10-Q
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
FORM 10-Q
_____________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from             to            .

Commission file number 001-36360
AMBER ROAD, INC.
(Exact name of registrant as specified in its charter)
Delaware
22-2590301
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
One Meadowlands Plaza, East Rutherford, NJ 07073
(Address and zip code of principal executive offices)
(201) 935-8588
(Registrant’s telephone number, including area code)
_____________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
x   (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨  No x
On April 30, 2016, the registrant had outstanding 26,346,987 shares of common stock, $0.001 par value per share.


 



AMBER ROAD, INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 2016
TABLE OF CONTENTS
 
 
Page
PART I. FINANCIAL INFORMATION
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

Amber Road, the Amber Road logo, Global Knowledge, Enterprise Technology Framework and other trademarks of Amber Road appearing in this report on Form 10-Q are the property of Amber Road. All other trademarks, service marks and trade names in this report on Form 10-Q are the property of their respective owners. We have omitted the ® and ™ designations, as applicable, for the trademarks used in this report on Form 10-Q.


2


CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, including those discussed in the section titled “Risk Factors”, set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 16, 2016, and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. As used in this report, the terms "Amber Road", "we", "us", and "our" mean Amber Road, Inc. and its subsidiaries unless the context indicates otherwise.


3


PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
AMBER ROAD, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
 
March 31,
 
December 31,
 
2016
 
2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
17,599,856

 
$
17,854,523

Accounts receivable, net
15,250,744

 
18,308,547

Unbilled receivables
302,424

 
1,024,861

Deferred commissions
3,805,502

 
3,767,432

Prepaid expenses and other current assets
2,608,900

 
2,003,849

Total current assets
39,567,426

 
42,959,212

Property and equipment, net
11,712,563

 
12,180,109

Goodwill
43,904,616

 
43,913,185

Other intangibles, net
7,290,001

 
7,673,661

Deferred commissions
6,578,094

 
7,007,518

Deposits and other assets
777,262

 
890,059

Total assets
$
109,829,962

 
$
114,623,744

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,553,483

 
$
1,451,463

Accrued expenses
9,450,025

 
8,805,159

Current portion of capital lease obligations
1,559,760

 
1,598,450

Deferred revenue
31,487,108

 
30,532,404

Current portion of term loan, net of discount and debt financing costs
312,086

 
312,086

Total current liabilities
44,362,462

 
42,699,562

Capital lease obligations, less current portion
1,554,503

 
1,916,944

Deferred revenue, less current portion
2,338,639

 
2,393,345

Term loan, net of discount and debt financing costs, less current portion
14,129,829

 
14,207,850

Revolving credit facility
3,250,000

 
5,000,000

Other noncurrent liabilities
4,423,028

 
3,909,728

Total liabilities
70,058,461

 
70,127,429

Commitments and contingencies (Note 11)


 


Stockholders’ equity:
 
 
 
Common stock, $0.001 par value; 100,000,000 shares authorized; issued and outstanding 26,346,987 and 26,260,459 shares at March 31, 2016 and December 31, 2015, respectively
26,347

 
26,261

Additional paid-in capital
182,941,280

 
181,457,089

Accumulated other comprehensive loss
(1,306,117
)
 
(783,209
)
Accumulated deficit
(141,890,009
)
 
(136,203,826
)
Total stockholders’ equity
39,771,501

 
44,496,315

Total liabilities and stockholders’ equity
$
109,829,962

 
$
114,623,744


See accompanying notes to condensed consolidated financial statements.

4


AMBER ROAD, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended
 
March 31,
 
2016
 
2015
Revenue:
 
 
 
Subscription
$
12,438,984

 
$
10,341,350

Professional services
4,525,688

 
4,852,775

Total revenue
16,964,672

 
15,194,125

Cost of revenue (1):
 
 
 
Cost of subscription revenue
5,049,875

 
4,388,240

Cost of professional services revenue
3,967,701

 
3,816,518

Total cost of revenue
9,017,576

 
8,204,758

Gross profit
7,947,096

 
6,989,367

Operating expenses (1):
 
 
 
Sales and marketing
5,495,541

 
5,715,141

Research and development
3,887,996

 
3,625,719

General and administrative
3,998,636

 
4,383,423

Total operating expenses
13,382,173

 
13,724,283

Loss from operations
(5,435,077
)
 
(6,734,916
)
Interest income
21,628

 
11,948

Interest expense
(200,380
)
 
(124,933
)
Loss before income taxes
(5,613,829
)
 
(6,847,901
)
Income tax expense
72,354

 
102,275

Net loss
$
(5,686,183
)
 
$
(6,950,176
)
 
 
 
 
Net loss per common share (Note 10):
 
 
 
Basic and diluted
$
(0.22
)
 
$
(0.27
)
Weighted-average common shares outstanding (Note 10):
 
 
 
Basic and diluted
26,440,343

 
25,959,332




 


(1) Includes stock-based compensation as follows:
 
 
 
 
Three Months Ended
 
March 31,
 
2016
 
2015
Cost of subscription revenue
$
207,711

 
$
194,552

Cost of professional services revenue
121,692

 
123,481

Sales and marketing
202,244

 
245,860

Research and development
266,015

 
306,694

General and administrative
550,859

 
846,712

 
$
1,348,521

 
$
1,717,299


See accompanying notes to condensed consolidated financial statements.

5


AMBER ROAD, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)

 
Three Months Ended
 
March 31,
 
2016
 
2015
Net loss
$
(5,686,183
)
 
$
(6,950,176
)
Other comprehensive loss:
 
 
 
Foreign currency translation
(522,908
)
 
(51,667
)
Total other comprehensive loss
(522,908
)
 
(51,667
)
Comprehensive loss
$
(6,209,091
)
 
$
(7,001,843
)
























See accompanying notes to condensed consolidated financial statements.

6


AMBER ROAD, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
 
March 31,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net loss
$
(5,686,183
)
 
$
(6,950,176
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
1,683,162

 
1,556,956

Bad debt expense
174,221

 
1,261

Stock-based compensation
1,348,521

 
1,717,299

Compensation related to puttable common stock

 
13,691

Acquisition related deferred compensation
283,977

 

Changes in fair value of contingent consideration liability
(20,000
)
 
(287,441
)
Non-cash interest expense related to debt

 
58,644

Amortization of debt financing costs and accretion of debt discount
15,729

 
9,060

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
2,886,825

 
2,337,994

Unbilled receivables
721,950

 
(360,182
)
Prepaid expenses and other assets
(215,749
)
 
(490,462
)
Accounts payable
71,753

 
(397,589
)
Accrued expenses
671,913

 
(2,208,237
)
Other liabilities
220,323

 
375,352

Deferred revenue
897,943

 
1,602,165

Net cash provided by (used in) operating activities
3,054,385

 
(3,021,665
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(87,003
)
 
(110,241
)
Addition of capitalized software development costs
(721,048
)
 
(254,755
)
Addition of intangible assets

 
(550,000
)
Acquisition, net of cash acquired

 
(25,593,426
)
Cash received (paid) for deposits

 
(992
)
Decrease in restricted cash
113,094

 

Net cash used in investing activities
(694,957
)
 
(26,509,414
)
Cash flows from financing activities:
 
 
 
Proceeds from revolving line of credit
3,250,000

 

Payments on revolving line of credit
(5,000,000
)
 

Proceeds from term loan

 
20,000,000

Payments on term loan
(93,750
)
 

Debt discount and financing costs

 
(183,854
)
Repayments on capital lease obligations
(401,131
)
 
(369,700
)
Proceeds from the exercise of stock options
135,756

 
986,182

Net cash provided by (used in) financing activities
(2,109,125
)
 
20,432,628

Effect of exchange rate on cash and cash equivalents
(504,970
)
 
(46,455
)
Net decrease in cash and cash equivalents
(254,667
)
 
(9,144,906
)
Cash and cash equivalents at beginning of period
17,854,523

 
41,242,200

Cash and cash equivalents at end of period
$
17,599,856

 
$
32,097,294

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
167,800

 
61,182

Non-cash property and equipment acquired under capital lease

 
618,946

Non-cash property and equipment and intangible asset purchases in accounts payable
27,681

 
35,683

Non-cash acquisition contingent consideration

 
2,251,000

See accompanying notes to condensed consolidated financial statements.

7


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, and Global Knowledge trade content database 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, Hong Kong, Shenzhen and Shanghai, China.
(2)
Summary of Significant Accounting Policies and Practices
(a) 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 in the United States (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement 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 the United Kingdom. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for other interim periods or future years. The consolidated balance sheet as of December 31, 2015 is derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. 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 filed with the Securities and Exchange Commission (SEC) on March 16, 2016.
(b) 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.
(c) Cash and Cash Equivalents
We consider all highly liquid investments with original maturities of three months or less at the balance sheet date to be cash equivalents. Cash and cash equivalents at March 31, 2016 and December 31, 2015 consists of the following:
 
March 31,
 
December 31,
 
2016
 
2015
Cash and cash equivalents
$
17,373,496

 
$
17,741,387

Money market accounts
226,360

 
113,136

 
$
17,599,856

 
$
17,854,523

(d) Fair Value of Financial Instruments and Fair Value Measurements
Our financial instruments consist of cash and 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.
We follow FASB accounting guidance on fair value measurements for financial assets and liabilities measured on a recurring basis. ASC 820, Fair Value Measurements, among other things, defines fair value, establishes a framework for measuring fair value, and requires disclosure about such fair value measurements. Assets and liabilities measured at fair value are based on one or more of three valuation techniques provided for in the standards.
The three value techniques are as follows:
Market Approach
—    Prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities;

8


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Income Approach
—     Techniques to convert future amounts to a single present amount based on market expectations     (including present value techniques and option pricing models); and
Cost Approach
—     Amount that currently would be required to replace the service capacity of an asset (often referred to as replacement cost).
The standards clarify that fair value is an exit price, representing the amount that would be received to sell an asset, based on the highest and best use of the asset, or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for evaluating such assumptions, the standards establish a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value as follows:
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 in which there is little or no market data, which require the reporting entity to develop its own assumptions about what market participants would use in pricing the asset or liability.
The following tables provide the financial assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2016 and December 31, 2015:
 
Fair Value Measurements at Reporting Date Using
March 31, 2016
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Cash equivalents - money market accounts
$
226,360

 
$
226,360

 
$

 
$

Restricted cash - money market accounts
56,141

 
56,141

 

 

Total assets measured at fair value on a recurring basis
$
282,501

 
$
282,501

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
Acquisition contingent consideration liability
$
1,239,531

 
$

 
$

 
$
1,239,531

Total liabilities measured at fair value on a recurring basis
$
1,239,531

 
$

 
$

 
$
1,239,531

 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Cash equivalents - money market accounts
$
113,136

 
$
113,136

 
$

 
$

Restricted cash - money market accounts
169,235

 
169,235

 

 

Total assets measured at fair value on a recurring basis
$
282,371

 
$
282,371

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
Acquisition contingent consideration liability
$
1,259,531

 
$

 
$

 
$
1,259,531

Total liabilities measured at fair value on a recurring basis
$
1,259,531

 
$

 
$

 
$
1,259,531

Acquisition contingent consideration liability is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement. The valuation of contingent consideration uses assumptions we believe would be made by a market participant. The reconciliation of the acquisition contingent consideration liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:
Balance at December 31, 2015
$
1,259,531

Mark to estimated fair value recorded as general and administrative expense
(20,000
)
Balance at March 31, 2016
$
1,239,531

(e) 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. We record unbilled receivables for contracts on which revenue has been recognized, but for which the customer has not yet been billed.

9


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


(f) 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 the global trade industry. We do not require collateral from our customers. For the three months ended March 31, 2016 and 2015, no customer accounted for more than 10% of our total revenue. As of March 31, 2016 and December 31, 2015, no customer accounted for more than 10% of our total accounts receivable.
(g) Revenue
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 have contract terms from, typically, three to five 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 provide our software as a service and follow the provisions of ASC Topic 605, Revenue Recognition (ASC 605) and ASC Topic 985, Software (ASC 985). We commence revenue recognition when all of the following conditions are met:
There is persuasive evidence of an arrangement;
The service has been or is being provided to the customer;
The collection of the fees is probable; and
The amount of fees to be paid by the customer is fixed or determinable.
The subscription fees typically begin the first month following contract execution, whether or not we have completed the solution’s implementation. In addition, typically, any services performed by us for our customers are not essential to the functionality of our products.
Subscription Revenue
Subscription revenue 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. 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
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.
Multiple-Deliverable Arrangements
We enter into arrangements with multiple deliverables that generally include subscription, professional services (primarily implementation) as well as transaction-related fees.
We allocate revenue to each element in an arrangement based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence (VSOE), if available, third party evidence (TPE), if VSOE is not available, or estimated selling prices (ESP), if neither VSOE nor TPE is available. As we have been unable to establish VSOE or TPE for the elements of its arrangements, we establish the ESP for each element primarily by considering the weighted average of actual sales prices of professional services sold on a standalone basis and subscription including various add-on modules if and when sold together without professional services, and other factors such as gross margin objectives, pricing practice and growth strategy. We have established processes to determine ESP and allocate revenue in multiple-deliverable arrangements using ESP.

10


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


For those contracts in which the customer accesses our software via an on-demand application, we account for these contracts in accordance with ASC 605-25, Revenue Recognition—Multiple- Element Arrangements. The majority of these agreements represent multiple-element arrangements, and we evaluate each element to determine whether it represents a separate unit of accounting. The consideration allocated to subscription is recognized as revenue ratably over the contract period. The consideration allocated to professional services is recognized as the services are performed, which is typically over the first three to six months of an arrangement.
For those contracts in which the customer takes possession of the software, we account for such transactions in accordance with ASC 985, Software. We account for these contracts as subscriptions and recognize the entire arrangement fee (subscription and services) ratably over the term of the agreement. In addition, as we do not have VSOE for services, any add-on services entered into during the term of the subscription are recognized over the remaining term of the agreement.
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 605. The amounts included in professional services revenue and cost of professional services revenue for the three months ended March 31, 2016 and 2015 were $149,208 and $104,467, respectively.
(h) 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 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.
(i) Deferred Commissions
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 the term of the related noncancelable customer contract and are recoverable through the related future revenue streams. Our commission costs deferred were $772,829 and $663,606 for the three months ended March 31, 2016 and 2015, respectively. Amortization of deferred commissions were $1,114,183 and $733,796 for the three months ended March 31, 2016 and 2015.
(j) Stock-Based Compensation
We recognize stock-based compensation as an expense in the condensed consolidated financial statements and measure that cost based on the estimated grant-date fair value using the Black-Scholes option pricing model.
(k) Geographic Information
Revenue by geographic area is as follows:
 
Three Months Ended
 
March 31,
Country
2016
 
2015
United States
$
13,221,005

 
$
12,456,150

International
3,743,667

 
2,737,975

Total revenue
$
16,964,672

 
$
15,194,125


11


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Long-lived assets by geographic area is as follows:
 
March 31,
 
December 31,
Country
2016
 
2015
United States
$
38,291,092

 
$
38,935,928

International
24,616,088

 
24,831,027

Total long-lived assets
$
62,907,180

 
$
63,766,955

(l) Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases, which requires that lease arrangements longer than 12 months result in an entity recognizing an asset and liability. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. We have not evaluated the impact of the updated guidance on our condensed consolidated financial statements.
In March, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Compensation-Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance also contains two practical expedients under which nonpublic entities can use the simplified method to estimate the expected term of an award and make a one-time election to switch from fair value measurement to intrinsic value measurement for liability-classified awards. We are evaluating the effect that ASU 2016-09 will have on our condensed consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases, which requires that lease arrangements longer than 12 months result in an entity recognizing an asset and liability. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. We have not evaluated the impact of the updated guidance on our condensed consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires an entity to record debt issuance costs as a direct deduction from the debt liability, rather than recording as a separate asset. The new standard is effective for annual reporting periods beginning after December 15, 2015. We implemented the provisions of ASU 2015-03 as of January 1, 2016. The application of this guidance decreased other assets and decreased current and long-term debt by $54,581 and $63,677, respectively, in the condensed consolidated balance sheet at December 31, 2015, and decreased other assets and decreased current and long-term debt by $54,581 and $50,033, respectively, in the condensed consolidated balance sheet at March 31, 2016.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting revenue gross versus net),” which clarifies gross versus net revenue reporting when another party is involved in the transaction. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” which amends the revenue guidance on identifying performance obligations and accounting for licenses of intellectual property. There are two transition methods available under the new standard, either cumulative effect or retrospective. The standard will be effective for us in the first quarter of 2018 and we are currently assessing which method we will choose for adoption and are evaluating the impact of the adoption on our condensed consolidated financial statements.
(3)
Acquisition
In March 2015, we acquired ecVision (International) Inc. (ecVision), a cloud-based provider of global sourcing and collaborative supply chain solutions for brand-focused companies. ecVision offers a cloud-based supply chain collaboration platform that optimizes product lifecycle and supply chain processes and their products help customers effectively manage their relationships with product suppliers, raw material vendors, product testing and social compliance audit firms, and global logistics companies. The acquisition of ecVision was accounted for under the purchase method of accounting and its operating results are included in the accompanying condensed consolidated financial statements from the date of acquisition.

12


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


As part of the purchase agreement, we will make an earnout payment of up to $5,176,000 on June 1, 2016 if certain GAAP revenue growth metrics were achieved from April 1, 2015 through March 31, 2016. For accounting purposes, the fair value of the contingent earnout consideration is classified within current liabilities in the condensed consolidated balance sheet and is being marked-to-market within general and administrative expense in the condensed consolidated statement of operations each quarter through March 2016, which is the end of the earnout period. At March 31, 2016, the fair value of the contingent earnout consideration was $0 since these metrics were not achieved.
In addition, on June 1, 2017, we will pay to ecVision’s former equityholders $3,675,000 if the founder of ecVision has not been terminated by us for “Cause” and if he has not left us without “Good Reason,” as such terms are defined in the merger agreement. The contingent retention consideration is classified within non-current liabilities in the condensed consolidated balance sheet and is being marked-to-market within general and administrative expense in the condensed consolidated statement of operations each quarter through March 2017, which is the end of the retention period. At March 31, 2016, the fair value of the contingent retention consideration was $1,239,531.
The revenue and net loss of the combined entity as if the acquisition date had been January 1, 2015 are as follows:
 
 
Three Months Ended
Supplemental pro forma information (unaudited):
 
March 31, 2015
Revenue
 
$
17,144,284

Net loss
 
(8,385,862
)
(4)
Consolidated Balance Sheet Components
Components of property and equipment, accrued expenses, deferred revenue and other noncurrent liabilities consisted of the following:
(a) Property and Equipment
 
March 31,
 
December 31,
 
2016
 
2015
Computer software and equipment
$
16,598,029

 
$
15,584,883

Software development costs
12,248,544

 
12,651,316

Furniture and fixtures
1,974,016

 
2,140,523

Leasehold improvements
2,945,018

 
3,081,861

Total property and equipment
33,765,607

 
33,458,583

Less: accumulated depreciation and amortization
(22,053,044
)
 
(21,278,474
)
Total property and equipment, net
$
11,712,563

 
$
12,180,109

Depreciation and amortization expense related to property and equipment was $1,302,813 and $1,306,601 for the three months ended March 31, 2016 and 2015, respectively.
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. Capitalized software costs were $721,048 and $254,755 for the three months ended March 31, 2016 and 2015, respectively. Amortization expense was $466,731 and $556,147 for the three months ended March 31, 2016 and 2015, respectively, and is included in cost of subscription revenue on the accompanying condensed consolidated statements of operations. As of March 31, 2016 and December 31, 2015, capitalized software costs not yet subject to amortization were $1,004,055 and $290,155, respectively.








13


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


(b) Accrued Expenses
 
March 31,
 
December 31,
 
2016
 
2015
Accrued bonus
$
2,516,351

 
$
1,843,719

Accrued commission
3,045,007

 
2,989,495

Deferred rent
226,583

 
230,224

Accrued severance
123,737

 
293,828

Accrued professional fees
682,924

 
815,893

Accrued taxes
789,896

 
705,032

Accrued contingent consideration and acquisition compensation

 
29,000

Other accrued expenses
2,065,527

 
1,897,968

Total
$
9,450,025

 
$
8,805,159

(c) Deferred revenue
 
March 31,
 
December 31,
 
2016
 
2015
Current:
 
 
 
Subscription revenue
$
30,159,287

 
$
28,766,188

Professional services revenue
1,327,821

 
1,455,578

Other

 
310,638

Total current
31,487,108

 
30,532,404

Noncurrent:
 
 
 
Subscription revenue
358,811

 
375,244

Professional services revenue
1,979,828

 
2,018,101

Total noncurrent
2,338,639

 
2,393,345

Total deferred revenue
$
33,825,747

 
$
32,925,749

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 that is being deferred and amortized over the remaining term of the related subscription contract related to customers who have taken possession of the software. See note 2(g).
(d) Other Noncurrent Liabilities
 
March 31,
 
December 31,
 
2016
 
2015
Deferred rent
$
1,952,930

 
$
1,732,607

Acquisition contingent consideration liability
1,239,531

 
1,230,531

Acquisition compensation costs
1,230,567

 
946,590

Total
$
4,423,028

 
$
3,909,728

(5)
Leases
We have several noncancelable operating leases that expire through 2022. These leases generally contain renewal options for periods ranging from three to five years and require us to pay all executory costs such as maintenance and insurance. Rental expense for operating leases for the three months ended March 31, 2016 and 2015 was approximately $945,000 and $748,000, respectively, and is allocated to various line items in the condensed consolidated statements of operations.
The carrying value of assets recorded under capital leases was $2,406,465 and $2,862,025 as of March 31, 2016 and December 31, 2015, respectively, which includes accumulated amortization of $4,477,215 and $4,021,656, respectively. Amortization of assets held under capital leases is allocated to various line items in the condensed consolidated statements of operations.


14


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of March 31, 2016 are as follows:
 
Capital
Leases
 
Operating
Leases
Remainder of 2016
$
1,315,165

 
$
3,522,630

2017
1,175,223

 
4,187,476

2018
506,395

 
3,096,591

2019
277,414

 
3,112,612

2020
100,399

 
2,295,700

2021 and thereafter

 
3,575,949

Total minimum lease payments
3,374,596

 
$
19,790,958

Less amount representing interest
(260,333
)
 
 
Present value of net minimum capital lease payments
3,114,263

 
 
Less current installments of obligations under capital leases
(1,559,760
)
 
 
Obligations under capital leases excluding current installments
$
1,554,503

 
 
(6)
Debt
In connection with the ecVision acquisition (Note 3), in March 2015 we entered into a 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 amended in November 2015 to allow for a borrowing limit of $10,000,000, and includes a $2,000,000 sublimit for the issuance of letters of credit. The maturity date of the credit agreement is March 4, 2018. The credit agreement contains customary affirmative and negative covenants for financings of its type that are subject to customary exceptions. As of March 31, 2016, we were in compliance with all the reporting and financial covenants.
The outstanding balance for the Term Loan as of March 31, 2016 was $14,441,915, net of unaccreted discount and deferred financing costs of $120,586 and the outstanding balance under the Revolver was $3,250,000. For the period ended March 31, 2016, the interest rate used was 4.14% for the Term Loan and 5.00% for the Revolver.
The following table reflects the schedule of principal payments for the Term Loan as of March 31, 2016:
 
Principal
Payments
Remainder of 2016
$
281,250

2017
656,250

2018
13,625,000

 
$
14,562,500

(7)
Stockholders' Equity
Common Stock
The following table presents our activity for common stock during the three months ended March 31, 2016:
 
Shares
 
Amount
Balance, December 31, 2015
26,260,459

 
$
26,261

Exercise of common stock options
68,758

 
69

Common stock issued for contingent consideration
6,506

 
6

Issuance of common stock for vested RSU's
11,264

 
11

Balance, March 31, 2016
26,346,987

 
$
26,347

(8)
Stock-based Compensation
Our 2012 Omnibus Incentive Compensation Plan (the 2012 Plan) allows us to grant common stock options, restricted stock units (RSUs), including performance-based restricted stock units (PSUs), and restricted stock awards to our employees (including officers), non-employee consultants and non-employee directors and those of our affiliates. As of March 31, 2016, we had authorized 5,146,696 awards to be issued under the 2012 Plan, had 3,779,344 options outstanding, 945,955 RSUs outstanding, of which 310,545 were PSUs, and 94,845 awards were available for future grant.

15


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Under our 2002 stock option plan (the 2002 Plan), we had 4,939,270 shares authorized and 764,825 options outstanding as of March 31, 2016. The 2002 Plan expired in 2012 and we are no longer making grants under it.
Stock Options
Under the 2002 Plan and the 2012 Plan, the fair value of option grants is estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
 
Three Months Ended
 
March 31,
 
2016
 
2015
Risk-free interest rate
1.29%
 
1.71 - 1.72%
Expected volatility
33.37%
 
37.41 - 39.32%
Expected dividend yield
 
Expected life in years
6.25
 
6.25
Weighted average fair value of options granted
$1.32
 
$3.35
The computation of expected volatility for each period is based on historical volatility of comparable public companies. The volatility percentage represents the mean volatility of these companies. The computation of expected life for each period 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:
 
Options
Outstanding
 
Exercise Price
Per Share
 
Weighted Average
Exercise Price
Balance at December 31, 2015
4,402,943

 
$1.75 - $15.90
 
$9.38
Granted
248,728

 
3.74
 
3.74

Exercised
(68,758
)
 
$1.75 - $4.06
 
1.97

Canceled

 
 

Expired
(38,744
)
 
$1.75
 
1.75

Balance at March 31, 2016
4,544,169

 
$1.75 - $15.90
 
9.25

The total intrinsic value of options exercised during the three months ended March 31, 2016 was $171,156. Options outstanding and exercisable under the 2002 Plan and the 2012 Plan at March 31, 2016 was as follows:
 
 
 
 
Options Outstanding
 
Options Exercisable
Exercise Price Per Share
 
Options
Outstanding
 
Weighted
Average
Remaining
Contractual
Life
 
Intrinsic
Value
 
Options
Exercisable
 
Weighted
Average Remaining
Contractual
Life
 
Intrinsic
Value
$
1.75

-
$ 2.68
 
763,175

 
4.0 years
 
$
2,321,046

 
729,775

 
3.9 years
 
$
2,229,864

$
2.74

-
$ 4.13
 
411,978

 
7.1 years
 
730,648

 
125,250

 
0.9 years
 
266,632

$
5.57

-
$ 9.06
 
1,194,878

 
8.5 years
 

 
428,644

 
8.1 years
 

$
12.62

-
$15.90
 
2,174,138

 
8.3 years
 

 
815,707

 
8.3 years
 

 
 
 
 
4,544,169

 
 
 
$
3,051,694

 
2,099,376

 
 
 
$
2,496,496

The weighted average exercise price and weighted average remaining term of fully vested options as of March 31, 2016 is $7.77 and 6.3 years, respectively.
As of March 31, 2016 and December 31, 2015, there was $10,491,971 and $11,268,573, respectively, of total unrecognized compensation expense related to non-vested stock options. That cost is expected to be recognized over a weighted average period of 2.5 years.






16


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Restricted Stock Units
The following table is a summary of our RSU activity for the three months ended March 31, 2016:
 
Number
of RSU's
Outstanding
 
Weighted Average
Grant Date
Fair Value
Balance at December 31, 2015
392,522

 
$8.07
Granted
635,410

 
3.74

Vested
(81,977
)
 
8.08

Canceled

 

Balance at March 31, 2016
945,955

 
5.16

Unvested RSUs at March 31, 2016 have a weighted-average grant date fair value of $5.16 per share. Unrecognized stock-based compensation with respect to non-vested RSUs was $2,293,535 as of March 31, 2016 and was expected to be recognized over a weighted-average period of 3.9 years.
(9)
Income Taxes
Our income tax provision for the three months ended March 31, 2016 and 2015 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, 2016 is primarily related to 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, 2016 and December 31, 2015.
We have a federal net operating loss (NOL) carryforward of approximately $73,533,000 and $64,600,000 as of December 31, 2015 and December 31, 2014, respectively. We expect to be in a taxable loss position for 2016. The federal NOL carryforward will begin to expire in 2019. For state income tax purposes, we have net operating loss carryforwards in a number of jurisdictions in varying amounts and with varying expiration dates from 2016 through 2035.
The Internal Revenue Code contains provisions that limit the yearly utilization of net operating loss carryforwards if there has been an ownership change, as defined. Such an ownership change, as described in Section 382 of the Internal Revenue Code, may limit our ability to utilize our net operating loss carryforwards on a yearly basis. As a result, to the extent that any single-year limitation is not utilized to the full amount of the limitation, such unused amounts are carried over to subsequent years until the earlier of its utilization or the expiration of the relevant carryforward period. We have not yet made a determination regarding the potential impact of these amounts.
We believe that we have not taken an uncertain tax position on prior tax filings and therefore have not recorded a liability for unrecognized tax benefits.
We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Tax years 2012 and forward remain open for examination for federal tax purposes and for our more significant state tax jurisdictions. To the extent utilized in future years tax returns, net operating loss carryforwards at December 31, 2015 will remain subject to examination until the respective tax year is closed. We are currently being audited by the Internal Revenue Service for the 2012 tax year. 
(10)
Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share:
 
Three Months Ended
 
March 31,
 
2016
 
2015
Basic and diluted net loss per share:
 
 
 
Numerator:
 
 
 
Net loss
$
(5,686,183
)
 
$
(6,950,176
)
Denominator:
 
 
 
Weighted average shares used in computing net loss
26,440,343

 
25,959,332

Basic and diluted net loss per share
$
(0.22
)
 
$
(0.27
)


17


AMBER ROAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Diluted net loss per share does not include the effect of the following antidilutive common equivalent shares:
 
Three Months Ended
 
March 31,
 
2016
 
2015
Stock options outstanding
4,544,169

 
4,402,943

Restricted stock units
945,955

 
392,522

 
5,490,124

 
4,795,465

(11)
Commitments and Contingencies
(a) 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 will not have a material adverse effect on our financial position, results of operations, or liquidity.
(b) Other
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.





18


Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2015 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 16, 2016. As discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below and in Item 1A in our Annual Report on Form 10-K.
Overview
As a leading provider of cloud based global trade management (GTM) solutions, our mission is to improve the way companies manage their international supply chains and conduct global trade. Our GTM solution automates the global supply chain across sourcing, logistics, cross-border trade, and regulatory compliance activities to dramatically improve operating efficiencies and financial performance. It combines enterprise-class software, trade content sourced from government agencies and transportation providers in 147 countries, and a global supply chain network connecting our customers with their trading partners, including suppliers, freight forwarders, customs brokers and transportation carriers. By automating more GTM processes, we enable our customers to enjoy significantly lower supply chain costs compared to legacy systems through faster and more predictable delivery times, less labor, reduced in-transit inventories, and reduced international trading costs such as brokerage fees, logistics fees, transportation costs and customs duties.
We deliver our GTM solution using a Software-as-a-Service (SaaS) model and leverage a highly flexible technology framework to quickly and efficiently meet our customers’ unique requirements around the world. It can be delivered in individual modules or as a suite, depending on our customers’ needs, utilizing a highly flexible technology framework.
We sell our GTM solution to many of the largest enterprises in the world, representing diversified industry verticals including Chemical/Pharmaceutical, High Technology/Electronics, Industrial/Manufacturing, Logistics, Oil & Gas, and Retail/Apparel. Our customers pay us subscription fees and implementation service fees for the use of our solutions under agreements that typically have an initial term of three to five years.
We believe that the growth of our business and our future success are dependent upon many factors, including our ability to innovate in the face of a rapidly changing technology landscape, manage our future growth effectively and in a cost effective manner, grow our customer base, expand deployment of our solution within existing customers and focus on customer satisfaction. Our management team continuously focuses on these and other challenges. However, we cannot assure you that we will be successful in addressing and managing these and the many challenges and risks that we face.
Key Metrics
We regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions.
Annualized Recurring Revenue Retention. We believe our annualized recurring revenue retention rate is an important metric to measure the long-term value of customer agreements with regard to revenue and billings visibility. We calculate our annualized recurring revenue retention rate by comparing, for a given quarter, subscription revenue for all customers in the corresponding quarter of the prior year to the subscription revenue from those same customers in the given quarter and calculating the average of the four quarters for the stated year. The annualized recurring revenue retention rate for the quarters ended March 31, 2016 and 2015 was 97% and 100%, respectively.
Adjusted EBITDA. EBITDA consists of net income (loss) plus depreciation and amortization, interest expense (income) and income tax expense (benefit). Adjusted EBITDA consists of EBITDA plus our non-cash stock-based compensation expense, the change in fair value of our warrant liability and contingent consideration liability, puttable stock compensation, severance costs, acquisition compensation costs, purchase accounting adjustment to deferred revenue and acquisition related costs. We use adjusted EBITDA as a measure of operating performance because it assists us in comparing performance on a consistent basis across reporting periods, as it removes from our operating results the impact of our capital structure. We believe adjusted EBITDA is useful to an investor in evaluating our operating performance because it is widely used to measure a company’s operating performance without regard to items such as depreciation and amortization, which can vary

19


depending upon accounting methods and the book value of assets, and to present a meaningful measure of performance exclusive of our capital structure and the method by which assets were acquired.
Adjusted EBITDA is a financial measure that is not calculated in accordance with generally accepted accounting principles, or GAAP. We have provided below a reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure. Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
Some of these limitations are:
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation;
adjusted EBITDA does not reflect interest or tax payments that may represent a reduction in cash available to us; and
other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Because of these and other limitations, you should consider adjusted EBITDA together with other GAAP-based financial performance measures, including various cash flow metrics, net loss and our other GAAP results.
The following table provides a reconciliation of net loss to adjusted EBITDA:
 
Three Months Ended
 
March 31,
 
2016
 
2015
Net loss
$
(5,686,183
)
 
$
(6,950,176
)
Depreciation and amortization
1,683,162

 
1,556,956

Interest expense
200,380

 
124,933

Interest income
(21,628
)
 
(11,948
)
Income tax expense
72,354

 
102,275

EBITDA
(3,751,915
)
 
(5,177,960
)
Stock-based compensation
1,348,521

 
1,717,299

Puttable stock compensation

 
13,691

Change in fair value of contingent consideration liability
(20,000
)
 
(287,441
)
Purchase accounting deferred revenue adjustment
69,095

 
261,268

Acquisition compensation costs
283,977

 
136,911

Acquisition related costs
5,420

 
731,483

Adjusted EBITDA
$
(2,064,902
)
 
$
(2,604,749
)
Components of Operating Results
Revenue
Revenue. We primarily generate revenue from the sale of subscriptions and subscription-related professional services. Our subscriptions are multi-year arrangements for software and content, and in certain instances include a transactional component. We derive professional services revenue from implementation, integration and other elements associated with solution and content subscriptions.
We typically invoice subscription customers in advance on an annual basis, with payment due upon receipt of the invoice. We reflect invoiced amounts on our balance sheet as accounts receivable or as cash when collected, and as deferred revenue until earned and recognized as revenue ratably over the performance period. Accordingly, deferred revenue represents the amount billed to customers that has not yet been earned or recognized as revenue, pursuant to agreements executed during current and prior periods, and does not reflect that portion of a contract to be invoiced to customers on a periodic basis for which payment is not yet due.

20


Subscription Revenue. We derive our subscription revenue from fees paid to us by our customers for access to our solution. We recognize the revenue associated with subscription agreements ratably on a straight-line basis over the term of the agreement, provided all criteria required for revenue recognition have been met.
Professional Services Revenue. Professional services revenue consists primarily of fees charged for implementation, integration, training and other services associated with the subscription agreements entered into with our customers. Generally, we charge for professional services to implement our solution on a time and materials basis.
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, software license fees, hosting costs, Internet connectivity, depreciation expenses directly related to delivering our solution, as well as amortization of capitalized software development costs. We generally expense our cost of subscription revenue as we incur the costs. Full year cost of subscription revenue for 2016 is expected to be consistent or higher compared to 2015 expenses.
Cost of Professional Services Revenue. Cost of professional services revenue consists primarily of personnel and related costs of our professional services team, including salaries, benefits, bonuses, payroll taxes, stock-based compensation, the costs of contracted third-party vendors, reimbursable expenses and depreciation, amortization and other allocated costs. 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. We expense our cost of professional services revenue as we incur the costs. Full year cost of professional services revenue for 2016 is expected to decrease compared to 2015 expenses.
Operating Expenses
Our operating expenses are classified into three categories: sales and marketing, research and development, and general and administrative.
Sales and Marketing. Sales and marketing expenses primarily consist of personnel and related costs for our sales and marketing staff, including salaries, benefits, commissions, bonuses, payroll taxes and stock-based compensation. It also includes the costs of promotional events, corporate communications, online marketing, solution marketing and other brand-building activities, in addition to depreciation, amortization and other allocated costs. When the initial customer contract is signed and upon any renewal, we capitalize and amortize commission costs as an expense ratably over the term of the related customer contract in proportion to the recognition of the subscription revenue. If a subscription agreement is terminated, we recognize the unamortized portion of any deferred commission cost as an expense immediately upon such termination. We believe that sales and marketing expenses for the full year 2016 as a percentage of revenue will be consistent with 2015 expenses.
Research and Development. Research and development expenses primarily consist of personnel and related costs of our research and development staff, including salaries, benefits, bonuses, payroll taxes, stock-based compensation and costs of certain third-party contractors, as well as depreciation, amortization and other allocated costs. We capitalize research and development costs related to the development of our solution modules and amortize them over their useful life. We have devoted our solution modules development efforts primarily to enhancing the functionality and expanding the capabilities of our solution. We believe that our research and development expenses for the full year 2016 as a percentage of revenue will be consistent with 2015 expenses.
General and Administrative. General and administrative expenses primarily consist of personnel and related costs for our executive, administrative, finance, information technology, legal, accounting and human resource staffs, including salaries, benefits, bonuses, payroll taxes and stock-based compensation, professional fees, other corporate expenses and depreciation, amortization and other allocated costs. We believe that general and administrative expenses for the full year 2016 will be consistent or higher than 2015 expenses as we grow our operations and operate as a public company.
Interest and Other Income (Expense)
Interest and other income (expense) consists primarily of interest income on our cash balances, and interest expense on outstanding debt and capital lease obligations.
Income Tax Expense
Because we have generated net losses in all periods to date and recorded a full valuation allowance against our deferred tax assets, we have historically not recorded a provision for federal or state income taxes. The tax provision for the three

21


months ended March 31, 2016 is exclusively related to actual foreign income taxes and is a result of the cost-plus transfer pricing agreements we have in place with our foreign subsidiaries, primarily in India and the United Kingdom. Realization of any of our deferred tax assets depends upon future earnings, the timing and amount of which are uncertain. Utilization of our net operating losses may be subject to annual limitations due to the ownership change rules under the Internal Revenue Code of 1986, as amended, and similar state provisions. We have not yet made a determination regarding the potential impact of these limitations. Moreover, in the event we have future changes in ownership, the availability of net operating losses could be further limited.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States. The preparation of condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the estimates and judgments used for revenue recognition, deferred revenue, stock-based compensation, goodwill, capitalized software costs, and income taxes have the greatest potential impact on our condensed consolidated financial statements, and consider these to be our critical accounting policies and estimates.
During the three months ended March 31, 2016, there were no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K that we filed with the SEC on March 16, 2016.
Recent Accounting Pronouncements
For detailed information regarding recently issued accounting pronouncements and the expected impact on our condensed consolidated financial statements, see Note 2, "Summary of Significant Accounting Policies" in the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of this Form 10-Q.


22


Results of Operations
The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of revenue. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.
 
Three Months Ended
 
March 31,
 
2016
 
2015
Revenue:
 
 
 
Subscription
$
12,438,984

 
$
10,341,350

Professional services
4,525,688

 
4,852,775

Total revenue
16,964,672

 
15,194,125

Cost of revenue:
 
 
 
Cost of subscription revenue
5,049,875

 
4,388,240

Cost of professional services revenue
3,967,701

 
3,816,518

Total cost of revenue
9,017,576

 
8,204,758

Gross profit
7,947,096

 
6,989,367

Operating expenses:
 
 
 
Sales and marketing
5,495,541

 
5,715,141

Research and development
3,887,996

 
3,625,719

General and administrative
3,998,636

 
4,383,423

Total operating expenses
13,382,173

 
13,724,283

Loss from operations
(5,435,077
)
 
(6,734,916
)
Interest income
21,628

 
11,948

Interest expense
(200,380
)
 
(124,933
)
Loss before income taxes
(5,613,829
)
 
(6,847,901
)
Income tax expense
72,354

 
102,275

Net loss
$
(5,686,183
)
 
$
(6,950,176
)


 
Three Months Ended
 
March 31,
 
2016
 
2015
Revenue:
 
 
 
Subscription
73
 %
 
68
 %
Professional services
27

 
32

Total revenue
100

 
100

Cost of revenue:
 
 
 
Cost of subscription revenue (1)
41

 
42

Cost of professional services revenue (1)
88

 
79

Total cost of revenue
53

 
54

Gross profit
47

 
46

Operating expenses:
 
 
 
Sales and marketing
32

 
38

Research and development
23

 
24

General and administrative
24

 
29

Total operating expenses
79

 
91

Loss from operations
(32
)
 
(45
)
Interest income
0

 
0

Interest expense
(1
)
 
(1
)
Loss before income taxes
(33
)
 
(46
)
Income tax expense
0

 
1

Net loss
(33
)%
 
(47
)%
(1) The table shows cost of revenue as a percentage of each component of revenue.
 
 
 



23


Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015
Revenue:
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
Change
 
2016
 
2015
 
$
 
%
Subscription
$
12,438,984

 
$
10,341,350

 
$
2,097,634

 
20.3
 %
Professional services
4,525,688

 
4,852,775

 
(327,087
)
 
(6.7
)%
Total revenue
$
16,964,672

 
$
15,194,125

 
$
1,770,547

 
11.7
 %
Subscription Revenue. The increase was primarily related to an increase in both enterprise and mid-market customers for the three months ended March 31, 2016 compared to 2015. Our increase in customer count is related to our sales and marketing efforts. Also, the increase in revenue was aided by the recognition of a full quarter of revenue from ecVision in 2016 compared to one month in 2015. We acquired ecVision in March 2015.
Professional Services Revenue. The decrease in professional services revenue was primarily due to less demand for our services from both new and existing customers offset by an increase due to recognition of a full quarter of revenue from ecVision in 2016 compared to one month in 2015.
Total Revenue. Revenue from international customers accounted for 22% and 18% of total revenue for the three months ended March 31, 2016 and 2015, respectively. For the three months ended March 31, 2016 and 2015, no customer accounted for more than 10% of total revenue.
Cost of Revenue:
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
Change
 
2016
 
2015
 
$
 
%
Cost of subscription revenue
$
5,049,875

 
$
4,388,240

 
$
661,635

 
15.1
%
Cost of professional services revenue
3,967,701

 
3,816,518

 
151,183

 
4.0
%
Total cost of revenue
$
9,017,576

 
$
8,204,758

 
$
812,818

 
9.9
%
Cost of Subscription Revenue. The increase in dollar amount was primarily the result of higher employee costs of $0.4 million and higher depreciation, amortization and other allocated costs of $0.2 million.
Cost of Professional Services Revenue. The increase in dollar amount was primarily for higher employee costs of $0.3 million offset by a $0.2 million decrease for employee-related costs transferred to research and development as our professional services organization temporarily assisted our engineering team.
Operating Expenses:
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
Change
 
2016
 
2015
 
$
 
%
Sales and marketing
$
5,495,541

 
$
5,715,141

 
$
(219,600
)
 
(3.8
)%
Research and development
3,887,996

 
3,625,719

 
262,277

 
7.2
 %
General and administrative
3,998,636

 
4,383,423

 
(384,787
)
 
(8.8
)%
Total operating expenses
$
13,382,173

 
$
13,724,283

 
$
(342,110
)
 
(2.5
)%
Sales and Marketing Expenses. The decrease in dollar amount was primarily due to lower costs of $0.3 million for North American and European marketing events and lower travel and recruiting costs of $0.2 million offset by higher commission costs of $0.3 million.
Research and Development Expenses. The increase in dollar amount was the result of higher employee costs of $0.4 million, higher acquisition-related compensation costs of $0.1 million and an increase of $0.2 million for employee-related costs transferred from our professional services organization as they temporarily assisted our engineering team. This was offset by a decrease of $0.5 million for higher employee costs capitalized in the three months ended March 31, 2016 compared to 2015.
General and Administrative Expenses. The decrease in dollar amount was primarily for lower stock compensation costs of $0.3 million, lower professional fees of $0.6 million and lower depreciation, amortization and other allocated costs of $0.2 million. This was offset by increases of $0.2 million in rent, $0.3 million for fair value mark-to-market treatment for contingent consideration related to the ecVision acquisition in March 2015 and $0.2 million in employee compensation costs.

24


Income Tax Expense:
 
 
 
 
 
 
Three Months Ended March 31,
 
Change
 
2016
 
2015
 
$
 
%
Income tax expense
$
72,354

 
$
102,275

 
(29,921
)
 
(29.3
)%
Income Tax Expense. Income tax expense is primarily related to our foreign operations.
Liquidity and Capital Resources
 
Three Months Ended
 
March 31,
 
2016
 
2015
Cash provided by (used in):
 
 
 
Operating activities
$
3,054,385

 
$
(3,021,665
)
Investing activities
(694,957
)
 
(26,509,414
)
Financing activities
(2,109,125
)
 
20,432,628

 
 
 
 
 
March 31,
 
December 31,
 
2016
 
2015
Cash and cash equivalents
$
17,599,856

 
$
17,854,523

Accounts receivable, net
$
15,250,744

 
$
18,308,547

Historically, we have financed our operations through the sale of preferred stock and borrowing from credit facilities. In March 2014, we closed our IPO and received proceeds of $53.1 million, net of underwriting discounts, commissions and offering expenses. Our principal sources of liquidity are our cash and cash equivalents, our accounts receivable, cash from operations and borrowings from our credit facility. We bill our customers in advance for annual subscriptions, while professional services are typically billed on a monthly basis as services are performed. As a result, the amount of our accounts receivable at the end of a period is driven significantly by our annual subscription and professional services billings for the last month of the period, and our cash flows from operations are affected by our collection of amounts due from customers for subscription and professional services billings that resulted in the recognition of revenue in a prior period.
Net Cash Flows from Operating Activities
For the three months ended March 31, 2016, net cash provided by operating activities was $3.1 million, which reflects our net loss of $5.7 million, adjusted for non-cash charges of $3.5 million consisting primarily of $1.3 million for stock-based compensation and $1.7 million for depreciation and amortization. Additionally, we had a $5.3 million increase in our working capital accounts consisting primarily of a decrease of $2.9 million in accounts receivable, a net increase in accrued expenses and other liabilities of $0.9 million, and an increase in deferred revenue of $0.9 million.
For the three months ended March 31, 2015, net cash used in operating activities was $3.0 million, which reflects our net loss of $7.0 million, adjusted for non-cash charges of $3.1 million consisting primarily of $1.7 million for stock-based compensation and $1.6 million for depreciation and amortization. Additionally, we had a $0.9 million increase in our working capital accounts consisting primarily of an increase of $2.3 million in accounts receivable that was primarily related to the ecVision acquisition and an increase of $1.6 million in deferred revenue. This was offset by a decrease in accounts payable and accrued expenses of $2.6 million.
Our deferred revenue was $33.8 million at March 31, 2016 and $32.9 million at December 31, 2015. The increase in deferred revenue reflects the timing of invoicing to new and existing customers offset by amortization of previously billed subscription agreements. Customers are invoiced annually in advance for their annual subscription fee and the invoices are recorded in accounts receivable and deferred revenue, which is then recognized ratably over the term of the subscription agreement. With respect to professional services fees, customers are invoiced as the services are performed, and the invoices are recorded in accounts receivable. Where appropriate based on revenue recognition criteria, professional services invoices are initially recorded in deferred revenue, which are then recognized ratably over the remaining term of the subscription agreement.
Net Cash Flows from Investing Activities
For the three months ended March 31, 2016, net cash used in investing activities was $0.7 million and consist of various capital expenditures of $0.1 million and capitalization of $0.7 million of software development costs. In general, our capital expenditures are for our network infrastructure to support our increasing customer base and growth in new business and for internal use, such as equipment for our employees.

25


For the three months ended March 31, 2015, net cash used in investing activities was $26.5 million, of which $25.6 million is related to the acquisition of ecVision. Investing activities also consist of various capital expenditures of $0.1 million and capitalization of $0.3 million of software development costs. In general, our capital expenditures are for our network infrastructure to support our increasing customer base and growth in new business and for internal use, such as equipment for our increasing employee headcount.
Net Cash Flows from Financing Activities
For the three months ended March 31, 2016, net cash used in financing activities was $2.1 million and consists of net payments for our revolving credit facility of $1.8 million and capital lease repayments of $0.4 million.
For the three months ended March 31, 2015, net cash provided by financing activities was $20.4 million and consists of proceeds from our term loan of $20.0 million and $1.0 million in proceeds from the exercise of stock options. This was offset for capital lease repayments of $0.4 million and costs of $0.2 million related to the term loan.
Credit Agreement
In connection with the ecVision acquisition (Note 3), in March 2015 we entered into a 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 amended in November 2015 to allow for a borrowing limit of $10,000,000, and includes a $2,000,000 sublimit for the issuance of letters of credit. The maturity date of the credit agreement is March 4, 2018. The credit agreement contains customary affirmative and negative covenants for financings of its type that are subject to customary exceptions. As of March 31, 2016, we were in compliance with all the reporting and financial covenants.
The outstanding balance for the Term Loan as of March 31, 2016 was $14,441,915, net of unaccreted discount of $120,586 and the outstanding balance under the Revolver was $3,250,000. For the period ended March 31, 2016, the interest rate used was 4.14% for the Term Loan and 5.00% for the Revolver.
Off-Balance Sheet Arrangements
As of March 31, 2016, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Other than our operating leases for office space, we do not engage in off-balance sheet financing arrangements. Our operating lease arrangements do not and are not reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital resources and capital expenditures. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.
Capital Resources
Historically, we have incurred net losses and negative cash flows from operations and have an accumulated deficit of $141,890,009 as of March 31, 2016. Our primary sources of liquidity have been proceeds from our IPO, cash and cash equivalents, accounts receivable, cash from operations and borrowings from our credit facility.
Additional financing may be required for us to successfully implement our growth strategy. There can be no assurance that additional financing, if needed, can be obtained on terms acceptable to us. Our ability to maintain successful operations will depend on, among other things, new business, the retention of customers, and the effectiveness of sales and marketing initiatives. If anticipated revenue growth is not achieved, we may be required to curtail spending to reduce cash outflows.
Based upon our existing cash balance, borrowings and our projected operating results, management believes that we have adequate resources to satisfy our liquidity requirements through at least the first half of 2017.


26


Item 3.    Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk. We bill our customers predominately in U.S. dollars and receive payment predominately in U.S. dollars. However, because most of our international sales are denominated in the currency of the country where the purchaser is located, as we continue to expand our direct sales presence in international regions, the portion of our accounts receivable denominated in foreign currencies may continue to increase. Historically, our greatest accounts receivable foreign currency exposure has been related to revenue denominated in Euros. In addition, we incur significant costs related to our operations in India in Rupees and since our acquisition of EasyCargo in 2013 and ecVision in 2015, we also have foreign currency risk related to our operations in China in Renminbi and in Hong Kong dollars. As a result of these factors, our results of operations and cash flows are and will increasingly be subject to fluctuations due to changes in foreign currency exchange rates.
Interest Rate Sensitivity. Interest income is sensitive to changes in the general level of U.S. interest rates. However, based on the nature and current level of our investments, which are primarily cash and cash equivalents, we believe there is no material risk of exposure. Although interest expense related to our Senior Facilities is sensitive to changes in the Prime rate and the LIBOR rate, we believe that we have no material risk of exposure.
Item 4.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended, an evaluation as of March 31, 2016 was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of March 31, 2016, were effective for the purposes stated above.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

27


PART II. OTHER INFORMATION
Item 1.    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 will not have a material adverse effect on our financial position, results of operations, or liquidity.
Item 1A.    Risk Factors
There have been no material changes to the Risk Factors we previously disclosed in our annual report on Form 10-K for the year ended December 31, 2015, which was filed with the Securities and Exchange Commission on March 16, 2016.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
During the three months ended March 31, 2016, we issued 6,506 shares of common stock in full satisfaction of provisions of the EasyCargo purchase agreement. The issuance of such shares of common stock was exempt from the registration requirement of the Securities Act pursuant to Section 4(a)(2) thereof.
Use of Proceeds
As of March 31, 2016, we have used a portion of the proceeds from our IPO in 2014 for the repayment of debt and general corporate purposes including the purchase price for the acquisition of ecVision. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to rule 424(b) under the Securities Act on March 24, 2014.
Item 3.    Defaults Upon Senior Securities
None.
Item 4.    Mine Safety Disclosures
Not applicable.
Item 5.    Other Information
On May 5, 2016, we entered into an employment agreement with our Chief Executive Officer and President, James W. Preuninger, which replaced his prior employment agreement dated March 3, 2014 that had expired on March 3, 2016. The May 5, 2016 employment agreement is identical to the March 3, 2014 employment agreement in all respects, with the following exceptions, (i) a term of employment through December 31, 2018 with successive two-year extensions unless either party provides written notice of non-renewal at least six (6) months before the end of the then-current term of employment, (ii) a base salary adjustment to reflect a prior 2015 increase, (iii) inclusion of non-renewal by the Company as an event upon which specified compensation (including certain equity vesting) would be owed to Mr. Preuninger, similar to termination by the Company without cause or termination by Mr. Preuninger with good reason, (iv) new provisions addressing recoupment and claw-back, and (v) modification to the Confidential Information, Assignment of Rights, Non-Solicitation and Non-Competition Agreement between the Company and Mr. Preuninger (Exhibit B to the employment agreement) to increase the timeframe for non-solicitation and non-competition, upon expiration or termination, from twelve (12) months to twenty-four (24) months. The May 5, 2016 employment agreement is filed herewith as Exhibit 10.1.
Item 6.    Exhibits
See exhibits listed under the Exhibit Index below.

28


SIGNATURE

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

 
AMBER ROAD, INC.
 
 
 
Date: May 9, 2016
By:
/s/ THOMAS E. CONWAY
 
 
Thomas E. Conway
 
 
Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)



























29


EXHIBIT INDEX

Exhibit
Number
 
Description
10.1*#
 
Employment Agreement, dated May 5, 2016 between Amber Road, Inc. and James W. Preuninger
31.1*
 
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2*
 
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1**
 
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350
32.2**
 
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350
101.INS†
 
XBRL Instance Document
101.SCH†
 
XBRL Taxonomy Extension Schema Linkbase Document
101.CAL†
 
XBRL Taxonomy Calculation Linkbase Document
101.DEF†
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB†
 
XBRL Taxonomy Label Linkbase Document
101.PRE†
 
XBRL Taxonomy Presentation Linkbase Document
 
 
 
# Indicates management contract or compensatory plan or agreement
* Filed herewith
** Furnished herewith
† In accordance with Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act, is deemed not filed for purposes of section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.
















30