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Note F - Acquisition | 12 Months Ended
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Sep. 30, 2018
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | NOTE F – ACQUISITION On February 20, 2018, the Company completed the acquisition of a portfolio of Telcordia certified outdoor active cabinet products from Calix, Inc. (“Calix”) upon the terms and conditions contained in an Asset Purchase Agreement dated February 20, 2018. The introduction of the Clearfield active cabinet line provides customers a single point of contact for cabinet solutions—both passive and powered. The acquisition enables Clearfield to expand its Fiber-to-Anywhere expertise to include active powered electronic cabinet platforms while leveraging its supply chain. The acquisition also enables Clearfield to capitalize on and expand its reach to a broader customer base, including service providers in the Tier 1 and Tier 2 markets. Acquisition date fair value of the consideration transferred totaled $10,350,000 which was comprised of a cash payment of $10,350,000 from the Company’s cash operating account. We assumed no liabilities in the acquisition. As part of the acquisition, we also agreed to purchase a minimum of $3,500,000 in inventory and purchase orders from a subcontractor. We are currently purchasing inventory from the subcontractor under the normal course of business and expect to fulfill the commitment during fiscal year 2019. The following table summarizes the preliminary estimated fair values of the assets acquired at the acquisition date:
|  |  | February 20, 2018 |
Inventories |  | $ | 2,781,000 |
Property, plant and equipment |  |  | 58,000 |
Trademarks |  |  | 563,000 |
Customer relationships |  |  | 3,742,000 |
Product certification |  |  | 1,068,000 |
Goodwill |  |  | 2,138,000 |
Total Assets |  | $ | 10,350,000 |
The active cabinet acquisition resulted in $2,138,000 of goodwill, which is expected to be deductible for tax purposes . Specifically, the goodwill recorded as part of the acquisition of the Calix active cabinets includes the expected synergies and other benefits that we believe will result from combining the operations of active cabinet lines with the operations of Clearfield, Inc. The Company incurred approximately $106,000 in legal, professional, and other costs related to this acquisition accounted for as selling and administrative expenses when incurred. The remaining weighted-average useful life of intangible assets acquired is 12.5 years. As the active cabinet business was not operated as a separate subsidiary, division or entity, Calix did not maintain separate financial statements for the active cabinet business. As a result, we are unable to accurately determine earnings/loss for the active cabinet business on a standalone basis since the date of acquisition. The following table below reflects our unaudited pro forma combined results of operations as if the acquisition had taken place as of October 1, 2016 and shows the net sales and net income as if the active cabinet business were combined with the Clearfield business for the years ended September 30, 2018 and 2017. The pro forma includes estimated expenses relating to the amortization of intangibles purchased, the amortization of the inventory fair value adjustment, and estimated personnel costs:
|  | Pro Forma Year Ended September 30, 2017 (unaudited) |  | Pro Forma Year Ended September 30, 2018 (unaudited)
Net sales |  | $ | 89,672,074 |  |  | $ | 80,958,789 |
Income from operations |  | $ | 8,174,841 |  |  | $ | 5,554,766 |
Net income |  | $ | 5,809,018 |  |  | $ | 4,794,757 |
Net income per share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.43 |  |  | $ | 0.36 |
Diluted |  | $ | 0.43 |  |  | $ | 0.36 |
The pro forma unaudited results do not purport to be indicative of the results which would have been obtained had the acquisition been completed as of the beginning of the earliest period presented or of results that may be obtained in the future. In addition, they do not include any benefits that may result from the acquisition due to synergies that may be derived from the elimination of any duplicative costs.

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