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Equity Investment
12 Months Ended
Mar. 31, 2017
Investments, Debt and Equity Securities [Abstract]  
Equity Investment

NOTE 4 — EQUITY INVESTMENT

 

Investment in Gosling-Castle Partners Inc., consolidated

 

In March 2017, the Company entered into a Stock Purchase Agreement (“Purchase Agreement”) with Gosling’s Limited (“GL”) and E. Malcolm B. Gosling (“Gosling,” and together with GL, the “Sellers”). Pursuant to the terms of the Purchase Agreement, the Company acquired an additional 201,000 shares (the “GCP Share Acquisition”) of the common stock of GCP, representing a 20.1% equity interest in GCP. GCP is a strategic global export venture between the Company and the Gosling family. As a result of the completion of the GCP Share Acquisition, the Company’s total equity interest in GCP increased to 80.1%. The consideration for the GCP Share Acquisition was (i) $20,000,000 in cash and (ii) 1,800,000 shares of common stock of the Company.

 

The Company accounted for this transaction in accordance with ASC 810 “Consolidation,” and in particular section 810-10-45. Under the relevant guidance, a parent accounts for such changes in its ownership interest in a subsidiary as equity transactions. The parent cannot recognize a gain or loss in consolidated net income or comprehensive income for such transactions and is not permitted to step up a portion of the subsidiary's net assets to fair value for the additional interests acquired. Any difference between the fair value of the consideration paid and the amount by which the noncontrolling interest is adjusted shall be recognized in equity attributable to the parent. As a result, the Company reduced the carrying amount of the noncontrolling interest by $2,232,824, with the $20,215,176 excess of the cash and stock paid over the adjustment to the carrying amount of the noncontrolling interest recognized as a decrease in the Company’s additional paid-in capital.

 

For the years ended March 31, 2017, 2016 and 2015, GCP had pretax net income on a stand-alone basis of $3,762,130, $3,475,006 and $814,573, respectively. The Company allocated a portion of this net income, or $1,359,145, $809,662 and $325,829, to non-controlling interest for the years ended March 31, 2017, 2016 and 2015, respectively. Combined with the effects of income tax expense, net, allocated to noncontrolling interests as described in Note 1.Q Income Taxes, the cumulative balance allocated to noncontrolling interests in GCP was $2,479,512 and $3,353,191 at March 31, 2017 and 2016, respectively, as shown on the accompanying consolidated balance sheets.

 

As the GCP Share Acquisition occurred at the end of the fiscal year, the additional income attributable to the change in ownership is immaterial and is not presented in these consolidated financial statements for the year ended March 31, 2017.

 

In September 2015, GCP declared and paid a $1,500,000 cash dividend to its shareholders. The Company recorded 60% of this dividend, or $900,000, as a return of capital and a reduction of its investment in GCP, and allocated 40% of this dividend, or $600,000, to noncontrolling interests and a reduction in the additional paid-in capital of GCP. GCP neither declared nor paid a dividend in the year ended March 31, 2017.

 

Investment in Copperhead Distillery Company, equity method

 

In June 2015, CB-USA purchased 20% of Copperhead Distillery Company (“Copperhead”) for $500,000. Copperhead owns and operates the Kentucky Artisan Distillery. The investment was part of an agreement to build a new warehouse to store Jefferson’s bourbons, provide distilling capabilities using special mash-bills made from locally grown grains and create a visitor center and store to enhance the consumer experience for the Jefferson’s brand. The investment has been used for the construction of a new warehouse in Crestwood, Kentucky dedicated to the storage of Jefferson’s whiskies. The Company has accounted for this investment under the equity method of accounting. For the year ended March 31, 2017, the Company recognized $51,430 of income from this investment; for the initial period ended March 31, 2016, the Company recognized $18,667 of income from this investment. The investment balance was $570,097 and $518,667 at March 31, 2017 and 2016, respectively.