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Note 4 - Acquisitions | 9 Months Ended
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Jun. 30, 2018
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | 4 . ACQUISITIONS On January 18, 2018, the Company completed its acquisition of Genasys, pursuant to a Stock Purchase Agreement. Genasys, headquartered in Madrid, Spain, is a leading software provider of advanced, location-based mass messaging solutions for emergency warning systems and workforce management. Genasys has 17 employees based primarily in Spain. The Company believes the combination of Genasys’ mass messaging solutions and software development capabilities will enable the Company to enhance existing product offerings through integrated mass messaging solutions as well as provide growth opportunities in new markets. Genasys’ operating results were included in the Company’s consolidated financial statements beginning January 18, 2018 and include $916,000 in net sales and a net operating loss of $90,000 through June 30, 2018. The acquisition consideration consisted of the following:
Cash paid |  | $ | 2,826,189 |
Acquisition escrow liability |  |  | 185,250 |
Total consideration |  | $ | 3,011,439 |
During the three months ended June 30, 2018, the acquisition escrow liability was paid to the former shareholders of Genasys. The Company incurred $356,547 in acquisition expenses related to this transaction, through June 30, 2018. Acquisition expenses include fees paid to auditors, attorneys, consultants and other professional services. These expenses were recorded in selling, general, and administrative expenses in the consolidated statement of operations as follows: $119,202 in the third quarter of fiscal 2018, $151,313 in the second quarter of fiscal 2018, $45,016 in the first quarter of fiscal 2018 and $41,016 in the fourth quarter of fiscal 2017. Purchase Price Allocation and Other Items The determination of the purchase price allocation to specific assets acquired and liabilities assumed is preliminary as of June 30, 2018. The purchase price allocation is subject to change based upon the final determination of fair value estimates of certain assets acquired and liabilities assumed. Based on the fair value estimates, the purchase price for Genasys has been allocated to individual assets acquired and liabilities assumed as follows:
Assets Acquired |  |  |  |
Cash and restricted cash acquired |  | $ | 579,644 |
Accounts receivable |  |  | 426,940 |
Fixed assets |  |  | 5,712 |
Intangible assets |  |  | 1,850,000 |
Goodwill |  |  | 2,603,688 |
Other assets |  |  | 54,520 |
Total assets acquired |  |  | 5,520,504 |
Liabilities assumed |  |  |  |
Accounts payable |  |  | 275,653 |
Accrued expenses and other liabilities |  |  | 315,817 |
Severance obligation |  |  | 397,558 |
Debt |  |  | 1,520,037 |
Total liabilities assumed |  |  | 2,509,065 |
Net assets acquired |  | $ | 3,011,439 |
The estimated fair value of identifiable intangible assets acquired, and their estimated useful lives were as follows:
|  | Fair Value |  |  | Useful Lives (in years) |
Technology |  | $ | 690,000 |  |  |  | 7 |
Customer relationships |  |  | 660,000 |  |  |  | 7 |
Trade name portfolio |  |  | 240,000 |  |  |  | 5 |
Non-compete agreements |  |  | 260,000 |  |  |  | 3 |
|  | $ | 1,850,000 |  |  |  |  |
Identifiable intangible assets are amortized over their useful lives based upon a number of assumptions including the estimated period of economic benefit and utilization. The weighted average amortization period for identifiable intangible assets acquired is 6 years. The goodwill for Genasys is attributable to combining the mass messaging solutions and software development capabilities with existing LRAD products for enhanced offerings and the skill level of the acquired workforce. The Company will continue to analyze the transaction and refine its calculations, as appropriate during the measurement period, which could affect the value of goodwill. Goodwill from the Genasys acquisition will not be deductible for tax purposes. Pro Forma Information The following table provides the unaudited pro forma results of operations for the three and nine months ended June 30, 2018 and 2017, respectively, as if Genasys had been acquired as of the beginning of fiscal year 2017. Pro forma results do not include any anticipated synergies from the combination of the companies, and accordingly, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the dates indicated or that may result in the future.
|  | Three months ended |  |  | Nine months ended |
|  | June 30, |  |  | June 30, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Net revenues |  | $ | 7,610,260 |  |  |  | 4,646,765 |  |  | $ | 23,833,153 |  |  |  | 14,326,125 |
Net loss |  |  | (48,821 | ) |  |  | (473,480 | ) |  |  | (1,136,331 | ) |  |  | (1,257,072 | )
Basic and diluted loss per share |  | $ | (0.00 | ) |  | $ | (0.01 | ) |  | $ | (0.04 | ) |  | $ | (0.04 | )
The following is a reconciliation of actual net revenue and net income to pro forma net revenue and net income:
|  | Three months ended June 30, |
|  | 2018 |  |  | 2017 |
|  | Net revenues |  |  | Net income (loss) |  |  | Net revenues |  |  | Net income (loss) |
LRAD actual results |  | $ | 7,012,430 |  |  | $ | 36,450 |  |  | $ | 4,129,554 |  |  | $ | (528,163 | )
Genasys actual results |  |  | 597,830 |  |  |  | (116,669 | ) |  |  | 517,211 |  |  |  | 103,947 |
Pro forma adjustments |  |  | - |  |  |  | 31,398 |  |  |  | - |  |  |  | (49,264 | )
Pro forma results |  | $ | 7,610,260 |  |  | $ | (48,821 | ) |  | $ | 4,646,765 |  |  | $ | (473,480 | )
|  | Nine months ended June 30, |
|  | 2018 |  |  | 2017 |
|  | Net revenues |  |  | Net income (loss) |  |  | Net revenues |  |  | Net income (loss) |
LRAD actual results |  | $ | 22,094,790 |  |  | $ | (1,194,052 | ) |  | $ | 12,813,280 |  |  | $ | (1,042,492 | )
Genasys actual results |  |  | 1,738,363 |  |  |  | 10,215 |  |  |  | 1,512,845 |  |  |  | (68,793 | )
Pro forma adjustments |  |  | - |  |  |  | 47,506 |  |  |  | - |  |  |  | (145,787 | )
Pro forma results |  | $ | 23,833,153 |  |  | $ | (1,136,331 | ) |  | $ | 14,326,125 |  |  | $ | (1,257,072 | )
The following table identifies the pro forma adjustments:
|  | Three months ended |  |  | Nine months ended |
|  | June 30, |  |  | June 30, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Acquisition costs |  | $ | 119,202 |  |  |  | - |  |  | $ | 315,531 |  |  | $ | - |
Depreciation and amortization costs |  |  | (79,458 | ) |  |  | (79,458 | ) |  |  | (238,374 | ) |  |  | (238,374 | )
Tax effect of adjustments |  |  | (8,346 | ) |  |  | 30,194 |  |  |  | (29,651 | ) |  |  | 92,587 |
Pro forma adjustments |  | $ | 31,398 |  |  | $ | (49,264 | ) |  | $ | 47,506 |  |  | $ | (145,787 | )

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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