Related Party Transactions

3 Months Ended

Mar. 31, 2017

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

In September 2016, we entered into dealer and loan agreements with a distribution partner. The dealer agreement enables the distribution partner to resell our SaaS services and hardware to their subscribers. Under the loan agreements, we agreed to loan the distribution partner up to $4.0 million, collateralized by all assets owned by the distribution partner. The loan has two advance periods which begin each year in October and end during the following January until August 31, 2019, the term date of the loan. Interest on the outstanding principal accrues at a rate per annum equal to the greater of 6% or the LIBOR rate plus 4%, as determined on the first date of each annual advance period. The borrower has the option to extend the term of the loan for two successive terms of one year each. During the first quarter of 2017, our distribution partner drew $1.0 million at a rate of 6.0% per annum. The $4.0 million and $3.0 million loan receivable balances as of March 31, 2017 and December 31, 2016 were included in other current assets. For the three months ended March 31, 2017, we recorded less than $0.1 million of interest income related to this note receivable and we recognized $0.2 million of revenue. No interest income and no revenue was recognized during the three months ended March 31, 2016 related to this distribution partner. Our accounts receivable balance from this distribution partner was less than $0.1 million as of March 31, 2017 and December 31, 2016.

Subsequent to March 31, 2017 and prior to the filing of this Quarterly Report on Form 10-Q, we entered into a subordinated credit agreement with the distribution partner. Under the subordinated credit agreement we agreed to loan the distribution partner $3.0 million, with a maturity date of November 21, 2022. Interest on the outstanding principal balance accrues at a rate of 8.5% per annum and requires monthly interest payments.

Our installation partner in which we have a 48.2% ownership interest performs installation services for security dealers and also provides installation services for us and certain of our subsidiaries. On December 11, 2015, we purchased an additional 9,290 common units of the same company for $0.2 million, which did not change our proportional share of ownership interest. We account for this investment using the equity method (see Note 7). We recorded $0.3 million of cost of hardware and other revenue in connection with this installation partner for the three months ended March 31, 2017, as compared to $0.4 million for the same period in the prior year. As of March 31, 2017 and December 31, 2016, the accounts payable balance to our installation partner was $0.1 million. In September 2014, we loaned $0.3 million to our installation partner under a secured promissory note that accrues interest at 8.0%. Interest is payable monthly with the entire principal balance plus accrued but unpaid interest due at maturity in September 2018. We recorded $6,300 of interest income related to this note receivable for the three months ended March 31, 2017, as compared to $6,000 for the same period in the prior year.