Branded Payment Solutions Acquisition

12 Months Ended

Dec. 31, 2012

Branded Payment Solutions Acquisition

Branded Payment Solutions Acquisition

3. Branded Payment Solutions Acquisition

On May 23, 2012, the Company acquired all of the outstanding shares of Branded Payment Solutions Limited (“BPS”) for a purchase price of approximately $3.4 million consisting of approximately $1.8 million in cash and $1.6 million in equity or 488,337 shares of Common Stock of $0.01 par value each of Planet Payment, Inc. issued to the BPS shareholders. Of the 488,337 consideration shares, 72,887 (valued on the date of closing at $0.2 million) are subject to certain technology development milestones. The fair value of the shares was determined on the date of closing and will not change. The Company believes that it is probable that the technology milestones will be achieved.

The acquisition of BPS expands the scope of the Company’s global technology solutions. Planet Payment currently interfaces with the merchant’s point of sale through its proprietary, currency-neutral, payment processing technology platform, but does not provide applications on the point of sale. With the acquisition of BPS, the Company will be able to implement new and innovative solutions that can sit alongside and communicate with existing point of sale applications. In addition, BPS operates a prepaid debit card program in Europe targeted at shopping malls and other private label initiatives.

The Company expensed approximately $0.1 million of professional fees associated with the acquisition for the year ended December 31, 2012, which is classified in selling, general and administrative expenses.

This business combination resulted in the total purchase price being allocated on a preliminary basis to the assets acquired and liabilities assumed according to their estimated fair values at the date of acquisition with the remaining unallocated purchase price recorded as goodwill as follows:

Current assets	$	818,601
Property and equipment	29,758
Non-current assets	113,603
Developed technology	2,796,411
Goodwill	335,791
Total assets acquired	4,094,164
Total liabilities assumed	(672,684		)
Net assets acquired	$	3,421,480

Included in current assets is approximately $0.2 million of cash acquired.

The amount allocated to developed technology (the acquired intangible asset) is $2.8 million. The fair values assigned to developed technology was determined primarily by using the income approach, which discounts expected future cash flows to present value using estimates and assumptions determined by management. The acquired identifiable intangible assets are being amortized on a straight-line basis over five years, which approximates the pattern in which the assets are utilized, over their estimated useful lives.

Goodwill represents the excess of the purchase price over the fair values of the acquired net tangible and intangible assets. In accordance with the provisions of ASC 350, goodwill is not amortized but will be tested for impairment at least annually. The allocated value of goodwill of $0.3 million primarily relates to the anticipated synergies resulting from adding BPS to our current products and the acquired workforce. The goodwill amount has been assigned to the payment processing services segment. Neither the acquired goodwill nor intangible assets are deductible for tax purposes.

The liabilities assumed includes a $0.3 million deferred tax liability that relates primarily to the future amortization of acquired intangibles offset by a $0.2 million deferred tax asset that relates primarily to acquired net operating loss carryovers.

The purchase price allocations for the BPS acquisition are provisional and are based on the information that was available as of the acquisition date to estimate the fair values of assets acquired and liabilities assumed. The purchase price allocation for this acquisition as reported as of December 31, 2012 represents the Company’s best estimates of the fair values and was based upon the information available to us. The Company is gathering and reviewing additional information necessary to finalize the value assigned to the acquired assets and liabilities assumed, as well as acquired identified intangible assets and goodwill. Therefore, the provisional measurements of fair values reported as of December 31, 2012 are subject to change. The Company is expected to finalize the purchase price allocations as soon as practicable but no later than one year from the respective acquisition date.  During the three months ended December 31, 2012, the Company recorded an adjustment to decrease goodwill in the amount of $0.3 million, of which, $0.2 million relates to the finalization of pre-acquisition research and development credits calculation that BPS is entitled to receive.

The results of BPS were included in our consolidated statement of operations from the date of acquisition. BPS revenue and net loss from the date of acquisition through December 31, 2012, were $0.3 million and $1.1 million, respectively. On June 18, 2012, the name BPS was changed to Planet Payment Solutions Limited.

Unaudited Pro Forma Summary of Operations

The accompanying unaudited pro forma summary represents our consolidated results of operations as if the acquisition of BPS had been completed as of January 1, 2011. The unaudited pro forma financial information includes the accounting effects of the business combination, including adjustments to the amortization of intangible assets and professional fees associated with the acquisition. The unaudited pro forma results do not include any operating efficiencies or potential cost savings which may result from the business combination.  Accordingly, such unaudited pro forma information does not necessarily reflect the actual results that would have been achieved, nor is it necessarily indicative of our future consolidated results.

	Year endedDecember 31,
	2012			2011
Net revenue	$	43,817,208		$	47,688,000
Net (loss) income	(4,791,408		)	3,130,964
Basic net (loss) income per share	(0.09		)	0.06
Diluted net (loss) income per share	(0.09		)	0.05