10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2015

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: 001-35170

JetPay Corporation

(Exact name of registrant as specified in its charter)

Delaware	90-0632274
(State or other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

1175 Lancaster Avenue, Suite 200, Berwyn, PA 19312

(Address of principal executive offices) (Zip code)

Registrant's Telephone Number, including area code: (484) 324-7980

(Former Name or Former Address, if Changed Since Last Report)

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 x 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 (Section 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 x 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    ¨	Accelerated filer    ¨	Non-accelerated filer    ¨	Smaller reporting company   x
		(Do not check if a smaller reporting company)

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of August 11, 2015, there were 13,892,990 shares of the registrant’s common stock, par value $.001 per share, outstanding.

JetPay Corporation

Form 10-Q

Quarter Ended June 30, 2015

Table of Contents

		Page
PART I - FINANCIAL INFORMATION
Item 1 -	Financial Statements
	Consolidated Balance Sheets – June 30, 2015 (Unaudited) and December 31, 2014 (Audited)	1
	Consolidated Statements of Operations (Unaudited) for the three months ended June 30, 2015 and 2014	2
	Consolidated Statements of Operations (Unaudited) for the six months ended June 30, 2015 and 2014	3
	Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) for the six months ended June 30, 2015	4
	Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2015 and 2014	5
	Notes to the Consolidated Financial Statements (Unaudited)	6
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3 -	Quantitative and Qualitative Disclosures about Market Risks	37
Item 4 -	Controls and Procedures	37
PART II - OTHER INFORMATION
Item 1 -	Legal Proceedings	38
Item 1A -	Risk Factors	38
Item 2 -	Unregistered Sales of Equity Securities	38
Item 3 -	Defaults Upon Senior Securities	38
Item 4 -	Mine Safety Disclosures	38
Item 5 -	Other Information	38
Item 6 -	Exhibits	38
Signatures		39

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

JetPay Corporation

Consolidated Balance Sheets

(In thousands, except share and par value information)

	June 30, 2015			December 31, 2014
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,228		$	5,359
Restricted cash		231			1,386
Accounts receivable, less allowance for doubtful accounts		1,899			2,634
Settlement processing assets		13,362			18,893
Prepaid expenses and other current assets		601			828
Current assets before funds held for clients		21,321			29,100
Funds held for clients		34,366			40,833
Total current assets		55,687			69,933
Property and equipment, net		1,287			1,226
Goodwill		41,760			41,760
Identifiable intangible assets, net of accumulated amortization of $6,155 at June 30, 2015 and $4,620 at December 31, 2014		25,357			26,892
Deferred financing costs, net of accumulated amortization of $4,396 at June 30, 2015 and $4,376 at December 31, 2014		113			89
Other assets		4,547			4,502
Total assets	$	128,751		$	144,402
LIABILITIES
Current liabilities:
Current portion of long-term debt and capital lease obligations	$	2,368		$	1,571
Accounts payable and accrued expenses		8,532			9,153
Settlement processing liabilities		12,408			18,024
Deferred revenue		298			520
Other current liabilities		1,400			3,250
Current liabilities before client fund obligations		25,006			32,518
Client fund obligations		34,366			40,833
Total current liabilities		59,372			73,351
Long-term debt and capital lease obligations, net of current portion		14,752			14,795
Deferred income taxes		284			284
Other liabilities		176			1,411
Total liabilities		74,584			89,841
Commitments and Contingencies
Redeemable Convertible Preferred Stock;
Redeemable convertible Series A and Series A-1 preferred stock, $0.001 par value per share, 97,498 shares issued and outstanding at June 30, 2015 and December 31, 2014 (liquidation preference of $58,500 at June 30, 2015)		32,244			29,779
Stockholders’ Equity
Preferred stock, $0.001 par value
Authorized 1,000,000 shares, none issued		-			-
Common stock, $0.001 par value
Authorized 100,000,000 shares; 13,892,990 and 13,863,823 issued and outstanding at June 30, 2015 and December 31, 2014, respectively		14			14
Additional paid-in capital		41,698			43,942
Accumulated deficit		(19,789	)		(19,174	)
Total Stockholders’ Equity		21,923			24,782
Total Liabilities and Stockholders’ Equity	$	128,751		$	144,402

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

1

JetPay Corporation

Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share information)

	For the Three Months Ended June 30,
	2015			2014
Processing revenues	$	10,566		$	7,726
Cost of processing revenues		6,520			4,733
Gross profit		4,046			2,993
Selling, general and administrative expenses		3,194			3,408
Change in fair value of contingent consideration liability		26			(8	)
Amortization of intangibles		767			560
Depreciation		115			103
Operating loss		(56	)		(1,070	)
Other expenses (income)
Interest expense		206			409
Amortization of deferred financing costs		11			571
Amortization of debt discounts and conversion options		81			381
Change in fair value of derivative liability		-			(110	)
Other income		(2	)		(2	)
Loss before income taxes		(352	)		(2,319	)
Income tax expense		43			52
Net loss		(395	)		(2,371	)
Accretion of convertible preferred stock		(1,249	)		(538	)
Net loss applicable to common stockholders	$	(1,644	)	$	(2,909	)
Basic and diluted loss per share applicable to common stockholders	$	(0.12	)	$	(0.25	)
Weighted average shares outstanding:
Basic and diluted		13,867,990			11,852,834

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

2

JetPay Corporation

Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share information)

	For the Six Months Ended June 30,
	2015			2014
Processing revenues	$	21,410		$	15,895
Cost of processing revenues		12,976			9,421
Gross profit		8,434			6,474
Selling, general and administrative expenses		6,576			6,183
Change in fair value of contingent consideration liability		37			(8	)
Amortization of intangibles		1,535			1,120
Depreciation		224			206
Operating income (loss)		62			(1,027	)
Other expenses (income)
Interest expense		403			815
Amortization of deferred financing costs		17			1,125
Amortization of debt discounts and conversion options		159			750
Change in fair value of derivative liability		-			(60	)
Other income		(3	)		(4	)
Loss before income taxes		(514	)		(3,653	)
Income tax expense		101			104
Net loss		(615	)		(3,757	)
Accretion of convertible preferred stock		(2,465	)		(1,047	)
Net loss applicable to common stockholders	$	(3,080	)	$	(4,804	)
Basic and diluted loss per share applicable to common stockholders	$	(0.22	)	$	(0.41	)
Weighted average shares outstanding:
Basic and diluted		13,865,918			11,692,329

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

3

JetPay Corporation

Consolidated Statement of Changes in Stockholders’ Equity

(Unaudited)

(In thousands, except share information)

	Common Stock				Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount
Balance at December 31, 2014		13,863,823	$	14	$	43,942		$	(19,174	)	$	24,782
Stock issued as compensation		29,167		-		79			-			79
Stock-based compensation expense		-		-		142			-			142
Accretion of convertible preferred stock to redemption value		-		-		(2,465	)		-			(2,465	)
Net loss		-		-		-			(615	)		(615	)
Balance at June 30, 2015		13,892,990	$	14	$	41,698		$	(19,789	)	$	21,923

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

4

JetPay Corporation

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	For the Six Months Ended June 30,
	2015			2014
Operating Activities
Net loss	$	(615	)	$	(3,757	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		224			206
Stock-based compensation		142			168
Common stock issued as compensation		79			6
Amortization of intangibles		1,535			1,120
Amortization of deferred financing costs		17			1,125
Amortization of debt discounts and conversion options		159			750
Change in fair value of contingent consideration liability		37			(8	)
Change in fair value of derivative liability		-			(60	)
Loss on disposal of fixed assets		-			237
Change in operating assets and liabilities:
Restricted cash		1,155			(48	)
Accounts receivable		735			769
Settlement processing assets and obligations, net		(85	)		(134	)
Prepaid expenses and other current assets		227			(83	)
Other assets		(45	)		245
Deferred revenue		(222	)		(211	)
Accounts payable and accrued expenses		(621	)		(3,334	)
Net cash provided by (used in) operating activities		2,722			(3,009	)
Investing Activities
Net decrease (increase) in restricted cash and cash equivalents held to satisfy client fund obligations		6,467			(15,591	)
Payment of deferred acquisition consideration		(2,850	)		-
Purchase of property and equipment		(293	)		(142	)
Proceeds on sale of property and equipment		8			-
Net cash provided by (used in) investing activities		3,332			(15,733	)
Financing Activities
Payments on long-term debt		(678	)		(657	)
Net (decrease) increase in client funds obligations		(6,467	)		15,591
Proceeds from notes payable		1,000			-
Deferred financing fees associated with new borrowings		(40	)		-
Proceeds from issuance of common stock		-			1,000
Proceeds from sale of preferred stock, net of issuance costs		-			2,126
Net cash (used in) provided by financing activities		(6,185	)		18,060
Net decrease in cash and cash equivalents		(131	)		(682	)
Cash and cash equivalents, beginning		5,359			4,799
Cash and cash equivalents, ending	$	5,228		$	4,117
Supplement disclosure of cash flow information:
Cash paid for interest	$	634		$	750
Cash paid for taxes	$	160		$	229
Summary of non-cash investing and financing activities:
Promissory note issued to satisfy deferred consideration	$	350		$	-

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

5

JetPay Corporation

Notes to Consolidated Financial Statements

(Unaudited)

Note 1.   Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the consolidated financial statements of JetPay Corporation and its subsidiaries (collectively, the “Company” or “JetPay”) as of June 30, 2015 and 2014. The results of operations for the six months ended June 30, 2015 and 2014 are not necessarily indicative of the operating results for the full year. It is recommended that these consolidated financial statements be read in conjunction with the consolidated financial statements and related disclosures for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 25, 2015.

Note 2.   Organization and Business Operations

The Company was incorporated in Delaware on November 12, 2010 as a blank check company whose objective was to acquire, through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more operating businesses. Until December 28, 2012, the Company’s efforts were limited to organizational activities, its initial public offering (the “Offering”) and the search for suitable business acquisition transactions.

Effective August 2, 2013, Universal Business Payment Solutions Acquisition Corporation changed its name to JetPay Corporation with the filing of its Amended and Restated Certificate of Incorporation. The Company’s ticker symbol on the Nasdaq Capital Market (“NASDAQ”) changed from “UBPS” to “JTPY” effective August 12, 2013.

The Company currently operates in two business segments: the JetPay Payment Processing Segment, which is an end-to-end processor of credit and debit card and ACH payment transactions, with a focus on those processing internet transactions and recurring billings as well as traditional retailers and service providers; and the JetPay Payroll Segment, which is a full-service payroll and related payroll tax payment processor, and a provider of human resource, time and labor management, and other payroll related services. The Company also initiated operations of JetPay Card Services in the fourth quarter of 2013, a division focused on providing low-cost money management and payment services to un-banked and under-banked employees of its business customers and other consumers. The activity within the JetPay Card Services division was not material for the year ended December 31, 2014 and the six months ended June 30, 2015. The Company entered the payment processing and the payroll processing businesses upon consummation of the acquisitions of JetPay, LLC (“JetPay, LLC” or “JetPay Payment Services”), and AD Computer Corporation (“ADC” or “JetPay Payroll Services”) on December 28, 2012 (the “Completed Transactions”). Additionally, on November 7, 2014, the Company acquired ACI Merchant Systems, LLC (“ACI” or “JetPay Strategic Partners”), an independent sales organization specializing in relationships with banks, credit unions and other financial institutions. See Note 3. Business Acquisition.

The consolidated financial statements as of June 30, 2015 and December 31, 2014 and for the six months ended June 30, 2015 and the year ended December 31, 2014 include the accounts of JetPay and its wholly owned subsidiaries, JetPay Payment Services, JetPay Payroll Services and JetPay Strategic Partners. All significant inter-company transactions and balances have been eliminated in consolidation.

The Company believes that the investments made by JetPay in its technology, infrastructure, and sales staff will help generate cash flows sufficient to cover its working capital needs. In addition to funding ongoing working capital needs, the Company’s cash requirements for the next twelve months ended June 30, 2016 include, but are not limited to: principal and interest payments on long-term debt of approximately $3.15 million, and $1.2 million of deferred consideration due to the unitholders of ACI on April 10, 2016. The Company expects to fund its cash needs, including capital required for acquisitions and capital expenditures, with cash flow from its operating activities, equity investments, and borrowings. As disclosed in Note 8. Redeemable Convertible Preferred Stock, from October 11, 2013 to December 31, 2014, the Company sold 91,333 shares of Series A Convertible Preferred Stock, par value $0.001 per share (“Series A Preferred”), to affiliates of Flexpoint Ford, LLC (“Flexpoint”) for an aggregate of $27.4 million, less certain costs, and has an agreement to potentially sell an additional $12.6 million of Series A Preferred to Flexpoint. Additionally, the Company sold 6,165 shares of Series A-1 Convertible Preferred Stock, par value $0.001 per share (“Series A-1 Preferred”), to affiliates of Wellington Capital Management, LLP (“Wellington”) for an aggregate of $1.85 million, and it has an agreement to potentially sell an additional $850,000 of Series A-1 Preferred to Wellington. This additional combined $13.45 million of convertible preferred stock, if sold, will be principally used as partial consideration for future acquisitions. If the Company is unable to raise additional capital, it may need to limit its future growth plans.

6

Note 3.   Business Acquisition

On November 7, 2014, the Company entered into a Unit Purchase Agreement (the “Unit Purchase Agreement”) with ACI and Michael Collester and Cathy Smith, pursuant to which the Company acquired all of the outstanding equity interests of ACI from Michael Collester and Cathy Smith.

In connection with the closing, the Company paid an aggregate of $11.0 million in cash, adjusted as set forth herein, and issued 2.0 million shares of its common stock to the members of ACI with a value of approximately $3.7 million on the date of acquisition. The ACI unitholders were entitled to receive additional cash consideration of $1.2 million on April 10, 2015 and are entitled to receive a further cash payment of $1.2 million on April 10, 2016. The initial deferred consideration payment was made on April 10, 2015. The $2.4 million of deferred consideration was recorded at $2.17 million, valuing the estimated fair value of the 2016 future payment utilizing a 16% discount rate. Additionally, ACI’s unitholders are entitled to earn up to an additional $500,000 based on the net revenue of ACI for the twelve month periods ending October 31, 2015 and 2016. This contingent cash consideration, recorded as a non-current liability, was valued at $400,000 at the date of acquisition utilizing a Monte Carlo simulation model. The fair value of the contingent cash consideration was $436,000 at June 30, 2015. See Note 4. Summary of Critical Accounting Policies. The acquisition of ACI provides the Company with additional expertise in selling debit and credit card processing services into the Financial Institution and Third Party channel, a base operation to sell its payroll and related payroll tax processing and payment services to its clients, and the ability to cross-market its payroll payment services and its prepaid card services to ACI’s customer base.

The fair value of the identifiable assets acquired and liabilities assumed in the ACI acquisition as of the acquisition date include: (i) $250,000 cash, (ii) $521,000 for accounts receivable; (iii) $46,000 for prepaid expenses and other assets; (iv) $27,000 for fixed assets; (v) the assumption of $601,000 of liabilities; and (vi) the remainder, or approximately $17.1 million, allocated to goodwill and other identifiable intangible assets. Within the $17.1 million of acquired intangible assets, $10.6 million was assigned to goodwill, which is not subject to amortization expense under U.S. GAAP. The Company expects to deduct for tax purposes substantially all of its goodwill. The amount assigned to goodwill was deemed appropriate based on several factors, including: (i) multiple paid by market participants for businesses in the merchant card processing business; (ii) levels of ACI’s current and future projected cash flows; and (iii) the Company’s strategic business plan, which includes cross-marketing the Company’s payroll processing and prepaid card services to ACI’s customer base as well as offering merchant credit card processing services to the Company’s ADC payroll customer base. The remaining intangible assets were assigned to customer relationships for $6.3 million, software costs of $100,000, and tradename for $60,000. The Company determined that the fair value of non-compete agreements were immaterial. Customer relationships, software costs, and trade name were assigned a life of 8.5, 2 and 3 years, respectively.

Assets acquired and liabilities assumed in the ACI acquisition were recorded on the Company’s Consolidated Balance Sheets as of the acquisition date based upon their estimated fair values at such date. The results of operations of the business acquired by the Company have been included in the Statements of Operations since the date of acquisition. The excess of the purchase price over the estimated fair values of the underlying identifiable assets acquired and liabilities assumed were allocated to goodwill.

The allocation of the ACI purchase price and the estimated fair market values of the ACI assets acquired and liabilities assumed are shown below (in thousands):

Cash	$	250
Accounts receivable		521
Prepaid expenses and other assets		46
Property and equipment, net		27
Goodwill		10,594
Identifiable intangible assets		6,460
Total assets acquired		17,898
Accounts payable and accrued expenses		601
Total liabilities assumed		601
Net assets acquired	$	17,297

7

Unaudited pro forma results of operations for the three and six months ended June 30, 2014 as if the Company and ACI had been combined on January 1, 2014 follow. The pro forma results include estimates and assumptions which management believes are reasonable. The pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the date indicated, or which may result in the future.

	Unaudited Pro Forma Results of Operations
	For the Three Months Ended June 30, 2014			For the Six Months Ended June 30, 2014
	(in thousands, except per share information)
Revenues	$	9,521		$	19,100
Operating loss	$	(734	)	$	(406	)
Net loss	$	(2,196	)	$	(3,454	)
Net loss applicable to common stockholders	$	(2,953	)	$	(4,932	)
Net loss per share applicable to common stockholders	$	(0.21	)	$	(0.36	)

Note 4.   Summary of Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company’s critical accounting policies are described below.

Use of Estimates

The accompanying financial statements have been prepared in accordance with U.S. GAAP and pursuant to the accounting and disclosure rules and regulations of the SEC. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the Company’s financial statements. Such estimates include, but are not limited to, the value of purchase consideration of acquisitions; valuation of accounts receivable, reserves for chargebacks, goodwill, intangible assets, and other long-lived assets; legal contingencies; and assumptions used in the calculation of stock-based compensation and in the calculation of income taxes. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition and Deferred Revenue

The Company recognizes revenue in general when the following criteria have been met: persuasive evidence of an arrangement exists, a customer contract or purchase order exists and the fees are fixed and determinable, no significant obligations remain and collection of the related receivable is reasonably assured. Allowances for chargebacks, discounts and other allowances are estimated and recorded concurrent with the recognition of revenue and are primarily based on historic rates.

Revenues from the Company’s credit and debit card processing operations are recognized in the period services are rendered as the Company processes credit and debit card transactions for its merchant customers or for merchant customers of its Third Party clients. Third Party clients include Independent Sales Organizations (“ISOs”), Value Added Resellers (“VARs”), Independent Software Vendors (“ISVs”), and Financial Institutions (“FIs”). The majority of the Company’s revenue within its credit and debit card processing business is comprised of transaction-based fees, which typically constitute a percentage of dollar volume processed, or a fee per transaction processed. In the case where the Company is only the processor of transactions, it charges transaction fees only and records these fees as revenues. In the case of merchant contracts or contracts with Third Parties for whom it processes credit and debit card transactions for the Third Parties’ merchant customers, revenue is primarily comprised of fees charged to the merchant, as well as a percentage of the processed sale transaction. The Company’s contracts in most instances involve three parties: the Company, the merchant, and the sponsoring bank. Under certain of these sales arrangements, the Company’s sponsoring bank collects the gross revenue from the merchants, pays the interchange fees and assessments to the credit card associations, collects their fees and pays the Company a net residual payment representing the Company’s fee for the services provided. Accordingly, under these arrangements, the Company records the revenue net of interchange, credit card association assessments and fees and the sponsoring bank’s fees. Under the majority of the Company’s sales arrangements, the Company is billed directly for certain fees by the credit card associations and the processing bank. In this instance, revenues and cost of revenues include the credit card association fees and assessments and the sponsoring bank’s fees which are billed to the Company and for which it assumes credit risk. In all instances, the Company recognizes processing revenues net of interchange fees, which are assessed to its merchant and ISO merchant customers on all processed transactions. Interchange rates and fees are not controlled by the Company. The Company effectively functions as a clearing house collecting and remitting interchange fee settlement on behalf of issuing banks, debit networks, credit card associations and their processing customers. Additionally, the Company’s direct merchant customers have the liability for any charges properly reversed by the cardholder. In the event, however, that the Company is not able to collect such amount from the merchants due to merchant fraud, insolvency, bankruptcy or any other reason, it may be liable for any such reversed charges. The Company requires cash deposits, guarantees, letters of credit and other types of collateral from certain merchants to minimize any such contingent liability, and it also utilizes a number of systems and procedures to manage merchant risk.

8

Revenues from the Company’s payroll processing operations are recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured. Certain processing services are provided under annual service arrangements with revenue recognized over the service period based on when the efforts and costs are expended. The Company’s service revenue is largely attributable to payroll-related processing services where the fees are based on a fixed amount per processing period or a fixed amount per processing period plus a fee per employee or transaction processed. The revenue earned from delivery service for the distribution of certain client payroll checks and reports is included in processing revenue, and the costs for delivery are included in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Interest on funds held for clients is earned primarily on funds that are collected from clients before due dates for payroll tax administration services and for employee payment services, and invested until remittance to the applicable tax or regulatory agencies or client employee. These collections from clients are typically remitted from 1 to 30 days after receipt, with some items extending to 90 days. The interest earned on these funds is included in total revenue on the Consolidated Statements of Operations because the collecting, holding, and remitting of these funds are critical components of providing these services.

Reserve for Chargeback Losses

Disputes between a cardholder and a merchant periodically arise as a result of, among other things, cardholder dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the purchase price is refunded to the customer through the merchant’s bank and charged to the merchant. If the merchant has inadequate funds, JetPay, LLC must bear the credit risk for the full amount of the transaction. JetPay, LLC evaluates the risk for such transactions and estimates the potential loss for chargebacks based primarily on historical experience and records a loss reserve accordingly. JetPay, LLC believes its reserve for chargeback losses is adequate to cover both the known probable losses and the incurred but not yet reported losses at the balance sheet dates. Chargeback reserves totaling $320,000 and $306,000 were recorded as of June 30, 2015 and December 31, 2014, respectively.

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, settlement processing assets and liabilities, accounts receivable, prepaid expenses and other current assets, funds held for clients, other assets, accounts payable and accrued expenses, deferred revenue, other current liabilities and client fund obligations, approximated fair value as of the balance sheet dates presented, because of the relatively short maturity dates on these instruments. The carrying amounts of the financing arrangements approximate fair value as of the balance sheet dates presented, because interest rates on these instruments approximate market interest rates after consideration of stated interest rates, anti-dilution protection and associated warrants.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash and cash equivalents, accounts receivable, settlement processing assets and funds held for clients. The Company’s cash and cash equivalents are deposited with major financial institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

9

Accounts Receivable

The Company’s accounts receivable are due from its merchant credit card and its payroll customers. Credit is extended based on the evaluation of customers’ financial condition and, generally, collateral is not required. Payment terms vary and amounts due from customers are stated in the financial statements net of an allowance for doubtful accounts. Accounts which are outstanding longer than the payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivables when they are deemed uncollectible.

Settlement Processing Assets and Obligations

Funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. Depending on the type of transaction, either the credit card interchange system or the debit network is used to transfer the information and funds between the sponsoring bank and card issuing bank to complete the link between merchants and card issuers. In certain of our processing arrangements, merchant funding primarily occurs after the sponsoring bank receives the funds from the card issuer through the card networks, creating a net settlement obligation on the Company’s Balance Sheet. In a limited number of other arrangements, the sponsoring bank funds the merchants before it receives the net settlement funds from the card networks, creating a net settlement asset on the Company’s Balance Sheet. Additionally, certain of the Company’s sponsoring banks collect the gross revenue from the merchants, pay the interchange fees and assessments to the credit card associations, collect their fees for processing and pay the Company a net residual payment representing the Company’s fees for the services. In these instances, the Company does not reflect the related settlement processing assets and obligations in its Consolidated Balance Sheet.

Timing differences in processing credit and debit card and ACH transactions, as described above, interchange expense collection, merchant reserves, sponsoring bank reserves, and exception items result in settlement processing assets and obligations. Settlement processing assets consist primarily of our receivable from merchants for the portion of the discount fee related to reimbursement of the interchange expense, our receivable from the processing bank for transactions we have funded merchants in advance of receipt of card association funding, merchant reserves held, sponsoring bank reserves and exception items, such as customer chargeback amounts receivable from merchants. Settlement processing obligations consist primarily of merchant reserves, our liability to the processing bank for transactions for which we have received funding from the members but have not funded merchants and exception items.

Property and Equipment

Property and equipment acquired in the Company’s recent business acquisitions have been recorded at estimated fair value. The Company records all other property and equipment acquired in the normal course of business at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, which are generally as follows: leasehold improvements – shorter of economic life or initial term of the related lease; machinery and equipment – 5 to 15 years; and furniture and fixtures – 5 to 10 years. Significant additions or improvements extending assets’ useful lives are capitalized; normal maintenance and repair costs are expensed as incurred.

Goodwill

Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company’s business combinations. The Company performs a goodwill impairment test on at least an annual basis. Application of the goodwill impairment test requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company conducts its annual goodwill impairment test as of December 31 of each year or more frequently if indicators of impairment exist. The Company periodically analyzes whether any such indicators of impairment exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include a sustained significant decline in our stock price and market capitalization, a significant adverse change in legal factors or in the business climate, unanticipated competition and/or slower expected growth rates, adverse actions or assessments by a regulator, among others. The Company compares the fair value of its reporting unit to its respective carrying value, including related goodwill. Future changes in the industry could impact the results of future annual impairment tests. The Company’s annual goodwill impairment testing indicated there was no impairment as of December 31, 2014. There can be no assurance that future tests of goodwill impairment will not result in impairment charges.

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Identifiable Intangible Assets

Identifiable intangible assets consist primarily of customer relationships, software costs, and tradenames. Certain tradenames are considered to have indefinite lives, and as such, are not subject to amortization. These assets are tested for impairment using undiscounted cash flow methodology annually and whenever there is an impairment indicator. Estimating future cash flows requires significant judgment and projections may vary from cash flows eventually realized. Several impairment indicators are beyond the Company’s control, and determining whether or not they will occur cannot be predicted with any certainty. Customer relationships, tradenames, and software costs are amortized on a straight-line basis over their respective assigned estimated useful lives.

Impairment of Long–Lived Assets

The Company periodically reviews the carrying value of its long-lived assets held and used at least annually or when events and circumstances warrant such a review. If significant events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. Cash flow projections are sometimes based on a group of assets, rather than a single asset. If cash flows cannot be separately and independently identified for a single asset, the Company determines whether impairment has occurred for the group of assets for which it can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, it measures any impairment by comparing the fair value of the asset group to its carrying value. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded. The Company’s annual testing indicated there was no impairment as of December 31, 2014.

Convertible Preferred Stock

The Company accounts for the redemption premium, beneficial conversion feature and issuance costs on its convertible preferred stock using the effective interest method, accreting such amounts to its convertible preferred stock from the date of issuance to the earliest date of redemption.

Share-Based Compensation

The Company expenses employee share-based payments under ASC Topic 718, Compensation-Stock Compensation, which requires compensation cost for the grant-date fair value of share-based payments to be recognized over the requisite service period. The Company estimates the grant date fair value of the share-based awards issued in the form of options using the Black-Scholes option pricing model.

Loss Per Share

Basic loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. The dilutive effect of the conversion option in the Flexpoint Series A Preferred and the Wellington Series A-1 Preferred of 9,133,300 and 616,500 shares of common stock, respectively, at June 30, 2015, and the effect of 537,908 exercisable stock options granted under the Company’s Stock Incentive Plan at June 30, 2015 have been excluded from the loss per share calculation for the three and six months ended June 30, 2015 in that the assumed conversion of these options would be anti-dilutive. As to the three and six months ended June 30, 2014, the dilutive effect of the conversion option in the $10 million Secured Convertible Promissory Notes Payable (the “Notes”) of 3,333,333 shares, the effect of the conversion option in the Flexpoint Series A Preferred and the Wellington Series A-1 Preferred of 3,800,000 and 256,500 shares of common stock, respectively, and the effect of 231,249 exercisable stock options granted under the Company’s Stock Incentive Plan at June 30, 2014 have been excluded from the loss per share calculation in that the assumed conversion of these options would be anti-dilutive.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company does review the terms of the convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound derivative instrument.

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Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges recorded within other expenses (income), using the effective interest method.

Fair Value Measurements

The Company accounts for fair value measurements in accordance with ASC Topic No. 820, Fair Value Measurements and Disclosures (“ASC Topic 820”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC Topic 820 are described below:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC Topic 820, assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement.

	Fair Value at June 30, 2015
	Total		Level 1		Level 2		Level 3
			(in thousands)
Contingent consideration	$	1,277	$	-	$	-	$	1,277

	Fair Value at December 31, 2014
	Total		Level 1		Level 2		Level 3
			(in thousands)
Contingent consideration	$	1,240	$	-	$	-	$	1,240

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The following table sets forth a summary of the change in fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis (in thousands):

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2015		2014			2015		2014
Beginning balance	$	1,251	$	1,280		$	1,240	$	1,230
Change in fair value of derivative liability		-	$	(110	)		-	$	(60	)
Change in fair value of contingent cash consideration		26	$	(8	)		37	$	(8	)
Totals	$	1,277	$	1,162		$	1,277	$	1,162

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the financial instrument. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department with support from the Company’s outside consultants which are approved by the Chief Financial Officer. Level 3 financial liabilities consist of a derivative liability and contingent consideration related to the JetPay, LLC acquisition for which there are no current markets such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy will be analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

The Level 3 financial liabilities are the result of recording the Completed Transactions, the ACI acquisition and related debt instruments as more fully described below.

In connection with the debt proceeds received under the Notes, the Company recorded a derivative liability of $2.1 million on its Consolidated Balance Sheet at December 28, 2012 related to the conversion feature embedded in the Notes. The fair value of the derivative liability was classified within Level 3 of the fair value hierarchy because it was valued using pricing models that incorporate management assumptions that cannot be corroborated with observable market data. The fair value at June 30, 2015 of $0 was the result of the notes being paid in full on December 31, 2014. The change in fair value of this derivative liability of $(110,000) and $(60,000) for the three and six months ended June 30, 2014, respectively, was recorded within other expenses (income) in the Company’s Consolidated Statements of Operations.

In addition to the consideration paid upon closing of the JetPay, LLC acquisition, WLES, L.P. (“WLES”), through December 28, 2017, is entitled to receive 833,333 shares of common stock if the trading price of the common stock is at least $8.00 per share for any 20 trading days out of a 30 trading day period and $5.0 million in cash if the trading price of the common stock is at least $9.50 per share for any 20 trading days out of a 30 trading day period. This contingent consideration was valued at $1.54 million at the date of acquisition based on utilization of option pricing models and was recorded as a non-current liability for $700,000 and as additional paid-in capital for $840,000 at December 31, 2012. The stock-based component value of $840,000 recorded at December 28, 2012 (the JetPay, LLC acquisition date), remains unchanged at June 30, 2015 as a result of this component being recorded as equity. The fair value at June 30, 2015 of the cash-based contingent consideration, valued at $1,000, was determined using a binomial option pricing model. The following assumptions were utilized in the June 2015 calculations: risk free interest rate: 0.82%; dividend yield: 0%; term of contingency of 2.51 years; and volatility: 22.6%.

The fair value of the common stock was derived from the per share price of recent sales of the common stock at the valuation date. Management determined that the results of its valuation were reasonable. The expected life represents the remaining contractual term of the derivative. The volatility rate was developed based on analysis of the historical volatility rates of similarly situated companies (using a number of observations that was at least equal to or exceeded the number of observations in the life of the derivative financial instrument at issue). The risk free interest rates were obtained from publicly available U.S. Treasury yield curve rates. The dividend yield is zero because the Company has not paid dividends and does not expect to pay dividends in the foreseeable future.

In addition to the consideration paid upon closing of the ACI acquisition, the previous unitholders are entitled to receive up to an additional $500,000 if certain net revenue goals are achieved through October 31, 2016. This contingent consideration was valued at $400,000 at the date of acquisition and $436,000 at June 30, 2015 based on utilization of a Monte Carlo simulation to estimate the variance and relative risk of achieving future net revenue growth and discounting the associated cash consideration payments at their present values using a credit-risk adjusted discount rate of 16.0%. The key assumptions in applying the Monte Carlo simulation included expected net revenue growth rates, the expected standard deviation and serial correlation of expected net revenue growth rates as well as a normal distribution assumption.

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The Company uses either a binomial option pricing model or the Black-Scholes option valuation model to value Level 3 financial liabilities at inception and on subsequent valuation dates. These models incorporate transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement.

As of June 30, 2015, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

In accordance with the provisions of ASC Topic 815, Derivatives and Hedging Activities, the Company presented its derivative liability at fair value on its Consolidated Balance Sheets, with the corresponding change in fair value recorded in the Company’s Consolidated Statement of Operations for the applicable reporting periods.

Income Taxes

The Company accounts for income taxes under ASC Topic 740, Income Taxes (“ASC Topic 740”). ASC Topic 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryovers. Deferred income tax expense (benefit) represents the change during the period in the deferred income tax assets and deferred income tax liabilities. In establishing the provision for income taxes and determining deferred income tax assets and liabilities, the Company makes judgments and interpretations based on enacted laws, published tax guidance and estimates of future earnings. ASC Topic 740 additionally requires a valuation allowance to be established when, based on available evidence, it is more likely than not that some portion or the entire deferred income tax asset will not be realized.

ASC Topic 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is required to file income tax returns in the United States (federal) and in various state and local jurisdictions. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The Company believes that its income tax positions and deductions would be sustained upon examination and does not anticipate any adjustments that would result in material changes to its financial position.

The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as interest expense and as a component of selling, general and administrative expense, respectively. There were no amounts accrued for penalties or interest as of or during the three and six months ended June 30, 2015 and 2014. Management does not expect any significant changes in its unrecognized tax benefits in the next year.

Subsequent Events

Management evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, management did not identify any recognized or non-recognized subsequent events which would have required an adjustment or disclosure in the financial statements, other than those disclosed in Note 14. Subsequent Events. See Note 14. Subsequent Events.

Recent Accounting Pronouncements

On February 18, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-02 Consolidation (Topic 810): Amendments to the Consolidation Analysis that amends the current consolidation guidance. The amendments affect both the variable interest entity and voting interest entity consolidation models. The new guidance is effective for the Company beginning January 1, 2016, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

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On April 7, 2015, the FASB issued ASU No. 2015-03 Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of related debt liability, consistent with debt discounts. Under current accounting standards, such costs are recorded as an asset. The new guidance is effective for the Company beginning January 1, 2016, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

Note 5.   Property and Equipment, net of Accumulated Depreciation

	June 30, 2015			December 31, 2014
	(in thousands)
Leasehold improvements	$	399		$	384
Equipment		885			811
Furniture and fixtures		270			252
Computer software		144			121
Vehicles		223			182
Assets in progress		266			152
Total property and equipment		2,187			1,902
Less: accumulated depreciation		(900	)		(676	)
Property and equipment, net	$	1,287		$	1,226

Property and equipment included $138,400 and $157,900 of computer equipment as of June 30, 2015 and December 31, 2014, respectively, net of accumulated depreciation of $33,100 and $13,600 as of June 30, 2015 and December 31, 2014, respectively, that is subject to capital lease obligations.

Depreciation expense was $115,000 and $103,000 for the three months ended June 30, 2015 and 2014, respectively, and $224,000 and $206,000 for the six months ended June 30, 2015 and 2014, respectively.

Note 6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following (in thousands):	June 30, 2015		December 31, 2014
Trade accounts payable	$	1,532	$	1,828
ACH clearing liability		1,728		2,146
Accrued compensation		1,314		1,233
Accrued agent commissions		1,103		758
Related party payables		80		70
Other		2,775		3,118
Total	$	8,532	$	9,153

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Note 7.   Long-Term Debt, Notes Payable and Capital Lease Obligations

Long-term debt, notes payable and capital lease obligations consist of the following:

	June 30, 2015			December 31, 2014
	(in thousands)
Term loan payable to Metro Bank (or “Metro”), interest rate of 4.0% payable in monthly principal payments of $107,143 plus interest, maturing December 28, 2019, collateralized by the assets  and equity interests of AD Computer Corporation and Payroll Tax Filing Services, Inc.	$	5,782		$	6,425
Term loan payable to Metro, interest rate of 5.25% payable in monthly principal payments of $104,167 plus interest beginning in December 2015, maturing November 7, 2021, collateralized by the assets  and equity interests of ACI Merchant Systems, LLC.		7,500			7,500
Revolving note payable to Metro, interest rate of Wall Street Journal Prime rate plus 1.00% (4.25% as June 30, 2015), interest payable monthly, collateralized by all assets of ADC, PTFS, and ACI, a pledge by the Company of its ownership interest in ADC and ACI, as well as a $1.0 million negative pledge on the stock of JetPay, LLC, maturing on May 6, 2017.		1,000			-
Unsecured promissory note payable to WLES, interest rate of 5.0% payable quarterly, note principal due on December 31, 2017. Note amount excludes unamortized fair value discount of $470,408 and $552,424 at June 30, 2015 and December 31, 2014, respectively. See Note 12. Related Party Transactions.		1,861			1,779
Unsecured promissory note payable to stockholder, interest rate of 4% payable at maturity, note principal due September 30, 2016. See Note 12. Related Party Transactions.		492			492
Unsecured promissory note payable to stockholder, interest rate of 4% payable quarterly, note principal due in two installments of $175,000 on May 6, 2016 and 2017. See Note 12. Related Party Transactions.		350			-
Capital lease obligations related to computer equipment at JetPay, LLC, interest rate of 5.55%, due in monthly lease payments of $4,114, maturing in May 2017, collateralized by equipment.		125			154
Various other debt instruments related to vehicles at ADC.		10			16
		17,120			16,366
Less current portion		(2,368	)		(1,571	)
	$	14,752		$	14,795

The Metro term loan agreements and the revolving note agreement require the Company to provide Metro with annual financial statements within 120 days of the Company’s year-end and quarterly financial statements within 60 days after the end of each quarter. The Metro agreements also contain certain annual financial covenants with which the Company was in compliance as of June 30, 2015.

Maturities of long-term debt and capital lease obligations, excluding fair value and conversion option debt discounts, are as follows for the twelve months ending June 30: 2016 – $2.4 million; 2017 – $4.2 million; 2018 – $4.9 million; 2019 – $2.5 million; 2020 – $1.9 million; and $1.7 million thereafter.

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Note 8.    Redeemable Convertible Preferred Stock

On October 11, 2013, the Company issued 33,333 shares of Series A Preferred to Flexpoint for an aggregate of $10.0 million less certain agreed-upon reimbursable expenses of Flexpoint (the “Initial Closing”) pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”) entered into on August 22, 2013.  Additionally, the Company issued 4,667 shares of Series A Preferred to Flexpoint on April 14, 2014 for an aggregate of $1.4 million; 20,000 shares on November 7, 2014 for $6.0 million; and 33,333 shares on December 28, 2014 for $10.0 million. The proceeds of the initial $10.0 million investment were used to retire the Ten Lords, Ltd. note payable of $5.9 million maturing in December 2013 with the remainder used for general corporate purposes. The proceeds of the $1.4 million investment were used to satisfy a portion of the EarlyBirdCapital, Inc. Award (the “EBC Award”). See Note 11. Commitments and Contingencies. As a result of the EBC Award, the Company was not able to satisfy one of the conditions to closing of the $1.4 million Series A Preferred purchase. Although Flexpoint agreed to waive this condition at the closing, for any subsequent closing of the Series A Preferred, the Company will need to seek a waiver of the failure of this condition from Flexpoint. The November 7, 2014 $6.0 million proceeds were used as partial consideration for the acquisition of ACI and the proceeds of the December 28, 2014 $10.0 million investment were used to redeem the Secured Convertible Promissory Notes that matured on December 31, 2014.

The Series A Preferred is convertible into shares of common stock.  Any holder of Series A Preferred may at any time convert such holder’s shares of Series A Preferred into that number of shares of common stock equal to the number of shares of Series A Preferred being converted multiplied by $300 and divided by the then-applicable conversion price, initially $3.00.  The conversion price of the Series A Preferred is subject to downward adjustment upon the occurrence of certain events. See Note 14. Subsequent Events.

Under the Securities Purchase Agreement, the Company agreed to sell to Flexpoint, and Flexpoint agreed to purchase, upon satisfaction of certain conditions, up to 133,333 shares of Series A Preferred for an aggregate purchase price of up to $40.0 million.  The Company’s obligation to issue and sell, and Flexpoint’s obligation to purchase, the Series A Preferred is divided into three separate tranches: Tranche A, Tranche B and Tranche C.  Tranche A consisted of $10.0 million of shares of Series A Preferred that was issued on October 11, 2013. Tranche B consisted of up to $10.0 million of shares of Series A Preferred, which Flexpoint was obligated to purchase, subject to satisfaction or waiver of certain conditions, from the Company if the Company was able to consummate a redemption any time after December 1, 2014 and prior to December 29, 2014 of the Notes.  The Series A Preferred under Tranche B was issued on December 28, 2014. Tranche C consists of up to $20.0 million of shares of Series A Preferred ($12.6 million remaining available at June 30, 2015, which Flexpoint has the option to purchase at any time until the third anniversary of the Initial Closing. The shares of Series A Preferred issuable with respect to Tranche A, Tranche B and Tranche C all have a purchase price of $300 per share.

The Series A Preferred has an initial liquidation preference of $600 per share (subject to adjustment for any stock split, stock dividend or other similar proportionate reduction or increase of the authorized number of shares of common stock) and will rank senior to the common stock with respect to distributions of assets upon the Company’s liquidation, dissolution or winding up. Holders of Series A Preferred will have the right to request redemption of any shares of Series A Preferred issued at least five years prior to the date of such request by delivering written notice to the Company at the then applicable liquidation value per share, unless holders of a majority of the outstanding Series A Preferred elect to waive such redemption request on behalf of all holders of Series A Preferred.

On May 5, 2014, the Company issued 2,565 shares of Series A-1 Preferred to Wellington for an aggregate of $769,500, less certain agreed-upon reimbursable expenses of Wellington, pursuant to a Securities Purchase Agreement dated May 1, 2014. Additionally, the Company issued 1,350 shares of Series A-1 Preferred to Wellington on November 20, 2014 for $405,000, and 2,250 shares on December 31, 2014 for $675,000. Under the Securities Purchase Agreement, the Company agreed to sell to Wellington, upon the satisfaction of certain conditions, up to 9,000 shares of Series A-1 Preferred at a purchase price of $300 per share for an aggregate purchase price of up to $2.7 million. The proceeds of the total investment to date of $1.85 million by Wellington will be used for general corporate purposes. The Series A-1 Preferred will be convertible into shares of the Company’s common stock or, in certain circumstances, Series A-2 Convertible Preferred Stock, par value $0.001 per share (“Series A-2 Preferred”). The Series A-1 Preferred can be converted into that number of shares of common stock equal to the number of shares of Series A-1 Preferred being converted multiplied by $300 and divided by the then-applicable conversion price, which initially will be $3.00. The conversion price of the series A-1 Preferred is subject to downward adjustment upon the occurrence of certain events as defined in the Securities Purchase Agreement. Additionally, Wellington will have the option, but not the obligation, to purchase up to the number of shares of Series A-1 Preferred equal to 6.75% of the cumulative number of shares of Series A Preferred purchased by Flexpoint.

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The Series A-1 Preferred will have an initial liquidation preference of $600 per share and will rank senior to the Company’s common stock and pari passu with the Series A Preferred owned by Flexpoint with respect to distributions of assets upon the Company’s liquidation, dissolution or winding up. Notwithstanding the above, no holder of the Series A-1 Preferred can convert if, as a result of such conversion, such holder would beneficially own 9.9% or more of the Company’s common stock. If at any time, no shares of Series A Preferred remain outstanding and shares of Series A-1 Preferred remain outstanding because of the limitation in the preceding sentence, all shares of Series A-1 Preferred shall automatically convert into shares of Series A-2 Preferred at a 1:1 ratio. Upon the occurrence of an Event of Noncompliance, as defined in the Securities Purchase Agreement, the holders of a majority of the Series A-1 Preferred may demand immediate redemption of all or a portion of the Series A-1 Preferred at the then-applicable liquidation value.

The Company considered the guidance of ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives, in determining the accounting treatment for its convertible preferred stock instruments. The Company considered the economic characteristics and the risks of the host contract based on the stated and implied substantive terms and features of the instruments; including, but not limited to, its redemption features, voting rights, and conversions rights; and determined that the terms of the preferred stock were more akin to an equity instrument than a debt instrument. The shares of Series A Preferred and Series A-1 Preferred are subject to redemption, at the option of the holder, on or after the fifth anniversary of their original purchase. Accordingly, the convertible preferred stock has been classified as temporary equity in the Company’s Consolidated Balance Sheets.

Upon issuance of the 33,333 shares of the Series A Preferred, the Company recorded as a reduction to the Series A Preferred and as Additional Paid-In Capital a beneficial conversion feature of $1.5 million. The beneficial conversion feature represents the difference between the effective conversion price and the fair value of the Series A Preferred as of the commitment date. There was no beneficial conversion feature upon the 2014 issuances of Series A Preferred to Flexpoint and Series A-1 Preferred to Wellington as a result of the price of the Company’s common stock at the dates of the closings being below the conversion price of the preferred stock. The Company accounts for the beneficial conversion feature, the liquidation preference, and the issuance costs related to the Series A Preferred and Series A-1 Preferred using the effective interest method by accreting such amounts to its Series A Preferred and Series A-1 Preferred from the date of issuance to the earliest date of redemption as a reduction to its total permanent equity within the Company’s Consolidated Statement of Changes in Stockholders’ Equity as a charge to Additional Paid-In Capital. Any accretion recorded during the periods presented are also shown as a reduction to the income available to common stockholders in the Company’s Consolidated Statements of Operations when presenting basic and dilutive per share information. Accretion was $1.25 million and $538,000 for the three months ended June 30, 2015 and 2014, respectively, and $2.47 million and $1.05 million for the six months ended June 30, 2015 and 2014, respectively.

Upon the occurrence of an Event of Noncompliance, the holders of a majority of the Series A Preferred may demand immediate redemption of all or a portion of the Series A Preferred at the then-applicable liquidation value.  Such holders may also exercise a right to have the holders of the Series A Preferred elect a majority of the Board by increasing the size of the Board and filling such vacancies.  Such right to control a minimum majority of the Board would exist for so long as the Event of Noncompliance was continuing. An “Event of Noncompliance” shall have occurred if: i) the Company fails to make any required redemption payment with respect to the Series A Preferred; ii) the Company breaches the Securities Purchase Agreement after the Initial Closing, and such breach has not been cured with thirty days after receipt of notice thereof; iii) the Company or any subsidiary makes an assignment for the benefit of creditors, admits its insolvency or is the subject of an order, judgment or decree adjudicating such entity as insolvent, among other similar actions; iv) a final judgment in excess of $5.0 million is rendered against the Company or any subsidiary that is not discharged within 60 days thereafter; or v) an event of default has occurred under the Loan and Security Agreement, dated as of December 28, 2012, as amended, by and among ADC, PTFS and Metro Bank, or the Loan and Security Agreement dated as of November 7, 2014 by and among ACI and Metro Bank, and such event of default has not been cured within thirty days after receipt of notice thereof.

Note 9.    Stockholders’ Equity

Common Stock

On January 30, 2014, the Company issued 1,396 shares of common stock with a fair market value of approximately $6,000, as additional compensation to a consultant for services rendered.

On March 28, 2014, the Company entered into a Securities Purchase Agreement (the “Common Stock SPA”) with each of Bipin C. Shah, its Chairman and Chief Executive Officer, and C. Nicholas Antich, the President of JetPay Payroll Services. Pursuant to the Common Stock SPA, on April 4, 2014, the Company received gross aggregate proceeds of $1.0 million, prior to issuance costs of $25,000, and issued an aggregate of 333,333 shares of common stock to Messrs. Shah and Antich. The proceeds were used to satisfy a portion of the EBC Award.

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On November 7, 2014, the Company issued 2,000,000 shares of the Company’s common stock in connection with the acquisition of ACI. See Note 3. Business Acquisition.

On June 18, 2015, the Company issued 29,167 shares of the Company’s common stock with a fair market value of approximately $79,000, as compensation to an employee for services rendered.

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.001 per share with such designations, rights and preferences as may be determined from time to time by the Company’s board of directors.

As of June 30, 2015 and December 31, 2014, there were no shares of preferred stock issued or outstanding other than the Series A Preferred issued to Flexpoint and Series A-1 Preferred issued to Wellington described above.

Stock-Based Compensation

ASC Topic 718, Compensation-Stock Compensation, requires compensation expense for the grant-date fair value of share-based payments to be recognized over the requisite service period.

At a meeting of the Company’s stockholders held on July 31, 2013 (the “Meeting”), the Company’s stockholders approved the adoption of the Company’s 2013 Stock Incentive Plan (the “Plan”). The Company granted options to purchase 200,000 and 65,000 shares of common stock under the Plan during the six months ended June 30, 2015 and 2014, respectively, all at an exercise price of $3.00 per share. The grant date fair value of the options granted during the six months ended June 30, 2015 and 2014 were determined to be approximately $232,000 and $145,000, respectively, using the Black-Scholes option pricing model. Aggregated stock-based compensation expense for the three months ended June 30, 2015 and 2014 was $64,000 and $88,000, respectively, and $142,000 and $168,000 for the six months ended June 30, 2015 and 2014, respectively. Unrecognized compensation expense as of June 30, 2015 relating to non-vested common stock options was approximately $624,000 and is expected to be recognized through 2019. During the six months ended June 30, 2015, no options have been exercised and 193,334 options have been forfeited.

The fair values of the Company’s options were estimated at the dates of grant using a Black-Scholes option pricing model with the following weighted average assumptions:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2015		2014		2015		2014
Expected term (years)		6.25		6.25		6.25		6.25
Risk-free interest rate		1.56%		2.03% to 2.10%		1.56%		2.03% to 2.10%
Volatility		44.8%		44.93%		44.8%		44.93%
Dividend yield		0%		0%		0%		0%

Expected term: The Company’s expected term is based on the period the options are expected to remain outstanding. The Company estimated this amount utilizing the “Simplified Method” in that the Company does not have sufficient historical experience to provide a reasonable basis to estimate an expected term.

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.

Volatility: The Company calculates the volatility of the stock price based on historical value and corresponding volatility of the Company’s peer group stock price for a period consistent with the stock option expected term.

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

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A summary of stock option activity for the six months ended June 30, 2015 and the year ended December 31, 2014 are presented below:

	Number of Options			Weighted Average Exercise Price
Outstanding at December 31, 2013		1,000,000		$	3.03
Granted		445,000		$	3.00
Forfeited		(43,750	)	$	3.04
Exercised		-		$	-
Outstanding at December 31, 2014		1,401,250		$	3.02
Granted		200,000		$	3.00
Forfeited		(193,334	)	$	3.00
Exercised		-		$	-
Outstanding at June 30, 2015		1,407,916		$	3.02
Exercisable at June 30, 2015		537,908		$	3.05

The weighted average remaining life of options outstanding at June 30, 2015 was 8.73 years. The aggregate intrinsic value of the exercisable options at June 30, 2015 was $0.

Note 10.    Income Taxes

The Company recorded income tax expense of $43,000 and $52,000 for the three months ended June 30, 2015 and 2014, respectively, and $101,000 and $104,000 for the six months ended June 30, 2015 and 2014, respectively. Income tax expense reflects the recording of state income taxes. The effective tax rates were approximately (12.22) % and (2.24) % for the three months ended June 30, 2015 and 2014, respectively, and (19.65) % and (2.85)% for the six months ended June 30, 2015 and 2014, respectively. The effective rate differs from the federal statutory rate for each period, primarily due to state and local income taxes and changes to the valuation allowance.

JetPay, LLC is subject to and pays the Texas Margin Tax which is considered to be an income tax in accordance with the provisions of the Income Taxes Topic in FASB, ASC and the associated interpretations. There are no significant temporary differences associated with the Texas Margin Tax.

As of December 31, 2014, the Company had cumulative U.S. federal and state net operating loss carryovers (“NOLs”) of approximately $12.8 million. These NOLs, if not utilized, expire at various times through 2034. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change in control. Management will be performing a preliminary evaluation as to whether a change in control has taken place.

In assessing the realization of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, Management believes that significant uncertainty exists with respect to future realization of the deferred tax assets, and has, therefore, increased its valuation allowance against deferred tax assets by $205,000 for the six months ended June 30, 2015 and $1.5 million for the six months ended June 30, 2014, with a total valuation allowance of approximately $7.8 million at June 30, 2015, representing the amount of its deferred income tax assets in excess of the Company’s deferred income tax liabilities. The deferred tax liability related to goodwill that is amortizable for tax purposes (“Intangibles”) will not reverse until such time, if any, that the goodwill, which is considered to be an asset with an indefinite life for financial reporting purposes, becomes impaired or sold. Due to the uncertain timing of this reversal, the temporary difference cannot be considered as future taxable income for purposes of determining a valuation allowance. Therefore, the deferred tax liability related to tax deductible goodwill Intangibles cannot be considered when determining the ultimate realization of deferred tax assets.

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Note 11.   Commitments and Contingencies

On or about March 13, 2012, a merchant of JetPay, LLC, Direct Air, a charter travel company, abruptly ceased operations and filed for bankruptcy. Under United States Department of Transportation requirements, all charter travel company customer charges for travel are to be deposited into an escrow account in a bank under a United States Department of Transportation escrow program, and not released to the charter travel company until the travel has been completed. In the case of Direct Air, such funds had historically been deposited into such United States Department of Transportation escrow account at Valley National Bank in New Jersey, and continued to be deposited through the date Direct Air ceased operations. At the time Direct Air ceased operations, according to Direct Air’s bankruptcy trustee, there should have been in excess of $31.0 million in the escrow account. Instead there was approximately $1.0 million. As a result, Merrick Bank (“Merrick”), JetPay, LLC’s sponsor with respect to this particular merchant, incurred chargebacks in excess of $25.0 million. Merrick maintains insurance through a Chartis Insurance Policy for chargeback losses that names Merrick as the primary insured. The policy has a limit of $25.0 million and a deductible of $250,000. Merrick has sued Chartis Insurance (“Chartis”) for payment under the claim. Under an agreement between Merrick and JetPay, LLC, JetPay, LLC may be obligated to indemnify Merrick for losses realized from such chargebacks that Merrick is unable to recover from other parties. JetPay, LLC recorded a loss for all chargebacks in excess of $25.0 million, the $250,000 deductible on the Chartis insurance policy and $487,000 of legal fees charged against JetPay, LLC’s cash reserve account by Merrick, totaling $1.9 million in 2012, as well as an additional $597,000 in legal fees charged against JetPay, LLC’s cash reserve account by Merrick through June 30, 2013. In December 2013, Merrick, in addition to its suit against Chartis, also filed suit against Valley National Bank as escrow agent. In February 2015, JetPay joined that suit, along with American Express. JetPay, LLC has received correspondence from Merrick of its intention to seek recovery for all unrecovered chargebacks and related costs, but JetPay, LLC is currently not a party to any litigation from Merrick regarding this matter. Merrick and JetPay, LLC have entered into a forbearance agreement pertaining to the Direct Air chargeback issue. The Direct Air situation has also caused other unexpected expenses, such as higher professional fees and fees for chargeback processing. Additionally, pursuant to the terms of its agreement with Merrick, Merrick has forced JetPay, LLC to maintain increased cash reserves in order to provide additional security for any obligations arising from the Direct Air situation. Merrick continues to hold approximately $4.4 million of total reserves related to the Direct Air matter as of June 30, 2015. The cash reserve balance was reduced by approximately $600,000 during the year ended December 31, 2014 to settle a lawsuit involving the Company and Merrick with MSC Cruise Lines, including certain legal fees claimed and deducted from the reserve by Merrick in connection with settling the matter, as more fully described below. These reserves are recorded in Other Assets.

On August 7, 2013, JetPay Merchant Services, LLC (“JPMS”), a wholly owned subsidiary of JetPay, LLC and indirect wholly owned subsidiary of the Company, together with WLES, (collectively, the “Plaintiffs”), filed suit in the United States District Court for the Northern District of Texas, Dallas Division, against Merrick, Royal Group Services, LTD, LLC and Gregory Richmond (collectively, the “Defendants”). The suit alleges that Merrick and Gregory Richmond (an agent of Royal Group Services) represented to JPMS that insurance coverage was arranged through Chartis Specialty Insurance Company to provide coverage for JPMS against potential chargeback losses related to certain of JPMS’s merchant customers, including Southern Sky Air Tours, d/b/a Direct Air. The complaint alleges several other causes of action against the Defendants, including violation of state insurance codes, negligence, fraud, breach of duty and breach of contract. Also, in August 2013, JPMS, JetPay, LLC, and JetPay ISO Services, LLC filed the second amendment to a previously filed complaint against Merrick in the United States District Court for the District of Utah, adding to its initial complaint several causes of action related to actions Merrick allegedly took during JetPay, LLC’s transition to a new sponsoring bank in June 2013. Additionally, subsequent to this transition, Merrick invoiced the Company for legal fees incurred by Merrick totaling approximately $3.2 million. The Company does not believe it has a responsibility to reimburse Merrick for these legal fees and intends to vigorously dispute these charges. Accordingly, the Company has not recorded an accrual for these legal fees as of June 30, 2015.

As partial protection against any potential losses related to Direct Air, the Company required that, upon closing of the Completed Transactions, 3,333,333 shares of our common stock that was to be paid to WLES as part of the JetPay, LLC acquisition be placed into an escrow account with JPMorgan Chase (“Chase”) as the trustee. The Escrow Agreement for the account names Merrick, the Company, and WLES as parties. If JetPay, LLC suffers any liability as a result of the Direct Air matter, these shares are to be used in partial or full payment for any such liability, with any remaining shares delivered to WLES. If JetPay, LLC is found to have any liability because of this issue, and these shares do not have sufficient value to fully cover such liability, the Company may be responsible for this JetPay, LLC liability. On February 3, 2014, the Company received notice that Merrick had requested Chase to release the 3,333,333 shares in the escrow account to Merrick. Both JetPay and WLES informed Chase that they did not agree to the release, and the shares remain in escrow.

On January 16, 2013, the Company received notice that EarlyBirdCapital, Inc. (“EBC”) had commenced arbitration proceedings (the “Claim”) against the Company with the International Centre for Dispute Resolution (the “ICDR”). The Claim alleged that the Company breached a Letter Agreement, dated as of May 9, 2011, with EBC by failing to pay EBC a cash fee of $2.07 million and reimburse EBC for certain expenses upon the closing of the Company’s initial business combination, which was consummated on December 28, 2012. As a result of such breach, EBC sought the cash fee plus interest and attorney’s fees and expenses. In November 2013, the ICDR held arbitration proceedings with respect to the Claim. On March 3, 2014, the ICDR rendered its decision and ordered the Company to pay the cash fee of $2.07 million plus interest, attorney’s fees and expenses of approximately $740,000 within 30 days of the decision (the “EBC Award”). The Company accrued $2,136,000 relating to this matter as of December 31, 2012 and an additional $675,000 was recorded as SG&A expenses in the fourth quarter of 2013 for the legal fees and interest costs awarded to EBC as part of the EBC Award. In order to satisfy a portion of the EBC Award, the Company entered into the Common Stock SPA. Pursuant to the Common Stock SPA, on April 4, 2014, the Company received aggregate proceeds of $1.0 million and issued an aggregate of 333,333 shares of common stock to Messrs. Shah and Antich. Additionally, on April 14, 2014, the Company issued 4,667 shares of Series A Preferred to Flexpoint for an aggregate of $1.4 million under the Securities Purchase Agreement. See Note 8. Redeemable Convertible Preferred Stock. The Company used the proceeds from the sale of common stock, the proceeds from the closing of the Series A Preferred to Flexpoint, and existing cash of $411,000 to fully satisfy its obligations to EBC pursuant to the EBC Award.

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On August 23, 2013, the Company received notice that JPMS was a party in a lawsuit brought by MSC Cruise Lines, a former customer. Merrick was a co-defendant in the lawsuit. MSC Cruise Lines claimed approximately $2.0 million in damages and alleged that JPMS breached its agreement with MSC by charging fees not specified in the agreement. The Company reached a settlement on the matter on July 31, 2014. Accordingly, the Company has recorded an expense of $600,000 for the year ended December 31, 2014, representing the settlement to MSC Cruise Lines and certain legal fees claimed by Merrick in connection with settling the suit. The settlement, including the Merrick legal fees, was satisfied by a deduction from the Merrick reserve account recorded in Other Assets as described above.

In December 2013, the Company settled a lawsuit with M&A Ventures in which it agreed to pay $400,000, with $100,000 paid in 2013 and the remainder in installments throughout 2014. The Company recorded the $400,000 settlement within SG&A expense for the three months ended December 31, 2013.

At the time of the acquisition of JetPay, LLC, the Company entered into an Amendment, Guarantee, and Waiver Agreement (the “Agreement”) dated December 28, 2012 between the Company, Ten Lords and Interactive Capital and JetPay, LLC. Under this Agreement, Ten Lords and Interactive Capital agreed to extend payment of a $6.0 million note remaining outstanding at the date of acquisition for up to twelve months. The note was paid in full in October 2013 using the proceeds from the initial purchase of Series A-1 Preferred by Flexpoint. See Note 8. Redeemable Convertible Preferred Stock. The terms of the Agreement required the Company to provide to Ten Lords a “true up” payment, which was meant to put the holders of the note (Ten Lords and Interactive Capital) in the same after-tax economic position as they would have been had the note been paid in full on December 28, 2012. JetPay has estimated the amount due to Ten Lords under this Agreement to be approximately $340,000. Accordingly, the Company has recorded an accrual of $340,000 for this matter as of June 30, 2015.

In December 2012, BCC Merchant Solutions, a former customer of JetPay, LLC filed a suit against JetPay, LLC, Merrick Bank, and Trent Voigt in the Northern District of Texas, Dallas Division, for $1.9 million, alleging that the parties by their actions, had cost BCC significant expense and lost customer revenue. The Company believes that the basis of the suit regarding JetPay, LLC is groundless and intends to defend it vigorously. Accordingly, the Company has not recorded an accrual for any potential loss related to this matter as of June 30, 2015.

The Company is a party to various other legal proceedings related to its ordinary business activities. In the opinion of the Company’s management, none of these proceedings are material in relation to our results of operations, liquidity, cash flows, or financial condition.

Note 12.    Related Party Transactions

JetPay Payroll Services’ headquarters are located in Center Valley, Pennsylvania and consist of approximately 22,500 square feet leased from C. Nicholas Antich and Carol A. Antich. Mr. Antich is the President of ADC. The rent is currently approximately $43,426 per month with annual 4% increases, on a net basis. The office lease has an initial 10-year term expiring May 31, 2016. Rent expense under this lease was $129,140 for each of the three months ended June 30, 2015 and 2014, and $258,280 for each of the six months ended June 30, 2015 and 2014.

JetPay Payment Services retains a backup center in Sunnyvale, Texas consisting of 1,600 square feet, rented for approximately $3,000 per month from JT Holdings, an entity controlled by Trent Voigt, Chief Executive Officer of JetPay, LLC. The terms of the lease are commercial. Rent expense was $9,000 for each of the three months ended June 30, 2015 and 2014, and $18,000 for each of the six months ended June 30, 2015 and 2014.

The above transactions with respect to JetPay Payroll Services and JetPay Payment Services were approved prior to the Completed Transactions. Going forward, all related party transactions with respect to such entities will be reviewed and approved by the Company’s Audit Committee to ensure that the terms of such transactions are no less favorable to the Company than those that would be available with respect to such transactions from unaffiliated third parties.

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On June 7, 2013, the Company issued an unsecured promissory note to Trent Voigt, Chief Executive Officer of JetPay, LLC, in the amount of $491,693. The note matures on September 30, 2016, as extended, and bears interest at an annual rate of 4% with interest expense of $4,900 recorded for each of the three months ended June 30, 2015 and 2014, and $9,750 for each of the six months ended June 30, 2015 and 2014. The transaction was approved upon resolution and review by the Company’s Audit Committee of the terms of the note to ensure that such terms were no less favorable to the Company than those that would be available with respect to such transactions from unaffiliated third parties.

On May 6, 2015, the Company issued an unsecured promissory note to C. Nicholas Antich, Chief Executive Officer and President of ADC, and Carol A. Antich in the amount of $350,000 to satisfy the remaining balance of the $2.0 million deferred consideration. The promissory note bears interest at an annual rate of 4% and matures on May 6, 2017, payable in two equal installments of $175,000 on May 6, 2016 and 2017. Interest expense related to this promissory note was $2,200 in the three and six months ended June 30, 2015. The promissory note was approved upon resolution and review by the Company’s Audit Committee of the terms of the promissory note to ensure that such terms were no less favorable to the Company than those that would be available with respect to such transactions from unaffiliated third parties.

In connection with the closing of the JetPay, LLC acquisition, the Company entered into a Note and Indemnity Side Agreement with JP Merger Sub, LLC, WLES and Trent Voigt (the “Note and Indemnity Side Agreement”) dated as of December 28, 2012. Pursuant to the Note and Indemnity Side Agreement, the Company agreed to issue a promissory note in the amount of $2,331,369 in favor of WLES. Interest accrues on amounts due under the note at a rate of 5% per annum, and is payable quarterly. Interest expense was $29,500 for each of the three months ended June 30, 2015 and 2014, and $58,600 for each of the six months ended June 30, 2015 and 2014. The note can be prepaid in full or in part at any time without penalty. As partial consideration for offering the note, the Company and JP Merger Sub, LLC agreed to waive certain specified indemnity claims against WLES and Mr. Voigt to the extent the losses under such claims do not exceed $2,331,369.

On August 22, 2013, JetPay, LLC entered into a Master Service Agreement with JetPay Solutions, LTD, a United Kingdom based entity 75% owned by WLES, an entity owned by Trent Voigt. The Company initiated transaction business under this agreement beginning in April 2014 with revenue earned from JetPay Solutions, LTD of $118,446 and $68,712 for the three months ended June 30, 2015 and 2014, respectively, and $223,272 and $68,712 for the six months ended June 30, 2015 and 2014, respectively.

On March 28, 2014, the Company entered into the Common Stock SPA with each of Bipin C. Shah, its Chairman and Chief Executive Officer, and C. Nicholas Antich, the President of JetPay Payroll Services. Pursuant to the Common Stock SPA, on April 4, 2014, the Company received aggregate proceeds of $1.0 million and issued an aggregate of 333,333 shares of common stock to Messrs. Shah and Antich. The proceeds were used to satisfy a portion of the EBC Award.

On October 31, 2014, following the unanimous consent of the Company’s Audit Committee, the Company entered into a letter agreement with WLES, an entity owned by Trent Voigt, that governs the distribution of any proceeds received in connection with the Direct Air matter. The Letter Agreement provides that subject to certain exceptions, after each of the Company and WLES receive out-of-pocket expenses and chargeback losses incurred subsequent to the consummation of the Completed Transactions and prior to the consummation of the Completed Transactions, respectively, each of the parties will share in any proceeds received pro rata.

Note 13.    Segments

The Company currently operates in two business segments, the JetPay Payment Processing Segment, consisting of JetPay Payment Services and JetPay Strategic Partners, an end-to-end processor of credit and debit card and ACH payment transactions for both businesses with a focus on those processing internet transactions and recurring billings, as well as traditional retailers and service providers, and the JetPay Payroll Segment, consisting of JetPay Payroll Services, a full-service payroll and related payroll tax payment processor.

Segment operating results are presented below (in thousands). The results reflect revenues and expenses directly related to each segment. The activity within the JetPay Card Services division was not material through June 30, 2015 and 2014, and accordingly was included in Corporate in the tables below. The Company does not evaluate performance or allocate resources based on segment asset data, and therefore, such information is not presented.

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	For the Three Months Ended June 30, 2015
	JetPay Payment Processing		JetPay Payroll			General/ Corporate			Total
Processing revenues	$	7,445	$	3,108		$	13		$	10,566
Cost of processing revenues		4,757		1,733			30			6,520
Selling, general and administrative expenses		1,807		1,144			243			3,194
Change in fair value of contingent consideration liability		-		-			26			26
Amortization of intangibles and depreciation		534		346			2			882
Other expenses		100		76			120			296
Income (loss) before income taxes	$	247	$	(191	)	$	(408	)	$	(352	)
Property and equipment additions	$	99	$	79		$	-		$	178

	For the Three Months Ended June 30, 2014
	JetPay Payment Processing			JetPay Payroll			General/ Corporate			Total
Processing revenues	$	4,687		$	3,038		$	1		$	7,726
Cost of processing revenues		2,941			1,781			11			4,733
Selling, general and administrative expenses		1,832			1,029			547			3,408
Change in fair value of contingent consideration liability		-			-			(8	)		(8	)
Amortization of intangibles and depreciation		321			341			1			663
Other (income) expenses		(2	)		75			1,176			1,249
Loss before income taxes	$	(405	)	$	(188	)	$	(1,726	)	$	(2,319	)
Property and equipment additions	$	16		$	29		$	13		$	58

	For the Six Months Ended June 30, 2015
	JetPay Payment Processing		JetPay Payroll		General/ Corporate			Total
Processing revenues	$	14,533	$	6,855	$	22		$	21,410
Cost of processing revenues		9,286		3,630		60			12,976
Selling, general and administrative expenses		3,559		2,291		726			6,576
Change in fair value of contingent consideration liability		-		-		37			37
Amortization of intangibles and depreciation		1,065		691		3			1,759
Other expenses		199		139		238			576
Income (loss) before income taxes	$	424	$	104	$	(1,042	)	$	(514	)
Total property and equipment, net	$	691	$	560	$	36		$	1,287
Property and equipment additions	$	174	$	118	$	1		$	293
Intangible assets and goodwill, net	$	48,823	$	18,294	$	-		$	67,117
Total segment assets	$	72,264	$	55,536	$	951		$	128,751

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	For the Six Months Ended June 30, 2014
	JetPay Payment Processing			JetPay Payroll		General/ Corporate			Total
Processing revenues	$	9,290		$	6,604	$	1		$	15,895
Cost of processing revenues		5,886			3,521		14			9,421
Selling, general and administrative expenses		2,828			2,030		1,325			6,183
Change in fair value of contingent consideration liability		-			-		(8	)		(8	)
Amortization of intangibles and depreciation		641			684		1			1,326
Other expenses		1			149		2,476			2,626
(Loss) income before income taxes	$	(66	)	$	220	$	(3,807	)	$	(3,653	)
Total property and equipment, net	$	458		$	614	$	14		$	1,086
Property and equipment additions	$	56		$	73	$	13		$	142
Intangible assets and goodwill, net	$	33,442		$	19,415	$	-		$	52,857
Total segment assets	$	54,828		$	70,662	$	2,155		$	127,645

Note 14.    Subsequent Events

Under the Securities Purchase Agreement (the “Securities Purchase Agreement”) entered into on August 22, 2013 between the Company and Flexpoint Ford, Flexpoint is provided certain indemnification rights based upon certain subsequent losses and expenses of the Company. On April 24, 2015, Flexpoint tendered to the Company a Claim Letter regarding an indemnification claim relative to the EarlyBirdCapital matter. See Note 11. Commitments and Contingencies. On August 6, 2015, in resolution of the indemnity claim, Flexpoint and the Company entered into a Letter Agreement to resolve the matter, whereby the conversion price of any of the Series A-1 Preferred Stock held by Flexpoint is reduced from $3.00 per share to $2.90 per share.

On August 4, 2015, the Company held its 2015 Annual Stockholders’ Meeting (the “Meeting”). At the Meeting, the Company’s stockholders elected two directors for three-year terms, ratified the Audit Committee’s appointment of Marcum LLP as the Company’s registered public accounting firm for fiscal year 2015, and approved the adoption of the JetPay Corporation Employee Stock Purchase Plan.

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

The following discussion of the financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto included in this Quarterly Report on Form 10-Q.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

As used in this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the references to “our company,” “the Company,” “JetPay,” “us,” “we” and “our” refer to JetPay Corporation.

This report and other written or oral statements made from time to time by us may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can sometimes identify forward looking-statements by our use of the words “believes,” “anticipates,” “expects,” “intends,” “plan,” “forecast,” “guidance” and similar expressions. Some of the statements we use in this report, contain forward-looking statements concerning our business operations, economic performance and financial condition, including in particular: our business strategy and means to implement the strategy; measures of future results of operations, such as revenue, expenses, operating margins, income tax rates, and earnings per share; other operating metrics such as shares outstanding and capital expenditures; our success and timing in developing and introducing new products or services and expanding our business; and the successful integration of future acquisitions.

Although we believe that the plans and expectations reflected in or suggested by our forward-looking statements are reasonable, those statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, many of which are beyond our control, cannot be foreseen and reflect future business decisions that are subject to change. Accordingly, we cannot guarantee you that our plans and expectations will be achieved. Our actual revenues, revenue growth rates and margins, other results of operations and shareholder values could differ materially from those anticipated in our forward-looking statements as a result of many known and unknown factors, many of which are beyond our ability to predict or control. These factors include, but are not limited to, those set forth in Item 1A - Risk Factors of this report and our Annual Report on Form 10-K, those set forth elsewhere in this report and those set forth in our press releases, reports and other filings made with the SEC. These cautionary statements qualify all of our forward-looking statements, and you are cautioned not to place undue reliance on these forward-looking statements.

Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. While we may elect to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to publicly release the results of any revisions to our forward-looking statements.

Overview

We were formed on November 12, 2010 as a blank check company in the development stage to serve as a vehicle to acquire through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more operating businesses. As previously disclosed, we completed the acquisitions of JetPay, LLC and ADC, on December 28, 2012, and ACI on November 7, 2014.

We are a provider of payment services – debit and credit card processing, payroll, and prepaid card services to businesses and their employees throughout the United States. We provide these services through three wholly-owned subsidiaries: JetPay, LLC, currently doing business as JetPay Payment Services, which provides debit and credit processing and ACH payment services to businesses with a focus on those processing internet transactions and recurring billings; ACI, currently doing business as JetPay Strategic Partners, an independent sales organization specializing in relationships with banks, credit unions and other associations; and ADC, currently doing business as JetPay Payroll Services, which provides payroll, tax filing, and related services to small and medium-sized employers.  We also operate JetPay Card Services, a division focused on providing low-cost money management and payment services to unbanked and under-banked employees of our business customers and other consumers. 

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Our overall business strategy is to provide payment processing services to small and large-sized businesses with a high percentage of our revenues consisting of recurring revenues with strong margins and with relatively low capital requirements. Our corporate strategy is to increase our revenues in our newly acquired businesses through a combination of organic growth and acquisitions. Our organic growth strategy is focused on developing and increasing our current marketing and sales staff at JetPay Payment Services, JetPay Strategic Partners and JetPay Payroll Services to penetrate new customer niches and geographic markets. Our organic growth strategy also includes cross marketing initiatives to sell credit and debit card processing services to JetPay Payroll Services’ payroll customers and payroll processing services to JetPay Payment Services’ credit and debit card processing customers. Additionally, we will seek additional debt and/or equity capital to acquire strategic payments’ distribution channels or extension of our current payments’ channels and/or payroll processors to integrate into our JetPay Payment Services and JetPay Payroll Services operations. Our acquisition strategy is focused on identifying companies that either provide services similar to ours or services that expand our product and service offerings and/or our geographic reach.  Both our JetPay Payment Services and our JetPay Payroll Services operations have significant under-utilized processing capacity, which can be leveraged to create additional processing revenues without significant cost increases.  We also plan to introduce new products, such as our recently launched Card Services division, which provides low-cost financial tools to both un-banked and under-banked consumers.  Our overall strategy also includes looking for cost synergies as we continue to integrate the operations of JetPay Payment Services, JetPay Strategic Partners and JetPay Payroll Services in such areas as insurance costs, banking costs, employee benefit costs, and other selling, general and administrative cost as well as operating cost areas.

JetPay Payment Processing Segment - JetPay Payment Services and JetPay Strategic Partners

Revenues

JetPay Payment Services’ and JetPay Strategic Partners’ revenues fall into two categories: transaction processing revenue and merchant discount revenue. As such, our two primary drivers are the number of transactions and merchant dollar volume. A third measure related to merchant dollar volume, for those merchants where we charge a percentage of the sale amount, is the average size of the transaction, as costs for processing the transaction tend to be fixed, so that the higher the average ticket, the more revenue we earn for a fixed cost. JetPay’s discount revenues are generally a fixed percentage of the merchant’s dollar volume, with interchange and other third-party fees passed through to the merchant without markup. Our billings to merchants primarily consist of these transaction fees and discount fees, as well as pass-through fees for other miscellaneous services, such as handling chargebacks. Interchange costs are set by the card networks, and are paid directly by the sponsoring bank to the credit card associations based upon a percentage of transaction amounts and/or a fixed price per transaction. JetPay Payment Services refers to the ratio of processing revenues to the dollar amount of card transactions processed as the “margin.” If margin increases, processing revenues will tend to increase accordingly. Further, both the number of merchants who process transactions, and the average dollar amount of transactions processed per merchant, will impact the total transaction volume and thus the total processing revenues. As such, growth in JetPay’s merchant count and/or growth in the same store transaction volume will also drive JetPay’s processing revenue growth.

Expenses

The most significant components of operating expenses are credit card association fees and assessments; Third Party residuals; and salaries and other employment costs. Salaries and other employment costs are largely fixed in nature, increasing slightly with the growth in numbers of customers, but tending to grow with inflation. Credit card fees and assessments and bank sponsorship costs are generally a percentage of card volume. Bank sponsorship costs are largely based upon transaction counts and volumes. Selling, general and administrative expenses include stable costs such as occupancy and office costs, outside services, and depreciation and amortization expense, which is recognized on a straight-line basis over the estimated useful life of the assets. Cost of processing revenues also includes chargeback losses, which vary over the long term based upon transaction volume processed by JetPay’s merchants, but can vary from period to period depending upon specific events in that period. JetPay Payment Services has and will continue to experience higher than normal professional fees due to the Direct Air bankruptcy hearings and associated legal concerns surrounding the failed merchant.

JetPay Payroll Segment - JetPay Payroll Services

Revenues

The majority of revenues from JetPay Payroll Services is derived from its payroll processing operations, which includes the calculation, preparation, collection and delivery of employer payroll obligations and the production of internal accounting records and management reports, and from services provided for the preparation of federal, state, and local payroll tax returns, including the collection and remittance of clients’ payroll tax obligations.  JetPay Payroll Services experiences increased revenues in the fourth and first calendar quarters due to additional employer annual tax filing requirements. Payroll Tax Filing Services (“PTFS”) trust account earnings represent the interest earned on the funds held for clients trust balance.  Trust fund earnings can fluctuate based on the amount held in the trust account as well as fluctuations in interest rate.

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Expenses

JetPay Payroll Services’ most significant cost of processing revenues is its payroll and related expenses and facility overhead costs.  These costs are largely fixed in nature, increasing slightly with the growth in numbers of customers and payrolls processed, but tending to grow with inflation. JetPay Payroll Services’ selling, general, and administrative expenses include the costs of the administrative and sales staff, payroll delivery costs, outside services, rent, office expense, insurance, sales and marketing costs and professional services costs.

Results of Operations for the Three Months Ended June 30, 2015 and 2014

The following tables represent a comparison of the results of our operations for the three month periods ended June 30, 2015 and June 30, 2014 (in thousands):

	For the Three Months Ended June 30, 2015
	Consolidated			General/ Corporate			JetPay Payroll			JetPay Payment Processing
Processing revenues	$	10,566		$	13		$	3,108		$	7,445
Cost of processing revenues		6,520			30			1,733			4,757
Gross profit		4,046			(17	)		1,375			2,688
Selling, general, and administrative expenses		3,194			243			1,144			1,807
Change in fair value of contingent consideration liability		26			26			-			-
Amortization of intangibles		767			-			280			487
Depreciation		115			2			66			47
Operating (loss) income		(56	)		(288	)		(115	)		347
Interest expense		206			34			71			101
Amortization of deferred financing, debt discounts, and conversion options		92			86			6			-
Other (income) expense		(2	)		-			(1	)		(1	)
(Loss) income before taxes		(352	)		(408	)		(191	)		247
Income tax expense		43			-			6			37
Net (loss) income		(395	)		(408	)		(197	)		210
Accretion of convertible preferred stock		(1,249	)		(1,249	)		-			-
Net (loss) income applicable to common stockholders	$	(1,644	)	$	(1,657	)	$	(197	)	$	210

	For the Three Months Ended June 30, 2014
	Consolidated			General/ Corporate			JetPay Payroll			JetPay Payment Processing
Processing revenues	$	7,726		$	1		$	3,038		$	4,687
Cost of processing revenues		4,733			11			1,781			2,941
Gross profit		2,993			(10	)		1,257			1,746
Selling, general, and administrative expenses		3,408			547			1,029			1,832
Change in fair value of contingent consideration liability		(8	)		(8	)		-			-
Amortization of intangibles		560			-			280			280
Depreciation		103			1			61			41
Operating loss		(1,070	)		(550	)		(113	)		(407	)
Interest expense		409			334			75			-
Amortization of deferred financing, debt discounts, and conversion options		952			952			-			-
Change in fair value of derivative Liability		(110	)		(110	)		-			-
Other (income) expense		(2	)		-			-			(2	)
Loss before taxes		(2,319	)		(1,726	)		(188	)		(405	)
Income tax expense		52			-			20			32
Net loss		(2,371	)		(1,726	)		(208	)		(437	)
Accretion of convertible preferred stock		(538	)		(538	)		-			-
Net loss applicable to common stockholders	$	(2,909	)	$	(2,264	)	$	(208	)	$	(437	)

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Revenues

Revenues were $10.57 million and $7.73 million for the three months ended June 30, 2015 and 2014, respectively. Overall revenues increased $2.84 million, or 36.8%, in 2015 as compared to 2014. Of the $10.57 million of revenues for the three months ended June 30, 2015, $3.11 million, or 29.4%, was generated from our JetPay Payroll Segment and $7.45 million, or 70.6%, from our JetPay Payment Processing Segment. Of the $7.73 million of revenues for the three months ended June 30, 2014, $3.04 million, or 39%, was generated from our JetPay Payroll Segment and $4.69 million, or 61%, from our JetPay Payment Processing Segment.

JetPay Payment Processing Segment’s revenues increased $2.76 million, or 58.8%, for the three months ended June 30, 2015 as compared to 2014. This increase included revenues of $1.86 million related to JetPay Strategic Partners, which we acquired on November 7, 2014. Excluding the JetPay Strategic Partners’ revenues, our Texas based JetPay Payment Services operation’s revenues increased $0.9 million, or 19.1%, in the second quarter of 2015 as compared to the same period in 2014. The most significant changes within our Texas based JetPay Payment Services’ operations were an increase of $609,000, or 30.8%, in our ISO, VAR and ISV business and an increase of $369,000, or 17.6%, in direct merchant services revenues, with these increases resulting from our investment in professional sales staff and marketing initiatives. These gains were partially offset by a decrease of $83,000, or 13.5%, in our processing and clearing business.

JetPay Payroll Segment’s revenues increased $70,000, or 2.3%, for the three months ended June 30, 2015 as compared to the same period in 2014. This increase was attributable to net growth in volume of payroll and related payroll taxes processed in addition to revenues generated from several new HR services introduced in 2014.

Cost of Processing Revenues

Cost of revenues were $6.52 million, or 61.7% of revenues, and $4.73 million, or 61.3% of revenues, for the three months ended June 30, 2015 and 2014, respectively. Of the $6.52 million cost of revenues for the three months ended June 30, 2015, $1.73 million, or 26.6%, related to our Payroll Segment and $4.76 million, or 73.4%, related to our Payment Processing Segment. Of the $4.73 million for the three months ended June 30, 2014, $1.78 million, or 37.6%, related to our Payroll Segment and $2.94 million, or 62.4%, related to our Payment Processing Segment.

The cost of processing revenues within the Payment Processing Segment increased from $2.94 million, or 62.7% of revenues in 2014 to $4.76 million, or 63.9% of revenues in 2015, an increase of $1.82 million or 61.9%. The increase in cost of processing revenues related to the growth in our Payment Processing Segment revenues, including the addition of the cost of processing revenues related to the JetPay Strategic Services acquisition on November 7, 2014 of $995,000. Overall gross profit margin as reported within our Payment Processing Segment decreased slightly from 37.3% in 2014 to 36.1% in 2015 largely as a result of investments made in technology professionals since the first quarter of 2014, partially offset by the increase in more profitable direct merchant processing revenues and the increase in Third Party revenues.

The cost of processing revenues within our Payroll Segment decreased $48,000, a decrease as a percentage of revenues from 58.6% in 2014 to 55.8% in 2015 principally due to efficiencies gained in technology and customer service departments despite our investment in new product development. The effect of this decrease in cost of processing revenues was an increase in gross profit margin within our Payroll Segment from 41.4% in 2014 to 44.2% in 2015.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $3.19 million, or 30.2% of revenues, for the three months ended June 30, 2015 as compared to $3.41 million, or 44.1% of revenues, for the same period in 2014.

SG&A expenses within the Payment Processing Segment were $1.83 million or 39.1% of revenues in 2014, as compared to $1.81 million, or 24.3% of revenues in 2015. This reduction as a percent of revenues was largely the result of the three months ended June 30, 2014 including a $460,000 charge related to a legal settlement and a $237,000 loss on the disposal of a fixed asset, partially offset by an increase in the three months ended June 30, 2015 in sales staff and marketing costs to attract new business and SG&A expenses related to JetPay Strategic Partners of $318,000 acquired in November 2014, an increase of $298,000 in Third Party commissions related to the previously noted increase in Third Party revenues, and an increase in legal fees of approximately $144,000 as the Company worked to resolve the legal matters described below in Part II, Item 1. Legal Proceedings.

SG&A expenses within the Payroll Segment increased from $1.03 million in 2014 to $1.14 million in 2015, an increase of approximately $115,000, or 11.2%, largely due to an increase in payroll costs as additional sales and technology professionals were added to help develop new products and services and execute our revenue growth strategies.

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Additionally, we incurred corporate SG&A expenses of $243,000 for the three months ended June 30, 2015, including the benefit of $450,000 of management fees received from the Company’s operating divisions as compared to Corporate SG&A expenses of $547,000 in the same period of 2014, including $210,000 of management fees from the operating divisions. Corporate SG&A expenses include, but are not limited to, the salaries of our executive officers, outside professional fees, investor relations and other public company costs, and general corporate operating expenses. Corporate SG&A expenses for the three months ending June 30, 2015 and 2014 also included $130,000 and $112,000, respectively, of start-up expenses relating to our Card Services operation. SG&A expenses for the three months ended June 30, 2015 included non-cash stock-based compensation expense of $64,000 as compared to $88,000 in 2014. The SG&A expenses of the Payroll Segment include $90,000 of Corporate allocated costs in the three months ended June 30, 2015 and 2014, and the SG&A expenses of the Payment Processing Segment includes $360,000 and $120,000 of Corporate allocated costs in the second quarter of 2015 and 2014, respectively, with an offsetting reduction in corporate SG&A expenses of $450,000 and $210,000 for the three months ended June 30, 2015 and 2014, respectively.

Depreciation and Amortization

Depreciation and amortization totaled $882,000 and $663,000 for the three months ended June 30, 2015 and 2014, respectively. The increase in depreciation and amortization expense in 2015 as compared to 2014 was primarily related to the amortization of the ACI intangible assets acquired on November 7, 2014.

Interest Expense

Interest expense for the three months ended June 30, 2015 and 2014 was $206,000 and $409,000, respectively. The reduction in interest expense in 2015 was primarily related to the pay-off of the $10.0 million convertible secured notes in December 2014, partially offset by interest expense relating to the Metro Bank term loan entered into on November 7, 2014 in connection with the ACI acquisition and the $1.0 million revolving note payable entered into with Metro Bank on May 6, 2015.

Income Taxes

The Company recorded income tax expense of $43,000 and $52,000 for the three months ended June 30, 2015 and 2014, respectively. Income tax expense reflects the recording of state income taxes. The effective tax rates were approximately (12.22)% and (2.24)% for the three months ended June 30, 2015 and 2014, respectively. The effective rate differs from the federal statutory rate for each year, primarily due to state and local income taxes and changes to the valuation allowance.

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Results of Operations for the Six Months Ended June 30, 2015 and 2014

The following tables represent a comparison of the results of our operations for the six month periods ended June 30, 2015 and June 30, 2014 (in thousands):

	For the Six Months Ended June 30, 2015
	Consolidated			General/ Corporate			JetPay Payroll			JetPay Payment Processing
Processing revenues	$	21,410		$	22		$	6,855		$	14,533
Cost of processing revenues		12,976			60			3,630			9,286
Gross profit		8,434			(38	)		3,225			5,247
Selling, general, and administrative expenses		6,576			726			2,291			3,559
Change in fair value of contingent consideration liability		37			37			-			-
Amortization of intangibles		1,535			-			560			975
Depreciation		224			3			131			90
Operating income (loss)		62			(804	)		243			623
Interest expense		403			68			134			201
Amortization of deferred financing, debt discounts, and conversion options		176			170			6			-
Other (income) expense		(3	)		-			(1	)		(2	)
(Loss) income before taxes		(514	)		(1,042	)		104			424
Income tax expense		101			-			26			75
Net (loss) income		(615	)		(1,042	)		78			349
Accretion of convertible preferred stock		(2,465	)		(2,465	)		-			-
Net (loss) income applicable to common stockholders	$	(3,080	)	$	(3,507	)	$	78		$	349

	For the Six Months Ended June 30, 2014
	Consolidated			General/ Corporate			JetPay Payroll			JetPay Payment Processing
Processing revenues	$	15,895		$	1		$	6,604		$	9,290
Cost of processing revenues		9,421			14			3,521			5,886
Gross profit		6,474			(13	)		3,083			3,404
Selling, general, and administrative expenses		6,183			1,325			2,030			2,828
Change in fair value of contingent consideration liability		(8	)		(8	)		-			-
Amortization of intangibles		1,120			-			560			560
Depreciation		206			1			124			81
Operating (loss) income		(1,027	)		(1,331	)		369			(65	)
Interest expense		815			663			151			1
Amortization of deferred financing, debt discounts, and conversion options		1,875			1,875			-			-
Change in fair value of derivative liability		(60	)		(60	)		-			-
Other (income) expense		(4	)		(2	)		(2	)		-
(Loss) income before taxes		(3,653	)		(3,807	)		220			(66	)
Income tax expense		104			-			40			64
Net (loss) income		(3,757	)		(3,807	)		180			(130	)
Accretion of convertible preferred stock		(1,047	)		(1,047	)		-			-
Net (loss) income applicable to common stockholders	$	(4,804	)	$	(4,854	)	$	180		$	(130	)

Revenues

Revenues were $21.41 million and $15.90 million for the six months ended June 30, 2015 and 2014, respectively. Overall revenues increased $5.51 million, or 34.7%, in 2015 as compared to 2014. Of the $21.41 million of revenues for the six months ended June 30, 2015, $6.86 million, or 32.0%, was generated from our JetPay Payroll Segment and $14.53 million, or 68.0%, from our JetPay Payment Processing Segment. Of the $15.90 million of revenues for the six months ended June 30, 2014, $6.60 million, or 42%, was generated from our JetPay Payroll Segment and $9.29 million, or 58%, from our JetPay Payment Processing Segment.

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JetPay Payment Processing Segment’s revenues increased $5.24 million, or 56.4%, for the six months ended June 30, 2015 as compared to 2014. This increase included revenues of $3.3 million related to JetPay Strategic Partners, which we acquired on November 7, 2014. Excluding the JetPay Strategic Partners’ revenues, our Texas based JetPay Payment Services operation’s revenues increased $1.91 million, or 20.6%, in the first half of 2015 as compared to the same period in 2014. The most significant changes within our Texas based JetPay Payment Services’ operations were an increase of $1.46 million, or 40.0%, in our Third Party business and an increase of $602,000, or 13.5%, in direct merchant services revenues, with these increases resulting from our investment in professional sales staff and marketing initiatives. These gains were partially offset by a decrease of $146,000, or 12.2%, in our processing and clearing business.

JetPay Payroll Segment’s revenues increased $251,000, or 3.8%, for the six months ended June 30, 2015 as compared to the same period in 2014. This increase was attributable to net growth in volume of payroll and related payroll taxes processed in addition to revenues generated from several new HR services introduced in 2014.

Cost of Processing Revenues

Cost of revenues were $12.98 million, or 60.6% of revenues, and $9.42 million, or 59.3% of revenues, for the six months ended June 30, 2015 and 2014, respectively. Of the $12.98 million of cost of revenues for the six months ended June 30, 2015, $3.63 million, or 28.0%, related to our Payroll Segment and $9.29 million, or 72.0%, related to our Payment Processing Segment. Of the $9.42 million of cost of revenues for the six months ended June 30, 2014, $3.52 million, or 37.4%, related to our Payroll Segment and $5.89 million, or 62.6%, related to our Payment Processing Segment.

The cost of processing revenues within the Payment Processing Segment increased from $5.89 million, or 63.4% of revenues in 2014 to $9.29 million, or 63.9% of revenues in 2015, an increase of $3.4 million or 57.8%. The increase in cost of processing revenues related to the growth in our Payment Processing Segment revenues, including the addition of $1.83 million cost of processing revenues related to the JetPay Strategic Services acquisition on November 7, 2014. Overall gross profit margin as reported within our Payment Processing Segment decreased slightly from 36.6% in 2014 to 36.1% in 2015 largely as a result of the increase in Third Party revenues combined with the investments made in technology professionals since the first half of 2014.

The cost of processing revenues within our Payroll Segment increased $109,000, a slight decrease as a percentage of revenues from 53.3% in 2014 to 53.0% in 2015 despite an increase in technology and customer service professionals as well as an investment in new product management. The effect of this decrease in cost of processing revenues as a percentage of revenues was a slight increase in gross profit margin within our Payroll Segment from 46.7% in 2014 to 47.0% in 2015.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $6.58 million, or 30.7% of revenues, for the six months ended June 30, 2015 as compared to $6.18 million, or 38.9% of revenues, for the same period in 2014.

SG&A expenses within the Payment Processing Segment increased from $2.83 million or 30.4% of revenues in 2014, to $3.56 million, or 24.5% of revenues in 2015. This increase was largely the result of an increase in sales staff and marketing costs to attract new business, SG&A expenses related to JetPay Strategic Partners of $641,000 acquired in November 2014, an increase of $606,000 in Third Party commissions related to the previously noted increase in Third Party revenues, and an increase in legal fees of approximately $275,000 as the Company worked to resolve the legal matters described below in Part II, Item 1. Legal Proceedings. Additionally, the results for the six months ended June 30, 2014 included a $460,000 charge related to a legal settlement and a $237,000 loss on the disposal of a fixed asset.

SG&A expenses within the Payroll Segment increased from $2.03 million in 2014 to $2.29 million in 2015, an increase of approximately $261,000, or 12.9%, largely due to an increase in payroll costs as additional sales and technology professionals were added to help develop new products and services and execute our revenue growth strategies.

Additionally, we incurred corporate SG&A expenses of $726,000 for the six months ended June 30, 2015, including the benefit of $900,000 of management fees received from the Company’s operating divisions as compared to Corporate SG&A expenses of $1.33 million in the same period of 2014, including $420,000 of management fees from the operating divisions. Corporate SG&A expenses include, but are not limited to, the salaries of our executive officers, outside professional fees, investor relations and other public company costs, and general corporate operating expenses. Corporate SG&A expenses for the six months ending June 30, 2015 and 2014 also included $182,500 and $267,600, respectively, of start-up expenses relating to our Card Services operation. SG&A expenses for the six months ended June 30, 2015 included non-cash stock-based compensation expense of $142,000 as compared to $168,000 in 2014. The SG&A expenses of the Payroll Segment include $180,000 of Corporate allocated costs in the six months ended June 30, 2015 and 2014, and the SG&A expenses of the Payment Processing Segment include $720,000 and $240,000 of Corporate allocated costs in the first half of 2015 and 2014, respectively, with an offsetting reduction in Corporate SG&A expenses of $900,000 and $420,000 for the six months ended June 30, 2015 and 2014, respectively.

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Depreciation and Amortization

Depreciation and amortization totaled $1.76 million and $1.33 million for the six months ended June 30, 2015 and 2014, respectively. The increase in depreciation and amortization expense in 2015 as compared to 2014 was primarily related to the amortization of the ACI intangible assets acquired on November 7, 2014.

Interest Expense

Interest expense for the six months ended June 30, 2015 and 2014 was $403,000 and $815,000, respectively. The reduction in interest expense in 2015 was primarily related to the pay-off of the $10.0 million convertible secured notes in December 2014, partially offset by interest expense relating to the Metro Bank term loan entered into on November 7, 2014 in connection with the ACI acquisition and the $1.0 million revolving note payable entered into with Metro Bank on May 6, 2015.

Income Taxes

The Company recorded income tax expense of $101,000 and $104,000 for the six months ended June 30, 2015 and 2014, respectively. Income tax expense reflects the recording of state income taxes. The effective tax rates were approximately (19.65)% and (2.85)% for the six months ended June 30, 2015 and 2014, respectively. The effective rate differs from the federal statutory rate for each year, primarily due to state and local income taxes and changes to the valuation allowance.

Liquidity and Capital Resources

Cash and cash equivalents were $5.2 million at June 30, 2015, excluding $231,000 of cash deposited into restricted cash accounts. Cash and cash equivalents also excludes $4.4 million of cash reserves, or the “Merrick Cash Reserve”, held by Merrick, JetPay Payment Services’ former sponsor bank, which is specifically related to the Direct Air matter. The Merrick Cash Reserve of $4.4 million at both June 30, 2015 and December 31, 2014, is recorded as non-current assets under the caption “Other Assets”. While we continue to defend the potential obligation related to the chargeback claims there can be no assurance as to the timing of this cash reserve release. See also Part II, Item 1. Legal Proceedings. The ratio of our total debt to total capitalization, which consists of total debt, convertible preferred stock, and stockholders’ equity, was 24% at June 30, 2015 and 23% at December 31, 2014. As of June 30, 2015, we had a working capital deficit, excluding funds held for clients and client funds obligations, of approximately $3.7 million.

We expect to fund our cash needs, including capital required for acquisitions, with cash flow from our operating activities, equity investments and borrowings. As previously disclosed, on October 11, 2013, we were successful in selling an initial 33,333 shares of Series A Preferred to Flexpoint for an aggregate of $10 million, less certain costs, an additional 4,667 shares of Series A Preferred on April 14, 2014 for $1.4 million, 20,000 shares on November 7, 2014 for $6.0 million, and 33,333 shares on December 28, 2014 for $10.0 million. We have an agreement to potentially sell up to an additional $12.6 million of Series A Preferred to Flexpoint. Additionally, the Company sold 6,165 shares of Series A-1 Preferred to Wellington for an aggregate of $1.85 million, and it has an agreement to potentially sell an additional $850,000 of Series A-1 Preferred to Wellington. This additional $13.45 million of convertible preferred stock, if sold, will be used principally as consideration for future acquisitions. Additionally, we will require approximately $3.15 million to cover our interest and principal payments for the twelve months ending June 30, 2016, and $1.2 million of deferred consideration due to the unitholders of ACI on April 10, 2016.

Capital expenditures were $178,000 and $58,000 for the three months ended June 30, 2015 and 2014, respectively, and $293,000 and $142,000 for the six months ended June 30, 2015 and 2014, respectively. We currently estimate capital expenditures for all of our ongoing operations, including JetPay Payment Services and JetPay Payroll Services, at approximately $900,000 to $1.0 million for the remainder of 2015, principally related to technology improvements. Our capital requirements include working capital for daily operations, including expenditures to maintain our technology platforms. Our operations currently generate sufficient cash flow to satisfy our current operating needs and our routine debt service requirements.

33

In the past, we have been successful in obtaining financing by obtaining loans and equity investments, including the Series A Preferred investment by Flexpoint and the Series A-1 Preferred investment by Wellington. To fund and integrate future acquisitions or new business initiatives, we will need to raise additional capital through loans, sale of Series A Preferred or Series A-1 Preferred, or additional equity investments. In addition, we continue to investigate the capital markets for sources of funding, which could take the form of additional debt or equity financing. We cannot provide any assurance that we will be successful in securing new financing or that we will secure such future financing with commercially acceptable terms. If we are unable to raise additional capital, we may need to limit our acquisition growth plans.

Debt Capitalization and Other Financing Arrangements

At June 30, 2015, we had borrowings of approximately $17.1 million net of unamortized valuation discounts totaling $470,000 relating to the WLES Note, as defined below. We had a letter of credit outstanding at June 30, 2015 of $100,000 as collateral with respect to a front-end processing relationship with a credit card company. Additionally, on August 21, 2013 a letter of credit for $1.9 million was issued and remained outstanding at June 30, 2015 as a reserve with respect to JetPay, LLC’s processing relationship with Wells Fargo Bank, N.A.

In order to finance a portion of the proceeds payable in the Completed Transactions, on December 28, 2012, we entered into a Note Agreement with Special Opportunities Fund, Inc., R8 Capital Partners, LLC, Bulldog Investors General Partnership, Ira Lubert, Mendota Insurance Company and American Services Insurance Company, Inc., (collectively, the “Note Investors”) pursuant to which, we issued $10,000,000 in promissory notes secured by 50% of our ownership interest in JetPay, LLC (the “Notes”). In connection with the Note Agreement, we entered into separate Notes with each of the Note Investors. Amounts outstanding under the Notes accrued interest at a rate of 12% per annum. The Notes matured on December 31, 2014 and were paid with proceeds from the sale of Series A Preferred to Flexpoint on December 28, 2014.

On December 28, 2012, ADC and PTFS, as borrowers, entered into the Loan and Security Agreement with Metro Bank (“Metro”), as the lender for a term loan with a principal amount of $9,000,000. Amounts outstanding under the loan accrue interest at a rate of 4% per annum. The loan matures on December 28, 2019 and amortizes over the course of the loan in equal monthly installments of $107,143. The principal balance of this term loan was $5.8 million at June 30, 2015. Additional principal payments may be required at the end of each fiscal year based on a free cash flow calculation at ADC as defined in the Loan and Security Agreement. The loans are guaranteed by us and are secured by all assets of ADC and PTFS, as well as a pledge by us of our ownership interest in ADC. The Loan and Security Agreement contains affirmative and negative covenants, including limitations on the incurrence of indebtedness, liens, transactions with affiliates and other customary restrictions for loans of this type and size. The borrowers are also subject to certain annual financial covenants including a debt coverage ratio and a leverage ratio during the term of the loan. We are required to provide Metro with annual financial statements within 120 days of our fiscal year end and quarterly financial statements within 60 days after the end of each fiscal quarter. We were in compliance with the covenant requirements as of June 30, 2015.

On May 6, 2015, ADC and PTFS, as borrowers, along with JetPay Corporation, ACI, and JetPay, LLC, collectively as loan parties, entered into a First Amendment and Joinder Agreement to the Loan and Security Agreement dated December 28, 2012 and a Revolving Credit Note (the “Revolving Note”) dated May 6, 2015 with Metro, as the lender. The Note provides a $1.0 million revolving credit facility that matures on May 6, 2017 and that accrues interest at the rate of the Wall Street Journal Prime rate plus 1.00%, with a floor of 4.25%. The Note is guaranteed by the borrowers and loan parties and is secured by all assets of ADC, PTFS, and ACI, a pledge by the Company of its ownership interest in ADC and ACI, as well as a $1.0 million negative pledge on the stock of JetPay, LLC. The amended and restated Loan and Security Agreement retains the affirmative and negative covenants included in the original December 28, 2012 loan agreement, including limitations on the incurrence of indebtedness, liens, transactions with affiliates and other customary restrictions for loans of this type and size. Certain of these affirmative and negative covenants encompass JetPay, LLC under a negative pledge obligation should the stock of JetPay, LLC be subject to a lien by a third party. On May 6, 2015, the proceeds of the $1.0 million Revolving Note, along with $650,000 of current cash and cash equivalents, were used to partially fund a $2.0 million deferred consideration liability due to the stockholders of ADC.

In connection with the closing of the Completed Transactions, we entered into a Note and Indemnity Side Agreement with JP Merger Sub, LLC, WLES and Trent Voigt, dated as of December 28, 2012. Pursuant to the Note and Indemnity Side Agreement, we agreed to issue a promissory note in the amount of $2,331,369 in favor of WLES (the “WLES Note”). Interest accrues on amounts due under the WLES Note at a rate of 5% per annum. The WLES Note is due in full on December 31, 2017. The WLES Note can be prepaid in full or in part at any time without penalty. As partial consideration for offering the WLES Note, we and JP Merger Sub, LLC agreed to waive certain specified indemnity claims against WLES and Mr. Voigt to the extent the losses under such claims do not exceed $2,331,369.

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On November 7, 2014, pursuant to a Unit Purchase Agreement by and between the Company, ACI and Michael Collester and Cathy Smith, the Company acquired all of the outstanding equity interests of JetPay Strategic Partners for an aggregate of $11.0 million in cash and the issuance of 2.0 million shares of its common stock to the unitholders of JetPay Strategic Partners with a value of approximately $3.7 million on the date of acquisition. The JetPay Strategic Partners’ unitholders are entitled to receive additional cash consideration of $1.2 million which was paid on April 10, 2015 and a further cash payment of $1.2 million payable on April 10, 2016, and are entitled to earn up to an additional $500,000 based on the net revenue of JetPay Strategic Partners for the twelve month periods ending October 31, 2015 and 2016. In order to finance a portion of the proceeds paid to the JetPay Strategic Partners’ unitholders, JetPay Strategic Partners, as borrower, and the Company and ADC, as guarantors, entered into a Loan and Security Agreement on November 7, 2014 with Metro with a principal amount of $7.5 million. Amounts outstanding under the loan accrue interest at a rate of 5.25% per annum. The loan matures on November 6, 2021 and amortizes in equal monthly installments of $104,167 over six years beginning in the month following the first anniversary of the Loan and Security Agreement. Additional principal payments may be required at the end of each fiscal year based on a free cash flow calculation set forth in the Loan and Security Agreement. Additionally, in order to finance a portion of the proceeds paid to the JetPay Strategic Partners’ unitholders, on November 7, 2014, the Company issued 20,000 shares of Series A Preferred to Flexpoint for an aggregate of $6.0 million.

Our ongoing ability to comply with the debt covenants under our credit arrangements and to refinance our debt depends largely on the achievement of adequate levels of cash flow. If our future cash flows are less than expected or our debt service, including interest expense, increases more than expected, causing us to default on any of the Metro covenants in the future, we will need to obtain amendments or waivers from Metro. In the event that non-compliance with the debt covenants should occur in the future, we would pursue various alternatives in an attempt to successfully resolve the non-compliance, which might include, among other things, seeking additional debt covenant waivers or amendments or refinancing debt with other financial institutions. There can be no assurance that debt covenant waivers or amendments would be obtained, if needed, or that the debt could be refinanced with other financial institutions on favorable terms.

At December 28, 2012, in connection with securing certain debt financing to consummate the Completed Transactions, we incurred a total of $4,393,000 in financing costs that have been capitalized and will be amortized over the life of the related debt instruments using the effective interest method beginning in 2013. Of the total deferred financing costs, $4,370,000 related to certain of our founding stockholders agreeing to sell at cost 832,698 shares of our common stock that they acquired prior to our initial public offering to certain of the Note Investors with respect to the Notes. In accordance with SEC Staff Accounting Bulletin (“SAB”) 79 amended by SAB 5T, Accounting for Expenses or Liabilities Paid by Principal Stockholder, we recorded a $4.37 million stock-based deferred financing cost with a credit to additional paid-in capital at December 28, 2012 for the fair value of the 832,698 shares transferred under this arrangement ($5.25 per share on December 28, 2012). This $4.37 million deferred financing cost was completely amortized as of December 31, 2014. Additionally, in connection with the December 2012 $9.0 million term loan, the November 2014 $7.5 million term loan, and the May 2015 Revolving Note, all payable to Metro, we incurred $23,000, $76,000, and $40,000, of deferred financing costs, respectively. Unamortized deferred financing costs were $113,000 at June 30, 2015.

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Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2015.

Contractual Obligations

We are obligated under various operating leases, primarily for office space and certain equipment related to our operations. Certain of these leases contain purchase options, renewal provisions, and contingent rentals for our proportionate share of taxes, utilities, insurance, and annual cost of living increases.

The following are summaries of our contractual obligations and other commercial commitments at June 30, 2015, excluding fair value and conversion option debt discounts as described in Part I, Item 1, Note 7. Long-Term Debt, Notes Payable and Capital Lease Obligations (in thousands):

	Payments Due By Period
Contractual obligations	Total		Less than One Year		One to Three Years		Three to Five Years		More than 5 years
Long-term debt and capital lease obligations (1)	$	17,590	$	2,368	$	9,130	$	4,425	$	1,667
Minimum operating lease payments		1,273		796		402		75		-
Total	$	18,863	$	3,164	$	9,532	$	4,500	$	1,667

	Amounts Expiring Per Period
Other Commercial Commitments	Total		Less than One Year		One to Three Years		Three to Five Years		More than 5 years
Standby letters of credit (2)	$	2,000	$	2,000	$	-	$	-	$	-

(1) Related interest obligations have been excluded from this maturity schedule. Our interest payments for the next twelve month period, based on current market rates, are expected to be approximately $783,000.

(2) Outstanding letters of credit of $2.0 million represents a $1.9 million letter of credit as a reserve with respect to JetPay, LLC’s main processing bank and a $100,000 letter of credit, which represents collateral for a front-end processing relationship with a credit card company.

Cash Flow

Operating Activities. Net cash provided by operating activities totaled $2.7 million for the six months ended June 30, 2015. Cash provided by operating activities in this period was primarily due to a net loss of $615,000, offset by non-cash depreciation and amortization relating to intangible assets, deferred financing costs, and debt discounts and conversion options of $1.9 million, a decrease in restricted cash of $1.2 million, and a decrease in accounts receivable of $735,000.

Net cash used in operating activities totaled $3.0 million for the six months ended June 30, 2014. Cash used in operating activities in this period was primarily due to a net loss of $3.8 million combined with a decrease in accounts payable and accrued expenses of $3.3 million. This decrease in cash was partially offset by non-cash depreciation and amortization relating to intangible assets, deferred financing fees and debt discounts and conversion options totaling $3.0 million and a decrease in accounts receivable by $769,000.

Investing Activities. Cash provided by investing activities totaled $3.3 million for the six months ended June 30, 2015, including a decrease of $6.5 million in restricted cash and equivalents held to satisfy client obligations, partially offset by payments of deferred acquisition consideration of $2.85 million and purchases of property and equipment of $293,000.

Cash used in investing activities totaled $15.7 million for the six months ended June 30, 2014, including an increase of $15.6 million in restricted cash and equivalents held to satisfy client obligations and the purchase of property and equipment of $142,000.

Financing Activities. Cash used in financing activities totaled $6.2 million for the six months ended June 30, 2015, which included a decrease of $6.5 million in client fund obligations and $678,000 of cash used for routine payments on long-term debt, all partially offset by proceeds from notes payable of $1.0 million.

36

Cash provided by financing activities totaled $18.1 million for the six months ended June 30, 2014, which included a $15.6 million increase in client fund obligations, an increase of $2.1 million from the sale of convertible preferred stock, and an increase of $1.0 million from the sale of common stock, all partially offset by $657,000 of cash used for routine payments on long-term debt.

Seasonality

JetPay Payment Services’ revenues and earnings are impacted by the volume of consumer usage of credit and debit cards at the point of sale. For example, JetPay Payment Services experiences increased purchase activity during the first and second quarters due to seasonal volumes of some merchants in JetPay Payment Services’ portfolio. Revenues during the first and second quarters tend to increase in comparison to the remaining two quarters of JetPay Payment Services’ fiscal year on a same store basis.

JetPay Strategic Partners’ expects increased revenues during the second and third quarters due to seasonal volumes of certain travel and entertainment industry related merchants within JetPay Strategic Partners’ portfolio.

JetPay Payroll Services’ revenues are recognized in the period services are rendered and earned. JetPay Payroll Services experiences increased revenues during the fourth and first quarters due to the processing of additional year-end tax filing requirements. Accordingly, revenues and earnings are greater in the fourth and first quarter in comparison to the remaining two quarters of JetPay Payroll Services’ fiscal year.

Effects of Inflation

JetPay Payroll Services’ and JetPay Payment Services’ monetary assets, consisting primarily of cash and receivables, are not significantly affected by inflation. Non-monetary assets, consisting primarily of property and equipment, are not affected by inflation. We believe that replacement costs of equipment, furniture and leasehold improvements will not materially affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and other operating expenses, which may not be readily recoverable in the price of services offered by us. The rate of inflation can also affect our revenues by affecting our client’s payroll processing volumes and our merchant charge volume and corresponding changes to processing revenue. While these can be positive or negative, since a portion of JetPay Payment Services’ revenues are derived as a percentage of dollar volume processed, JetPay Payment Services’ revenues will generally rise when inflation rises.

Item 3. Quantitative and Qualitative Disclosures about Market Risks.

We are a smaller reporting company; as a result, we are not required to report the information required by Item 305 of Regulation S-K.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO, we completed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the CEO and the CFO concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2015 to ensure that information relating to the Company that is required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and is accumulated and communicated to management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control

There has been no change in our internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during our quarter ended June 30, 2015 that are reasonably likely to materially affect our internal control over financial reporting.

37

PART II
OTHER INFORMATION

Item 1. Legal Proceedings

See Note 11. Commitments and Contingencies to our consolidated financial statements in Part I, Item 1 of this report.

Item 1A. Risk Factors

There have been no material changes in our risk factors disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

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

On June 18, 2015, the Company issued 29,167 shares of common stock to Ralph Bianco, a former employee of the Company, as compensation for services rendered to the Company.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits:

10.1	First Amendment and Joinder Agreement dated May 6, 2015, by and between ADC, PTFS, JetPay Corporation, ACI, JetPay, LLC, and Metro Bank. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 12, 2015).
10.2	Revolving Credit Note dated May 6, 2015, by and between ADC, PTFS, and Metro Bank. (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on May 12, 2015).
10.3	Unsecured Promissory Note dated May 6, 2015, made by JetPay Corporation in favor of    C. Nicholas Antich and Carol A. Antich. (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on May 12, 2015).
10.4	First Amendment to ACI Loan and Security Agreement dated May 6, 2015, by and   between ACI and Metro Bank. (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on May 12, 2015).
10.5**	Letter Agreement dated August 6, 2015, by and between JetPay Corporation and Flexpoint Fund II, L.P.
31.1**	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
	** Filed herewith

38

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.

JetPay Corporation

By: /s/  Bipin C. Shah

Bipin C. Shah, Chief Executive Officer

(Principal Executive Officer)

By: /s/  Gregory M. Krzemien

Gregory M. Krzemien, Chief Financial Officer

and Chief Accounting Officer

(Principal Financial Officer)

DATE: August 12, 2015

39

EXHIBIT INDEX

Exhibit No.	Description
10.5**	Letter Agreement dated August 6, 2015, by and between JetPay Corporation and Flexpoint Fund II, L.P.
31.1**	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
	** Filed herewith

40

EX-10.5

Exhibit 10.5

 

August 6, 2015

VIA FACSIMILE & OVERNIGHT DELIVERY

Flexpoint Fund II, L.P.
c/o Flexpoint Ford, LLC

676 N. Michigan Avenue, Suite 3300

Chicago, IL 60611

Facsimile No.: (312) 327-4525

Attention: Charles E. Glew - Steven M. Michienzi

Dear Mssrs. Glew and Michienzi:

Reference is hereby made to that certain Securities Purchase Agreement dated as of August 22, 2013 (the "Purchase Agreement"), by and among JetPay Corporation (f/k/a Universal Business Payment Solutions Acquisition Corporation), a Delaware corporation (the "Company"), and Flexpoint Fund II, L.P., a Delaware limited partnership ("Flexpoint"). Reference is hereby also made to that certain letter dated April 29, 2014 from Flexpoint to the Company which provided notice of a claim for indemnification with respect to the EBC Dispute (the "Claim Notice"). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Claim Notice, or if not defined therein, the Purchase Agreement.

The purpose of this letter agreement is to document an adjustment to the Conversion Price (as defined in the Certificate of Designation) applicable to the Preferred Stock of the Company held by Flexpoint as a result of the claims described in the Claim Notice. In accordance with Section 10.2(d) of the Purchase Agreement, the parties hereby agree that the Conversion Price applicable to the Preferred Stock of the Company held by Flexpoint shall be reduced to a price per share equal to $2.90 (the "Adjusted Conversion Price"), which reduction is being made in respect of the Indemnified Liabilities identified to date by the Company with respect to the EBC Dispute. The parties each acknowledge and agree that the above-described conversion price adjustment is being made pursuant to Section 10.2(d) of the Purchase Agreement with respect to the EBC Dispute and the Aggregate EBC Liabilities incurred as a result thereof and not as a settlement of claims. Accordingly, Flexpoint is not waiving its rights under the Purchase Agreement to indemnification for any Indemnified Liabilities not taken into account in calculating the Adjusted Conversion Price, whether due to the discovery of new information, or otherwise (including, without limitation, any new or different claims not related to the EBC Dispute).

(Signature page follows) 

1175 Lancaster Avenue, Suite 200, Berwyn, PA 19312 | 484-324-7980 | www.JetPayCorp.com

 

jetpay corporation
By:	/s/ Peter B. Davidson
Name: Its:	Peter B. Davidson Vice Chairman and Secretary

Acknowledged, agreed and accepted

as of the date first written above:

FLEXPOINT FUND II, L.P.

By:	/s/ Donald J. Edwards
Name:	Donald J. Edwards
Its:	Authorized Person

1175 Lancaster Avenue, Suite 200, Berwyn, PA 19312 | 484-324-7980 | www.JetPayCorp.com

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Bipin C. Shah, certify that:

1. I have reviewed this quarterly report on Form 10-Q of JetPay Corporation;

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 a transition 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: August 12, 2015	/s/ Bipin C. Shah
	Bipin C. Shah
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Gregory M. Krzemien, certify that:

1. I have reviewed this quarterly report on Form 10-Q of JetPay Corporation;

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 a transition 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: August 12, 2015	/s/ Gregory M. Krzemien
	Gregory M. Krzemien
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

In connection with the quarterly report on Form 10-Q of JetPay Corporation (the “Company”) for the quarter ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bipin C. Shah, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2015	/s/ Bipin C. Shah
	Bipin C. Shah
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION

In connection with the quarterly report on Form 10-Q of JetPay Corporation (the “Company”) for the quarter ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory M. Krzemien, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2015	/s/ Gregory M. Krzemien
	Gregory M. Krzemien
	Chief Financial Officer

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Long-Term Debt, Notes Payable and Capital Lease Obligations (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	$ 17,120	$ 16,366
Less current portion	(2,368)	(1,571)
Long-term Debt and Capital Lease Obligations	14,752	14,795
Revolving Note Payable To Metro Bank [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	1,000	0
Revolving Note Payable To Metro Bank [Member] | AD Computer [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	5,782	6,425
Revolving Note Payable To Metro Bank [Member] | ACI Merchant Systems [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	7,500	7,500
WLES [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	1,861	1,779
StockHolders [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	492	492
Stockholders One [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	350	0
JetPay, LLC, [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	125	154
AD Computer Corporation and Payroll Tax Filing Services, Inc. [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	$ 10	$ 16

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Segments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Segment Reporting Information [Line Items]
Processing revenues	$ 10,566	$ 7,726	$ 21,410	$ 15,895
Cost of processing revenues	6,520	4,733	12,976	9,421
Selling, general and administrative expenses	3,194	3,408	6,576	6,183
Change in fair value of contingent consideration liability	26	(8)	37	(8)
Amortization of intangibles and depreciation	882	663	1,759	1,326
Other expenses (income)	296	1,249	576	2,626
Income (loss) before income taxes	(352)	(2,319)	(514)	(3,653)
Total property and equipment, net	1,287	1,086	1,287	1,086	$ 1,226
Property and equipment additions	178	58	293	142
Intangible assets and goodwill	67,117	52,857	67,117	52,857
Total segment assets	128,751	127,645	128,751	127,645	$ 144,402
Payment Processing [Member]
Segment Reporting Information [Line Items]
Processing revenues	7,445	4,687	14,533	9,290
Cost of processing revenues	4,757	2,941	9,286	5,886
Selling, general and administrative expenses	1,807	1,832	3,559	2,828
Change in fair value of contingent consideration liability	0	0	0	0
Amortization of intangibles and depreciation	534	321	1,065	641
Other expenses (income)	100	(2)	199	1
Income (loss) before income taxes	247	(405)	424	(66)
Total property and equipment, net	691	458	691	458
Property and equipment additions	99	16	174	56
Intangible assets and goodwill	48,823	33,442	48,823	33,442
Total segment assets	72,264	54,828	72,264	54,828
Payroll Service [Member]
Segment Reporting Information [Line Items]
Processing revenues	3,108	3,038	6,855	6,604
Cost of processing revenues	1,733	1,781	3,630	3,521
Selling, general and administrative expenses	1,144	1,029	2,291	2,030
Change in fair value of contingent consideration liability	0	0	0	0
Amortization of intangibles and depreciation	346	341	691	684
Other expenses (income)	76	75	139	149
Income (loss) before income taxes	(191)	(188)	104	220
Total property and equipment, net	560	614	560	614
Property and equipment additions	79	29	118	73
Intangible assets and goodwill	18,294	19,415	18,294	19,415
Total segment assets	55,536	70,662	55,536	70,662
General/Corporate [Member]
Segment Reporting Information [Line Items]
Processing revenues	13	1	22	1
Cost of processing revenues	30	11	60	14
Selling, general and administrative expenses	243	547	726	1,325
Change in fair value of contingent consideration liability	26	(8)	37	(8)
Amortization of intangibles and depreciation	2	1	3	1
Other expenses (income)	120	1,176	238	2,476
Income (loss) before income taxes	(408)	(1,726)	(1,042)	(3,807)
Total property and equipment, net	36	14	36	14
Property and equipment additions	0	13	1	13
Intangible assets and goodwill	0	0	0	0
Total segment assets	$ 951	$ 2,155	$ 951	$ 2,155

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Commitments and Contingencies (Details Textual) - USD ($)				1 Months Ended			3 Months Ended			6 Months Ended		12 Months Ended
	Apr. 04, 2014	Mar. 03, 2014	Feb. 03, 2014	Aug. 23, 2013	Jun. 30, 2013	Dec. 28, 2012	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2012	Apr. 14, 2014
Commitments and Contingencies [Line Items]
Escrow Amount Before Direct Air Bankruptcy Filing													$ 31,000,000
Escrow Amount After Direct Air Bankruptcy Filing													1,000,000
Proceeds from Issuance of Common Stock										$ 0	$ 1,000,000
Stock Issued During Period, Shares, Issued for Services	333,333
Selling, General and Administrative Expense							$ 3,194,000	$ 3,408,000		6,576,000	$ 6,183,000
Common Stock SPA [Member]
Commitments and Contingencies [Line Items]
Proceeds from Issuance of Common Stock	$ 1,000,000
MSC Cruine Lines [Member]
Commitments and Contingencies [Line Items]
Loss Contingency, Damages Sought, Value				$ 2,000,000
Litigation Settlement, Expense												$ 600,000
Series A Preferred Stock [Member]
Commitments and Contingencies [Line Items]
Other Commitment						$ 6,000,000
Loss Contingency, Estimate of Possible Loss						340,000
Series A Preferred Stock [Member] | Flexpoint [Member]
Commitments and Contingencies [Line Items]
Additional Issuance Of Preferred Stock Shares														4,667
Additional Issuance Of Preferred Stock Amount														$ 1,400,000
Early Bird Capital Inc [Member]
Commitments and Contingencies [Line Items]
Payments for Legal Settlements	$ 411,000
Fees and Commissions						$ 2,070,000
Interest Expense, Other		$ 740,000
Accrued Liabilities, Current													2,136,000
Selling, General and Administrative Expense									$ 675,000
Merrick Bank [Member]
Commitments and Contingencies [Line Items]
Loss Contingency, Loss in Period													25,000,000
Legal Fees					$ 597,000								1,900,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares)			3,333,333
Legal Fees and Interest Costs										3,200,000			487,000
Increase (Decrease) in Restructuring Reserve												$ 600,000
Cash Reserve Deposit Required and Made							4,400,000			4,400,000
Jetpay [Member]
Commitments and Contingencies [Line Items]
Litigation Settlement, Amount													1,900,000
Jetpay [Member] | Series A Preferred Stock [Member]
Commitments and Contingencies [Line Items]
Loss Contingency Accrual							$ 340,000			$ 340,000
Jp Morgan Chase [Member] | Common Stock [Member]
Commitments and Contingencies [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares)										3,333,333
M and A Ventures [Member]
Commitments and Contingencies [Line Items]
Litigation Settlement, Amount									400,000
Payments for Legal Settlements									100,000
Litigation Settlement, Expense									$ 400,000
Chartis Insurance [Member]
Commitments and Contingencies [Line Items]
Deductible Policy Amount													$ 250,000

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Summary of Critical Accounting Policies (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Liabilities:
Contingent consideration	$ 1,277	$ 1,240
Fair Value, Inputs, Level 1 [Member]
Liabilities:
Contingent consideration	0	0
Fair Value, Inputs, Level 2 [Member]
Liabilities:
Contingent consideration	0	0
Fair Value, Inputs, Level 3 [Member]
Liabilities:
Contingent consideration	$ 1,277	$ 1,240

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Accounts Payable and Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2015

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities [Table Text Block]

	June 30,		December 31,
Accounts payable and accrued expenses consist of the following (in thousands):	2015		2014
Trade accounts payable	$	1,532	$	1,828
ACH clearing liability		1,728		2,146
Accrued compensation		1,314		1,233
Accrued agent commissions		1,103		758
Related party payables		80		70
Other		2,775		3,118
Total	$	8,532	$	9,153

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Stockholders' Equity (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Stockholders Equity Note [Line Items]
Expected term (years)	6 years 3 months	6 years 3 months	6 years 3 months	6 years 3 months
Risk-free interest rate	1.56%		1.56%
Volatility	44.80%	44.93%	44.80%	44.93%
Dividend Yield	0.00%	0.00%	0.00%	0.00%
Minimum [Member]
Stockholders Equity Note [Line Items]
Risk-free interest rate		2.03%		2.03%
Maximum [Member]
Stockholders Equity Note [Line Items]
Risk-free interest rate		2.10%		2.10%

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Property and Equipment, net of Accumulated Depreciation (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Depreciation expenses	$ 115	$ 103	$ 224	$ 206
Property, Plant and Equipment, Net, Total	1,287	$ 1,086	1,287	$ 1,086	$ 1,226
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	900		900		676
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Net, Total	138		138		157
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	$ 33		$ 33		$ 13

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Related Party Transactions (Details Textual)			3 Months Ended		6 Months Ended
	Apr. 04, 2014 USD ($) shares	Jun. 07, 2013 USD ($)	Jun. 30, 2015 USD ($) a shares	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) a shares	Jun. 30, 2014 USD ($)	May. 06, 2017 USD ($)	May. 06, 2016 USD ($)	May. 06, 2015 USD ($)	Dec. 31, 2014 shares	Aug. 22, 2013	Dec. 28, 2012 USD ($)
Related Party Transaction [Line Items]
Common Stock, Shares, Issued | shares			13,892,990		13,892,990					13,863,823
Proceeds from Issuance of Common Stock					$ 0	$ 1,000,000
Revenues			$ 10,566,000	$ 7,726,000	$ 21,410,000	15,895,000
Unsecured Debt [Member]
Related Party Transaction [Line Items]
Other Deferred Compensation Arrangements, Liability, Current									$ 2,000,000
Unsecured Promissory Note [Member] | Unsecured Debt [Member]
Related Party Transaction [Line Items]
Debt Instrument, Face Amount									$ 350,000
Promissory Note [Member] | Unsecured Debt [Member]
Related Party Transaction [Line Items]
Debt Instrument, Interest Rate, Effective Percentage			4.00%		4.00%
Interest Expense, Debt			$ 2,200		$ 2,200
Promissory Note [Member] | Scenario, Forecast [Member] | Unsecured Debt [Member]
Related Party Transaction [Line Items]
Unsecured Debt							$ 175,000	$ 175,000
Note and Indemnity Side Agreement [Member]
Related Party Transaction [Line Items]
Debt Instrument, Interest Rate, Stated Percentage												5.00%
Debt Instrument, Face Amount												$ 2,331,369
Interest Expense, Related Party			29,500	29,500	58,600	58,600
Indemnity Claim Loss Waived Amount					$ 2,331,369
Jet Pay Solutions Ltd [Member]
Related Party Transaction [Line Items]
Business Acquisition, Percentage of Voting Interests Acquired											75.00%
Subsequent Event [Member] | Promissory Note [Member] | Unsecured Debt [Member]
Related Party Transaction [Line Items]
Debt Instrument, Maturity Date					May 06, 2017
Jt Holdings [Member]
Related Party Transaction [Line Items]
Payments for Rent			$ 9,000	9,000	$ 18,000	18,000
Trent Voigt [Member] | Promissory Note [Member]
Related Party Transaction [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			4.00%		4.00%
Debt Instrument, Face Amount		$ 491,693
Interest Expense, Related Party			$ 4,900	4,900	$ 9,750	9,750
Debt Instrument, Maturity Date		Sep. 30, 2016
Jetpay [Member]
Related Party Transaction [Line Items]
Revenues			$ 118,446	68,712	$ 223,272	68,712
Common Stock SPA [Member]
Related Party Transaction [Line Items]
Common Stock, Shares, Issued | shares	333,333
Proceeds from Issuance of Common Stock	$ 1,000,000
JetPay Payroll Service [Member]
Related Party Transaction [Line Items]
Area of Land | a			22,500		22,500
Operating Leases, Rent Expense			$ 129,140	$ 129,140	$ 258,280	$ 258,280
Monthly Rent Expense					$ 43,426
Lease Rent Annual Increase Percentage					4.00%
Lease Term					10 years
Debt Instrument, Maturity Date					May 31, 2016
JetPay Payment Services [Member]
Related Party Transaction [Line Items]
Area of Land | a			1,600		1,600
Monthly Rent Expense					$ 3,000

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Business Acquisition

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note 3.   Business Acquisition

On November 7, 2014, the Company entered into a Unit Purchase Agreement (the “Unit Purchase Agreement”) with ACI and Michael Collester and Cathy Smith, pursuant to which the Company acquired all of the outstanding equity interests of ACI from Michael Collester and Cathy Smith.

In connection with the closing, the Company paid an aggregate of $11.0 million in cash, adjusted as set forth herein, and issued 2.0 million shares of its common stock to the members of ACI with a value of approximately $3.7 million on the date of acquisition. The ACI unitholders were entitled to receive additional cash consideration of $1.2 million on April 10, 2015 and are entitled to receive a further cash payment of $1.2 million on April 10, 2016. The initial deferred consideration payment was made on April 10, 2015. The $2.4 million of deferred consideration was recorded at $2.17 million, valuing the estimated fair value of the 2016 future payment utilizing a 16% discount rate. Additionally, ACI’s unitholders are entitled to earn up to an additional $500,000 based on the net revenue of ACI for the twelve month periods ending October 31, 2015 and 2016. This contingent cash consideration, recorded as a non-current liability, was valued at $400,000 at the date of acquisition utilizing a Monte Carlo simulation model. The fair value of the contingent cash consideration was $436,000 at June 30, 2015. See Note 4. Summary of Critical Accounting Policies. The acquisition of ACI provides the Company with additional expertise in selling debit and credit card processing services into the Financial Institution and Third Party channel, a base operation to sell its payroll and related payroll tax processing and payment services to its clients, and the ability to cross-market its payroll payment services and its prepaid card services to ACI’s customer base.

The fair value of the identifiable assets acquired and liabilities assumed in the ACI acquisition as of the acquisition date include: (i) $250,000 cash, (ii) $521,000 for accounts receivable; (iii) $46,000 for prepaid expenses and other assets; (iv) $27,000 for fixed assets; (v) the assumption of $601,000 of liabilities; and (vi) the remainder, or approximately $17.1 million, allocated to goodwill and other identifiable intangible assets. Within the $17.1 million of acquired intangible assets, $10.6 million was assigned to goodwill, which is not subject to amortization expense under U.S. GAAP. The Company expects to deduct for tax purposes substantially all of its goodwill. The amount assigned to goodwill was deemed appropriate based on several factors, including: (i) multiple paid by market participants for businesses in the merchant card processing business; (ii) levels of ACI’s current and future projected cash flows; and (iii) the Company’s strategic business plan, which includes cross-marketing the Company’s payroll processing and prepaid card services to ACI’s customer base as well as offering merchant credit card processing services to the Company’s ADC payroll customer base. The remaining intangible assets were assigned to customer relationships for $6.3 million, software costs of $100,000, and tradename for $60,000. The Company determined that the fair value of non-compete agreements were immaterial. Customer relationships, software costs, and trade name were assigned a life of 8.5, 2 and 3 years, respectively.

Assets acquired and liabilities assumed in the ACI acquisition were recorded on the Company’s Consolidated Balance Sheets as of the acquisition date based upon their estimated fair values at such date. The results of operations of the business acquired by the Company have been included in the Statements of Operations since the date of acquisition. The excess of the purchase price over the estimated fair values of the underlying identifiable assets acquired and liabilities assumed were allocated to goodwill.

The allocation of the ACI purchase price and the estimated fair market values of the ACI assets acquired and liabilities assumed are shown below (in thousands):

Cash	$	250
Accounts receivable		521
Prepaid expenses and other assets		46
Property and equipment, net		27
Goodwill		10,594
Identifiable intangible assets		6,460
Total assets acquired		17,898
Accounts payable and accrued expenses		601
Total liabilities assumed		601
Net assets acquired	$	17,297

Unaudited pro forma results of operations for the three and six months ended June 30, 2014 as if the Company and ACI had been combined on January 1, 2014 follow. The pro forma results include estimates and assumptions which management believes are reasonable. The pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the date indicated, or which may result in the future.

	Unaudited Pro Forma Results of Operations
	For the Three Months		For the Six Months
	Ended June 30, 2014		Ended June 30, 2014
	(in thousands, except per share information)
Revenues	$	9,521	$	19,100
Operating loss	$	(734)	$	(406)
Net loss	$	(2,196)	$	(3,454)
Net loss applicable to common stockholders	$	(2,953)	$	(4,932)
Net loss per share applicable to common stockholders	$	(0.21)	$	(0.36)

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Stockholders' Equity (Details 1) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Stockholders Equity Note [Line Items]
Outstanding Opening - Number of Options (in shares)	1,401,250	1,000,000
Granted - Number of Options (in shares)	200,000	445,000
Forfeited - Number of Options (in shares)	(193,334)	(43,750)
Exercised - Number of Options (in shares)	0	0
Outstanding Ending - Number of Options (in shares)	1,407,916	1,401,250
Exercisable - Number of Options (in shares)	537,908
Outstanding Opending - Weighted Average Exercise Price (in dollars per share)	$ 3.02	$ 3.03
Granted - Weighted Average Exercise Price (in dollars per share)	3.00	3.00
Forfeited - Weighted Average Exercise Price (in dollars per share)	3.00	3.04
Exercised - Weighted Average Exercise Price (in dollars per share)	0	0
Outstanding Ending - Weighted Average Exercise Price (in dollars per share)	3.02	$ 3.02
Exercisable - Weighted Average Exercise Price (in dollars per share)	$ 3.05

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Organization and Business Operations (Details Textual) - Auction Market Preferred Securities, Stock Series, Title [Domain] - USD ($)	Jun. 30, 2015	Dec. 31, 2014	Dec. 28, 2014	Nov. 07, 2014	May. 05, 2014	Apr. 14, 2014
Organization and Business Operations [Line Items]
Preferred Stock, Shares Issued	0	0
Preferred Stock, Value, Issued	$ 0	$ 0	$ 10,000,000	$ 6,000,000		$ 1,400,000
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Payment Of Principal And Interest Of Long Term Debt For The Next Twelve Months	$ 3,150,000
Series A Preferred Stock [Member]
Organization and Business Operations [Line Items]
Preferred Stock, Shares Issued	33,333
Preferred Stock, Value, Issued						$ 1,400,000
Convertible Preferred Stock [Member] | Acquisition-related Costs [Member]
Organization and Business Operations [Line Items]
Preferred Stock, Value, Issued	$ 13,450,000
Flexpoint [Member] | Series A Preferred Stock [Member]
Organization and Business Operations [Line Items]
Preferred Stock Value Reserved for Future Issuance		$ 12,600,000
Flexpoint [Member] | Series A Convertible Preferred Stock [Member]
Organization and Business Operations [Line Items]
Preferred Stock, Shares Issued		91,333
Preferred Stock, Value, Issued		$ 27,400,000
Preferred Stock, Par or Stated Value Per Share		$ 0.001
Wellington [Member] | Series A-1 Preferred stock [Member]
Organization and Business Operations [Line Items]
Preferred Stock, Shares Issued	6,165
Preferred Stock, Value, Issued	$ 1,850,000				$ 1,850,000
Preferred Stock Value Reserved for Future Issuance	$ 850,000
Preferred Stock, Par or Stated Value Per Share	$ 0.001
ACI Merchant Systems, LLC [Member]
Organization and Business Operations [Line Items]
Deferred Consideration Due In Next Twelve Months	$ 1,200,000

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Segments (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

The Company does not evaluate performance or allocate resources based on segment asset data, and therefore, such information is not presented.

	For the Three Months Ended June 30, 2015
	JetPay
	Payment		JetPay		General/
	Processing		Payroll		Corporate		Total
Processing revenues	$	7,445	$	3,108	$	13	$	10,566
Cost of processing revenues		4,757		1,733		30		6,520
Selling, general and administrative expenses		1,807		1,144		243		3,194
Change in fair value of contingent consideration liability		-		-		26		26
Amortization of intangibles and depreciation		534		346		2		882
Other expenses		100		76		120		296
Income (loss) before income taxes	$	247	$	(191)	$	(408)	$	(352)
Property and equipment additions	$	99	$	79	$	-	$	178

	For the Three Months Ended June 30, 2014
	JetPay
	Payment		JetPay		General/
	Processing		Payroll		Corporate		Total
Processing revenues	$	4,687	$	3,038	$	1	$	7,726
Cost of processing revenues		2,941		1,781		11		4,733
Selling, general and administrative expenses		1,832		1,029		547		3,408
Change in fair value of contingent consideration liability		-		-		(8)		(8)
Amortization of intangibles and depreciation		321		341		1		663
Other (income) expenses		(2)		75		1,176		1,249
Loss before income taxes	$	(405)	$	(188)	$	(1,726)	$	(2,319)
Property and equipment additions	$	16	$	29	$	13	$	58

	For the Six Months Ended June 30, 2015
	JetPay
	Payment		JetPay		General/
	Processing		Payroll		Corporate		Total
Processing revenues	$	14,533	$	6,855	$	22	$	21,410
Cost of processing revenues		9,286		3,630		60		12,976
Selling, general and administrative expenses		3,559		2,291		726		6,576
Change in fair value of contingent consideration liability		-		-		37		37
Amortization of intangibles and depreciation		1,065		691		3		1,759
Other expenses		199		139		238		576
Income (loss) before income taxes	$	424	$	104	$	(1,042)	$	(514)
Total property and equipment, net	$	691	$	560	$	36	$	1,287
Property and equipment additions	$	174	$	118	$	1	$	293
Intangible assets and goodwill, net	$	48,823	$	18,294	$	-	$	67,117
Total segment assets	$	72,264	$	55,536	$	951	$	128,751

	For the Six Months Ended June 30, 2014
	JetPay
	Payment		JetPay		General/
	Processing		Payroll		Corporate		Total
Processing revenues	$	9,290	$	6,604	$	1	$	15,895
Cost of processing revenues		5,886		3,521		14		9,421
Selling, general and administrative expenses		2,828		2,030		1,325		6,183
Change in fair value of contingent consideration liability		-		-		(8)		(8)
Amortization of intangibles and depreciation		641		684		1		1,326
Other expenses		1		149		2,476		2,626
(Loss) income before income taxes	$	(66)	$	220	$	(3,807)	$	(3,653)
Total property and equipment, net	$	458	$	614	$	14	$	1,086
Property and equipment additions	$	56	$	73	$	13	$	142
Intangible assets and goodwill, net	$	33,442	$	19,415	$	-	$	52,857
Total segment assets	$	54,828	$	70,662	$	2,155	$	127,645

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Stockholders' Equity (Details Textual) - USD ($)				1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended
	Nov. 07, 2014	Apr. 14, 2014	Apr. 04, 2014	Jun. 18, 2015	Jan. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Stockholders Equity Note [Line Items]
Preferred Stock, Shares Authorized						1,000,000		1,000,000		1,000,000
Preferred Stock, Par or Stated Value Per Share						$ 0.001		$ 0.001		$ 0.001
Common stock, shares issued						13,892,990		13,892,990		13,863,823
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross								200,000		445,000
Share-based Goods and Nonemployee Services Transaction, Valuation Method, Expected Dividend Rate								0.00%
Stock Issued During Period, Value, New Issues		$ 1,400,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price						$ 3.05		$ 3.05
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested Options Forfeited, Number of Shares								193,334
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term								8 years 8 months 23 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value						$ 0		$ 0
Proceeds from Issuance of Common Stock								$ 0	$ 1,000,000
Common Stock SPA [Member]
Stockholders Equity Note [Line Items]
Common stock, shares issued			333,333
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs			$ 25,000
Proceeds from Issuance of Common Stock			$ 1,000,000
ACI [Member]
Stockholders Equity Note [Line Items]
Stock Issued During Period, Shares, Acquisitions	2,000,000
Employee Stock [Member]
Stockholders Equity Note [Line Items]
Common stock, shares issued				29,167
Stock Issued During Period, Value, New Issues				$ 79,000
Consultant Service [Member]
Stockholders Equity Note [Line Items]
Common stock, shares issued					1,396
Stock Issued During Period, Value, New Issues					$ 6,000
Stock Incentive Plan [Member]
Stockholders Equity Note [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross								200,000	65,000
Stock Issued During Period, Value, Stock Options Exercised								$ 232,000	$ 145,000
Allocated Share-based Compensation Expense						64,000	$ 88,000	142,000	$ 168,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options						$ 624,000		$ 624,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price						$ 3.00	$ 3.00	$ 3.00	$ 3.00

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Business Acquisition (Details) $ in Thousands	Jun. 30, 2015 USD ($)
Business Acquisition [Line Items]
Cash	$ 250
Accounts receivable	521
Prepaid expenses and other assets	46
Property and equipment, net	27
Goodwill	10,594
Identifiable intangible assets	6,460
Total assets acquired	17,898
Accounts payable and accrued expenses	601
Total liabilities assumed	601
Net assets acquired	$ 17,297

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Business Acquisition (Details 1) - Jun. 30, 2014 - Consolidated Entities [Member] - USD ($) $ / shares in Units, $ in Thousands	Total	Total
Business Acquisition [Line Items]
Revenues	$ 9,521	$ 19,100
Operating loss	(734)	(406)
Net loss	(2,196)	(3,454)
Net loss applicable to common stockholders	$ (2,953)	$ (4,932)
Net loss per share applicable to common stockholders	$ (0.21)	$ (0.36)

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Organization and Business Operations

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 2.   Organization and Business Operations

The Company was incorporated in Delaware on November 12, 2010 as a blank check company whose objective was to acquire, through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more operating businesses. Until December 28, 2012, the Company’s efforts were limited to organizational activities, its initial public offering (the “Offering”) and the search for suitable business acquisition transactions.

Effective August 2, 2013, Universal Business Payment Solutions Acquisition Corporation changed its name to JetPay Corporation with the filing of its Amended and Restated Certificate of Incorporation. The Company’s ticker symbol on the Nasdaq Capital Market (“NASDAQ”) changed from “UBPS” to “JTPY” effective August 12, 2013.

The Company currently operates in two business segments: the JetPay Payment Processing Segment, which is an end-to-end processor of credit and debit card and ACH payment transactions, with a focus on those processing internet transactions and recurring billings as well as traditional retailers and service providers; and the JetPay Payroll Segment, which is a full-service payroll and related payroll tax payment processor, and a provider of human resource, time and labor management, and other payroll related services. The Company also initiated operations of JetPay Card Services in the fourth quarter of 2013, a division focused on providing low-cost money management and payment services to un-banked and under-banked employees of its business customers and other consumers. The activity within the JetPay Card Services division was not material for the year ended December 31, 2014 and the six months ended June 30, 2015. The Company entered the payment processing and the payroll processing businesses upon consummation of the acquisitions of JetPay, LLC (“JetPay, LLC” or “JetPay Payment Services”), and AD Computer Corporation (“ADC” or “JetPay Payroll Services”) on December 28, 2012 (the “Completed Transactions”). Additionally, on November 7, 2014, the Company acquired ACI Merchant Systems, LLC (“ACI” or “JetPay Strategic Partners”), an independent sales organization specializing in relationships with banks, credit unions and other financial institutions. See Note 3. Business Acquisition.

The consolidated financial statements as of June 30, 2015 and December 31, 2014 and for the six months ended June 30, 2015 and the year ended December 31, 2014 include the accounts of JetPay and its wholly owned subsidiaries, JetPay Payment Services, JetPay Payroll Services and JetPay Strategic Partners. All significant inter-company transactions and balances have been eliminated in consolidation.

The Company believes that the investments made by JetPay in its technology, infrastructure, and sales staff will help generate cash flows sufficient to cover its working capital needs. In addition to funding ongoing working capital needs, the Company’s cash requirements for the next twelve months ended June 30, 2016 include, but are not limited to: principal and interest payments on long-term debt of approximately $3.15 million, and $1.2 million of deferred consideration due to the unitholders of ACI on April 10, 2016. The Company expects to fund its cash needs, including capital required for acquisitions and capital expenditures, with cash flow from its operating activities, equity investments, and borrowings. As disclosed in Note 8. Redeemable Convertible Preferred Stock, from October 11, 2013 to December 31, 2014, the Company sold 91,333 shares of Series A Convertible Preferred Stock, par value $0.001 per share (“Series A Preferred”), to affiliates of Flexpoint Ford, LLC (“Flexpoint”) for an aggregate of $27.4 million, less certain costs, and has an agreement to potentially sell an additional $12.6 million of Series A Preferred to Flexpoint. Additionally, the Company sold 6,165 shares of Series A-1 Convertible Preferred Stock, par value $0.001 per share (“Series A-1 Preferred”), to affiliates of Wellington Capital Management, LLP (“Wellington”) for an aggregate of $1.85 million, and it has an agreement to potentially sell an additional $850,000 of Series A-1 Preferred to Wellington. This additional combined $13.45 million of convertible preferred stock, if sold, will be principally used as partial consideration for future acquisitions. If the Company is unable to raise additional capital, it may need to limit its future growth plans.

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Business Acquisition (Details Textual) - USD ($) shares in Millions				6 Months Ended
	Apr. 10, 2016	Apr. 10, 2015	Nov. 07, 2014	Jun. 30, 2015
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross			$ 6,000,000	$ 11,000,000
ACI [Member]
Business Acquisition [Line Items]
Business Acquisition Contingent Consideration Potential Cash Receipt				436,000
Payments to Acquire Businesses, Gross		$ 1,200,000		$ 2,400,000
Stock Issued During Period, Shares, Acquisitions				2.0
Stock Issued During Period, Value, Acquisitions				$ 3,700,000
Business Acquisitions Purchase Price Allocation Goodwill Amount				17,100,000
Business Acquisitions Purchase Price Allocation Amortizable Intangible Assets				$ 10,600,000
Rate Of Discount On Fair Value Of Future Payments				16.00%
Maximum Amount Of Consideration Right On Net Revenue				$ 500,000
Business Combination, Consideration Transferred				400,000
Deferred Consideration Or To Be Paid To Acquire Business				2,170,000
ACI [Member] | Scenario, Forecast [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross	$ 1,200,000
ACI [Member] | Customer Relationships [Member]
Business Acquisition [Line Items]
Business Acquisitions Purchase Price Allocation Amortizable Intangible Assets				$ 6,300,000
Business Acquisitions Purchase Price Allocation Assigned Life				8 years 6 months
ACI [Member] | Trade Names [Member]
Business Acquisition [Line Items]
Business Acquisitions Purchase Price Allocation Amortizable Intangible Assets				$ 60,000
Business Acquisitions Purchase Price Allocation Assigned Life				3 years
ACI [Member] | Software [Member]
Business Acquisition [Line Items]
Business Acquisitions Purchase Price Allocation Amortizable Intangible Assets				$ 100,000
Business Acquisitions Purchase Price Allocation Assigned Life				2 years

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Long-Term Debt, Notes Payable and Capital Lease Obligations (Details Textual) - Subsequent Event Type [Domain] - USD ($)	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months	$ 2,400,000
Long-term Debt, Maturities, Repayments of Principal in Year Two	4,200,000
Long-term Debt, Maturities, Repayments of Principal in Year Three	4,900,000
Long-term Debt, Maturities, Repayments of Principal in Year Four	2,500,000
Long-term Debt, Maturities, Repayments of Principal in Year Five	1,900,000
Long-term Debt, Maturities, Repayments of Principal after Year Five	$ 1,700,000
Revolving Note Payable To Metro Bank [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date	May 06, 2017
Long-term Debt, Gross	$ 1,000,000
Debt Instrument, Description of Variable Rate Basis	Wall Street Journal Prime rate plus 1.00% (4.25% as June 30, 2015), interest payable monthly
Wles [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date	Dec. 31, 2017
Debt Instrument, Unamortized Discount	$ 470,408	$ 552,424
Debt Instrument, Interest Rate, Effective Percentage	5.00%
StockHolders [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date	Sep. 30, 2016
Debt Instrument, Interest Rate, Effective Percentage	4.00%
Stockholders One [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Effective Percentage	4.00%
Unsecured Debt Instrument Principal Payment, First Installment	$ 175,000
Unsecured Debt Instrument Principal Payment Second Installment	$ 175,000
AD Computer Corporation and Payroll Tax Filing Services, Inc. [Member] | Metro Banks [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date	Dec. 28, 2019
Debt Instrument, Interest Rate, Effective Percentage	4.00%
Equal Monthly Installments	$ 107,143
ACI Merchant Systems, LLC [Member] | Metro Banks [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date	Nov. 07, 2021
Debt Instrument, Interest Rate, Effective Percentage	5.25%
Equal Monthly Installments	$ 104,167
JetPay, LLC, [Member]
Debt Instrument [Line Items]
Debt Instrument, Maturity Date	May 30, 2017
Debt Instrument On Unamortized Discount and Derivative Liability	$ 4,114
Debt Instrument, Interest Rate, Effective Percentage	5.55%

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Consolidated Balance Sheets - Class of Stock [Domain] - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 5,228	$ 5,359
Restricted cash	231	1,386
Accounts receivable, less allowance for doubtful accounts	1,899	2,634
Settlement processing assets	13,362	18,893
Prepaid expenses and other current assets	601	828
Current assets before funds held for clients	21,321	29,100
Funds held for clients	34,366	40,833
Total current assets	55,687	69,933
Property and equipment, net	1,287	1,226
Goodwill	41,760	41,760
Identifiable intangible assets, net of accumulated amortization of $6,155 at June 30, 2015 and $4,620 at December 31, 2014	25,357	26,892
Deferred financing costs, net of accumulated amortization of $4,396 at June 30, 2015 and $4,376 at December 31, 2014	113	89
Other assets	4,547	4,502
Total assets	128,751	144,402
Current liabilities:
Current portion of long-term debt and capital lease obligations	2,368	1,571
Accounts payable and accrued expenses	8,532	9,153
Settlement processing liabilities	12,408	18,024
Deferred revenue	298	520
Other current liabilities	1,400	3,250
Current liabilities before client fund obligations	25,006	32,518
Client fund obligations	34,366	40,833
Total current liabilities	59,372	73,351
Long-term debt and capital lease obligations, net of current portion	14,752	14,795
Deferred income taxes	284	284
Other liabilities	176	1,411
Total liabilities	$ 74,584	$ 89,841
Commitments and Contingencies
Redeemable Convertible Preferred Stock;
Redeemable convertible Series A and Series A-1 preferred stock, $0.001 par value per share, 97,498 shares issued and outstanding at June 30, 2015 and December 31, 2014 (liquidation preference of $58,500 at June 30, 2015)	$ 32,244	$ 29,779
Stockholders’ Equity
Preferred stock, $0.001 par value Authorized 1,000,000 shares, none issued	0	0
Common stock, $0.001 par value Authorized 100,000,000 shares; 13,892,990 and 13,863,823 issued and outstanding at June 30, 2015 and December 31, 2014, respectively	14	14
Additional paid-in capital	41,698	43,942
Accumulated deficit	(19,789)	(19,174)
Total Stockholders’ Equity	21,923	24,782
Total Liabilities and Stockholders’ Equity	$ 128,751	$ 144,402

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Income Taxes (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Income Tax Expense (Benefit)	$ 43,000	$ 52,000	$ 101,000	$ 104,000
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	(12.22%)	(2.24%)	(19.65%)	(2.85%)
Deferred Tax Assets, Operating Loss Carryforwards, State and Local					$ 12,800,000
Operating Loss Carryforward Expiration Date					2034
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount			$ 205,000	$ 1,500,000
Deferred Tax Assets, Valuation Allowance	$ 7,800,000		$ 7,800,000

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating Activities
Net loss	$ (615)	$ (3,757)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	224	206
Stock-based compensation	142	168
Common stock issued as compensation	79	6
Amortization of intangibles	1,535	1,120
Amortization of deferred financing costs	17	1,125
Amortization of debt discounts and conversion options	159	750
Change in fair value of contingent consideration liability	37	(8)
Change in fair value of derivative liability	0	(60)
Loss on disposal of fixed assets	0	237
Change in operating assets and liabilities:
Restricted cash	1,155	(48)
Accounts receivable	735	769
Settlement processing assets and obligations, net	(85)	(134)
Prepaid expenses and other current assets	227	(83)
Other assets	(45)	245
Deferred revenue	(222)	(211)
Accounts payable and accrued expenses	(621)	(3,334)
Net cash provided by (used in) operating activities	2,722	(3,009)
Investing Activities
Net decrease (increase) in restricted cash and cash equivalents held to satisfy client fund obligations	6,467	(15,591)
Payment of deferred acquisition consideration	(2,850)	0
Purchase of property and equipment	(293)	(142)
Proceeds on sale of property and equipment	8	0
Net cash provided by (used in) investing activities	3,332	(15,733)
Financing Activities
Payments on long-term debt	(678)	(657)
Net (decrease) increase in client funds obligations	(6,467)	15,591
Proceeds from notes payable	1,000	0
Deferred financing fees associated with new borrowings	(40)	0
Proceeds from issuance of common stock	0	1,000
Proceeds from sale of preferred stock, net of issuance costs	0	2,126
Net cash (used in) provided by financing activities	(6,185)	18,060
Net decrease in cash and cash equivalents	(131)	(682)
Cash and cash equivalents, beginning	5,359	4,799
Cash and cash equivalents, ending	5,228	4,117
Supplement disclosure of cash flow information:
Cash paid for interest	634	750
Cash paid for taxes	160	229
Summary of non-cash investing and financing activities:
Promissory note issued to satisfy deferred consideration	$ 350	$ 0

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Summary of Critical Accounting Policies (Details Textual) - Fair Value, Measurements, Fair Value Hierarchy [Domain] - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Nov. 07, 2014	Dec. 31, 2012	Dec. 28, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Reserve for Losses and Loss Adjustment Expenses	$ 320,000		$ 320,000		$ 306,000
Derivative Liability, Fair Value, Net								$ 2,100,000
Contingent consideration	1,277,000		1,277,000		1,240,000
Change in fair value of derivative liability	$ 0	$ (110,000)	$ 0	$ (60,000)
Share Price	$ 9.50		$ 9.50
Business Acquisition Contingent Consideration Potential Cash Receipt					$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number	537,908		537,908
Secured Convertible Promissory Notes Payable [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Conversion of Stock, Shares Converted		3,333,333		3,333,333
Conversion of Stock, Amount Converted		$ 10,000,000		$ 10,000,000
Series A Preferred Stock [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount			9,133,300	3,800,000
Series A-1 Preferred stock [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount			616,500	256,500
Employee Stock Option [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number	537,908	231,249	537,908	231,249
Machinery and Equipment [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, Plant and Equipment, Useful Life			15 years
Machinery and Equipment [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, Plant and Equipment, Useful Life			5 years
Furniture and Fixtures [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, Plant and Equipment, Useful Life			10 years
Furniture and Fixtures [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Property, Plant and Equipment, Useful Life			5 years
Wles [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Assumptions, Risk Free Interest Rate			0.82%
Fair Value Assumptions, Expected Dividend Rate			0.00%
Fair Value Assumptions, Expected Term			2 years 6 months 4 days
Fair Value Assumptions, Expected Volatility Rate			22.60%
Common stock issued for acquisitions (in shares)			833,333
Contingent consideration	$ 1,000		$ 1,000				$ 1,540,000
Business Combination, Contingent Consideration, Liability, Noncurrent							840,000	$ 840,000
Share Price	$ 8.00		$ 8.00
Stock Issued During Period, Value, Acquisitions			$ 5,000,000
Business Acquisition Contingent Consideration Potential Cash Receipt							$ 700,000
ACI [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock issued for acquisitions (in shares)			2,000,000
Contingent consideration	$ 436,000		$ 436,000			$ 400,000
Stock Issued During Period, Value, Acquisitions			$ 3,700,000
Rate Of Discount On Fair Value Of Future Payments			16.00%
Maximum Amount Of Consideration Right On Net Revenue			$ 500,000

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Business Acquisition (Tables)

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

The allocation of the ACI purchase price and the estimated fair market values of the ACI assets acquired and liabilities assumed are shown below (in thousands):

Cash	$	250
Accounts receivable		521
Prepaid expenses and other assets		46
Property and equipment, net		27
Goodwill		10,594
Identifiable intangible assets		6,460
Total assets acquired		17,898
Accounts payable and accrued expenses		601
Total liabilities assumed		601
Net assets acquired	$	17,297

Condensed Income Statement [Table Text Block]

The pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the date indicated, or which may result in the future.

	Unaudited Pro Forma Results of Operations
	For the Three Months		For the Six Months
	Ended June 30, 2014		Ended June 30, 2014
	(in thousands, except per share information)
Revenues	$	9,521	$	19,100
Operating loss	$	(734)	$	(406)
Net loss	$	(2,196)	$	(3,454)
Net loss applicable to common stockholders	$	(2,953)	$	(4,932)
Net loss per share applicable to common stockholders	$	(0.21)	$	(0.36)

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Property and Equipment, net of Accumulated Depreciation (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 2,187	$ 1,902
Less: Accumulated depreciation	(900)	(676)
Property and equipment, net	1,287	1,226	$ 1,086
Leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	399	384
Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	885	811
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	270	252
Computer Software [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	144	121
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	223	182
Assets in progress [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 266	$ 152

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Property and Equipment, net of Accumulated Depreciation (Tables)

6 Months Ended

Jun. 30, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	June 30,		December 31,
	2015		2014
	(in thousands)
Leasehold improvements	$	399	$	384
Equipment		885		811
Furniture and fixtures		270		252
Computer software		144		121
Vehicles		223		182
Assets in progress		266		152
Total property and equipment		2,187		1,902
Less: accumulated depreciation		(900)		(676)
Property and equipment, net	$	1,287	$	1,226

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Basis of Presentation

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

Note 1.   Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the consolidated financial statements of JetPay Corporation and its subsidiaries (collectively, the “Company” or “JetPay”) as of June 30, 2015 and 2014. The results of operations for the six months ended June 30, 2015 and 2014 are not necessarily indicative of the operating results for the full year. It is recommended that these consolidated financial statements be read in conjunction with the consolidated financial statements and related disclosures for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 25, 2015.

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Consolidated Balance Sheets [Parenthetical] - Class of Stock [Domain] - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets, Accumulated Amortization	$ 6,155	$ 4,620
Accumulated Amortization, Deferred Finance Costs	$ 4,396	$ 4,376
Temporary Equity, Par or Stated Value Per Share (in dollars per share)	$ 0.001	$ 0.001
Temporary Equity, Shares Issued	97,498	97,498
Temporary Equity, Shares Outstanding	97,498	97,498
Temporary Equity, Liquidation Preference	$ 58,500
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	13,892,990	13,863,823
Common stock, shares outstanding	13,892,990	13,863,823

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 11.   Commitments and Contingencies

On or about March 13, 2012, a merchant of JetPay, LLC, Direct Air, a charter travel company, abruptly ceased operations and filed for bankruptcy. Under United States Department of Transportation requirements, all charter travel company customer charges for travel are to be deposited into an escrow account in a bank under a United States Department of Transportation escrow program, and not released to the charter travel company until the travel has been completed. In the case of Direct Air, such funds had historically been deposited into such United States Department of Transportation escrow account at Valley National Bank in New Jersey, and continued to be deposited through the date Direct Air ceased operations. At the time Direct Air ceased operations, according to Direct Air’s bankruptcy trustee, there should have been in excess of $31.0 million in the escrow account. Instead there was approximately $1.0 million. As a result, Merrick Bank (“Merrick”), JetPay, LLC’s sponsor with respect to this particular merchant, incurred chargebacks in excess of $25.0 million. Merrick maintains insurance through a Chartis Insurance Policy for chargeback losses that names Merrick as the primary insured. The policy has a limit of $25.0 million and a deductible of $250,000. Merrick has sued Chartis Insurance (“Chartis”) for payment under the claim. Under an agreement between Merrick and JetPay, LLC, JetPay, LLC may be obligated to indemnify Merrick for losses realized from such chargebacks that Merrick is unable to recover from other parties. JetPay, LLC recorded a loss for all chargebacks in excess of $25.0 million, the $250,000 deductible on the Chartis insurance policy and $487,000 of legal fees charged against JetPay, LLC’s cash reserve account by Merrick, totaling $1.9 million in 2012, as well as an additional $597,000 in legal fees charged against JetPay, LLC’s cash reserve account by Merrick through June 30, 2013. In December 2013, Merrick, in addition to its suit against Chartis, also filed suit against Valley National Bank as escrow agent. In February 2015, JetPay joined that suit, along with American Express. JetPay, LLC has received correspondence from Merrick of its intention to seek recovery for all unrecovered chargebacks and related costs, but JetPay, LLC is currently not a party to any litigation from Merrick regarding this matter. Merrick and JetPay, LLC have entered into a forbearance agreement pertaining to the Direct Air chargeback issue. The Direct Air situation has also caused other unexpected expenses, such as higher professional fees and fees for chargeback processing. Additionally, pursuant to the terms of its agreement with Merrick, Merrick has forced JetPay, LLC to maintain increased cash reserves in order to provide additional security for any obligations arising from the Direct Air situation. Merrick continues to hold approximately $4.4 million of total reserves related to the Direct Air matter as of June 30, 2015. The cash reserve balance was reduced by approximately $600,000 during the year ended December 31, 2014 to settle a lawsuit involving the Company and Merrick with MSC Cruise Lines, including certain legal fees claimed and deducted from the reserve by Merrick in connection with settling the matter, as more fully described below. These reserves are recorded in Other Assets.

On August 7, 2013, JetPay Merchant Services, LLC (“JPMS”), a wholly owned subsidiary of JetPay, LLC and indirect wholly owned subsidiary of the Company, together with WLES, (collectively, the “Plaintiffs”), filed suit in the United States District Court for the Northern District of Texas, Dallas Division, against Merrick, Royal Group Services, LTD, LLC and Gregory Richmond (collectively, the “Defendants”). The suit alleges that Merrick and Gregory Richmond (an agent of Royal Group Services) represented to JPMS that insurance coverage was arranged through Chartis Specialty Insurance Company to provide coverage for JPMS against potential chargeback losses related to certain of JPMS’s merchant customers, including Southern Sky Air Tours, d/b/a Direct Air. The complaint alleges several other causes of action against the Defendants, including violation of state insurance codes, negligence, fraud, breach of duty and breach of contract. Also, in August 2013, JPMS, JetPay, LLC, and JetPay ISO Services, LLC filed the second amendment to a previously filed complaint against Merrick in the United States District Court for the District of Utah, adding to its initial complaint several causes of action related to actions Merrick allegedly took during JetPay, LLC’s transition to a new sponsoring bank in June 2013. Additionally, subsequent to this transition, Merrick invoiced the Company for legal fees incurred by Merrick totaling approximately $3.2 million. The Company does not believe it has a responsibility to reimburse Merrick for these legal fees and intends to vigorously dispute these charges. Accordingly, the Company has not recorded an accrual for these legal fees as of June 30, 2015.

As partial protection against any potential losses related to Direct Air, the Company required that, upon closing of the Completed Transactions, 3,333,333 shares of our common stock that was to be paid to WLES as part of the JetPay, LLC acquisition be placed into an escrow account with JPMorgan Chase (“Chase”) as the trustee. The Escrow Agreement for the account names Merrick, the Company, and WLES as parties. If JetPay, LLC suffers any liability as a result of the Direct Air matter, these shares are to be used in partial or full payment for any such liability, with any remaining shares delivered to WLES. If JetPay, LLC is found to have any liability because of this issue, and these shares do not have sufficient value to fully cover such liability, the Company may be responsible for this JetPay, LLC liability. On February 3, 2014, the Company received notice that Merrick had requested Chase to release the 3,333,333 shares in the escrow account to Merrick. Both JetPay and WLES informed Chase that they did not agree to the release, and the shares remain in escrow.

On January 16, 2013, the Company received notice that EarlyBirdCapital, Inc. (“EBC”) had commenced arbitration proceedings (the “Claim”) against the Company with the International Centre for Dispute Resolution (the “ICDR”). The Claim alleged that the Company breached a Letter Agreement, dated as of May 9, 2011, with EBC by failing to pay EBC a cash fee of $2.07 million and reimburse EBC for certain expenses upon the closing of the Company’s initial business combination, which was consummated on December 28, 2012. As a result of such breach, EBC sought the cash fee plus interest and attorney’s fees and expenses. In November 2013, the ICDR held arbitration proceedings with respect to the Claim. On March 3, 2014, the ICDR rendered its decision and ordered the Company to pay the cash fee of $2.07 million plus interest, attorney’s fees and expenses of approximately $740,000 within 30 days of the decision (the “EBC Award”). The Company accrued $2,136,000 relating to this matter as of December 31, 2012 and an additional $675,000 was recorded as SG&A expenses in the fourth quarter of 2013 for the legal fees and interest costs awarded to EBC as part of the EBC Award. In order to satisfy a portion of the EBC Award, the Company entered into the Common Stock SPA. Pursuant to the Common Stock SPA, on April 4, 2014, the Company received aggregate proceeds of $1.0 million and issued an aggregate of 333,333 shares of common stock to Messrs. Shah and Antich. Additionally, on April 14, 2014, the Company issued 4,667 shares of Series A Preferred to Flexpoint for an aggregate of $1.4 million under the Securities Purchase Agreement. See Note 8. Redeemable Convertible Preferred Stock. The Company used the proceeds from the sale of common stock, the proceeds from the closing of the Series A Preferred to Flexpoint, and existing cash of $411,000 to fully satisfy its obligations to EBC pursuant to the EBC Award.

On August 23, 2013, the Company received notice that JPMS was a party in a lawsuit brought by MSC Cruise Lines, a former customer. Merrick was a co-defendant in the lawsuit. MSC Cruise Lines claimed approximately $2.0 million in damages and alleged that JPMS breached its agreement with MSC by charging fees not specified in the agreement. The Company reached a settlement on the matter on July 31, 2014. Accordingly, the Company has recorded an expense of $600,000 for the year ended December 31, 2014, representing the settlement to MSC Cruise Lines and certain legal fees claimed by Merrick in connection with settling the suit. The settlement, including the Merrick legal fees, was satisfied by a deduction from the Merrick reserve account recorded in Other Assets as described above.

In December 2013, the Company settled a lawsuit with M&A Ventures in which it agreed to pay $400,000, with $100,000 paid in 2013 and the remainder in installments throughout 2014. The Company recorded the $400,000 settlement within SG&A expense for the three months ended December 31, 2013.

At the time of the acquisition of JetPay, LLC, the Company entered into an Amendment, Guarantee, and Waiver Agreement (the “Agreement”) dated December 28, 2012 between the Company, Ten Lords and Interactive Capital and JetPay, LLC. Under this Agreement, Ten Lords and Interactive Capital agreed to extend payment of a $6.0 million note remaining outstanding at the date of acquisition for up to twelve months. The note was paid in full in October 2013 using the proceeds from the initial purchase of Series A-1 Preferred by Flexpoint. See Note 8. Redeemable Convertible Preferred Stock. The terms of the Agreement required the Company to provide to Ten Lords a “true up” payment, which was meant to put the holders of the note (Ten Lords and Interactive Capital) in the same after-tax economic position as they would have been had the note been paid in full on December 28, 2012. JetPay has estimated the amount due to Ten Lords under this Agreement to be approximately $340,000. Accordingly, the Company has recorded an accrual of $340,000 for this matter as of June 30, 2015.

In December 2012, BCC Merchant Solutions, a former customer of JetPay, LLC filed a suit against JetPay, LLC, Merrick Bank, and Trent Voigt in the Northern District of Texas, Dallas Division, for $1.9 million, alleging that the parties by their actions, had cost BCC significant expense and lost customer revenue. The Company believes that the basis of the suit regarding JetPay, LLC is groundless and intends to defend it vigorously. Accordingly, the Company has not recorded an accrual for any potential loss related to this matter as of June 30, 2015.

The Company is a party to various other legal proceedings related to its ordinary business activities. In the opinion of the Company’s management, none of these proceedings are material in relation to our results of operations, liquidity, cash flows, or financial condition.

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Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 11, 2015
Document Information [Line Items]
Entity Registrant Name	JetPay Corp
Entity Central Index Key	0001507986
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	JTPY
Entity Common Stock, Shares Outstanding		13,892,990
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2015

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Related Party Transactions

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 12.    Related Party Transactions

JetPay Payroll Services’ headquarters are located in Center Valley, Pennsylvania and consist of approximately 22,500 square feet leased from C. Nicholas Antich and Carol A. Antich. Mr. Antich is the President of ADC. The rent is currently approximately $43,426 per month with annual 4% increases, on a net basis. The office lease has an initial 10-year term expiring May 31, 2016. Rent expense under this lease was $129,140 for each of the three months ended June 30, 2015 and 2014, and $258,280 for each of the six months ended June 30, 2015 and 2014.

JetPay Payment Services retains a backup center in Sunnyvale, Texas consisting of 1,600 square feet, rented for approximately $3,000 per month from JT Holdings, an entity controlled by Trent Voigt, Chief Executive Officer of JetPay, LLC. The terms of the lease are commercial. Rent expense was $9,000 for each of the three months ended June 30, 2015 and 2014, and $18,000 for each of the six months ended June 30, 2015 and 2014.

The above transactions with respect to JetPay Payroll Services and JetPay Payment Services were approved prior to the Completed Transactions. Going forward, all related party transactions with respect to such entities will be reviewed and approved by the Company’s Audit Committee to ensure that the terms of such transactions are no less favorable to the Company than those that would be available with respect to such transactions from unaffiliated third parties.

On June 7, 2013, the Company issued an unsecured promissory note to Trent Voigt, Chief Executive Officer of JetPay, LLC, in the amount of $491,693. The note matures on September 30, 2016, as extended, and bears interest at an annual rate of 4% with interest expense of $4,900 recorded for each of the three months ended June 30, 2015 and 2014, and $9,750 for each of the six months ended June 30, 2015 and 2014. The transaction was approved upon resolution and review by the Company’s Audit Committee of the terms of the note to ensure that such terms were no less favorable to the Company than those that would be available with respect to such transactions from unaffiliated third parties.

On May 6, 2015, the Company issued an unsecured promissory note to C. Nicholas Antich, Chief Executive Officer and President of ADC, and Carol A. Antich in the amount of $350,000 to satisfy the remaining balance of the $2.0 million deferred consideration. The promissory note bears interest at an annual rate of 4% and matures on May 6, 2017, payable in two equal installments of $175,000 on May 6, 2016 and 2017. Interest expense related to this promissory note was $2,200 in the three and six months ended June 30, 2015. The promissory note was approved upon resolution and review by the Company’s Audit Committee of the terms of the promissory note to ensure that such terms were no less favorable to the Company than those that would be available with respect to such transactions from unaffiliated third parties.

In connection with the closing of the JetPay, LLC acquisition, the Company entered into a Note and Indemnity Side Agreement with JP Merger Sub, LLC, WLES and Trent Voigt (the “Note and Indemnity Side Agreement”) dated as of December 28, 2012. Pursuant to the Note and Indemnity Side Agreement, the Company agreed to issue a promissory note in the amount of $2,331,369 in favor of WLES. Interest accrues on amounts due under the note at a rate of 5% per annum, and is payable quarterly. Interest expense was $29,500 for each of the three months ended June 30, 2015 and 2014, and $58,600 for each of the six months ended June 30, 2015 and 2014. The note can be prepaid in full or in part at any time without penalty. As partial consideration for offering the note, the Company and JP Merger Sub, LLC agreed to waive certain specified indemnity claims against WLES and Mr. Voigt to the extent the losses under such claims do not exceed $2,331,369.

On August 22, 2013, JetPay, LLC entered into a Master Service Agreement with JetPay Solutions, LTD, a United Kingdom based entity 75% owned by WLES, an entity owned by Trent Voigt. The Company initiated transaction business under this agreement beginning in April 2014 with revenue earned from JetPay Solutions, LTD of $118,446 and $68,712 for the three months ended June 30, 2015 and 2014, respectively, and $223,272 and $68,712 for the six months ended June 30, 2015 and 2014, respectively.

On March 28, 2014, the Company entered into the Common Stock SPA with each of Bipin C. Shah, its Chairman and Chief Executive Officer, and C. Nicholas Antich, the President of JetPay Payroll Services. Pursuant to the Common Stock SPA, on April 4, 2014, the Company received aggregate proceeds of $1.0 million and issued an aggregate of 333,333 shares of common stock to Messrs. Shah and Antich. The proceeds were used to satisfy a portion of the EBC Award.

On October 31, 2014, following the unanimous consent of the Company’s Audit Committee, the Company entered into a letter agreement with WLES, an entity owned by Trent Voigt, that governs the distribution of any proceeds received in connection with the Direct Air matter. The Letter Agreement provides that subject to certain exceptions, after each of the Company and WLES receive out-of-pocket expenses and chargeback losses incurred subsequent to the consummation of the Completed Transactions and prior to the consummation of the Completed Transactions, respectively, each of the parties will share in any proceeds received pro rata.

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Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Processing revenues	$ 10,566	$ 7,726	$ 21,410	$ 15,895
Cost of processing revenues	6,520	4,733	12,976	9,421
Gross profit	4,046	2,993	8,434	6,474
Selling, general and administrative expenses	3,194	3,408	6,576	6,183
Change in fair value of contingent consideration liability	26	(8)	37	(8)
Amortization of intangibles	767	560	1,535	1,120
Depreciation	115	103	224	206
Operating income (loss)	(56)	(1,070)	62	(1,027)
Other expenses (income)
Interest expense	206	409	403	815
Amortization of deferred financing costs	11	571	17	1,125
Amortization of debt discounts and conversion options	81	381	159	750
Change in fair value of derivative liability	0	(110)	0	(60)
Other income	(2)	(2)	(3)	(4)
Loss before income taxes	(352)	(2,319)	(514)	(3,653)
Income tax expense	43	52	101	104
Net loss	(395)	(2,371)	(615)	(3,757)
Accretion of convertible preferred stock	(1,249)	(538)	(2,465)	(1,047)
Net loss applicable to common stockholders	$ (1,644)	$ (2,909)	$ (3,080)	$ (4,804)
Basic and diluted loss per share applicable to common stockholders (in dollars per share)	$ (0.12)	$ (0.25)	$ (0.22)	$ (0.41)
Weighted average shares outstanding:
Basic and diluted (in shares)	13,867,990	11,852,834	13,865,918	11,692,329

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Accounts Payable and Accrued Expenses

6 Months Ended

Jun. 30, 2015

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Note 6. Accounts Payable and Accrued Expenses

	June 30,		December 31,
Accounts payable and accrued expenses consist of the following (in thousands):	2015		2014
Trade accounts payable	$	1,532	$	1,828
ACH clearing liability		1,728		2,146
Accrued compensation		1,314		1,233
Accrued agent commissions		1,103		758
Related party payables		80		70
Other		2,775		3,118
Total	$	8,532	$	9,153

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Property and Equipment, net of Accumulated Depreciation

6 Months Ended

Jun. 30, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 5.   Property and Equipment, net of Accumulated Depreciation

	June 30,		December 31,
	2015		2014
	(in thousands)
Leasehold improvements	$	399	$	384
Equipment		885		811
Furniture and fixtures		270		252
Computer software		144		121
Vehicles		223		182
Assets in progress		266		152
Total property and equipment		2,187		1,902
Less: accumulated depreciation		(900)		(676)
Property and equipment, net	$	1,287	$	1,226

Property and equipment included $138,400 and $157,900 of computer equipment as of June 30, 2015 and December 31, 2014, respectively, net of accumulated depreciation of $33,100 and $13,600 as of June 30, 2015 and December 31, 2014, respectively, that is subject to capital lease obligations.

Depreciation expense was $115,000 and $103,000 for the three months ended June 30, 2015 and 2014, respectively, and $224,000 and $206,000 for the six months ended June 30, 2015 and 2014, respectively.

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Summary of Critical Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Fair Value, Liabilities Measured On Recurring Basis [Table Text Block]

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC Topic 820, assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement.

	Fair Value at June 30, 2015
	Total		Level 1		Level 2		Level 3
			(in thousands)
Contingent consideration	$	1,277	$	-	$	-	$	1,277

	Fair Value at December 31, 2014
	Total		Level 1		Level 2		Level 3
			(in thousands)
Contingent consideration	$	1,240	$	-	$	-	$	1,240

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following table sets forth a summary of the change in fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis (in thousands):

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Beginning balance	$	1,251	$	1,280	$	1,240	$	1,230
Change in fair value of derivative liability		-	$	(110)		-	$	(60)
Change in fair value of contingent cash consideration		26	$	(8)		37	$	(8)
Totals	$	1,277	$	1,162	$	1,277	$	1,162

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Segments

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 13.    Segments

The Company currently operates in two business segments, the JetPay Payment Processing Segment, consisting of JetPay Payment Services and JetPay Strategic Partners, an end-to-end processor of credit and debit card and ACH payment transactions for both businesses with a focus on those processing internet transactions and recurring billings, as well as traditional retailers and service providers, and the JetPay Payroll Segment, consisting of JetPay Payroll Services, a full-service payroll and related payroll tax payment processor.

Segment operating results are presented below (in thousands). The results reflect revenues and expenses directly related to each segment. The activity within the JetPay Card Services division was not material through June 30, 2015 and 2014, and accordingly was included in Corporate in the tables below. The Company does not evaluate performance or allocate resources based on segment asset data, and therefore, such information is not presented.

	For the Three Months Ended June 30, 2015
	JetPay
	Payment		JetPay		General/
	Processing		Payroll		Corporate		Total
Processing revenues	$	7,445	$	3,108	$	13	$	10,566
Cost of processing revenues		4,757		1,733		30		6,520
Selling, general and administrative expenses		1,807		1,144		243		3,194
Change in fair value of contingent consideration liability		-		-		26		26
Amortization of intangibles and depreciation		534		346		2		882
Other expenses		100		76		120		296
Income (loss) before income taxes	$	247	$	(191)	$	(408)	$	(352)
Property and equipment additions	$	99	$	79	$	-	$	178

	For the Three Months Ended June 30, 2014
	JetPay
	Payment		JetPay		General/
	Processing		Payroll		Corporate		Total
Processing revenues	$	4,687	$	3,038	$	1	$	7,726
Cost of processing revenues		2,941		1,781		11		4,733
Selling, general and administrative expenses		1,832		1,029		547		3,408
Change in fair value of contingent consideration liability		-		-		(8)		(8)
Amortization of intangibles and depreciation		321		341		1		663
Other (income) expenses		(2)		75		1,176		1,249
Loss before income taxes	$	(405)	$	(188)	$	(1,726)	$	(2,319)
Property and equipment additions	$	16	$	29	$	13	$	58

	For the Six Months Ended June 30, 2015
	JetPay
	Payment		JetPay		General/
	Processing		Payroll		Corporate		Total
Processing revenues	$	14,533	$	6,855	$	22	$	21,410
Cost of processing revenues		9,286		3,630		60		12,976
Selling, general and administrative expenses		3,559		2,291		726		6,576
Change in fair value of contingent consideration liability		-		-		37		37
Amortization of intangibles and depreciation		1,065		691		3		1,759
Other expenses		199		139		238		576
Income (loss) before income taxes	$	424	$	104	$	(1,042)	$	(514)
Total property and equipment, net	$	691	$	560	$	36	$	1,287
Property and equipment additions	$	174	$	118	$	1	$	293
Intangible assets and goodwill, net	$	48,823	$	18,294	$	-	$	67,117
Total segment assets	$	72,264	$	55,536	$	951	$	128,751

	For the Six Months Ended June 30, 2014
	JetPay
	Payment		JetPay		General/
	Processing		Payroll		Corporate		Total
Processing revenues	$	9,290	$	6,604	$	1	$	15,895
Cost of processing revenues		5,886		3,521		14		9,421
Selling, general and administrative expenses		2,828		2,030		1,325		6,183
Change in fair value of contingent consideration liability		-		-		(8)		(8)
Amortization of intangibles and depreciation		641		684		1		1,326
Other expenses		1		149		2,476		2,626
(Loss) income before income taxes	$	(66)	$	220	$	(3,807)	$	(3,653)
Total property and equipment, net	$	458	$	614	$	14	$	1,086
Property and equipment additions	$	56	$	73	$	13	$	142
Intangible assets and goodwill, net	$	33,442	$	19,415	$	-	$	52,857
Total segment assets	$	54,828	$	70,662	$	2,155	$	127,645

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Stockholders' Equity

6 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 9.    Stockholders’ Equity

Common Stock

On January 30, 2014, the Company issued 1,396 shares of common stock with a fair market value of approximately $6,000, as additional compensation to a consultant for services rendered.

On March 28, 2014, the Company entered into a Securities Purchase Agreement (the “Common Stock SPA”) with each of Bipin C. Shah, its Chairman and Chief Executive Officer, and C. Nicholas Antich, the President of JetPay Payroll Services. Pursuant to the Common Stock SPA, on April 4, 2014, the Company received gross aggregate proceeds of $1.0 million, prior to issuance costs of $25,000, and issued an aggregate of 333,333 shares of common stock to Messrs. Shah and Antich. The proceeds were used to satisfy a portion of the EBC Award.

On November 7, 2014, the Company issued 2,000,000 shares of the Company’s common stock in connection with the acquisition of ACI. See Note 3. Business Acquisition.

On June 18, 2015, the Company issued 29,167 shares of the Company’s common stock with a fair market value of approximately $79,000, as compensation to an employee for services rendered.

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.001 per share with such designations, rights and preferences as may be determined from time to time by the Company’s board of directors.

As of June 30, 2015 and December 31, 2014, there were no shares of preferred stock issued or outstanding other than the Series A Preferred issued to Flexpoint and Series A-1 Preferred issued to Wellington described above.

Stock-Based Compensation

ASC Topic 718, Compensation-Stock Compensation, requires compensation expense for the grant-date fair value of share-based payments to be recognized over the requisite service period.

At a meeting of the Company’s stockholders held on July 31, 2013 (the “Meeting”), the Company’s stockholders approved the adoption of the Company’s 2013 Stock Incentive Plan (the “Plan”). The Company granted options to purchase 200,000 and 65,000 shares of common stock under the Plan during the six months ended June 30, 2015 and 2014, respectively, all at an exercise price of $3.00 per share. The grant date fair value of the options granted during the six months ended June 30, 2015 and 2014 were determined to be approximately $232,000 and $145,000, respectively, using the Black-Scholes option pricing model. Aggregated stock-based compensation expense for the three months ended June 30, 2015 and 2014 was $64,000 and $88,000, respectively, and $142,000 and $168,000 for the six months ended June 30, 2015 and 2014, respectively. Unrecognized compensation expense as of June 30, 2015 relating to non-vested common stock options was approximately $624,000 and is expected to be recognized through 2019. During the six months ended June 30, 2015, no options have been exercised and 193,334 options have been forfeited.

The fair values of the Company’s options were estimated at the dates of grant using a Black-Scholes option pricing model with the following weighted average assumptions:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Expected term (years)		6.25		6.25		6.25		6.25
Risk-free interest rate		1.56%		2.03% to 2.10%		1.56%		2.03% to 2.10%
Volatility		44.8%		44.93%		44.8%		44.93%
Dividend yield		0%		0%		0%		0%

Expected term: The Company’s expected term is based on the period the options are expected to remain outstanding. The Company estimated this amount utilizing the “Simplified Method” in that the Company does not have sufficient historical experience to provide a reasonable basis to estimate an expected term.

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.

Volatility: The Company calculates the volatility of the stock price based on historical value and corresponding volatility of the Company’s peer group stock price for a period consistent with the stock option expected term.

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

A summary of stock option activity for the six months ended June 30, 2015 and the year ended December 31, 2014 are presented below:

			Weighted Average
	Number of Options		Exercise Price
Outstanding at December 31, 2013		1,000,000	$	3.03
Granted		445,000	$	3.00
Forfeited		(43,750)	$	3.04
Exercised		-	$	-
Outstanding at December 31, 2014		1,401,250	$	3.02
Granted		200,000	$	3.00
Forfeited		(193,334)	$	3.00
Exercised		-	$	-
Outstanding at June 30, 2015		1,407,916	$	3.02
Exercisable at June 30, 2015		537,908	$	3.05

The weighted average remaining life of options outstanding at June 30, 2015 was 8.73 years. The aggregate intrinsic value of the exercisable options at June 30, 2015 was $0.

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Long-Term Debt, Notes Payable and Capital Lease Obligations

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 7.   Long-Term Debt, Notes Payable and Capital Lease Obligations

Long-term debt, notes payable and capital lease obligations consist of the following:

	June 30,		December 31,
	2015		2014
	(in thousands)
Term loan payable to Metro Bank (or “Metro”), interest rate of 4.0% payable in monthly principal payments of $107,143 plus interest, maturing December 28, 2019, collateralized by the assets  and equity interests of AD Computer Corporation and Payroll Tax Filing Services, Inc.	$	5,782	$	6,425
Term loan payable to Metro, interest rate of 5.25% payable in monthly principal payments of $104,167 plus interest beginning in December 2015, maturing November 7, 2021, collateralized by the assets  and equity interests of ACI Merchant Systems, LLC.		7,500		7,500
Revolving note payable to Metro, interest rate of Wall Street Journal Prime rate plus 1.00% (4.25% as June 30, 2015), interest payable monthly, collateralized by all assets of ADC, PTFS, and ACI, a pledge by the Company of its ownership interest in ADC and ACI, as well as a $1.0 million negative pledge on the stock of JetPay, LLC, maturing on May 6, 2017.		1,000		-
Unsecured promissory note payable to WLES, interest rate of 5.0% payable quarterly, note principal due on December 31, 2017. Note amount excludes unamortized fair value discount of $470,408 and $552,424 at June 30, 2015 and December 31, 2014, respectively. See Note 12. Related Party Transactions.		1,861		1,779
Unsecured promissory note payable to stockholder, interest rate of 4% payable at maturity, note principal due September 30, 2016. See Note 12. Related Party Transactions.		492		492
Unsecured promissory note payable to stockholder, interest rate of 4% payable quarterly, note principal due in two installments of $175,000 on May 6, 2016 and 2017. See Note 12. Related Party Transactions.		350		-
Capital lease obligations related to computer equipment at JetPay, LLC, interest rate of 5.55%, due in monthly lease payments of $4,114, maturing in May 2017, collateralized by equipment.		125		154
Various other debt instruments related to vehicles at ADC.		10		16
		17,120		16,366
Less current portion		(2,368)		(1,571)
	$	14,752	$	14,795

The Metro term loan agreements and the revolving note agreement require the Company to provide Metro with annual financial statements within 120 days of the Company’s year-end and quarterly financial statements within 60 days after the end of each quarter. The Metro agreements also contain certain annual financial covenants with which the Company was in compliance as of June 30, 2015.

Maturities of long-term debt and capital lease obligations, excluding fair value and conversion option debt discounts, are as follows for the twelve months ending June 30: 2016 – $2.4 million; 2017 – $4.2 million; 2018 – $4.9 million; 2019 – $2.5 million; 2020 – $1.9 million; and $1.7 million thereafter.

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Redeemable Convertible Preferred Stock

6 Months Ended

Jun. 30, 2015

Convertible Preferred Stock [Abstract]

Convertible Preferred Stock [Text Block]

Note 8.    Redeemable Convertible Preferred Stock

On October 11, 2013, the Company issued 33,333 shares of Series A Preferred to Flexpoint for an aggregate of $10.0 million less certain agreed-upon reimbursable expenses of Flexpoint (the “Initial Closing”) pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”) entered into on August 22, 2013.  Additionally, the Company issued 4,667 shares of Series A Preferred to Flexpoint on April 14, 2014 for an aggregate of $1.4 million; 20,000 shares on November 7, 2014 for $6.0 million; and 33,333 shares on December 28, 2014 for $10.0 million. The proceeds of the initial $10.0 million investment were used to retire the Ten Lords, Ltd. note payable of $5.9 million maturing in December 2013 with the remainder used for general corporate purposes. The proceeds of the $1.4 million investment were used to satisfy a portion of the EarlyBirdCapital, Inc. Award (the “EBC Award”). See Note 11. Commitments and Contingencies. As a result of the EBC Award, the Company was not able to satisfy one of the conditions to closing of the $1.4 million Series A Preferred purchase. Although Flexpoint agreed to waive this condition at the closing, for any subsequent closing of the Series A Preferred, the Company will need to seek a waiver of the failure of this condition from Flexpoint. The November 7, 2014 $6.0 million proceeds were used as partial consideration for the acquisition of ACI and the proceeds of the December 28, 2014 $10.0 million investment were used to redeem the Secured Convertible Promissory Notes that matured on December 31, 2014.

The Series A Preferred is convertible into shares of common stock.  Any holder of Series A Preferred may at any time convert such holder’s shares of Series A Preferred into that number of shares of common stock equal to the number of shares of Series A Preferred being converted multiplied by $300 and divided by the then-applicable conversion price, initially $3.00.  The conversion price of the Series A Preferred is subject to downward adjustment upon the occurrence of certain events. See Note 14. Subsequent Events.

Under the Securities Purchase Agreement, the Company agreed to sell to Flexpoint, and Flexpoint agreed to purchase, upon satisfaction of certain conditions, up to 133,333 shares of Series A Preferred for an aggregate purchase price of up to $40.0 million.  The Company’s obligation to issue and sell, and Flexpoint’s obligation to purchase, the Series A Preferred is divided into three separate tranches: Tranche A, Tranche B and Tranche C.  Tranche A consisted of $10.0 million of shares of Series A Preferred that was issued on October 11, 2013. Tranche B consisted of up to $10.0 million of shares of Series A Preferred, which Flexpoint was obligated to purchase, subject to satisfaction or waiver of certain conditions, from the Company if the Company was able to consummate a redemption any time after December 1, 2014 and prior to December 29, 2014 of the Notes.  The Series A Preferred under Tranche B was issued on December 28, 2014. Tranche C consists of up to $20.0 million of shares of Series A Preferred ($12.6 million remaining available at June 30, 2015, which Flexpoint has the option to purchase at any time until the third anniversary of the Initial Closing. The shares of Series A Preferred issuable with respect to Tranche A, Tranche B and Tranche C all have a purchase price of $300 per share.

The Series A Preferred has an initial liquidation preference of $600 per share (subject to adjustment for any stock split, stock dividend or other similar proportionate reduction or increase of the authorized number of shares of common stock) and will rank senior to the common stock with respect to distributions of assets upon the Company’s liquidation, dissolution or winding up. Holders of Series A Preferred will have the right to request redemption of any shares of Series A Preferred issued at least five years prior to the date of such request by delivering written notice to the Company at the then applicable liquidation value per share, unless holders of a majority of the outstanding Series A Preferred elect to waive such redemption request on behalf of all holders of Series A Preferred.

On May 5, 2014, the Company issued 2,565 shares of Series A-1 Preferred to Wellington for an aggregate of $769,500, less certain agreed-upon reimbursable expenses of Wellington, pursuant to a Securities Purchase Agreement dated May 1, 2014. Additionally, the Company issued 1,350 shares of Series A-1 Preferred to Wellington on November 20, 2014 for $405,000, and 2,250 shares on December 31, 2014 for $675,000. Under the Securities Purchase Agreement, the Company agreed to sell to Wellington, upon the satisfaction of certain conditions, up to 9,000 shares of Series A-1 Preferred at a purchase price of $300 per share for an aggregate purchase price of up to $2.7 million. The proceeds of the total investment to date of $1.85 million by Wellington will be used for general corporate purposes. The Series A-1 Preferred will be convertible into shares of the Company’s common stock or, in certain circumstances, Series A-2 Convertible Preferred Stock, par value $0.001 per share (“Series A-2 Preferred”). The Series A-1 Preferred can be converted into that number of shares of common stock equal to the number of shares of Series A-1 Preferred being converted multiplied by $300 and divided by the then-applicable conversion price, which initially will be $3.00. The conversion price of the series A-1 Preferred is subject to downward adjustment upon the occurrence of certain events as defined in the Securities Purchase Agreement. Additionally, Wellington will have the option, but not the obligation, to purchase up to the number of shares of Series A-1 Preferred equal to 6.75% of the cumulative number of shares of Series A Preferred purchased by Flexpoint.

The Series A-1 Preferred will have an initial liquidation preference of $600 per share and will rank senior to the Company’s common stock and pari passu with the Series A Preferred owned by Flexpoint with respect to distributions of assets upon the Company’s liquidation, dissolution or winding up. Notwithstanding the above, no holder of the Series A-1 Preferred can convert if, as a result of such conversion, such holder would beneficially own 9.9% or more of the Company’s common stock. If at any time, no shares of Series A Preferred remain outstanding and shares of Series A-1 Preferred remain outstanding because of the limitation in the preceding sentence, all shares of Series A-1 Preferred shall automatically convert into shares of Series A-2 Preferred at a 1:1 ratio. Upon the occurrence of an Event of Noncompliance, as defined in the Securities Purchase Agreement, the holders of a majority of the Series A-1 Preferred may demand immediate redemption of all or a portion of the Series A-1 Preferred at the then-applicable liquidation value.

The Company considered the guidance of ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives, in determining the accounting treatment for its convertible preferred stock instruments. The Company considered the economic characteristics and the risks of the host contract based on the stated and implied substantive terms and features of the instruments; including, but not limited to, its redemption features, voting rights, and conversions rights; and determined that the terms of the preferred stock were more akin to an equity instrument than a debt instrument. The shares of Series A Preferred and Series A-1 Preferred are subject to redemption, at the option of the holder, on or after the fifth anniversary of their original purchase. Accordingly, the convertible preferred stock has been classified as temporary equity in the Company’s Consolidated Balance Sheets.

Upon issuance of the 33,333 shares of the Series A Preferred, the Company recorded as a reduction to the Series A Preferred and as Additional Paid-In Capital a beneficial conversion feature of $1.5 million. The beneficial conversion feature represents the difference between the effective conversion price and the fair value of the Series A Preferred as of the commitment date. There was no beneficial conversion feature upon the 2014 issuances of Series A Preferred to Flexpoint and Series A-1 Preferred to Wellington as a result of the price of the Company’s common stock at the dates of the closings being below the conversion price of the preferred stock. The Company accounts for the beneficial conversion feature, the liquidation preference, and the issuance costs related to the Series A Preferred and Series A-1 Preferred using the effective interest method by accreting such amounts to its Series A Preferred and Series A-1 Preferred from the date of issuance to the earliest date of redemption as a reduction to its total permanent equity within the Company’s Consolidated Statement of Changes in Stockholders’ Equity as a charge to Additional Paid-In Capital. Any accretion recorded during the periods presented are also shown as a reduction to the income available to common stockholders in the Company’s Consolidated Statements of Operations when presenting basic and dilutive per share information. Accretion was $1.25 million and $538,000 for the three months ended June 30, 2015 and 2014, respectively, and $2.47 million and $1.05 million for the six months ended June 30, 2015 and 2014, respectively.

Upon the occurrence of an Event of Noncompliance, the holders of a majority of the Series A Preferred may demand immediate redemption of all or a portion of the Series A Preferred at the then-applicable liquidation value.  Such holders may also exercise a right to have the holders of the Series A Preferred elect a majority of the Board by increasing the size of the Board and filling such vacancies.  Such right to control a minimum majority of the Board would exist for so long as the Event of Noncompliance was continuing. An “Event of Noncompliance” shall have occurred if: i) the Company fails to make any required redemption payment with respect to the Series A Preferred; ii) the Company breaches the Securities Purchase Agreement after the Initial Closing, and such breach has not been cured with thirty days after receipt of notice thereof; iii) the Company or any subsidiary makes an assignment for the benefit of creditors, admits its insolvency or is the subject of an order, judgment or decree adjudicating such entity as insolvent, among other similar actions; iv) a final judgment in excess of $5.0 million is rendered against the Company or any subsidiary that is not discharged within 60 days thereafter; or v) an event of default has occurred under the Loan and Security Agreement, dated as of December 28, 2012, as amended, by and among ADC, PTFS and Metro Bank, or the Loan and Security Agreement dated as of November 7, 2014 by and among ACI and Metro Bank, and such event of default has not been cured within thirty days after receipt of notice thereof.

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Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 10.    Income Taxes

The Company recorded income tax expense of $43,000 and $52,000 for the three months ended June 30, 2015 and 2014, respectively, and $101,000 and $104,000 for the six months ended June 30, 2015 and 2014, respectively. Income tax expense reflects the recording of state income taxes. The effective tax rates were approximately (12.22) % and (2.24) % for the three months ended June 30, 2015 and 2014, respectively, and (19.65) % and (2.85)% for the six months ended June 30, 2015 and 2014, respectively. The effective rate differs from the federal statutory rate for each period, primarily due to state and local income taxes and changes to the valuation allowance.

JetPay, LLC is subject to and pays the Texas Margin Tax which is considered to be an income tax in accordance with the provisions of the Income Taxes Topic in FASB, ASC and the associated interpretations. There are no significant temporary differences associated with the Texas Margin Tax.

As of December 31, 2014, the Company had cumulative U.S. federal and state net operating loss carryovers (“NOLs”) of approximately $12.8 million. These NOLs, if not utilized, expire at various times through 2034. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change in control. Management will be performing a preliminary evaluation as to whether a change in control has taken place.

In assessing the realization of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, Management believes that significant uncertainty exists with respect to future realization of the deferred tax assets, and has, therefore, increased its valuation allowance against deferred tax assets by $205,000 for the six months ended June 30, 2015 and $1.5 million for the six months ended June 30, 2014, with a total valuation allowance of approximately $7.8 million at June 30, 2015, representing the amount of its deferred income tax assets in excess of the Company’s deferred income tax liabilities. The deferred tax liability related to goodwill that is amortizable for tax purposes (“Intangibles”) will not reverse until such time, if any, that the goodwill, which is considered to be an asset with an indefinite life for financial reporting purposes, becomes impaired or sold. Due to the uncertain timing of this reversal, the temporary difference cannot be considered as future taxable income for purposes of determining a valuation allowance. Therefore, the deferred tax liability related to tax deductible goodwill Intangibles cannot be considered when determining the ultimate realization of deferred tax assets.

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Summary of Critical Accounting Policies (Details 1) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Change in fair value of derivative liability	$ 0	$ (110)	$ 0	$ (60)
Change in fair value of contingent cash consideration	26	(8)	37	(8)
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning balance	1,251	1,280	1,240	1,230
Change in fair value of derivative liability	0	(110)	0	(60)
Change in fair value of contingent cash consideration	26	(8)	37	(8)
Totals	$ 1,277	$ 1,162	$ 1,277	$ 1,162

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Summary of Critical Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The accompanying financial statements have been prepared in accordance with U.S. GAAP and pursuant to the accounting and disclosure rules and regulations of the SEC. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the Company’s financial statements. Such estimates include, but are not limited to, the value of purchase consideration of acquisitions; valuation of accounts receivable, reserves for chargebacks, goodwill, intangible assets, and other long-lived assets; legal contingencies; and assumptions used in the calculation of stock-based compensation and in the calculation of income taxes. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition, Deferred Revenue [Policy Text Block]

Revenue Recognition and Deferred Revenue

The Company recognizes revenue in general when the following criteria have been met: persuasive evidence of an arrangement exists, a customer contract or purchase order exists and the fees are fixed and determinable, no significant obligations remain and collection of the related receivable is reasonably assured. Allowances for chargebacks, discounts and other allowances are estimated and recorded concurrent with the recognition of revenue and are primarily based on historic rates.

Revenues from the Company’s credit and debit card processing operations are recognized in the period services are rendered as the Company processes credit and debit card transactions for its merchant customers or for merchant customers of its Third Party clients. Third Party clients include Independent Sales Organizations (“ISOs”), Value Added Resellers (“VARs”), Independent Software Vendors (“ISVs”), and Financial Institutions (“FIs”). The majority of the Company’s revenue within its credit and debit card processing business is comprised of transaction-based fees, which typically constitute a percentage of dollar volume processed, or a fee per transaction processed. In the case where the Company is only the processor of transactions, it charges transaction fees only and records these fees as revenues. In the case of merchant contracts or contracts with Third Parties for whom it processes credit and debit card transactions for the Third Parties’ merchant customers, revenue is primarily comprised of fees charged to the merchant, as well as a percentage of the processed sale transaction. The Company’s contracts in most instances involve three parties: the Company, the merchant, and the sponsoring bank. Under certain of these sales arrangements, the Company’s sponsoring bank collects the gross revenue from the merchants, pays the interchange fees and assessments to the credit card associations, collects their fees and pays the Company a net residual payment representing the Company’s fee for the services provided. Accordingly, under these arrangements, the Company records the revenue net of interchange, credit card association assessments and fees and the sponsoring bank’s fees. Under the majority of the Company’s sales arrangements, the Company is billed directly for certain fees by the credit card associations and the processing bank. In this instance, revenues and cost of revenues include the credit card association fees and assessments and the sponsoring bank’s fees which are billed to the Company and for which it assumes credit risk. In all instances, the Company recognizes processing revenues net of interchange fees, which are assessed to its merchant and ISO merchant customers on all processed transactions. Interchange rates and fees are not controlled by the Company. The Company effectively functions as a clearing house collecting and remitting interchange fee settlement on behalf of issuing banks, debit networks, credit card associations and their processing customers. Additionally, the Company’s direct merchant customers have the liability for any charges properly reversed by the cardholder. In the event, however, that the Company is not able to collect such amount from the merchants due to merchant fraud, insolvency, bankruptcy or any other reason, it may be liable for any such reversed charges. The Company requires cash deposits, guarantees, letters of credit and other types of collateral from certain merchants to minimize any such contingent liability, and it also utilizes a number of systems and procedures to manage merchant risk.

Revenues from the Company’s payroll processing operations are recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured. Certain processing services are provided under annual service arrangements with revenue recognized over the service period based on when the efforts and costs are expended. The Company’s service revenue is largely attributable to payroll-related processing services where the fees are based on a fixed amount per processing period or a fixed amount per processing period plus a fee per employee or transaction processed. The revenue earned from delivery service for the distribution of certain client payroll checks and reports is included in processing revenue, and the costs for delivery are included in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Interest on funds held for clients is earned primarily on funds that are collected from clients before due dates for payroll tax administration services and for employee payment services, and invested until remittance to the applicable tax or regulatory agencies or client employee. These collections from clients are typically remitted from 1 to 30 days after receipt, with some items extending to 90 days. The interest earned on these funds is included in total revenue on the Consolidated Statements of Operations because the collecting, holding, and remitting of these funds are critical components of providing these services.

Contingent Liability Reserve Estimate, Policy [Policy Text Block]

Reserve for Chargeback Losses

Disputes between a cardholder and a merchant periodically arise as a result of, among other things, cardholder dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the purchase price is refunded to the customer through the merchant’s bank and charged to the merchant. If the merchant has inadequate funds, JetPay, LLC must bear the credit risk for the full amount of the transaction. JetPay, LLC evaluates the risk for such transactions and estimates the potential loss for chargebacks based primarily on historical experience and records a loss reserve accordingly. JetPay, LLC believes its reserve for chargeback losses is adequate to cover both the known probable losses and the incurred but not yet reported losses at the balance sheet dates. Chargeback reserves totaling $320,000 and $306,000 were recorded as of June 30, 2015 and December 31, 2014, respectively.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, settlement processing assets and liabilities, accounts receivable, prepaid expenses and other current assets, funds held for clients, other assets, accounts payable and accrued expenses, deferred revenue, other current liabilities and client fund obligations, approximated fair value as of the balance sheet dates presented, because of the relatively short maturity dates on these instruments. The carrying amounts of the financing arrangements approximate fair value as of the balance sheet dates presented, because interest rates on these instruments approximate market interest rates after consideration of stated interest rates, anti-dilution protection and associated warrants.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash and cash equivalents, accounts receivable, settlement processing assets and funds held for clients. The Company’s cash and cash equivalents are deposited with major financial institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

Receivables, Policy [Policy Text Block]

Accounts Receivable

The Company’s accounts receivable are due from its merchant credit card and its payroll customers. Credit is extended based on the evaluation of customers’ financial condition and, generally, collateral is not required. Payment terms vary and amounts due from customers are stated in the financial statements net of an allowance for doubtful accounts. Accounts which are outstanding longer than the payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivables when they are deemed uncollectible.

Unsettled Merchant Accounts [Policy Text Block]

Settlement Processing Assets and Obligations

Funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. Depending on the type of transaction, either the credit card interchange system or the debit network is used to transfer the information and funds between the sponsoring bank and card issuing bank to complete the link between merchants and card issuers. In certain of our processing arrangements, merchant funding primarily occurs after the sponsoring bank receives the funds from the card issuer through the card networks, creating a net settlement obligation on the Company’s Balance Sheet. In a limited number of other arrangements, the sponsoring bank funds the merchants before it receives the net settlement funds from the card networks, creating a net settlement asset on the Company’s Balance Sheet. Additionally, certain of the Company’s sponsoring banks collect the gross revenue from the merchants, pay the interchange fees and assessments to the credit card associations, collect their fees for processing and pay the Company a net residual payment representing the Company’s fees for the services. In these instances, the Company does not reflect the related settlement processing assets and obligations in its Consolidated Balance Sheet.

Timing differences in processing credit and debit card and ACH transactions, as described above, interchange expense collection, merchant reserves, sponsoring bank reserves, and exception items result in settlement processing assets and obligations. Settlement processing assets consist primarily of our receivable from merchants for the portion of the discount fee related to reimbursement of the interchange expense, our receivable from the processing bank for transactions we have funded merchants in advance of receipt of card association funding, merchant reserves held, sponsoring bank reserves and exception items, such as customer chargeback amounts receivable from merchants. Settlement processing obligations consist primarily of merchant reserves, our liability to the processing bank for transactions for which we have received funding from the members but have not funded merchants and exception items.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment acquired in the Company’s recent business acquisitions have been recorded at estimated fair value. The Company records all other property and equipment acquired in the normal course of business at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, which are generally as follows: leasehold improvements – shorter of economic life or initial term of the related lease; machinery and equipment – 5 to 15 years; and furniture and fixtures – 5 to 10 years. Significant additions or improvements extending assets’ useful lives are capitalized; normal maintenance and repair costs are expensed as incurred.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company’s business combinations. The Company performs a goodwill impairment test on at least an annual basis. Application of the goodwill impairment test requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company conducts its annual goodwill impairment test as of December 31 of each year or more frequently if indicators of impairment exist. The Company periodically analyzes whether any such indicators of impairment exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include a sustained significant decline in our stock price and market capitalization, a significant adverse change in legal factors or in the business climate, unanticipated competition and/or slower expected growth rates, adverse actions or assessments by a regulator, among others. The Company compares the fair value of its reporting unit to its respective carrying value, including related goodwill. Future changes in the industry could impact the results of future annual impairment tests. The Company’s annual goodwill impairment testing indicated there was no impairment as of December 31, 2014. There can be no assurance that future tests of goodwill impairment will not result in impairment charges.

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

Identifiable Intangible Assets

Identifiable intangible assets consist primarily of customer relationships, software costs, and tradenames. Certain tradenames are considered to have indefinite lives, and as such, are not subject to amortization. These assets are tested for impairment using undiscounted cash flow methodology annually and whenever there is an impairment indicator. Estimating future cash flows requires significant judgment and projections may vary from cash flows eventually realized. Several impairment indicators are beyond the Company’s control, and determining whether or not they will occur cannot be predicted with any certainty. Customer relationships, tradenames, and software costs are amortized on a straight-line basis over their respective assigned estimated useful lives.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long–Lived Assets

The Company periodically reviews the carrying value of its long-lived assets held and used at least annually or when events and circumstances warrant such a review. If significant events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. Cash flow projections are sometimes based on a group of assets, rather than a single asset. If cash flows cannot be separately and independently identified for a single asset, the Company determines whether impairment has occurred for the group of assets for which it can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, it measures any impairment by comparing the fair value of the asset group to its carrying value. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded. The Company’s annual testing indicated there was no impairment as of December 31, 2014.

Convertible Preferred Stock [Policy Text Block]

Convertible Preferred Stock

The Company accounts for the redemption premium, beneficial conversion feature and issuance costs on its convertible preferred stock using the effective interest method, accreting such amounts to its convertible preferred stock from the date of issuance to the earliest date of redemption.

Share-Based Compensation [Policy Text Block]

Share-Based Compensation

The Company expenses employee share-based payments under ASC Topic 718, Compensation-Stock Compensation, which requires compensation cost for the grant-date fair value of share-based payments to be recognized over the requisite service period. The Company estimates the grant date fair value of the share-based awards issued in the form of options using the Black-Scholes option pricing model.

Earnings Per Share, Policy [Policy Text Block]

Loss Per Share

Basic loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. The dilutive effect of the conversion option in the Flexpoint Series A Preferred and the Wellington Series A-1 Preferred of 9,133,300 and 616,500 shares of common stock, respectively, at June 30, 2015, and the effect of 537,908 exercisable stock options granted under the Company’s Stock Incentive Plan at June 30, 2015 have been excluded from the loss per share calculation for the three and six months ended June 30, 2015 in that the assumed conversion of these options would be anti-dilutive. As to the three and six months ended June 30, 2014, the dilutive effect of the conversion option in the $10 million Secured Convertible Promissory Notes Payable (the “Notes”) of 3,333,333 shares, the effect of the conversion option in the Flexpoint Series A Preferred and the Wellington Series A-1 Preferred of 3,800,000 and 256,500 shares of common stock, respectively, and the effect of 231,249 exercisable stock options granted under the Company’s Stock Incentive Plan at June 30, 2014 have been excluded from the loss per share calculation in that the assumed conversion of these options would be anti-dilutive.

Derivatives, Policy [Policy Text Block]

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company does review the terms of the convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound derivative instrument.

Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges recorded within other expenses (income), using the effective interest method.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

The Company accounts for fair value measurements in accordance with ASC Topic No. 820, Fair Value Measurements and Disclosures (“ASC Topic 820”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC Topic 820 are described below:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC Topic 820, assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement.

	Fair Value at June 30, 2015
	Total		Level 1		Level 2		Level 3
			(in thousands)
Contingent consideration	$	1,277	$	-	$	-	$	1,277

	Fair Value at December 31, 2014
	Total		Level 1		Level 2		Level 3
			(in thousands)
Contingent consideration	$	1,240	$	-	$	-	$	1,240

The following table sets forth a summary of the change in fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis (in thousands):

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Beginning balance	$	1,251	$	1,280	$	1,240	$	1,230
Change in fair value of derivative liability		-	$	(110)		-	$	(60)
Change in fair value of contingent cash consideration		26	$	(8)		37	$	(8)
Totals	$	1,277	$	1,162	$	1,277	$	1,162

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the financial instrument. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department with support from the Company’s outside consultants which are approved by the Chief Financial Officer. Level 3 financial liabilities consist of a derivative liability and contingent consideration related to the JetPay, LLC acquisition for which there are no current markets such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy will be analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

The Level 3 financial liabilities are the result of recording the Completed Transactions, the ACI acquisition and related debt instruments as more fully described below.

In connection with the debt proceeds received under the Notes, the Company recorded a derivative liability of $2.1 million on its Consolidated Balance Sheet at December 28, 2012 related to the conversion feature embedded in the Notes. The fair value of the derivative liability was classified within Level 3 of the fair value hierarchy because it was valued using pricing models that incorporate management assumptions that cannot be corroborated with observable market data. The fair value at June 30, 2015 of $0 was the result of the notes being paid in full on December 31, 2014. The change in fair value of this derivative liability of $(110,000) and $(60,000) for the three and six months ended June 30, 2014, respectively, was recorded within other expenses (income) in the Company’s Consolidated Statements of Operations.

In addition to the consideration paid upon closing of the JetPay, LLC acquisition, WLES, L.P. (“WLES”), through December 28, 2017, is entitled to receive 833,333 shares of common stock if the trading price of the common stock is at least $8.00 per share for any 20 trading days out of a 30 trading day period and $5.0 million in cash if the trading price of the common stock is at least $9.50 per share for any 20 trading days out of a 30 trading day period. This contingent consideration was valued at $1.54 million at the date of acquisition based on utilization of option pricing models and was recorded as a non-current liability for $700,000 and as additional paid-in capital for $840,000 at December 31, 2012. The stock-based component value of $840,000 recorded at December 28, 2012 (the JetPay, LLC acquisition date), remains unchanged at June 30, 2015 as a result of this component being recorded as equity. The fair value at June 30, 2015 of the cash-based contingent consideration, valued at $1,000, was determined using a binomial option pricing model. The following assumptions were utilized in the June 2015 calculations: risk free interest rate: 0.82%; dividend yield: 0%; term of contingency of 2.51 years; and volatility: 22.6%.

The fair value of the common stock was derived from the per share price of recent sales of the common stock at the valuation date. Management determined that the results of its valuation were reasonable. The expected life represents the remaining contractual term of the derivative. The volatility rate was developed based on analysis of the historical volatility rates of similarly situated companies (using a number of observations that was at least equal to or exceeded the number of observations in the life of the derivative financial instrument at issue). The risk free interest rates were obtained from publicly available U.S. Treasury yield curve rates. The dividend yield is zero because the Company has not paid dividends and does not expect to pay dividends in the foreseeable future.

In addition to the consideration paid upon closing of the ACI acquisition, the previous unitholders are entitled to receive up to an additional $500,000 if certain net revenue goals are achieved through October 31, 2016. This contingent consideration was valued at $400,000 at the date of acquisition and $436,000 at June 30, 2015 based on utilization of a Monte Carlo simulation to estimate the variance and relative risk of achieving future net revenue growth and discounting the associated cash consideration payments at their present values using a credit-risk adjusted discount rate of 16.0%. The key assumptions in applying the Monte Carlo simulation included expected net revenue growth rates, the expected standard deviation and serial correlation of expected net revenue growth rates as well as a normal distribution assumption.

The Company uses either a binomial option pricing model or the Black-Scholes option valuation model to value Level 3 financial liabilities at inception and on subsequent valuation dates. These models incorporate transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement.

As of June 30, 2015, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

In accordance with the provisions of ASC Topic 815, Derivatives and Hedging Activities, the Company presented its derivative liability at fair value on its Consolidated Balance Sheets, with the corresponding change in fair value recorded in the Company’s Consolidated Statement of Operations for the applicable reporting periods.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes under ASC Topic 740, Income Taxes (“ASC Topic 740”). ASC Topic 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryovers. Deferred income tax expense (benefit) represents the change during the period in the deferred income tax assets and deferred income tax liabilities. In establishing the provision for income taxes and determining deferred income tax assets and liabilities, the Company makes judgments and interpretations based on enacted laws, published tax guidance and estimates of future earnings. ASC Topic 740 additionally requires a valuation allowance to be established when, based on available evidence, it is more likely than not that some portion or the entire deferred income tax asset will not be realized.

ASC Topic 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is required to file income tax returns in the United States (federal) and in various state and local jurisdictions. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The Company believes that its income tax positions and deductions would be sustained upon examination and does not anticipate any adjustments that would result in material changes to its financial position.

The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as interest expense and as a component of selling, general and administrative expense, respectively. There were no amounts accrued for penalties or interest as of or during the three and six months ended June 30, 2015 and 2014. Management does not expect any significant changes in its unrecognized tax benefits in the next year.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

Management evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, management did not identify any recognized or non-recognized subsequent events which would have required an adjustment or disclosure in the financial statements, other than those disclosed in Note 14. Subsequent Events. See Note 14. Subsequent Events.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

On February 18, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-02 Consolidation (Topic 810): Amendments to the Consolidation Analysis that amends the current consolidation guidance. The amendments affect both the variable interest entity and voting interest entity consolidation models. The new guidance is effective for the Company beginning January 1, 2016, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

On April 7, 2015, the FASB issued ASU No. 2015-03 Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of related debt liability, consistent with debt discounts. Under current accounting standards, such costs are recorded as an asset. The new guidance is effective for the Company beginning January 1, 2016, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

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Long-Term Debt, Notes Payable and Capital Lease Obligations (Tables)

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

Long-term debt, notes payable and capital lease obligations consist of the following:

	June 30,		December 31,
	2015		2014
	(in thousands)
Term loan payable to Metro Bank (or “Metro”), interest rate of 4.0% payable in monthly principal payments of $107,143 plus interest, maturing December 28, 2019, collateralized by the assets  and equity interests of AD Computer Corporation and Payroll Tax Filing Services, Inc.	$	5,782	$	6,425
Term loan payable to Metro, interest rate of 5.25% payable in monthly principal payments of $104,167 plus interest beginning in December 2015, maturing November 7, 2021, collateralized by the assets  and equity interests of ACI Merchant Systems, LLC.		7,500		7,500
Revolving note payable to Metro, interest rate of Wall Street Journal Prime rate plus 1.00% (4.25% as June 30, 2015), interest payable monthly, collateralized by all assets of ADC, PTFS, and ACI, a pledge by the Company of its ownership interest in ADC and ACI, as well as a $1.0 million negative pledge on the stock of JetPay, LLC, maturing on May 6, 2017.		1,000		-
Unsecured promissory note payable to WLES, interest rate of 5.0% payable quarterly, note principal due on December 31, 2017. Note amount excludes unamortized fair value discount of $470,408 and $552,424 at June 30, 2015 and December 31, 2014, respectively. See Note 12. Related Party Transactions.		1,861		1,779
Unsecured promissory note payable to stockholder, interest rate of 4% payable at maturity, note principal due September 30, 2016. See Note 12. Related Party Transactions.		492		492
Unsecured promissory note payable to stockholder, interest rate of 4% payable quarterly, note principal due in two installments of $175,000 on May 6, 2016 and 2017. See Note 12. Related Party Transactions.		350		-
Capital lease obligations related to computer equipment at JetPay, LLC, interest rate of 5.55%, due in monthly lease payments of $4,114, maturing in May 2017, collateralized by equipment.		125		154
Various other debt instruments related to vehicles at ADC.		10		16
		17,120		16,366
Less current portion		(2,368)		(1,571)
	$	14,752	$	14,795

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Subsequent Events (Details Textual)	Aug. 06, 2015
Subsequent Event [Member]
Subsequent Event [Line Items]
Loss Contingency, Settlement Agreement, Report Classification	the Company entered into a Letter Agreement to resolve the matter, whereby the conversion price of any of the Series A-1 Preferred Stock held by Flexpoint is reduced from $3.00 per share to $2.90 per share.

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Redeemable Convertible Preferred Stock (Details Textual) - USD ($)				1 Months Ended			3 Months Ended		6 Months Ended		12 Months Ended
	Nov. 07, 2014	Apr. 14, 2014	Oct. 11, 2013	Dec. 31, 2014	Dec. 28, 2014	Nov. 20, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2013	May. 05, 2014	May. 01, 2014
Convertible Preferred Stock [Line Items]
Stock Issued During Period, Shares, New Issues	20,000	4,667			33,333
Preferred Stock, Value, Issued	$ 6,000,000	$ 1,400,000		$ 0	$ 10,000,000		$ 0		$ 0
Preferred Stock, Shares Issued				0			0		0
Noncompliance Event Description									An Event of Noncompliance shall have occurred if: i) the Company fails to make any required redemption payment with respect to the Series A Preferred; ii) the Company breaches the Securities Purchase Agreement after the Initial Closing, and such breach has not been cured with thirty days after receipt of notice thereof; iii) the Company or any subsidiary makes an assignment for the benefit of creditors, admits its insolvency or is the subject of an order, judgment or decree adjudicating such entity as insolvent, among other similar actions; iv) a final judgment in excess of $5.0 million is rendered against the Company or any subsidiary that is not discharged within 60 days thereafter; or v) an event of default has occurred under the Loan and Security Agreement, dated as of December 28, 2012, as amended,by and among ADC, PTFS and Metro Bank, or the Loan and Security Agreement dated as of November 7, 2014 by and among ACI and Metro Bank, and such event of default has not been cured within thirty days after receipt of notice thereof.
Adjustments to Additional Paid in Capital, Increase in Carrying Amount of Redeemable Preferred Stock									$ 1,500,000
Stock Issued During Period, Value, New Issues		1,400,000
Payments to Acquire Businesses, Gross	$ 6,000,000								$ 11,000,000
Repayments of Convertible Debt					$ 10,000,000
Ten Lords Ltd [Member]
Convertible Preferred Stock [Line Items]
Repayments of Notes Payable											$ 5,900,000
Wellington [Member] | Securities Purchase Agreement [Member]
Convertible Preferred Stock [Line Items]
Preferred Stock, Conversion Basis									The Series A-1 Preferred will be convertible into shares of the Companys common stock or, in certain circumstances, Series A-2 Convertible Preferred Stock, par value $0.001 per share (Series A-2 Preferred). The Series A-1 Preferred can be converted into that number of shares of common stock equal to the number of shares of Series A-1 Preferred being converted multiplied by $300 and divided by the then-applicable conversion price, which initially will be $3.00.
Flexpoint Securities Purchase Agreement [Member]
Convertible Preferred Stock [Line Items]
Sale of Stock, Price Per Share			$ 300
Series A Preferred Stock [Member]
Convertible Preferred Stock [Line Items]
Preferred Stock, Conversion Basis									The Series A Preferred is convertible into shares of common stock. Any holder of Series A Preferred may at any time convert such holders shares of Series A Preferred into that number of shares of common stock equal to the number of shares of Series A Preferred being converted multiplied by $300 and divided by the then-applicable conversion price, initially $3.00. The conversion price of the Series A Preferred is subject to downward adjustment upon the occurrence of certain events. See Note 14. Subsequent Events.
Preferred Stock, Value, Issued		$ 1,400,000
Preferred Stock, Liquidation Preference Per Share							$ 600		$ 600
Preferred Stock, Shares Issued							33,333		33,333
Percentage Of Beneficially Own							9.90%		9.90%
Adjustments to Additional Paid in Capital, Increase in Carrying Amount of Redeemable Preferred Stock							$ 1,250,000	$ 538,000	$ 2,470,000	$ 1,050,000
Series A Preferred Stock [Member] | Flexpoint Securities Purchase Agreement [Member]
Convertible Preferred Stock [Line Items]
Stock Issued During Period, Shares, New Issues			33,333
Maximum Number Of Shares To Be Sold							133,333		133,333
Maximum Number Of Shares To Be Sold Value							$ 40,000,000		$ 40,000,000
Initial Proceeds From Sale Of Trading Securities			$ 10,000,000
Tranche A [Member] | Flexpoint Securities Purchase Agreement [Member] | Ten Lords Ltd [Member]
Convertible Preferred Stock [Line Items]
Preferred Stock, Value, Issued			10,000,000
Tranche B [Member] | Flexpoint Securities Purchase Agreement [Member]
Convertible Preferred Stock [Line Items]
Preferred Stock, Value, Issued							10,000,000		10,000,000
Tranche C [Member]
Convertible Preferred Stock [Line Items]
Preferred Stock, Value, Issued							12,600,000		12,600,000
Tranche C [Member] | Flexpoint Securities Purchase Agreement [Member]
Convertible Preferred Stock [Line Items]
Preferred Stock, Value, Issued			$ 20,000,000
Series A-1 Preferred stock [Member] | Securities Purchase Agreement [Member]
Convertible Preferred Stock [Line Items]
Stock Issued During Period, Shares, New Issues				2,250
Stock Issued During Period, Value, New Issues				$ 675,000		$ 405,000
Series A-1 Preferred stock [Member] | Flexpoint [Member] | Securities Purchase Agreement [Member]
Convertible Preferred Stock [Line Items]
Percentage Of Cumulative Number Of Shares												6.75%
Series A-1 Preferred stock [Member] | Wellington [Member]
Convertible Preferred Stock [Line Items]
Stock Issued During Period, Shares, New Issues						1,350
Preferred Stock, Value, Issued							$ 1,850,000		$ 1,850,000			$ 1,850,000
Preferred Stock, Shares Issued							6,165		6,165
Series A-1 Preferred stock [Member] | Wellington [Member] | Securities Purchase Agreement [Member]
Convertible Preferred Stock [Line Items]
Preferred Stock, Value, Issued												$ 769,500	$ 2,700,000
Preferred Stock, Shares Issued												2,565	9,000

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Consolidated Statement of Changes in Stockholders' Equity - 6 months ended Jun. 30, 2015 - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]
Balance at Dec. 31, 2014	$ 24,782	$ 14	$ 43,942	$ (19,174)
Balance (in shares) at Dec. 31, 2014		13,863,823
Stock issued as compensation	79	$ 0	79	0
Stock issued as compensation (in shares)		29,167
Stock-based compensation expense	142	$ 0	142	0
Accretion of convertible preferred stock to redemption value	(2,465)	0	(2,465)	0
Net loss	(615)	0	0	(615)
Balance at Jun. 30, 2015	$ 21,923	$ 14	$ 41,698	$ (19,789)
Balance (in Shares) at Jun. 30, 2015		13,892,990

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Summary of Critical Accounting Policies

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 4.   Summary of Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company’s critical accounting policies are described below.

Use of Estimates

The accompanying financial statements have been prepared in accordance with U.S. GAAP and pursuant to the accounting and disclosure rules and regulations of the SEC. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the Company’s financial statements. Such estimates include, but are not limited to, the value of purchase consideration of acquisitions; valuation of accounts receivable, reserves for chargebacks, goodwill, intangible assets, and other long-lived assets; legal contingencies; and assumptions used in the calculation of stock-based compensation and in the calculation of income taxes. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition and Deferred Revenue

The Company recognizes revenue in general when the following criteria have been met: persuasive evidence of an arrangement exists, a customer contract or purchase order exists and the fees are fixed and determinable, no significant obligations remain and collection of the related receivable is reasonably assured. Allowances for chargebacks, discounts and other allowances are estimated and recorded concurrent with the recognition of revenue and are primarily based on historic rates.

Revenues from the Company’s credit and debit card processing operations are recognized in the period services are rendered as the Company processes credit and debit card transactions for its merchant customers or for merchant customers of its Third Party clients. Third Party clients include Independent Sales Organizations (“ISOs”), Value Added Resellers (“VARs”), Independent Software Vendors (“ISVs”), and Financial Institutions (“FIs”). The majority of the Company’s revenue within its credit and debit card processing business is comprised of transaction-based fees, which typically constitute a percentage of dollar volume processed, or a fee per transaction processed. In the case where the Company is only the processor of transactions, it charges transaction fees only and records these fees as revenues. In the case of merchant contracts or contracts with Third Parties for whom it processes credit and debit card transactions for the Third Parties’ merchant customers, revenue is primarily comprised of fees charged to the merchant, as well as a percentage of the processed sale transaction. The Company’s contracts in most instances involve three parties: the Company, the merchant, and the sponsoring bank. Under certain of these sales arrangements, the Company’s sponsoring bank collects the gross revenue from the merchants, pays the interchange fees and assessments to the credit card associations, collects their fees and pays the Company a net residual payment representing the Company’s fee for the services provided. Accordingly, under these arrangements, the Company records the revenue net of interchange, credit card association assessments and fees and the sponsoring bank’s fees. Under the majority of the Company’s sales arrangements, the Company is billed directly for certain fees by the credit card associations and the processing bank. In this instance, revenues and cost of revenues include the credit card association fees and assessments and the sponsoring bank’s fees which are billed to the Company and for which it assumes credit risk. In all instances, the Company recognizes processing revenues net of interchange fees, which are assessed to its merchant and ISO merchant customers on all processed transactions. Interchange rates and fees are not controlled by the Company. The Company effectively functions as a clearing house collecting and remitting interchange fee settlement on behalf of issuing banks, debit networks, credit card associations and their processing customers. Additionally, the Company’s direct merchant customers have the liability for any charges properly reversed by the cardholder. In the event, however, that the Company is not able to collect such amount from the merchants due to merchant fraud, insolvency, bankruptcy or any other reason, it may be liable for any such reversed charges. The Company requires cash deposits, guarantees, letters of credit and other types of collateral from certain merchants to minimize any such contingent liability, and it also utilizes a number of systems and procedures to manage merchant risk.

Revenues from the Company’s payroll processing operations are recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured. Certain processing services are provided under annual service arrangements with revenue recognized over the service period based on when the efforts and costs are expended. The Company’s service revenue is largely attributable to payroll-related processing services where the fees are based on a fixed amount per processing period or a fixed amount per processing period plus a fee per employee or transaction processed. The revenue earned from delivery service for the distribution of certain client payroll checks and reports is included in processing revenue, and the costs for delivery are included in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Interest on funds held for clients is earned primarily on funds that are collected from clients before due dates for payroll tax administration services and for employee payment services, and invested until remittance to the applicable tax or regulatory agencies or client employee. These collections from clients are typically remitted from 1 to 30 days after receipt, with some items extending to 90 days. The interest earned on these funds is included in total revenue on the Consolidated Statements of Operations because the collecting, holding, and remitting of these funds are critical components of providing these services.

Reserve for Chargeback Losses

Disputes between a cardholder and a merchant periodically arise as a result of, among other things, cardholder dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the purchase price is refunded to the customer through the merchant’s bank and charged to the merchant. If the merchant has inadequate funds, JetPay, LLC must bear the credit risk for the full amount of the transaction. JetPay, LLC evaluates the risk for such transactions and estimates the potential loss for chargebacks based primarily on historical experience and records a loss reserve accordingly. JetPay, LLC believes its reserve for chargeback losses is adequate to cover both the known probable losses and the incurred but not yet reported losses at the balance sheet dates. Chargeback reserves totaling $320,000 and $306,000 were recorded as of June 30, 2015 and December 31, 2014, respectively.

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, settlement processing assets and liabilities, accounts receivable, prepaid expenses and other current assets, funds held for clients, other assets, accounts payable and accrued expenses, deferred revenue, other current liabilities and client fund obligations, approximated fair value as of the balance sheet dates presented, because of the relatively short maturity dates on these instruments. The carrying amounts of the financing arrangements approximate fair value as of the balance sheet dates presented, because interest rates on these instruments approximate market interest rates after consideration of stated interest rates, anti-dilution protection and associated warrants.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash and cash equivalents, accounts receivable, settlement processing assets and funds held for clients. The Company’s cash and cash equivalents are deposited with major financial institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

Accounts Receivable

The Company’s accounts receivable are due from its merchant credit card and its payroll customers. Credit is extended based on the evaluation of customers’ financial condition and, generally, collateral is not required. Payment terms vary and amounts due from customers are stated in the financial statements net of an allowance for doubtful accounts. Accounts which are outstanding longer than the payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivables when they are deemed uncollectible.

Settlement Processing Assets and Obligations

Funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. Depending on the type of transaction, either the credit card interchange system or the debit network is used to transfer the information and funds between the sponsoring bank and card issuing bank to complete the link between merchants and card issuers. In certain of our processing arrangements, merchant funding primarily occurs after the sponsoring bank receives the funds from the card issuer through the card networks, creating a net settlement obligation on the Company’s Balance Sheet. In a limited number of other arrangements, the sponsoring bank funds the merchants before it receives the net settlement funds from the card networks, creating a net settlement asset on the Company’s Balance Sheet. Additionally, certain of the Company’s sponsoring banks collect the gross revenue from the merchants, pay the interchange fees and assessments to the credit card associations, collect their fees for processing and pay the Company a net residual payment representing the Company’s fees for the services. In these instances, the Company does not reflect the related settlement processing assets and obligations in its Consolidated Balance Sheet.

Timing differences in processing credit and debit card and ACH transactions, as described above, interchange expense collection, merchant reserves, sponsoring bank reserves, and exception items result in settlement processing assets and obligations. Settlement processing assets consist primarily of our receivable from merchants for the portion of the discount fee related to reimbursement of the interchange expense, our receivable from the processing bank for transactions we have funded merchants in advance of receipt of card association funding, merchant reserves held, sponsoring bank reserves and exception items, such as customer chargeback amounts receivable from merchants. Settlement processing obligations consist primarily of merchant reserves, our liability to the processing bank for transactions for which we have received funding from the members but have not funded merchants and exception items.

Property and Equipment

Property and equipment acquired in the Company’s recent business acquisitions have been recorded at estimated fair value. The Company records all other property and equipment acquired in the normal course of business at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, which are generally as follows: leasehold improvements – shorter of economic life or initial term of the related lease; machinery and equipment – 5 to 15 years; and furniture and fixtures – 5 to 10 years. Significant additions or improvements extending assets’ useful lives are capitalized; normal maintenance and repair costs are expensed as incurred.

Goodwill

Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company’s business combinations. The Company performs a goodwill impairment test on at least an annual basis. Application of the goodwill impairment test requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company conducts its annual goodwill impairment test as of December 31 of each year or more frequently if indicators of impairment exist. The Company periodically analyzes whether any such indicators of impairment exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include a sustained significant decline in our stock price and market capitalization, a significant adverse change in legal factors or in the business climate, unanticipated competition and/or slower expected growth rates, adverse actions or assessments by a regulator, among others. The Company compares the fair value of its reporting unit to its respective carrying value, including related goodwill. Future changes in the industry could impact the results of future annual impairment tests. The Company’s annual goodwill impairment testing indicated there was no impairment as of December 31, 2014. There can be no assurance that future tests of goodwill impairment will not result in impairment charges.

Identifiable Intangible Assets

Identifiable intangible assets consist primarily of customer relationships, software costs, and tradenames. Certain tradenames are considered to have indefinite lives, and as such, are not subject to amortization. These assets are tested for impairment using undiscounted cash flow methodology annually and whenever there is an impairment indicator. Estimating future cash flows requires significant judgment and projections may vary from cash flows eventually realized. Several impairment indicators are beyond the Company’s control, and determining whether or not they will occur cannot be predicted with any certainty. Customer relationships, tradenames, and software costs are amortized on a straight-line basis over their respective assigned estimated useful lives.

Impairment of Long–Lived Assets

The Company periodically reviews the carrying value of its long-lived assets held and used at least annually or when events and circumstances warrant such a review. If significant events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. Cash flow projections are sometimes based on a group of assets, rather than a single asset. If cash flows cannot be separately and independently identified for a single asset, the Company determines whether impairment has occurred for the group of assets for which it can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, it measures any impairment by comparing the fair value of the asset group to its carrying value. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded. The Company’s annual testing indicated there was no impairment as of December 31, 2014.

Convertible Preferred Stock

The Company accounts for the redemption premium, beneficial conversion feature and issuance costs on its convertible preferred stock using the effective interest method, accreting such amounts to its convertible preferred stock from the date of issuance to the earliest date of redemption.

Share-Based Compensation

The Company expenses employee share-based payments under ASC Topic 718, Compensation-Stock Compensation, which requires compensation cost for the grant-date fair value of share-based payments to be recognized over the requisite service period. The Company estimates the grant date fair value of the share-based awards issued in the form of options using the Black-Scholes option pricing model.

Loss Per Share

Basic loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. The dilutive effect of the conversion option in the Flexpoint Series A Preferred and the Wellington Series A-1 Preferred of 9,133,300 and 616,500 shares of common stock, respectively, at June 30, 2015, and the effect of 537,908 exercisable stock options granted under the Company’s Stock Incentive Plan at June 30, 2015 have been excluded from the loss per share calculation for the three and six months ended June 30, 2015 in that the assumed conversion of these options would be anti-dilutive. As to the three and six months ended June 30, 2014, the dilutive effect of the conversion option in the $10 million Secured Convertible Promissory Notes Payable (the “Notes”) of 3,333,333 shares, the effect of the conversion option in the Flexpoint Series A Preferred and the Wellington Series A-1 Preferred of 3,800,000 and 256,500 shares of common stock, respectively, and the effect of 231,249 exercisable stock options granted under the Company’s Stock Incentive Plan at June 30, 2014 have been excluded from the loss per share calculation in that the assumed conversion of these options would be anti-dilutive.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company does review the terms of the convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound derivative instrument.

Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges recorded within other expenses (income), using the effective interest method.

Fair Value Measurements

The Company accounts for fair value measurements in accordance with ASC Topic No. 820, Fair Value Measurements and Disclosures (“ASC Topic 820”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC Topic 820 are described below:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC Topic 820, assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement.

	Fair Value at June 30, 2015
	Total		Level 1		Level 2		Level 3
			(in thousands)
Contingent consideration	$	1,277	$	-	$	-	$	1,277

	Fair Value at December 31, 2014
	Total		Level 1		Level 2		Level 3
			(in thousands)
Contingent consideration	$	1,240	$	-	$	-	$	1,240

The following table sets forth a summary of the change in fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis (in thousands):

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Beginning balance	$	1,251	$	1,280	$	1,240	$	1,230
Change in fair value of derivative liability		-	$	(110)		-	$	(60)
Change in fair value of contingent cash consideration		26	$	(8)		37	$	(8)
Totals	$	1,277	$	1,162	$	1,277	$	1,162

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the financial instrument. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department with support from the Company’s outside consultants which are approved by the Chief Financial Officer. Level 3 financial liabilities consist of a derivative liability and contingent consideration related to the JetPay, LLC acquisition for which there are no current markets such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy will be analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

The Level 3 financial liabilities are the result of recording the Completed Transactions, the ACI acquisition and related debt instruments as more fully described below.

In connection with the debt proceeds received under the Notes, the Company recorded a derivative liability of $2.1 million on its Consolidated Balance Sheet at December 28, 2012 related to the conversion feature embedded in the Notes. The fair value of the derivative liability was classified within Level 3 of the fair value hierarchy because it was valued using pricing models that incorporate management assumptions that cannot be corroborated with observable market data. The fair value at June 30, 2015 of $0 was the result of the notes being paid in full on December 31, 2014. The change in fair value of this derivative liability of $(110,000) and $(60,000) for the three and six months ended June 30, 2014, respectively, was recorded within other expenses (income) in the Company’s Consolidated Statements of Operations.

In addition to the consideration paid upon closing of the JetPay, LLC acquisition, WLES, L.P. (“WLES”), through December 28, 2017, is entitled to receive 833,333 shares of common stock if the trading price of the common stock is at least $8.00 per share for any 20 trading days out of a 30 trading day period and $5.0 million in cash if the trading price of the common stock is at least $9.50 per share for any 20 trading days out of a 30 trading day period. This contingent consideration was valued at $1.54 million at the date of acquisition based on utilization of option pricing models and was recorded as a non-current liability for $700,000 and as additional paid-in capital for $840,000 at December 31, 2012. The stock-based component value of $840,000 recorded at December 28, 2012 (the JetPay, LLC acquisition date), remains unchanged at June 30, 2015 as a result of this component being recorded as equity. The fair value at June 30, 2015 of the cash-based contingent consideration, valued at $1,000, was determined using a binomial option pricing model. The following assumptions were utilized in the June 2015 calculations: risk free interest rate: 0.82%; dividend yield: 0%; term of contingency of 2.51 years; and volatility: 22.6%.

The fair value of the common stock was derived from the per share price of recent sales of the common stock at the valuation date. Management determined that the results of its valuation were reasonable. The expected life represents the remaining contractual term of the derivative. The volatility rate was developed based on analysis of the historical volatility rates of similarly situated companies (using a number of observations that was at least equal to or exceeded the number of observations in the life of the derivative financial instrument at issue). The risk free interest rates were obtained from publicly available U.S. Treasury yield curve rates. The dividend yield is zero because the Company has not paid dividends and does not expect to pay dividends in the foreseeable future.

In addition to the consideration paid upon closing of the ACI acquisition, the previous unitholders are entitled to receive up to an additional $500,000 if certain net revenue goals are achieved through October 31, 2016. This contingent consideration was valued at $400,000 at the date of acquisition and $436,000 at June 30, 2015 based on utilization of a Monte Carlo simulation to estimate the variance and relative risk of achieving future net revenue growth and discounting the associated cash consideration payments at their present values using a credit-risk adjusted discount rate of 16.0%. The key assumptions in applying the Monte Carlo simulation included expected net revenue growth rates, the expected standard deviation and serial correlation of expected net revenue growth rates as well as a normal distribution assumption.

The Company uses either a binomial option pricing model or the Black-Scholes option valuation model to value Level 3 financial liabilities at inception and on subsequent valuation dates. These models incorporate transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement.

As of June 30, 2015, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

In accordance with the provisions of ASC Topic 815, Derivatives and Hedging Activities, the Company presented its derivative liability at fair value on its Consolidated Balance Sheets, with the corresponding change in fair value recorded in the Company’s Consolidated Statement of Operations for the applicable reporting periods.

Income Taxes

The Company accounts for income taxes under ASC Topic 740, Income Taxes (“ASC Topic 740”). ASC Topic 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryovers. Deferred income tax expense (benefit) represents the change during the period in the deferred income tax assets and deferred income tax liabilities. In establishing the provision for income taxes and determining deferred income tax assets and liabilities, the Company makes judgments and interpretations based on enacted laws, published tax guidance and estimates of future earnings. ASC Topic 740 additionally requires a valuation allowance to be established when, based on available evidence, it is more likely than not that some portion or the entire deferred income tax asset will not be realized.

ASC Topic 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is required to file income tax returns in the United States (federal) and in various state and local jurisdictions. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The Company believes that its income tax positions and deductions would be sustained upon examination and does not anticipate any adjustments that would result in material changes to its financial position.

The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as interest expense and as a component of selling, general and administrative expense, respectively. There were no amounts accrued for penalties or interest as of or during the three and six months ended June 30, 2015 and 2014. Management does not expect any significant changes in its unrecognized tax benefits in the next year.

Subsequent Events

Management evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, management did not identify any recognized or non-recognized subsequent events which would have required an adjustment or disclosure in the financial statements, other than those disclosed in Note 14. Subsequent Events. See Note 14. Subsequent Events.

Recent Accounting Pronouncements

On February 18, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-02 Consolidation (Topic 810): Amendments to the Consolidation Analysis that amends the current consolidation guidance. The amendments affect both the variable interest entity and voting interest entity consolidation models. The new guidance is effective for the Company beginning January 1, 2016, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

On April 7, 2015, the FASB issued ASU No. 2015-03 Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of related debt liability, consistent with debt discounts. Under current accounting standards, such costs are recorded as an asset. The new guidance is effective for the Company beginning January 1, 2016, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The fair values of the Company’s options were estimated at the dates of grant using a Black-Scholes option pricing model with the following weighted average assumptions:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Expected term (years)		6.25		6.25		6.25		6.25
Risk-free interest rate		1.56%		2.03% to 2.10%		1.56%		2.03% to 2.10%
Volatility		44.8%		44.93%		44.8%		44.93%
Dividend yield		0%		0%		0%		0%

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

A summary of stock option activity for the six months ended June 30, 2015 and the year ended December 31, 2014 are presented below:

			Weighted Average
	Number of Options		Exercise Price
Outstanding at December 31, 2013		1,000,000	$	3.03
Granted		445,000	$	3.00
Forfeited		(43,750)	$	3.04
Exercised		-	$	-
Outstanding at December 31, 2014		1,401,250	$	3.02
Granted		200,000	$	3.00
Forfeited		(193,334)	$	3.00
Exercised		-	$	-
Outstanding at June 30, 2015		1,407,916	$	3.02
Exercisable at June 30, 2015		537,908	$	3.05

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Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Payables And Accruals [Line Items]
Trade accounts payable	$ 1,532	$ 1,828
ACH clearing liability	1,728	2,146
Accrued compensation	1,314	1,233
Accrued agent commissions	1,103	758
Related party payables	80	70
Other	2,775	3,118
Total	$ 8,532	$ 9,153

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Subsequent Events

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 14.    Subsequent Events

Under the Securities Purchase Agreement (the “Securities Purchase Agreement”) entered into on August 22, 2013 between the Company and Flexpoint Ford, Flexpoint is provided certain indemnification rights based upon certain subsequent losses and expenses of the Company. On April 24, 2015, Flexpoint tendered to the Company a Claim Letter regarding an indemnification claim relative to the EarlyBirdCapital matter. See Note 11. Commitments and Contingencies. On August 6, 2015, in resolution of the indemnity claim, Flexpoint and the Company entered into a Letter Agreement to resolve the matter, whereby the conversion price of any of the Series A-1 Preferred Stock held by Flexpoint is reduced from $3.00 per share to $2.90 per share.

On August 4, 2015, the Company held its 2015 Annual Stockholders’ Meeting (the “Meeting”). At the Meeting, the Company’s stockholders elected two directors for three-year terms, ratified the Audit Committee’s appointment of Marcum LLP as the Company’s registered public accounting firm for fiscal year 2015, and approved the adoption of the JetPay Corporation Employee Stock Purchase Plan.