Acquisition

6 Months Ended

Mar. 31, 2016

Notes to Financial Statements

ACQUISITION

Track Group Analytics Limited

On November 26, 2014, the Company entered into a Share Purchase Agreement to purchase from the shareholders of Track Group Analytics Limited, formerly G2 Research Limited (“TGA“), all issued and outstanding shares of TGA for an aggregate purchase price of up to CAD$4,600,000 (the “TGA Acquisition“), of which CAD$2,000,000 was paid in cash to the TGA shareholders on the Closing Date with the remainder of the purchase price to be paid as follows: (i) CAD$600,000 to the former TGA shareholders in shares of common stock of which one-half of the shares were issued on the one-year anniversary of the closing and the balance to be issued on the two-year anniversary of the closing; and (ii) the CAD$2,000,000 to the former TGA shareholders in shares of common stock  over a two-year period beginning as of the closing, upon the achievement of certain milestones set forth in the purchase agreement. As of March 31, 2016, the Company had issued 38,499 shares of common stock in connection to this acquisition and 70,962 shares of common stock to the TGA shareholders upon achieving certain performance milestones.

During the third quarter of fiscal 2015, the Company received the final valuation report for the TGA Acquisition. The Consolidated Balance Sheet at March 31, 2016 has been retrospectively adjusted to include the effect of the measurement period adjustments as required under ASC 805, Business Combinations, (“ASC 805“). The revisions to the purchase price allocation for the acquisition resulted from the Company’s finalization of valuation of long-term and intangible assets with consideration of the valuation report obtained from a third party appraisal firm. The aforementioned adjustments resulted in a retrospective adjustment to goodwill by $2,384,000 and other intangibles by $1,817,000. The $1,653,000 in goodwill recognized as a result of this acquisition is not deductible for income tax purposes.

The fair value of patents, developed technology, customer contracts/relationship, tradename and trademarks were capitalized as of the acquisition date and will be subsequently amortized using a straight-line method to depreciation and amortization expense over their estimated useful lives.

Summary of Unaudited Pro-Forma Information

The unaudited pro-forma information below for the three and six months ended March 31, 2016 and 2015 gives effect to each of the acquisitions described herein as, if the acquisitions had occurred on October 1, 2013. The pro-forma financial information is not necessarily indicative of the results of operations if the acquisitions had been effective as of this date.

	Three Months Ended						Six Months Ended
	March 31,			March 31,			March 31,			March 31,
	2016			2015			2016			2015
Revenues:		6,592,039			4,816,117			12,909,643			9,801,883
Loss from operations		(1,246,208	)		(2,233,813	)		(2,636,640	)		(3,917,377	)
Net income (loss) from continuing operations		(1,920,689	)		1,387,470			(4,047,918	)		(878,804	)
Basic earnings (loss) per common share	$	(0.19	)	$	0.14		$	(0.08	)	$	(0.09	)
Diluted earnings (loss) per common share	$	(0.19	)	$	0.14		$	(0.08	)	$	(0.09	)
Net income (loss) attributable to common shareholders		(1,920,689	)		1,387,470			(4,047,918	)		(878,804	)
Basic earnings (loss) per common share	$	(0.19	)	$	0.14		$	(0.08	)	$	(0.09	)
Diluted earnings (loss) per common share	$	(0.19	)	$	0.14		$	(0.08	)	$	(0.09	)