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A. Basis of Presentation, Accounting Policies and Recent Accounting Pronouncements (Policies)
 9 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations

Nature of Operations

 

Alanco Technologies, Inc. (Stock Symbol: ALAN) was incorporated in 1969 under the laws of the State of Arizona. Unless otherwise noted, the “Company” or “Alanco” refers to Alanco Technologies, Inc. and its wholly-owned subsidiaries. During the fiscal year ended June 30, 2012, the Company formed Alanco Energy Services, Inc. (“AES”), for the purpose of obtaining property to establish a water disposal facility near Grand Junction, CO to receive produced water generated as a byproduct from oil and natural gas production in Western Colorado. The new Deer Creek facility started to receive produced water in August 2012. During the quarter ended March 31, 2016, the Company implemented a plan to divest of its 160 acre owned and undeveloped land and associated permits located in Whitewater, Colorado and known as Indian Mesa. Refer to Note D – Assets Held for Sale and Discontinued Operations for further discussion.

 

The Company formed Alanco Behavioral Health, Inc. (“ABH”) during the quarter ended September 30, 2016, a wholly-owned subsidiary incorporated in the State of Arizona with the expectation of pursuing a business plan to consolidate small cap private behavioral health companies through acquisition. The Company executed a letter of intent to purchase the operations of a behavioral health treatment facility located in California, but has since terminated said acquisition and currently has no plans to pursue acquisitions in the behavioral health market.

 

The Company is developing alternative business plans for monetization of its resources.
Basis of Presentation

Basis of Presentation

 

The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q. Accordingly, certain information and footnotedisclosures normally included in financial statements prepared in accordance with GAAPhave been condensed or omitted. In our opinion, the accompanying condensed consolidated financial statements include all adjustments necessary for a fair presentation of such condensed consolidated financial statements. Such necessary adjustments consist of normal recurring items and the elimination of all significant intercompany balances and transactions.

 

The condensed consolidated balance sheet as of June 30, 2016 was derived from audited financial statements, but does not include all disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s June 30, 2016 Annual Report filed on Form 10-K. Interim results are not necessarily indicative of results for a full year.

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Fair Value of Assets and Liabilities

The estimated fair value 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 Company’s policy is to recognize transfers into and out of Level 1, 2 and 3 categories as of the date of the event or change in circumstances occurs. The carrying amounts of receivables, prepaid expenses, trust account, accounts payable, accrued liabilities and note payable approximate fair value given their short-term nature or their effective interest rates, which represent Level 3 input levels.

 

The following are the classes of assets and liabilities measured at fair value on a recurring basis at March 31, 2017 and June 30, 2016, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3): 

 

Fair Value at March 31, 2017  
                   
    Level 1:              
    Quoted Prices   Level 2:          
    in Active   Significant   Level 3:   Total  
    Markets   Other   Significant   at  
    for Identical   Observable   Unobservable   March 31,  
    Assets   Inputs   Inputs   2017  
Asset Retirement Obligation $                        -    $                     -    $              434,000 $           434,000  
Contingent Land Payment                          -                          -                   686,700             686,700  
  $                        -    $                     -    $           1,120,700 $        1,120,700  

 

 

Fair Value at June 30, 2016  
                   
    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   2016  
Asset Retirement Obligation $                        -    $                     -    $              434,000 $           434,000  
Contingent Land Payment                          -                          -                   672,700             672,700  
  $                        -    $                     -    $           1,106,700 $        1,106,700  

 

The following is a reconciliation of the opening and closing balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended March 31, 2017.

      Asset   Contingent    
      Retirement   Land    
      Obligation   Payment   Total
Opening balance $              434,000 $           672,700 $        1,106,700
  Accretion expense                          -                  14,000               14,000
Closing balance $              434,000 $           686,700 $        1,120,700

 

The following are the classes of assets and liabilities measured at fair value on a non-recurring basis at March 31, 2017, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

 

Fair Value at March 31, 2017  
                   
    Level 1:              
    Quoted Prices   Level 2:          
    in Active   Significant   Level 3:   Total  
    Markets   Other   Significant   at  
    for Identical   Observable   Unobservable   March 31,  
    Assets   Inputs   Inputs   2017  
Property and Equipment, net $                        -    $                     -    $           1,617,200 $        1,617,200  
  $                        -    $                     -    $           1,617,200 $        1,617,200  

 

There were no fair value measurements of Property and Equipment at June 30, 2016.
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. Management’s estimate of the asset retirementobligation is based upon a cost estimate developed by a consultant knowledgeable of government closure requirements and costs incurred at similar water disposal facility operations. A present value discount has not been taken as the estimated closure costs, excluding regulatory changes and inflation adjustments, are anticipatedto 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 the asset retirement obligation to be a Level 3 fair value measurement. ASC Topic 410-20: Asset Retirement Obligations 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 liability is 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 the contingent land payment, management completed an estimate of the present value of the contingent liability based upon projected income, cash flows and capital expenditures for the Deer Creek facility developed under plans currently approved by the Company’s board of directors. Different assumptions relative to the expansion or alternative uses of the 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 tovalidate the estimated contingent land liability results in the fair value of the contingent land liability to be a Level 3 fair value measurement. ASC Topic 820: Fair Value Measurement requires the Company to review the contingent land liability on a recurring basis and record changes in the period incurred.
Fair Value of Property and Equipment, net

Fair Value of Property and Equipment, net – The fair value of property and equipment, net is evaluated on a non-recurring basis and is based upon unobservable inputs in which little or no market activity exists that is significant to the fair value of the asset, therefore requiring the Company to develop its own assumptions. Operating results to date for the nine months ended March 31, 2017 for the Deer Creek facility as compared to projections for the same period have resulted in a significant unfavorable variance to date primarily due to the negative prolonged impact of depressed market prices of oil and gas and the associated uncertainty of the market recovery. Therefore, the Company has recorded an impairment charge of $350,000 on its property and equipment as of March 31, 2017, which is based on the estimated selling price of the assets. The estimated selling price is subject to material change based on information known at certain points in time and estimate revisions could occur in the near term.
Assets Held for Sale

Assets Held for Sale – The Company has implemented a plan to divest of its 160 acre owned and undeveloped land and associated permits located in Whitewater, Colorado and known as Indian Mesa. As a result, the value of the land and associated permits has been reclassified as Assets Held for Sale at March 31,2017. A long-lived asset classified as held for sale shall be measured at the lower of its carrying amount or fair value less cost to sell. The value of Assets Held for Sale represents the carrying amount.
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance regarding revenue from contracts with customers. The guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance. In August 2015, this accounting pronouncement was deferred for one year, and is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of reporting periods beginning after December 15, 2016. The Company is currently assessing the impact on its financial position and results of operations, but does not anticipate it to have a material impact.

 

In January 2016, the FASB issued guidance regarding the enhancement of reporting financial instruments including aspects of recognition, measurement, presentation and disclosure. The guidance is effective for periods beginning after December 15, 2017 including interim periods within those fiscal years. While a portion of the guidance allows for early application, it does not permit complete early adoption. The Company is currently assessing the impact on its financial position and results of operations.

 

In February 2016, the FASB issued guidance regarding lease reporting. The guidance requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by leases with terms of more than 12 months. The guidance is effective for periods beginning after December 15, 2018 including interim periods within those fiscal years and early adoption is permitted. The Company is currently assessing the impact on its financial position and results of operations, but will need to report a right of use asset and liability in regards to its facility lease.

 

In March 2016, the FASB issued guidance under the simplification initiative regarding stock compensation. The guidance is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted provided that all amendments are adopted in the same period. The Company is currently assessing the impact on its financial position and results of operations.

 

In June 2016, the FASB issued guidance regarding credit losses on financial instruments including loans. The guidance is effective for annual periods beginning after December 15, 2019 including interim periods within those annual periods. The Company is currently assessing the impact on its financial position and results of operations.

 

In October 2016, the FASB issued guidance regarding the treatment of intra-entity transfers of assets other than inventory. The guidance is effective for annual periods beginning after December 15, 2017, including interim reporting periods. Early adoption is permitted at the beginning of an annual period. The Company is currently assessing the impact on its financial position and results of operations.

 

In January 2017, the FASB issued guidance regarding the definition of a business as it pertains to business combinations. The guidance is effective for annual reporting periods beginning after December 15, 2017 including interim periods within that reporting period and early adoption is permitted. The Company has adopted the guidance, which had no material impact on its financial position and results of operations.

 

In January 2017, the FASB issued guidance regarding amendments to the FASB Accounting Standards Codification pursuant to SEC staff announcements. The guidance is effective upon issuance. The Company has adopted the guidance, which had no material impact on its financial position and results of operations.

 

In February 2017, the FASB issued guidance regarding gains and losses from the derecognition of non-financial assets. The guidance is effective for annual reporting periods beginning after December 15, 2017including interim periodsand early adoption is permitted. The Company is currently assessing the impact on its financial position and results of operations.

 

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended March 31, 2017, that are of significance, or potential significance, to us.