Note 1 - Basis of Presentation.and Going Concern

3 Months Ended

Mar. 31, 2012

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1. BASIS OF PRESENTATION AND GOING CONCERN

The accompanying consolidated financial statements of National Holdings Corporation (“National” or the “Company”) have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and disclosures required for annual financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  The consolidated financial statements as of March 31, 2012 and for the six months ended March 31, 2012 and 2011 are unaudited.  The results of operations for the interim periods are not necessarily indicative of the results of operations for the fiscal year 2012.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes included thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2011.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis. For the six-months ended March 31, 2012, the Company has a net loss of $2,769,000 and a working capital deficit of approximately $4,772,000 as of March 31, 2012. For the fiscal year ended September 30, 2011 the Company had a net loss of $4,713,000 and had a working capital deficit of $3,936,000 as of September 30, 2011.

One of our convertible notes amounting to $3,000,000 matures on June 30, 2012.  The Company has also secured other convertible promissory notes aggregating $4,000,000 during March and April 2012, which may mature as early as January 2013, or, if certain conditions are met, in March 2015.  Such notes are unsecured, are solely the obligation of the parent company and not any of its operating subsidiaries, including our broker-dealer subsidiaries.  Such notes are due to entities affiliated to one of the Company’s directors and one of the Company’s former directors. Our plan is to satisfy our obligations under the $3,000,000 convertible note by either: 1) providing incentives to the holders to either extend the maturity of the notes or convert the notes into our shares of common stock, 2) securing additional financing between now and the maturity dates to repay the notes, 3) repay the notes in cash and other available current assets at maturity, or 4) a combination of the aforementioned options.  Additionally, we intend to satisfy our obligations under the $4,000,000 convertible promissory note by either:  1) securing the acceptance of the holder of its capital restructuring, which would allow the Company to firmly extend the maturity of the note to March 2015, 2) encourage the holder to convert its note to the Company’s Series E Preferred Stock in due course.  While the Company believes that it will ultimately satisfy its obligations under such convertible notes, it cannot guarantee that it will be able to do so at favorable terms, or at all.  Should the Company default on the convertible notes and the lender forecloses on the debt, the operations of our subsidiaries will not be initially impacted.  Following a default, the lender could potentially take action which could adversely affect the operations of one of more of the operating subsidiaries.