þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30, 2016
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|
OR
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|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from ________________ to ________________ |
DIRECT INSITE CORP.
|
||
(Exact name of registrant as specified in its charter)
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Delaware
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11-2895590
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|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
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500 East Broward Boulevard, Suite 1550
Fort Lauderdale, Florida
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33394
|
|
(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
|
o
|
Accelerated filer
|
o
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Non-accelerated filer
|
o
|
Smaller reporting company
|
þ
|
PART I.FINANCIAL INFORMATION
|
2-18
|
ITEM 1.FINANCIAL STATEMENTS
|
2
|
CONDENSED BALANCE SHEETS AS OF JUNE 30, 2016 (UNAUDITED) AND DECEMBER 31 2015
|
2
|
CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)
|
3
|
CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)
|
4
|
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
|
5
|
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
|
13
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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
18
|
ITEM 4.CONTROLS AND PROCEDURES
|
18
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PART II.OTHER INFORMATION
|
19–20
|
ITEM 1.LEGAL PROCEEDINGS
|
19
|
ITEM 1A.RISK FACTORS
|
19
|
ITEM 2.UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
|
19
|
ITEM 3.DEFAULTS IN SENIOR SECURITIES
|
19
|
ITEM 4.MINE SAFETY DISCLOSURES
|
19
|
ITEM 5.OTHER INFORMATION
|
19
|
ITEM 6.EXHIBITS
|
20
|
SIGNATURES
|
21
|
June 30,
2016
|
December 31,
2015
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 2,503 | $ | 2,375 | ||||
Accounts receivable
|
1,182 | 1,444 | ||||||
Prepaid expenses and other current assets
|
349 | 405 | ||||||
Total current assets
|
4,034 | 4,224 | ||||||
Property and equipment, net
|
1,127 | 934 | ||||||
Deferred tax assets
|
1,195 | 1,195 | ||||||
Other assets
|
224 | 247 | ||||||
Total assets
|
$ | 6,580 | $ | 6,600 | ||||
Liabilities and Stockholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$ | 1,251 | $ | 1,468 | ||||
Capital lease obligations
|
-- | 11 | ||||||
Deferred rent
|
31 | 37 | ||||||
Total current liabilities
|
1,282 | 1,516 | ||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock, $0.0001 par value; 2,000,000 shares authorized; none issued or outstanding
|
– | – | ||||||
Common stock, $0.0001 par value; 50,000,000 shares authorized; 13,063,769 and 12,979,536 shares issued and 13,023,842 and 12,939,609 shares outstanding in 2016 and 2015, respectively
|
1 | 1 | ||||||
Additional paid-in capital
|
116,555 | 116,478 | ||||||
Accumulated deficit
|
(110,930 | ) | (111,067 | ) | ||||
Common stock in treasury, at cost; 24,371 shares in 2016 and 2015
|
(328 | ) | (328 | ) | ||||
Total stockholders’ equity
|
5,298 | 5,084 | ||||||
Total liabilities and stockholders’ equity
|
$ | 6,580 | $ | 6,600 |
For the three months ended
|
For the six months ended
|
|||||||||||||||
June 30,
2016
|
June 30,
2015
|
June 30,
2016
|
June 30,
2015
|
|||||||||||||
Revenues:
|
||||||||||||||||
Recurring
|
$ | 1,307 | $ | 1,696 | $ | 2,807 | $ | 3,403 | ||||||||
Non-recurring
|
356 | 369 | 631 | 722 | ||||||||||||
Total revenues
|
1,663 | 2,065 | 3,438 | 4,125 | ||||||||||||
Operating costs and expenses:
|
||||||||||||||||
Operations, research and development
|
611 | 918 | 1,347 | 1,811 | ||||||||||||
General and administrative
|
569 | 565 | 1,159 | 1,186 | ||||||||||||
Sales and marketing
|
398 | 395 | 674 | 780 | ||||||||||||
Amortization and depreciation
|
59 | 76 | 120 | 156 | ||||||||||||
Total operating costs and expenses
|
1,637 | 1,954 | 3,300 | 3,933 | ||||||||||||
Operating income
|
26 | 111 | 138 | 192 | ||||||||||||
Other expense, net
|
1 | 1 | 1 | 2 | ||||||||||||
Income before provision for income taxes
|
25 | 110 | 137 | 190 | ||||||||||||
Provision for income taxes
|
– | – | – | – | ||||||||||||
Net income
|
$ | 25 | $ | 110 | $ | 137 | $ | 190 | ||||||||
Basic income per share attributable to common stockholders
|
$ | 0.00 | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||||
Diluted income per share attributable to common stockholders
|
$ | 0.00 | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||||
Basic weighted average common stock outstanding
|
12,971 | 12,837 | 12,950 | 12,814 | ||||||||||||
Diluted weighted average common stock outstanding
|
12,980 | 12,862 | 12,955 | 12,832 |
For the six months ended
|
||||||||
June 30,
2016
|
June 30,
2015
|
|||||||
Cash flows from operating activities
|
||||||||
Net income
|
$ | 137 | $ | 190 | ||||
Adjustments to reconcile net income to net cash provided by operations:
|
||||||||
Amortization and depreciation
|
120 | 156 | ||||||
Stock-based compensation expense
|
77 | 104 | ||||||
Deferred rent expense
|
(6 | ) | (3 | ) | ||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
262 | 796 | ||||||
Prepaid expenses and other current assets
|
79 | 26 | ||||||
Accounts payable and accrued expenses
|
(217 | ) | (289 | ) | ||||
Deferred revenue
|
-- | (52 | ) | |||||
Total adjustments
|
315 | 738 | ||||||
Net cash provided by operating activities
|
452 | 928 | ||||||
Cash flows from investing activities:
|
||||||||
Expenditures for property and equipment
|
(52 | ) | (3 | ) | ||||
Capitalization of internally developed software
|
(261 | ) | (89 | ) | ||||
Net cash used in investing activities
|
(313 | ) | (92 | ) | ||||
Cash flows from financing activities:
|
||||||||
Repayment of capital lease obligations
|
(11 | ) | (13 | ) | ||||
Net cash used in financing activities
|
(11 | ) | (13 | ) | ||||
Net increase in cash and cash equivalents
|
128 | 823 | ||||||
Cash and cash equivalents – beginning
|
2,375 | 871 | ||||||
Cash and cash equivalents – ending
|
$ | 2,503 | $ | 1,694 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for interest
|
$ | 1 | $ | 2 | ||||
Cash paid for income taxes
|
$ | -- | $ | -- | ||||
Issuance of common stock in settlement of accrued directors’ fees
|
$ | -- | $ | 103 |
For the three months ended
June 30,
|
For the six months ended
June 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Basic weighted average shares outstanding
|
12,971 | 12,837 | 12,950 | 12,814 | ||||||||||||
Restricted stock grants
|
9 | 25 | 5 | 18 | ||||||||||||
Diluted weighted average shares outstanding.
|
12,980 | 12,862 | 12,955 | 12,832 |
For the three months ended
June 30,
|
For the six months ended
June 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Options to purchase common stock
|
498 | 629 | 531 | 629 | ||||||||||||
Unvested stock grants
|
48 | 10 | 137 | 12 | ||||||||||||
Potential anti-dilutive common shares
|
546 | 639 | 668 | 641 |
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Computer equipment and purchased software (3 years)
|
$ | 1,427 | $ | 1,378 | ||||
Internally developed software either placed or not yet placed in service (5 years)
|
1,363 | 1,101 | ||||||
Furniture and fixtures and leasehold improvements (5 – 7 years)
|
161 | 159 | ||||||
2,951 | 2,638 | |||||||
Less: accumulated depreciation and amortization
|
(1,824 | ) | (1,704 | ) | ||||
Property and equipment, net
|
$ | 1,127 | $ | 934 |
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Trade accounts payable
|
$ | 153 | $ | 262 | ||||
Sales taxes payable
|
539 | 539 | ||||||
Accrued directors’ fees
|
392 | 377 | ||||||
Other accrued expenses
|
167 | 290 | ||||||
Total accounts payable and accrued expenses
|
$ | 1,251 | $ | 1,468 |
Weighted Average
|
||||||||||||||||
Weighted
|
Remaining
|
|||||||||||||||
Shares
|
Average Exercise
|
Contractual Term
|
Aggregate Intrinsic Value
|
|||||||||||||
(in thousands)
|
Price
|
(in years)
|
(in thousands)
|
|||||||||||||
Outstanding at January 1, 2016
|
600 | $ | 1.24 | 2.10 | $ | -- | ||||||||||
Expired
|
(20 | ) | $ | 1.20 | -- | $ | -- | |||||||||
Forfeited
|
(100 | ) | $ | 1.65 | ||||||||||||
Outstanding at June 30, 2016
|
480 | $ | 1.16 | 1.52 | $ | -- | ||||||||||
Exercisable at June 30, 2016
|
390 | $ | 1.18 | 0.82 | $ | -- |
Outstanding Options
|
|||||||||||
Weighted Average
|
|||||||||||
Number Outstanding
|
Remaining
|
Options Exercisable
|
|||||||||
Exercise Prices
|
(in thousands)
|
Contractual Life
|
(in thousands)
|
||||||||
$ | 0.90 | 90 |
3.75 Years
|
30 | |||||||
$ | 1.15 | 310 |
0.63 years
|
310 | |||||||
$ | 1.50 | 80 |
2.47 years
|
50 | |||||||
Total
|
480 |
1.52 years
|
390 |
Non-Vested Shares
|
Shares
(in thousands)
|
Weighted-Average
Grant Date Fair Value
|
||||||
Non-Vested at January 1, 2016
|
78 | $ | 0.66 | |||||
Granted
|
161 | $ | 0.62 | |||||
Vested
|
(84 | ) | $ | 0.68 | ||||
Non-Vested at June 30, 2016
|
155 | $ | 0.65 |
For the three months ended
|
For the six months ended
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
HPE Customer A
|
-- | % | 14.2 | % | 5.7 | % | 14.2 | % | ||||||||
HPE Customer B
|
13.5 | 12.6 | 13.3 | 11.9 | ||||||||||||
HPE Customer C
|
6.3 | 6.0 | 7.1 | 6.1 | ||||||||||||
Total HP
|
19.8 | % | 32.8 | % | 26.1 | % | 32.2 | % | ||||||||
IBM
|
41.9 | 37.2 | 40.1 | 38.5 | ||||||||||||
Other Major Customer
|
14.1 | 11.3 | 12.9 | 10.2 | ||||||||||||
Total Major Customers
|
75.8 | % | 81.3 | % | 79.1 | % | 80.9 | % | ||||||||
Others | 24.2 | 18.7 | 20.9 | 19.1 | ||||||||||||
Total
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
June 30,
2016
|
December 31,
2015
|
|||||||
HPE
|
$ | 261 | $ | 389 | ||||
IBM
|
455 | 467 | ||||||
One Other Major Customer
|
232 | 224 | ||||||
Total
|
$ | 948 | $ | 1,080 |
2016
|
2015
|
Increase (Decrease)
|
||||||||||||||
Revenues:
|
||||||||||||||||
Recurring
|
$ | 1,307 | $ | 1,696 | $ | (389 | ) | (22.9 | ) % | |||||||
Non-recurring
|
356 | 369 | (13 | ) | (3.5 | ) % | ||||||||||
Total revenues
|
1,663 | 2,065 | (402 | ) | (19.5 | ) % | ||||||||||
Operating costs and expenses:
|
||||||||||||||||
Operations, research and development……
|
611 | 918 | (307 | ) | (33.4 | ) % | ||||||||||
General and administrative
|
569 | 565 | 4 | 0.7 | % | |||||||||||
Sales and marketing
|
398 | 395 | 3 | 0.8 | % | |||||||||||
Amortization and depreciation
|
59 | 76 | (17 | ) | (22.4 | ) % | ||||||||||
Total operating costs and expenses
|
1,637 | 1,954 | (317 | ) | (16.2 | ) % | ||||||||||
Operating income
|
26 | 111 | (85 | ) | (76.6 | ) % | ||||||||||
Other expense, net
|
1 | 1 | -- | -- | ||||||||||||
Net income
|
$ | 25 | $ | 110 | $ | (85 | ) | (77.3 | ) % |
2016
|
2015
|
Increase (Decrease)
|
||||||||||||||
Revenues:
|
||||||||||||||||
Recurring
|
$ | 2,807 | $ | 3,403 | $ | (596 | ) | (17.5 | ) % | |||||||
Non-recurring
|
631 | 722 | (91 | ) | (12.6 | ) % | ||||||||||
Total revenues
|
3,438 | 4,125 | (687 | ) | (16.7 | ) % | ||||||||||
Operating costs and expenses:
|
||||||||||||||||
Operations, research and development
|
1,347 | 1,811 | (464 | ) | (25.6 | ) % | ||||||||||
General and administrative
|
1,159 | 1,186 | (27 | ) | (2.3 | ) % | ||||||||||
Sales and marketing
|
674 | 780 | (106 | ) | (13.6 | ) % | ||||||||||
Amortization and depreciation
|
120 | 156 | (36 | ) | (23.1 | ) % | ||||||||||
Total operating costs and expenses
|
3,300 | 3,933 | (633 | ) | (16.1 | ) % | ||||||||||
Operating income
|
138 | 192 | (54 | ) | (28.1 | ) % | ||||||||||
Other expense, net
|
1 | 2 | (1 | ) | (50.0 | ) % | ||||||||||
Provision for Income Taxes
|
-- | -- | -- | -- | ||||||||||||
Net income
|
$ | 137 | $ | 190 | $ | (53 | ) | (27.9 | ) % |
Exhibit No. | Description | |
10.1
|
Employment Agreement, effective January 1, 2015 by and between Direct Insite Corp. and Matthew E. Oakes (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 24, 2015).
|
|
Certification pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer.
|
||
Certification pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer.
|
||
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer.
|
||
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer.
|
||
101
|
The following materials from Direct Insite’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015, (ii) Condensed Statements of Income for the Three and Six Months Ended June 30, 2016 and 2015 (Unaudited), (iii) Condensed Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015 (Unaudited), (iv) and Notes to Condensed Financial Statements (Unaudited).
|
1.
|
I have reviewed this report on Form 10-Q of Direct Insite Corp.;
|
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 officers 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 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 changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5.
|
The registrant’s other certifying officers 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 function):
|
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.
|
August 11, 2016
|
By:
|
/s/ Matthew E. Oakes | |
Matthew E. Oakes | |||
President, Chief Executive Officer, and
|
|||
Chairman of the Board of Directors
(Principal Executive Officer)
|
1.
|
I have reviewed this report on Form 10-Q of Direct Insite Corp.;
|
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 officers 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 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 changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5.
|
The registrant’s other certifying officers 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 function):
|
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.
|
August 11, 2016
|
By:
|
/s/ Lowell M. Rush | |
Lowell M. Rush | |||
Chief Financial Officer | |||
(Principal Accounting Officer and Principal Financial Officer) |
(1)
|
The Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2016 (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.
|
August 11, 2016
|
By:
|
/s/ Matthew E. Oakes | |
Matthew E. Oakes | |||
President, Chief Executive Officer, and
|
|||
Chairman of the Board of Directors
(Principal Executive Officer)
|
(1)
|
The Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2016 (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.
|
August 11, 2016
|
By:
|
/s/ Lowell M. Rush | |
Lowell M. Rush | |||
Chief Financial Officer | |||
(Principal Accounting Officer and Principal Financial Officer) |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Aug. 11, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | DIRECT INSITE CORP | |
Entity Central Index Key | 0000879703 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 13,040,752 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q2 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2016 |
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Stockholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock authorized (in shares) | 2,000,000 | 2,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, issued (in shares) | 13,063,769 | 12,979,536 |
Common stock, outstanding (in shares) | 13,023,842 | 12,939,609 |
Treasury stock, at cost (in shares) | 24,371 | 24,371 |
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Revenues: | ||||
Recurring | $ 1,307 | $ 1,696 | $ 2,807 | $ 3,403 |
Non-recurring | 356 | 369 | 631 | 722 |
Total revenues | 1,663 | 2,065 | 3,438 | 4,125 |
Operating costs and expenses: | ||||
Operations, research and development | 611 | 918 | 1,347 | 1,811 |
General and administrative | 569 | 565 | 1,159 | 1,186 |
Sales and marketing | 398 | 395 | 674 | 780 |
Amortization and depreciation | 59 | 76 | 120 | 156 |
Total operating costs and expenses | 1,637 | 1,954 | 3,300 | 3,933 |
Operating income | 26 | 111 | 138 | 192 |
Other expense, net | 1 | 1 | 1 | 2 |
Income before provision for income taxes | 25 | 110 | 137 | 190 |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net income | $ 25 | $ 110 | $ 137 | $ 190 |
Basic income per share | $ 0 | $ 0.01 | $ 0.01 | $ 0.01 |
Diluted income per share | $ 0 | $ 0.01 | $ 0.01 | $ 0.01 |
Basic weighted average common stock outstanding | 12,971 | 12,837 | 12,950 | 12,814 |
Diluted weighted average common stock outstanding | 12,980 | 12,862 | 12,955 | 12,832 |
NATURE OF BUSINESS |
6 Months Ended |
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Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS | Direct Insite Corp. (Direct Insite or the Company) operates as a Software as a Service (SaaS) provider, providing financial supply chain automation and workflow efficiencies within the Procure-to-Pay and Order-to-Cash processes. Specifically, Direct Insites global electronic invoice (e-invoice) management services automate complex manual business processes such as invoice validation, order matching, consolidation, dispute handling, and e-payment processing in a business-to-business transaction based fee for services business model.
The Companys revenue comes from (i) recurring, on-going services that are billed monthly and (ii) non-recurring, professional services derived from the configuration of the Companys software platform.
Throughout the year, the Company operated redundant data centers in Miami, Florida, and Amsterdam, Netherlands.
As described in Note 9, the Company has three major customers that accounted for 75.8% and 81.3% of the Companys revenue for the three months ended June 30, 2016 and 2015, respectively, and 79.1% and 80.9% of the Companys revenue for the six months ended June 30, 2016 and 2015, respectively. Loss of any of these customers would have a material effect on the Company.
In November 2015, we were notified by HP Enterprise Services (HPE) that one of its clients, representing approximately 5.7% and 14.2% of our revenue for the six months ended June 30, 2016 and 2015, respectively, was terminating its contract with HPE effective February 23, 2016. As disclosed in our Current Report on Form 8-K filed with the SEC on February 19, 2016, despite efforts to negotiate a direct contractual agreement with this client, the client ultimately decided to terminate its use of our services, and accordingly, the Company has not recorded revenue from this client after February 2016. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Interim Financial Information
The accompanying unaudited condensed interim financial statements include the accounts of Direct Insite. The condensed balance sheet as of June 30, 2016, and the statements of operations and cash flows for the three and six months ended June 30, 2016 and 2015 have not been audited. These unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to quarterly report on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The December 31, 2015 balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. These interim condensed financial statements include all adjustments which management considers necessary for a fair presentation of the financial statements and consist of normal recurring items. The results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of results that may be expected for any other interim period or for the full year.
These unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2015 included in the Companys annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 22, 2016.
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed financial statements, as well as the reported amounts of revenue and expenses during the reporting period.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates are used in the accounting related to stock based compensation, the valuation allowance on deferred tax assets and capitalized internally developed software. Actual results could differ from those estimates.
Revenue Recognition
The Company records revenue in accordance with Accounting Standards Codification (ASC) 605, Revenue Recognition (ASC 605), and SEC Staff Accounting Bulletin Topic 13, Revenue Recognition in Financial Statements. Revenue is recognized when it is both earned and realizable, that is, when the following criteria are met:
● persuasive evidence of arrangements exist; ● delivery has occurred or services have been rendered; ● the sellers price is fixed and determinable; and ● collectability is reasonably assured.
The following are the specific revenue recognition policies for each major category of revenue.
Recurring (Ongoing Services)
The Company provides transactional data processing services through its SaaS software solutions to its customers. The customer is charged a monthly fixed rate on a per transaction basis or a fixed fee based on monthly transaction volumes. Revenue is recognized as the services are provided.
Non-Recurring (Professional Services)
The Company provides non-recurring engineering services to its customers, which may include initial or additional development, modification, and customization services to the Companys software platform. Such services are billed based on: (i) hourly rates; or (ii) milestone billings. For hourly billed services, revenue is recognized when work is performed. For milestone billed services, revenue is recognized when the project milestone has been accepted by the customer. The Company does not sell software licenses, upgrades or enhancements, or post-contract customer services.
Internally Developed Software
The Company released the first phase of PAYBOX®, a new version of its accounts receivable platform in November 2014. It was designed for a global bank and is available to all Order-to-Cash process customers. According to ASC 350-40, Intangibles-Goodwill and Other-Internal-Use Software, the Company is able to capitalize the costs associated with the application development stage of a project. The Company started amortizing capitalized costs when the software was ready for use and placed in service in November 2014. The capitalized costs are being amortized on a straight-line basis over the estimated five year useful life of the software. As additional functionality is added, costs incurred are capitalized in accordance with ASC 350-40. Precontract software development costs are generally charged to operating costs and expenses as incurred, however, in accordance with professional standards the Company defers precontract costs when such costs are directly associated with specific anticipated contracts for which recovery is probable.
Income Taxes
The Company accounts for income taxes using the asset and liability method. This method requires the determination of deferred tax assets and liabilities based on the differences between the financial statement and income tax basis of assets and liabilities, using enacted tax rates. Additionally, net deferred tax assets are adjusted by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In addition, the Company expects to provide a valuation allowance on the remaining future tax benefits until it can sustain a level of profitability that demonstrates its ability to utilize the remaining assets, or other significant positive evidence arises that suggests its ability to utilize the remaining assets. The future realization of a portion of reserved deferred tax assets related to tax benefits associated with the exercise of stock options, if and when realized, will not result in a tax benefit in the statement of income, but rather will result in an increase in additional paid-in capital. The Company will continue to re-assess its reserves on deferred income tax assets in future periods on a quarterly basis.
Earnings Per Share
The Company displays earnings per share in accordance with ASC 260, Earnings Per Share (ASC 260). ASC 260 requires dual presentation of basic and diluted earnings per share (EPS). Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
The computation of diluted weighted average shares outstanding used in the calculation of diluted earnings per share for the three and six months ended June 30, 2016 is as follows (in thousands):
Securities that could potentially dilute basic EPS in the future, that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the periods presented, consist of the following (in thousands):
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable. The Company has cash deposits in excess of the maximum amounts insured by the Federal Depository Insurance Corporation at June 30, 2016 and December 31, 2015.
The Company performs ongoing credit evaluations of its customers financial condition and, generally, requires no collateral from its customers. Concentrations of credit risk with respect to accounts receivable and revenue are disclosed in Note 9.
Recently Issued and Adopted Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which changes how companies account for certain aspects of share-based payments to employees. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled, allows an employer to repurchase more of an employees shares than previously allowed for tax withholding purposes without triggering liability accounting, allows a company to make a policy election to account for forfeitures as they occur, and eliminates the requirement that excess tax benefits be realized before companies can recognize them. The new guidance also requires excess tax benefits and tax shortfalls to be presented on the cash flow statement as an operating activity rather than as a financing activity, and clarifies that cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation are to be presented as a financing activity. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company has elected to adopt this standard early and applied it as of January 1, 2016, with no significant impact on its financial statements.
Several ASUs were issued during March through May 2016 that modified ASU 2014-09, Revenue from Contracts with Customers. The Company is currently evaluating the effect of the new accounting guidance, including these modifications, on its financial statements or notes thereto.
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PROPERTY AND EQUIPMENT |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT | Property and equipment consist of the following at June 30, 2016 and December 31, 2015:
Depreciation and amortization expense related to property and equipment for the three months ended June 30, 2016 and 2015 was approximately $59,000 and $76,000, respectively. Depreciation and amortization expense related to property and equipment for the six months ended June 30, 2016 and 2015 was approximately $120,000 and $156,000, respectively. |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
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ACCOUNTS PAYABLE AND ACCRUED EXPENSES | Accounts payable and accrued expenses consist of the following at June 30, 2016 and December 31, 2015:
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CAPITAL LEASE OBLIGATIONS |
6 Months Ended |
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Jun. 30, 2016 | |
Capital Lease Obligations [Abstract] | |
CAPITAL LEASE OBLIGATIONS | The Company had equipment under two capital lease obligations that expired at various times through June 2016. As of June 30, 2016, there are no remaining future payments. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair values of the assets.
The implied interest rates related to these capital leases ranged from 7.4% to 8.9%. The gross book value and the net book value of the related assets are approximately $77,000 and $0, respectively, as of June 30, 2016, and $77,000 and $21,000, respectively, as of December 31, 2015. |
STOCKHOLDERS' EQUITY |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY | Preferred Stock
The Company is authorized to issue 2,000,000 shares of preferred stock, of which none were issued or outstanding as of June 30, 2016 and December 31, 2015.
Common Stock, Options and Stock Grants
Six Months Ended June 30, 2016
During the six months ended June 30, 2016, 161,812 restricted common shares were granted with an aggregate grant date fair value of approximately $100,000. During the six months ended June 30, 2016, 84,233 restricted common shares with an aggregate grant date fair value of approximately $57,000 vested. During the six months ended June 30, 2016, the Company recognized approximately $21,000 of stock based compensation expense related to the expected vesting of stock options.
Six Months Ended June 30, 2015
During the six months ended June 30, 2015, 135,000 restricted common shares were granted with an aggregate grant date fair value of approximately $100,000. During this time, approximately 54,000 restricted common shares with an aggregate grant date fair value of approximately $44,000 vested. During the six months ended June 30, 2015, the Company issued 111,602 shares of restricted common stock pursuant to the Companys Directors Deferred Compensation Plan dated January 1, 2008 (the Directors Deferred Compensation Plan). These shares were issued to settle approximately $103,175 of accrued directors fees to two former directors for past services. During the six months ended June 30, 2015, the Company recognized $60,466 of stock based compensation expense related to the expected vesting of 83,670 options. Outstanding options vest over a four-year period, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting in equal monthly amounts through the fourth anniversary of the grant date. In March 2015, 90,000 options were awarded to employees. These options vest over three years with 33% vesting at the end of each of the three years. These options expire after a five-year term.
The Company estimates the grant date fair value of the stock option using the Black-Scholes-Merton option model and the following assumptions: volatility of 90%, risk free rate of 0.89%, dividend rate of zero, and expected term of 3.75 years. The grant date fair value of the stock options issued was determined to be approximately $44,100.
Stock Option Plans
The Company has granted options under multiple stock-based compensation plans that do not differ substantially in the characteristics of the awards. Nonqualified and incentive stock options have been granted to directors, officers and employees of the Company under the Companys stock option plans. Options generally vest over three to four years and expire five years from the date of the grant. On June 3, 2014, the Companys stockholders approved the adoption of the 2014 Stock Incentive Plan (the 2014 Plan). The 2014 Plan replaces the 2004 Stock Option/Stock Issuance Plan which expired on August 20, 2014. The 2014 Plan provides for the grant of non-qualified stock options, incentive stock options, and stock appreciation rights, shares of restricted stock, stock units and shares of unrestricted stock. Eligible participants include officers, employees and directors. The aggregate number of shares authorized for issuance under the 2014 Plan is 1,200,000, and is subject to adjustment as described in the 2014 Plan. As of June 30, 2016, 640,169 shares were available for issuance under the 2014 Plan. Awards that expire or are cancelled without delivery of shares generally become available for issuance under the plans.
The following is a summary of stock option activity for the six months ended June 30, 2016, relating to all of the Companys common stock plans:
The following table summarizes stock option information as of June 30, 2016:
As of June 30, 2016, there was approximately $45,000 of unrecognized compensation costs related to stock options outstanding.
Note 6 Stockholders Equity (continued)
Restricted Stock Grants
A summary of the status of the Companys non-vested stock grants as of June 30, 2016 and changes during the six months then ended is presented below:
The future expected expense as of June 30, 2016 for non-vested shares is approximately $100,000 and will be recognized as expense through December 31, 2017. |
INCOME TAXES |
6 Months Ended |
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Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which 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. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition. There were no unrecognized tax benefits as of June 30, 2016 and December 31, 2015.
The Company has identified its federal tax return and its state tax return in Florida as major tax jurisdictions, as defined in ASC 740. Based on the Companys evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Companys financial statements. The Companys evaluation was performed for tax years ended 2012 through 2015, the only periods subject to examination. The Company believes that its income tax positions and deductions would be sustained upon audit and does not anticipate any adjustments that would result in a material change to its financial position. The Company has elected to classify interest and penalties incurred on income taxes, if any, as income tax expense. No interest or penalties on income taxes have been recorded during the three months ended June 30, 2016 and 2015. The Company does not expect its unrecognized tax benefit position to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
As of June 30, 2016, the Company has federal and state net operating loss carryforwards (NOLs) remaining of approximately $25 million and $20 million, respectively, which may be available to reduce taxable income, if any. Remaining federal and state net operating loss carry forwards expire from 2019 through 2035. However, Internal Revenue Code Section 382 rules limit the utilization of NOLs upon a change in control of a company. During 2015, the Company performed an evaluation as to whether a change in control had taken place. Management believes that there has been no change in control in accordance with Section 382. However, if it is determined that an ownership change has taken place, either historically or in the future, utilization of its NOLs could be subject to severe limitations, which could eliminate a substantial portion of the future income tax benefits of the NOLs. The NOL carryforward as of June 30, 2016 included approximately $1,195,000 related to windfall tax benefits for which a benefit would be recorded in additional paid-in capital if and when realized. |
COMMITMENT AND CONTINGENCIES |
6 Months Ended |
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Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENT AND CONTINGENCIES | The Company had an employment agreement with Matthew E. Oakes, Chief Executive Officer and Chairman of the Board of Directors, for a term effective June 1, 2013 through December 31, 2015. On February 20, 2015, Mr. Oakes employment agreement was superseded by a new employment agreement extending the term through December 31, 2017. The agreement provides for a base salary of $24,583 per month, discretionary and annual incentive bonuses based on the Companys performance in achieving prescribed revenue and earnings before interest and taxes (EBIT) targets. The agreement also provides for reimbursement of all out-of-pocket expenses reasonably incurred by him in the performance of his duties hereunder and certain severance benefits in the event of termination prior to the expiration date. If Mr. Oakes is terminated without cause or resigns from employment for good reason (as defined within Mr. Oakes employment agreement), he would receive one year of base salary and COBRA coverage at the Companys expense. The Company shall continue to provide corporate lodging to Mr. Oakes through the term of his agreement.
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MAJOR CUSTOMERS |
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MAJOR CUSTOMERS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MAJOR CUSTOMERS | Three customers, HP Enterprise Services (HPE), inclusive of its underlying customers, International Business Machines Corp. (IBM) and one other customer, accounted for a significant portion of the Companys revenues for the respective three and six month periods ended June 30, 2016 and 2015 as follows:
Three customers accounted for a significant portion of the Companys accounts receivable as follows as of the following dates (in thousands):
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SUBSEQUENT EVENTS |
6 Months Ended |
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Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS |
The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed financial statements.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended |
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Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
INTERIM FINANCIAL INFORMATION | The accompanying unaudited condensed interim financial statements include the accounts of Direct Insite. The condensed balance sheet as of June 30, 2016, and the statements of operations and cash flows for the three and six months ended June 30, 2016 and 2015 have not been audited. These unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to quarterly report on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The December 31, 2015 balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. These interim condensed financial statements include all adjustments which management considers necessary for a fair presentation of the financial statements and consist of normal recurring items. The results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of results that may be expected for any other interim period or for the full year.
These unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2015 included in the Companys annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 22, 2016.
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USE OF ESTIMATES | In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed financial statements, as well as the reported amounts of revenue and expenses during the reporting period.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates are used in the accounting related to stock based compensation, the valuation allowance on deferred tax assets and capitalized internally developed software. Actual results could differ from those estimates. |
REVENUE RECOGNITION | The Company records revenue in accordance with Accounting Standards Codification (ASC) 605, Revenue Recognition (ASC 605), and SEC Staff Accounting Bulletin Topic 13, Revenue Recognition in Financial Statements. Revenue is recognized when it is both earned and realizable, that is, when the following criteria are met:
● persuasive evidence of arrangements exist; ● delivery has occurred or services have been rendered; ● the sellers price is fixed and determinable; and ● collectability is reasonably assured.
The following are the specific revenue recognition policies for each major category of revenue.
Recurring (Ongoing Services)
The Company provides transactional data processing services through its SaaS software solutions to its customers. The customer is charged a monthly fixed rate on a per transaction basis or a fixed fee based on monthly transaction volumes. Revenue is recognized as the services are provided.
Non-Recurring (Professional Services)
The Company provides non-recurring engineering services to its customers, which may include initial or additional development, modification, and customization services to the Companys software platform. Such services are billed based on: (i) hourly rates; or (ii) milestone billings. For hourly billed services, revenue is recognized when work is performed. For milestone billed services, revenue is recognized when the project milestone has been accepted by the customer. The Company does not sell software licenses, upgrades or enhancements, or post-contract customer services. |
INTERNALLY DEVELOPED SOFTWARE | The Company released the first phase of PAYBOX®, a new version of its accounts receivable platform in November 2014. It was designed for a global bank and is available to all Order-to-Cash process customers. According to ASC 350-40, Intangibles-Goodwill and Other-Internal-Use Software, the Company is able to capitalize the costs associated with the application development stage of a project. The Company started amortizing capitalized costs when the software was ready for use and placed in service in November 2014. The capitalized costs are being amortized on a straight-line basis over the estimated five year useful life of the software. As additional functionality is added, costs incurred are capitalized in accordance with ASC 350-40. Precontract software development costs are generally charged to operating costs and expenses as incurred, however, in accordance with professional standards the Company defers precontract costs when such costs are directly associated with specific anticipated contracts for which recovery is probable. |
INCOME TAXES | The Company accounts for income taxes using the asset and liability method. This method requires the determination of deferred tax assets and liabilities based on the differences between the financial statement and income tax basis of assets and liabilities, using enacted tax rates. Additionally, net deferred tax assets are adjusted by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In addition, the Company expects to provide a valuation allowance on the remaining future tax benefits until it can sustain a level of profitability that demonstrates its ability to utilize the remaining assets, or other significant positive evidence arises that suggests its ability to utilize the remaining assets. The future realization of a portion of reserved deferred tax assets related to tax benefits associated with the exercise of stock options, if and when realized, will not result in a tax benefit in the statement of income, but rather will result in an increase in additional paid-in capital. The Company will continue to re-assess its reserves on deferred income tax assets in future periods on a quarterly basis. |
EARNINGS PER SHARE | The Company accounts for income taxes using the asset and liability method. This method requires the determination of deferred tax assets and liabilities based on the differences between the financial statement and income tax basis of assets and liabilities, using enacted tax rates. Additionally, net deferred tax assets are adjusted by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In addition, the Company expects to provide a valuation allowance on the remaining future tax benefits until it can sustain a level of profitability that demonstrates its ability to utilize the remaining assets, or other significant positive evidence arises that suggests its ability to utilize the remaining assets. The future realization of a portion of reserved deferred tax assets related to tax benefits associated with the exercise of stock options, if and when realized, will not result in a tax benefit in the statement of income, but rather will result in an increase in additional paid-in capital. The Company will continue to re-assess its reserves on deferred income tax assets in future periods on a quarterly basis. |
CONCENTRATION OF CREDIT RISK | Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable. The Company has cash deposits in excess of the maximum amounts insured by the Federal Depository Insurance Corporation at June 30, 2016 and December 31, 2015.
The Company performs ongoing credit evaluations of its customers financial condition and, generally, requires no collateral from its customers. Concentrations of credit risk with respect to accounts receivable and revenue are disclosed in Note 9.
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RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS | In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which changes how companies account for certain aspects of share-based payments to employees. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled, allows an employer to repurchase more of an employees shares than previously allowed for tax withholding purposes without triggering liability accounting, allows a company to make a policy election to account for forfeitures as they occur, and eliminates the requirement that excess tax benefits be realized before companies can recognize them. The new guidance also requires excess tax benefits and tax shortfalls to be presented on the cash flow statement as an operating activity rather than as a financing activity, and clarifies that cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation are to be presented as a financing activity. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company has elected to adopt this standard early and applied it as of January 1, 2016, with no significant impact on its financial statements.
Several ASUs were issued during March through May 2016 that modified ASU 2014-09, Revenue from Contracts with Customers. The Company is currently evaluating the effect of the new accounting guidance, including these modifications, on its financial statements or notes thereto. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of basic and diluted earnings per share |
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PROPERTY AND EQUIPMENT (Tables) |
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Property and Equipment |
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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) |
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Accounts Payable and Accrued Expenses |
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STOCKHOLDERS' EQUITY (Tables) |
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Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Activity |
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Stock Option Information |
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Non-vested Stock Grants |
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MAJOR CUSTOMERS (Tables) |
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Revenues [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Customers Accounted for Significant Portion of Revenues and Accounts Receivable |
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Accounts Receivable [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Customers Accounted for Significant Portion of Revenues and Accounts Receivable |
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NATURE OF BUSINESS (Details Narrative) - Revenues [Member] - Customer |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Concentration Risk [Line Items] | ||||
Ratio of revenues from major customers to total revenues | 100.00% | 100.00% | 100.00% | 100.00% |
Customers [Member] | ||||
Concentration Risk [Line Items] | ||||
Number of major customers | 3 | 3 | ||
Ratio of revenues from major customers to total revenues | 79.10% | 80.90% |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Earnings Per Share [Abstract] | ||||
Basic weighted average shares outstanding | 12,971 | 12,837 | 12,950 | 12,814 |
Restricted stock grants | 9 | 25 | 5 | 18 |
Weighted average shares outstanding-diluted | 12,980 | 12,862 | 12,955 | 12,832 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - shares |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Accounting Policies [Abstract] | ||||
Options to purchase common stock | 498 | 629 | 531 | 629 |
Restricted stock grants | 48 | 10 | 137 | 12 |
Potential anti-dilutive common shares | 5,46. | 639 | 668 | 641 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Property, Plant and Equipment [Abstract] | ||||
Depreciation and amortization | $ 59 | $ 76 | $ 120 | $ 156 |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
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Summary of Accounts Payable and Accrued Expenses [Abstract] | ||
Trade accounts payable | $ 153 | $ 262 |
Sales taxes payable | 539 | 539 |
Accrued directors' fees | 392 | 377 |
Other accrued expenses | 167 | 290 |
Total accounts payable and accrued expenses | $ 1,251 | $ 1,468 |
STOCKHOLDERS' EQUITY (Details) - USD ($) $ / shares in Units, $ in Thousands |
6 Months Ended | 12 Months Ended |
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Jun. 30, 2016 |
Dec. 31, 2015 |
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Shares | ||
Outstanding at January 1, 2016 | 600 | |
Expired | (20) | |
Forfeited | (100) | |
Outstanding at June 30, 2016 | 480 | 600 |
Exercisable at June 30, 2016 | 390 | |
Weighted Average Exercise Price | ||
Outstanding at January 1, 2016 | $ 1.24 | |
Expired | 1.20 | |
Forfeited | 1.65 | |
Outstanding at June 30, 2016 | 1.16 | $ 1.24 |
Exercisable at June 30, 2016 | $ 1.18 | |
Weighted Average Remaining Contractual Term (in years) | ||
Outstanding | 1 year 6 months 7 days | 2 years 1 month 6 days |
Exercisable at June 30, 2016 | 1 year 2 months 5 days | |
Aggregate Intrinsic Value (in thousands) | $ 0 |
STOCKHOLDERS' EQUITY (Details 1) - shares |
6 Months Ended | 12 Months Ended |
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Jun. 30, 2016 |
Dec. 31, 2015 |
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Number Outstanding | 480 | 600 |
Weighted Average Remaining Contractual Life | 1 year 6 months 7 days | 2 years 1 month 6 days |
Options Exercisable | 390 | |
Exercise Prices 0.90 [Member] | ||
Number Outstanding | 90 | |
Weighted Average Remaining Contractual Life | 4 years | |
Options Exercisable | 30 | |
Exercise Price 1.15 [Member] | ||
Number Outstanding | 310 | |
Weighted Average Remaining Contractual Life | 10 months 17 days | |
Options Exercisable | 306 | |
Exercise Price 1.20 [Member] | ||
Number Outstanding | 20 | |
Weighted Average Remaining Contractual Life | 2 months 23 days | |
Options Exercisable | 20 | |
Exercise Price 1.50 [Member] | ||
Number Outstanding | 80 | |
Weighted Average Remaining Contractual Life | 2 years 8 months 19 days | |
Options Exercisable | 44 |
STOCKHOLDERS' EQUITY (Details 2) |
6 Months Ended |
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Jun. 30, 2016
$ / shares
shares
| |
Non-Vested Shares | |
Non-Vested at January 1, 2016 | shares | 78,000 |
Granted | shares | 161,000 |
Vested | shares | (84,000) |
Non-Vested at June 30, 2016 | shares | 155,000 |
Weighted-Average Grant Date Fair Value | |
Non-Vested at January 1, 2016 | $ / shares | $ .66 |
Granted | $ / shares | .62 |
Vested | $ / shares | .68 |
Non-Vested at June 30, 2016 | $ / shares | $ .65 |
INCOME TAXES (Details Narrative) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
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Unrecognized tax benefits | $ 0 | $ 0 | |
Unrecognized tax benefits, interest and penalties | 0 | $ 0 | |
Net operating loss carryforwards related to tax benefit | 1,195 | ||
Federal Tax Authority [Member] | |||
Net operating loss carryforwards related to tax benefit | 25,000 | ||
State and Local Jurisdiction [Member] | |||
Net operating loss carryforwards related to tax benefit | $ 20,000 | ||
Minimum [Member] | |||
Operating loss carryforwards, expiration dates | Jan. 01, 2019 | ||
Maximum [Member] | |||
Operating loss carryforwards, expiration dates | Jan. 01, 2035 |
COMMITMENT AND CONTINGENCIES (Details Narrative) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Chief Executive Officer [Member] | |
Employment Agreement [Abstract] | |
Base salary per month as per employment agreements | $ 24,583 |
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