Note 8 - Business Combination

9 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

NOTE 8 - BUSINESS COMBINATION

On October 15, 2013, the Company completed a merger with Gilman Ciocia, Inc., a Delaware corporation (“Gilman”) pursuant to the terms and conditions of the Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 20, 2013, by and among the Company, National Acquisition Corp., a Delaware corporation and the Company’s wholly-owned subsidiary (“Merger Sub”), and Gilman. Pursuant to the Merger Agreement, Merger Sub was merged with and into Gilman, with Gilman surviving the merger and becoming a wholly-owned subsidiary of the Company. Gilman provides federal, state and local tax preparation services to individuals predominantly in upper and middle income tax brackets and accounting services to small and middle size companies. In addition, through wholly owned subsidiaries, Gilman is engaged in broker-dealer, investment advisory, insurance product sales and mortgage brokerage activities.

Pursuant to the Merger Agreement, the Company issued to Gilman’s stockholders approximately 22,666,685 shares of its common stock valued at $8,840,000 determined based on the closing market price of the Company’s common stock on the acquisition date, and became the owner of 100% of the outstanding shares of Gilman’s common stock. Additionally, the Company financed repayment of $5,400,000 of Gilman’s liabilities through a capital contribution to Gilman. In August 2013, the Company issued 10,583,330 shares of its common stock pursuant to a private placement which generated net proceeds of $3,016,000 to partially finance the cash consideration of $5,400,000.

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as follows:

Assets
Current assets	$	4,833,000
Fixed assets		482,000
Other assets		272,000
Intangible assets (amortizable)		10,417,000
Goodwill		4,464,000
		20,468,000
Liabilities
Current liabilities		6,000,000
Long-term liabilities		5,628,000
		11,628,000
Total purchase price	$	8,840,000

The aforementioned allocation is preliminary and the Company is still evaluating the allocation of the purchase price among certain intangible assets and goodwill. The Company anticipates that it will complete its analysis of the allocation of the purchase price among such assets in the fourth quarter of fiscal 2014 and that the final allocation may vary from the preliminary allocation. The goodwill recognized, none of which is expected to be deductible for income tax purposes, is attributable to the assembled workforce of Gilman and to expected synergies and other benefits that the Company believes will result from combining its operations with Gilman’s. The intangible assets recognized are primarily attributable to expected increased margins that the Company believes will result from Gilman’s existing customer relationships and increased margins from financial planning and tax preparation services that the Company will offer to its existing clients.

The following table presents the intangible assets subject to amortization and the carrying amount as of June 30, 2014 and the respective estimated useful lives:

	Preliminary		Accumulated			Carrying		Estimated
Intangible asset	Fair Value		Amortization			Value		Useful Life (years)
Customer Relationships	$	8,334,000	$	(1,179,000	)	$	7,155,000		5
Brand		2,083,000		(297,000	)		1,786,000		5
	$	10,417,000	$	(1,476,000	)	$	8,941,000

The estimated future amortization expense of the above intangible assets for the next five fiscal years and thereafter is as follows:

Year ended
September 30,
2014	$	175,000
2015		2,083,000
2016		2,083,000
2017		2,083,000
2018		2,083,000
2019		434,000
Total	$	8,941,000

Gilman’s results of operations are included in the accompanying consolidated financial statements from October 15, 2013, the date of acquisition. The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition occurred at October 1, 2012:

	(Unaudited)				(Unaudited)
	Three Month Period Ended June 30,				Nine Month Period Ended June 30,
	2014		2013		2014		2013
Revenues	$	46,602,000	$	42,628,000	$	143,149,000	$	121,132,000
Net Income atributable to common stockholders	$	1,382,000	$	691,000	$	4,951,000	$	1,026,750
Basic earnings per share	$	0.01	$	0.01	$	0.04	$	0.01
Diluted earnings per share	$	0.01	$	0.01	$	0.04	$	0.01
Weighted number of shares outstanding - basic		123,246,888		122,268,028		123,343,755		95,831,779
Weighted number of shares outstanding - diluted		125,141,280		122,268,028		124,869,387		99,847,721

These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results to reflect, among other things, 1) additional amortization that would have been charged assuming the fair value adjustments to amortizable intangible assets had been applied, 2) additional compensation related to the grant of 1,750,000 stock options to certain employees of Gilman, 3) the shares issued by the Company to acquire Gilman and to partially fund the $5,400,000 of cash consideration used to finance the repayment of Gilman’s liabilities, and 4) the decrease in interest expense related to Gilman’s liabilities paid by the Company. These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have been resulted had the acquisition occurred on the date indicated or that may result in the future.

Acquisition related costs incurred by the Company amounted to $86,000 in the nine months ended June 30, 2014 and were changed to professional fees.

The amount of revenues and income of Gilman since the acquisition date included in the accompanying consolidated statement of operations for the three and nine months ended June 30, 2014 are as follows:

	Three Month		Nine Month
	Period		Period
	Ended		Ended
	June 30, 2014		June 30, 2014
Revenues	$	10,456,000	$	28,493,000
Net income attributable to common stockholders	$	986,000	$	1,935,000