-transactional services of $0.2 million.  The increase in settled dollar volume processed and average net mark-up percentage is primarily due to the growth in our e-commerce and ATM offerings. 

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EMEA multi-currency processing services revenue. EMEA multi-currency processing services revenue decreased $0.7 million, or 33%, to $1.6 million for the three months ended September 30, 2016 from $2.3 million for the three months ended September 30, 2015.  The decrease in EMEA multi-currency processing services revenue was driven by changes in the following key business metrics:

	Three Months Ended
	September 30,						Variance
	2016			2015			Amount			Percent
EMEA multi-currency processing active merchant locations (at period end)		14,603			11,611			2,992		26	%
EMEA multi-currency processing settled transactions processed		1,220,581			1,034,676			185,905		18
EMEA multi-currency processing settled dollar volume processed	$	170,357,817		$	261,044,201		$	(90,686,384)		(35)
EMEA average net mark-up % on settled dollar volume processed		0.93	%		0.90	%		0.03	%	3	%

The 35% decrease in settled dollar volume processed resulted in a $0.8 million decrease in revenue. This decrease was primarily due to the activation of new currencies in 2015 which have decreased in 2016.  This decrease was offset by a 3% increase in average net mark-up percentage on settled dollar volume processed which resulted in a $0.1 million increase in revenue.

Payment processing services revenue

Payment processing services revenue is primarily earned from transaction processing services for customers in the Americas.  Payment processing services revenue increased $0.6 million, or 13%, to $5.4 million for the three months ended September 30, 2016 from $4.8 million for the three months ended September 30, 2015.  The increase was primarily due to transaction processing fees arising from the continuous roll-out of merchants from existing and new payment processing customers.

Cost of revenue

	Three Months Ended
	September 30,				Variance
	2016		2015		Amount		Percent
Payment processing services fees	$	2,781,289	$	2,692,090	$	89,199	3	%
Processing and service costs		2,878,088		3,776,232		(898,144)	(24)
Total cost of revenue	$	5,659,377	$	6,468,322	$	(808,945)	(13)	%

Payment processing service fees

The increase in payment processing service fees of $0.1 million, or 3%, to $2.8 million for the three months ended September 30, 2016 from $2.7 million for the three months ended September 30, 2015 is a direct result of the mix of business within the payment processing service revenue.

Processing and service costs

The decrease in processing and service costs of $0.9 million, or 24%, to $2.9 million for the three months ended September 30, 2016 from $3.8 million for the three months ended September 30, 2015 is primarily due to a $0.3 million decrease in salary compensation, a $0.1 million decrease in software amortization and a $0.5 million decrease in multi-currency referral commissions earned by third party agents. 

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Selling, general and administrative expenses

	Three Months Ended
	September 30,				Variance
	2016		2015		Amount		Percent
Selling, general and administrative expenses	$	5,222,560	$	5,657,740	$	(435,180)	(8)	%

Selling, general and administrative expenses decreased $0.4 million, or 8%, to $5.2 million for the three months ended September 30, 2016 from $5.6 million for the three months ended September 30, 2015.  The decrease in selling, general and administrative expenses was primarily due to a $0.4 million decrease in stock-based compensation expense and a $0.2 million decrease in general and administrative expense, partially offset by a $0.2 million increase in salary compensation. 

Comparison of the nine months ended September 30, 2016 and 2015

Revenue

	Nine Months Ended
	September 30,				Variance
	2016		2015		Amount		Percent
APAC	$	11,541,521	$	11,836,523	$	(295,002)	(2)	%
The Americas		7,264,448		5,114,772		2,149,676	42
EMEA		5,962,345		6,584,488		(622,143)	(9)
Total multi-currency processing services revenue		24,768,314		23,535,783		1,232,531	5
Payment processing services revenue		15,640,814		13,898,759		1,742,055	13
Net revenue	$	40,409,128	$	37,434,542	$	2,974,586	8	%

Net revenue increased $3.0 million, or 8%, to  $40.4 million for the nine months ended September 30, 2016 from $37.4 million for the nine months ended September 30, 2015.  These changes are described below.

Multi-currency processing services revenue

APAC multi-currency processing services revenue.  APAC multi-currency processing services revenue decreased $0.3 million, or 2%, to $11.5 million for the nine months ended September 30, 2016 from $11.8 million for the nine months ended September 30, 2015. The decrease in APAC multi-currency processing services revenue was driven by changes in the following key business metrics:

	Nine Months Ended
	September 30,						Variance
	2016			2015			Amount			Percent
APAC multi-currency processing active merchant locations (at period end)		18,579			15,088			3,491		23	%
APAC multi-currency processing settled transactions processed		5,017,066			4,620,901			396,165		9
APAC multi-currency processing settled dollar volume processed	$	1,037,600,001		$	1,034,501,621		$	3,098,380		0
APAC average net mark-up % on settled dollar volume processed		1.11	%		1.14	%		(0.03)	%	(3)	%

The 3% decrease in average net mark-up percentage on settled dollar volume processed resulted in a $0.3 million decrease to revenue.  The decrease in average net mark-up percentage was primarily due to our five-year contract extension with Global Payments effective June 2015.

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The Americas multi-currency processing services revenue.  The Americas multi-currency processing services revenue increased $2.2 million, or 42%, to $7.3 million for the nine months ended September 30, 2016 from $5.1 million for the nine months ended September 30, 2015.  The increase in the Americas multi-currency processing services revenue was driven by changes in the following key business metrics:

	Nine Months Ended
	September 30,						Variance
	2016			2015			Amount			Percent
The Americas multi-currency processing active merchant locations (at period end)		92,416			10,796			81,620		756	%
The Americas multi-currency processing settled transactions processed		3,342,333			2,338,898			1,003,435		43
The Americas multi-currency processing settled dollar volume processed	$	362,647,112		$	247,312,048		$	115,335,064		47
The Americas average net mark-up % on settled dollar volume processed		2.00	%*		1.81	%*		0.19	%	10	%

(*)For purposes of calculating “Average net mark-up percentage on settled dollar volume processed,” multi-currency processing services revenue includes revenue related to multi-currency transactions only.

The 47% increase in settled dollar volume processed resulted in a $2.3 million increase to revenue and a 10% increase in average net mark-up percentage on settled dollar volume processed resulted in a $0.5 million increase to revenue.  These increases were offset by a decrease in revenues earned on non-transactional services of $0.6 million. The increase in settled dollar volume processed and average net mark-up percentage is primarily due to the growth in our e-commerce and ATM offerings.

EMEA multi-currency processing services revenue. EMEA multi-currency processing services revenue decreased $0.6 million, or 9%, to $6.0 million for the nine months ended September 30, 2016 from $6.6 million for the nine months ended September 30, 2015.  The decrease in EMEA multi-currency processing services revenue was driven by changes in the following key business metrics:

	Nine Months Ended
	September 30,						Variance
	2016			2015			Amount			Percent
EMEA multi-currency processing active merchant locations (at period end)		14,603			11,611			2,992		26	%
EMEA multi-currency processing settled transactions processed		3,985,562			3,663,060			322,502		9
EMEA multi-currency processing settled dollar volume processed	$	640,581,534		$	704,982,577		$	(64,401,043)		(9)
EMEA average net mark-up % on settled dollar volume processed		0.93	%		0.93	%		0.00	%	0	%

The 9% decrease in settled dollar volume processed resulted in a $0.6 million decrease in revenue.  This decrease was primarily due to the activation of new currencies in 2015 which have decreased in 2016.

Payment processing services revenue

Payment processing services revenue is primarily earned from transaction processing services for customers in the Americas.  Payment processing services revenue increased $1.7 million, or 13%, to $15.6 million for the nine months ended September 30, 2016 from $13.9 million for the nine months ended September 30, 2015.  The increase was primarily due to transaction processing fees, arising from the continuous roll-out of merchants from existing and new payment processing customers.

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Cost of revenue

	Nine Months Ended
	September 30,				Variance
	2016		2015		Amount		Percent
Payment processing services fees	$	8,207,202	$	7,871,179	$	336,023	4	%
Processing and service costs		9,902,879		10,399,830		(496,951)	(5)
Total cost of revenue	$	18,110,081	$	18,271,009	$	(160,928)	(1)	%

Payment processing service fees

The increase in payment processing service fees of $0.3 million, or 4%, to $8.2 million for the nine months ended September 30, 2016 from $7.9 million for the nine months ended September 30, 2015 is a direct result of the mix of business within the payment processing service revenue.

Processing and service costs

The decrease in processing and service costs of $0.5 million, or 5%, to $9.9 million for the nine months ended September 30, 2016 from $10.4 million for the nine months ended September 30, 2015 is primarily due to a $0.4 million decrease in software amortization and a $0.4 million decrease in multi-currency referral commissions earned by third party agents.

Selling, general and administrative expenses

	Nine Months Ended
	September 30,				Variance
	2016		2015		Amount		Percent
Selling, general and administrative expenses	$	15,908,166	$	14,840,844	$	1,067,322	7	%

Selling, general and administrative expenses increased $1.1 million, or 7%, to $15.9 million for the nine months ended September 30, 2016 from $14.8 million for the nine months ended September 30, 2015.  The increase in selling, general and administrative expenses was primarily due to a $0.4 million increase in salary compensation, and a $0.3 million increase in stock-based compensation expense.

Liquidity and capital resources

We currently anticipate that our available cash balances will be sufficient to meet our presently anticipated working capital and capital expenditure requirements for at least the next twelve months. However, we may be required to raise additional funds through public or private debt or equity financing to meet additional working capital requirements. There can be no assurance that this additional financing will be available, or if available, will be on reasonable terms and not dilutive to our stockholders. If adequate funds are not available on acceptable terms, our business and operating results could be adversely affected.

Sources of liquidity

As of September 30, 2016, we had approximately $7.4 million in cash and cash equivalents of which $4.9 million in cash was held by foreign subsidiaries. Currently, if we were to repatriate cash held by our foreign subsidiaries, to the extent that such repatriation was a taxable event, we could utilize a portion of our $61.2 million net operating loss carry forward to offset the tax obligation, so that no U.S. tax liability would arise. However, our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.

On June 10, 2015, we entered into a $10.0 million secured revolving credit facility (the “Credit Facility”) with Citizens Bank, N.A. (“Citizens”) pursuant to a Credit and Security Agreement by and among our Company, certain affiliates thereof as borrowers or guarantors, and Citizens (the “Credit Agreement”). 

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On January 28, 2016, we entered into a Second Amendment to Credit and Security Agreement with Citizens and certain subsidiary affiliates of our Company as borrowers and/or guarantors (the “Amendment”). The Amendment amends the Credit Agreement and provides for an increase in our line of credit (the “Line of Credit”) with Citizens from $10.0 million to $20.0 million.  The Line of Credit is secured by substantially all of our personal property, including our intellectual property and that of our subsidiaries that are borrowers or guarantors.  The interest rate applicable to committed borrowings is tied to LIBOR plus a margin of 2.5%.  The Credit Agreement also provides for a letter of credit sub-facility of up to $2.0 million. The Credit Agreement contains customary affirmative and negative covenants, including, among others, financial covenants based on our leverage and fixed charge coverage ratios, as well as an obligation to maintain a minimum availability requirement of at least $5.0 million in the aggregate of cash and availability under the line of credit.  The Credit Facility will provide funds for general corporate purposes and repurchases of issued and outstanding capital stock of our Company.  The Credit Facility matures on December 31, 2020 and is payable in full upon maturity. 

On April 12, 2016, we borrowed approximately $13.9 million under the Credit Facility. Subsequently, on April 26, 2016, we repaid $4.0 million on the Credit Facility. As of September 30, 2016, we had $9.9 million outstanding under the Credit Facility and were in compliance with all financial covenants contained in the Credit Agreement. 

Capital expenditures

Our capital expenditures related to property and equipment, software development costs, and intangible assets were approximately $1.3 million in the first nine months of 2016.  The 2016 capital expenditures were primarily attributable to our investment in the business primarily through capital expenditures for network infrastructure and investments in software development and equipment.

Cash flows

	Nine Months Ended
	September 30,
	2016		2015
Cash provided by operating activities	$	5,848,584	$	8,035,295
Cash used for investing activities		(1,171,334)		(1,140,283)
Cash used for financing activities		(11,911,901)		(3,768,635)

Operating activities

Cash provided by operating activities during the nine months ended September 30, 2016 was $5.8 million, comprised of $8.9 million of cash generated by operations and a net decrease in our operating assets and liabilities of $3.1 million. This net decrease in our operating assets and liabilities of $3.1 million primarily consisted of a $3.1 million decrease in accounts payable and accrued expenses, a $1.2 million decrease in due to merchants and a $0.3 million increase in receivables, prepaid expenses and other assets.  These decreases were partially offset by a $1.2 million decrease in settlement assets and a $0.3 million decrease in other long-term assets.  Cash generated by operations of $8.9 million was inclusive of net income of $5.3 million and total non-cash charges of $3.6 million. Significant non-cash adjustments to net income primarily include depreciation and amortization expense of $2.0 million, stock-based compensation expense of $1.5 million and provision for doubtful accounts of $0.1 million.

Cash provided by operating activities during the nine months ended September 30, 2015 was $8.0 million, comprising of $6.6 million of cash generated by operations and a net increase in our operating assets and liabilities of $1.4 million. This net increase in our operating assets and liabilities of $1.4 million primarily consisted of a $1.2 million decrease in receivables, prepaid expenses and other assets coupled with a $0.5 million increase in accounts payable and accrued expenses and a $0.3 million increase in due to merchants.  These increases were partially offset by a $0.3 million increase in settlement assets and a $0.2 million increase in other long-term assets. Cash generated by operations of $6.6 million was inclusive of net income of $3.7 million and total non-cash charges of $2.9 million. Significant non-cash adjustments to net income primarily included depreciation and amortization expense of $2.2 million and stock option expense of $1.2 million which were offset by a gain on insurance proceeds of $0.5 million.  

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Investing activities

Cash used for investing activities for the nine months ended September 30, 2016 was $1.2 million, which was primarily attributable to a $1.0 million investment in software development and a $0.2 million purchase of property and equipment.

Cash used in investing activities for the nine months ended September 30, 2015 was $1.1 million, which was primarily attributable to a $0.8 million investment in software development, a $0.2 million purchase of property and equipment and a $0.1 million decrease in merchant reserves.

Financing activities

Cash used for financing activities for the nine months ended September 30, 2016 was $11.9 million, comprised of $23.8 million of treasury stock repurchases, $13.9 million of credit facility borrowings, $4.0 million of credit facility repayments, $0.3 million in payments for capital lease obligations and $2.3 million in proceeds from the issuance of common stock.

Cash used in financing activities for the nine months ended September 30, 2015 was $3.8 million, comprised of $4.6 million of treasury stock repurchases and $0.4 million in payments for capital lease obligations offset by $1.2 million in proceeds from the issuance of common stock.

Stock repurchase program

In 2014 and 2015, the Board of Directors authorized a total repurchase of $13.5 million of the Company’s outstanding shares of common stock.

As of March 9, 2016, the total amount of common stock repurchased under the program was 4.9 million shares for an aggregate price of $11.5 million and $2.0 million remained available for repurchase under the program.  As of March 10, 2016, the stock repurchase program was suspended in connection with the tender offer. On August 2, 2016, the Board of Directors reinstated the Company’s share repurchase program and expanded the authorization by an incremental $4.0 million, bringing its total current authorization to $6.0 million.

From August 2, 2016 to September 30, 2016, the Company repurchased approximately 1.6 million shares of common stock for an aggregate price of $6.0 million.  As of September 30, 2016, the total amount of common stock repurchased under the program was 6.5 million shares for an aggregate price of $17.5 million and there is currently no availability under the program.

Tender offer

On March 10, 2016, the Board of Directors authorized our Company to commence a modified “Dutch auction” tender offer to repurchase up to $15.0 million of our outstanding shares of common stock at a tender price of not less than $3.20 per share or greater than $3.60 per share. The tender offer commenced on March 14, 2016 and expired on April 11, 2016. On April 12, 2016, we paid $14.2 million, including transaction costs, to repurchase approximately 3.9 million shares at a tender price of $3.60 per share. The repurchased shares of common stock became treasury shares of our Company. 

30

Contractual obligations and commitments

As of September 30, 2016, there were no material changes in our contractual obligations and commitments as disclosed in our financial statements for the year ended December 31, 2015, except for the following agreements:

· Amendment to Credit and Security Agreement with Citizens Bank, N.A. entered into in January 2016;

· Employment Agreement with Carl J. Williams, entered into in February 2016; and

· Borrowing under revolving credit facility with Citizens Bank, N.A. in April 2016.

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such entities often referred to as structured finance or variable interest entities, which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purpose.

Effects of inflation

Our monetary assets consist primarily of cash and cash equivalents and receivables, and our non-monetary assets consist primarily of property and equipment, software development and intangible assets, which are not affected significantly by inflation. We believe the replacement costs of property and equipment will not materially affect our operations. However, the rate of inflation affects our expenses, which may not be readily recoverable in the prices of services we offer.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest rate risk

We had cash and cash equivalents totaling $7.4 million and $14.7 million as of September 30, 2016 and December 31, 2015, respectively.  The cash and cash equivalents are held for working capital purposes. We did not have any derivative financial instruments as of September 30, 2016 and December 31, 2015. We are not exposed, nor do we anticipate being exposed, to material risks due to changes in market interest rates given the historic low levels of interest being earned on the short-term fixed-rate cash operating accounts. In addition, the interest rate on our Credit Facility borrowings are based on LIBOR plus a margin of 2.5%. Any material increases to LIBOR could negatively impact our interest expense on our Credit Facility.

Foreign currency exchange risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. Dollar, principally the Hong Kong Dollar. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Although we have experienced and will continue to experience fluctuations in our net income as a result of transaction gains (losses), we believe such a change would not have a material impact on our results of operations as Hong Kong is not considered to be a highly inflationary or deflationary economy and historically the Hong Kong Dollar has traded in a very narrow band of exchange rates against the U.S. Dollar. Based upon our annual historical financial statements, for every 1% change in the exchange rate between the U.S. Dollar and the Hong Kong Dollar, our net income would be impacted by approximately $10,000 and the carrying value of assets on our balance sheet would be impacted by approximately $0.1 million.

In the event our foreign sales and expenses increase and expand into other currencies, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. At this time we do not enter into derivatives or other financial activities in an attempt to hedge our foreign currency exchange risk, but may do so in the future. It is difficult to predict the impact any hedging activities would have on our results of operations.

31

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating our disclosure controls and procedures, we and our management recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the third quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting means a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in legal proceedings in the ordinary course of business. While any litigation contains an element of uncertainty, we have no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of Planet Payment.

Item 1A. Risk Factors

Other than below, there were no material changes to the Company's risk factors as disclosed in Item 1A - Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

The United Kingdom’s departure from the Eurpean Union could adversely affect us.

The United Kingdom (U.K.) held a referendum on June 23, 2016 in which a majority of voters approved an exit from the European Union (EU) (“Brexit”). Negotiations are expected to commence to determine the future terms of the U.K.’s relationship with the EU, including, among other things, the terms of trade between the U.K. and the EU. The effects of Brexit will depend on any agreements the U.K. reaches to retain access to EU markets either during a transitional period or more permanently. The outcome of this referendum caused volatility in global stock markets and foreign currency exchange rate fluctuations, including the strengthening of the U.S. dollar against the British pound and euro. While it is difficult to predict the future effects of Brexit, increased uncertainty and a strong U.S. dollar may negatively impact the level of foreign travel and spending in markets where we do business, such as the UAE and Hong Kong, which could adversely affect our business, results of operations, financial condition and cash flows.

32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchase of Equity Securities

					Maximum Number
				Total Number of	(or approximate
				Shares Purchased	dollar value) of
				as Part of Publicly	Shares that May Yet
	Total Number of		Average Price	Announced Plans	be Purchased Under
Period	Shares Purchased		Paid per Share	or Programs(1)	the Plan or Programs
July 1-31, 2016	—	$	—	—	—
August 1-31, 2016	1,268,534	$	3.72	10,025,630	—
September 1-30, 2016	349,724	$	3.72	10,375,354	—

(1) In 2014 and 2015, the Board of Directors authorized a total repurchase of $13.5 million of the Company’s outstanding shares of common stock. 

As of March 9, 2016, the total amount of common stock repurchased under the program was 4.9 million shares for an aggregate price of $11.5 million and $2.0 million remained available for repurchase under the program.  As of March 10, 2016, the stock repurchase program was suspended in connection with the tender offer. On August 2, 2016, the Board of Directors reinstated the Company’s share repurchase program and expanded the authorization by an incremental $4.0 million, bringing its total current authorization to $6.0 million.

From August 2, 2016 to September 30, 2016, the Company repurchased approximately 1.6 million shares of common stock for an aggregate price of $6.0 million.  As of September 30, 2016, the total amount of common stock repurchased under the program was 6.5 million shares for an aggregate price of $17.5 million and there is currently no availability under the program. 

33

Item 6. Exhibits

(a) Exhibits

Exhibit		Incorporated by Reference			Filing	Filed/Furnished
Number	Exhibit Description	Form	File No.	Exhibit	Date	Herewith
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002.					X
32.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.					X

*This exhibit is being furnished and is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		PLANET PAYMENT, INC.
		(Registrant)
Dated: November 2, 2016	By:	/S/  CARL J. WILLIAMS
		Carl J. Williams
		Chairman of the Board of Directors and Chief Executive Officer
		(Principal Executive Officer)
Dated: November 2, 2016	By:	/S/  RAYMOND D’APONTE
		Raymond D’Aponte
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

35

EXHIBIT INDEX

Exhibit		Incorporated by Reference			Filing		Filed/Furnished
Number	Exhibit Description	Form	File No.	Exhibit		Date		Herewith
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.							X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.							X
32.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.							X
32.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.							X
101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.							X

*This exhibit is being furnished and is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

36

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Carl J.  Williams, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Planet Payment, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report), that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2,  2016	By:	/s/ Carl J.  Williams
		Carl J.  Williams
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Raymond D’Aponte, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Planet Payment, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report), that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2016	By:	/s/ Raymond D’Aponte
		Raymond D’Aponte
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C SECTION 1350

The undersigned, Carl J. Williams, Chief Executive Officer of Planet Payment, Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies:

(i) the Quarterly Report on Form 10-Q for the period ended September 30, 2016 of the Company (the “Report”) fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 2, 2016	By:	/s/ Carl J.  Williams
		Carl J.  Williams
		Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned, Raymond D’Aponte, Chief Financial Officer of Planet Payment, Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies:

(i) the Quarterly Report on Form 10-Q for the period ended September 30, 2016 of the Company (the “Report”) fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 2, 2016	By:	/s/ Raymond D’Aponte
		Raymond D’Aponte
		Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 31, 2016
Document and Entity Information
Entity Registrant Name	Planet Payment Inc
Entity Central Index Key	0001362925
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		48,902,496
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3

XML

Consolidated Balance Sheets - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 7,440,864	$ 14,675,515
Restricted cash	3,887,288	5,050,147
Accounts receivable, net of allowances of $0.1 million as of September 30, 2016 and December 31, 2015	6,641,993	6,406,496
Prepaid expenses and other assets	1,761,184	1,800,566
Total current assets	19,731,329	27,932,724
Other assets:
Restricted cash	551,054	551,917
Property and equipment, net	1,321,342	1,811,619
Software development costs, net	4,177,879	3,964,454
Intangible assets, net	981,279	1,378,264
Goodwill	294,844	286,852
Deferred tax asset and other long-term assets	8,270,540	8,581,082
Total other assets	15,596,938	16,574,188
Total assets	35,328,267	44,506,912
Current liabilities:
Accounts payable	446,946	306,520
Accrued expenses	4,459,360	6,438,600
Due to merchants	4,068,506	5,240,427
Current portion of capital leases	206,873	290,911
Total current liabilities	9,181,685	12,276,458
Long-term liabilities:
Long-term debt	9,916,000
Other long-term liabilities	1,107,982	1,666,938
Total long-term liabilities	11,023,982	1,666,938
Total liabilities	20,205,667	13,943,396
Commitments and contingencies (Note 8)
Stockholders' equity:
Convertible preferred stock-10,000,000 shares authorized as of September 30, 2016 and December 31, 2015, $0.01 par value: Series A-2,243,750 issued and 1,535,398 outstanding as of September 30, 2016 and 2,243,750 issued and outstanding as of December 31, 2015; $6,141,592 and $8,975,000 aggregate liquidation preference as of September 30, 2016 and December 31, 2015, respectively	15,354	22,438
Common stock-250,000,000 shares authorized as of September 30, 2016 and December 31, 2015, $0.01 par value, and 59,230,684 issued and 48,855,330 shares outstanding as of September 30, 2016, and 56,191,389 issued and 52,585,503 shares outstanding as of December 31, 2015	592,307	561,914
Treasury stock, at cost, 10,375,354 shares and 3,605,886 shares as of September 30, 2016 and December 31, 2015, respectively	(31,726,486)	(7,883,012)
Additional paid-in capital	109,870,586	106,741,026
Accumulated other comprehensive loss	(529,197)	(510,445)
Accumulated deficit	(63,099,964)	(68,368,405)
Total stockholders' equity	15,122,600	30,563,516
Total liabilities and stockholders' equity	$ 35,328,267	$ 44,506,912

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Condensed Consolidated Balance Sheets
Accounts receivable, allowances (in dollars)	$ 100,000	$ 100,000
Series A Convertible preferred stock, shares authorized	10,000,000	10,000,000
Series A Convertible preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Series A Convertible preferred stock, shares issued	2,243,750	2,243,750
Series A Convertible preferred stock, shares outstanding	1,535,398	2,243,750
Series A Convertible preferred stock, aggregate liquidation preference (in dollars)	$ 6,141,592	$ 8,975,000
Common stock, shares authorized	250,000,000	250,000,000
Common stock par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares issued	59,230,684	56,191,389
Common stock, shares outstanding	48,855,330	52,585,503
Treasury stock, shares	10,375,354	3,605,886

XML

Consolidated Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenue:
Net revenue	$ 13,621,239	$ 12,618,413	$ 40,409,128	$ 37,434,542
Cost of revenue:
Payment processing service fees	2,781,289	2,692,090	8,207,202	7,871,179
Processing and service costs	2,878,088	3,776,232	9,902,879	10,399,830
Total cost of revenue	5,659,377	6,468,322	18,110,081	18,271,009
Selling, general and administrative expenses	5,222,560	5,657,740	15,908,166	14,840,844
Restructuring charges	229,121	283,726	354,389	283,726
Total operating expenses	11,111,058	12,409,788	34,372,636	33,395,579
Income from operations	2,510,181	208,625	6,036,492	4,038,963
Other income (expense):
Interest expense	(88,669)	(10,372)	(186,366)	(38,815)
Interest income	428	392	1,250	1,183
Other income	93,016		93,016
Total other income (expense), net	4,775	(9,980)	(92,100)	(37,632)
Income from operations before provision for income taxes	2,514,956	198,645	5,944,392	4,001,331
Provision for income taxes	(289,543)	(92,674)	(675,951)	(308,406)
Net income	$ 2,225,413	$ 105,971	$ 5,268,441	$ 3,692,925
Basic net income per share applicable to common stockholders ( in dollars per share)	$ 0.04	$ 0.00	$ 0.10	$ 0.06
Diluted net income per share applicable to common stockholders (in dollars per share)	$ 0.04	$ 0.00	$ 0.09	$ 0.06
Weighted-average common stock outstanding (basic) (in shares)	49,179,596	51,360,758	49,848,634	52,985,106
Weighted-average common stock outstanding (diluted) (in shares)	51,254,223	52,384,391	52,002,249	53,611,968

XML

Consolidated Statements of Comprehensive Income - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Consolidated Statements of Comprehensive Income
Net income	$ 2,225,413	$ 105,971	$ 5,268,441	$ 3,692,925
Foreign currency translation adjustment	(11,530)	(65,265)	(18,752)	(262,084)
Total comprehensive income	$ 2,213,883	$ 40,706	$ 5,249,689	$ 3,430,841

XML

Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities:
Net income	$ 5,268,441	$ 3,692,925
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	1,498,358	1,197,741
Depreciation and amortization expense	2,083,655	2,175,220
Provision for doubtful accounts	62,675	7,403
Disposal of property and equipment	500
Gain on insurance settlement		(517,930)
Changes in operating assets and liabilities:
Decrease (increase) in settlement assets	1,160,869	(322,982)
(Increase) decrease in accounts receivables, prepaid expenses and other current assets	(258,790)	1,184,851
Decrease (increase) in other long-term assets	310,542	(131,588)
(Decrease) increase in accounts payable and accrued expenses	(3,062,995)	559,792
(Decrease) increase in due to merchants	(1,169,931)	323,105
Other	(44,740)	(133,242)
Net cash provided by operating activities	5,848,584	8,035,295
Cash flows from investing activities:
Decrease (increase) in restricted cash	2,853	(27,651)
Decrease in merchant reserves	(1,990)	(92,169)
Purchase of property and equipment	(156,165)	(175,570)
Capitalized software development	(999,733)	(828,393)
Purchase of intangible assets	(16,299)	(16,500)
Net cash used for investing activities	(1,171,334)	(1,140,283)
Cash flows from financing activities:
Proceeds from issuance of common stock	2,287,990	1,203,750
Principal payments on capital lease obligations	(272,417)	(404,884)
Borrowings under credit facility	13,916,000
Repayments under credit facility	(4,000,000)
Purchase of treasury stock	(23,843,474)	(4,567,501)
Net cash used for financing activities	(11,911,901)	(3,768,635)
Net (decrease) increase in cash and cash equivalents	(7,234,651)	3,126,377
Cash and cash equivalents at beginning of period	14,675,515	9,837,791
Cash and cash equivalents at end of period	7,440,864	12,964,168
Cash paid for:
Interest	165,252	36,585
Income taxes	744,911	539,520
Non-cash investing and financing activities:
Common stock issued for preferred stock conversion	21,629
Common stock issued for stock options exercised	98
Assets acquired under capital leases	122,630	156,129
Accrued capitalized hardware, software and fixed assets	75,870	39,158
Capitalized stock-based compensation	$ 21,625	$ 27,245

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Business description and basis of presentation

9 Months Ended

Sep. 30, 2016

Business description and basis of presentation

Business description and basis of presentation

1. Business description and basis of presentation

Business description

Planet Payment, Inc. together with its wholly-owned subsidiaries (“Planet Payment,” the “Company,” “we,” or “our”) is a provider of international payment and transaction processing and multi­currency processing services. The Company provides its services to approximately 197,000 active merchant locations in 23 countries and territories across the Asia- Pacific region, the Americas, the Middle East, Africa and Europe, primarily through its acquiring bank and processor customers, as well as through its own direct sales force. The Company provides banks and their merchants with innovative services to accept, process and reconcile electronic payments. The Company’s point-of-sale multi-currency payment processing services are designed for merchants in the retail, restaurant, and hospitality environments. We also provide payment services for e-commerce and mail and telephone order merchants. Our point-of-sale and e-commerce services help merchants sell more goods and services to consumers, and are integrated within the payment card transaction process enabling its acquiring customers to process and reconcile payment transactions in multiple currencies, geographies and channels. The Company’s ATM services provide its acquirers with additional processing capabilities to help them increase revenue and improve customer satisfaction. The Company also offers non-financial transaction processing services that allow merchants to offer a range of commercial services including pre-paid mobile phone top-up and bill payments using the same point-of-sale devices deployed to accept payment cards. The Company is a registered third party processor with the major card associations and operates in accordance with industry standards, including the Payment Card Industry, or PCI, Security Council’s Data Security Standards.

Basis of presentation

The unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying unaudited condensed consolidated interim financial statements include the accounts of Planet Payment, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

Unaudited condensed consolidated interim financial information

The accompanying unaudited condensed consolidated interim financial statements as of September 30, 2016 and for the periods ended September 30, 2016 and 2015 have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, which are normal and recurring, necessary for a fair presentation of the statement of operations, financial position and cash flows. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. Operating results for the interim period ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.  The December 31, 2015 balance sheet information has been derived from the audited financial statements at that date. Certain information and disclosures normally included in annual consolidated financial statements have been omitted pursuant to the rules and regulation of the Securities and Exchange Commission (“SEC”).

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Recent accounting pronouncements

9 Months Ended

Sep. 30, 2016

Recent accounting pronouncements

Recent accounting pronouncements

2. Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.  The new guidance includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a company’s contracts with customers.  The original effective date of ASU 2014-09 of January 1, 2017 has been delayed until January 1, 2018.  Early adoption is not permitted before the original effective date.  The standard allows for either retrospective application to each reporting period presented or retrospective application with the cumulative effect of initially applying this update recognized at the date of initial application.  The Company is currently evaluating the effect ASU 2014-09 will have on the Company’s condensed consolidated financial statements and disclosures.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU No. 2016-02”).  The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in ASU No. 2016-02 is permitted for all entities.  A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the effect ASU 2016-02 will have on the Company’s condensed consolidated financial statements and disclosures.

In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-08”). The amendments in ASU 2016-08 do not change the core principle of the guidance. The amendments clarify the implementation guidance on principal versus agent considerations.   The update suggests that entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The effective date and transition requirements for the amendments in ASU 2016-08 are the same as the effective date and transition requirements of ASU 2014-09.  We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation—Stock Compensation (Topic 718) (“ASU No. 2016-09”).  This update is part of the FASB’s Simplification Initiative, which simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.

In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-10”). The amendments in this update do not change the core principle of the guidance. The amendments in this update clarify the identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.  The amendments in this update clarify that contractual provisions that, explicitly or implicitly, require an entity to transfer control of additional goods or services to a customer should be distinguished from contractual provisions that, explicitly or implicitly, define the attributes of a single promised license.  The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of update ASU 2014-09.  The Company is currently evaluating the effect ASU 2016-10 will have on the Company’s condensed consolidated financial statements and disclosures.

In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-12”), in which the FASB finalized the guidance in the new revenue standard on collectibility, noncash consideration, presentation of sales tax, and transition.  The amendments are intended to address implementation issues that were raised by stakeholders and discussed by the Revenue Recognition Transition Resource Group, and provide additional practical expedients.  The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of update ASU 2014-09.  We do not expect a material impact on our financial condition, results of operations or cash flows from the adoption of this guidance.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230) (“ASU 2016-15”), which intends to reduce diversity in practice in how certain cash receipts and cash payments are presented in the statement of cash flows.  ASU 2016-15 clarifies that the classification of cash activity relates to debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate and bank-owned life insurance policies, distributions received from equity-method investments and beneficial interests in securitization transactions.  The new standard is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, provided that all of the amendments are adopted in the same period.  The early adoption of the provisions of ASU No. 2016-15 did not materially impact the Company's financial condition, results of operations or cash flows.

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Concentration of credit risk

9 Months Ended

Sep. 30, 2016

Concentration of credit risk

Concentration of credit risk

3. Concentration of credit risk

The Company’s assets that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and receivables from clients. The Company places some of its cash, cash equivalents, and restricted cash with financial banking institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company also maintains cash balances at foreign banking institutions, which are not insured by the FDIC.

The Company maintains an allowance for uncollectible accounts receivable based on expected collectability and performs ongoing credit evaluations of customers’ financial condition.

The Company’s accounts receivable concentrations of 10% and greater are as follows:

	As of		As of
	September 30,		December 31,
	2016		2015
Customer A	16	%	15	%
Customer B	13		*
Customer C	12		*
Customer H	*		11

* Less than 10% accounts receivable concentration.

The Company’s revenue concentrations of 10% and greater are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Customer A	16	%	17	%	16	%	19	%
Customer G	14		*		12		*
Customer H	*		13		*		*

* Less than 10% revenue concentration.

a

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Net income per share

9 Months Ended

Sep. 30, 2016

Net income per share

Net income per share

4. Net income per share

The Company computes net income per share in accordance with ASC 260, Earnings per Share (“ASC topic 260”). Under ASC topic 260, securities that contain rights to receive non-forfeitable dividends (whether paid or unpaid) are participating securities and should be included in the two-class method of computing earnings per share. The Company’s preferred stockholders are entitled to participate in dividends and earnings when, and if, dividends are declared on the common stock. As such, the Company calculates net income per share using the two-class method. The two-class method is an earnings formula that treats a participating security as having rights to dividends that otherwise would have been available to common and preferred stockholders based on their respective rights to receive dividends. Losses are not allocated to the preferred stockholders for computing net loss per share under the two-class method because the preferred stockholders do not have contractual obligations to share in the losses of the Company.

Basic earnings per share is calculated by dividing net income, adjusted for amounts allocated to participating securities under the two-class method, if applicable, by the weighted average number of common stock outstanding during the period.

Diluted earnings per share is calculated by dividing net income by the weighted average number of shares of the Company’s common stock outstanding, assuming dilution, during the period. The diluted earnings per share calculation assumes (i) all stock options and warrants which are in the money are exercised at the beginning of the period and (ii) each issue or series of issues of potential common stock are considered in sequence from the most dilutive to the least dilutive. That is, dilutive potential common stock with the lowest “earnings add-back per incremental share” shall be included in dilutive earnings per share before those shares with higher earnings add back per incremental share.

The following table sets forth the computation of basic and diluted net income per share:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Numerator:
Net income	$	2,225,413	$	105,971	$	5,268,441	$	3,692,925
Amounts allocated to participating preferred stockholders under the two-class method		(196,868)		(12,284)		(466,065)		(428,090)
Net income applicable to common stockholders (basic and dilutive)	$	2,028,545	$	93,687	$	4,802,376	$	3,264,835
Denominator:
Weighted-average common stock outstanding (basic)		49,179,596		51,360,758		49,848,634		52,985,106
Common equivalent shares from options and warrants to purchase common stock		2,074,627		1,023,633		2,153,615		626,862
Weighted-average common stock outstanding (diluted)(1)		51,254,223		52,384,391		52,002,249		53,611,968
Basic net income per share applicable to common stockholders	$	0.04	$	0.00	$	0.10	$	0.06
Diluted net income per share applicable to common stockholders(1)	$	0.04	$	0.00	$	0.09	$	0.06

(1) In accordance with ASC 260-10-45-48, for the three and nine months ended September 30, 2016 and 2015, the Company excluded 396,500 and 1,446,500, respectively, of contingently-issued restricted shares from diluted weighted average common stock outstanding as the contingencies were neither (a) satisfied at the reporting date nor (b) would have been satisfied if the reporting date was at the end of the contingency period.

The following table sets forth the weighted average securities outstanding that have been excluded from the diluted net income per share calculation because the effect would have been anti-dilutive:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Stock options	—	3,588,862	581,665	5,096,019
Restricted stock awards	—	—	23,574	98,147
Convertible preferred stock(1)	4,688,237	6,851,144	5,493,407	6,851,144
Total anti-dilutive securities	4,688,237	10,440,006	6,098,646	12,045,310

(1) Diluted net income per share increases when convertible preferred stock is included in the required sequence in the diluted earnings per share computation. As such, convertible preferred stock is excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2016 and 2015.

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Stock-based compensation expense

9 Months Ended

Sep. 30, 2016

Stock-based compensation expense and assumptions

Stock-based compensation expense and assumptions

5. Stock-based compensation expense

Stock-based compensation expense is measured at the grant date based on fair value, and recognized as an expense over the requisite service period, net of an estimated forfeiture rate.

During the first quarter of 2016, 0.8 million stock options were granted to certain employees of the Company, with a grant fair value of $0.7 million. The actual number of shares that will be issued upon exercise of the options is subject to the achievement of service-based vesting conditions.  Stock-based compensation expense is recorded on a straight line basis from the date of the grant over the requisite service period of 36 months. 

During the second quarter of 2016, 0.1 million restricted stock awards with a grant fair value of $0.2 million were granted to certain members of the Company’s Board of Directors.  The final number of vested shares is subject to service-based vesting conditions.  Stock-based compensation expense is recorded on a straight line basis from the date of the grant over the requisite service period of 12 months.

During the second quarter of 2016, 0.5 million shares of the 2015 restricted stock awards granted to certain officers of the Company vested.  The market condition was achieved as the Company’s volume weighted average price on NASDAQ was greater than or equal to $3.50 per share for seven consecutive trading days, or any ten trading days over a consecutive thirty-five day period. The market condition was valued at $0.7 million, of which $0.5 million was expensed as of March 31, 2016 and an additional $0.2 million was expensed during the three months ended June 30, 2016.

The following summarizes stock-based compensation expense recognized by income statement classification:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Processing and service costs	$	35,051	$	43,030	$	134,112	$	143,611
Selling, general and administrative expenses		282,408		656,197		1,364,246		1,017,206
Restructuring charges		—		36,924		—		36,924
Total stock-based compensation expense	$	317,459	$	736,151	$	1,498,358	$	1,197,741

The following summarizes stock-based compensation expense recognized by type:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Stock options	$	217,537	$	528,249	$	766,766	$	783,954
Restricted stock awards		99,922		207,902		731,592		413,787
Total stock-based compensation expense	$	317,459	$	736,151	$	1,498,358	$	1,197,741

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Property and equipment

9 Months Ended

Sep. 30, 2016

Property and equipment

Property and equipment

6. Property and equipment

Property and equipment, net consist of the following:

	Estimated			As of		As of
	useful life			September 30,		December 31,
	(in years)			2016		2015
Equipment	2	-	7	$	1,008,798	$	958,175
Computer hardware	3	-	5		3,409,750		3,266,233
Furniture and fixtures	5	-	7		227,851		192,565
Leasehold improvements	3	-	10		786,637		746,336
Total property and equipment, gross					5,433,036		5,163,309
Less: Accumulated depreciation and amortization					(4,111,694)		(3,351,690)
Property and equipment, net				$	1,321,342	$	1,811,619

Property and equipment depreciation and amortization expense is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Depreciation and amortization expense	$	328,181	$	164,538	$	768,740	$	489,010

Included in depreciation and amortization expense for the three and nine months ended September 30, 2016 is $0.2 million and $0.3 million, respectively, of expense related to the acceleration of amortization on certain assets due to exiting a floor in the Company’s corporate location before the end of the lease term.  The cease use date is October 1, 2016.  For additional information on the Company’s restructuring charges disclosure, refer to Note 14.

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Goodwill and intangible assets

9 Months Ended

Sep. 30, 2016

Goodwill and intangible assets

Goodwill and intangible assets

7. Goodwill and intangible assets

The change in carrying amount of goodwill for the nine months ended September 30, 2016 is as follows:

Goodwill, gross, as of December 31, 2015	$	286,852
Impact of change in Euro exchange rate		7,992
Accumulated impairment losses as of September 30, 2016		—
Goodwill, net, as of September 30, 2016	$	294,844

The entire goodwill balance is assigned to the payment processing services segment.

Intangible assets are recorded at estimated fair value and are amortized ratably over their estimated useful lives to processing and service costs, which are included in cost of revenue.

The gross book value, accumulated amortization and amortization periods of intangible assets are as follows:

	As of September 30, 2016						As of December 31, 2015						Amortization
	Gross book		Accumulated		Net book		Gross book		Accumulated		Net book		period
	value		amortization		value		value		amortization		value		(in years)
Trademarks and patents	$	1,202,666	$	(538,214)	$	664,452	$	1,184,612	$	(472,914)	$	711,698	15	-	21
Technology		2,455,406		(2,138,579)		316,827		2,388,852		(1,722,286)		666,566	5
Intangible assets, net	$	3,658,072	$	(2,676,793)	$	981,279	$	3,573,464	$	(2,195,200)	$	1,378,264

Amortization expense related to intangible assets is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Amortization expense	$	143,692	$	143,599	$	431,710	$	431,388

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Commitments and contingencies

9 Months Ended

Sep. 30, 2016

Commitments and contingencies

Commitments and contingencies

8. Commitments and contingencies

Employment agreements

Pursuant to employment agreements with certain employees, the Company had a commitment to pay severance of approximately $1.2 million as of September 30, 2016 and $0.9 million as of December 31, 2015, in the event of an involuntary termination, as defined in the employment agreements. Additionally, in the event of termination upon a change of control, as defined in the agreements, the Company had a commitment to pay severance of approximately $1.2 million as of September 30, 2016 and $1.1 million as of December 31, 2015.

Contingent liabilities

In instances where the Company is acting as the merchant acquirer, the Company bears a risk that a merchant may engage in fraud by submitting for payment certain credit card transactions that may have been manipulated, are fictitious, or are otherwise not bona fide. Similarly, the Company bears the risk that a merchant becomes insolvent, owing money to cardholders. To the extent that such fraud or insolvency occurs in circumstances where the Company is liable to make good on any resultant losses, this could affect the Company’s operating results and cash flows. The Company has required certain merchants to post cash reserves of approximately $0.9 million with the sponsoring bank against such liabilities and has itself paid the acquirer a reserve of $0.3 million in connection therewith, which is included in long-term “Restricted cash” on the condensed consolidated balance sheets. In addition, the Company holds merchant reserves of approximately $2.2 million. This reserve amount is included in “Restricted cash” with an offset in “Due to merchants.” Under FASB ASC 460, Guarantees, the Company evaluates its ultimate risk and records an estimate of potential loss for chargeback’s related to merchant fraud and processing errors based upon an assessment of actual historical fraud rates and errors in processing compared to recent bank card processing volume levels.  No contingent liability has been recorded as of September 30, 2016 and December 31, 2015, as the risk of material loss is considered remote. The Company monitors these contingent liabilities on a quarterly basis and will provide for a reserve if deemed necessary.

Outstanding litigation

From time to time, the Company’s operating entities may be involved in legal proceedings in the ordinary course of business. While any litigation contains an element of uncertainty, the Company has no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of the Company.

Acquiring bank sponsorship agreement

In order to offer merchant acquiring services for Visa and MasterCard transactions, the Company must be sponsored by a financial institution that is a principal member of the Visa and MasterCard networks.

The Company entered into a five-year agreement with a sponsoring bank effective September 1, 2013. The Company was required to pay minimum annual sponsorship transaction fees of $0.3 million in year one.  The minimum fees escalate each subsequent year with minimum fees of $0.5 million due in year five for total minimum fees of $1.8 million to be paid over the term of the agreement.  Sponsorship fees are recorded to payment processing service fees cost of sales with the total agreement minimum of $1.8 million recognized on a straight line basis over the term of the agreement.

Pursuant to the agreement, the Company is liable for all losses incurred by the sponsoring bank with respect to the activities of its merchants sponsored under the agreement.  No contingent liability has been recorded as of September 30, 2016 as the risk of material loss is considered remote based on historical information.  The Company monitors this contingent liability on a quarterly basis and will provide for a reserve if deemed necessary.   

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Credit Facility

9 Months Ended

Sep. 30, 2016

Convertible debt

Credit Facility

9. Credit Facility

On June 10, 2015, the Company entered into a $10.0 million secured revolving credit facility (the “Credit Facility”) with Citizens Bank, N.A. (“Citizens”) pursuant to a Credit and Security Agreement by and among the Company, certain affiliates thereof as borrowers or guarantors, and Citizens (the “Credit Agreement”). 

On January 28, 2016, the Company entered into a Second Amendment to Credit and Security Agreement with Citizens and certain subsidiary affiliates of the Company as borrowers and/or guarantors (the “Amendment”). The Amendment amends the Credit Agreement and provides for an increase in the Company’s line of credit (the “Line of Credit”) with Citizens from $10.0 million to $20.0 million.  The Line of Credit is secured by substantially all of the Company’s personal property, including the Company’s intellectual property and that of its subsidiaries that are borrowers or guarantors.  The interest rate applicable to committed borrowings is tied to LIBOR plus a margin of 2.5%.  The Credit Agreement also provides for a letter of credit sub-facility of up to $2.0 million. The Credit Agreement contains customary affirmative and negative covenants, including, among others, financial covenants based on the Company’s leverage and fixed charge coverage ratios, as well as an obligation to maintain a minimum availability requirement of at least $5.0 million in the aggregate of cash and availability under the line of credit.  The Credit Facility will provide funds for general corporate purposes and repurchases of issued and outstanding capital stock of the Company.  The Credit Facility matures on December 31, 2020 and is payable in full upon maturity. 

On April 12, 2016, the Company borrowed approximately $13.9 million under the Credit Facility. Subsequently, on April 26, 2016, the Company repaid $4.0 million on the Credit Facility. As of September 30, 2016, the Company had $9.9 million outstanding under the Credit Facility and was in compliance with all financial covenants contained in the Credit Agreement.

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Convertible preferred stock

9 Months Ended

Sep. 30, 2016

Convertible preferred stock.

Convertible preferred stock

10. Convertible preferred stock

On April 11, 2016, 708,352 shares of Series A Preferred Stock were converted into 2,162,907 shares of common stock at a conversion ratio of approximately 3.05 shares of common stock per share of Series A Preferred Stock.  As of September 30, 2016, the remaining preferred stock consists of 1,535,398 shares designated (and issued) as Series A Preferred Stock, and 1,756,250 shares which are undesignated (and unissued). Each issued share of Series A Preferred Stock is convertible into approximately 3.05 shares of common stock, for a total of 4,688,237 shares of common stock.

For additional information on the Company’s convertible preferred stock disclosure, refer to Note 9 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

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Accrued expenses

9 Months Ended

Sep. 30, 2016

Accrued expenses

Accrued expenses

11. Accrued expenses

The following are the components of accrued expenses:

	As of		As of
	September 30,		December 31,
	2016		2015
Bonus	$	307,292	$	710,739
Deferred revenue(*)		753,787		688,418
Deferred incentive(**)		600,000		950,000
Other(***)		2,798,281		4,089,443
Total accrued expenses	$	4,459,360	$	6,438,600

(*)Current deferred revenue will be recognized as revenue ratably over the next 12 months.  As of September 30, 2016, included in the balance sheet classification “Other long-term liabilities” is the non-current portion of deferred revenue in the amount of $0.7 million. The long-term portion of deferred revenue balance as of December 31, 2015 was approximately $0.6 million.

(**)As of September 30, 2016, the Company recorded approximately $0.6 million in short-term incentives in relation to future obligations under a contract. As of September 30, 2016 and December 31, 2015, included in the balance sheet classification “Other long-term liabilities” is the non‑current portion of these incentives of approximately $0.2 million and $0.7 million, respectively.    

(***)As of September 30, 2016 and December 31, 2015, included in “other” were third party referral commissions of approximately $0.5 million and $1.6 million, respectively. No other amount included in “Other” exceeded 10% of total current liabilities.

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Segment information

9 Months Ended

Sep. 30, 2016

Segment information

Segment information

12. Segment information

General information

The segment and geographic information provided in the table below is being reported consistent with the Company’s method of internal reporting. Operating segments are defined as components of an enterprise for which separate financial information is available and which is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM reviews net revenue and gross profit by service by geographical region. The Company operates in two reportable segments: multi-currency processing services and payment processing services.

Information about revenue, profit and assets

The CODM evaluates performance and allocates resources based on net revenue and gross profit of each segment. For purposes of analyzing segments, gross profit of the multi-currency processing services segment is equal to net revenue less multi-currency cost of sales of $0.5 million and $1.0 million, which is included in “processing and services costs” for the three months ended September 30, 2016 and 2015, respectively, and $1.9 million and $2.3 million for the nine months ended September 30, 2016 and 2015, respectively. The gross profit for the payment processing services segment includes net revenue of the segment less the cost of revenue component “payment processing services fees,” which includes interchange and card network fees and assessments. Net revenue and gross profit by geographical region is based upon where the transaction originated. Lastly, the Company does not evaluate performance or allocate resources using segment asset data. Long-lived assets are primarily located in the Americas and Europe and as of September 30, 2016 and December 31, 2015, long-lived asset amounts are $6.8 million and $7.4 million, respectively.

The Company conducts its business primarily in three geographical regions: Asia-Pacific (“APAC”); the Americas; and Europe, Middle East and Africa (“EMEA”). The following table provides revenue concentration by geographic region. Analysis of revenue by segment and geographical region and reconciliations to consolidated revenue, gross profit, and income before the provision for income taxes are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Net Revenue:
APAC	$	3,962,539	$	3,573,478	$	11,541,521	$	11,836,523
The Americas		2,634,887		1,870,722		7,264,448		5,114,772
EMEA		1,578,050		2,348,129		5,962,345		6,584,488
Total multi-currency processing services revenue		8,175,476		7,792,329		24,768,314		23,535,783
Payment processing services revenue		5,445,763		4,826,084		15,640,814		13,898,759
Net revenue	$	13,621,239	$	12,618,413	$	40,409,128	$	37,434,542
Gross Profit:
APAC	$	3,942,457	$	3,547,202	$	11,467,607	$	11,741,027
The Americas		2,470,294		1,761,686		6,766,889		4,799,928
EMEA		1,229,358		1,450,650		4,636,893		4,662,273
Total multi-currency processing services gross profit		7,642,109		6,759,538		22,871,389		21,203,228
Payment processing services gross profit		2,664,474		2,133,994		7,433,612		6,027,578
Total reportable segment gross profit		10,306,583		8,893,532		30,305,001		27,230,806
Corporate allocated cost of sales		2,344,721		2,743,441		8,005,954		8,067,273
Total gross profit	$	7,961,862	$	6,150,091	$	22,299,047	$	19,163,533
Income from operations before provision for income taxes:
Total gross profit	$	7,961,862	$	6,150,091	$	22,299,047	$	19,163,533
Selling, general and administrative expenses		5,222,560		5,657,740		15,908,166		14,840,844
Restructuring charges		229,121		283,726		354,389		283,726
Income from operations		2,510,181		208,625		6,036,492		4,038,963
Interest expense		(88,669)		(10,372)		(186,366)		(38,815)
Interest income		428		392		1,250		1,183
Other income		93,016		—		93,016		—
Total other income (expense), net		4,775		(9,980)		(92,100)		(37,632)
Income from operations before provision for income taxes	$	2,514,956	$	198,645	$	5,944,392	$	4,001,331

Payment processing services revenue and gross profit are the result of transactions that primarily originated in the Americas. For the three months ended September 30, 2016, Customer B and Customer G had revenue concentration of 14% and 35%, respectively, and for the nine months ended September 30, 2016, Customer B and Customer G had revenue concentration of 15% and 30%, respectively.  For the three months ended September 30, 2015, Customer B and Customer G had revenue concentration of 15% and 24%, respectively, and for the nine months ended September 30, 2015, Customer B and Customer G had revenue concentration of 15% and 22%, respectively.

“Corporate allocated cost of sales” includes expenses of running its platform infrastructure including: Internet connectivity, hosting and data storage expenses, amortization expenses of capitalized software development costs, compensation and related benefits of its technology personnel and a portion of general overhead expenses.

Concentration of revenue by customer by geographical region:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Multi-currency processing services revenue:
APAC:
Customer A	56	%	59	%	56	%	59	%
The Americas:
Customer D	22		*		22		10
Customer E	*		10		*		13
Customer F	*		19		*		19
Customer I	15		*		12		*
Customer J	15		*		11		*
EMEA:
Customer C	58		27		61		48
Customer H	37		72		37		52

(*)Less than 10% revenue concentration.

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Stock repurchase program

9 Months Ended

Sep. 30, 2016

Stock Repurchase Program

Stock repurchase program

13. Stock Repurchases

Stock repurchase program

In 2014 and 2015, the Board of Directors authorized a total repurchase of $13.5 million of the Company’s outstanding shares of common stock.  

As of March 9, 2016, the total amount of common stock repurchased under the program was 4.9 million shares for an aggregate price of $11.5 million and $2.0 million remained available for repurchase under the program.  As of March 10, 2016, the stock repurchase program was suspended in connection with the tender offer. On August 2, 2016, the Board of Directors reinstated the Company’s share repurchase program and expanded the authorization by an incremental $4.0 million, bringing its total current authorization to $6.0 million.

From August 2, 2016 to September 30, 2016, the Company repurchased approximately 1.6 million shares of common stock for an aggregate price of $6.0 million.  As of September 30, 2016, the total amount of common stock repurchased under the program was 6.5 million shares for an aggregate price of $17.5 million and there is currently no availability under the program.   

Tender offer

On March 10, 2016, the Board of Directors authorized the Company to commence a modified “Dutch auction” tender offer to repurchase up to $15.0 million of its outstanding shares of common stock at a tender price of not less than $3.20 per share or greater than $3.60 per share. The tender offer commenced on March 14, 2016 and expired on April 11, 2016. On April 12, 2016, the Company paid $14.2 million, including transaction costs, to repurchase approximately 3.9 million shares at a tender price of $3.60 per share. The repurchased shares of common stock became treasury shares of the Company.  

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Restructuring charges

9 Months Ended

Sep. 30, 2016

Restructuring charges

Restructuring charges

14. Restructuring charges

During the second quarter of 2016, the Company incurred total restructuring charges of approximately $125,000, of which approximately $100,000 represents the accelerated amortization of certain assets due to exiting a floor in its corporate location before the end of the lease term.  The remaining amount represents the cash components of severance and benefits paid during the period.

During the third quarter of 2016, the Company incurred total restructuring charges of approximately $229,000, of which approximately $150,000 represents the accelerated amortization of certain assets due to exiting a floor in its corporate location before the end of the lease term. The cease use date is October 1, 2016. The remaining amount represents the cash components of severance and benefits paid during the period. 

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Subsequent events

9 Months Ended

Sep. 30, 2016

Subsequent events

Subsequent events

15. Subsequent event

On November 1, 2016, the Company’s Board of Directors authorized the repurchase of up to $10.0 million of the Company’s outstanding shares of common stock. 

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Concentration of credit risk (Tables)

9 Months Ended

Sep. 30, 2016

Accounts Receivable

Concentration of credit risk

Schedule of concentrations of 10% and greater

	As of		As of
	September 30,		December 31,
	2016		2015
Customer A	16	%	15	%
Customer B	13		*
Customer C	12		*
Customer H	*		11

* Less than 10% accounts receivable concentration.

Revenue

Concentration of credit risk

Schedule of concentrations of 10% and greater

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Customer A	16	%	17	%	16	%	19	%
Customer G	14		*		12		*
Customer H	*		13		*		*

* Less than 10% revenue concentration.

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Net income per share (Tables)

9 Months Ended

Sep. 30, 2016

Net income per share

Schedule of computation of basic and diluted net income (loss) per share

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Numerator:
Net income	$	2,225,413	$	105,971	$	5,268,441	$	3,692,925
Amounts allocated to participating preferred stockholders under the two-class method		(196,868)		(12,284)		(466,065)		(428,090)
Net income applicable to common stockholders (basic and dilutive)	$	2,028,545	$	93,687	$	4,802,376	$	3,264,835
Denominator:
Weighted-average common stock outstanding (basic)		49,179,596		51,360,758		49,848,634		52,985,106
Common equivalent shares from options and warrants to purchase common stock		2,074,627		1,023,633		2,153,615		626,862
Weighted-average common stock outstanding (diluted)(1)		51,254,223		52,384,391		52,002,249		53,611,968
Basic net income per share applicable to common stockholders	$	0.04	$	0.00	$	0.10	$	0.06
Diluted net income per share applicable to common stockholders(1)	$	0.04	$	0.00	$	0.09	$	0.06

(1) In accordance with ASC 260-10-45-48, for the three and nine months ended September 30, 2016 and 2015, the Company excluded 396,500 and 1,446,500, respectively, of contingently-issued restricted shares from diluted weighted average common stock outstanding as the contingencies were neither (a) satisfied at the reporting date nor (b) would have been satisfied if the reporting date was at the end of the contingency period.

Schedule of weighted average securities outstanding that have been excluded from the diluted net income (loss) per share calculation because the effect would have been anti-dilutive

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Stock options	—	3,588,862	581,665	5,096,019
Restricted stock awards	—	—	23,574	98,147
Convertible preferred stock(1)	4,688,237	6,851,144	5,493,407	6,851,144
Total anti-dilutive securities	4,688,237	10,440,006	6,098,646	12,045,310

(1) Diluted net income per share increases when convertible preferred stock is included in the required sequence in the diluted earnings per share computation. As such, convertible preferred stock is excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2016 and 2015.

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Stock-based compensation expense (Tables)

9 Months Ended

Sep. 30, 2016

Stock-based compensation expense and assumptions

Summary of stock-based compensation expense recognized by income statement classification

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Processing and service costs	$	35,051	$	43,030	$	134,112	$	143,611
Selling, general and administrative expenses		282,408		656,197		1,364,246		1,017,206
Restructuring charges		—		36,924		—		36,924
Total stock-based compensation expense	$	317,459	$	736,151	$	1,498,358	$	1,197,741

Summary of stock-based compensation expense recognized by type

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Stock options	$	217,537	$	528,249	$	766,766	$	783,954
Restricted stock awards		99,922		207,902		731,592		413,787
Total stock-based compensation expense	$	317,459	$	736,151	$	1,498,358	$	1,197,741

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Property and equipment (Tables)

9 Months Ended

Sep. 30, 2016

Property and equipment

Schedule of property and equipment, net

	Estimated			As of		As of
	useful life			September 30,		December 31,
	(in years)			2016		2015
Equipment	2	-	7	$	1,008,798	$	958,175
Computer hardware	3	-	5		3,409,750		3,266,233
Furniture and fixtures	5	-	7		227,851		192,565
Leasehold improvements	3	-	10		786,637		746,336
Total property and equipment, gross					5,433,036		5,163,309
Less: Accumulated depreciation and amortization					(4,111,694)		(3,351,690)
Property and equipment, net				$	1,321,342	$	1,811,619

Schedule of property and equipment depreciation and amortization expense

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Depreciation and amortization expense	$	328,181	$	164,538	$	768,740	$	489,010

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Goodwill and intangible assets (Tables)

9 Months Ended

Sep. 30, 2016

Goodwill and intangible assets

Schedule of changes in carrying amount of goodwill

Goodwill, gross, as of December 31, 2015	$	286,852
Impact of change in Euro exchange rate		7,992
Accumulated impairment losses as of September 30, 2016		—
Goodwill, net, as of September 30, 2016	$	294,844

Schedule of the gross book value, accumulated amortization and amortization periods of intangible assets

	As of September 30, 2016						As of December 31, 2015						Amortization
	Gross book		Accumulated		Net book		Gross book		Accumulated		Net book		period
	value		amortization		value		value		amortization		value		(in years)
Trademarks and patents	$	1,202,666	$	(538,214)	$	664,452	$	1,184,612	$	(472,914)	$	711,698	15	-	21
Technology		2,455,406		(2,138,579)		316,827		2,388,852		(1,722,286)		666,566	5
Intangible assets, net	$	3,658,072	$	(2,676,793)	$	981,279	$	3,573,464	$	(2,195,200)	$	1,378,264

Schedule of amortization expense related to intangible assets

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Amortization expense	$	143,692	$	143,599	$	431,710	$	431,388

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Accrued expenses (Tables)

9 Months Ended

Sep. 30, 2016

Accrued expenses

Schedule of the components of accrued expenses

	As of		As of
	September 30,		December 31,
	2016		2015
Bonus	$	307,292	$	710,739
Deferred revenue(*)		753,787		688,418
Deferred incentive(**)		600,000		950,000
Other(***)		2,798,281		4,089,443
Total accrued expenses	$	4,459,360	$	6,438,600

(*)Current deferred revenue will be recognized as revenue ratably over the next 12 months.  As of September 30, 2016, included in the balance sheet classification “Other long-term liabilities” is the non-current portion of deferred revenue in the amount of $0.7 million. The long-term portion of deferred revenue balance as of December 31, 2015 was approximately $0.6 million.

(**)As of September 30, 2016, the Company recorded approximately $0.6 million in short-term incentives in relation to future obligations under a contract. As of September 30, 2016 and December 31, 2015, included in the balance sheet classification “Other long-term liabilities” is the non‑current portion of these incentives of approximately $0.2 million and $0.7 million, respectively.    

(***)As of September 30, 2016 and December 31, 2015, included in “other” were third party referral commissions of approximately $0.5 million and $1.6 million, respectively. No other amount included in “Other” exceeded 10% of total current liabilities.

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Segment information (Tables)

9 Months Ended

Sep. 30, 2016

Segment information

Schedule of revenue by segment and geographical region and reconciliations to consolidated revenue and gross profit

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Net Revenue:
APAC	$	3,962,539	$	3,573,478	$	11,541,521	$	11,836,523
The Americas		2,634,887		1,870,722		7,264,448		5,114,772
EMEA		1,578,050		2,348,129		5,962,345		6,584,488
Total multi-currency processing services revenue		8,175,476		7,792,329		24,768,314		23,535,783
Payment processing services revenue		5,445,763		4,826,084		15,640,814		13,898,759
Net revenue	$	13,621,239	$	12,618,413	$	40,409,128	$	37,434,542
Gross Profit:
APAC	$	3,942,457	$	3,547,202	$	11,467,607	$	11,741,027
The Americas		2,470,294		1,761,686		6,766,889		4,799,928
EMEA		1,229,358		1,450,650		4,636,893		4,662,273
Total multi-currency processing services gross profit		7,642,109		6,759,538		22,871,389		21,203,228
Payment processing services gross profit		2,664,474		2,133,994		7,433,612		6,027,578
Total reportable segment gross profit		10,306,583		8,893,532		30,305,001		27,230,806
Corporate allocated cost of sales		2,344,721		2,743,441		8,005,954		8,067,273
Total gross profit	$	7,961,862	$	6,150,091	$	22,299,047	$	19,163,533
Income from operations before provision for income taxes:
Total gross profit	$	7,961,862	$	6,150,091	$	22,299,047	$	19,163,533
Selling, general and administrative expenses		5,222,560		5,657,740		15,908,166		14,840,844
Restructuring charges		229,121		283,726		354,389		283,726
Income from operations		2,510,181		208,625		6,036,492		4,038,963
Interest expense		(88,669)		(10,372)		(186,366)		(38,815)
Interest income		428		392		1,250		1,183
Other income		93,016		—		93,016		—
Total other income (expense), net		4,775		(9,980)		(92,100)		(37,632)
Income from operations before provision for income taxes	$	2,514,956	$	198,645	$	5,944,392	$	4,001,331

Schedule of concentration of revenue by customer by geographical region

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Multi-currency processing services revenue:
APAC:
Customer A	56	%	59	%	56	%	59	%
The Americas:
Customer D	22		*		22		10
Customer E	*		10		*		13
Customer F	*		19		*		19
Customer I	15		*		12		*
Customer J	15		*		11		*
EMEA:
Customer C	58		27		61		48
Customer H	37		72		37		52

(*)Less than 10% revenue concentration.

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Business description and basis of presentation (Details)	Sep. 30, 2016 item
Business description and basis of presentation
Number of active merchant locations to which the Company provides services	197,000
Number of countries in which the entity provides services	23

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Concentration of credit risk (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Concentration of credit risk
Cash, cash equivalents, and restricted cash with financial banking institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC")	$ 250,000		$ 250,000
Accounts Receivable | Credit concentration risk | Customer A
Concentration of credit risk
Concentration risk (as a percent)			16.00%		15.00%
Accounts Receivable | Credit concentration risk | Customer B
Concentration of credit risk
Concentration risk (as a percent)			13.00%
Accounts Receivable | Credit concentration risk | Customer C
Concentration of credit risk
Concentration risk (as a percent)			12.00%
Accounts Receivable | Credit concentration risk | Customer H
Concentration of credit risk
Concentration risk (as a percent)					11.00%
Revenue | Customer concentration risk | Customer A
Concentration of credit risk
Concentration risk (as a percent)	16.00%	17.00%	16.00%	19.00%
Revenue | Customer concentration risk | Customer H
Concentration of credit risk
Concentration risk (as a percent)		13.00%
Revenue | Customer concentration risk | Customer G
Concentration of credit risk
Concentration risk (as a percent)	14.00%		12.00%

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Net income per share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Numerator:
Net income	$ 2,225,413	$ 105,971	$ 5,268,441	$ 3,692,925
Amounts allocated to participating preferred stockholders under the two-class method	(196,868)	(12,284)	(466,065)	(428,090)
Net income applicable to common stockholders (basic and dilutive)	$ 2,028,545	$ 93,687	$ 4,802,376	$ 3,264,835
Denominator:
Weighted-average common stock outstanding (basic) (in shares)	49,179,596	51,360,758	49,848,634	52,985,106
Common equivalent shares from options and warrants to purchase common stock (in shares)	2,074,627	1,023,633	2,153,615	626,862
Weighted-average common stock outstanding (diluted) (in shares)	51,254,223	52,384,391	52,002,249	53,611,968
Basic net income per share applicable to common stockholders ( in dollars per share)	$ 0.04	$ 0.00	$ 0.10	$ 0.06
Diluted net income per share applicable to common stockholders (in dollars per share)	$ 0.04	$ 0.00	$ 0.09	$ 0.06
Total anti-dilutive securities (in shares)	4,688,237	10,440,006	6,098,646	12,045,310
Contingently issued restricted shares
Denominator:
Total anti-dilutive securities (in shares)	396,500	1,446,500	396,500	1,446,500

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Net income per share other (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Anti-dilutive securities excluded from computation of diluted earnings per share
Total anti-dilutive securities (in shares)	4,688,237	10,440,006	6,098,646	12,045,310
Stock options
Anti-dilutive securities excluded from computation of diluted earnings per share
Total anti-dilutive securities (in shares)		3,588,862	581,665	5,096,019
Restricted stock
Anti-dilutive securities excluded from computation of diluted earnings per share
Total anti-dilutive securities (in shares)			23,574	98,147
Convertible preferred stock
Anti-dilutive securities excluded from computation of diluted earnings per share
Total anti-dilutive securities (in shares)	4,688,237	6,851,144	5,493,407	6,851,144

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Stock-based compensation expense (Details) shares in Millions	3 Months Ended				6 Months Ended	9 Months Ended
	Sep. 30, 2016 USD ($)	Jun. 30, 2016 USD ($) $ / shares item shares	Mar. 31, 2016 USD ($) shares	Sep. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) $ / shares	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)
Stock-based expense
Options granted (in shares) | shares			0.8
Total stock-based compensation expense	$ 317,459			$ 736,151		$ 1,498,358	$ 1,197,741
Processing and service costs
Stock-based expense
Total stock-based compensation expense	35,051			43,030		134,112	143,611
Selling general and administrative expenses
Stock-based expense
Total stock-based compensation expense	282,408			656,197		1,364,246	1,017,206
Restructuring charge
Stock-based expense
Total stock-based compensation expense				36,924			36,924
Stock options
Stock-based expense
Fair value of options granted			$ 700,000
Requisite service period			36 months
Total stock-based compensation expense	217,537			528,249		766,766	783,954
Restricted stock
Stock-based expense
Total stock-based compensation expense	$ 99,922			$ 207,902		$ 731,592	$ 413,787
Restricted stock | Officers
Additional information
Restricted stock awards vested (in shares) | shares		0.5
Number of consecutive trading days equal or over $3.50 per share | item		7
Number of trading days equal or over $3.50 per share over a consecutive thirty-five day period | item		10
Number of consecutive days which any ten trading days equal or over $3.50 per share | item		35
Value at market condition					$ 700,000
Restricted stock awards expensed		$ 200,000	$ 500,000
Restricted stock | Officers | Awarded third quarter 2015 expires December 31, 2017
Additional information
Minimum volume weighted average price on NASDAQ (per share) | $ / shares		3.50			3.50
Restricted stock | Directors
Stock-based expense
Awards granted (in shares) | shares		0.1
Fair value of awards granted		$ 200,000
Requisite service period		12 months

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Property and equipment (Details) - USD ($)	3 Months Ended			9 Months Ended		21 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Dec. 31, 2015
Property and equipment
Total property and equipment	$ 5,433,036			$ 5,433,036		$ 5,433,036	$ 5,163,309
Less: Accumulated depreciation and amortization	(4,111,694)			(4,111,694)		(4,111,694)	(3,351,690)
Property and equipment, net	1,321,342			1,321,342		1,321,342	1,811,619
Depreciation and amortization expense	328,181		$ 164,538	768,740	$ 489,010
Accelerated Depreciation on abandoned assets	150,000	$ 100,000		300,000
Equipment
Property and equipment
Total property and equipment	1,008,798			1,008,798		$ 1,008,798	958,175
Equipment | Minimum
Property and equipment
Estimated useful life						2 years
Equipment | Maximum
Property and equipment
Estimated useful life						7 years
Computer hardware
Property and equipment
Total property and equipment	3,409,750			3,409,750		$ 3,409,750	3,266,233
Computer hardware | Minimum
Property and equipment
Estimated useful life						3 years
Computer hardware | Maximum
Property and equipment
Estimated useful life						5 years
Furniture and fixtures
Property and equipment
Total property and equipment	227,851			227,851		$ 227,851	192,565
Furniture and fixtures | Minimum
Property and equipment
Estimated useful life						5 years
Furniture and fixtures | Maximum
Property and equipment
Estimated useful life						7 years
Leasehold improvements
Property and equipment
Total property and equipment	$ 786,637			$ 786,637		$ 786,637	$ 746,336
Leasehold improvements | Minimum
Property and equipment
Estimated useful life						3 years
Leasehold improvements | Maximum
Property and equipment
Estimated useful life						10 years

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Goodwill and intangible assets - Goodwill (Details)	9 Months Ended
	Sep. 30, 2016 USD ($)
Goodwill
Goodwill, gross, at the Beginning of the period	$ 286,852
Impact of change in Euro exchange rate	7,992
Goodwill, net, at the end of the period	$ 294,844

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Goodwill and intangible assets - Intangible assets (Details) - USD ($)	3 Months Ended		9 Months Ended		21 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Dec. 31, 2015
Intangible assets
Gross book value	$ 3,658,072		$ 3,658,072		$ 3,658,072	$ 3,573,464
Accumulated amortization	(2,676,793)		(2,676,793)		(2,676,793)	(2,195,200)
Net book value	981,279		981,279		981,279	1,378,264
Amortization expense	143,692	$ 143,599	431,710	$ 431,388
Trademarks and patents
Intangible assets
Gross book value	1,202,666		1,202,666		1,202,666	1,184,612
Accumulated amortization	(538,214)		(538,214)		(538,214)	(472,914)
Net book value	664,452		664,452		$ 664,452	711,698
Trademarks and patents | Minimum
Intangible assets
Amortization period					15 years
Trademarks and patents | Maximum
Intangible assets
Amortization period					21 years
Technology
Intangible assets
Gross book value	2,455,406		2,455,406		$ 2,455,406	2,388,852
Accumulated amortization	(2,138,579)		(2,138,579)		(2,138,579)	(1,722,286)
Net book value	$ 316,827		$ 316,827		$ 316,827	$ 666,566
Amortization period					5 years

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Commitments and contingencies (Details) - USD ($) $ in Millions		1 Months Ended
	Sep. 01, 2013	Sep. 30, 2013	Sep. 30, 2016	Dec. 31, 2015
Employment agreements
Commitment to pay severance in event of employment termination without cause			$ 1.2	$ 0.9
Commitment to pay severance in event of employment termination upon change of control			1.2	$ 1.1
Fraud related to certain credit card transactions
Employment agreements
Reserves posted by merchants with sponsor bank			0.9
Reserves posted by entity			0.3
Cash reserves required to be posted by merchant, entity			2.2
Contingent liability			0.0
Bank Sponsorship Agreement
Employment agreements
Contingent liability			$ 0.0
Term of Bank Sponsorship Agreement	5 years	5 years
Bank Sponsorship Agreement | Financial Guarantee | Minimum
Employment agreements
Bank sponsorship agreement annual fees in year one	$ 0.3
Bank sponsorship agreement fees final year	0.5
Cost of sales | Bank Sponsorship Agreement | Financial Guarantee | Minimum
Employment agreements
Bank sponsorship agreement fees due	$ 1.8

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Credit Facility (Details) - USD ($)			9 Months Ended
	Apr. 26, 2016	Jan. 28, 2016	Sep. 30, 2016	Apr. 12, 2016	Jun. 10, 2015
Debt Instrument [Line Items]
Credit Facility repaid			$ 4,000,000
Revolving Credit Facility
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 20,000,000			$ 10,000,000
Minimum availability requirement		$ 5,000,000
Credit Facility borrowed			$ 9,900,000	$ 13,900,000
Credit Facility repaid	$ 4,000,000
Revolving Credit Facility | LIBOR
Debt Instrument [Line Items]
Variable interest rate		2.50%
Revolving Credit Facility | Letter of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 2,000,000

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Convertible preferred stock (Details) - shares	Sep. 30, 2016	Apr. 11, 2016	Dec. 31, 2015
Convertible preferred stock
Shares designated (and issued)	2,243,750		2,243,750
Series A Preferred stock
Convertible preferred stock
Number of Series A Preferred Stock converted		708,352
Number of common stock that Series A Preferred Stock converted into		2,162,907
Conversion ratio of common stock per share of Series A Preferred Stock	3.05	3.05
Shares designated (and issued)	1,535,398
Shares undesignated (and unissued)	1,756,250
Number of common shares into which each issued share to be converted	3.05	3.05
Total number of common shares into which issued shares to be converted	4,688,237

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Accrued expenses (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Bonus	$ 307,292	$ 710,739
Deferred revenue	753,787	688,418
Deferred incentive	600,000	950,000
Other	2,798,281	4,089,443
Total accrued expenses	$ 4,459,360	6,438,600
Recognition period of deferred revenue	12 months
Non-current portion of deferred revenue		600,000
Noncurrent Portion Of Deferred Incentive	$ 200,000	700,000
Multicurrency Referral Commissions	$ 500,000	$ 1,600,000
Maximum percentage of total current liabilities	10.00%	10.00%
Long-term lease and deferred income
Non-current portion of deferred revenue	$ 700,000

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Segment information - Information about revenue, profit and assets (Details)	3 Months Ended			9 Months Ended
	Sep. 30, 2016 USD ($)	Jun. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) item	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Segment information
Number of reportable segments | item				2
Cost of sales included in processing and services costs	$ 2,878,088		$ 3,776,232	$ 9,902,879	$ 10,399,830
Long-lived assets	6,800,000			$ 6,800,000		$ 7,400,000
Number of geographical regions in which the entity conducts its business | item				3
Net Revenue:
Net revenue	13,621,239		12,618,413	$ 40,409,128	37,434,542
Gross Profit:
Total gross profit	7,961,862		6,150,091	22,299,047	19,163,533
Income from operations before provision for income taxes:
Total gross profit	7,961,862		6,150,091	22,299,047	19,163,533
Selling, general and administrative expenses	5,222,560		5,657,740	15,908,166	14,840,844
Restructuring charges	229,121	$ 125,000	283,726	354,389	283,726
Income from operations	2,510,181		208,625	6,036,492	4,038,963
Interest expense	(88,669)		(10,372)	(186,366)	(38,815)
Interest income	428		392	1,250	1,183
Other income	93,016			93,016
Total other income (expense), net	4,775		(9,980)	(92,100)	(37,632)
Income from operations before provision for income taxes	2,514,956		198,645	5,944,392	4,001,331
Operating segments
Gross Profit:
Total gross profit	10,306,583		8,893,532	30,305,001	27,230,806
Income from operations before provision for income taxes:
Total gross profit	10,306,583		8,893,532	30,305,001	27,230,806
Corporate allocated cost of sales
Gross Profit:
Total gross profit	2,344,721		2,743,441	8,005,954	8,067,273
Income from operations before provision for income taxes:
Total gross profit	2,344,721		2,743,441	8,005,954	8,067,273
Multi-currency processing services
Segment information
Cost of sales included in processing and services costs	500,000		1,000,000	1,900,000	2,300,000
Net Revenue:
Net revenue	8,175,476		7,792,329	24,768,314	23,535,783
Multi-currency processing services | Operating segments
Gross Profit:
Total gross profit	7,642,109		6,759,538	22,871,389	21,203,228
Income from operations before provision for income taxes:
Total gross profit	7,642,109		6,759,538	22,871,389	21,203,228
Payment processing services
Net Revenue:
Net revenue	5,445,763		4,826,084	15,640,814	13,898,759
Payment processing services | Operating segments
Gross Profit:
Total gross profit	2,664,474		2,133,994	7,433,612	6,027,578
Income from operations before provision for income taxes:
Total gross profit	2,664,474		2,133,994	7,433,612	6,027,578
APAC
Net Revenue:
Net revenue	3,962,539		3,573,478	11,541,521	11,836,523
APAC | Multi-currency processing services | Operating segments
Gross Profit:
Total gross profit	3,942,457		3,547,202	11,467,607	11,741,027
Income from operations before provision for income taxes:
Total gross profit	3,942,457		3,547,202	11,467,607	11,741,027
Americas
Net Revenue:
Net revenue	2,634,887		1,870,722	7,264,448	5,114,772
Americas | Multi-currency processing services | Operating segments
Gross Profit:
Total gross profit	2,470,294		1,761,686	6,766,889	4,799,928
Income from operations before provision for income taxes:
Total gross profit	2,470,294		1,761,686	6,766,889	4,799,928
EMEA
Net Revenue:
Net revenue	1,578,050		2,348,129	5,962,345	6,584,488
EMEA | Multi-currency processing services | Operating segments
Gross Profit:
Total gross profit	1,229,358		1,450,650	4,636,893	4,662,273
Income from operations before provision for income taxes:
Total gross profit	$ 1,229,358		$ 1,450,650	$ 4,636,893	$ 4,662,273

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Segment information - Concentration of revenue by customer by geographical region (Details) - Revenue	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Geographical concentration risk | Multi-currency processing services | Customer I
Revenue concentration
Concentration risk (as a percent)	15.00%		12.00%
Geographical concentration risk | Multi-currency processing services | Customer J
Revenue concentration
Concentration risk (as a percent)	15.00%		11.00%
Geographical concentration risk | Multi-currency processing services | APAC | Customer A
Revenue concentration
Concentration risk (as a percent)	56.00%	59.00%	56.00%	59.00%
Geographical concentration risk | Multi-currency processing services | Americas | Customer D
Revenue concentration
Concentration risk (as a percent)	22.00%		22.00%	10.00%
Geographical concentration risk | Multi-currency processing services | Americas | Customer E
Revenue concentration
Concentration risk (as a percent)		10.00%		13.00%
Geographical concentration risk | Multi-currency processing services | Americas | Customer F
Revenue concentration
Concentration risk (as a percent)		19.00%		19.00%
Geographical concentration risk | Multi-currency processing services | EMEA | Customer C
Revenue concentration
Concentration risk (as a percent)	58.00%	27.00%	61.00%	48.00%
Geographical concentration risk | Multi-currency processing services | EMEA | Customer H
Revenue concentration
Concentration risk (as a percent)	37.00%	72.00%	37.00%	52.00%
Customer concentration risk | Customer A
Revenue concentration
Concentration risk (as a percent)	16.00%	17.00%	16.00%	19.00%
Customer concentration risk | Customer H
Revenue concentration
Concentration risk (as a percent)		13.00%
Customer concentration risk | Customer G
Revenue concentration
Concentration risk (as a percent)	14.00%		12.00%
Customer concentration risk | Multi-currency processing services | Customer B
Revenue concentration
Concentration risk (as a percent)	14.00%	15.00%	15.00%	15.00%
Customer concentration risk | Multi-currency processing services | Customer G
Revenue concentration
Concentration risk (as a percent)	35.00%	24.00%	30.00%	22.00%

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Stock Repurchase Program (Details) - USD ($) $ / shares in Units, shares in Millions		2 Months Ended	9 Months Ended		17 Months Ended	24 Months Ended
	Apr. 12, 2016	Sep. 30, 2016	Sep. 30, 2016	Sep. 30, 2015	Mar. 09, 2016	Sep. 30, 2016	Aug. 02, 2016	Mar. 10, 2016	Dec. 31, 2015	Dec. 31, 2014
Shares repurchased, authorized amount							$ 6,000,000		$ 13,500,000	$ 13,500,000
Shares repurchased, increased authorized amount							$ 4,000,000
Repurchase of common stock paid			$ 23,843,474	$ 4,567,501
Common stock repurchased (in shares)		1.6			4.9	6.5
Stock repurchased, aggregate price		$ 6,000,000			$ 11,500,000	$ 17,500,000
Remaining shares available for purchase, value					$ 2,000,000
Modified "Dutch auction" tender offer
Shares repurchased, authorized amount								$ 15,000,000
Share price (in dollars per share)	$ 3.60
Repurchase of common stock paid	$ 14,200,000
Common stock repurchased (in shares)	3.9
Modified "Dutch auction" tender offer | Maximum
Share price (in dollars per share)								$ 3.60
Modified "Dutch auction" tender offer | Minimum
Share price (in dollars per share)								$ 3.20

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Restructuring charges (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Restructuring charges
Restructuring charges	$ 229,121	$ 125,000	$ 283,726	$ 354,389	$ 283,726
Accelerated Depreciation on abandoned assets	$ 150,000	$ 100,000		$ 300,000

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Subsequent events (Details) - USD ($) $ in Millions	Nov. 01, 2016	Aug. 02, 2016	Dec. 31, 2015	Dec. 31, 2014
Subsequent events
Shares repurchased, authorized amount		$ 6.0	$ 13.5	$ 13.5
Subsequent event
Subsequent events
Shares repurchased, authorized amount	$ 10.0