Ominto, Inc.

On June 20, 2017, the Company’s shareholders approved the Ominto, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”). The 2017 Plan authorizes the issuance of a number of shares of our common stock equal to 3.275 million shares. The 2017 Plan replaced the 2010 Plan, and no new awards will be granted under the 2010 Plan. Any awards outstanding under the 2010 Plan on the date of stockholder approval of the 2017 Plan will remain subject to and be paid under the 2010 Plan, and any shares subject to outstanding awards under the 2010 Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares will automatically become available for issuance under the 2017 Plan.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of transferred assets and activities is not a business. The guidance also narrows the definition of outputs by aligning it with how outputs are described in ASC 606: Revenue from Contracts with Customers. 

The Company receives varying percentages in commission income earned from merchants participating on our online Cash Back shopping websites, dubli.com and bsp-rewards.com. These commissions are calculated based upon the agreed rates with the participating merchants on all customer transactions processed through our online shopping websites and are recognized on an accrual basis based upon tracked data obtained from the merchant. A percentage of the commission income is payable in the form of Cash Back to the customer for each purchase transaction. This Cash Back amount due the customer is accrued as a deduction from commission income at the time the commission income is recognized. Commissions receivable from merchants are included in other receivables and prepaid expenses.

SG&A expenses were approximately $17.6 million and $12.0 million for the nine months ended June 30, 2017 and 2016, respectively. The increase was primarily due to approximately $7.8 million in payroll costs that included a $2.0 million bonus awarded to the CEO and $1.3 million of additional stock compensation to the CEO in connection with the successful listing of the Company’s common stock on the Nasdaq National Capital Markets stock exchange. In addition, we had an increase in accounting, legal and other professional fees related to SOX compliance and Nasdaq compliance requirements. We also incurred increases in: (a) rent, office and other related expenses due to growth of the Company that necessitated additional office space in USA, UAE and Germany; and (b) payroll cost; which were partially offset by (i) a decrease in travel expense due to reduced travel by a decrease in travel expense and more efficient use of technology for conducting meetings.and (ii) foreign  exchange transactional costs. Details of our SG&A expenses are summarized as follows:

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires that lessees recognize right-of-use assets and lease liabilities for any lease classified as either a finance or operating lease that is not considered short-term. The accounting applied by lessors is largely consistent from the existing lease standard. ASU 2016-02 is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2018. Lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We have obligations under lease agreements for facilities, which are classified as operating leases under the existing lease standard. We are still evaluating the impact ASU 2016-02 will have on the consolidated results of operations, financial condition, and cash flows.