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0001193125-17-151859.txt : 20170501 0001193125-17-151859.hdr.sgml : 20170501 20170501161756 ACCESSION NUMBER: 0001193125-17-151859 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 52 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20170501 DATE AS OF CHANGE: 20170501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HENNESSY ADVISORS INC CENTRAL INDEX KEY: 0001145255 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 680176227 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36423 FILM NUMBER: 17800945 BUSINESS ADDRESS: STREET 1: 7250 REDWOOD BLVD. STREET 2: SUITE 200 CITY: NOVATO STATE: CA ZIP: 94945 BUSINESS PHONE: 415-899-1555 MAIL ADDRESS: STREET 1: 7250 REDWOOD BLVD. STREET 2: SUITE 200 CITY: NOVATO STATE: CA ZIP: 94945 10-Q 1 d349800d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2017

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission File Number 001-36423

HENNESSY ADVISORS, INC.

(Exact name of registrant as specified in its charter)

California

68-0176227

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

7250 Redwood Blvd., Suite 200

Novato, California

94945

(Address of principal executive office)

(Zip Code)

(415) 899-1555

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 25, 2017, there were 7,690,285 shares of common stock issued and outstanding.

HENNESSY ADVISORS, INC.

INDEX


		Page Number

PART I.	Financial Information

Item 1.	Unaudited Condensed Financial Statements

	Balance Sheets		3

	Statements of Income		4

	Statement of Changes in Stockholders’ Equity		5

	Statements of Cash Flows		6

	Notes to Unaudited Condensed Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		31

Item 4.	Controls and Procedures		31

PART II.	Other Information

Item 6.	Exhibits		32

Signatures			33

PART I: FINANCIAL INFORMATION

Item 1:

Unaudited Condensed Financial Statements

Hennessy Advisors, Inc.

Balance Sheets

(In thousands, except share and per share amounts)


	March 31, 2017		September 30, 2016
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	8,099	$	3,535
Investments in marketable securities, at fair value		8		8
Investment fee income receivable		4,560		4,230
Prepaid expenses		555		1,175
Deferred income tax asset		607		607
Other accounts receivable		536		580

Total current assets		14,365		10,135


Property and equipment, net of accumulated depreciation of $813 and $940, respectively		253		296
Management contracts		74,478		74,359
Deferred offering costs		13		13
Other assets		134		137

Total assets	$	89,243	$	84,940


Liabilities and Stockholders’ Equity
Current liabilities:
Accrued liabilities and accounts payable	$	4,559	$	6,578
Income taxes payable		—		383
Deferred rent		115		32
Current portion of long-term debt, net of discount		4,228		4,228

Total current liabilities		8,902		11,221


Long-term debt, net of discount and current portion		23,843		25,957
Deferred income tax liability		11,727		10,431

Total liabilities		44,472		47,609


Commitments and Contingencies (Note 8)

Stockholders’ equity:
Adjustable rate preferred stock, $25 stated value, 7,500,000 shares authorized: zero shares issued and outstanding		—		—
Common stock, no par value, 22,500,000 shares authorized: 7,690,275 shares issued and outstanding at March 31, 2017 and 7,661,968 at September 30, 2016		14,286		13,279
Retained earnings		30,485		24,052

Total stockholders’ equity		44,771		37,331


Total liabilities and stockholders’ equity	$	89,243	$	84,940

See accompanying notes to unaudited condensed financial statements

Hennessy Advisors, Inc.

Statements of Income

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended March 31,					Six Months Ended March 31,
	2017		2016			2017		2016
Revenue:
Investment advisory fees	$	12,063	$	10,991		$	24,172	$	22,814
Shareholder service fees		1,173		1,201			2,358		2,531

Total revenue		13,236		12,192			26,530		25,345


Operating expenses:
Compensation and benefits		3,275		2,891			6,489		5,856
General and administrative		1,395		1,405			2,790		2,944
Mutual fund distribution		72		301			133		451
Sub-advisor fees		2,292		2,054			4,581		4,204
Amortization and depreciation		91		89			184		177

Total operating expenses		7,125		6,740			14,177		13,632

Net operating income		6,111		5,452			12,353		11,713

Interest expense		278		309			544		670
Other income		—		(1	)		—		(1	)

Income before income tax expense		5,833		5,144			11,809		11,044

Income tax expense		2,205		1,861			4,185		4,111


Net income	$	3,628	$	3,283		$	7,624	$	6,933


Earnings per share:
Basic	$	0.47	$	0.43		$	0.99	$	0.91


Diluted	$	0.47	$	0.43		$	0.98	$	0.90


Weighted average shares outstanding:
Basic		7,688,994		7,598,415			7,687,374		7,596,707


Diluted		7,773,622		7,693,611			7,784,353		7,687,742

See accompanying notes to unaudited condensed financial statements

Hennessy Advisors, Inc.

Statements of Changes in Stockholders’ Equity

Six Months Ended March 31, 2017

(In thousands, except share data)

(Unaudited)


										Total
	Common Stock						Retained			Stockholders’
	Shares			Amount			Earnings			Equity

Balance at September 30, 2016		7,661,968		$	13,279		$	24,052		$	37,331

Net income		—			—			7,624			7,624

Dividends paid		—			—			(1,074	)		(1,074	)

Employee and director restricted stock vested		34,875			—			—			—

Repurchase of vested employee restricted stock for tax withholding		(7,445	)		(66	)		(102	)		(168	)

Shares issued for auto-investments pursuant to the 2015 Dividend Reinvestment and Stock Purchase Plan		125			2			—			2

Shares issued for dividend reinvestment pursuant to the 2015 Dividend Reinvestment and Stock Purchase Plan		808			15			(15	)		—

Stock-based compensation		—			1,057			—			1,057

Adjustment for fractional shares paid in cash		(56	)		(1	)		—			(1	)

Balance at March 31, 2017		7,690,275		$	14,286		$	30,485		$	44,771

See accompanying notes to unaudited condensed financial statements

Hennessy Advisors, Inc.

Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended March 31,
	2017			2016
Cash flows from operating activities:
Net income	$	7,624		$	6,933
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation		184			177
Deferred income taxes		1,296			1,529
Tax effect from restricted stock units		—			95
Restricted stock units repurchased for employee tax withholding		(168	)		(98	)
Stock-based compensation		1,057			700
Deferred rent		83			(29	)
Amortization of loan fee payments		(73	)		(73	)

Change in operating assets and liabilities
Investment fee income receivable		(330	)		(262	)
Prepaid expenses		620			242
Other accounts receivable		44			11
Other assets		3			73
Accrued liabilities and accounts payable		(2,019	)		(523	)
Income taxes payable		(383	)		(1,097	)

Net cash provided by operating activities		7,938			7,678


Cash flows used in investing activities:
Purchases of property and equipment		(68	)		(100	)
Deferred offering costs		—			(1	)
Payments related to management contracts		(119	)		(270	)

Net cash used in investing activities		(187	)		(371	)


Cash flows provided by (used in) financing activities:
Principal payments on bank loan		(2,114	)		(2,187	)
Proceeds from shares issued pursuant to the 2015 Dividend Reinvestment and Stock Repurchase Plan		2			14
Dividend payments		(1,074	)		(709	)
Payment of loan fees		—			(15	)
Cash paid for fractional shares		(1	)		—

Net cash used in financing activities		(3,187	)		(2,897	)


Net increase in cash and cash equivalents		4,564			4,410

Cash and cash equivalents at the beginning of the period		3,535			3,086


Cash and cash equivalents at the end of the period	$	8,099		$	7,496


Supplemental disclosures of cash flow information:
Cash paid for:
Income taxes	$	1,994		$	3,428

Interest	$	271		$	626

See accompanying notes to unaudited condensed financial statements

HENNESSY ADVISORS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(1) Basis of Financial Statement Presentation

The accompanying condensed balance sheet as of September 30, 2016, which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of March 31, 2017, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and include the accounts of Hennessy Advisors, Inc. (the “Company”). Certain information and footnote disclosures in these unaudited interim condensed financial statements, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission for Quarterly Reports on Form 10-Q. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the Company’s financial position at March 31, 2017, the Company’s operating results for the three and six months ended March 31, 2017 and 2016, and the Company’s cash flows for the six months ended March 31, 2017 and 2016. These unaudited interim condensed financial statements and notes should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended September 30, 2016, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

The Company’s operating activities consist primarily of providing investment advisory services to 14 open-end mutual funds branded as the Hennessy Funds. The Company serves as the investment advisor to all classes of the Hennessy Cornerstone Growth Fund, the Hennessy Focus Fund, the Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy Cornerstone Large Growth Fund, the Hennessy Cornerstone Value Fund, the Hennessy Total Return Fund, the Hennessy Equity and Income Fund, the Hennessy Balanced Fund, the Hennessy Gas Utility Fund, the Hennessy Small Cap Financial Fund, the Hennessy Large Cap Financial Fund, the Hennessy Technology Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund. The Company also provides shareholder services to the entire family of the Hennessy Funds.

The Company’s operating revenues consist of contractual investment advisory and shareholder service fees paid to it by the Hennessy Funds. The Company earns investment advisory fees from each Hennessy Fund by, among other things:

•

acting as portfolio manager for the fund or overseeing the sub-advisor acting as portfolio manager for the fund, which includes managing the composition of the fund’s portfolio (including the purchase, retention, and disposition of portfolio securities in accordance with the fund’s investment objectives, policies, and restrictions), seeking best execution for the fund’s portfolio, managing the use of soft dollars for the fund, and managing proxy voting for the fund;

•

performing a daily reconciliation of portfolio positions and cash for the fund;

•

monitoring the fund’s compliance with its investment objectives and restrictions and federal securities laws;

•

performing activities such as maintaining a compliance program, conducting ongoing reviews of the compliance programs of the fund’s service providers (including its sub-advisor, as applicable), conducting on-site visits to the fund’s service providers (including its sub-advisor, as applicable), monitoring incidents of abusive trading practices, reviewing fund expense accruals, payments, and fixed expense ratios, evaluating insurance providers for fidelity bond coverage, D&O/E&O insurance coverage, and cybersecurity insurance coverage, conducting employee compliance training, reviewing reports provided by service providers, maintaining books and records, and preparing an annual compliance report to the Board of Trustees of Hennessy Funds Trust (the “Funds’ Board of Trustees”);

•

overseeing the selection and continued employment of the fund’s sub-advisor, if applicable, monitoring such sub-advisor’s adherence to the fund’s investment objectives, policies, and restrictions, and reviewing the fund’s investment performance;

•

overseeing service providers that provide accounting, administration, distribution, transfer agency, custodial, sales and marketing, audit, information technology, and legal services to the fund;

•

maintaining in-house marketing and distribution departments on behalf of the fund;

•

being actively involved with preparing all regulatory filings for the fund, including writing and annually updating the fund’s prospectus and related documents;

•

preparing or reviewing a written summary of the fund’s performance for the most recent twelve-month period for each annual report of the fund;

•

monitoring and overseeing the accessibility of the fund on third party platforms;

•

paying the incentive compensation of the fund’s compliance officers and employing other staff such as management executives, legal personnel, marketing personnel, national accounts and distribution personnel, sales personnel, administrative personnel, and trading oversight personnel;

•

providing a quarterly certification to Hennessy Funds Trust; and

•

preparing or reviewing materials for the Funds’ Board of Trustees, presenting or leading discussions to or with the Funds’ Board of Trustees, preparing or reviewing meeting minutes, and arranging for training and education of the Funds’ Board of Trustees.

The Company earns shareholder service fees from Investor Class shares of the Hennessy Funds by, among other things, maintaining a toll-free number that the current investors of the Hennessy Funds may call to ask questions about the Hennessy Funds or their accounts, or to get help with processing exchange and redemption requests or changing account options. These fee revenues are earned and calculated daily by the Hennessy Funds’ accountants at U.S. Bancorp Fund Services, LLC. The fees are computed and billed monthly, at which time they are recognized in accordance with Accounting Standard Codification 605 “Revenue Recognition.”

Effective February 28, 2017, the Company waives fees with respect to the Hennessy Technology Fund to comply with a contractual expense ratio limitation. The fee waiver is calculated daily by the Hennessy Funds’ accountants at U.S. Bancorp Fund Services, LLC and is charged to expense monthly by the Company as an offset to revenue. The waived fee is deducted from investment advisory fee income and reduces the aggregate amount of advisory fees received by the Company in the subsequent month. To date, the Company has only waived fees based on contractual obligations, but the Company has the ability to waive fees at its discretion. If the Company elects to voluntarily waive fees, the decision to waive fees would not apply to previous periods, but would only apply on a going forward basis.

The Company’s contractual agreements for investment advisory and shareholder services provide persuasive evidence that an arrangement exists with fixed and determinable fees, and the services are rendered daily. The collectability is probable as the fees are received from the Hennessy Funds in the month subsequent to the month in which the services are provided.

(2) Management Contracts Purchased

Throughout its history, the Company has completed eight purchases of assets related to the management of 25 different mutual funds, some of which were reorganized into already existing Hennessy Funds. In accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), the Company periodically reviews the carrying value of its purchased management contracts to determine if any impairment has occurred. The fair value of management contracts are based on management estimates and assumptions, including third party valuations that utilize appropriate valuation techniques. The fair value of the management contracts was estimated by applying the income approach. It is the opinion of the Company’s management that there was no impairment as of March 31, 2017 or 2016.

Under the FASB guidance on “Intangibles – Goodwill and Other,” intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment. The Company reviews the life of the management contracts each reporting period to determine if they continue to have an indefinite useful life. The Company considers the mutual fund management contracts to be intangible assets with an indefinite useful life and are not impaired as of March 31, 2017.

The Company completed its most recent asset purchase on September 23, 2016, when it purchased the assets related to the management of the Westport Fund and the Westport Select Cap Fund. This asset purchase added approximately $435 million to the Company’s assets under management. The purchase was consummated in accordance with the terms and conditions of that certain Transaction Agreement, dated as of May 2, 2016, between the Company and Westport Advisers, LLC. The purchase price of $11.3 million was funded with available cash and was based on the aggregate average assets under management for the Westport Fund and the Westport Select Cap Fund as measured at the close of business on the effective date of the Transaction Agreement and on each of the two trading days immediately preceding the date of the Transaction Agreement. The total capitalized costs related to the purchase were $11.4 million.

(3) Investment Advisory Agreements

The Company has management contracts with Hennessy Funds Trust, under which it provides investment advisory services to all classes of the 14 Hennessy Funds.

The management contracts must be renewed annually (except in limited circumstances) by (1) the Funds’ Board of Trustees or by the vote of a majority of the outstanding shares of the applicable Hennessy Fund and (2) by the vote of a majority of the trustees of Hennessy Funds Trust who are not interested persons of the Hennessy Funds. If the management contracts are not renewed annually as described above, they will terminate automatically. In addition, there are two other circumstances in which the management contracts would terminate. First, the management contracts would automatically terminate if the Company assigned them to another advisor (assignment includes “indirect assignment,” which is the transfer of the Company’s common stock in sufficient quantities deemed to constitute a controlling block). Additionally, each management contract may be terminated prior to its expiration upon 60 days’ notice by either the Company or the applicable Hennessy Fund.

As provided in the management contracts, the Company receives investment advisory fees monthly based on a percentage of the respective fund’s average daily net assets.

The Company has entered into sub-advisory agreements for the Hennessy Focus Fund, the Hennessy Equity and Income Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund. Under each of these sub-advisory agreements, the sub-advisor is responsible for the investment and re-investment of the assets of the applicable Hennessy Fund in accordance with the terms of such agreement and the applicable Hennessy Fund’s Prospectus and Statement of Additional Information. The sub-advisors are subject to the direction, supervision and control of the Company and the Funds’ Board of Trustees. The sub-advisory agreements must be renewed annually in the same manner and are subject to the same termination provisions as the management contracts.

In exchange for the sub-advisory services, the Company (not the Hennessy Funds) pays sub-advisor fees to the sub-advisors, which are based on the amount of each applicable Hennessy Fund’s average daily net assets.

(4) Bank Loan

The Company has an outstanding bank loan with U.S. Bank National Association, as administrative agent (in such capacity, “Agent”) and as a lender, and California Bank & Trust, as syndication agent and as a lender, which replaced and refinanced the bank loan previously entered into by the Company and U.S. Bank National Association on October 26, 2012, and amended on November 1, 2013. Immediately prior to September 17, 2015, the Company’s bank loan had an outstanding principal balance of $23.0 million. On September 17, 2015, in anticipation of the repurchase of up to 1,000,000 shares of the Company’s common stock at $25 per share pursuant to its self-tender offer, the Company entered into a new term loan agreement to fund in part its self-tender offer, thereby increasing its total loan balance to $35.0 million (consisting of a $20.0 million promissory note to U.S. Bank National Association and a $15.0 million promissory note to California Bank & Trust). Then, on September 19, 2016, the Company entered into an amendment to its term loan agreement with the Agent and the lenders to allow it to consummate the purchase of assets related to the management of the Westport Fund and the Westport Select Cap Fund. In addition, the amendment revised one of the financial covenants in the term loan agreement.

The current term loan agreement requires 48 monthly payments in the amount of $364,583 plus interest, at the Company’s option, at either:

(1) LIBOR plus a margin that ranges from 2.75% to 3.25%, depending on the Company’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation and amortization (excluding, among other things, certain non-cash gains and losses) (“EBITDA”), or

(2) the sum of (a) the highest of the prime rate set by U.S. Bank from time to time, the Federal Funds Rate plus 0.50%, or one-month LIBOR plus 1.00%, and (b) a margin that ranges from 0.25% to 0.75%, depending on the Company’s ratio of consolidated debt to consolidated EBITDA.

From the effective date of the current term loan agreement through February 29, 2016, the interest rate in effect was U.S. Bank’s prime rate plus a margin. The applicable margin was initially 0.75% and then decreased to 0.5% as of January 21, 2016, based on the Company’s ratio of consolidated debt to consolidated EBITDA as of December 31, 2015. This margin decrease reduced the effective interest rate on the term loan from 4.25% to 4.0%. Effective March 1, 2016, the Company converted $32.8 million of its principal loan balance to a 1-month LIBOR contract, which has been renewed each subsequent month. As of March 31, 2017, the effective rate is 3.784%, which is comprised of the LIBOR rate of 0.784% as of March 1, 2017, plus a margin of 3.0% based on the Company’s ratio of consolidated debt to consolidated EBITDA as of December 31, 2016. The Company intends to renew the 1-month LIBOR contract on a monthly basis provided that the LIBOR-based interest rate remains favorable to the prime rate-based interest rate.

All borrowings under the term loan agreement are secured by substantially all of the Company’s assets. The final installment of the then-outstanding principal of $17.9 million plus interest is due September 17, 2019.

The previous amended loan agreement included, and the current term loan agreement includes, certain reporting requirements and loan covenants requiring the maintenance of certain financial ratios. The Company was in compliance for the periods ended March 31, 2017 and 2016.

The Company did an evaluation of the debt modification and determined that the portion of the loan refinanced with the same creditor (the $20.0 million with U.S. Bank National Association) is not considered “substantially different” from the original loan with U.S. Bank National Association per the conditions set forth in Accounting Standards Codification 470-50 – Debt; Modifications and Extinguishments. Furthermore, due to the variable nature of the interest rate, this feature of the loan was examined for potential bifurcation as an embedded derivative, and it was determined that the feature does not require bifurcation from the host contract.

In connection with securing the financings discussed above, the Company incurred loan costs in the amount of $0.41 million. These costs were reclassified to offset debt liability per Accounting Standards Update (“ASU”) 2015-03 as of March 31, 2017, and the balance is being amortized on a straight-line basis, which approximates the effective interest basis, over 48 months. Amortization expense during the six-month periods ended March 31, 2017 and 2016, was $0.07 million for each period. The unamortized balance of the loan fees was $0.3 million as of March 31, 2017. The following is a reconciliation of the reclassification (in thousands):


	Gross Debt at September 30, 2016		Debt Issuance Cost			Net Debt at September 30, 2016

Current portion of debt	$	4,375	$	(147	)	$	4,228
Long-term portion of debt		26,250		(293	)		25,957

Total Debt	$	30,625	$	(440	)	$	30,185


	Gross Debt at March 31, 2017		Debt Issuance Cost			Net Debt at March 31, 2017

Current portion of debt	$	4,375	$	(147	)	$	4,228
Long-term portion of debt		24,063		(220	)		23,843

Total Debt	$	28,438	$	(367	)	$	28,071

(5) Income Taxes

The Company’s effective income tax rates for the six months ended March 31, 2017 and 2016, were 35.4% and 37.2%, respectively, and differ from the federal statutory rate of 35% primarily due to state taxes. The effective income tax rate was lower for the period ended March 31, 2017, due to the early adoption of ASU 2016-09 (see further discussion in Footnote 10).

We are subject to income tax in the U.S. federal jurisdiction and multiple state jurisdictions. Our U.S. federal tax returns for 2013 and subsequent years remain open to examination. Generally, we are no longer subject to state examinations by tax authorities for years prior to fiscal 2012. For state tax jurisdictions with unfiled tax returns, the statute of limitations will remain open indefinitely.

(6) Earnings per Share and Dividends per Share

Basic earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents.

All common stock equivalents were dilutive and therefore included in the diluted earnings per share calculation for the three and six months ended March 31, 2017.

On January 26, 2017, the Company’s Board of Directors declared a 3-for-2 stock split, which was effected on March 6, 2017, for shareholders of record as of February 10, 2017. All disclosures in this report relating to shares of common stock, restricted stock units, and per share data have been adjusted to reflect this stock split.

The Company paid quarterly cash dividends of $0.067 per share on December 8, 2016, to shareholders of record as of November 15, 2016, and $0.075 per share on March 6, 2017, to shareholders of record as of February 10, 2017.

(7) Stock-Based Compensation

On March 26, 2014, the Company adopted, and the Company’s shareholders approved, the Amended and Restated 2013 Omnibus Incentive Plan (the “Plan”). Under the Plan, participants may be granted restricted stock units (“RSUs”), representing an unfunded, unsecured right to receive a share of the Company’s common stock on the date specified in the recipient’s award. The Company issues new shares of its common stock when it is required to deliver shares to an RSU recipient. The RSUs granted under the Plan vest over four years, at a rate of 25 percent per year. The Company recognizes compensation expense on a straight-line basis over the four-year vesting term of each award. There were no RSUs granted under the Plan during the six months ended March 31, 2017 or 2016. RSU activity for the six months ended March 31, 2017, was as follows:


	Restricted Stock Unit Activity Six Months Ended March 31, 2017
	Number of Share Units			Weighted Avg. Fair Value Per Share at Each Date
Non-vested Balance at September 30, 2016		379,464		$	16.19

Granted		—			—

Vested (1)		(76,162	)		13.88

Forfeited		—			—


Non-vested Balance at March 31, 2017		303,302		$	16.76

(1)

The restricted share units vested includes partially vested shares. Shares of common stock have not been issued for the partially vested shares, but the related compensation costs have been charged to expense. There were 27,430 net shares of common stock issued for restricted stock units vested in the six months ended March 31, 2017.


Restricted Stock Unit Compensation Six Months Ended March 31, 2017

	(In thousands)
Total expected compensation expense related to Restricted Stock Units	$	10,608

Compensation expense recognized through March 31, 2017		(5,523	)


Unrecognized compensation expense related to RSUs at March 31, 2017	$	5,085

As of March 31, 2017, there was $5.1 million of total RSU compensation expense related to non-vested awards not yet recognized, which is expected to be recognized over a weighted-average vesting period of 2.6 years.

(8) Commitments and Contingencies

The Company’s headquarters is located in leased office space under a single non-cancelable operating lease at 7250 Redwood Blvd., Suite 200, in Novato, California. The lease expires on June 30, 2021, with one five-year extension available thereafter.

The Company also has office space under a single non-cancelable operating lease at 101 Federal Street, Suite 1900, Boston, Massachusetts 02110. The initial term of the lease expired on November 30, 2015, but automatically renews for successive one-year periods unless either party terminates the lease by providing at least three months’ notice of termination to the other party prior to the next renewal date.

The Company also has office space under a single non-cancelable operating lease at 1340 Environ Way, #305, Chapel Hill, North Carolina 27517. The initial term of the lease expired on November 30, 2015, but automatically renews for successive three-month periods unless either party terminates the lease by providing at least two months’ notice of termination to the other party prior to the next renewal date.

As of March 31, 2017, there were no material changes in the leasing arrangements that would have a significant effect on future minimum lease payments reported in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

(9) Fair Value Measurements

The Company applies the FASB standard “Fair Value Measurements” for all financial assets and liabilities, which establishes a framework for measuring fair value and expands disclosures about fair value measurements. The standard defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” It also establishes a fair value hierarchy consisting of the following three “levels” that prioritize the inputs to the valuation techniques used to measure fair value:

•

Level 1 – Unadjusted, quoted prices in active markets for identical assets or liabilities that an entity has the ability to access at the measurement date.

•

Level 2 – Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets).

•

Level 3 – Significant unobservable inputs (including the entity’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are not available.

Based on the definitions, the following table represents the Company’s assets categorized in the Level 1 to 3 hierarchies as of March 31, 2017, and September 30, 2016:


	Fair Value Measurements at March 31, 2017
	Level 1		Level 2		Level 3		Total
	(In thousands)

Money market fund deposits	$	5,321	$	—	$	—	$	5,321
Mutual fund investments		8		—		—		8


Total	$	5,329	$	—	$	—	$	5,329


Amounts included in:
Cash and cash equivalents	$	5,321	$	—	$	—	$	5,321
Investments in marketable securities		8		—		—		8


Total	$	5,329	$	—	$	—	$	5,329


	Fair Value Measurements at September 30, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)

Money market fund deposits	$	320	$	—	$	—	$	320
Mutual fund investments		8		—		—		8


Total	$	328	$	—	$	—	$	328


Amounts included in:
Cash and cash equivalents	$	320	$	—	$	—	$	320
Investments in marketable securities		8		—		—		8


Total	$	328	$	—	$	—	$	328

There were no transfers between levels during the six months ended March 31, 2017, or the year ended September 30, 2016.

(10) New Accounting Standards

In April 2015, the FASB issued ASU 2015-03 “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This ASU requires reporting entities to record costs paid to third parties that are directly related to issuing debt, and that otherwise would not be incurred, as a deduction to the corresponding debt for presentation purposes. The effective date for the new standard is for annual periods beginning after December 15, 2015. We adopted ASU 2015-03 on January 1, 2017, for debt issuance costs on our term loan, on a retrospective basis. The impact of adopting ASU 2015-03 on our current period condensed consolidated financial statements was the classification of all deferred financing costs as a deduction to the corresponding debt in addition to the reclassification of deferred financing costs in other current and long term assets to short and long term notes payable as of September 30, 2016, within the condensed consolidated balance sheets to conform to the current period presentation. Other than these reclassifications and additional disclosures, the adoption of ASU 2015-03 did not have a material impact on our financial statements.

In March 2016, the FASB issued ASU 2016-09 “Compensation – Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting.” The new standard contains several amendments that will simplify the recognition for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification within the statement of cash flows for certain components of share-based awards. Early adoption is permitted for any interim or annual period. The changes in the new standard eliminate the recognition of excess tax benefits or tax deficiencies from the statement of stockholders’ equity. Under the new guidance, all excess tax benefits and tax deficiencies resulting from stock-based compensation awards vesting and exercises are recognized prospectively within income tax expense, and excess tax benefits are recognized regardless of whether they reduce current taxes payable. This will increase the volatility of our effective tax rate.

We have elected to early adopt ASU 2016-09 for the three months ended March 31, 2017, using a modified retrospective approach, effective as if adopted the first day of the fiscal year, October 1, 2016. As a result of early adoption of ASU 2016-09, income tax benefits of approximately $0.004 million and $0.2 million were recognized as discrete events in the quarterly periods ended March 31, 2017, and December 31, 2016, respectively. We have elected to continue to estimate the number of stock-based awards expected to vest, as permitted by ASU 2016-09, rather than electing to account for forfeitures as they occur. As such, this has no cumulative effect on retained earnings for the prior year. With the early adoption of 2016-09, we have elected to present the cash flow statement on a prospective transition method and no prior periods have been adjusted.

In January 2017, the FASB issued ASU No. 2017-01 “Business Combinations (Topic 805): Clarifying the Definition of a Business.” Based on feedback that the definition of business is being applied too broadly, the update adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The effective date for the new standard is for annual periods beginning after December 15, 2017 (the Company’s first quarter of fiscal year 2019). The adoption of this standard is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

(11) Subsequent Events

The Company has evaluated subsequent events through the date these financial statements were issued and has concluded that no material subsequent events occurred during this period that would require recognition or disclosure.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the securities laws, for which we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by terminology such as “expect,” “anticipate,” “intend,” “may,” “plan,” “will,” “should,” “could,” “would,” “assume,” “believe,” “estimate,” “predict,” “potential,” “project,” “continue,” “seek” and similar expressions, as well as statements in the future tense. We have based these forward-looking statements on our current expectations and projections about future events, based on information currently available to us. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or means by, which such performance or results will be achieved.

Forward-looking statements are subject to risks, uncertainties and assumptions, including those described in the section entitled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016, filed with the Securities and Exchange Commission. Unforeseen developments could cause actual performance or results to differ substantially from those expressed in or suggested by the forward-looking statements. Management does not assume responsibility for the accuracy or completeness of these forward-looking statements. There is no regulation requiring an update of any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations.

Our business activities are affected by many factors, including, without limitation, redemptions by mutual fund shareholders, general economic and financial conditions, movement of interest rates, competitive conditions, industry regulation, and fluctuations in the stock market, many of which are beyond the control of our management. Further, the business and regulatory environments in which we operate remain complex, uncertain, and subject to change. We expect that regulatory requirements and developments will cause us to incur additional administrative and compliance costs. In addition, while domestic economic conditions are relatively stable, further increases in short-term interest rates, policy changes from the new administration in Washington D.C. and developments in international financial markets could influence economic and financial conditions significantly. Notwithstanding the variability in our economic and regulatory environments, we remain focused on the investment performance of the Hennessy Funds and on providing high quality customer service to investors.

Our business strategy centers on (i) the identification, completion and integration of future acquisitions and (ii) organic growth, through both the retention of the mutual fund assets we currently manage and the generation of inflows into the mutual funds we manage. The success of our business strategy may be influenced by the factors discussed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016. All statements regarding our business strategy, as well as statements regarding market trends and risks and assumptions about changes in the marketplace, are forward-looking by their nature.

Overview

Our primary operating activity is providing investment advisory services to 14 open-end mutual funds branded as the Hennessy Funds. With respect to four of the funds, sub-advisors act as portfolio managers for the funds, subject to our oversight. We oversee the selection and continued employment of each sub-advisor, review each sub-advisor’s investment performance, and monitor each sub-advisor’s adherence to the applicable fund’s investment objectives, policies, and restrictions. In addition, we conduct ongoing reviews of the compliance programs of sub-advisors and make on-site visits to sub-advisors. Our secondary operating activity is providing shareholder services to Investor Class shares of each of the Hennessy Funds.

We have recently completed several changes to the Hennessy Funds product lineup. For the Hennessy Technology Fund, there was a change in investment strategy, a change in portfolio management, a decrease in the management fee from 0.90% to 0.74%, and the adoption of an expense limitation agreement. Additionally, we added Institutional Class shares to the Hennessy Gas Utility Fund, liquidated the Hennessy Core Bond Fund, and reorganized the Hennessy Large Value Fund into the Hennessy Cornerstone Value Fund.

We derive our operating revenue from investment advisory fees and shareholder service fees paid to us by the Hennessy Funds. These fees are calculated as a percentage of the average daily net assets in each of the Hennessy Funds. The percentage amount of the investment advisory fees vary from fund to fund, but the percentage amount of the shareholder service fees is consistent across all funds. The dollar amount of the fees we receive fluctuates with changes in the average net asset value of each of the Hennessy Funds, which is affected by each fund’s investment performance, purchases and redemptions of shares, general market conditions and the success of our marketing, sales, and public relations efforts.

The majority of the Hennessy Funds are solely invested in the U.S. equity markets, while two funds are solely invested in the Japanese equity markets and one fund has exposure to the fixed income markets.

U.S. equity markets posted strong gains for the six-month period ended March 31, 2017. Investors reacted positively to the election of President Trump, a Republican, to the White House, and to Republican majorities in both houses of Congress. Stock prices generally increased as the potential for higher government infrastructure spending, reduced regulatory restrictions, and tax reform could stimulate investment spending and economic growth. Additionally, investors seemed encouraged by certain indicators that showed robust domestic economic activity. The Federal Reserve, seeming confident about the strength of the economy and mindful of the steady acceleration in wage increases over the last year, raised the current federal funds rate by a quarter point in December.

The Japanese equity market rose significantly in local currency terms over the six-month period ended March 31, 2017. With the U.S. dollar rallying strongly against most currencies, including the Japanese yen, export-oriented Japanese equities moved higher. Signs of a recovery in industrial production and a stabilization in the inflation rate in Japan also helped improve investor sentiment over the period.

U.S. government bond yields increased precipitously after the U.S. elections in anticipation of faster economic growth and higher inflation. Economic indicators showing that personal income grew 3.5% in 2016 also contributed to the rise in bond yields.

We seek to provide positive annualized returns to investors in the Hennessy Funds on average over a market cycle and to generate net inflows into the Hennessy Funds through our marketing and sales efforts. We regularly target over 120,000 financial advisors through our marketing and sales program, and currently serve over 18,000 advisors who utilize the Hennessy Funds for their clients. More than one in five of those advisors owns two or more of the Hennessy Funds. We continue to expand our team of sales professionals to serve our advisor community and to assist us with providing services to our nearly 350,000 mutual fund accounts across the country. In addition, we have a rigorous public relations effort with the Hennessy brand name appearing on TV, radio, print or online media on average once every two days.

As of March 31, 2017, all 14 of the Hennessy Funds posted positive performance over the 1-year, 3-year, 5-year, 10-year and since inception periods. Total assets under management as of March 31, 2017, were $6.6 billion, an increase of 3.3%, or $211 million, from $6.4 billion as of March 31, 2016 (the end of the prior comparable period). The increase in total assets is attributable to market appreciation of $669 million and the purchase of assets related to the management of The Westport Funds of $435 million, and was offset by net outflows from the Hennessy Funds of $893 million.

The following table illustrates the changes in total assets under management from March 31, 2016, through March 31, 2017:


	Total Assets Under Management
	At Each Quarter End, March 31, 2016 through March 31, 2017
	3/31/2016			6/30/2016			9/30/2016			12/31/2016			3/31/2017
	(In thousands)
Beginning assets under management	$	6,324,044		$	6,424,453		$	6,342,902		$	6,698,519		$	6,592,589

Acquisition inflows		—			—			434,530			—			—

Organic inflows		574,821			557,343			296,459			327,308			376,440

Redemptions		(644,800	)		(654,042	)		(593,539	)		(647,952	)		(554,606	)

Market appreciation (depreciation)		170,388			15,148			218,167			214,714			221,379


Ending assets under management	$	6,424,453		$	6,342,902		$	6,698,519		$	6,592,589		$	6,635,802

The principal asset on our balance sheet, management contracts, represents the capitalized costs incurred in connection with the purchase of assets related to the management of mutual funds. As of March 31, 2017, this asset had a net balance of $74.5 million, compared to $63.0 million as of March 31, 2016. The current period increase is mainly due to payments relating to the purchase of assets related to the management of The Westport Funds, and also to a much lesser extent, the result of costs relating to the reorganization of the Hennessy Large Value Fund into the Hennessy Cornerstone Value Fund.

The principal liability on our balance sheet is the bank debt incurred in connection with the purchase of assets related to the management of mutual funds and the repurchase of 1,000,000 shares of the Company’s common stock pursuant to the completion of its self-tender offer in September 2015. As of March 31, 2017, this liability had a gross balance of $28.4 million ($28.1 million net of reclassed deferred loan fees of $0.3 million, further discussed in Footnote 4).

Results of Operations

Three Months Ended March 31, 2017, Compared to Three Months Ended March 31, 2016

The following table sets forth items in the statement of income as dollar amounts and as percentages of total revenue for the three months ended March 31, 2017 and 2016:


	Three Months Ended March 31,
	2017					2016
	Amounts		Percent of Total Revenue			Amounts			Percent of Total Revenue
	(In thousands, except percentages)
Revenue:
Investment advisory fees	$	12,063		91.1	%	$	10,991			90.1	%
Shareholder service fees		1,173		8.9			1,201			9.9

Total revenue		13,236		100.0			12,192			100.0


Operating expenses:
Compensation and benefits		3,275		24.8			2,891			23.7
General and administrative		1,395		10.5			1,405			11.5
Mutual fund distribution		72		0.5			301			2.5
Sub-advisor fees		2,292		17.3			2,054			16.8
Amortization and depreciation		91		0.7			89			0.8

Total operating expenses		7,125		53.8			6,740			55.3


Net operating income		6,111		46.2			5,452			44.7

Interest expense		278		2.1			309			2.5
Other income		—		—			(1	)		—

Income before income tax expense		5,833		44.1			5,144			42.2

Income tax expense		2,205		16.7			1,861			15.3

Net income	$	3,628		27.4	%	$	3,283			26.9	%

Revenues – Investment Advisory Fees and Shareholder Service Fees

Total revenue increased 8.6% from the prior comparable period to $13.2 million in the three months ended March 31, 2017. Investment advisory fees increased 9.8% from the prior comparable period to $12.1 million in the three months ended March 31, 2017. The increase in investment advisory fees is due to increased average daily net assets of the Hennessy Funds. This was slightly offset by a reduction in the annual rate of the investment advisory fee for the Hennessy Japan Fund from 1.00% to 0.80% and for the Hennessy Japan Small Cap Fund from 1.20% to 0.80%, each effective as of March 1, 2016, and by a reduction in the investment advisory fee from 0.90% to 0.74% and the implementation of an expense limitation agreement for the Hennessy Technology Fund, each effective as of February 28, 2017. Average daily net assets of the Hennessy Funds for the three months ended March 31, 2017, increased by

$641 million, or 10.7%, to $6.63 billion, versus the prior comparable period. Shareholder service fees decreased 2.3% from the prior comparable period to $1.2 million in the three months ended March 31, 2017. The decrease in shareholder service fees is due to a change in the composition of average daily net assets. Assets held in Institutional Class shares of the Hennessy Funds are not subject to a shareholder service fee, whereas assets held in Investor Class shares of the Hennessy Funds are subject to a shareholder service fee. The average daily net assets held in Institutional Class shares increased, while the average daily net assets held in Investor Class shares decreased versus the prior comparable period.

The Company collects investment advisory fees from each of the Hennessy Funds at differing rates. These annual rates previously ranged between 0.40% to 1.20% of average daily net assets, but now range between 0.40% and 0.90% of average daily net assets because the annual rate of the investment advisory fee for the Hennessy Japan Fund was reduced from 1.00% to 0.80% and the annual rate of the investment advisory fee for the Hennessy Japan Small Cap Fund was reduced from 1.20% to 0.80%, each effective as of March 1, 2016. The Hennessy Fund with the largest average daily net assets for the three months ended March 31, 2017, was the Hennessy Focus Fund, with $2.55 billion. The Company collects an investment advisory fee from the Hennessy Focus Fund at an annual rate of 0.90% of average daily net assets. However, the Company pays a sub-advisor fee at an annual rate of 0.29% to the Fund’s sub-advisor, which reduces the net operating profit contribution of the Fund to the Company’s financial operations. The Hennessy Fund with the second largest average daily assets for the three months ended March 31, 2017, was the Hennessy Gas Utility Fund, with $1.45 billion. The Company collects an investment advisory fee from the Hennessy Gas Utility Fund at an annual rate of 0.40% of average daily net assets.

Total assets under management as of March 31, 2017, were $6.64 billion, an increase of 0.7% or $43 million, compared with $6.60 billion as of December 31, 2016. The increase in total assets under management over the three months ended March 31, 2017, was due to aggregate market appreciation of $221 million, partly offset by aggregate net outflows from the Hennessy Funds of $178 million. The Hennessy Funds with the three largest amounts of net inflows for the three months ended March 31, 2017, were as follows:

•

Hennessy Japan Fund: $46 million

•

Hennessy Small Cap Financial Fund: $20 million

•

Hennessy Japan Small Cap Fund: $10 million

The Hennessy Funds with the three largest amounts of net outflows for the three months ended March 31, 2017, were as follows:

•

Hennessy Mid Cap 30 Fund: -$142 million

•

Hennessy Gas Utility Fund: -$44 million

•

Hennessy Equity & Income Fund: -$22 million

Redemptions as a percentage of assets under management decreased from an average of 3.5% per month during the three months ended March 31, 2016, to 2.8% per month during the three months ended March 31, 2017.

Operating and Other Expenses

Total operating expenses increased 5.7% to $7.1 million in the three months ended March 31, 2017, from $6.7 million in the prior comparable period. The increase is due primarily to increases in compensation and benefits expense and sub-advisor fee expense, but was partially offset by decreases in both mutual fund distribution expense and general and administrative expense. As a percentage of total revenue, total operating expenses decreased 1.5 percentage points to 53.8% in the three months ended March 31, 2017, as compared to 55.3% in the prior comparable period.

Compensation and Benefits Expense: Compensation and benefits expense increased 13.3% to $3.3 million in the three months ended March 31, 2017, from $2.9 million in the prior comparable period. The increase is primarily due to an increase in the Company’s incentive-based compensation expense related to the Company’s increased profitability in the current period versus the prior comparable period. As a percentage of total revenue, compensation and benefits expense increased 1.1 percentage points to 24.8% for the three months ended March 31, 2017, compared to 23.7% in the prior comparable period.

General and Administrative Expense: General and administrative expense decreased 0.7% to $1.40 million in the three months ended March 31, 2017, from $1.41 million in the prior comparable period. The decrease resulted from decreased variable sales-related costs in the current period versus the prior comparable period. As a percentage of total revenue, general and administrative expense decreased 1.0 percentage points to 10.5% in the three months ended March 31, 2017, compared to 11.5% in the prior comparable period.

Mutual Fund Distribution Expense: Mutual fund distribution expense decreased 76.1% to $0.1 million in the three months ended March 31, 2017, from $0.3 million in the prior comparable period. As a percentage of total revenue, mutual fund distribution expense decreased 2.0 percentage points to 0.5% for the three months ended March 31, 2017, compared to 2.5% in the prior comparable period ended March 31, 2016.

Mutual fund distribution expense consists of fees paid to various financial institutions that offer the Hennessy Funds as potential investments to their clients. When the Hennessy Funds are purchased through one of these financial institutions, the institution typically charges an asset-based fee, which is recorded in “mutual fund distribution expense” in our statement of operations to the extent paid by us. When the Hennessy Funds are purchased directly, we do not incur any such expense. These fees generally increase or decrease in line with the net assets of the Hennessy Funds held through these financial institutions, which are affected by inflows, outflows and fund performance.

The decrease in mutual fund distribution expense in the current three-month period is primarily due to the timing of payments made by the Company to financial intermediaries following the completion of contract negotiations in the prior period and also, to a lesser extent, the implementation of a Distribution (Rule 12b-1) Plan for each of the Hennessy Japan Fund and the Hennessy Japan Small Cap Fund as of March 1, 2016. These distribution plans charge the Hennessy Japan Fund and the Hennessy Japan Small Cap Fund an annual rate of 0.15% (though 0.25% is the maximum allowable) of average daily net assets to pay for sales, distribution and other expenses. Each distribution plan therefore allows the applicable fund to use its distribution plan fees to offset fees charged by financial institutions that offer the Hennessy Funds as potential investments to their clients. Therefore, as of March 1, 2016, a portion of the mutual fund distribution expense previously paid by the Company began to be offset by payments made by the Hennessy Japan Fund and the Hennessy Japan Small Cap Fund pursuant to their distribution plans.

Sub-Advisor Fee Expense: Sub-advisor fee expense increased 11.6% to $2.3 million in the three months ended March 31, 2017, from $2.1 million in the prior comparable period. The increase is a result of an increase in average assets under management in the sub-advised Hennessy Funds, with a slight offset as a result of the Company no longer paying sub-advisor fees with respect to the Hennessy Core Bond Fund following its liquidation as of February 17, 2017, or with respect to the Hennessy Large Value Fund following its reorganization into the Hennessy Cornerstone Value Fund as of February 28, 2017. As a percentage of total revenue, sub-advisor fee expense increased 0.5 percentage points to 17.3% for the three months ended March 31, 2017, compared to 16.8% in the prior comparable period.

Amortization and Depreciation Expense: Amortization and depreciation expense increased 2.2% to $0.091 million in the three months ended March 31, 2017, from $0.089 million in the prior comparable period. The increase is a result of a higher fixed asset base for the three months ended March 31, 2017, compared to the prior comparable period. As a percentage of total revenue, amortization and depreciation expense decreased 0.1 percentage points to 0.7% for the three months ended March 31, 2017, compared to 0.8% in the prior comparable period.

Interest Expense: Interest expense decreased 10.0% to $0.28 million in the three months ended March 31, 2017, from $0.31 million in the prior comparable period. The decrease is due primarily to a decrease to the Company’s principal loan balance compared to the prior comparable period. As a percentage of total revenue, interest expense decreased 0.4 percentage points to 2.1% for the three months ended March 31, 2017, compared to 2.5% in the prior comparable period ended March 31, 2016.

Income Tax Expense: The provision for income tax expense increased 18.5% to $2.2 million in the three months ended March 31, 2017, from $1.9 million in the prior comparable period. This change is due to increased income before income tax expense in the current period. As a percentage of total revenue, income tax expense increased 1.4 percentage points to 16.7% for the three months ended March 31, 2017, compared to 15.3% in the prior comparable period.

Net Income

Net income increased by 10.5% to $3.6 million in the three months ended March 31, 2017, from $3.3 million in the prior comparable period, as a result of the factors discussed above. As a percentage of total revenue, net income increased 0.5 percentage points to 27.4% for the three months ended March 31, 2017, compared to 26.9% in the prior comparable period.

Six Months Ended March 31, 2017, Compared to Six Months Ended March 31, 2016

The following table sets forth items in the statement of income as dollar amounts and as percentages of total revenue for the six months ended March 31, 2017 and 2016:


	Six Months Ended March 31,
	2017					2016
	Amounts		Percent of Total Revenue			Amounts			Percent of Total Revenue
	(In thousands, except percentages)
Revenue:
Investment advisory fees	$	24,172		91.1	%	$	22,814			90.0	%
Shareholder service fees		2,358		8.9			2,531			10.0

Total revenue		26,530		100.0			25,345			100.0


Operating expenses:
Compensation and benefits		6,489		24.5			5,856			23.1
General and administrative		2,790		10.5			2,944			11.6
Mutual fund distribution		133		0.5			451			1.8
Sub-advisor fees		4,581		17.2			4,204			16.6
Amortization and depreciation		184		0.7			177			0.7

Total operating expenses		14,177		53.4			13,632			53.8


Net operating income		12,353		46.6			11,713			46.2

Interest expense		544		2.1			670			2.6
Other income		—		—			(1	)		—


Income before income tax expense		11,809		44.5			11,044			43.6

Income tax expense		4,185		15.8			4,111			16.2

Net income	$	7,624		28.7	%	$	6,933			27.4	%

Revenues – Investment Advisory Fees and Shareholder Service Fees

Total revenue increased 4.7% from the prior comparable period to $26.5 million in the six months ended March 31, 2017. Investment advisory fees increased 6.0% from the prior comparable period to $24.2 million in the six months ended March 31, 2017. The increase in investment advisory fees is due to increased average daily net assets of the Hennessy Funds. This was slightly offset by a reduction in the annual rate of the investment advisory fee for the Hennessy Japan Fund from 1.00% to 0.80% and for the Hennessy Japan Small Cap Fund from 1.20% to 0.80%, each effective as of March 1, 2016, and by a reduction in the investment advisory fee from 0.90% to 0.74% and the implementation of an expense limitation agreement for the Hennessy Technology Fund, each effective as of February 28, 2017. Average daily net assets of the Hennessy Funds for the six months ended March 31, 2017, increased by $376 million, or 6.1%, to $6.59 billion, versus the prior comparable period. Shareholder service fees decreased 6.8% from the prior comparable period to $2.4 million in the six months ended March 31, 2017. The decrease in shareholder service fees is due to a change in the composition of average daily net assets. Assets held in Institutional Class shares of the Hennessy Funds are not subject to a shareholder service fee, whereas assets held in Investor Class shares of the Hennessy Funds are subject to a shareholder service fee. The average daily net assets held in Institutional Class shares increased, while the average daily net assets held in Investor Class shares decreased versus the prior comparable period.

The Company collects investment advisory fees from each of the Hennessy Funds at differing rates. These annual rates previously ranged between 0.40% to 1.20% of average daily net assets, but now range between 0.40% and 0.90% of average daily net assets because the annual rate of the investment advisory fee for the Hennessy Japan Fund was reduced from 1.00% to 0.80% and the annual rate of the investment advisory fee for the Hennessy Japan Small Cap Fund was reduced from 1.20% to 0.80%, each effective as of March 1, 2016. The Hennessy Fund with the largest average daily net assets for the six months ended March 31, 2017, was the Hennessy Focus Fund, with $2.50 billion. The Company collects an investment advisory fee from the Hennessy Focus Fund at an annual rate of 0.90% of average daily net assets. However, the Company pays a sub-advisor fee at an annual rate of 0.29% to the Fund’s sub-advisor, which reduces the net operating profit contribution of the Fund to the Company’s financial operations. The Hennessy Fund with the second largest average daily assets for the six months ended March 31, 2017, was the Hennessy Gas Utility Fund, with $1.44 billion. The Company collects an investment advisory fee from the Hennessy Gas Utility Fund at an annual rate of 0.40% of average daily net assets.

Total assets under management as of March 31, 2017, were $6.6 billion, a decrease of 0.9% or $63 million, compared with $6.7 billion as of September 30, 2016. The decrease in total assets under management over the six months ended March 31, 2017, was due to aggregate net outflows from the Hennessy Funds of $499 million, partly offset by aggregate market appreciation of $436 million. The Hennessy Funds with the three largest amounts of net inflows for the six months ended March 31, 2017, were as follows:

•

Hennessy Small Cap Financial Fund: $61 million

•

Hennessy Japan Fund: $55 million

•

Hennessy Japan Small Cap Fund: $10 million

The Hennessy Funds with the three largest amounts of net outflows for the six months ended March 31, 2017, were as follows:

•

Hennessy Mid Cap 30 Fund: -$353 million

•

Hennessy Gas Utility Fund: -$101 million

•

Hennessy Equity & Income Fund: -$72 million

Redemptions as a percentage of assets under management decreased from an average of 3.2% per month during the six months ended March 31, 2016, to 3.0% per month during the six months ended March 31, 2017.

Operating and Other Expenses

Total operating expenses increased 4.0% to $14.2 million in the six months ended March 31, 2017, from $13.6 million in the prior comparable period. The increase is due primarily to increases in compensation and benefits expense and sub-advisor fee expense, but was partially offset by decreases in both mutual fund distribution expense and general and administrative expense. As a percentage of total revenue, total operating expenses decreased 0.4 percentage points to 53.4% in the six months ended March 31, 2017, as compared to 53.8% in the prior comparable period.

Compensation and Benefits Expense: Compensation and benefits expense increased 10.8% to $6.5 million in the six months ended March 31, 2017, from $5.9 million in the prior comparable period. The increase is primarily due to an increase in the Company’s incentive-based compensation expense related to the Company’s increased profitability in the current period versus the prior comparable period. As a percentage of total revenue, compensation and benefits expense increased 1.4 percentage points to 24.5% for the six months ended March 31, 2017, compared to 23.1% in the prior comparable period.

General and Administrative Expense: General and administrative expense decreased 5.2% to $2.8 million in the six months ended March 31, 2017, from $2.9 million in the prior comparable period. The decrease resulted from decreased variable sales-related costs in the current period versus the prior comparable period. As a percentage of total revenue, general and administrative expense decreased 1.1 percentage points to 10.5% in the six months ended March 31, 2017, compared to 11.6% in the prior comparable period.

Mutual Fund Distribution Expense: Mutual fund distribution expense decreased 70.5% to $0.1 million in the six months ended March 31, 2017, from $0.5 million in the prior comparable period. As a percentage of total revenue, mutual fund distribution expense decreased 1.3 percentage points to 0.5% for the six months ended March 31, 2017, compared to 1.8% in the prior comparable period ended March 31, 2016.

The decrease in mutual fund distribution expense in the current six-month period is primarily due to the timing of payments made by the Company to financial intermediaries following the completion of contract negotiations in the prior period and also, to a lesser extent, the implementation of a Distribution (Rule 12b-1) Plan for each of the following Hennessy Funds as of the given dates:


• November 1, 2015:		Hennessy Cornerstone Growth Fund
		Hennessy Cornerstone Mid Cap 30 Fund
		Hennessy Cornerstone Large Growth Fund
		Hennessy Cornerstone Value Fund
		Hennessy Large Value Fund*

• March 1, 2016:		Hennessy Japan Fund
		Hennessy Japan Small Cap Fund

The Hennessy Large Value Fund was reorganized into the Hennessy Cornerstone Value Fund as of February 28, 2017.

These distribution plans charge their respective funds an annual rate of 0.15% (though 0.25% is the maximum allowable) of average daily net assets to pay for sales, distribution and other expenses. Each distribution plan therefore allows its fund to use its distribution plan fees to offset fees charged by financial institutions that offer the Hennessy Funds as potential investments to their clients. Therefore, as of the dates listed above, a portion of the mutual fund distribution expense previously paid by the Company began to be offset by payments made by the respective Hennessy Funds pursuant to their distribution plans.

Sub-Advisor Fee Expense: Sub-advisor fee expense increased 9.0% to $4.6 million in the six months ended March 31, 2017, from $4.2 million in the prior comparable period. The increase is a result of an increase in average assets under management in the sub-advised Hennessy Funds, with a slight offset as a result of the Company no longer paying sub-advisor fees with respect to the Hennessy Core Bond Fund following its liquidation as of February 17, 2017, or with respect to the Hennessy Large Value Fund following its reorganization into the Hennessy Cornerstone Value Fund as of February 28, 2017. As a percentage of total revenue, sub-advisor fee expense increased 0.6 percentage points to 17.2% for the six months ended March 31, 2017, compared to 16.6% in the prior comparable period.

Amortization and Depreciation Expense: Amortization and depreciation expense increased 4.0% to $0.184 million in the six months ended March 31, 2017, from $0.177 million in the prior comparable period. The increase is a result of a higher fixed asset base for the six months ended March 31, 2017, compared to the prior comparable period, as well as a larger capitalized loan fee balance to amortize compared to the prior comparable period. As a percentage of total revenue, amortization and depreciation expense remained the same at 0.7% for the six months ended March 31, 2017, compared to the prior comparable period.

Interest Expense: Interest expense decreased 18.8% to $0.5 million in the six months ended March 31, 2017, from $0.7 million in the prior comparable period. The decrease is due primarily to a decrease to the Company’s principal loan balance compared to the prior comparable period. As a percentage of total revenue, interest expense decreased 0.5 percentage points to 2.1% for the six months ended March 31, 2017, compared to 2.6% in the prior comparable period ended March 31, 2016.

Income Tax Expense: The provision for income tax expense increased 1.8% to $4.2 million in the six months ended March 31, 2017, from $4.1 million in the prior comparable period. This change is due to increased income before income tax expense in the current period and is partially offset by a lower effective tax rate resulting from the early adoption of ASU 2016-09 (see further discussion in Footnote 10). As a percentage of total revenue, income tax expense decreased 0.4 percentage points to 15.8% for the six months ended March 31, 2017, compared to 16.2% in the prior comparable period.

Net Income

Net income increased by 10.0% to $7.6 million in the six months ended March 31, 2017, from $6.9 million in the prior comparable period, as a result of the factors discussed above. As a percentage of total revenue, net income increased 1.3 percentage points to 28.7% for the six months ended March 31, 2017, compared to 27.4% in the prior comparable period.

Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These accounting policies, methods, and estimates are an integral part of the financial statements prepared by management and are based upon management’s current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods, and estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgment. For a discussion of the accounting policies that we believe are most critical to understanding our results of operations and financial position, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

Liquidity and Capital Resources

We continually review our capital requirements to ensure that we have funding available to support our business model. Management anticipates that cash and other liquid assets on hand as of March 31, 2017, will be sufficient to meet our short-term capital requirements. To the extent that liquid resources and cash provided by operations are not adequate to meet long-term capital requirements, management plans to raise additional capital by either, or both of, seeking to increase our borrowing capacity or accessing the capital markets. There can be no assurance that we will be able to raise additional capital.

Total assets under management as of March 31, 2017, were $6.6 billion, which was an increase of $211 million, or 3.3%, from March 31, 2016. The primary source of our revenue, liquidity and cash flow are our investment advisory fees and shareholder service fees, which are based on and generated by our average assets under management. Property and equipment and management contracts purchased totaled $74.7 million as of March 31, 2017. As of March 31, 2017, we had cash and cash equivalents of $8.1 million.

The following table summarizes key financial data relating to our liquidity and use of cash for the six months ended March 31, 2017 and 2016:


	For the Six Months Ended March 31,
	2017			2016
	(Unaudited, in thousands)
Cash flow data:
Operating cash flows	$	7,938		$	7,678
Investing cash outflows		(187	)		(371	)
Financing cash outflows		(3,187	)		(2,897	)

Net increase in cash and cash equivalents	$	4,564		$	4,410

The increase in cash provided by operating activities of $0.3 million is mainly due to an increase in net income, partially offset by the timing of the payout of accrued expenses in the current period versus the prior comparable period.

The decrease in cash used in investing activities of $0.2 million is mainly related to costs in the prior comparable period associated with the special proxy vote for the approval of a Distribution (Rule 12b-1) Plan for the Hennessy Funds that did not previously have a 12b-1 plan.

The increase in cash used in financing activities of $0.3 million is due to an increase in the dividend payments in the current period versus the prior comparable period.

The current term loan agreement requires 48 monthly payments in the amount of $364,583 plus interest, at our option, at either:

All borrowings under the term loan agreement are secured by substantially all of the Company’s assets. The final installment of the then-outstanding principal and interest is due September 17, 2019.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

An analysis of our market risk was provided in Item 7A of the Company’s Annual Report on Form 10-K for the year ended September 30, 2016. There were no material changes to the Company’s market risk during the six months ended March 31, 2017.

Item 4.

Controls and Procedures

An evaluation was performed by management of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2017. Based on that evaluation, management, including the Company’s principal executive and principal financial officers, concluded that the Company’s disclosure controls and procedures are effective.

There has been no change in the internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 of the Exchange Act that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II: OTHER INFORMATION

Item 6.

Exhibits


3.1		Amended and Restated Articles of Incorporation (1)

31.1		Rule 13a-14a Certification of the Chief Executive Officer.

31.2		Rule 13a-14a Certification of the Chief Financial Officer.

32.1		Written Statement of the Chief Executive Officer, Pursuant to 18 U.S.C. §1350.

32.2		Written Statement of the Chief Financial Officer, Pursuant to 18 U.S.C. §1350.

101		Financial statements from the Quarterly Report on Form 10-Q of Hennessy Advisors, Inc. for the quarter ended March 31, 2017, filed on May 1, 2017, formatted in XBRL: (i) the Condensed Balance Sheets; (ii) the Condensed Statements of Income; (iii) the Condensed Statements of Changes in Stockholders’ Equity; (iv) the Condensed Statements of Cash Flows; and (v) the Notes to Unaudited Condensed Financial Statements.

(1)	Incorporated by reference from the Company’s Current Report on Form 8-K (SEC File No. 001-36423) filed March 7, 2017.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		HENNESSY ADVISORS, INC.

Date:	May 1, 2017	By:	/s/ Teresa M. Nilsen
			Teresa M. Nilsen, Executive Vice President, Chief Financial Officer and Secretary

EXHIBIT INDEX


3.1		Amended and Restated Articles of Incorporation. (1)

31.1		Rule 13a-14a Certification of the Chief Executive Officer.

31.2		Rule 13a-14a Certification of the Chief Financial Officer.

32.1		Written Statement of the Chief Executive Officer, Pursuant to 18 U.S.C. §1350.

32.2		Written Statement of the Chief Financial Officer, Pursuant to 18 U.S.C. §1350.

101		Financial statements from the Quarterly Report on Form 10-Q of Hennessy Advisors, Inc. for the quarter ended March 31, 2017, filed on May 1, 2017, formatted in XBRL: (i) the Condensed Balance Sheets; (ii) the Condensed Statements of Income; (iii) the Condensed Statements of Changes in Stockholders’ Equity; (iv) the Condensed Statements of Cash Flows; and (v) the Notes to Unaudited Condensed Financial Statements.

(1)	Incorporated by reference from the Company’s Current Report on Form 8-K (SEC File No. 001-36423) filed March 7, 2017.

EX-31.1 2 d349800dex311.htm CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER Certification of the Chief Executive Officer

Exhibit 31.1

Rule 13a – 14a Certification of the Chief Executive Officer

I, Neil J. Hennessy, certify that:

I have reviewed this quarterly report on Form 10-Q of Hennessy Advisors, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:		May 1, 2017

/s/ Neil J. Hennessy
Neil J. Hennessy, Chief Executive Officer and President
Hennessy Advisors, Inc.

EX-31.2 3 d349800dex312.htm CERTIFICATION OF THE CHIEF FINANCIAL OFFICER Certification of the Chief Financial Officer

Exhibit 31.2

Rule 13a – 14a Certification of the Chief Financial Officer

I, Teresa M. Nilsen, certify that:

I have reviewed this quarterly report on Form 10-Q of Hennessy Advisors, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:		May 1, 2017

/s/ Teresa M. Nilsen
Teresa M. Nilsen, Chief Financial Officer
Hennessy Advisors, Inc.

EX-32.1 4 d349800dex321.htm WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER Written Statement of the Chief Executive Officer

Exhibit 32.1

Written Statement of the Chief Executive Officer

Pursuant to 18 U.S.C. §1350

Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned Chief Executive Officer of Hennessy Advisors, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2017 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:		May 1, 2017

/s/ Neil J. Hennessy
Neil J. Hennessy, Chief Executive Officer and President
Hennessy Advisors, Inc.

EX-32.2 5 d349800dex322.htm WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER Written Statement of the Chief Financial Officer

Exhibit 32.2

Written Statement of the Chief Financial Officer

Pursuant to 18 U.S.C. §1350

Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned Chief Financial Officer of Hennessy Advisors, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2017 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:		May 1, 2017

/s/ Teresa M. Nilsen
Teresa M. Nilsen, Chief Financial Officer
Hennessy Advisors, Inc.

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HENNESSY ADVISORS INC 10-Q

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<div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> (4) Bank Loan <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> The Company has an outstanding bank loan with U.S. Bank National Association, as administrative agent (in such capacity, “Agent”) and as a lender, and California Bank & Trust, as syndication agent and as a lender, which replaced and refinanced the bank loan previously entered into by the Company and U.S. Bank National Association on October 26, 2012, and amended on November 1, 2013. Immediately prior to September 17, 2015, the Company’s bank loan had an outstanding principal balance of $23.0 million. On September 17, 2015, in anticipation of the repurchase of up to 1,000,000 shares of the Company’s common stock at $25 per share pursuant to its self-tender offer, the Company entered into a new term loan agreement to fund in part its self-tender offer, thereby increasing its total loan balance to $35.0 million (consisting of a $20.0 million promissory note to U.S. Bank National Association and a $15.0 million promissory note to California Bank & Trust). Then, on September 19, 2016, the Company entered into an amendment to its term loan agreement with the Agent and the lenders to allow it to consummate the purchase of assets related to the management of the Westport Fund and the Westport Select Cap Fund. In addition, the amendment revised one of the financial covenants in the term loan agreement. <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">   <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> The current term loan agreement requires 48 monthly payments in the amount of $364,583 plus interest, at the Company’s option, at either: <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> (1) LIBOR plus a margin that ranges from 2.75% to 3.25%, depending on the Company’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation and amortization (excluding, among other things, certain non-cash gains and losses) (“EBITDA”), or <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> (2) the sum of (a) the highest of the prime rate set by U.S. Bank from time to time, the Federal Funds Rate plus 0.50%, or one-month LIBOR plus 1.00%, and (b) a margin that ranges from 0.25% to 0.75%, depending on the Company’s ratio of consolidated debt to consolidated EBITDA. <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> From the effective date of the current term loan agreement through February 29, 2016, the interest rate in effect was U.S. Bank’s prime rate plus a margin. The applicable margin was initially 0.75% and then decreased to 0.5% as of January 21, 2016, based on the Company’s ratio of consolidated debt to consolidated EBITDA as of December 31, 2015. This margin decrease reduced the effective interest rate on the term loan from 4.25% to 4.0%. Effective March 1, 2016, the Company converted $32.8 million of its principal loan balance to a 1-month LIBOR contract, which has been renewed each subsequent month. As of March 31, 2017, the effective rate is 3.784%, which is comprised of the LIBOR rate of 0.784% as of March 1, 2017, plus a margin of 3.0% based on the Company’s ratio of consolidated debt to consolidated EBITDA as of December 31, 2016. The Company intends to renew the 1-month LIBOR contract on a monthly basis provided that the LIBOR-based interest rate remains favorable to the prime rate-based interest rate. <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> All borrowings under the term loan agreement are secured by substantially all of the Company’s assets. The final installment of the then-outstanding principal of $17.9 million plus interest is due September 17, 2019. <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> The previous amended loan agreement included, and the current term loan agreement includes, certain reporting requirements and loan covenants requiring the maintenance of certain financial ratios. The Company was in compliance for the periods ended March 31, 2017 and 2016. <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> The Company did an evaluation of the debt modification and determined that the portion of the loan refinanced with the same creditor (the $20.0 million with U.S. Bank National Association) is not considered “substantially different” from the original loan with U.S. Bank National Association per the conditions set forth in Accounting Standards Codification 470-50 – Debt; Modifications and Extinguishments. Furthermore, due to the variable nature of the interest rate, this feature of the loan was examined for potential bifurcation as an embedded derivative, and it was determined that the feature does not require bifurcation from the host contract. <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">   <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> In connection with securing the financings discussed above, the Company incurred loan costs in the amount of $0.41 million. These costs were reclassified to offset debt liability per Accounting Standards Update (“ASU”) 2015-03 as of March 31, 2017, and the balance is being amortized on a straight-line basis, which approximates the effective interest basis, over 48 months. Amortization expense during the six-month periods ended March 31, 2017 and 2016, was $0.07 million for each period. The unamortized balance of the loan fees was $0.3 million as of March 31, 2017. The following is a reconciliation of the reclassification (in thousands): <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">   <table style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; ORPHANS: 2; WIDOWS: 2; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="84%" align="center" border="0"> <tr> <td width="53%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Gross Debt at September 30, 2016</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Debt Issuance Cost</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Net Debt at September 30, 2016</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> Current portion of debt </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,375</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(147</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,228</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid"> <td valign="top"> Long-term portion of debt </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">26,250</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(293</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">25,957</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total Debt </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">30,625</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(440</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">30,185</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="16"></td> <td height="16" colspan="4"></td> <td height="16" colspan="4"></td> <td height="16" colspan="4"></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Gross Debt at March 31, 2017</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Debt Issuance Cost</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center">Net Debt at March 31, 2017</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> Current portion of debt </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,375</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(147</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,228</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid"> <td valign="top"> Long-term portion of debt </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">24,063</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(220</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">23,843</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; break-inside: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total Debt </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">28,438</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(367</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">28,071</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px">   </div>

2017-03-31

4564000

2017 false

1057000

--09-30

2790000

0.99

184000

<div> Based on the definitions, the following table represents the Company’s assets categorized in the Level 1 to 3 hierarchies as of March 31, 2017, and September 30, 2016:   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="70%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="14" align="center"> Fair Value Measurements at March 31, 2017</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 1</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 2</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 3</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="14" align="center">(In thousands)</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Money market fund deposits </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,321</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,321</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Mutual fund investments </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,329</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,329</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Amounts included in: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Cash and cash equivalents </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,321</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,321</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Investments in marketable securities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,329</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,329</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="16"></td> <td height="16" colspan="16"></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="14" align="center"> Fair Value Measurements at September 30, 2016</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 1</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 2</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 3</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="14" align="center">(In thousands)</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Money market fund deposits </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">320</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">320</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Mutual fund investments </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">328</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">328</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Amounts included in: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Cash and cash equivalents </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">320</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">320</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Investments in marketable securities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">328</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">328</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> </table> </div>

<div> (7) Stock-Based Compensation On March 26, 2014, the Company adopted, and the Company’s shareholders approved, the Amended and Restated 2013 Omnibus Incentive Plan (the “Plan”). Under the Plan, participants may be granted restricted stock units (“RSUs”), representing an unfunded, unsecured right to receive a share of the Company’s common stock on the date specified in the recipient’s award. The Company issues new shares of its common stock when it is required to deliver shares to an RSU recipient. The RSUs granted under the Plan vest over four years, at a rate of 25 percent per year. The Company recognizes compensation expense on a straight-line basis over the four-year vesting term of each award. There were no RSUs granted under the Plan during the six months ended March 31, 2017 or 2016. RSU activity for the six months ended March 31, 2017, was as follows:   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="70%"></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"> Restricted Stock Unit Activity Six Months Ended March 31, 2017</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Number of Share Units</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Weighted Avg. Fair Value Per Share at Each Date</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Non-vested Balance at September 30, 2016 </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">379,464</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16.19</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Granted </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Vested (1) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(76,162</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">13.88</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Forfeited </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Non-vested Balance at March 31, 2017 </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">303,302</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16.76</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td valign="top" width="4%" align="left">(1)</td> <td valign="top" align="left">The restricted share units vested includes partially vested shares. Shares of common stock have not been issued for the partially vested shares, but the related compensation costs have been charged to expense. There were 27,430 net shares of common stock issued for restricted stock units vested in the six months ended March 31, 2017.</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="84%"></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom" colspan="4" nowrap="nowrap" align="center"> Restricted Stock Unit Compensation Six Months Ended March 31, 2017 </td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="2" align="center"> (In thousands)</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total expected compensation expense related to Restricted Stock Units </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,608</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Compensation expense recognized through March 31, 2017 </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(5,523</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Unrecognized compensation expense related to RSUs at March 31, 2017 </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,085</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> </table> As of March 31, 2017, there was $5.1 million of total RSU compensation expense related to non-vested awards not yet recognized, which is expected to be recognized over a weighted-average vesting period of 2.6 years. </div>

73000

0.98

Accelerated Filer

<div> (8) Commitments and Contingencies The Company’s headquarters is located in leased office space under a single non-cancelable operating lease at 7250 Redwood Blvd., Suite 200, in Novato, California. The lease expires on June 30, 2021, with one five-year extension available thereafter. The Company also has office space under a single non-cancelable operating lease at 101 Federal Street, Suite 1900, Boston, Massachusetts 02110. The initial term of the lease expired on November 30, 2015, but automatically renews for successive one-year periods unless either party terminates the lease by providing at least three months’ notice of termination to the other party prior to the next renewal date. The Company also has office space under a single non-cancelable operating lease at 1340 Environ Way, #305, Chapel Hill, North Carolina 27517. The initial term of the lease expired on November 30, 2015, but automatically renews for successive three-month periods unless either party terminates the lease by providing at least two months’ notice of termination to the other party prior to the next renewal date. As of March 31, 2017, there were no material changes in the leasing arrangements that would have a significant effect on future minimum lease payments reported in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016. </div>

1074000

<div> (9) Fair Value Measurements The Company applies the FASB standard “Fair Value Measurements” for all financial assets and liabilities, which establishes a framework for measuring fair value and expands disclosures about fair value measurements. The standard defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” It also establishes a fair value hierarchy consisting of the following three “levels” that prioritize the inputs to the valuation techniques used to measure fair value:   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Level 1 – Unadjusted, quoted prices in active markets for identical assets or liabilities that an entity has the ability to access at the measurement date.</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Level 2 – Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets).</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Level 3 – Significant unobservable inputs (including the entity’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are not available.</td> </tr> </table> Based on the definitions, the following table represents the Company’s assets categorized in the Level 1 to 3 hierarchies as of March 31, 2017, and September 30, 2016:   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="70%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="14" align="center"> Fair Value Measurements at March 31, 2017</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 1</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 2</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 3</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="14" align="center">(In thousands)</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Money market fund deposits </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,321</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,321</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Mutual fund investments </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,329</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,329</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Amounts included in: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Cash and cash equivalents </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,321</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,321</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Investments in marketable securities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,329</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,329</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="16"></td> <td height="16" colspan="16"></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="14" align="center"> Fair Value Measurements at September 30, 2016</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 1</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 2</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level 3</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="14" align="center">(In thousands)</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Money market fund deposits </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">320</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">320</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Mutual fund investments </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">328</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">328</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Amounts included in: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Cash and cash equivalents </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">320</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">320</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Investments in marketable securities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">328</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">328</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> </table>   There were no transfers between levels during the six months ended March 31, 2017, or the year ended September 30, 2016. </div>

0.354

0.35

26530000

-383000

271000

-620000

<div> (5) Income Taxes The Company’s effective income tax rates for the six months ended March 31, 2017 and 2016, were 35.4% and 37.2%, respectively, and differ from the federal statutory rate of 35% primarily due to state taxes. The effective income tax rate was lower for the period ended March 31, 2017, due to the early adoption of ASU 2016-09 (see further discussion in Footnote 10). We are subject to income tax in the U.S. federal jurisdiction and multiple state jurisdictions. Our U.S. federal tax returns for 2013 and subsequent years remain open to examination. Generally, we are no longer subject to state examinations by tax authorities for years prior to fiscal 2012. For state tax jurisdictions with unfiled tax returns, the statute of limitations will remain open indefinitely. </div>

1994000

14177000

7624000

11809000

83000

330000

544000

-187000

12353000

24172000

2000

1074000

119000

-3187000

-2019000

-3000

-1296000

<div> (1) Basis of Financial Statement Presentation The accompanying condensed balance sheet as of September 30, 2016, which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of March 31, 2017, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and include the accounts of Hennessy Advisors, Inc. (the “Company”). Certain information and footnote disclosures in these unaudited interim condensed financial statements, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission for Quarterly Reports on Form 10-Q. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the Company’s financial position at March 31, 2017, the Company’s operating results for the three and six months ended March 31, 2017 and 2016, and the Company’s cash flows for the six months ended March 31, 2017 and 2016. These unaudited interim condensed financial statements and notes should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended September 30, 2016, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016. The Company’s operating activities consist primarily of providing investment advisory services to 14 open-end mutual funds branded as the Hennessy Funds. The Company serves as the investment advisor to all classes of the Hennessy Cornerstone Growth Fund, the Hennessy Focus Fund, the Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy Cornerstone Large Growth Fund, the Hennessy Cornerstone Value Fund, the Hennessy Total Return Fund, the Hennessy Equity and Income Fund, the Hennessy Balanced Fund, the Hennessy Gas Utility Fund, the Hennessy Small Cap Financial Fund, the Hennessy Large Cap Financial Fund, the Hennessy Technology Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund. The Company also provides shareholder services to the entire family of the Hennessy Funds. The Company’s operating revenues consist of contractual investment advisory and shareholder service fees paid to it by the Hennessy Funds. The Company earns investment advisory fees from each Hennessy Fund by, among other things:   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">acting as portfolio manager for the fund or overseeing the sub-advisor acting as portfolio manager for the fund, which includes managing the composition of the fund’s portfolio (including the purchase, retention, and disposition of portfolio securities in accordance with the fund’s investment objectives, policies, and restrictions), seeking best execution for the fund’s portfolio, managing the use of soft dollars for the fund, and managing proxy voting for the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">performing a daily reconciliation of portfolio positions and cash for the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">monitoring the fund’s compliance with its investment objectives and restrictions and federal securities laws;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">performing activities such as maintaining a compliance program, conducting ongoing reviews of the compliance programs of the fund’s service providers (including its sub-advisor, as applicable), conducting on-site visits to the fund’s service providers (including its sub-advisor, as applicable), monitoring incidents of abusive trading practices, reviewing fund expense accruals, payments, and fixed expense ratios, evaluating insurance providers for fidelity bond coverage, D&O/E&O insurance coverage, and cybersecurity insurance coverage, conducting employee compliance training, reviewing reports provided by service providers, maintaining books and records, and preparing an annual compliance report to the Board of Trustees of Hennessy Funds Trust (the “Funds’ Board of Trustees”);</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">overseeing the selection and continued employment of the fund’s sub-advisor, if applicable, monitoring such sub-advisor’s adherence to the fund’s investment objectives, policies, and restrictions, and reviewing the fund’s investment performance;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">overseeing service providers that provide accounting, administration, distribution, transfer agency, custodial, sales and marketing, audit, information technology, and legal services to the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">maintaining in-house marketing and distribution departments on behalf of the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">being actively involved with preparing all regulatory filings for the fund, including writing and annually updating the fund’s prospectus and related documents;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">preparing or reviewing a written summary of the fund’s performance for the most recent twelve-month period for each annual report of the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">monitoring and overseeing the accessibility of the fund on third party platforms;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">paying the incentive compensation of the fund’s compliance officers and employing other staff such as management executives, legal personnel, marketing personnel, national accounts and distribution personnel, sales personnel, administrative personnel, and trading oversight personnel;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">providing a quarterly certification to Hennessy Funds Trust; and</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">preparing or reviewing materials for the Funds’ Board of Trustees, presenting or leading discussions to or with the Funds’ Board of Trustees, preparing or reviewing meeting minutes, and arranging for training and education of the Funds’ Board of Trustees.</td> </tr> </table>   The Company earns shareholder service fees from Investor Class shares of the Hennessy Funds by, among other things, maintaining a toll-free number that the current investors of the Hennessy Funds may call to ask questions about the Hennessy Funds or their accounts, or to get help with processing exchange and redemption requests or changing account options. These fee revenues are earned and calculated daily by the Hennessy Funds’ accountants at U.S. Bancorp Fund Services, LLC. The fees are computed and billed monthly, at which time they are recognized in accordance with Accounting Standard Codification 605 “Revenue Recognition.” Effective February 28, 2017, the Company waives fees with respect to the Hennessy Technology Fund to comply with a contractual expense ratio limitation. The fee waiver is calculated daily by the Hennessy Funds’ accountants at U.S. Bancorp Fund Services, LLC and is charged to expense monthly by the Company as an offset to revenue. The waived fee is deducted from investment advisory fee income and reduces the aggregate amount of advisory fees received by the Company in the subsequent month. To date, the Company has only waived fees based on contractual obligations, but the Company has the ability to waive fees at its discretion. If the Company elects to voluntarily waive fees, the decision to waive fees would not apply to previous periods, but would only apply on a going forward basis. The Company’s contractual agreements for investment advisory and shareholder services provide persuasive evidence that an arrangement exists with fixed and determinable fees, and the services are rendered daily. The collectability is probable as the fees are received from the Hennessy Funds in the month subsequent to the month in which the services are provided. </div>

4185000

7938000

<div> RSU activity for the six months ended March 31, 2017, was as follows:   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="70%"></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"> Restricted Stock Unit Activity Six Months Ended March 31, 2017</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Number of Share Units</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Weighted Avg. Fair Value Per Share at Each Date</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Non-vested Balance at September 30, 2016 </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">379,464</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16.19</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Granted </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Vested (1) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(76,162</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">13.88</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Forfeited </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right"> —  </td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Non-vested Balance at March 31, 2017 </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">303,302</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16.76</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td valign="top" width="4%" align="left">(1)</td> <td valign="top" align="left">The restricted share units vested includes partially vested shares. Shares of common stock have not been issued for the partially vested shares, but the related compensation costs have been charged to expense. There were 27,430 net shares of common stock issued for restricted stock units vested in the six months ended March 31, 2017.</td> </tr> </table> </div>

-44000

68000

7784353

168000

2358000

4581000

7687374

HNNA

<div> The accompanying condensed balance sheet as of September 30, 2016, which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of March 31, 2017, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and include the accounts of Hennessy Advisors, Inc. (the “Company”). Certain information and footnote disclosures in these unaudited interim condensed financial statements, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission for Quarterly Reports on Form 10-Q. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the Company’s financial position at March 31, 2017, the Company’s operating results for the three and six months ended March 31, 2017 and 2016, and the Company’s cash flows for the six months ended March 31, 2017 and 2016. These unaudited interim condensed financial statements and notes should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended September 30, 2016, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016. The Company’s operating activities consist primarily of providing investment advisory services to 14 open-end mutual funds branded as the Hennessy Funds. The Company serves as the investment advisor to all classes of the Hennessy Cornerstone Growth Fund, the Hennessy Focus Fund, the Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy Cornerstone Large Growth Fund, the Hennessy Cornerstone Value Fund, the Hennessy Total Return Fund, the Hennessy Equity and Income Fund, the Hennessy Balanced Fund, the Hennessy Gas Utility Fund, the Hennessy Small Cap Financial Fund, the Hennessy Large Cap Financial Fund, the Hennessy Technology Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund. The Company also provides shareholder services to the entire family of the Hennessy Funds. The Company’s operating revenues consist of contractual investment advisory and shareholder service fees paid to it by the Hennessy Funds. The Company earns investment advisory fees from each Hennessy Fund by, among other things:   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">acting as portfolio manager for the fund or overseeing the sub-advisor acting as portfolio manager for the fund, which includes managing the composition of the fund’s portfolio (including the purchase, retention, and disposition of portfolio securities in accordance with the fund’s investment objectives, policies, and restrictions), seeking best execution for the fund’s portfolio, managing the use of soft dollars for the fund, and managing proxy voting for the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">performing a daily reconciliation of portfolio positions and cash for the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">monitoring the fund’s compliance with its investment objectives and restrictions and federal securities laws;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">performing activities such as maintaining a compliance program, conducting ongoing reviews of the compliance programs of the fund’s service providers (including its sub-advisor, as applicable), conducting on-site visits to the fund’s service providers (including its sub-advisor, as applicable), monitoring incidents of abusive trading practices, reviewing fund expense accruals, payments, and fixed expense ratios, evaluating insurance providers for fidelity bond coverage, D&O/E&O insurance coverage, and cybersecurity insurance coverage, conducting employee compliance training, reviewing reports provided by service providers, maintaining books and records, and preparing an annual compliance report to the Board of Trustees of Hennessy Funds Trust (the “Funds’ Board of Trustees”);</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">overseeing the selection and continued employment of the fund’s sub-advisor, if applicable, monitoring such sub-advisor’s adherence to the fund’s investment objectives, policies, and restrictions, and reviewing the fund’s investment performance;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">overseeing service providers that provide accounting, administration, distribution, transfer agency, custodial, sales and marketing, audit, information technology, and legal services to the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">maintaining in-house marketing and distribution departments on behalf of the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">being actively involved with preparing all regulatory filings for the fund, including writing and annually updating the fund’s prospectus and related documents;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">preparing or reviewing a written summary of the fund’s performance for the most recent twelve-month period for each annual report of the fund;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">monitoring and overseeing the accessibility of the fund on third party platforms;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">paying the incentive compensation of the fund’s compliance officers and employing other staff such as management executives, legal personnel, marketing personnel, national accounts and distribution personnel, sales personnel, administrative personnel, and trading oversight personnel;</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">providing a quarterly certification to Hennessy Funds Trust; and</td> </tr> </table>   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="8%"> </td> <td valign="top" width="4%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">preparing or reviewing materials for the Funds’ Board of Trustees, presenting or leading discussions to or with the Funds’ Board of Trustees, preparing or reviewing meeting minutes, and arranging for training and education of the Funds’ Board of Trustees.</td> </tr> </table>   The Company earns shareholder service fees from Investor Class shares of the Hennessy Funds by, among other things, maintaining a toll-free number that the current investors of the Hennessy Funds may call to ask questions about the Hennessy Funds or their accounts, or to get help with processing exchange and redemption requests or changing account options. These fee revenues are earned and calculated daily by the Hennessy Funds’ accountants at U.S. Bancorp Fund Services, LLC. The fees are computed and billed monthly, at which time they are recognized in accordance with Accounting Standard Codification 605 “Revenue Recognition.” </div>

1057000

2114000

<div> The following is a reconciliation of the reclassification (in thousands):   <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0"> <tr> <td width="53%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Gross Debt at September 30, 2016</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Debt Issuance Cost</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Net Debt at September 30, 2016</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Current portion of debt </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,375</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(147</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,228</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Long-term portion of debt </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">26,250</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(293</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">25,957</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total Debt </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">30,625</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(440</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">30,185</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="16"></td> <td height="16" colspan="4"></td> <td height="16" colspan="4"></td> <td height="16" colspan="4"></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Gross Debt at March 31, 2017</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Debt Issuance Cost</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Net Debt at March 31, 2017</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Current portion of debt </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,375</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(147</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,228</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Long-term portion of debt </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">24,063</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(220</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">23,843</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total Debt </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">28,438</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(367</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">28,071</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> </table> </div>

<div> (11) Subsequent Events The Company has evaluated subsequent events through the date these financial statements were issued and has concluded that no material subsequent events occurred during this period that would require recognition or disclosure. </div>

-1000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="84%"></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom" colspan="4" nowrap="nowrap" align="center"> Restricted Stock Unit Compensation Six Months Ended March 31, 2017 </td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="2" align="center"> (In thousands)</td> <td valign="bottom"> </td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Total expected compensation expense related to Restricted Stock Units </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,608</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> Compensation expense recognized through March 31, 2017 </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(5,523</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> Unrecognized compensation expense related to RSUs at March 31, 2017 </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,085</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> </table> </div> <div> (6) Earnings per Share and Dividends per Share Basic earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents. All common stock equivalents were dilutive and therefore included in the diluted earnings per share calculation for the three and six months ended March 31, 2017. On January 26, 2017, the Company’s Board of Directors declared a 3-for-2 stock split, which was effected on March 6, 2017, for shareholders of record as of February 10, 2017. All disclosures in this report relating to shares of common stock, restricted stock units, and per share data have been adjusted to reflect this stock split.   The Company paid quarterly cash dividends of $0.067 per share on December 8, 2016, to shareholders of record as of November 15, 2016, and $0.075 per share on March 6, 2017, to shareholders of record as of February 10, 2017. </div> <div> (2) Management Contracts Purchased Throughout its history, the Company has completed eight purchases of assets related to the management of 25 different mutual funds, some of which were reorganized into already existing Hennessy Funds. In accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), the Company periodically reviews the carrying value of its purchased management contracts to determine if any impairment has occurred. The fair value of management contracts are based on management estimates and assumptions, including third party valuations that utilize appropriate valuation techniques. The fair value of the management contracts was estimated by applying the income approach. It is the opinion of the Company’s management that there was no impairment as of March 31, 2017 or 2016. Under the FASB guidance on “Intangibles – Goodwill and Other,” intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment. The Company reviews the life of the management contracts each reporting period to determine if they continue to have an indefinite useful life. The Company considers the mutual fund management contracts to be intangible assets with an indefinite useful life and are not impaired as of March 31, 2017. The Company completed its most recent asset purchase on September 23, 2016, when it purchased the assets related to the management of the Westport Fund and the Westport Select Cap Fund. This asset purchase added approximately $435 million to the Company’s assets under management. The purchase was consummated in accordance with the terms and conditions of that certain Transaction Agreement, dated as of May 2, 2016, between the Company and Westport Advisers, LLC. The purchase price of $11.3 million was funded with available cash and was based on the aggregate average assets under management for the Westport Fund and the Westport Select Cap Fund as measured at the close of business on the effective date of the Transaction Agreement and on each of the two trading days immediately preceding the date of the Transaction Agreement. The total capitalized costs related to the purchase were $11.4 million. </div> 168000 133000 -1000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> (3) Investment Advisory Agreements <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> The Company has management contracts with Hennessy Funds Trust, under which it provides investment advisory services to all classes of the 14 Hennessy Funds. <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> The management contracts must be renewed annually (except in limited circumstances) by (1) the Funds’ Board of Trustees or by the vote of a majority of the outstanding shares of the applicable Hennessy Fund and (2) by the vote of a majority of the trustees of Hennessy Funds Trust who are not interested persons of the Hennessy Funds. If the management contracts are not renewed annually as described above, they will terminate automatically. In addition, there are two other circumstances in which the management contracts would terminate. First, the management contracts would automatically terminate if the Company assigned them to another advisor (assignment includes “indirect assignment,” which is the transfer of the Company’s common stock in sufficient quantities deemed to constitute a controlling block). Additionally, each management contract may be terminated prior to its expiration upon 60 days’ notice by either the Company or the applicable Hennessy Fund. <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> As provided in the management contracts, the Company receives investment advisory fees monthly based on a percentage of the respective fund’s average daily net assets. <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> The Company has entered into sub-advisory agreements for the Hennessy Focus Fund, the Hennessy Equity and Income Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund. Under each of these sub-advisory agreements, the sub-advisor is responsible for the investment and re-investment of the assets of the applicable Hennessy Fund in accordance with the terms of such agreement and the applicable Hennessy Fund’s Prospectus and Statement of Additional Information. The sub-advisors are subject to the direction, supervision and control of the Company and the Funds’ Board of Trustees. The sub-advisory agreements must be renewed annually in the same manner and are subject to the same termination provisions as the management contracts. <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: "Times New Roman"; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: normal; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 4%; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px"> In exchange for the sub-advisory services, the Company (not the Hennessy Funds) pays sub-advisor fees to the sub-advisors, which are based on the amount of each applicable Hennessy Fund’s average daily net assets. </div> 14 P60D 2000

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The Company intends to renew the 1-month LIBOR contract on a monthly basis provided that the LIBOR-based interest rate remains favorable to the prime rate-based interest rate.

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Number Of Open End Mutual Funds Number of Hennessy funds to which company provides investment advisory services One Month Libor [Member] One Month Libor [Member] One Month Libor [Member] Open Tax Year Open tax year Operating Expenses Total operating expenses Operating Expenses [Abstract] Operating expenses: Operating Income (Loss) Net operating income Organization, Consolidation and Presentation of Financial Statements [Abstract] Organization, Consolidation and Presentation of Financial Statements [Abstract] Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] Basis of Financial Statement Presentation Other Assets, Noncurrent Other assets Other Nonoperating Income Other income Other Receivables Other accounts receivable EX-101.PRE 11 hnna-20170331_pre.xml XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE XML 12 R1.htm IDEA: XBRL DOCUMENT

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Mar. 31, 2017	Apr. 25, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Trading Symbol	HNNA
Entity Registrant Name	HENNESSY ADVISORS INC
Entity Central Index Key	0001145255
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		7,690,285

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Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Current assets:
Cash and cash equivalents	$ 8,099	$ 3,535
Investments in marketable securities, at fair value	8	8
Investment fee income receivable	4,560	4,230
Prepaid expenses	555	1,175
Deferred income tax asset	607	607
Other accounts receivable	536	580
Total current assets	14,365	10,135
Property and equipment, net of accumulated depreciation of $813 and $940, respectively	253	296
Management contracts	74,478	74,359
Deferred offering costs	13	13
Other assets	134	137
Total assets	89,243	84,940
Current liabilities:
Accrued liabilities and accounts payable	4,559	6,578
Income taxes payable		383
Deferred rent	115	32
Current portion of long-term debt, net of discount	4,228	4,228
Total current liabilities	8,902	11,221
Long-term debt, net of discount and current portion	23,843	25,957
Deferred income tax liability	11,727	10,431
Total liabilities	44,472	47,609
Commitments and Contingencies (Note 8)
Stockholders' equity:
Adjustable rate preferred stock, $25 stated value, 7,500,000 shares authorized: zero shares issued and outstanding
Common stock, no par value, 22,500,000 shares authorized: 7,690,275 shares issued and outstanding at March 31, 2017 and 7,661,968 at September 30, 2016	14,286	13,279
Retained earnings	30,485	24,052
Total stockholders' equity	44,771	37,331
Total liabilities and stockholders' equity	$ 89,243	$ 84,940

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Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Statement of Financial Position [Abstract]
Property and equipment, accumulated depreciation	$ 813	$ 940
Adjustable rate preferred stock, stated value	$ 25	$ 25
Adjustable rate preferred stock, shares authorized	7,500,000	7,500,000
Adjustable rate preferred stock, shares issued	0	0
Adjustable rate preferred stock, shares outstanding	0	0
Common stock, no par value
Common stock, shares authorized	22,500,000	22,500,000
Common stock, shares issued	7,690,275	7,661,968
Common stock, shares outstanding	7,690,275	7,661,968

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Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Statements of Income (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Revenue:
Investment advisory fees	$ 12,063	$ 10,991	$ 24,172	$ 22,814
Shareholder service fees	1,173	1,201	2,358	2,531
Total revenue	13,236	12,192	26,530	25,345
Operating expenses:
Compensation and benefits	3,275	2,891	6,489	5,856
General and administrative	1,395	1,405	2,790	2,944
Mutual fund distribution	72	301	133	451
Sub-advisor fees	2,292	2,054	4,581	4,204
Amortization and depreciation	91	89	184	177
Total operating expenses	7,125	6,740	14,177	13,632
Net operating income	6,111	5,452	12,353	11,713
Interest expense	278	309	544	670
Other income		(1)		(1)
Income before income tax expense	5,833	5,144	11,809	11,044
Income tax expense	2,205	1,861	4,185	4,111
Net income	$ 3,628	$ 3,283	$ 7,624	$ 6,933
Earnings per share:
Basic	$ 0.47	$ 0.43	$ 0.99	$ 0.91
Diluted	$ 0.47	$ 0.43	$ 0.98	$ 0.90
Weighted average shares outstanding:
Basic	7,688,994	7,598,415	7,687,374	7,596,707
Diluted	7,773,622	7,693,611	7,784,353	7,687,742

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Statements of Changes in Stockholders' Equity (Unaudited) - 6 months ended Mar. 31, 2017 - USD ($) $ in Thousands	Total	Common Stock [Member]	Retained Earnings [Member]
Beginning balance at Sep. 30, 2016	$ 37,331	$ 13,279	$ 24,052
Beginning balance, Shares at Sep. 30, 2016		7,661,968
Net income	7,624		7,624
Dividends paid	(1,074)		(1,074)
Employee and director restricted stock vested	0	$ 0	0
Employee and director restricted stock vested, Shares		34,875
Repurchase of vested employee restricted stock for tax withholding	(168)	$ (66)	(102)
Repurchase of vested employee restricted stock for tax withholding, Shares		(7,445)
Shares issued for auto-investments pursuant to the 2015 Dividend Reinvestment and Stock Purchase Plan	2	$ 2
Shares issued for auto-investments pursuant to the 2015 Dividend Reinvestment and Stock Purchase Plan, Shares		125
Shares issued for dividend reinvestment pursuant to the 2015 Dividend Reinvestment and Stock Purchase Plan		$ 15	(15)
Shares issued for dividend reinvestment pursuant to the 2015 Dividend Reinvestment and Stock Purchase Plan, Shares		808
Stock-based compensation	1,057	$ 1,057
Adjustment for fractional shares paid in cash	(1)	$ (1)
Adjustment for fractional shares paid in cash, Shares		(56)
Ending balance at Mar. 31, 2017	$ 44,771	$ 14,286	$ 30,485
Ending balance, shares at Mar. 31, 2017		7,690,275

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Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 7,624	$ 6,933
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation	184	177
Deferred income taxes	1,296	1,529
Tax effect from restricted stock units		95
Restricted stock units repurchased for employee tax withholding	(168)	(98)
Stock-based compensation	1,057	700
Deferred rent	83	(29)
Amortization of loan fee payments	(73)	(73)
Change in operating assets and liabilities
Investment fee income receivable	(330)	(262)
Prepaid expenses	620	242
Other accounts receivable	44	11
Other assets	3	73
Accrued liabilities and accounts payable	(2,019)	(523)
Income taxes payable	(383)	(1,097)
Net cash provided by operating activities	7,938	7,678
Cash flows used in investing activities:
Purchases of property and equipment	(68)	(100)
Deferred offering costs		(1)
Payments related to management contracts	(119)	(270)
Net cash used in investing activities	(187)	(371)
Cash flows provided by (used in) financing activities:
Principal payments on bank loan	(2,114)	(2,187)
Proceeds from shares issued pursuant to the 2015 Dividend Reinvestment and Stock Repurchase Plan	2	14
Dividend payments	(1,074)	(709)
Payment of loan fees		(15)
Cash paid for fractional shares	(1)
Net cash used in financing activities	(3,187)	(2,897)
Net increase in cash and cash equivalents	4,564	4,410
Cash and cash equivalents at the beginning of the period	3,535	3,086
Cash and cash equivalents at the end of the period	8,099	7,496
Cash paid for:
Income taxes	1,994	3,428
Interest	$ 271	$ 626

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Basis of Financial Statement Presentation

6 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Financial Statement Presentation

(1) Basis of Financial Statement Presentation

•

performing a daily reconciliation of portfolio positions and cash for the fund;

•

monitoring the fund’s compliance with its investment objectives and restrictions and federal securities laws;

•

overseeing service providers that provide accounting, administration, distribution, transfer agency, custodial, sales and marketing, audit, information technology, and legal services to the fund;

•

maintaining in-house marketing and distribution departments on behalf of the fund;

•

being actively involved with preparing all regulatory filings for the fund, including writing and annually updating the fund’s prospectus and related documents;

•

preparing or reviewing a written summary of the fund’s performance for the most recent twelve-month period for each annual report of the fund;

•

monitoring and overseeing the accessibility of the fund on third party platforms;

•

providing a quarterly certification to Hennessy Funds Trust; and

•

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Management Contracts Purchased	6 Months Ended
Management Contracts Purchased	Mar. 31, 2017
Text Block [Abstract]
Management Contracts Purchased	(2) Management Contracts Purchased Throughout its history, the Company has completed eight purchases of assets related to the management of 25 different mutual funds, some of which were reorganized into already existing Hennessy Funds. In accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), the Company periodically reviews the carrying value of its purchased management contracts to determine if any impairment has occurred. The fair value of management contracts are based on management estimates and assumptions, including third party valuations that utilize appropriate valuation techniques. The fair value of the management contracts was estimated by applying the income approach. It is the opinion of the Company’s management that there was no impairment as of March 31, 2017 or 2016. Under the FASB guidance on “Intangibles – Goodwill and Other,” intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment. The Company reviews the life of the management contracts each reporting period to determine if they continue to have an indefinite useful life. The Company considers the mutual fund management contracts to be intangible assets with an indefinite useful life and are not impaired as of March 31, 2017. The Company completed its most recent asset purchase on September 23, 2016, when it purchased the assets related to the management of the Westport Fund and the Westport Select Cap Fund. This asset purchase added approximately $435 million to the Company’s assets under management. The purchase was consummated in accordance with the terms and conditions of that certain Transaction Agreement, dated as of May 2, 2016, between the Company and Westport Advisers, LLC. The purchase price of $11.3 million was funded with available cash and was based on the aggregate average assets under management for the Westport Fund and the Westport Select Cap Fund as measured at the close of business on the effective date of the Transaction Agreement and on each of the two trading days immediately preceding the date of the Transaction Agreement. The total capitalized costs related to the purchase were $11.4 million.

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Investment Advisory Agreements	6 Months Ended
Investment Advisory Agreements	Mar. 31, 2017
Text Block [Abstract]
Investment Advisory Agreements	(3) Investment Advisory Agreements The Company has management contracts with Hennessy Funds Trust, under which it provides investment advisory services to all classes of the 14 Hennessy Funds. The management contracts must be renewed annually (except in limited circumstances) by (1) the Funds’ Board of Trustees or by the vote of a majority of the outstanding shares of the applicable Hennessy Fund and (2) by the vote of a majority of the trustees of Hennessy Funds Trust who are not interested persons of the Hennessy Funds. If the management contracts are not renewed annually as described above, they will terminate automatically. In addition, there are two other circumstances in which the management contracts would terminate. First, the management contracts would automatically terminate if the Company assigned them to another advisor (assignment includes “indirect assignment,” which is the transfer of the Company’s common stock in sufficient quantities deemed to constitute a controlling block). Additionally, each management contract may be terminated prior to its expiration upon 60 days’ notice by either the Company or the applicable Hennessy Fund. As provided in the management contracts, the Company receives investment advisory fees monthly based on a percentage of the respective fund’s average daily net assets. The Company has entered into sub-advisory agreements for the Hennessy Focus Fund, the Hennessy Equity and Income Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund. Under each of these sub-advisory agreements, the sub-advisor is responsible for the investment and re-investment of the assets of the applicable Hennessy Fund in accordance with the terms of such agreement and the applicable Hennessy Fund’s Prospectus and Statement of Additional Information. The sub-advisors are subject to the direction, supervision and control of the Company and the Funds’ Board of Trustees. The sub-advisory agreements must be renewed annually in the same manner and are subject to the same termination provisions as the management contracts. In exchange for the sub-advisory services, the Company (not the Hennessy Funds) pays sub-advisor fees to the sub-advisors, which are based on the amount of each applicable Hennessy Fund’s average daily net assets.

XML 21 R10.htm IDEA: XBRL DOCUMENT

Bank Loan

6 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Bank Loan

(4) Bank Loan

The current term loan agreement requires 48 monthly payments in the amount of $364,583 plus interest, at the Company’s option, at either:


	Gross Debt at September 30, 2016		Debt Issuance Cost			Net Debt at September 30, 2016

Current portion of debt	$	4,375	$	(147	)	$	4,228
Long-term portion of debt		26,250		(293	)		25,957

Total Debt	$	30,625	$	(440	)	$	30,185


	Gross Debt at March 31, 2017		Debt Issuance Cost			Net Debt at March 31, 2017

Current portion of debt	$	4,375	$	(147	)	$	4,228
Long-term portion of debt		24,063		(220	)		23,843

Total Debt	$	28,438	$	(367	)	$	28,071

XML 22 R11.htm IDEA: XBRL DOCUMENT

Income Taxes	6 Months Ended
Income Taxes	Mar. 31, 2017
Income Tax Disclosure [Abstract]
Income Taxes	(5) Income Taxes The Company’s effective income tax rates for the six months ended March 31, 2017 and 2016, were 35.4% and 37.2%, respectively, and differ from the federal statutory rate of 35% primarily due to state taxes. The effective income tax rate was lower for the period ended March 31, 2017, due to the early adoption of ASU 2016-09 (see further discussion in Footnote 10). We are subject to income tax in the U.S. federal jurisdiction and multiple state jurisdictions. Our U.S. federal tax returns for 2013 and subsequent years remain open to examination. Generally, we are no longer subject to state examinations by tax authorities for years prior to fiscal 2012. For state tax jurisdictions with unfiled tax returns, the statute of limitations will remain open indefinitely.

XML 23 R12.htm IDEA: XBRL DOCUMENT

Earnings per Share and Dividends per Share	6 Months Ended
Earnings per Share and Dividends per Share	Mar. 31, 2017
Text Block [Abstract]
Earnings per Share and Dividends per Share	(6) Earnings per Share and Dividends per Share Basic earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents. All common stock equivalents were dilutive and therefore included in the diluted earnings per share calculation for the three and six months ended March 31, 2017. On January 26, 2017, the Company’s Board of Directors declared a 3-for-2 stock split, which was effected on March 6, 2017, for shareholders of record as of February 10, 2017. All disclosures in this report relating to shares of common stock, restricted stock units, and per share data have been adjusted to reflect this stock split. The Company paid quarterly cash dividends of $0.067 per share on December 8, 2016, to shareholders of record as of November 15, 2016, and $0.075 per share on March 6, 2017, to shareholders of record as of February 10, 2017.

XML 24 R13.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation

6 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

(7) Stock-Based Compensation


	Restricted Stock Unit Activity Six Months Ended March 31, 2017
	Number of Share Units			Weighted Avg. Fair Value Per Share at Each Date
Non-vested Balance at September 30, 2016		379,464		$	16.19

Granted		—			—

Vested (1)		(76,162	)		13.88

Forfeited		—			—


Non-vested Balance at March 31, 2017		303,302		$	16.76

(1)


Restricted Stock Unit Compensation Six Months Ended March 31, 2017

	(In thousands)
Total expected compensation expense related to Restricted Stock Units	$	10,608

Compensation expense recognized through March 31, 2017		(5,523	)


Unrecognized compensation expense related to RSUs at March 31, 2017	$	5,085

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References + Details

XML 25 R14.htm IDEA: XBRL DOCUMENT

Commitments and Contingencies	6 Months Ended
Commitments and Contingencies	Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	(8) Commitments and Contingencies The Company’s headquarters is located in leased office space under a single non-cancelable operating lease at 7250 Redwood Blvd., Suite 200, in Novato, California. The lease expires on June 30, 2021, with one five-year extension available thereafter. The Company also has office space under a single non-cancelable operating lease at 101 Federal Street, Suite 1900, Boston, Massachusetts 02110. The initial term of the lease expired on November 30, 2015, but automatically renews for successive one-year periods unless either party terminates the lease by providing at least three months’ notice of termination to the other party prior to the next renewal date. The Company also has office space under a single non-cancelable operating lease at 1340 Environ Way, #305, Chapel Hill, North Carolina 27517. The initial term of the lease expired on November 30, 2015, but automatically renews for successive three-month periods unless either party terminates the lease by providing at least two months’ notice of termination to the other party prior to the next renewal date. As of March 31, 2017, there were no material changes in the leasing arrangements that would have a significant effect on future minimum lease payments reported in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

XML 26 R15.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

6 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

(9) Fair Value Measurements

•

Level 1 – Unadjusted, quoted prices in active markets for identical assets or liabilities that an entity has the ability to access at the measurement date.

•

Based on the definitions, the following table represents the Company’s assets categorized in the Level 1 to 3 hierarchies as of March 31, 2017, and September 30, 2016:


	Fair Value Measurements at March 31, 2017
	Level 1		Level 2		Level 3		Total
	(In thousands)

Money market fund deposits	$	5,321	$	—	$	—	$	5,321
Mutual fund investments		8		—		—		8


Total	$	5,329	$	—	$	—	$	5,329


Amounts included in:
Cash and cash equivalents	$	5,321	$	—	$	—	$	5,321
Investments in marketable securities		8		—		—		8


Total	$	5,329	$	—	$	—	$	5,329


	Fair Value Measurements at September 30, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)

Money market fund deposits	$	320	$	—	$	—	$	320
Mutual fund investments		8		—		—		8


Total	$	328	$	—	$	—	$	328


Amounts included in:
Cash and cash equivalents	$	320	$	—	$	—	$	320
Investments in marketable securities		8		—		—		8


Total	$	328	$	—	$	—	$	328

There were no transfers between levels during the six months ended March 31, 2017, or the year ended September 30, 2016.

XML 27 R16.htm IDEA: XBRL DOCUMENT

New Accounting Standards	6 Months Ended
New Accounting Standards	Mar. 31, 2017
Accounting Changes and Error Corrections [Abstract]
New Accounting Standards	(10) New Accounting Standards In April 2015, the FASB issued ASU 2015-03 “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This ASU requires reporting entities to record costs paid to third parties that are directly related to issuing debt, and that otherwise would not be incurred, as a deduction to the corresponding debt for presentation purposes. The effective date for the new standard is for annual periods beginning after December 15, 2015. We adopted ASU 2015-03 on January 1, 2017, for debt issuance costs on our term loan, on a retrospective basis. The impact of adopting ASU 2015-03 on our current period condensed consolidated financial statements was the classification of all deferred financing costs as a deduction to the corresponding debt in addition to the reclassification of deferred financing costs in other current and long term assets to short and long term notes payable as of September 30, 2016, within the condensed consolidated balance sheets to conform to the current period presentation. Other than these reclassifications and additional disclosures, the adoption of ASU 2015-03 did not have a material impact on our financial statements. In March 2016, the FASB issued ASU 2016-09 “Compensation – Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting.” The new standard contains several amendments that will simplify the recognition for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification within the statement of cash flows for certain components of share-based awards. Early adoption is permitted for any interim or annual period. The changes in the new standard eliminate the recognition of excess tax benefits or tax deficiencies from the statement of stockholders’ equity. Under the new guidance, all excess tax benefits and tax deficiencies resulting from stock-based compensation awards vesting and exercises are recognized prospectively within income tax expense, and excess tax benefits are recognized regardless of whether they reduce current taxes payable. This will increase the volatility of our effective tax rate. We have elected to early adopt ASU 2016-09 for the three months ended March 31, 2017, using a modified retrospective approach, effective as if adopted the first day of the fiscal year, October 1, 2016. As a result of early adoption of ASU 2016-09, income tax benefits of approximately $0.004 million and $0.2 million were recognized as discrete events in the quarterly periods ended March 31, 2017, and December 31, 2016, respectively. We have elected to continue to estimate the number of stock-based awards expected to vest, as permitted by ASU 2016-09, rather than electing to account for forfeitures as they occur. As such, this has no cumulative effect on retained earnings for the prior year. With the early adoption of 2016-09, we have elected to present the cash flow statement on a prospective transition method and no prior periods have been adjusted. In January 2017, the FASB issued ASU No. 2017-01 “Business Combinations (Topic 805): Clarifying the Definition of a Business.” Based on feedback that the definition of business is being applied too broadly, the update adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The effective date for the new standard is for annual periods beginning after December 15, 2017 (the Company’s first quarter of fiscal year 2019). The adoption of this standard is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

- Definition

The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6507316

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Direct Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=66092750

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=64853466&loc=d3e22583-107794

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Indirect Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6515603

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=64853466&loc=d3e22580-107794

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.10-01.(b)(6))
-URI http://asc.fasb.org/extlink&oid=27015980&loc=d3e46468-122699

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Accounting Change
-URI http://asc.fasb.org/extlink&oid=6503790

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=64853466&loc=d3e22499-107794

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Retrospective Application
-URI http://asc.fasb.org/extlink&oid=6523989

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section 45
-Paragraph 13
-URI http://asc.fasb.org/extlink&oid=68064558&loc=d3e765-108305

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section 45
-Paragraph 12
-URI http://asc.fasb.org/extlink&oid=68064558&loc=d3e725-108305

+ Details

XML 28 R17.htm IDEA: XBRL DOCUMENT

Subsequent Events	6 Months Ended
Subsequent Events	Mar. 31, 2017
Subsequent Events [Abstract]
Subsequent Events	(11) Subsequent Events The Company has evaluated subsequent events through the date these financial statements were issued and has concluded that no material subsequent events occurred during this period that would require recognition or disclosure.

XML 29 R18.htm IDEA: XBRL DOCUMENT

Basis of Financial Statement Presentation (Policies)

6 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Revenue Recognition

•

performing a daily reconciliation of portfolio positions and cash for the fund;

•

monitoring the fund’s compliance with its investment objectives and restrictions and federal securities laws;

•

overseeing service providers that provide accounting, administration, distribution, transfer agency, custodial, sales and marketing, audit, information technology, and legal services to the fund;

•

maintaining in-house marketing and distribution departments on behalf of the fund;

•

being actively involved with preparing all regulatory filings for the fund, including writing and annually updating the fund’s prospectus and related documents;

•

preparing or reviewing a written summary of the fund’s performance for the most recent twelve-month period for each annual report of the fund;

•

monitoring and overseeing the accessibility of the fund on third party platforms;

•

providing a quarterly certification to Hennessy Funds Trust; and

•

XML 30 R19.htm IDEA: XBRL DOCUMENT

Bank Loan (Tables)

6 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Summary of Debt Reclassification

The following is a reconciliation of the reclassification (in thousands):


	Gross Debt at September 30, 2016		Debt Issuance Cost			Net Debt at September 30, 2016

Current portion of debt	$	4,375	$	(147	)	$	4,228
Long-term portion of debt		26,250		(293	)		25,957

Total Debt	$	30,625	$	(440	)	$	30,185


	Gross Debt at March 31, 2017		Debt Issuance Cost			Net Debt at March 31, 2017

Current portion of debt	$	4,375	$	(147	)	$	4,228
Long-term portion of debt		24,063		(220	)		23,843

Total Debt	$	28,438	$	(367	)	$	28,071

XML 31 R20.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation (Tables)

6 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Non-Vested Restricted Stock Units Activity

RSU activity for the six months ended March 31, 2017, was as follows:


	Restricted Stock Unit Activity Six Months Ended March 31, 2017
	Number of Share Units			Weighted Avg. Fair Value Per Share at Each Date
Non-vested Balance at September 30, 2016		379,464		$	16.19

Granted		—			—

Vested (1)		(76,162	)		13.88

Forfeited		—			—


Non-vested Balance at March 31, 2017		303,302		$	16.76

(1)

Schedule of Non-Vested Restricted Stock Units Compensation


Restricted Stock Unit Compensation Six Months Ended March 31, 2017

	(In thousands)
Total expected compensation expense related to Restricted Stock Units	$	10,608

Compensation expense recognized through March 31, 2017		(5,523	)


Unrecognized compensation expense related to RSUs at March 31, 2017	$	5,085

XML 32 R21.htm IDEA: XBRL DOCUMENT

Fair Value Measurements (Tables)

6 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Assets Categorized on Basis of Various Levels

Based on the definitions, the following table represents the Company’s assets categorized in the Level 1 to 3 hierarchies as of March 31, 2017, and September 30, 2016:


	Fair Value Measurements at March 31, 2017
	Level 1		Level 2		Level 3		Total
	(In thousands)

Money market fund deposits	$	5,321	$	—	$	—	$	5,321
Mutual fund investments		8		—		—		8


Total	$	5,329	$	—	$	—	$	5,329


Amounts included in:
Cash and cash equivalents	$	5,321	$	—	$	—	$	5,321
Investments in marketable securities		8		—		—		8


Total	$	5,329	$	—	$	—	$	5,329


	Fair Value Measurements at September 30, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)

Money market fund deposits	$	320	$	—	$	—	$	320
Mutual fund investments		8		—		—		8


Total	$	328	$	—	$	—	$	328


Amounts included in:
Cash and cash equivalents	$	320	$	—	$	—	$	320
Investments in marketable securities		8		—		—		8


Total	$	328	$	—	$	—	$	328

XML 33 R22.htm IDEA: XBRL DOCUMENT

Basis of Financial Statement Presentation - Additional Information (Detail)	6 Months Ended
	Mar. 31, 2017 Funds
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of Hennessy funds to which company provides investment advisory services	14

XML 34 R23.htm IDEA: XBRL DOCUMENT

Management Contracts Purchased - Additional Information (Detail)	6 Months Ended
	Mar. 31, 2017 USD ($) Funds	Sep. 23, 2016 USD ($)	Mar. 31, 2016 USD ($)
Contracts In Progress Costs And Earnings [Line Items]
Number of mutual funds \| Funds	25
Management contracts impairment amount	$ 0		$ 0
Westport Fund and Westport Select Cap Fund [Member]
Contracts In Progress Costs And Earnings [Line Items]
Acquisition of Westport Fund and the Westport Select Cap Fund		$ 435,000,000
Cash paid	11,300,000
Total capitalized costs related to purchase	$ 11,400,000

XML 35 R24.htm IDEA: XBRL DOCUMENT

Investment Advisory Agreements - Additional Information (Detail)	6 Months Ended
	Mar. 31, 2017 Funds
Investments Schedule [Abstract]
Number of Hennessy funds to which company provides investment advisory services	14
Notice period for termination of agreement	60 days

XML 36 R25.htm IDEA: XBRL DOCUMENT

Bank Loan - Additional Information (Detail)					6 Months Ended
Bank Loan - Additional Information (Detail)	Mar. 01, 2017	Dec. 31, 2016	Jan. 21, 2016	Sep. 17, 2015 USD ($) $ / shares shares	Mar. 31, 2017 USD ($) Installment	Mar. 31, 2016 USD ($)	Jan. 20, 2016	Sep. 16, 2015 USD ($)
US Bank National Association Loan [Member]
Debt Instrument [Line Items]
Number of monthly installments payable \| Installment					48
Required monthly loan principal repayment					$ 364,583
Common stock repurchase, share \| shares				1,000,000
Common stock repurchase, price per share \| $ / shares				$ 25
Outstanding bank loan				$ 35,000,000
Long-term loan outstanding principal balance								$ 23,000,000
Effective interest rate on debt			4.00%				4.25%
Final installment date					Sep. 17, 2019
Outstanding principal amount					$ 17,900,000
Amortized loan costs					$ 410,000
Amortized cost on straight-line basis in months					48 months
Amortization expenses					$ 70,000	$ 70,000
Unamortized loan cost					$ 300,000
US Bank National Association Loan [Member] \| Promissory Note [Member]
Debt Instrument [Line Items]
Outstanding bank loan				20,000,000
California Bank And Trust Loan [Member] \| Promissory Note [Member]
Debt Instrument [Line Items]
Outstanding bank loan				$ 15,000,000
Prime Rate [Member] \| US Bank National Association Loan [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate					0.50%
One Month Libor [Member] \| US Bank National Association Loan [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate		3.00%			1.00%
Effective interest rate on debt					3.784%
Principal loan balance converted					$ 32,800,000
Debt instrument converted rate	0.784%
Debt conversion description					The Company intends to renew the 1-month LIBOR contract on a monthly basis provided that the LIBOR-based interest rate remains favorable to the prime rate-based interest rate.
Minimum [Member] \| London Interbank Offered Rate (LIBOR) [Member] \| US Bank National Association Loan [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate					2.75%
Minimum [Member] \| One Month Libor [Member] \| US Bank National Association Loan [Member]
Debt Instrument [Line Items]
Debt instrument additional basis spread			0.75%		0.25%
Maximum [Member] \| London Interbank Offered Rate (LIBOR) [Member] \| US Bank National Association Loan [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate					3.25%
Maximum [Member] \| One Month Libor [Member] \| US Bank National Association Loan [Member]
Debt Instrument [Line Items]
Debt instrument additional basis spread			0.50%		0.75%

XML 37 R26.htm IDEA: XBRL DOCUMENT

Bank Loan - Summary of Debt Reclassification (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Long-term Debt, by Current and Noncurrent [Abstract]
Current portion of debt, Gross Debt	$ 4,375	$ 4,375
Long-term portion of debt, Gross Debt	24,063	26,250
Total Debt, Gross Debt	28,438	30,625
Current portion of debt, Debt Issuance Cost	(147)	(147)
Long-term portion of debt, Debt Issuance Cost	(220)	(293)
Total Debt, Debt Issuance Cost	(367)	(440)
Current portion of debt, Net Debt	4,228	4,228
Long-term portion of debt, Net Debt	23,843	25,957
Total Debt, Net Debt	$ 28,071	$ 30,185

XML 38 R27.htm IDEA: XBRL DOCUMENT

Income Taxes - Additional Information (Detail)	6 Months Ended
Income Taxes - Additional Information (Detail)	Mar. 31, 2017	Mar. 31, 2016
Income Tax Examination [Line Items]
Effective tax rates	35.40%	37.20%
Federal statutory rate	35.00%
Domestic Tax Authority [Member] \| Earliest Tax Year [Member]
Income Tax Examination [Line Items]
Open tax year	2013
Domestic Tax Authority [Member] \| Latest Tax Year [Member]
Income Tax Examination [Line Items]
Open tax year	2012

XML 39 R28.htm IDEA: XBRL DOCUMENT

Earnings per Share and Dividends per Share - Additional Information (Detail)	Mar. 06, 2017 $ / shares	Dec. 08, 2016 $ / shares
Earnings Per Share [Abstract]
Stock split ratio	1.5
Dividend paid	$ 0.075	$ 0.067
Date of record	Feb. 10, 2017	Nov. 15, 2016

XML 40 R29.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation - Additional Information (Detail) - Restricted Stock Units (RSUs) [Member] - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum Vesting Period	4 years
Rate of restricted stock units vest under plan	25.00%
Granted, Number of Restricted Share Units	0	0
Compensation expense related to non-vested awards not yet recognized	$ 5,085
Weighted-average vesting period for compensation expenses not yet recognized	2 years 7 months 6 days

XML 41 R30.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation - Schedule of Non-Vested Restricted Stock Units Activity (Detail) - Restricted Stock Units (RSUs) [Member] - $ / shares	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Non-vested Beginning Balance, Number of Share Units	379,464
Granted, Number of Share Units	0	0
Vested, Number of Share Units	(76,162)
Forfeited, Number of Share Units	0
Non-vested Ending Balance, Number of Share Units	303,302
Non-vested Beginning Balance, Weighted Avg Fair Value Per Share at Each Date	$ 16.19
Granted, Weighted Avg Fair Value Per Share at Each Date	0
Vested, Weighted Avg Fair Value Per Share at Each Date	13.88
Forfeited, Weighted Avg Fair Value Per Share at Each Date	0
Non-vested Ending Balance, Weighted Avg Fair Value Per Share at Each Date	$ 16.76

XML 42 R31.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation - Schedule of Non-Vested Restricted Stock Units Activity (Parenthetical) (Detail) - shares	Mar. 31, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, shares issued	7,690,275	7,661,968
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, shares issued	27,430

XML 43 R32.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation - Schedule of Non-Vested Restricted Stock Units Compensation (Detail) - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total expected compensation expense related to Restricted Stock Units	$ 1,057	$ 700
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total expected compensation expense related to Restricted Stock Units	10,608
Compensation expense recognized through March 31, 2017	(5,523)
Unrecognized compensation expense related to RSUs at March 31, 2017	$ 5,085

XML 44 R33.htm IDEA: XBRL DOCUMENT

Commitments and Contingencies - Additional Information (Detail)	6 Months Ended
	Mar. 31, 2017
California [Member]
Loss Contingencies [Line Items]
Lease expiration date	Jun. 30, 2021
Extension period available after expiration of lease	5 years
North Carolina [Member]
Loss Contingencies [Line Items]
Lease expiration date	Nov. 30, 2015
Lease renewal period	3 months
Massachusetts [Member]
Loss Contingencies [Line Items]
Lease expiration date	Nov. 30, 2015
Lease renewal period	1 year

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Fair Value Measurements - Assets Categorized on Basis of Various Levels (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market fund deposits	$ 5,321	$ 320
Mutual fund investments	8	8
Total	5,329	328
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market fund deposits	5,321	320
Mutual fund investments	8	8
Total	$ 5,329	$ 328

- Definition

Fair value portion of investment securities, including, but not limited to, marketable securities, derivative financial instruments, and investments accounted for under the equity method.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(12))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Trading Securities
-URI http://asc.fasb.org/extlink&oid=6526789

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-03(5))
-URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-03(6))
-URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 35
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=27723805&loc=d3e24584-111560

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(2))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 25
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=65884222&loc=d3e22054-111558

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-03(a)(1))
-URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Available-for-Sale Securities
-URI http://asc.fasb.org/extlink&oid=6505594

+ Details

XML 46 R35.htm IDEA: XBRL DOCUMENT

Fair Value Measurements - Additional Information (Detail) - USD ($)	6 Months Ended	12 Months Ended
	Mar. 31, 2017	Sep. 30, 2016
Fair Value Disclosures [Abstract]
Transfer from fair value level 1 to level 2	$ 0	$ 0
Transfer from fair value level 2 to level 1	0	0
Transfer into (out of) level 3	$ 0	$ 0

XML 47 R36.htm IDEA: XBRL DOCUMENT

New Accounting Standards - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Income tax benefits	$ 2,205		$ 1,861	$ 4,185	$ 4,111
ASU 2016-09 [Member] \| New Accounting Pronouncement Early Adoption Effect [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Income tax benefits	$ 4	$ 200

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