|6 Months Ended|
Jun. 30, 2017
|Loans Receivable [Abstract]|
4. LOANS RECEIVABLE
Loans receivable as of June 30, 2017 and December 31, 2016 consisted of the following:
Loans to employees bear interest at rates between 2% and 3% per annum. As of June 30, 2017 and December 31, 2016, the value of the collateral was below the value of the outstanding loans to employees. As a result, the Company recorded a reserve on the balance of loans to employees of $891 as of June 30, 2017 and December 31, 2016. These employees are considered related parties (refer to Note 13, Related Parties, for further detail).
During the six months ended June 30, 2017, the Company loaned an additional $126 to a third party.
On April 25, 2017, the Company sold 80.1% of the assets associated with its AWS Entities subsidiaries (refer to Note 3, Disposals of Subsidiaries, for further detail). In connection with the sale, the Company received from the buyer a one-year convertible promissory note in the principal amount of $2,000, which included a loan premium of $231. This note accrues interest at a rate of 8% per annum. The interest income, including amortization of loan premium, associated with this loan receivable during the three and six months ended June 30, 2017 amounted to $71, and is included in interest expense on the unaudited condensed consolidated income statements for the three and six months ended June 30, 2017.
The Company evaluated the convertible note’s settlement provisions and determined that the voluntary conversion feature and fundamental transaction clauses met the criteria to be classified as embedded derivatives as set forth in ASC 815, Derivatives and Hedging. On April 25, 2017, the Company used a Monte Carlo simulation to value the settlement features. The Company ascribed a value of $231 related to the conversion feature as a derivative asset and recorded this item on the consolidated balance sheets within other assets.
On June 30, 2017, the Company used a Monte Carlo simulation to value the settlement features of the convertible note and determined the fair value to be $457. The Company recorded the change in fair value as a gain of $226 on the unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2017.
The fair value of the derivative asset as of June 30, 2017 was calculated using a Monte Carlo simulation with the following factors, assumptions and methodologies:
The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.
Reference 1: http://www.xbrl.org/2003/role/presentationRef