Note 7 - Business Combination

6 Months Ended

Mar. 31, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

NOTE 7 - BUSINESS COMBINATIONS

In February 2015, Gilman acquired certain assets of a tax preparation and accounting business that was deemed to be a business acquisition. The consideration for the transaction consisted of contingent consideration payable in cash having a fair value of $569,000, for which a liability (included in Accounts payable and other liabilities) was recognized based on the estimated acquisition date fair value of the potential earn-out. The earn-out is based on revenue, as defined in the agreement, during the 48-month period following the closing up to a maximum of $640,000. The liability was valued using an income-based approach using unobservable inputs (Level 3) and reflects the Company’s own assumptions. The liability will be revalued at each Balance Sheet date with changes therein recorded in earnings. There was no change in the estimated fair value of the liability at March 31, 2015. The fair value of the acquired assets was allocated to customer relationships, which will be amortized over seven years. Results of operations of the acquired business are included in the accompanying consolidated statements of operations from the date of acquisition and were not material. In addition, based on materiality, pro forma results are not presented.

On October 15, 2013, the Company completed a merger with 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 2,266,669 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 1,058,333 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		8,350,000
Goodwill		6,531,000
Total Assets		20,468,000
Liabilities
Current liabilities		6,000,000
Long-term liabilities		5,628,000
Total Liabilities		11,628,000
Purchase Price	$	8,840,000

The goodwill recognized, none of which is 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 intangible assets acquired, including $569,000 attributable to the February 2015 Gilman aquisition, their carrying amount as of March 31, 2015 and their estimated useful lives: 

Intangible asset	Fair Value		Accumulated Amortization		Carrying Value		Estimated Useful Life (years)
Customer relationships	$	6,969,000	$	948,000	$	6,021,000		7&10
Non-compete		296,000		216,000		80,000		2
Brands		1,654,000		-		1,654,000	Indefinite
	$	8,919,000	$	1,164,000	$	7,755,000

Amortization expense associated with intangible assets, for the six months ended March 31, 2015 and 2014 was $409,000 and $463,000, respectively.

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

Year ending
September 30,
2015	$	426,000
2016		733,000
2017		719,000
2018		719,000
2019		719,000
Thereafter		2,785,000
Total	$	6,101,000

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

	(Unaudited) Six Month Period Ended March 31, 2014
Revenues	$	95,518,000
Net income attributable to common stockholders	$	3,881,000
Basic earnings per share	$	0.31
Diluted earnings per share	$	0.31
Weighted number of shares outstanding – basic		12,339,219
Weighted number of shares outstanding – Diluted		12,490,219

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 after giving effect to measurement period adjustments (see Note 1), had been applied, 2) the shares issued by the Company to acquire Gilman, and 3) 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 resulted had the acquisition occurred on the date indicated or that may result in the future.