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Secured Borrowings and Pledged Receivables
12 Months Ended
Dec. 31, 2014
Transfers of Financial Assets Accounted for as Secured Borrowings [Abstract]  
Secured Borrowings and Pledged Receivables
Secured Borrowings and Pledged Receivables
Pursuant to agreements entered into on April 23, 2012 with The Receivables Exchange ("TRE") and on November 26, 2013 with CapFlow Funding Group Managers LLC ("CapFlow), both of which are unrelated third parties, Wave has transferred certain accounts receivable to buyers which are accounted for as secured borrowings. The transferred receivables are classified as pledged receivables and Wave's obligation to repurchase the transferred receivables is presented as secured borrowings on the consolidated balance sheet. The carrying value of each secured borrowing approximates 85% of each associated pledged receivable and takes into consideration a 15% holdback provision per the TRE and CapFlow agreements. The customers' payment of the pledged receivables constitutes the repayment of the related amounts borrowed. The respective financial institution will then remit the remaining 15% holdback to Wave less interest. Beginning on November 26, 2013 Wave no longer transfers accounts receivable to TRE and utilizes CapFlow exclusively. The interest rate on the secured borrowings was 1.50% for every thirty days outstanding, or an annual effective rate of 18%.
With Wave's approval, CapFlow establishes arrangements with buyers providing for borrowings that are secured by our accounts receivable, and for which recourse exists against Wave. Wave can be required to repurchase the receivables under certain circumstances in case of specific defaults by our customers as set forth in the program terms. CapFlow acts as the servicing agent for receivables transferred to buyers. CapFlow collects the pledged receivables from Wave's customers and makes the repayment to the buyers on its behalf once the receivables are collected.
At December 31, 2014 and 2013, receivables totaling $0 and $1,683,188, respectively, were transferred to CapFlow, and TRE, respectively, remain uncollected and are subject to repurchase. The secured borrowings totaled $0 and $1,430,710 as of December 31, 2014 and 2013, respectively. Wave recognized $35,227 and $117,907 of interest expense associated with the secured borrowings for the years ended December 31, 2014 and 2013, respectively. Proceeds from the transfer of receivables are included in cash provided by operating activities in the consolidated statements of cash flows. Proceeds from the transfer of pledged receivables were $1,693,450 and $8,316,898 for the years ended December 31, 2014 and 2013, respectively. CapFlow and TRE collected $1,693,450 and $6,886,188 of pledged receivables in the years ended December 31, 2014 and 2013, respectively, which thereby reduced Wave's repurchase obligation and were accounted for as reductions of pledged receivables and secured borrowings on the consolidated balance sheet. No pledged receivables were repurchased by the Company during the years ended December 31, 2014 and 2013. The changes in pledged receivables and secured borrowings on the consolidated balance sheets are included within the change in accounts receivable on the consolidated statements of cash Flows.