Rendering
Component: (Network and Table) |
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Network | 0027 - Disclosure - 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Policies) (http://alanco.com/role/NatureOfOperationsAndSignificantAccountingPoliciesPolicies) |
Table | (Implied) |
Slicers (applies to each fact value in each table cell)
Reporting Entity [Axis] | 0000098618 (http://www.sec.gov/CIK) |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | Period [Axis] |
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2011-07-01 - 2012-06-30 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Nature of
Operations - Alanco Technologies, Inc. was incorporated in Arizona in 1969.
Alanco Technologies, Inc. and subsidiaries
(the Company) sold substantially all of the assets and certain liabilities of its operations (Alanco/TSI PRISM, Inc.
and StarTrak Systems, LLC) during fiscal year 2011 and at fiscal year end June 30, 2011 the Company was without operating entities. The
Company has stated in previous filings that its objective is to complete a merger (possibly a reverse merger) and remain an operating
publicly traded company. To that objective, on June 29, 2011 the Company announced that it had signed a definitive merger
agreement with YuuZoo Corporation (a private company with corporate offices in Singapore), subject to the completion of due diligence
and shareholder approval of both companies. The agreement was terminated on September 20, 2011 due to market conditions and Alancos
inability to complete its due diligence. Alanco began an operational restructuring in April 2012 with the formation
of a new subsidiary, Alanco Energy Services, Inc. (AES), for the purpose of obtaining property to establish a facility
for the treatment and disposal of large quantities of produced water generated by the oil and natural gas producers in Western
Colorado. See Note 5 - Alanco Energy Services for discussion of AES transactions. |
Principles of Consolidation | Principles of Consolidation
These consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the
United States (GAAP). The consolidated financial statements for the years ended June 30, 2012 and 2011 include, where
appropriate, the accounts of Alanco Technologies, Inc. and its wholly-owned subsidiaries, Alanco Energy Services, Inc., Alanco/TSI
PRISM, Inc. (ATSI), Excel/Meridian Data, Inc. (Excel), Fry Guy Inc. (Fry Guy) and StarTrak
Systems, LLC (StarTrak) (collectively, the Company). The operating results for ATSI, Excel
and StarTrak for fiscal year 2011 are presented as discontinued operations. All subsidiaries are Arizona corporations,
except for Alanco Energy Services, Inc., which is a Colorado corporation; Fry Guy Inc., which is a Nevada corporation; and StarTrak
Systems, LLC, which is a Delaware LLC. All significant intercompany accounts and transactions have been eliminated in
consolidation. |
Reclassifications | Reclassifications Certain
prior year balances have been reclassified in the accompanying consolidated financial statements to conform to the
current year presentation. |
Cash Equivalents | Cash Equivalents - The
Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. |
Other Receivables | Other Receivables
At June 30, 2012, the other receivables balance of $16,800 consists of $7,800 of accrued interest related to notes receivable and
$9,000 of miscellaneous billings for accounting services performed for a related party, American Citizenship Center, LLC. The
Company historically provided for potentially uncollectible receivables by use of the allowance method. An allowance for doubtful
accounts is provided based upon a review of the individual accounts outstanding and the Company's prior history of uncollectible
accounts. At June 30, 2012 and 2011, the other receivables balance had been reviewed and no receivable reserves were
deemed necessary. |
Notes Receivable | Notes Receivable
At June 30, 2012, the notes receivable balance of $400,000 ($250,000 current and $150,000 long-term) consisted of a $300,000 note
from American Citizenship Center, LLC (ACC) and a $100,000 note from Symbius Financial, Inc. (Symbius). The
Company historically provided for potentially uncollectible notes receivable by use of the allowance method. An allowance
for doubtful accounts is provided based upon a review of the individual notes outstanding and the Companys prior history
of uncollectible accounts. Interest income from notes receivable is recognized when earned. At June 30, 2012,
the notes receivable balance has been reviewed and no notes receivable reserves were deemed necessary. |
Marketable Securities - Restricted | Marketable Securities - Restricted
The Company determines the appropriate classification of its investments in marketable equity securities at the
time of acquisition and reevaluates such determinations at each balance sheet date. Marketable securities are classified as held
to maturity when the Company has the positive intent and ability to hold securities to maturity. Marketable securities that are
bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported
at fair value, with the unrealized gains and losses recognized in earnings. Marketable securities not classified as held to maturity
or as trading, are classified as available for sale, and are carried at fair value, with the unrecognized gains and losses, net
of tax, included in the determination of comprehensive income (loss) and reported in shareholders equity. The Company measures
and discloses its investments in marketable securities, which are classified as available for sale, at fair value on a recurring
basis, in accordance with the ASC. The cost of the securities sold is based on specific identification of the security.
The fair value of substantially
all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market
prices is based on similar types of securities that are traded in the market. |
Fair Value of Assets and Liabilities | Fair Value of Assets and Liabilities
The estimated fair values for assets and liabilities are determined at discrete points in time based on relevant information. The
Accounting Standards Codification (ASC) prioritizes inputs used in measuring fair value into a hierarchy of three
levels: Level 1 unadjusted quoted prices for identical assets or liabilities traded in active markets, Level 2
observable inputs other than quoted prices included within Level 1 such as quoted prices for similar assets or liabilities, quoted
prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the asset or liability; and Level 3 unobservable inputs in which little or no market activity
exists that are significant to the fair value of the assets or liabilities, therefore requiring an entity to develop its own assumptions
that market participants would use in pricing. These estimates involve uncertainties and cannot be determined with precision.
The carrying amounts of receivables, prepaid expenses, accounts payable, accrued liabilities, and notes payable approximate fair
value given their short-term nature and borrowing rates currently available to the Company for loans with similar terms and maturities.
The following are the classes of
assets and liabilities measured at fair value on a recurring basis at June 30, 2012, using quoted prices in active markets for
identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):
|
|
Level 1: |
|
|
|
|
|
|
|
|
Quoted Prices |
|
Level 2: |
|
|
|
|
|
|
in active |
|
Significant |
|
Level 3: |
|
Total |
|
|
Markets |
|
Other |
|
Significant |
|
at |
|
|
for Identical |
|
Observable |
|
Unobservable |
|
June 30, |
|
|
Assets |
|
Inputs |
|
Inputs |
|
2012 |
Marketable Securities - Restricted |
$ |
- |
$ |
3,572,600 |
$ |
- |
$ |
3,572,600 |
|
|
|
|
|
|
|
|
|
Asset Retirement Obligation |
|
- |
|
- |
|
410,000 |
|
410,000 |
|
|
|
|
|
|
|
|
|
Contigent Land Payment |
|
- |
|
- |
|
625,000 |
|
625,000 |
|
|
|
|
|
|
|
|
|
Contingent Purchase Price |
|
- |
|
- |
|
500,000 |
|
500,000 |
|
$ |
- |
$ |
3,572,600 |
$ |
1,535,000 |
$ |
5,107,600 |
|
Fair Value of Marketable Securities - Restricted | Fair Value of Marketable Securities
- Restricted The estimated fair values of Marketable Securities - Restricted are determined at discrete points
in time based on relevant market information. The Marketable Securities Restricted is comprised entirely of
ORBCOMM Inc. (ORBCOMM) common shares (NASDAQ: ORBC) registered under a currently effective ORBCOMM Form S-3
registration statement. Under the terms of the Agreement, the Company is limited to selling up to 279,600 shares
(12 ½% of the total shares) per month. The sale restriction above is why the fair value measurement of June 30,
2012 of ORBCOMMs Stock is based on quoted prices for similar assets in active markets that are directly observable and thus
represent a Level 2 fair value measurement. However, management does not believe the restriction will interfere with
any plans to market their stock holdings. As such, the trading price is used as fair value with no further adjustment. The
remaining shares will be revalued at the end of each reporting period with per share market value fluctuations reported as Comprehensive
Income (Loss) for the period. |
Fair Value of Asset Retirement Obligation | Fair Value of Asset Retirement
Obligation The Deer Creek asset retirement obligation is the estimated cost to close the Deer Creek facility
under terms of the lease, meeting environmental and State of Colorado regulatory requirements. The estimate is determined
at discrete points in time based upon significant unobservable inputs in which little or no market activity exists that is significant
to the fair value of the liability, therefore requiring the Company to develop its own assumptions. Managements
estimate of the asset retirement obligation is based upon a cost estimate developed by a consultant knowledgeable of government
closure requirements and costs incurred at similar water disposal facility operations. The process used was to identify
each activity in the closure process, obtaining vendor estimated costs, in current dollars, to perform the closure activity and
accumulating the various vendor estimates to determine the asset retirement obligation. Although the water disposal
facility is anticipated to remain operational for a period of up to 30 years, a present value discount has not been taken as the
estimated closure costs, excluding regulatory changes and inflation adjustments, are anticipated to remain fairly consistent over
the operational life of the facility. The lack of an active market to validate the estimated asset retirement obligation
results in the fair value of asset retirement obligation to be a Level 3 fair value measurement. ASC Topic 820: Fair
Value Measurement requires the Company to review the asset retirement obligation on a recurring basis and record changes in the
period incurred. |
Fair Value of Contingent Payments | Fair Value of Contingent Payments
The contingent land payment and contingent purchase price liabilities are also determined at discrete points in time based upon
unobservable inputs in which little or no market activity exists that is significant to the fair value of the liability, therefore
requiring the Company to develop its own assumptions. In calculating the estimate of fair value for both of the contingent
payments, management completed an estimate of the present value of each identified contingent liability based upon projected income,
cash flows and capital expenditures for the Deer Creek facility developed under plans currently approved by the Companys
board of directors. Different assumptions relative to the expansion of Deer Creek and Indian Mesa facilities could result
in significantly different valuations. The projected payments have been discounted at a rate of 3% per annum to determine
net present value. The lack of an active market to validate the estimated contingent land and purchase price liabilities
results in the fair value of the contingent land and purchase price liabilities to be a Level 3 fair value measurement. ASC
Topic 820: Fair Value Measurement requires the Company to review the contingent land and purchase price liabilities on a recurring
basis and record changes in the period incurred. |
Land, Property and Equipment | Land, Property and Equipment
Land, Property and Equipment are stated at cost, net of accumulated depreciation, of $3,524,600 and $6,700 at June 30, 2012 and
2011, respectively. Depreciation is computed over the estimated useful lives of the assets using the straight-line method, generally
over a 3 to 20-year period. Currently all furniture and office equipment are being depreciated over 3 years; production
equipment over 7-10 years; evaporation pond liners over 15 years and pond construction over 20 years. Expenditures for
ordinary maintenance and repairs are charged to expense as incurred while betterments or renewals are capitalized. Upon retirement
or disposal of assets, the cost and accumulated depreciation are eliminated from the account and any gain or loss is reflected
in the statement of operations. Related depreciation expense for the years ended June 30, 2012 and 2011, was $2,700
and $1,000, respectively. |
Income Taxes | Income Taxes - The Company
accounts for income taxes under the asset and liability method, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the difference between the financial statement basis and tax
basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. To
the extent that the Company does not consider it more than likely than not that a future tax asset will be recovered, it provides
a valuation allowance against the excess. |
Use of Estimates | Use of Estimates - The
preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States
of America requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial
statements and accompanying notes. Actual results could differ from those estimates.
The Company makes significant estimates
and assumptions concerning the classification and valuation of investments, valuation of contingent and non-cash consideration
received in the sale of the Wireless Asset Management segment, the estimated fair value of stock based compensation, expense
recognition, realization of deferred tax assets and notes receivable and the recorded values of accruals and contingencies including
the estimated fair values of the Companys asset retirement obligation and the contingent land and purchase price liabilities. Due
to the uncertainties inherent in the estimation process and the significance of these items, it is at least reasonably possible
that the estimates in connection with these items could be further materially revised within the next year. |
Impairment of Intangibles and Other Long-Lived Assets | Impairment of Intangibles and
Other Long-Lived Assets - The Companys policy is to perform an assessment for impairment whenever events or changes
in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If the net carrying
value of the asset exceeds estimated future net cash flows, then impairment is recognized to reduce the carrying value to the estimated
fair value. No impairment charge was recorded in fiscal years ended June 30, 2012 or 2011. |
Income (Loss) Per Share | Income (Loss) Per Share -
The income (loss) per share (EPS) is presented in accordance with the provisions of the ASC. Basic EPS
is calculated by dividing the income or loss available to common shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. Basic and Diluted EPS were the same for fiscal 2012 and 2011, as the
Company had losses from operations during both years and therefore the effect of all potential common stock equivalents is antidilutive
(reduces loss per share). Stock options representing 674,100 shares of Class A Common Stock were outstanding at
June 30, 2012 with exercise prices ranging between $.75 and $2.00. The weighted average exercise price for all outstanding options
was $0.80. Stock warrants representing 150,400 Class A Common Shares were outstanding at June 30, 2012 with exercise
prices ranging between $2.64 and $14.00. The weighted average exercise price was $6.24. In addition, $28,000
of a note due to an officer is convertible at $2.24 per share, or 12,500 shares of Class A Common Stock.
Stock options representing 661,800
shares of Class A Common Stock were outstanding at June 30, 2011 with exercise prices ranging between $1.50 and $20.00. The
weighted average exercise price for all outstanding options was $1.62. Stock warrants representing 201,100 Class A Common
Shares were outstanding at June 30, 2011 with exercise prices ranging between $1.92 and $14.40. The weighted average
exercise price was $5.77. At June 30, 2011, Preferred Stock outstanding included 122,600 shares of Series B Convertible
Preferred Stock with a stated value per share of $10.00, which are convertible into Class A Common shares at a ratio of .65 shares
of common stock for each share of Series B Preferred Stock. In addition, $28,000 of a note due to an officer is convertible
at $2.24 per share, or 12,500 shares of Class A Common Stock. |
Stock Options Plans | Stock Options Plans -
The Company has stock-based compensation plans and effective July 1, 2006 the Company adopted the fair value recognition provisions
of the ASC. Stock-based compensation expense for all stock-based compensation awards granted after June 30, 2006 is
based on the grant date fair value estimated in accordance with the provisions of the ASC. The value of the compensation
cost is amortized on a straight-line basis over the requisite service periods of the award (the option vesting term).
The Company estimates fair value
using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows:
· |
Expected term for current year grants was determined under the simplified method using an average of the contractual term and vesting period of the award as appropriate statistical data required to properly estimate the expected term was not available; |
· |
Expected volatility of award grants made under the Companys plans is measured using the historical daily changes in the market price of the Companys common stock over the expected term of the award, and contemplation of future activity; |
· |
Risk-free interest rate is to approximate the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and, |
· |
Forfeitures are based on the history of cancellations of awards granted by the Company and managements analysis of potential forfeitures. |
|
Concentrations of Credit Risks | Concentrations of Credit Risks -
The Company invests its excess cash in short term bank investments that in some cases exceeds the maximum FDIC insurance amount. At
June 30, 2012 and 2011, deposits in excess of FDIC insured limits amounted to Nil and $153,100, respectively. The Company
currently has a substantial amount of its assets invested in ORBCOMM Common Stock, received as partial consideration in the sale
of the Wireless Asset Management segment. Although the Company performed due diligence during the negotiations with
ORBCOMM and believes that ORBCOMM Common Stock is a good investment, no assurance can be made that the stock will maintain its
value. See Note 4 - Marketable Securities - Restricted for additional discussion of the investment. At June
30, 2012, the notes receivable balance of $400,000 consisted of a $300,000 note from American Citizenship Center, LLC (ACC)
and a $100,000 note from Symbius Financial, Inc. Both notes are secured, however there is no assurance the amounts will
be repaid when due or if ever. The Symbius note for $100,000 was repaid, including accrued interest, subsequent to June
30, 2012. See Note 3 Notes Receivable and Note 9 Investments for additional discussions of the notes
receivable at June 30, 2012. |
Segment Information | Segment Information
The ASC defines operating segments as components of a company about which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. See Note 6
Discontinued Operations for further information related to the Companys segments classified as discontinued operations. |
Reverse Stock Split | Reverse Stock Split -
The Company announced on August 26, 2010 that the Board of Directors had elected to effect a 1 for 8 reverse split that was effective
on Friday, August 27, 2010. The Company had previously received authority from its shareholders to effect a reverse split
at a ratio within a specified range, if and as determined by the Board of Directors, in order to maintain its NASDAQ listing.
As a result of the reverse split,
each eight (8) shares of the Companys Class a Common Stock outstanding at the time of the reverse split was automatically
reclassified and changed into one share of common stock, and the total number ofcommon shares outstanding was reduced from approximately
41.7 million shares to approximately 5.2 million shares, post-split. The reverse stock split resulted in the same adjustment
to the Companys outstanding stock options and securities reserved for issuance under its current incentive plans. No fractional
shares were issued in connection with the reverse stock split. Upon surrender of their stock certificates, shareholders have received,
or will receive, cash in lieu of the fractional shares to which they would otherwise be entitled. All per share amounts and outstanding
shares, including all common stock equivalents (stock options, warrants and convertible securities) have been restated in the Consolidated
Financial Statements, the Notes to the Consolidated Financial Statements and the calculation of the weighted average common
shares outstanding and loss per share for all periods presented to reflect the reverse stock split. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements
- With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting
pronouncements during the twelve months ended June 30, 2012, that are of significance, or potential significance, to us.
In April 2011, the FASB issued guidance
which addresses agreements that entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The
guidance is effective for the first interim or annual period beginning on or after December 15, 2011. The Company has
adopted the guidance, which had no material impact on its financial position and results of operations.
In May 2011, the FASB issued guidance
which applies to measurement and disclosure of fair value of assets, liabilities, or instruments in shareholders equity. The
guidance is effective for the first interim or annual period beginning on or after December 15, 2011. The Company has
adopted the guidance, which had no material impact on its financial position and results of operations.
In December 2011, the FASB issued
revised guidance on the reporting of comprehensive income. The Company previously adopted earlier guidance on the reporting
of comprehensive income for which early adoption was permitted; therefore, the revised guidance had no material impact on its financial
position and results of operations. |
Marketable Securities - Restricted
The Company determines the appropriate classification of its investments in marketable equity securities at the
time of acquisition and reevaluates such determinations at each balance sheet date. Marketable securities are classified as held
to maturity when the Company has the positive intent and ability to hold securities to maturity. Marketable securities that are
bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported
at fair value, with the unrealized gains and losses recognized in earnings. Marketable securities not classified as held to maturity
or as trading, are classified as available for sale, and are carried at fair value, with the unrecognized gains and losses, net
of tax, included in the determination of comprehensive income (loss) and reported in shareholders equity. The Company measures
and discloses its investments in marketable securities, which are classified as available for sale, at fair value on a recurring
basis, in accordance with the ASC. The cost of the securities sold is based on specific identification of the security.
The fair value of substantially
all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market
prices is based on similar types of securities that are traded in the market.
Notes Receivable
At June 30, 2012, the notes receivable balance of $400,000 ($250,000 current and $150,000 long-term) consisted of a $300,000 note
from American Citizenship Center, LLC (ACC) and a $100,000 note from Symbius Financial, Inc. (Symbius). The
Company historically provided for potentially uncollectible notes receivable by use of the allowance method. An allowance
for doubtful accounts is provided based upon a review of the individual notes outstanding and the Companys prior history
of uncollectible accounts. Interest income from notes receivable is recognized when earned. At June 30, 2012,
the notes receivable balance has been reviewed and no notes receivable reserves were deemed necessary.
Income (Loss) Per Share -
The income (loss) per share (EPS) is presented in accordance with the provisions of the ASC. Basic EPS
is calculated by dividing the income or loss available to common shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. Basic and Diluted EPS were the same for fiscal 2012 and 2011, as the
Company had losses from operations during both years and therefore the effect of all potential common stock equivalents is antidilutive
(reduces loss per share). Stock options representing 674,100 shares of Class A Common Stock were outstanding at
June 30, 2012 with exercise prices ranging between $.75 and $2.00. The weighted average exercise price for all outstanding options
was $0.80. Stock warrants representing 150,400 Class A Common Shares were outstanding at June 30, 2012 with exercise
prices ranging between $2.64 and $14.00. The weighted average exercise price was $6.24. In addition, $28,000
of a note due to an officer is convertible at $2.24 per share, or 12,500 shares of Class A Common Stock.
Stock options representing 661,800
shares of Class A Common Stock were outstanding at June 30, 2011 with exercise prices ranging between $1.50 and $20.00. The
weighted average exercise price for all outstanding options was $1.62. Stock warrants representing 201,100 Class A Common
Shares were outstanding at June 30, 2011 with exercise prices ranging between $1.92 and $14.40. The weighted average
exercise price was $5.77. At June 30, 2011, Preferred Stock outstanding included 122,600 shares of Series B Convertible
Preferred Stock with a stated value per share of $10.00, which are convertible into Class A Common shares at a ratio of .65 shares
of common stock for each share of Series B Preferred Stock. In addition, $28,000 of a note due to an officer is convertible
at $2.24 per share, or 12,500 shares of Class A Common Stock.
Recent Accounting Pronouncements
- With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting
pronouncements during the twelve months ended June 30, 2012, that are of significance, or potential significance, to us.
In April 2011, the FASB issued guidance
which addresses agreements that entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The
guidance is effective for the first interim or annual period beginning on or after December 15, 2011. The Company has
adopted the guidance, which had no material impact on its financial position and results of operations.
In May 2011, the FASB issued guidance
which applies to measurement and disclosure of fair value of assets, liabilities, or instruments in shareholders equity. The
guidance is effective for the first interim or annual period beginning on or after December 15, 2011. The Company has
adopted the guidance, which had no material impact on its financial position and results of operations.
In December 2011, the FASB issued
revised guidance on the reporting of comprehensive income. The Company previously adopted earlier guidance on the reporting
of comprehensive income for which early adoption was permitted; therefore, the revised guidance had no material impact on its financial
position and results of operations.
Stock Options Plans -
The Company has stock-based compensation plans and effective July 1, 2006 the Company adopted the fair value recognition provisions
of the ASC. Stock-based compensation expense for all stock-based compensation awards granted after June 30, 2006 is
based on the grant date fair value estimated in accordance with the provisions of the ASC. The value of the compensation
cost is amortized on a straight-line basis over the requisite service periods of the award (the option vesting term).
The Company estimates fair value
using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows:
· |
Expected term for current year grants was determined under the simplified method using an average of the contractual term and vesting period of the award as appropriate statistical data required to properly estimate the expected term was not available; |
· |
Expected volatility of award grants made under the Companys plans is measured using the historical daily changes in the market price of the Companys common stock over the expected term of the award, and contemplation of future activity; |
· |
Risk-free interest rate is to approximate the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and, |
· |
Forfeitures are based on the history of cancellations of awards granted by the Company and managements analysis of potential forfeitures. |
Income Taxes - The Company
accounts for income taxes under the asset and liability method, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the difference between the financial statement basis and tax
basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. To
the extent that the Company does not consider it more than likely than not that a future tax asset will be recovered, it provides
a valuation allowance against the excess.
Use of Estimates - The
preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States
of America requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial
statements and accompanying notes. Actual results could differ from those estimates.
The Company makes significant estimates
and assumptions concerning the classification and valuation of investments, valuation of contingent and non-cash consideration
received in the sale of the Wireless Asset Management segment, the estimated fair value of stock based compensation, expense
recognition, realization of deferred tax assets and notes receivable and the recorded values of accruals and contingencies including
the estimated fair values of the Companys asset retirement obligation and the contingent land and purchase price liabilities. Due
to the uncertainties inherent in the estimation process and the significance of these items, it is at least reasonably possible
that the estimates in connection with these items could be further materially revised within the next year.
Concentrations of Credit Risks -
The Company invests its excess cash in short term bank investments that in some cases exceeds the maximum FDIC insurance amount. At
June 30, 2012 and 2011, deposits in excess of FDIC insured limits amounted to Nil and $153,100, respectively. The Company
currently has a substantial amount of its assets invested in ORBCOMM Common Stock, received as partial consideration in the sale
of the Wireless Asset Management segment. Although the Company performed due diligence during the negotiations with
ORBCOMM and believes that ORBCOMM Common Stock is a good investment, no assurance can be made that the stock will maintain its
value. See Note 4 - Marketable Securities - Restricted for additional discussion of the investment. At June
30, 2012, the notes receivable balance of $400,000 consisted of a $300,000 note from American Citizenship Center, LLC (ACC)
and a $100,000 note from Symbius Financial, Inc. Both notes are secured, however there is no assurance the amounts will
be repaid when due or if ever. The Symbius note for $100,000 was repaid, including accrued interest, subsequent to June
30, 2012. See Note 3 Notes Receivable and Note 9 Investments for additional discussions of the notes
receivable at June 30, 2012.
Principles of Consolidation
These consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the
United States (GAAP). The consolidated financial statements for the years ended June 30, 2012 and 2011 include, where
appropriate, the accounts of Alanco Technologies, Inc. and its wholly-owned subsidiaries, Alanco Energy Services, Inc., Alanco/TSI
PRISM, Inc. (ATSI), Excel/Meridian Data, Inc. (Excel), Fry Guy Inc. (Fry Guy) and StarTrak
Systems, LLC (StarTrak) (collectively, the Company). The operating results for ATSI, Excel
and StarTrak for fiscal year 2011 are presented as discontinued operations. All subsidiaries are Arizona corporations,
except for Alanco Energy Services, Inc., which is a Colorado corporation; Fry Guy Inc., which is a Nevada corporation; and StarTrak
Systems, LLC, which is a Delaware LLC. All significant intercompany accounts and transactions have been eliminated in
consolidation.
Other Receivables
At June 30, 2012, the other receivables balance of $16,800 consists of $7,800 of accrued interest related to notes receivable and
$9,000 of miscellaneous billings for accounting services performed for a related party, American Citizenship Center, LLC. The
Company historically provided for potentially uncollectible receivables by use of the allowance method. An allowance for doubtful
accounts is provided based upon a review of the individual accounts outstanding and the Company's prior history of uncollectible
accounts. At June 30, 2012 and 2011, the other receivables balance had been reviewed and no receivable reserves were
deemed necessary.
Fair Value of Marketable Securities
- Restricted The estimated fair values of Marketable Securities - Restricted are determined at discrete points
in time based on relevant market information. The Marketable Securities Restricted is comprised entirely of
ORBCOMM Inc. (ORBCOMM) common shares (NASDAQ: ORBC) registered under a currently effective ORBCOMM Form S-3
registration statement. Under the terms of the Agreement, the Company is limited to selling up to 279,600 shares
(12 ½% of the total shares) per month. The sale restriction above is why the fair value measurement of June 30,
2012 of ORBCOMMs Stock is based on quoted prices for similar assets in active markets that are directly observable and thus
represent a Level 2 fair value measurement. However, management does not believe the restriction will interfere with
any plans to market their stock holdings. As such, the trading price is used as fair value with no further adjustment. The
remaining shares will be revalued at the end of each reporting period with per share market value fluctuations reported as Comprehensive
Income (Loss) for the period.
Reclassifications Certain
prior year balances have been reclassified in the accompanying consolidated financial statements to conform to the
current year presentation.
Fair Value of Asset Retirement
Obligation The Deer Creek asset retirement obligation is the estimated cost to close the Deer Creek facility
under terms of the lease, meeting environmental and State of Colorado regulatory requirements. The estimate is determined
at discrete points in time based upon significant unobservable inputs in which little or no market activity exists that is significant
to the fair value of the liability, therefore requiring the Company to develop its own assumptions. Managements
estimate of the asset retirement obligation is based upon a cost estimate developed by a consultant knowledgeable of government
closure requirements and costs incurred at similar water disposal facility operations. The process used was to identify
each activity in the closure process, obtaining vendor estimated costs, in current dollars, to perform the closure activity and
accumulating the various vendor estimates to determine the asset retirement obligation. Although the water disposal
facility is anticipated to remain operational for a period of up to 30 years, a present value discount has not been taken as the
estimated closure costs, excluding regulatory changes and inflation adjustments, are anticipated to remain fairly consistent over
the operational life of the facility. The lack of an active market to validate the estimated asset retirement obligation
results in the fair value of asset retirement obligation to be a Level 3 fair value measurement. ASC Topic 820: Fair
Value Measurement requires the Company to review the asset retirement obligation on a recurring basis and record changes in the
period incurred.
Nature of
Operations - Alanco Technologies, Inc. was incorporated in Arizona in 1969.
Alanco Technologies, Inc. and subsidiaries
(the Company) sold substantially all of the assets and certain liabilities of its operations (Alanco/TSI PRISM, Inc.
and StarTrak Systems, LLC) during fiscal year 2011 and at fiscal year end June 30, 2011 the Company was without operating entities. The
Company has stated in previous filings that its objective is to complete a merger (possibly a reverse merger) and remain an operating
publicly traded company. To that objective, on June 29, 2011 the Company announced that it had signed a definitive merger
agreement with YuuZoo Corporation (a private company with corporate offices in Singapore), subject to the completion of due diligence
and shareholder approval of both companies. The agreement was terminated on September 20, 2011 due to market conditions and Alancos
inability to complete its due diligence. Alanco began an operational restructuring in April 2012 with the formation
of a new subsidiary, Alanco Energy Services, Inc. (AES), for the purpose of obtaining property to establish a facility
for the treatment and disposal of large quantities of produced water generated by the oil and natural gas producers in Western
Colorado. See Note 5 - Alanco Energy Services for discussion of AES transactions.
Fair Value of Assets and Liabilities
The estimated fair values for assets and liabilities are determined at discrete points in time based on relevant information. The
Accounting Standards Codification (ASC) prioritizes inputs used in measuring fair value into a hierarchy of three
levels: Level 1 unadjusted quoted prices for identical assets or liabilities traded in active markets, Level 2
observable inputs other than quoted prices included within Level 1 such as quoted prices for similar assets or liabilities, quoted
prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the asset or liability; and Level 3 unobservable inputs in which little or no market activity
exists that are significant to the fair value of the assets or liabilities, therefore requiring an entity to develop its own assumptions
that market participants would use in pricing. These estimates involve uncertainties and cannot be determined with precision.
The carrying amounts of receivables, prepaid expenses, accounts payable, accrued liabilities, and notes payable approximate fair
value given their short-term nature and borrowing rates currently available to the Company for loans with similar terms and maturities.
The following are the classes of
assets and liabilities measured at fair value on a recurring basis at June 30, 2012, using quoted prices in active markets for
identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):
|
|
Level 1: |
|
|
|
|
|
|
|
|
Quoted Prices |
|
Level 2: |
|
|
|
|
|
|
in active |
|
Significant |
|
Level 3: |
|
Total |
|
|
Markets |
|
Other |
|
Significant |
|
at |
|
|
for Identical |
|
Observable |
|
Unobservable |
|
June 30, |
|
|
Assets |
|
Inputs |
|
Inputs |
|
2012 |
Marketable Securities - Restricted |
$ |
- |
$ |
3,572,600 |
$ |
- |
$ |
3,572,600 |
|
|
|
|
|
|
|
|
|
Asset Retirement Obligation |
|
- |
|
- |
|
410,000 |
|
410,000 |
|
|
|
|
|
|
|
|
|
Contigent Land Payment |
|
- |
|
- |
|
625,000 |
|
625,000 |
|
|
|
|
|
|
|
|
|
Contingent Purchase Price |
|
- |
|
- |
|
500,000 |
|
500,000 |
|
$ |
- |
$ |
3,572,600 |
$ |
1,535,000 |
$ |
5,107,600 |
Segment Information
The ASC defines operating segments as components of a company about which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. See Note 6
Discontinued Operations for further information related to the Companys segments classified as discontinued operations.
Impairment of Intangibles and
Other Long-Lived Assets - The Companys policy is to perform an assessment for impairment whenever events or changes
in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If the net carrying
value of the asset exceeds estimated future net cash flows, then impairment is recognized to reduce the carrying value to the estimated
fair value. No impairment charge was recorded in fiscal years ended June 30, 2012 or 2011.
Land, Property and Equipment
Land, Property and Equipment are stated at cost, net of accumulated depreciation, of $3,524,600 and $6,700 at June 30, 2012 and
2011, respectively. Depreciation is computed over the estimated useful lives of the assets using the straight-line method, generally
over a 3 to 20-year period. Currently all furniture and office equipment are being depreciated over 3 years; production
equipment over 7-10 years; evaporation pond liners over 15 years and pond construction over 20 years. Expenditures for
ordinary maintenance and repairs are charged to expense as incurred while betterments or renewals are capitalized. Upon retirement
or disposal of assets, the cost and accumulated depreciation are eliminated from the account and any gain or loss is reflected
in the statement of operations. Related depreciation expense for the years ended June 30, 2012 and 2011, was $2,700
and $1,000, respectively.
Reverse Stock Split -
The Company announced on August 26, 2010 that the Board of Directors had elected to effect a 1 for 8 reverse split that was effective
on Friday, August 27, 2010. The Company had previously received authority from its shareholders to effect a reverse split
at a ratio within a specified range, if and as determined by the Board of Directors, in order to maintain its NASDAQ listing.
As a result of the reverse split,
each eight (8) shares of the Companys Class a Common Stock outstanding at the time of the reverse split was automatically
reclassified and changed into one share of common stock, and the total number ofcommon shares outstanding was reduced from approximately
41.7 million shares to approximately 5.2 million shares, post-split. The reverse stock split resulted in the same adjustment
to the Companys outstanding stock options and securities reserved for issuance under its current incentive plans. No fractional
shares were issued in connection with the reverse stock split. Upon surrender of their stock certificates, shareholders have received,
or will receive, cash in lieu of the fractional shares to which they would otherwise be entitled. All per share amounts and outstanding
shares, including all common stock equivalents (stock options, warrants and convertible securities) have been restated in the Consolidated
Financial Statements, the Notes to the Consolidated Financial Statements and the calculation of the weighted average common
shares outstanding and loss per share for all periods presented to reflect the reverse stock split.
Fair Value of Contingent Payments
The contingent land payment and contingent purchase price liabilities are also determined at discrete points in time based upon
unobservable inputs in which little or no market activity exists that is significant to the fair value of the liability, therefore
requiring the Company to develop its own assumptions. In calculating the estimate of fair value for both of the contingent
payments, management completed an estimate of the present value of each identified contingent liability based upon projected income,
cash flows and capital expenditures for the Deer Creek facility developed under plans currently approved by the Companys
board of directors. Different assumptions relative to the expansion of Deer Creek and Indian Mesa facilities could result
in significantly different valuations. The projected payments have been discounted at a rate of 3% per annum to determine
net present value. The lack of an active market to validate the estimated contingent land and purchase price liabilities
results in the fair value of the contingent land and purchase price liabilities to be a Level 3 fair value measurement. ASC
Topic 820: Fair Value Measurement requires the Company to review the contingent land and purchase price liabilities on a recurring
basis and record changes in the period incurred.
Cash Equivalents - The
Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.