Exhibit 99.1
AMONE CORP.
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR’S REPORT
DECEMBER 31, 2017
TABLE OF CONTENTS
Independent Auditor’s Report |
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Financial Statements |
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Balance Sheet |
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Statement of Operations |
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Statement of Stockholder’s Equity |
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Statement of Cash Flows |
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Notes to Financial Statements |
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Board of Directors
AmOne Corp
Plantation, Florida
We have audited the accompanying financial statements of AmOne Corp, which comprise the balance sheet as of December 31, 2017, and the related statements of operations, stockholder’s equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects the financial position of AmOne Corp as of December 31, 2017, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
/s/ BDO USA, LLP
Miami, Florida
December 17, 2018
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BALANCE SHEET
(In thousands, except share data)
| December 31, |
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| 2017 |
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Assets |
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Current assets: |
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Cash |
| $ | 1,493 |
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Accounts receivable |
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| 1,561 |
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Marketable securities |
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| 373 |
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Prepaid expenses and other assets |
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| 49 |
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Total current assets |
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| 3,476 |
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Property and equipment, net |
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| 97 |
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Other assets, noncurrent |
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| 20 |
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Total assets |
| $ | 3,593 |
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Liabilities and Stockholder's Equity |
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Current liabilities: |
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Accounts payable |
| $ | 604 |
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Accrued liabilities |
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| 455 |
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Total current liabilities |
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| 1,059 |
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Stockholder's equity: |
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Common stock: $1 par; 7,500 shares authorized and issued, 6,962 shares outstanding |
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| 8 |
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Treasury stock, at cost (538 shares) |
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| (416 | ) |
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Additional paid-in capital |
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| 190 |
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Retained earnings |
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| 2,752 |
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Total stockholder's equity |
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| 2,534 |
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Total liabilities and stockholder's equity |
| $ | 3,593 |
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See notes to financial statements
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(In thousands)
| Fiscal Year Ended |
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| December 31, 2017 |
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Net revenue |
| $ | 20,426 |
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Cost of revenue |
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| 14,907 |
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Gross profit |
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| 5,519 |
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Operating expenses: |
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Product development |
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| 366 |
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Sales and marketing |
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| 651 |
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General and administrative |
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| 1,120 |
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Operating income |
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| 3,382 |
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Other income |
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| 78 |
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Income before taxes |
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| 3,460 |
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Provision for taxes |
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| — |
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Net income |
| $ | 3,460 |
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See notes to financial statements
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STATEMENT OF STOCKHOLDER’S EQUITY
(In thousands, except share data)
Shares |
| Common stock |
| Additional Paid-in Capital |
| Treasury Stock |
| Retained earnings |
| Total |
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January 1, 2017 |
| 7,500 |
| $ | 8 |
| $ | 190 |
| $ | (416 | ) | $ | 2,261 |
| $ | 2,043 |
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Net income |
| — |
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| — |
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| — |
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| 3,460 |
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| 3,460 |
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Distributions |
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| — |
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| — |
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| — |
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| (2,969 | ) |
| (2,969 | ) |
December 31, 2017 |
| 7,500 |
| $ | 8 |
| $ | 190 |
| $ | (416 | ) | $ | 2,752 |
| $ | 2,534 |
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See notes to financial statements
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(In thousands)
| Fiscal Year Ended |
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| December 31, 2017 |
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Cash Flows from Operating Activities |
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Net income |
| $ | 3,460 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
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| 7 |
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Net realized and unrealized gains on marketable securities |
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| (71 | ) |
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Changes in assets and liabilities: |
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Accounts receivable |
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| (183 | ) |
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Marketable securities |
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| 2 |
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Prepaid expenses and other assets |
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| (42 | ) |
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Other assets, noncurrent |
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| 1 |
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Accounts payable |
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| (42 | ) |
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Accrued liabilities |
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| 145 |
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Net cash provided by operating activities |
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| 3,277 |
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Cash Flows from Investing Activities |
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Purchases of property and equipment |
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| (40 | ) |
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Net cash used in investing activities |
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| (40 | ) |
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Cash Flows from Financing Activities |
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Shareholder distributions |
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| (2,969 | ) |
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Net cash used in financing activities |
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| (2,969 | ) |
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Net increase in cash |
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| 268 |
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Cash at beginning of period |
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| 1,225 |
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Cash at end of period |
| $ | 1,493 |
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See notes to financial statements
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AMONE CORP.
NOTES TO FINANCIAL STATEMENTS
Founded in 1999, AmOne Corp. (the “Company”) operates an online marketplace. Using its proprietary technology, the Company matches consumers that visits its website with personal loan, credit repair and debt management programs.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
Revenue Recognition
The Company earns revenue when it delivers a lead to a client that converts to a customer for the client. The Company may earn a fixed fee per customer or a fee based on a percentage of the customer’s total debt. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is reasonably assured.
The Company records an allowance for doubtful accounts when it is probable that the accounts receivable balance will not be collected, based upon an analysis of individual accounts, number of days past due and historical collections. As of December 31, 2017, the allowance for doubtful accounts was $0.
Concentrations of Credit Risk
The Company had the following clients that accounted for 10% or more of revenue for fiscal year 2017 or 10% or more of accounts receivable as of December 31, 2017:
| • | Customer A accounted for 15% of revenue and 23% of accounts receivable |
| • | Customer B accounted for 14% of revenue and 12% of accounts receivable |
| • | Customer C accounted for 13% of revenue and 13% of accounts receivable and; |
| • | Customer D accounted for 13% of revenue and 13% of accounts receivable. |
Marketable Securities
The Company determines the appropriate classification of its investments in marketable securities at the time of purchase and re-evaluates the designation at each balance sheet date. Based on the Company’s liquidity requirements, its marketable securities are classified and accounted for as trading. These securities are recorded at fair value and changes in the unrealized gains and losses are recorded within other income on the statement of operations. For fiscal year 2017, the Company recognized unrealized gains of $68 thousand.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and is depreciated on a straight-line basis over the estimated useful lives of the assets, as follows:
Computer equipment | 3 years |
Leasehold improvements | the shorter of the lease term or the estimated useful lives of the improvements |
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AMONE CORP.
NOTES TO FINANCIAL STATEMENTS
Expenditures for additions and improvements are capitalized, and costs for repairs and maintenance are charged to operations as incurred.
Income Taxes
The Company is treated as a pass through entity under the applicable provisions of the Internal Revenue Code and local jurisdictions. Therefore, the Company is not subject to income taxes, and net income as determined for income tax purposes is allocated to its sole shareholder.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard update on revenue from contracts with clients. The new guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March and April 2016, the FASB amended this standard to clarify implementation guidance on principal versus agent considerations and the identification of performance obligations and licensing. In May 2016, the FASB amended this standard to address improvements to the guidance on collectability, noncash consideration, and completed contracts at transition as well as provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The new standard becomes effective for the Company on January 1, 2019. The Company is currently assessing the impact of this new guidance.
In January 2016, the FASB issued a new accounting standards update which requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value for certain equity investments recognized in other income on the statements of operations. The new standard becomes effective for the Company on January 1, 2019 and is not expected to have an impact on the Company’s financial statements.
In February 2016, the FASB issued a new accounting standard update which replaces ASC 840, “Leases.” The new guidance requires a lessee to recognize on its balance sheet a right-of-use asset representing its right to use the underlying asset for the lease term and a lease liability representing its lease payment obligations. The guidance also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The guidance becomes effective for the Company on January 1, 2020. The Company is currently assessing the impact of this new guidance.
3. Fair Value Measurements
Fair value is defined as the price that would be received on sale of an asset or paid to transfer a liability (“exit price”) in an orderly transaction between market participants at the measurement date. The FASB has established a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy under the guidance for fair value measurement are described below:
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Pricing inputs are based upon quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. The valuations are based on quoted prices of the underlying security that are readily and regularly available in an active market, and accordingly, a significant degree of judgment is not required.
Level 2 — Pricing inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for
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AMONE CORP.
NOTES TO FINANCIAL STATEMENTS
which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Pricing inputs are generally unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require management’s judgment or estimation of assumptions that market participants would use in pricing the assets or liabilities. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The Company’s financial instruments as of December 31, 2017 were categorized as follows in the fair value hierarchy (in thousands):
Level 1: |
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Equity securities |
| $ | 322 |
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Exchange traded funds |
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| 51 |
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Total |
| $ | 373 |
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As of December 31, 2017, the Company had unrealized gains related to its trading securities of $133 thousand.
4. Property and Equipment, Net
Property and equipment, net was comprised of the following (in thousands):
Computer equipment | $ | 17 |
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Leasehold improvements |
| 87 |
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Total property plant and equipment, gross |
| 104 |
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Less: Accumulated depreciation |
| (7 | ) |
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Total property plant and equipment, net | $ | 97 |
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Depreciation expense was $7 thousand for fiscal year 2017.
5. Commitments and Contingencies
Leases
The Company leases office space under non-cancelable operating leases with various expiration dates through fiscal year 2023. Rent expense for fiscal year 2017 was $419 thousand. The Company recognizes rent expense on a straight-line basis over the lease period and accrues for rent expense incurred but not paid.
Future annual minimum lease payments under noncancelable operating leases as of December 31, 2017 were as follows (in thousands):
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Fiscal Year Ending December 31, |
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2018 |
| $ | 402 |
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2019 |
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| 485 |
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2020 |
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| 493 |
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2021 |
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| 469 |
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2022 |
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| 429 |
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Thereafter |
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| 218 |
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Total |
| $ | 2,496 |
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AMONE CORP.
NOTES TO FINANCIAL STATEMENTS
On October 1, 2018, pursuant to a Share Purchase Agreement by and among QuinStreet, Inc. (“QuinStreet”), the Company and the Company’s sole shareholder, Rod Romero (the “Seller”), entered into on October 1, 2018, QuinStreet acquired all of the issued and outstanding capital stock of the Company from the Seller.
The Company has evaluated subsequent events through December 17, 2018, which is the date the financial statements were issued.
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