Deconsolidation of Former French Subsidiary (TAAG)

6 Months Ended

Dec. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

Deconsolidation of Former French Subsidiary (TAAG)

Note 6. Deconsolidation of Former French Subsidiary (TAAG)

On August 18, 2014 the Board of Directors of the Company authorized management to commit to a plan to sell TAAG. The Company concluded that TAAG’s printing operations in the major geographical area of France were not aligned with the Company’s long term strategy. The plan to dispose of TAAG will have a material effect on the Company’s revenue as TAAG accounted for 22.1% and 22.6% of consolidated revenue for the years ended June 30, 2014 and 2013, respectively. Accordingly, the operations of TAAG are classified as discontinued operations. Comparative information for prior periods have been restated to segregate the assets, liabilities, revenue, expenses, and cash flows related to TAAG as discontinued operations.

The Board of Directors of the Company authorized the immediate disposal of the Company’s former subsidiary TAAG at a reasonable price in relation to its current fair value, and in the event such sale was not consummated by September 10, 2014, that management proceed with an insolvency filing by TAAG under French law. On September 15, 2014, the French Tribunal de Commerce appointed an Administrator for TAAG following a declaration of insolvency by our legal representative, and on October 6, 2014 TAAG entered into a judicial liquidation procedure. As a result, effective September 15, 2014, the Company relinquished control of TAAG to the Tribunal and TAAG ceased to be our subsidiary and was deconsolidated from our financial statements. 

The Company deconsolidated the assets, liabilities and other comprehensive income of TAAG with a resulting non-cash gain on deconsolidation of $1,548,295 recorded on the consolidated statements of operations. 

The Company has determined based on discussion with French counsel that it is remote that the Company will be generally liable for the unsatisfied liabilities of TAAG as a result of the insolvency process in France. In addition, the Company has also determined based on discussion with French counsel that it is probable that the Company will be liable for specific liabilities associated with TAAG in the amount of $187,907, and as a result, the Company has recorded a liability for that amount as of December 31, 2014.

The carrying amounts of the major classes of assets and liabilities associated with discontinued operations as of June 30, 2014 were as follows:

Assets
Current assets:
Cash and cash equivalents	$	191,259
Accounts receivable:
Trade receivables, net of allowance		746,685
Due from factor		116,762
Inventory		192,245
Prepaid expenses and other current assets		234,232
Total current assets of discontinued operations		1,481,183
Other assets:
Property and equipment, net of accumulated depreciation		418,460
Deposits and other assets		453,752
Total non-current assets of discontinued operations		872,212
Total assets of discontinued operations	$	2,353,395
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	2,960,378
Capital lease obligations, current		324,802
Notes payable, current		11,601
Deferred revenue		158,359
Other liability		143,304
Total current liabilities of discontinued operations		3,598,444
Long term liabilities:
Capital lease obligations, long term		113,415
Total long term liabilities of discontinued operations		113,415
Total liabilities of discontinued operations	$	3,711,859

Revenue and expenses from discontinued operations were as follows:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2014		2013		2014		2013
Revenue	$	-	$	2,271,186	$	1,164,314	$	4,199,522
Cost of revenue		-		1,366,330		849,174		2,487,393
Gross profit		-		904,856		315,140		1,712,129
Operating expenses:
Selling, general and administrative		-		802,687		660,500		1,574,403
Depreciation and amortization		-		70,194		44,027		139,994
Total operating expenses		-		872,881		704,527		1,714,397
Income (loss) from discontinued operations before other income (expenses)		-		31,975		(389,387)		(2,268)
Other income (expenses):
Interest expense		-		(10,927)		(5,957)		(22,581)
Income (loss) from discontinued operations	$	-	$	21,048	$	(395,344)	$	(24,849)