AMBER ROAD, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2019
|
|
2018
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
$
|
(3,323,063)
|
|
$
|
(5,413,837)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization
|
1,221,705
|
|
1,284,346
|
Bad debt expense
|
8,598
|
|
2,199
|
Stock-based compensation
|
1,982,116
|
|
4,252,233
|
|
|
|
|
Accretion of debt discount
|
8,814
|
|
8,902
|
Changes in operating assets and liabilities:
|
|
|
|
Accounts receivable and unbilled receivables
|
2,844,760
|
|
3,357,243
|
Prepaid expenses and other assets
|
638,801
|
|
(869,287)
|
|
|
|
|
Accounts payable
|
507,397
|
|
(600,915)
|
Accrued expenses
|
(1,952,449)
|
|
(689,650)
|
|
|
|
|
|
|
|
|
Other liabilities
|
255,871
|
|
381,842
|
Deferred revenue
|
1,053,505
|
|
(285,938)
|
Net cash provided by operating activities
|
3,246,055
|
|
1,427,138
|
Cash flows from investing activities:
|
|
|
|
Capital expenditures
|
(106,105)
|
|
(15,607)
|
Addition of capitalized software development costs
|
(725,773)
|
|
(850,373)
|
Cash (paid) received for deposits
|
(25,907)
|
|
421
|
Net cash used in investing activities
|
(857,785)
|
|
(865,559)
|
Cash flows from financing activities:
|
|
|
|
Proceeds from revolving line of credit
|
1,500,000
|
|
7,000,000
|
Payments on revolving line of credit
|
(1,500,000)
|
|
(7,000,000)
|
Payments on term loan
|
(187,500)
|
|
(187,500)
|
Repayments on finance lease obligations
|
(431,519)
|
|
(357,989)
|
Proceeds from the exercise of stock options
|
321,622
|
|
81,017
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
(297,397)
|
|
(464,472)
|
Effect of exchange rate on cash, cash equivalents and restricted cash
|
(7,005)
|
|
(145,296)
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
2,083,868
|
|
(48,189)
|
Cash, cash equivalents and restricted cash at beginning of period
|
7,571,119
|
|
9,417,001
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
9,654,987
|
|
$
|
9,368,812
|
|
|
|
|
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:
|
|
|
|
Cash and cash equivalents
|
$
|
9,598,587
|
|
$
|
9,312,412
|
Restricted cash in deposits and other assets
|
56,400
|
|
56,400
|
Total cash, cash equivalents and restricted cash
|
$
|
9,654,987
|
|
$
|
9,368,812
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
Cash paid for interest
|
$
|
348,202
|
|
$
|
290,697
|
Non-cash property and equipment acquired under finance leases
|
2,483,193
|
|
318,014
|
Non-cash right-of-use assets acquired under operating leases
|
7,781,725
|
|
—
|
Non-cash property and equipment purchases in accounts payable
|
22,200
|
|
—
|
See accompanying notes to condensed consolidated financial statements.
AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Background
Amber Road, Inc. (we, our or us) is a leading provider of a cloud-based global trade management solution, including modules for logistics contract and rate management, supply chain visibility and event management, international trade compliance, Global Knowledge trade content database, supply chain collaboration with overseas factories and vendors, and duty management solutions to importers and exporters, nonvessel owning common carriers (resellers), and ocean carriers. Our solution is primarily delivered using an on-demand, cloud-based, delivery model. We are incorporated in the state of Delaware and our corporate headquarters are located in East Rutherford, New Jersey. We also have offices in McLean, Virginia; Raleigh, North Carolina; Munich, Germany; Bangalore, India; Shenzhen and Shanghai, China; and Hong Kong.
(2) Summary of Significant Accounting Policies and Practices
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (GAAP) in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair presentation of our financial position and results of operations have been included. The accompanying condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries primarily located in India, China and Europe. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for other interim periods or future years. The consolidated balance sheet as of December 31, 2018 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Form 10-K for the year ended December 31, 2018.
Use of Estimates
The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include the carrying amount of intangibles and goodwill; valuation allowance for receivables and deferred income tax assets; revenue; capitalization of software costs; and valuation of share-based payments. Actual results could differ from those estimates.
Revenue Recognition
We primarily generate revenue from the sale of subscriptions and subscription-related professional services. In instances involving subscriptions, revenue is generated under customer contracts with multiple elements, which are comprised of (1) subscription fees that provide the customers with access to our on-demand application and content, unspecified solution and content upgrades, and customer support, (2) professional services associated with consulting services (primarily implementation services), and (3) transaction-related fees (including publishing services). Our initial customer contracts usually have contract terms from 3 years to 5 years in length. Typically, the customer does not take possession of the software nor does the customer have the right to take possession of the software supporting the on-demand application service. However, in certain instances, we have customers that take possession of the software whereby the application is installed on the customer’s premises. Our subscription service arrangements typically may only be terminated for cause and do not contain refund provisions.
We determine revenue recognition through the following steps:
•
Identification of the contract, or contracts, with a customer
•
Identification of the performance obligations in the contract
•
Determination of the transaction price
•
Allocation of the transaction price to the performance obligations in the contract
•
Recognition of revenue when, or as, we satisfy a performance obligation
The subscription fees typically begin the first month following contract execution, whether or not we have completed the solution’s implementation.
AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Subscription Revenue for Hosted and On-Premise Customers
Subscription revenue, which primarily consists of fees to provide customers access to our solution, is recognized ratably over contract terms beginning on the commencement date of each contract, which is the date our service is made available to customers. For contracts in which the customer takes possession of the software, we determined that the software license and related content updates are one performance obligation and accordingly, recognize the arrangement fee over the contract term. Typically, amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Transaction-related revenue is recognized as the transactions occur.
Professional Services Revenue for Hosted Customers
Professional services revenue primarily consists of fees for deployment of our solution. The majority of professional services contracts are on a time and material basis. When these services are not combined with subscription revenue as a single unit of accounting, as discussed below, this revenue is recognized as the services are rendered for time and material contracts, and when the milestones are achieved and accepted by the customer for fixed price contracts.
Professional Services Revenue for On-Premise Customers
For customers that take possession of the software, billings for professional services will be recognized as revenue when services are performed.
Multiple Performance Obligations
Some of our contracts with customers contain multiple performance obligations that generally include subscription, professional services (primarily implementation) as well as transaction-related fees.
For contracts with customers, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the solution sold, taking into account the modules included, term of the arrangement, and base transaction volume, customer demographics, and geographic locations.
Other Revenue Items
Sales tax collected from customers and remitted to governmental authorities is accounted for on a net basis and, therefore, is not included in revenue and cost of revenue in the condensed consolidated statements of operations. We classify customer reimbursements received for direct costs paid to third parties and related expenses as revenue, in accordance with ASC 606.
Costs to Obtain and Fulfill a Contract
We defer commission costs that are incremental and directly related to the acquisition of customer contracts. Commission costs are accrued and deferred upon execution of the sales contract by the customer. Payments to sales personnel are made shortly after the receipt of the related customer payment. Deferred commissions are amortized over an estimated customer life of 6 years. We determined the period of amortization of deferred commissions by taking into consideration our customer contracts, our technology and other factors.
Our commission costs deferred and amortized in the period are as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Commission costs deferred
|
|
|
|
|
$
|
296,046
|
|
$
|
670,037
|
Commission costs amortized
|
|
|
|
|
1,107,366
|
|
999,576
|
Deferred Revenue and Performance Obligations
Deferred revenue from subscriptions represents amounts collected from (or invoiced to) customers in advance of earning subscription revenue. Typically, we bill our annual subscription fees in advance of providing the service. Deferred revenue from professional services represents revenue for time and material contracts where the revenue is recognized when milestones are achieved and accepted by the customer for fixed price contracts.
AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
Current:
|
|
|
|
Subscription revenue
|
$
|
35,901,595
|
|
$
|
34,849,486
|
Professional services revenue
|
251,756
|
|
189,669
|
Total current
|
36,153,351
|
|
35,039,155
|
Noncurrent:
|
|
|
|
Subscription revenue
|
213,449
|
|
265,324
|
Total noncurrent
|
213,449
|
|
265,324
|
Total deferred revenue
|
$
|
36,366,800
|
|
$
|
35,304,479
|
The amount of subscription revenue and professional services revenue recognized that was included in the beginning balance of deferred revenue is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Subscription revenue
|
|
|
|
|
$
|
13,424,374
|
|
$
|
13,164,922
|
Professional services revenue
|
|
|
|
|
89,140
|
|
349,222
|
As of March 31, 2019, $127,359,267 of revenue is expected to be recognized from remaining performance obligations for subscription contracts and is expected to be recognized over the next 6.8 years. Remaining performance obligations for professional services contracts are recognized within one year or less.
Cost of Revenue
Cost of subscription revenue
. Cost of subscription revenue consists primarily of personnel and related costs of our hosting, support, and content teams, including salaries, benefits, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as software license fees, hosting costs, Internet connectivity, and depreciation expenses directly related to delivering our solutions, as well as amortization of capitalized software development costs. Our cost of subscription revenue is generally expensed as the costs are incurred.
Cost of professional services revenue
. Cost of professional services revenue consists primarily of personnel and related costs, including salaries, benefits, bonuses, payroll taxes, stock-based compensation, the costs of contracted third-party vendors, reimbursable expenses and allocated overhead. As our personnel are employed on a full-time basis, our cost of professional services is largely fixed in the short term, while our professional services revenue may fluctuate, leading to fluctuations in professional services gross profit. Cost of professional services revenue is generally expensed as costs are incurred.
Cash and Cash Equivalents
We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents at March 31, 2019 and December 31, 2018 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
Cash
|
$
|
9,555,117
|
|
$
|
7,471,075
|
Money market accounts
|
43,470
|
|
43,644
|
|
$
|
9,598,587
|
|
$
|
7,514,719
|
Fair Value of Financial Instruments and Fair Value Measurements
Our financial instruments consist of cash equivalents, accounts receivable, accounts payable, and accrued expenses. Management believes that the carrying values of these instruments are representative of their fair value due to the relatively short-term nature of those instruments.
Our estimate of fair value for financial assets and financial liabilities is based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available.
AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Management determines fair value using the following hierarchy:
Level 1 — Quoted prices in active markets for identical assets or liabilities;
Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; or
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following table provides the financial assets and liabilities classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
Assets:
|
|
|
|
Cash equivalents - money market accounts
|
$
|
43,470
|
|
$
|
43,644
|
Restricted cash - money market accounts
|
56,400
|
|
56,400
|
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on historical write-off experience, the industry, and the economy. We review our allowance for doubtful accounts monthly. Past-due balances over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance-sheet credit exposure related to our customers. Typically, we record unbilled receivables for contracts on which revenue has been recognized, but for which the customer has not yet been billed.
Major Customers and Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. Our customer base is principally comprised of enterprise and mid-market companies within industries including Chemical/Pharmaceutical, High Technology/Electronics, Industrial/Manufacturing, Logistics, Oil & Gas, and Retail/Apparel. We do not require collateral from our customers. For the three months ended March 31, 2019, no customer accounted for more than 10% of our total revenue. For the three months ended March 31, 2018, one customer accounted for 12.0% of our total revenue. As of March 31, 2019 and December 31, 2018, no single customer accounted for more than 10% of our total accounts receivable.
Geographic Information
Disaggregation of Revenue
We sell our subscription contracts and related professional services to customers primarily in two geographical markets. Revenue by geographic location based on the billing address of our customers is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Country
|
|
|
|
|
2019
|
|
2018
|
United States
|
|
|
|
|
$
|
16,059,619
|
|
$
|
15,237,501
|
International
|
|
|
|
|
5,037,044
|
|
4,826,891
|
Total revenue
|
|
|
|
|
$
|
21,096,663
|
|
$
|
20,064,392
|
For the three months ended March 31, 2019 and 2018, no single country other than the United States had revenue greater than 10% of our total revenue.
Long-lived assets by geographic location is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
March 31,
2019
|
|
December 31,
2018
|
United States
|
$
|
9,219,019
|
|
$
|
9,310,108
|
International
|
916,819
|
|
822,700
|
Total long-lived assets
|
$
|
10,135,838
|
|
$
|
10,132,808
|
AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Adjustments to Previously Reported Amounts
Immaterial Correction of an Error.
As previously disclosed, during the third quarter of 2018, we revised previously reported stock-based compensation expense for the three months ended March 31, 2018 related to certain performance stock units due to a change in performance conditions. In accordance with Staff Accounting Bulletin (SAB) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, management evaluated the materiality of the error from qualitative and quantitative perspectives, and concluded the error was immaterial to the prior periods. The correction of the immaterial error resulted in an increase of $2,246,644 to stock-based compensation for the three months ended March 31, 2018.
Recent Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. We early adopted this standard on January 1, 2019 and it did not have a material effect on our condensed consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. We adopted this standard on January 1, 2019 on a modified retrospective basis and have not restated comparative amounts. Also, we elected the practical expedients permitted under the transition guidance, which allows us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. We also elected to combine lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term. As a result, on January 1, 2019, we recorded operating lease right-of-use (ROU) assets of $7,781,725 and operating lease liabilities of $9,302,876 in our condensed consolidated balance sheet. Our capital leases that existed as of January 1, 2019 are now classified as finance leases.
(3) Property and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
Computer software and equipment
|
$
|
15,858,651
|
|
$
|
15,674,596
|
Software development costs
|
16,026,662
|
|
15,300,893
|
Furniture and fixtures
|
1,752,102
|
|
1,713,226
|
Leasehold improvements
|
2,643,360
|
|
2,643,337
|
Total property and equipment
|
36,280,775
|
|
35,332,052
|
Less: accumulated depreciation and amortization
|
(26,144,937)
|
|
(25,199,244)
|
Total property and equipment, net
|
$
|
10,135,838
|
|
$
|
10,132,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Depreciation and amortization expense
|
|
|
|
|
$
|
963,904
|
|
$
|
1,024,853
|
Certain development costs of our software solution are capitalized in accordance with ASC Topic 350-40, Internal Use Software, which outlines the stages of computer software development and specifies when capitalization of costs is required. Projects that are determined to be in the development stage are capitalized and amortized over their useful lives of five years. Projects that are determined to be within the preliminary stage are expensed as incurred.
AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Information related to capitalized software costs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Software costs capitalized
|
|
|
|
|
$
|
725,773
|
|
$
|
850,373
|
Software costs amortized
(1)
|
|
|
|
|
475,975
|
|
454,232
|
(1)
Included in cost of subscription revenue on the accompanying condensed consolidated statements of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
Capitalized software costs not yet subject to amortization
|
|
|
|
|
$
|
1,563,448
|
|
$
|
2,372,042
|
(4) Accrued Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
Accrued bonus
|
$
|
2,845,344
|
|
$
|
3,648,837
|
Accrued commissions
|
1,368,566
|
|
2,466,219
|
Deferred rent
|
—
|
|
423,301
|
Accrued professional fees
|
1,532,585
|
|
935,881
|
Accrued taxes
|
805,962
|
|
745,105
|
Other accrued expenses
|
974,633
|
|
1,289,823
|
Total
|
$
|
7,527,090
|
|
$
|
9,509,166
|
(5) Leases
We determine if an arrangement is or contains a lease at inception. We have non-cancelable operating leases primarily for office space and finance leases primarily for network equipment. Leases with an initial term of less than 12 months are not recorded in our condensed consolidated balance sheet. Leases with an initial term in excess of 12 months are recorded as operating or financing leases in our condensed consolidated balance sheet.
Our lease terms may include an option to extend the lease. The exercise of lease renewal options is at our sole discretion. When deemed reasonably certain of exercise, the renewal option is included in the determination of the lease term and lease payment obligation, respectively.
Operating lease ROU assets and liabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, we use the implicit rate in determining the present value of lease payments. When leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date, including the lease term. When a lease agreement contains lease and non-lease components, we combine them for accounting purposes. Operating lease ROU assets are shown separately and finance lease assets are included in property and equipment in the condensed consolidated balance sheet.
Lease costs consists of the following:
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
|
|
Amortization of finance lease assets
|
$
|
389,744
|
|
|
Interest on finance lease obligations
|
57,168
|
|
|
Operating lease costs
|
763,998
|
|
|
Short-term lease costs
|
49,034
|
|
|
Sublease income
|
(77,499)
|
|
|
Total lease costs
|
$
|
1,182,445
|
|
|
AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
We have a sublease related to one of our existing office spaces. The term of the sublease is through August 2022, the same as our underlying existing lease. As of March 31, 2019, fixed sublease payments to us are escalating over the remaining term of the lease and aggregate to $1,359,153.
Weighted-average remaining lease terms and discount rates are as follows:
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|
|
|
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|
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March 31, 2019
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|
Weighted-average remaining lease terms:
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Finance leases
|
2.3 years
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|
|
Operating leases
|
3.5 years
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|
|
|
|
|
|
Weighted-average discount rate:
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Finance leases
|
8.8
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%
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|
|
Operating leases
|
6.8
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%
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|
|
The following table presents aggregate lease maturities as of March 31, 2019:
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|
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Finance
Leases
|
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Operating
Leases
|
Remainder of 2019
|
$
|
981,582
|
|
$
|
2,567,219
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2020
|
758,046
|
|
2,565,333
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2021
|
466,939
|
|
2,016,773
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2022
|
192,769
|
|
1,422,944
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2023
|
—
|
|
668,646
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2024 and thereafter
|
—
|
|
157,021
|
Total
|
2,399,336
|
|
9,397,936
|
Less amount representing interest
|
(256,440)
|
|
(1,010,771)
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Present value of net minimum lease payments
|
2,142,896
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|
8,387,165
|
Less current installments of lease obligations
|
(1,049,157)
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|
(3,141,603)
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Lease obligations excluding current installments
|
$
|
1,093,739
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|
$
|
5,245,562
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The following table presents aggregate lease maturities as of December 31, 2018:
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Capital
Leases
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Operating
Leases
|
2019
|
$
|
1,431,296
|
|
$
|
4,296,528
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2020
|
719,074
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|
2,663,588
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2021
|
427,967
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|
1,450,505
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2022
|
153,798
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|
906,176
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2023
|
—
|
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461,453
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2024 and thereafter
|
—
|
|
157,021
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Total minimum lease payments
|
2,732,135
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|
$
|
9,935,271
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Less amount representing interest
|
(271,361)
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Present value of net minimum capital lease payments
|
2,460,774
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Less current installments of obligations under capital leases
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(1,263,375)
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Obligations under capital leases excluding current installments
|
$
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1,197,399
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AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Supplemental cash flow information related to leases is as follows:
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Three Months Ended
March 31, 2019
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Cash paid for amounts included in the measurement of lease liabilities:
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Operating cash flows from operating leases
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$
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865,725
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|
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(6) Debt
In March 2015, we entered into a credit agreement (the Credit Agreement) providing for financing comprised of (i) a senior secured term loan facility (the Term Loan) of $20,000,000, and (ii) a senior secured revolving credit facility (the Revolver) that was subsequently amended to a borrowing limit of $15,000,000, and which includes a $2,000,000 sublimit for the issuance of letters of credit. The Credit Agreement contains customary affirmative and negative covenants for financings of its type that are subject to customary exceptions. As of March 31, 2019, we were in compliance with all the reporting and financial covenants. In February 2017, the maturity date for both the Term Loan and the Revolver was extended to December 31, 2019. On December 26, 2018, we negotiated to extend the maturity date for both the Term Loan and the Revolver to
December 31, 2021.
The outstanding balance for the Term Loan as of March 31, 2019 was $12,590,549, net of unaccreted discount and deferred financing costs of $96,951, and the outstanding balance under the Revolver was $6,000,000. For the three months ended March 31, 2019, the weighted average interest rate used was 6.06% for the Term Loan and 6.75% for the Revolver.
The following table reflects the schedule of principal payments for the Term Loan as of March 31, 2019:
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Principal
Payments
|
Remainder of 2019
|
$
|
562,500
|
2020
|
750,000
|
2021
|
11,375,000
|
|
$
|
12,687,500
|
(7) Stock-Based Compensation
We grant stock-based incentive awards to attract, motivate and retain qualified employees (including officers), non-employee directors and consultants, and those of our affiliates. Awards granted under our 2012 Omnibus Incentive Compensation Plan (the 2012 Plan) include common stock options, restricted stock units (RSUs), performance-based restricted stock units (PSUs), and restricted stock awards. The 2002 Stock Option Plan (the 2002 Plan) expired in 2012 and we are no longer making grants under it. Information related to the 2012 Plan and the 2002 Plan as of March 31, 2019 is as follows:
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2012 Plan
|
|
2002 Plan
|
Shares of common stock authorized for issuance
|
9,646,696
|
|
4,939,270
|
Stock options outstanding
|
4,206,756
|
|
150,835
|
RSUs outstanding
|
1,148,739
|
|
—
|
PSUs outstanding
|
50,000
|
|
—
|
Shares available for future grant
|
129,135
|
|
—
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AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Stock Options
The fair value of option grants is estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
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Three Months Ended
March 31,
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|
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|
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2019
|
|
2018
|
Risk-free interest rate
|
|
|
|
|
*
|
|
2.71%
|
|
Expected volatility
|
|
|
|
|
*
|
|
31.22%
|
|
Expected dividend yield
|
|
|
|
|
*
|
|
—
|
Expected life in years
|
|
|
|
|
*
|
|
6.25
|
Weighted average fair value of options granted
|
|
|
|
|
*
|
|
$3.63
|
* There were no options granted during the three months ended March 31, 2019.
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The computation of expected volatility is based on historical volatility of comparable public companies. The volatility percentage represents the mean volatility of these companies. The computation of expected life was determined based on the simplified method. The risk-free interest rate is based on U.S. Treasury yields for zero-coupon bonds with a term consistent with the expected life of the options.
Information for the 2002 Plan and 2012 Plan is as follows:
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Options
Outstanding
|
|
Weighted Average
Exercise Price
|
Balance at December 31, 2018
|
4,447,185
|
|
$10.04
|
Granted
|
—
|
|
—
|
Exercised
|
(89,594)
|
|
3.59
|
Canceled
|
—
|
|
—
|
Expired
|
—
|
|
—
|
Balance at March 31, 2019
|
4,357,591
|
|
10.18
|
|
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|
March 31,
|
|
|
|
2019
|
|
2018
|
Total intrinsic value of options exercised
|
$
|
513,308
|
|
$
|
70,170
|
Weighted average exercise price of fully vested options
|
$
|
10.62
|
|
$
|
10.52
|
Weighted average remaining term of fully vested options
|
5.7 years
|
|
6.1 years
|
Total unrecognized compensation cost related to non-vested stock options
|
$
|
1,873,735
|
|
$
|
4,599,373
|
Weighted average period to recognize compensation cost related to non-vested stock options
|
2.3 years
|
|
2.4 years
|
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|
Options Outstanding
|
|
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|
|
|
Options Exercisable
|
|
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|
Exercise Price
Per Share
|
|
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|
Options
Outstanding
|
|
Weighted Average
Remaining
Contractual Life
|
|
Intrinsic
Value
|
|
Options
Exercisable
|
|
Weighted Average
Remaining
Contractual Life
|
|
Intrinsic
Value
|
$
|
2.31
|
-
|
$
|
3.74
|
.
|
275,320
|
|
4.8 years
|
|
$
|
1,573,022
|
|
226,558
|
|
4.3 years
|
|
$
|
1,332,625
|
4.13
|
-
|
7.20
|
.
|
673,092
|
|
6.9 years
|
|
1,344,515
|
|
409,868
|
|
6.2 years
|
|
935,702
|
8.07
|
-
|
12.62
|
.
|
1,454,021
|
|
7.0 years
|
|
559,533
|
|
1,022,283
|
|
6.4 years
|
|
486,562
|
13.00
|
-
|
15.90
|
.
|
1,955,158
|
|
5.3 years
|
|
—
|
|
1,955,158
|
|
5.3 years
|
|
—
|
|
|
|
|
4,357,591
|
|
|
|
$
|
3,477,070
|
|
3,613,867
|
|
|
|
$
|
2,754,889
|
AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Restricted Stock and Performance Stock Units
The following table is a summary of our RSU and PSU activity for the three months ended March 31, 2019:
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|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
Number
of RSU's
Outstanding
|
|
Number
of PSU's
Outstanding
|
|
Total
|
|
Weighted
Average
Grant Date
Fair Value
|
Balance at December 31, 2018
|
1,189,899
|
|
248,440
|
|
1,438,339
|
|
$8.58
|
Granted
|
131,669
|
|
—
|
|
131,669
|
|
9.69
|
Performance condition adjustment
|
—
|
|
793,760
|
|
793,760
|
|
—
|
Vested
|
(172,829)
|
|
(992,200)
|
|
(1,165,029)
|
|
8.69
|
Canceled
|
—
|
|
—
|
|
—
|
|
—
|
Balance at March 31, 2019
|
1,148,739
|
|
50,000
|
|
1,198,739
|
|
8.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
Total unrecognized compensation cost related to non-vested combined RSU/PSU
|
|
|
|
|
|
|
$8,454,582
|
Weighted average period to recognize compensation cost related to non-vested combined RSU/PSU
|
|
|
|
|
|
|
2.8 years
|
In 2017, we awarded 198,440 PSUs that entitle recipients to shares of our common stock if certain financial metrics are met for the fiscal year ending December 31, 2018. The PSUs entitle the recipients to an amount of shares of common stock that could range from 0% up to 500% of the number of units granted at the date of vesting depending on the level of achievement of the specified conditions. The financial metrics were achieved and the PSUs vested at 500% in March 2019.
(8) Income Taxes
Our income tax provision for the three months ended March 31, 2019 and 2018 reflects our estimate of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events that are recorded in the period in which they occur. The estimates are re-evaluated each quarter based on our estimated tax expense for the full fiscal year. The tax provision for the three months ended March 31, 2019 is primarily related to current foreign income taxes.
We have historically incurred operating losses and, given our cumulative losses and no history of profits, we have recorded a full valuation allowance against our deferred tax assets at March 31, 2019 and December 31, 2018.
We have a federal net operating loss (NOL) carryforward of $91,166,826 and $88,442,842 as of December 31, 2018 and 2017, respectively. We expect to be in a taxable loss position for 2019. The federal NOL carryforward will begin to expire in 2019.
I
f not used, these NOLs may be subject to limitation under Internal Revenue Code (IRC) Section 382 should there be a greater than 50% ownership change as determined under the regulations.
Under IRC Section 382, substantial changes in ownership may limit the amount of NOL carryforwards that may be utilized annually in the future to offset taxable income. We completed an IRC Section 382 study through June 30, 2016, which concluded that we have experienced several ownership changes, causing limitations on the annual use of NOL carryforwards. Provided there is sufficient taxable income, $2,131,290 of NOL carryforwards are expected to expire without utilization between 2019 and 2022. Additionally, our ability to use our NOL carryforwards to reduce future taxable income may be further limited as a result of any future equity transactions, including, but not limited to, an issuance of shares of stock or sales of common stock by our existing stockholders.
For state income tax purposes, we have state NOL carryforwards in a number of jurisdictions in varying amounts and with varying expiration dates from 2018 through 2038.
Tax benefits of uncertain tax positions are recognized only if it is more likely than not that we will be able to sustain a position taken on an income tax return. We have no liability for uncertain positions. Interest and penalties, if any, related to unrecognized tax benefits, would be recognized as income tax expense.
We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Tax years 2015 and forward remain open for examination for federal tax purposes and tax years 2014 and forward remain open for examination for our more significant state tax jurisdictions. To the extent utilized in future years’ tax returns, NOL carryforwards at December 31, 2019 will remain subject to examination until the respective tax year is closed.
AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On December 22, 2017, H.R. 1 (also, known as the Tax Cuts and Jobs Act (the Act)) was signed into law. Among its numerous changes to the Internal Revenue Code, the Act reduces U.S. federal corporate tax rate from 35% to 21%. As a result, we believe that the most significant impact on our consolidated financial statements was a reduction in deferred tax assets related to NOLs and other deferred tax assets. Such reduction was offset by an equal reduction to our valuation allowance. Additionally, we have full ownership of various foreign subsidiaries. At December 31, 2017 and November 2, 2017, the cumulative earnings and profits of these entities combined were negative. Accordingly, we are not liable for the transition tax enacted under the Act. The Act also introduced a tax on global intangible low-taxed income (GILTI), which had no impact on the 2018 year. We have completed the accounting for the tax impact of the Act as of December 31, 2018 and recorded no provisional amounts.
(9) Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
$
|
(3,323,063)
|
|
$
|
(5,413,837)
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
28,576,283
|
|
27,596,070
|
Basic and diluted net loss per share
|
|
|
|
|
$
|
(0.12)
|
|
$
|
(0.20)
|
Diluted net loss per share does not include the effect of the following antidilutive common equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Stock options outstanding
|
|
|
|
|
4,357,591
|
|
4,782,911
|
Restricted stock and performance stock units
|
|
|
|
|
1,198,739
|
|
1,451,534
|
|
|
|
|
|
5,556,330
|
|
6,234,445
|
(10) Commitments and Contingencies
Legal Proceedings
We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on our financial position, results of operations, or liquidity.
Indemnifications
Under the indemnification clauses of our standard customer agreements, we guarantee to defend and indemnify the customer against any claim based upon any failure to satisfy the warranty set forth in the contract associated with infringements of any patent, copyright, trade secret, or other intellectual property right. We do not expect to incur any infringement liability as a result of the customer indemnification clauses.
To the extent permitted under Delaware law, we have agreements whereby we indemnify our senior officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences so long as such officer or director may be subject to any possible claim. The maximum potential amount of future payments we could be required to make under these indemnification agreements is undetermined; however, we have director and officer insurance coverage that reduces our exposure and may enable us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.