For the Quarter Ended June 30, 2016 | Commission File Number | |
001-12629 |
Delaware | 36-4128138 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large Accelerated Filer ☐ | Accelerated Filer ☐ | ||
Non-Accelerated Filer ☐ | Smaller Reporting Company ☒ |
PART I – FINANCIAL INFORMATION | |||
Item 1 – Unaudited Condensed Financial Statements | |||
Condensed Consolidated Statements of Financial Condition as of June 30, 2016 and September 30, 2015 | |||
Condensed Consolidated Statements of Operations for the Three and Nine months ended June 30, 2016 and 2015 | |||
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Nine months ended June 30, 2016 | |||
Condensed Consolidated Statements of Cash Flows for the Nine months ended June 30, 2016 and 2015 | |||
Condensed Notes to Consolidated Financial Statements | |||
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||
Item 3 – Quantitative and Qualitative Disclosures About Market Risk | |||
Item 4 – Controls and Procedures | |||
PART II – OTHER INFORMATION | |||
Item 1 – Legal Proceedings | |||
Item 1A – Risk Factors | |||
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds | |||
Item 3 - Defaults Upon Senior Securities | |||
Item 4 - Mine Safety Disclosures | |||
Item 5 - Other Information | |||
Item 6 – Exhibits | |||
Signatures |
June 30, 2016 (Unaudited) | September 30, 2015 | ||||||
ASSETS | |||||||
Cash | $ | 22,207,000 | $ | 24,642,000 | |||
Restricted cash | 353,000 | 218,000 | |||||
Cash deposits with clearing organizations | 1,030,000 | 1,005,000 | |||||
Securities owned, at fair value | 1,522,000 | 887,000 | |||||
Receivables from broker-dealers and clearing organizations | 3,610,000 | 3,078,000 | |||||
Forgivable loans receivable | 1,808,000 | 1,368,000 | |||||
Other receivables, net | 3,852,000 | 3,709,000 | |||||
Prepaid expenses | 1,638,000 | 1,727,000 | |||||
Fixed assets, net | 837,000 | 712,000 | |||||
Intangible assets, net | 6,778,000 | 7,331,000 | |||||
Goodwill | 6,531,000 | 6,531,000 | |||||
Deferred tax asset, net | 11,801,000 | 11,662,000 | |||||
Other assets, principally refundable deposits | 306,000 | 512,000 | |||||
Total Assets | $ | 62,273,000 | $ | 63,382,000 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Liabilities | |||||||
Securities sold, but not yet purchased, at fair value | $ | — | $ | 32,000 | |||
Accrued commissions and payroll payable | 10,026,000 | 10,244,000 | |||||
Accounts payable and accrued expenses | 5,937,000 | 6,602,000 | |||||
Deferred clearing and marketing credits | 1,048,000 | 1,205,000 | |||||
Other | 205,000 | 37,000 | |||||
Total Liabilities | 17,216,000 | 18,120,000 | |||||
Stockholders’ Equity | |||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized; none outstanding | — | — | |||||
Common stock $0.02 par value, 150,000,000 shares authorized; 12,440,035 issued and outstanding at June 30, 2016 and 12,473,968 issued and outstanding at September 30, 2015 | 249,000 | 249,000 | |||||
Additional paid-in-capital | 80,321,000 | 80,282,000 | |||||
Accumulated deficit | (35,528,000 | ) | (35,284,000 | ) | |||
Total National Holdings Corporation Stockholders’ Equity | 45,042,000 | 45,247,000 | |||||
Non-Controlling interest | 15,000 | 15,000 | |||||
Total Stockholders’ Equity | 45,057,000 | 45,262,000 | |||||
Total Liabilities and Stockholders’ Equity | $ | 62,273,000 | $ | 63,382,000 |
Three Month Period Ended June 30, | Nine Month Period Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | |||||||||||||||
Commissions | $ | 25,051,000 | $ | 24,272,000 | $ | 71,722,000 | $ | 74,434,000 | |||||||
Net dealer inventory gains | 2,340,000 | 2,418,000 | 7,483,000 | 8,562,000 | |||||||||||
Investment banking | 10,735,000 | 6,356,000 | 22,921,000 | 15,869,000 | |||||||||||
Investment advisory | 3,361,000 | 3,797,000 | 10,337,000 | 11,149,000 | |||||||||||
Interest and dividends | 702,000 | 946,000 | 2,415,000 | 2,624,000 | |||||||||||
Transaction fees and clearing services | 1,591,000 | 1,735,000 | 5,512,000 | 6,302,000 | |||||||||||
Tax preparation and accounting | 2,386,000 | 2,724,000 | 7,222,000 | 7,231,000 | |||||||||||
Other | 176,000 | 87,000 | 385,000 | 280,000 | |||||||||||
Total Revenues | 46,342,000 | 42,335,000 | 127,997,000 | 126,451,000 | |||||||||||
Operating Expenses | |||||||||||||||
Commissions, compensation and fees | 39,667,000 | 35,831,000 | 110,260,000 | 107,228,000 | |||||||||||
Clearing fees | 509,000 | 681,000 | 1,798,000 | 2,209,000 | |||||||||||
Communications | 786,000 | 927,000 | 2,427,000 | 2,891,000 | |||||||||||
Occupancy | 982,000 | 999,000 | 2,886,000 | 2,977,000 | |||||||||||
License and registration | 417,000 | 335,000 | 1,155,000 | 1,025,000 | |||||||||||
Professional fees | 2,327,000 | 1,720,000 | 4,897,000 | 3,727,000 | |||||||||||
Interest | 13,000 | 6,000 | 16,000 | 12,000 | |||||||||||
Depreciation and amortization | 302,000 | 294,000 | 898,000 | 862,000 | |||||||||||
Other administrative expenses | 1,624,000 | 1,185,000 | 3,973,000 | 4,111,000 | |||||||||||
Total Operating Expenses | 46,627,000 | 41,978,000 | 128,310,000 | 125,042,000 | |||||||||||
(Loss) income before income tax expense | (285,000 | ) | 357,000 | (313,000 | ) | 1,409,000 | |||||||||
Income tax (benefit) expense | (124,000 | ) | 208,000 | (69,000 | ) | 626,000 | |||||||||
Net (loss) income | $ | (161,000 | ) | $ | 149,000 | $ | (244,000 | ) | $ | 783,000 | |||||
Net (loss) income per share - Basic | $ | (0.01 | ) | $ | 0.01 | $ | (0.02 | ) | $ | 0.06 | |||||
Net (loss) income per share - Diluted | $ | (0.01 | ) | $ | 0.01 | $ | (0.02 | ) | $ | 0.06 | |||||
Weighted number of shares outstanding - Basic | 12,440,035 | 12,446,365 | 12,442,059 | 12,446,365 | |||||||||||
Weighted number of shares outstanding - Diluted | 12,440,035 | 12,491,170 | 12,442,059 | 12,495,475 |
Common Stock | Additional Paid-in- Capital | Accumulated Deficit | Non-Controlling Interest | Total Stockholder's Equity | ||||||||||||||||||
Shares | $ | |||||||||||||||||||||
Balance, September 30, 2015 | 12,473,968 | $ | 249,000 | $ | 80,282,000 | $ | (35,284,000 | ) | $ | 15,000 | $ | 45,262,000 | ||||||||||
Stock-based compensation – stock options | 125,000 | 125,000 | ||||||||||||||||||||
Stock repurchase | (33,933 | ) | (86,000 | ) | (86,000 | ) | ||||||||||||||||
Net loss | (244,000 | ) | (244,000 | ) | ||||||||||||||||||
Balance, June 30, 2016 | 12,440,035 | $ | 249,000 | $ | 80,321,000 | $ | (35,528,000 | ) | $ | 15,000 | $ | 45,057,000 |
For The Nine Month Period Ended June 30, | |||||||
6/30/2016 | 6/30/2015 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net (loss) income | $ | (244,000 | ) | $ | 783,000 | ||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities | |||||||
Depreciation and amortization | 898,000 | 862,000 | |||||
Amortization of forgivable loans to registered representatives | 493,000 | 262,000 | |||||
Stock-based compensation | 125,000 | 470,000 | |||||
Provision for doubtful accounts | 121,000 | 343,000 | |||||
Amortization of deferred clearing credit | (157,000 | ) | (148,000 | ) | |||
Increase in fair value of contingent consideration payable | 12,000 | ||||||
Deferred tax (benefit) expense | (139,000 | ) | 620,000 | ||||
Changes in assets and liabilities, net of effects of acquisition | |||||||
Restricted cash | (135,000 | ) | (126,000 | ) | |||
Cash deposits with clearing organizations | (25,000 | ) | — | ||||
Securities owned, at fair value | (635,000 | ) | (433,000 | ) | |||
Receivables from broker-dealers and clearing organizations | (532,000 | ) | 827,000 | ||||
Forgivable loans receivable, net of repayments | (933,000 | ) | (1,001,000 | ) | |||
Other receivables, net | (264,000 | ) | (821,000 | ) | |||
Prepaid expenses | 89,000 | (345,000 | ) | ||||
Other assets, principally refundable deposits | 206,000 | 279,000 | |||||
Accounts payable, accrued expenses and other liabilities | (727,000 | ) | (1,600,000 | ) | |||
Securities sold, but not yet purchased, at fair value | (32,000 | ) | 194,000 | ||||
Net cash (used in) provided by operating activities | (1,879,000 | ) | 166,000 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Purchase of fixed assets | (470,000 | ) | (232,000 | ) | |||
Net cash used in investing activities | (470,000 | ) | (232,000 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Repurchase of shares of common stock | (86,000 | ) | — | ||||
Net cash used in financing activities | (86,000 | ) | — | ||||
NET DECREASE IN CASH | (2,435,000 | ) | (66,000 | ) | |||
CASH BALANCE | |||||||
Beginning of the period | 24,642,000 | 24,465,000 | |||||
End of the period | $ | 22,207,000 | $ | 24,399,000 | |||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 16,000 | $ | 6,000 | |||
Income taxes | $ | 76,000 | $ | 1,123,000 | |||
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES | |||||||
Identifiable intangible assets acquired | $ | — | $ | 569,000 | |||
Contingent consideration payable | $ | — | $ | 569,000 |
Balance, October 1, 2015 | $ | 1,368,000 | |
Additions | 933,000 | ||
Amortization | (493,000 | ) | |
Balance, June 30, 2016 | $ | 1,808,000 |
As of June 30, 2016 | |||||||||||||||
Securities owned at fair value | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Corporate stocks | $ | 82,000 | — | — | $ | 82,000 | |||||||||
Municipal bonds | 1,259,000 | — | — | 1,259,000 | |||||||||||
Restricted stock and warrants | — | 181,000 | — | 181,000 | |||||||||||
$ | 1,341,000 | $ | 181,000 | $ | — | $ | 1,522,000 |
As of September 30, 2015 | |||||||||||||||
Securities owned at fair value | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Corporate stocks | $ | 44,000 | — | — | $ | 44,000 | |||||||||
Municipal bonds | 638,000 | — | — | 638,000 | |||||||||||
Restricted stock and warrants | — | 205,000 | — | 205,000 | |||||||||||
$ | 682,000 | $ | 205,000 | $ | — | $ | 887,000 |
Securities sold, but not yet purchased at fair value | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Corporate stocks | $ | 32,000 | $ | — | $ | — | $ | 32,000 |
June 30, 2016 | September 30, 2015 | Estimated Useful Lives | |||||||
Equipment | $ | 755,000 | $ | 539,000 | 5 | ||||
Furniture and fixtures | 166,000 | 162,000 | 5 | ||||||
Leasehold improvements | 648,000 | 598,000 | Lesser of useful life or term of lease | ||||||
Capital leases (primarily composed of computer equipment) | 652,000 | 452,000 | 5 | ||||||
2,221,000 | 1,751,000 | ||||||||
Less accumulated depreciation and amortization | (1,384,000 | ) | (1,039,000 | ) | |||||
Fixed assets – net | $ | 837,000 | $ | 712,000 |
Intangible asset | Fair Value | Accumulated Amortization | Carrying Value | Estimated Useful Life (years) | |||||||||
Customer relationships | $ | 6,969,000 | $ | 1,845,000 | $ | 5,124,000 | 7-10 | ||||||
Non-compete | 296,000 | 296,000 | — | 2 | |||||||||
Brands | 1,654,000 | — | 1,654,000 | Indefinite | |||||||||
$ | 8,919,000 | $ | 2,141,000 | $ | 6,778,000 |
Year ending September 30, | |||
2016 | $ | 183,000 | |
2017 | 721,000 | ||
2018 | 721,000 | ||
2019 | 721,000 | ||
2020 | 721,000 | ||
Thereafter | 2,057,000 | ||
Total | $ | 5,124,000 |
June 30, 2016 | September 30, 2015 | ||||||
Legal | $ | 1,663,000 | $ | 807,000 | |||
Audit | 200,000 | 552,000 | |||||
Telecommunications | 222,000 | 201,000 | |||||
Data services | 291,000 | 384,000 | |||||
Regulatory | 433,000 | 640,000 | |||||
Settlements | 794,000 | 817,000 | |||||
Contingent consideration payable | 457,000 | 534,000 | |||||
Other | 1,877,000 | 2,667,000 | |||||
Total | $ | 5,937,000 | $ | 6,602,000 |
Three Month Period Ended June 30, | Nine Month Period Ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Basic weighted-average shares | 12,440,035 | 12,446,365 | 12,442,059 | 12,446,365 | |||||||
Effect of dilutive securities: | |||||||||||
Options | — | 8,284 | — | 18,912 | |||||||
Warrants | — | 36,521 | — | 30,198 | |||||||
Diluted weighted-average shares | 12,440,035 | 12,491,170 | 12,442,059 | 12,495,475 |
Three Month Period Ended June 30, | Nine Month Period Ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Options | 1,224,500 | 1,328,000 | 1,311,167 | 1,328,000 | |||||||
Warrants | 43,116 | 64,676 | 43,116 | 64,676 | |||||||
1,267,616 | 1,392,676 | 1,354,283 | 1,392,676 |
Fiscal Year Ending | Rental Payments | Less, Sublease Income | Net | ||||||||
2016 | $ | 950,000 | $ | 35,000 | $ | 915,000 | |||||
2017 | 2,648,000 | 84,000 | 2,564,000 | ||||||||
2018 | 1,855,000 | — | 1,855,000 | ||||||||
2019 | 1,057,000 | — | 1,057,000 | ||||||||
2020 | 885,000 | — | 885,000 | ||||||||
Thereafter | 900,000 | — | 900,000 | ||||||||
$ | 8,295,000 | $ | 119,000 | $ | 8,176,000 |
Options | Weighted Average Exercise Price Per Share | Weighted Average Grant- Date Fair Value Per Share | Weighted Average Remaining Contractual term (years) | Aggregate Intrinsic Value | ||||||||||||
Outstanding at September 30, 2015 | 1,370,000 | $ | 6.34 | $ | 1.14 | $ | — | |||||||||
Forfeited | (45,500 | ) | $ | 6.32 | $ | 1.44 | $ | — | ||||||||
Expired | (100,000 | ) | $ | 4.30 | $ | 8.90 | $ | — | ||||||||
Outstanding at June 30, 2016 | 1,224,500 | $ | 6.51 | $ | 1.23 | 3.57 | $ | — | ||||||||
Vested and exercisable at June 30, 2016 | 1,162,500 | $ | 6.56 | $ | 1.18 | 3.40 | $ | — |
Brokerage and Advisory Services | Tax and Accounting Services | Corporate | Total | ||||||||||||
Three Months Ended June 30, | |||||||||||||||
2016 | |||||||||||||||
Revenues | $ | 43,956,000 | $ | 2,386,000 | $ | — | $ | 46,342,000 | |||||||
Pre-tax income (loss) | 1,741,000 | 198,000 | (2,224,000 | ) | (a) | (285,000 | ) | ||||||||
Assets | 40,798,000 | 3,006,000 | 18,469,000 | (b) | 62,273,000 | ||||||||||
Depreciation and amortization | 185,000 | 44,000 | 73,000 | 302,000 | |||||||||||
Interest | — | — | 13,000 | 13,000 | |||||||||||
Capital expenditures | 48,000 | — | 155,000 | 203,000 | |||||||||||
2015 | |||||||||||||||
Revenues | $ | 39,577,000 | $ | 2,758,000 | $ | — | $ | 42,335,000 | |||||||
Pre-tax income (loss) | 916,000 | 837,000 | (1,396,000 | ) | (a) | 357,000 | |||||||||
Assets | 43,077,000 | 3,946,000 | 18,038,000 | (b) | 65,061,000 | ||||||||||
Depreciation and amortization | 202,000 | 22,000 | 70,000 | 294,000 | |||||||||||
Interest | 1,000 | — | 5,000 | 6,000 | |||||||||||
Capital expenditures | — | 15,000 | 6,000 | 21,000 |
Brokerage and Advisory Services | Tax and Accounting Services | Corporate | Total | ||||||||||||
Nine Months Ended June 30, | |||||||||||||||
2016 | |||||||||||||||
Revenues | $ | 120,775,000 | $ | 7,222,000 | $ | — | $ | 127,997,000 | |||||||
Pre-tax income (loss) | 3,173,000 | 399,000 | (3,885,000 | ) | (a) | (313,000 | ) | ||||||||
Assets | 40,798,000 | 3,006,000 | 18,469,000 | (b) | 62,273,000 | ||||||||||
Depreciation and amortization | 569,000 | 132,000 | 197,000 | 898,000 | |||||||||||
Interest | 1,000 | — | 15,000 | 16,000 | |||||||||||
Capital expenditures | 53,000 | 28,000 | 389,000 | 470,000 | |||||||||||
2015 | |||||||||||||||
Revenues | $ | 119,166,000 | $ | 7,285,000 | $ | — | $ | 126,451,000 | |||||||
Pre-tax income (loss) | 3,153,000 | 1,409,000 | (3,153,000 | ) | (a) | 1,409,000 | |||||||||
Assets | 43,077,000 | 3,946,000 | 18,038,000 | (b) | 65,061,000 | ||||||||||
Depreciation and amortization | 522,000 | 41,000 | 299,000 | 862,000 | |||||||||||
Interest | 7,000 | 1,000 | 4,000 | 12,000 | |||||||||||
Capital expenditures | 199,000 | 27,000 | 6,000 | 232,000 |
(a) | Consists of operating expenses not allocated to reportable segments. |
(b) | Consists principally of deferred tax asset. |
Three Months Ended June 30, | Increase (Decrease) | |||||||||||||
2016 | 2015 | Amount | Percent | |||||||||||
Commissions | $ | 25,051,000 | $ | 24,272,000 | $ | 779,000 | 3 | % | ||||||
Net dealer inventory gains | 2,340,000 | 2,418,000 | (78,000 | ) | (3 | ) | ||||||||
Investment banking | 10,735,000 | 6,356,000 | 4,379,000 | 69 | ||||||||||
Investment advisory | 3,361,000 | 3,797,000 | (436,000 | ) | (11 | ) | ||||||||
Interest and dividends | 702,000 | 946,000 | (244,000 | ) | (26 | ) | ||||||||
Transaction fees and clearing services | 1,591,000 | 1,735,000 | (144,000 | ) | (8 | ) | ||||||||
Tax preparation and accounting | 2,386,000 | 2,724,000 | (338,000 | ) | (12 | ) | ||||||||
Other | 176,000 | 87,000 | 89,000 | 102 | ||||||||||
Total Revenues | $ | 46,342,000 | $ | 42,335,000 | $ | 4,007,000 | 9 | % |
Three Months Ended June 30, | Increase (Decrease) | |||||||||||||
2016 | 2015 | Amount | Percent | |||||||||||
Commissions, compensation and fees | $ | 39,667,000 | $ | 35,831,000 | $ | 3,836,000 | 11 | % | ||||||
Clearing fees | 509,000 | 681,000 | (172,000 | ) | (25 | ) | ||||||||
Communications | 786,000 | 927,000 | (141,000 | ) | (15 | ) | ||||||||
Occupancy | 982,000 | 999,000 | (17,000 | ) | (2 | ) | ||||||||
License and registration | 417,000 | 335,000 | 82,000 | 24 | ||||||||||
Professional fees | 2,327,000 | 1,720,000 | 607,000 | 35 | ||||||||||
Interest | 13,000 | 6,000 | 7,000 | 117 | ||||||||||
Depreciation and amortization | 302,000 | 294,000 | 8,000 | 3 | ||||||||||
Other administrative expenses | 1,624,000 | 1,185,000 | 439,000 | 37 | ||||||||||
Total Operating Expenses | $ | 46,627,000 | $ | 41,978,000 | $ | 4,649,000 | 11 | % |
Nine Months Ended June 30, | Increase (Decrease) | |||||||||||||
2016 | 2015 | Amount | Percent | |||||||||||
Commissions | $ | 71,722,000 | $ | 74,434,000 | $ | (2,712,000 | ) | (4 | )% | |||||
Net dealer inventory gains | 7,483,000 | 8,562,000 | (1,079,000 | ) | (13 | ) | ||||||||
Investment banking | 22,921,000 | 15,869,000 | 7,052,000 | 44 | ||||||||||
Investment advisory | 10,337,000 | 11,149,000 | (812,000 | ) | (7 | ) | ||||||||
Interest and dividends | 2,415,000 | 2,624,000 | (209,000 | ) | (8 | ) | ||||||||
Transaction fees and clearing services | 5,512,000 | 6,302,000 | (790,000 | ) | (13 | ) | ||||||||
Tax preparation and accounting | 7,222,000 | 7,231,000 | (9,000 | ) | — | |||||||||
Other | 385,000 | 280,000 | 105,000 | 38 | ||||||||||
Total Revenues | $ | 127,997,000 | $ | 126,451,000 | $ | 1,546,000 | 1 | % |
Nine Months Ended June 30, | Increase (Decrease) | |||||||||||||
2016 | 2015 | Amount | Percent | |||||||||||
Commissions, compensation and fees | $ | 110,260,000 | $ | 107,228,000 | $ | 3,032,000 | 3 | % | ||||||
Clearing fees | 1,798,000 | 2,209,000 | (411,000 | ) | (19 | ) | ||||||||
Communications | 2,427,000 | 2,891,000 | (464,000 | ) | (16 | ) | ||||||||
Occupancy | 2,886,000 | 2,977,000 | (91,000 | ) | (3 | ) | ||||||||
License and registration | 1,155,000 | 1,025,000 | 130,000 | 13 | ||||||||||
Professional fees | 4,897,000 | 3,727,000 | 1,170,000 | 31 | ||||||||||
Interest | 16,000 | 12,000 | 4,000 | 33 | ||||||||||
Depreciation and amortization | 898,000 | 862,000 | 36,000 | 4 | ||||||||||
Other administrative expenses | 3,973,000 | 4,111,000 | (138,000 | ) | (3 | ) | ||||||||
Total Operating Expenses | $ | 128,310,000 | $ | 125,042,000 | $ | 3,268,000 | 3 | % |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net (loss) income , as reported | $ | (161,000 | ) | $ | 149,000 | $ | (244,000 | ) | $ | 783,000 | |||||
Interest expense | 13,000 | 6,000 | 16,000 | 12,000 | |||||||||||
Income taxes | (124,000 | ) | 208,000 | (69,000 | ) | 626,000 | |||||||||
Depreciation | 122,000 | 79,000 | 345,000 | 238,000 | |||||||||||
Amortization | 180,000 | 215,000 | 553,000 | 624,000 | |||||||||||
EBITDA | 30,000 | 657,000 | 601,000 | 2,283,000 | |||||||||||
Non-cash compensation expense | 26,000 | 218,000 | 125,000 | 470,000 | |||||||||||
Forgivable loan amortization | 169,000 | 113,000 | 493,000 | 262,000 | |||||||||||
EBITDA, as adjusted | $ | 225,000 | $ | 988,000 | $ | 1,219,000 | $ | 3,015,000 |
Ending Balance at June 30, | Average Balance during first nine months of | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash | $ | 22,207,000 | $ | 24,399,000 | $ | 22,964,000 | $ | 23,648,000 | |||||||
Receivables from broker-dealers and clearing organizations | 3,610,000 | 4,158,000 | 3,246,000 | 4,046,000 | |||||||||||
Securities owned | 1,522,000 | 1,494,000 | 907,000 | 1,223,000 | |||||||||||
Accrued commissions and payroll payable, accounts payable and accrued expenses | 15,963,000 | 18,070,000 | 16,158,000 | 17,527,000 |
Nine months ended June 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities | |||||||
Net (loss) income | $ | (244,000 | ) | $ | 783,000 | ||
Non-cash adjustments | |||||||
Depreciation and amortization | 898,000 | 862,000 | |||||
Stock based compensation | 125,000 | 470,000 | |||||
Deferred tax (benefit) expense | (139,000 | ) | 620,000 | ||||
Other | 469,000 | 457,000 | |||||
Changes in assets and liabilities | |||||||
Receivables from clearing organizations, broker-dealers and others | (1,754,000 | ) | (995,000 | ) | |||
Accounts payable and accrued expenses and other liabilities | (727,000 | ) | (1,600,000 | ) | |||
Prepaid expenses | 89,000 | (345,000 | ) | ||||
Other | (596,000 | ) | (86,000 | ) | |||
Net cash (used in) provided by operating activities | (1,879,000 | ) | 166,000 | ||||
Cash flows from investing and financing activities | |||||||
Purchase of fixed assets | (470,000 | ) | (232,000 | ) | |||
Repurchase of shares of common stock | (86,000 | ) | — | ||||
Net cash used in investing and financing activities | (556,000 | ) | (232,000 | ) | |||
Net decrease in cash | $ | (2,435,000 | ) | $ | (66,000 | ) |
Securities owned | Securities sold, but not yet purchased | ||||||
Corporate stocks | $ | 82,000 | $ | — | |||
Municipal bonds | 1,259,000 | — | |||||
Restricted stock and warrants | 181,000 | — | |||||
Total | $ | 1,522,000 | $ | — |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Be Purchased Under the Plans or Programs | ||||||
April 1, 2016 - April 30, 2016 | — | — | 80,576 | $1,769,000 | ||||||
May 1, 2016 - May 31, 2016 | — | — | 80,576 | $1,769,000 | ||||||
June 1, 2016 - June 31, 2016 | — | — | 80,576 | $1,769,000 | ||||||
Total | — | — | 80,576 | $1,769,000 |
31.1 | Principal Executive Officer’s Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Principal Financial Officer’s Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Principal Executive Officer’s Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 | Principal Financial Officer’s Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS** | XBRL Instance |
101.SCH** | XBRL Taxonomy Extension Schema |
101.CAL** | XBRL Taxonomy Extension Calculation |
101.DEF** | XBRL Taxonomy Extension Definition |
101.LAB** | XBRL Taxonomy Extension Labels |
101.PRE** | XBRL Taxonomy Extension Presentation |
** XBRL | information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
August 15, 2016 | By: | /s/ Robert B. Fagenson | |
Robert B. Fagenson | |||
Executive Chairman of the Board and Chief Executive Officer | |||
August 15, 2016 | By: | /s/ Alan B. Levin | |
Alan B. Levin | |||
Chief Financial Officer |
1. | I have reviewed this quarterly report on Form 10-Q of National Holdings Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Robert B. Fagenson | ||
Robert B. Fagenson, Chief Executive Officer (Principal Executive Officer) | ||
August 15, 2016 |
1. | I have reviewed this quarterly report on Form 10-Q of National Holdings Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Glenn C. Worman | ||
Glenn C. Worman, Executive Vice President - Finance (Principal Financial Officer) | ||
August 15, 2016 |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Robert B. Fagenson | ||
Robert B. Fagenson | ||
Chief Executive Officer (Principal Executive Officer) | ||
August 15, 2016 |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Glenn C. Worman | ||
Glenn C. Worman, Executive Vice President - Finance (Principal Financial Officer) | ||
August 15, 2016 |
Document And Entity Information - shares |
9 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Aug. 15, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | NATIONAL HOLDINGS CORP | |
Trading Symbol | NHLD | |
Entity Central Index Key | 0001023844 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Smaller Reporting Company | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 12,440,035 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes |
Condensed Consolidated Statements of Financial Condition (Current Period Unaudited) (Parentheticals) - $ / shares |
Jun. 30, 2016 |
Sep. 30, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.02 | $ 0.02 |
Common stock, shares authorized (in shares) | 150,000,000 | 150,000,000 |
Common stock, shares issued (in shares) | 12,440,035 | 12,473,968 |
Common stock, shares outstanding (in shares) | 12,440,035 | 12,473,968 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Revenues | ||||
Commissions | $ 25,051,000 | $ 24,272,000 | $ 71,722,000 | $ 74,434,000 |
Net dealer inventory gains | 2,340,000 | 2,418,000 | 7,483,000 | 8,562,000 |
Investment banking | 10,735,000 | 6,356,000 | 22,921,000 | 15,869,000 |
Investment advisory | 3,361,000 | 3,797,000 | 10,337,000 | 11,149,000 |
Interest and dividends | 702,000 | 946,000 | 2,415,000 | 2,624,000 |
Transaction fees and clearing services | 1,591,000 | 1,735,000 | 5,512,000 | 6,302,000 |
Tax preparation and accounting | 2,386,000 | 2,724,000 | 7,222,000 | 7,231,000 |
Other | 176,000 | 87,000 | 385,000 | 280,000 |
Total Revenues | 46,342,000 | 42,335,000 | 127,997,000 | 126,451,000 |
Operating Expenses | ||||
Commissions, compensation and fees | 39,667,000 | 35,831,000 | 110,260,000 | 107,228,000 |
Clearing fees | 509,000 | 681,000 | 1,798,000 | 2,209,000 |
Communications | 786,000 | 927,000 | 2,427,000 | 2,891,000 |
Occupancy | 982,000 | 999,000 | 2,886,000 | 2,977,000 |
License and registration | 417,000 | 335,000 | 1,155,000 | 1,025,000 |
Professional fees | 2,327,000 | 1,720,000 | 4,897,000 | 3,727,000 |
Interest | 13,000 | 6,000 | 16,000 | 12,000 |
Depreciation and amortization | 302,000 | 294,000 | 898,000 | 862,000 |
Other administrative expenses | 1,624,000 | 1,185,000 | 3,973,000 | 4,111,000 |
Total Operating Expenses | 46,627,000 | 41,978,000 | 128,310,000 | 125,042,000 |
(Loss) income before income tax expense | (285,000) | 357,000 | (313,000) | 1,409,000 |
Income tax (benefit) expense | (124,000) | 208,000 | (69,000) | 626,000 |
Net (loss) income | $ (161,000) | $ 149,000 | $ (244,000) | $ 783,000 |
Net (loss) income per share - Basic (in dollars per share) | $ (0.01) | $ 0.01 | $ (0.02) | $ 0.06 |
Net (loss) income per share - Diluted (in dollars per share) | $ (0.01) | $ 0.01 | $ (0.02) | $ 0.06 |
Weighted number of shares outstanding - Basic (in shares) | 12,440,035 | 12,446,365 | 12,442,059 | 12,446,365 |
Weighted number of shares outstanding - Diluted (in shares) | 12,440,035 | 12,491,170 | 12,442,059 | 12,495,475 |
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - 9 months ended Jun. 30, 2016 - USD ($) $ in Thousands |
Total |
Common Stock |
Additional Paid-in- Capital |
Accumulated Deficit |
Non-Controlling Interest |
---|---|---|---|---|---|
Balance (in shares) at Sep. 30, 2015 | 12,473,968 | ||||
Balance at Sep. 30, 2015 | $ 45,262 | $ 249 | $ 80,282 | $ (35,284) | $ 15 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation – stock options | 125 | 125 | |||
Stock repurchase (in shares) | (33,933) | ||||
Stock repurchase | (86) | (86) | |||
Net loss | (244) | (244) | |||
Balance (in shares) at Jun. 30, 2016 | 12,440,035 | ||||
Balance at Jun. 30, 2016 | $ 45,057 | $ 249 | $ 80,321 | $ (35,528) | $ 15 |
BASIS OF PRESENTATION |
9 Months Ended |
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Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying condensed consolidated financial statements of the Company, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated financial statements as of June 30, 2016 and for the three and nine months ended June 30, 2016 and 2015 are unaudited. The results of operations for the interim periods are not necessarily indicative of the results of operations for the respective fiscal years. The consolidated statement of financial condition at September 30, 2015 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statement presentation. The accompanying consolidated financial information should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015 for additional disclosures and accounting policies. In February 2015, the board of directors declared a 1 for 10 reverse stock split of the Company’s common stock. All share and per share information has been restated for the nine months ended June 30, 2015, giving retroactive effect to the reverse stock split. Certain items in the consolidated statement of operations for the fiscal 2015 periods have been reclassified to conform to the presentation in the fiscal 2016 periods. Such reclassifications did not have a material impact on the presentation of the overall financial statements. |
ORGANIZATION AND DESCRIPTION OF BUSINESS |
9 Months Ended |
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Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | ORGANIZATION AND DESCRIPTION OF BUSINESS National was organized in 1996 and operates through its wholly-owned subsidiaries which principally provide diverse financial services. Through its broker-dealer and investment advisory subsidiaries, the Company (1) offers full service retail brokerage to retail individual and institutional clients, (2) provides investment banking, merger, acquisition and advisory services to micro, small and mid-cap high growth companies, (3) engages in trading securities, including making markets in micro and small-cap, NASDAQ and other exchange listed stocks and (4) provides liquidity in the United States Treasury marketplace. Broker-dealer subsidiaries consist of National Securities Corporation (“National Securities” or “NSC”) and vFinance Investments, Inc. (“vFinance Investments”) (collectively, the “Broker-Dealer Subsidiaries”). The Broker-Dealer Subsidiaries conduct a national securities brokerage business through their main offices in New York City, Boca Raton, Florida, and Seattle, Washington. The Broker-Dealer subsidiaries are introducing brokers and clear all transactions through clearing organizations, on a fully disclosed basis. The Broker-Dealer Subsidiaries are registered with the Securities and Exchange Commission ("SEC") and the Commodities and Futures Trading Commission, and are members of the Financial Industry Regulatory Authority ("FINRA"), the Securities Investor Protection Corporation and the National Futures Association. The Company’s wholly-owned subsidiary, National Asset Management, Inc., a Washington corporation ("NAM"), is a federally-registered investment adviser providing asset management advisory services to retail clients for a fee based upon a percentage of assets managed. The Company’s wholly-owned subsidiary, National Insurance Corporation, a Washington corporation ("National Insurance"), provides fixed insurance products to its clients, including life insurance, disability insurance, long term care insurance and fixed annuities. The Company’s wholly-owned subsidiary, Gilman Ciocia, Inc., a Delaware corporation ("Gilman"), provides tax preparation services to individuals and accounting services to small and midsize companies. The Company’s wholly-owned subsidiary, GC Capital Corporation, a Delaware corporation ("GC"), provides licensed residential mortgage brokerage services in the State of Florida. |
RECEIVEABLES FROM BROKER-DEALERS AND CLEARING ORGANIZATIONS AND OTHER RECEIVABLES |
9 Months Ended |
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Jun. 30, 2016 | |
Brokers and Dealers [Abstract] | |
RECEIVEABLES FROM BROKER-DEALERS AND CLEARING ORGANIZATIONS AND OTHER RECEIVABLES | RECEIVABLES FROM BROKER-DEALERS AND CLEARING ORGANIZATIONS AND OTHER RECEIVABLES At June 30, 2016 and September 30, 2015, the receivables of $3,610,000 and $3,078,000, respectively, from broker-dealers and clearing organizations represent net amounts due for fees and commissions associated with the Company’s retail brokerage business as well as asset based fee revenues associated with the Company’s Investment advisory business. Other receivables, net, at June 30, 2016 and September 30, 2015 of $3,852,000 and $3,709,000, respectively, principally represent trailing fees and fees for tax and accounting services and are net of allowance for doubtful accounts of $646,000 and $573,000, respectively. |
FORGIVABLE LOANS RECEIVABLE |
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Jun. 30, 2016 | |||||||||||||||||||||||||
Investments in and Advances to Affiliates, Schedule of Investments [Abstract] | |||||||||||||||||||||||||
FORGIVABLE LOANS RECEIVABLE | FORGIVABLE LOANS RECEIVABLE From time to time, the Company's operating subsidiaries may make loans, evidenced by promissory notes, primarily to newly recruited independent financial advisors as an incentive for their affiliation. The notes receivable balance is comprised of unsecured non-interest-bearing and interest-bearing loans (interest rates ranging up to 9%). These notes have various schedules for repayment or forgiveness based on production or retention requirements being met and mature at various dates through 2020. Forgiveness of loans amounted to $493,000 and $262,000 for the nine months ended June 30, 2016 and 2015, respectively, and the related compensation was included in commissions, compensation and fees in the condensed consolidated statements of operations. In the event the advisor’s affiliation with the subsidiary terminates, the advisor is required to repay the unamortized balance of any notes payable. The Company provides an allowance for doubtful accounts on the notes based on historical collection experience and continually evaluates the receivables for collectability and possible write-offs where a loss is deemed probable. As of June 30, 2016 and September 30, 2015, no allowance for doubtful accounts was required. Forgivable loan activity for the nine months ended June 30, 2016 is as follows:
There were no unamortized loans outstanding attributable to registered representatives who ended their affiliation with the Broker-Dealer Subsidiaries prior to the fulfillment of their obligation. |
SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET PURCHASED AT FAIR VALUE |
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Schedule of Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET PURCHASED AT FAIR VALUE | SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET PURCHASED AT FAIR VALUE Classification of securities are as follows: Fair Value Measurements
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FIXED ASSETS |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FIXED ASSETS | FIXED ASSETS Fixed assets as of June 30, 2016 and September 30, 2015 consist of the following:
Depreciation and amortization expense associated with fixed assets for the nine months ended June 30, 2016 and 2015 was $345,000 and $238,000, respectively. |
INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS | INTANGIBLE ASSETS 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 accrued expenses) 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 acquisition 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. During the three and nine months ended June 30, 2016, the estimated fair value of the liability was increased by $4,000 and $12,000, respectively, which was included in other administrative expenses and decreased by payments to the seller during the three and nine months ended June 30, 2016 of $44,000 and $89,000, respectively . The fair value of the acquired assets was allocated to customer relationships, which is being amortized over seven years. The following table presents the carrying amounts of intangible assets as of June 30, 2016, principally acquired in the Company's acquisition of Gilman in October 2013, and their estimated useful lives:
Amortization expense associated with intangible assets for the nine months ended June 30, 2016 and 2015 was $553,000 and $624,000, respectively. The estimated future amortization expense of the above intangible assets for the next five fiscal years and thereafter is as follows:
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ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTS PAYABLE AND OTHER LIABILITIES | ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses as of June 30, 2016 and September 30, 2015 consist of the following:
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PER SHARE DATA |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PER SHARE DATA | PER SHARE DATA Basic net income (loss) per share of common stock attributable to the Company is computed on the basis of the weighted average number of shares of common stock outstanding. Diluted net income (loss) per share is computed on the basis of such weighted average number of shares of common stock outstanding plus the dilutive effect of incremental shares of common stock potentially issuable under outstanding options, warrants and unvested restricted stock units utilizing the treasury stock method. A reconciliation of basic and diluted common shares used in the computation of per share data follows:
The following potential common share equivalents are not included in the above diluted computation because to do so would be anti-dilutive:
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OFF BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK |
9 Months Ended |
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Jun. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
OFF BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK | OFF BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK The Company through its subsidiaries is engaged in trading and providing a broad range of securities brokerage and investment services to a diverse group of retail and institutional clientele, as well as corporate finance and investment banking services to corporations and businesses. Counterparties to the Company’s business activities include broker-dealers and clearing organizations, banks and other financial institutions. The Clearing brokers are used to process transactions and maintain customer accounts on a fee basis for the Company. Clearing firms extend credit to the Company's clientele secured by cash and securities in the client’s account. The Company’s exposure to credit risk associated with the non-performance by its customers and counterparties in fulfilling their contractual obligations can be directly impacted by volatile or illiquid trading markets, which may impair the ability of customers and counterparties to satisfy their obligations to the Company. The Company has agreed to indemnify the clearing brokers for losses they incur while extending credit to the Company’s clients. It is the Company’s policy to review, periodically and as necessary, the credit standing of its customers and counterparties. Amounts due from customers that are considered uncollectible by the clearing broker are charged back to the Company by the clearing broker when such amounts become determinable. Upon notification of a charge back, such amounts, in total or in part, are then either (i) collected from the customers, (ii) charged to the broker initiating the transaction, and/or (iii) charged to operations, based on the particular facts and circumstances. The Company maintains cash in bank deposits, which, at times, may exceed federally insured limits. In the event of a financial institution’s insolvency, the recovery of cash may be limited. The Company has not experienced and does not expect to experience losses on such accounts. A short sale involves the sale of a security that is not owned in the expectation of purchasing the same security (or a security exchangeable into the same security) at a later date at a lower price. A short sale involves the risk of a theoretically unlimited increase in the market price of the security that would result in a theoretically unlimited loss. |
NEW ACCOUNTING GUIDANCE |
9 Months Ended |
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Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
NEW ACCOUNTING GUIDANCE | NEW ACCOUNTING GUIDANCE In July 2013, the Financial Accounting Standards Board ("FASB") issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The update requires the netting of unrecognized tax benefits against a deferred tax asset for the loss or other carryforward that would apply in settlement of the uncertain tax positions. The new guidance was effective for the Company beginning October 1, 2014. The adoption did not have any impact on the Company’s financial statements. In April 2014, the FASB issued ASU 2014-8, which changes the requirement for reporting discontinued operations. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on an entity's operations and financial results. ASU 2014-08, which is to be applied prospectively to all new disposals of components and new classifications as held for sale, will become effective in annual periods beginning on or after December 15, 2014 and interim periods within those annual periods with early adoption allowed. The Company adopted ASU 2014-08 on October 1, 2015 which did not have any impact on its financial statements. In May 2014, the FASB issued an accounting standard update on revenue recognition. The new guidance creates a single, principle-based model for revenue recognition and expands and improves disclosures about revenue. The new guidance is effective for the Company beginning October 1, 2018, and must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. The Company is currently evaluating the potential impact of this standard on its financial statements. In June 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation (Topic 718), which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 will become effective for the Company beginning after October 1, 2016 and early adoption is permitted. The Company does not anticipate that the adoption of ASU 2014-12 will have a material impact on its financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for the Company beginning October 1, 2019 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is currently assessing the impact that the adoption of ASU 2016-02 will have on its financial statements. |
COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Leases The Company leases office space in various states expiring at various dates through April 2025, and as of June 30, 2016, is committed under operating leases for future minimum lease payments as follows:
The total amount of rent payable under the leases is recognized on a straight line basis over the term of the leases. Rental expense under all operating leases, excluding sublease income, for the nine months ended June 30, 2016 and June 30, 2015 was $2,880,000 and $2,973,000, respectively. Sublease income under all operating subleases for the nine months ended June 30, 2016 and 2015 was approximately $106,000 and $204,000, respectively. As of June 30, 2016, the Company and its subsidiaries had three outstanding letters of credit, which have been issued in the maximum amount of $353,000 as security for property leases, and which are collateralized by the restricted cash as reflected in the statements of financial condition. Litigation and Regulatory Matters The Company and its subsidiaries are defendants or respondents in various pending and threatened arbitrations, administrative proceedings and lawsuits seeking compensatory damages. Several cases have no stated alleged damages. Claim amounts are infrequently indicative of the actual amounts the Company will be liable for, if any. Further, the Company has a history of collecting amounts awarded in these types of matters from its registered representatives that are still affiliated, as well as from those that are no longer affiliated. Many of these claimants also seek, in addition to compensatory damages, punitive or treble damages, and all seek interest, costs and fees. These matters arise in the normal course of business. The Company intends to vigorously defend itself in these actions, and the ultimate outcome of these matters cannot be determined at this time. Liabilities for potential losses from complaints, legal actions, government investigations and proceedings are established where the Company believes that it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In making these decisions, management bases its judgments on its knowledge of the situations, consultations with legal counsel and its historical experience in resolving similar matters. In many lawsuits, arbitrations and regulatory proceedings, it is not possible to determine whether a liability has been incurred or to estimate the amount of that liability until the matter is close to resolution. However, accruals are reviewed regularly and are adjusted to reflect the Company’s estimates of the impact of developments, rulings, advice of counsel and any other information pertinent to a particular matter. Because of the inherent difficulty in predicting the ultimate outcome of legal and regulatory actions, management cannot predict with certainty the eventual loss or range of loss related to such matters. At June 30, 2016 and September 30, 2015, the Company accrued approximately $794,000 and $817,000, respectively. These amounts are included in accounts payable and other liabilities in the statement of financial condition. The Company has included in "Professional fees" litigation and FINRA related expenses of $584,000 and $566,000 for the three months ended June 30, 2016 and 2015, respectively, and $1,734,000 and $1,466,000 for the nine months ended June 30, 2016 and 2015, respectively. |
NET CAPITAL REQUIREMENTS |
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Jun. 30, 2016 | |
Disclosure Text Block [Abstract] | |
NET CAPITAL REQUIREMENTS | NET CAPITAL REQUIREMENTS National Securities is subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1) (the "Rule"), which, among other things, requires the maintenance of minimum net capital. At June 30, 2016, National Securities had net capital of $6,655,429 which was $6,405,429 in excess of its required net capital of $250,000. National Securities is exempt from the provisions of the SEC's Rule 15c3-3 since it is an introducing broker-dealer that clears all transactions on a fully disclosed basis and promptly transmits all customer funds and securities to clearing brokers. vFinance Investments is also subject to the Rule, which, among other things, requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. At June 30, 2016, vFinance Investments had net capital of $2,335,245 which was $1,335,245 in excess of its required net capital of $1,000,000. vFinance Investments ratio of aggregate indebtedness to net capital was 2.11 to 1. vFinance Investments is exempt from the provisions of the SEC's Rule 15c3-3 since it is an introducing broker-dealer that clears all transactions on a fully disclosed basis and promptly transmits all customer funds and securities to clearing brokers. Advances, dividend payments and other equity withdrawals from its Broker-Dealer Subsidiaries are restricted by the regulations of the SEC, and other regulatory agencies. These regulatory restrictions may limit the amounts that a subsidiary may dividend or advance to the Company. |
STOCK BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK BASED COMPENSATION | STOCK BASED COMPENSATION Stock Options Information with respect to stock option activity during the nine months ended June 30, 2016 follows:
During the nine months ended June 30, 2016 and 2015, the Company recognized compensation expense of $125,000 and $470,000, respectively, related to stock options (and restricted stock units in 2015) and as of June 30, 2016, had approximately $76,000 of unamortized compensation costs related to non-vested options, which will be recognized by 2017. Warrants As of June 30, 2016, there are 43,116 vested warrants outstanding to purchase common stock at an exercise price of $5.00 per share of which 20,087 expired in July 2016, 20,087 expire in July 2017 and 1,471 expire in each of October 2016 and 2017. The Company had previously reported at September 30, 2015 that such warrants had expired. |
SHARE REPURCHASE |
9 Months Ended |
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Jun. 30, 2016 | |
Share Repurchase Agreements [Abstract] | |
SHARE REPURCHASE | SHARE REPURCHASE In August 2015, the Company’s Board of Directors authorized the repurchase of up to $2 million of the Company’s common stock. Share repurchases, if any, will be made using a variety of methods, which may include open market purchases, privately negotiated transactions or block trades, or any combination of such methods, in accordance with applicable insider trading and other securities laws and regulations. The Company's Board did not stipulate an expiration date for this repurchase and the purchase decisions are at the discretion of the Company's management. During the three months ended June 30, 2016, the Company did not repurchase any shares. During the nine months ended June 30, 2016, the Company repurchased 33,933 common shares at a cost of approximately $86,000. Since inception, the Company has repurchased 80,576 shares at a total cost of approximately $231,000. Such shares have been retired. |
INCOME TAXES |
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Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company files a consolidated federal income tax return and certain combined state and local income tax returns with its subsidiaries. Income tax expense for the three and nine-month periods ended June 30, 2016 is based on the estimated annual effective tax rate. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. The effective tax rate for the nine month period ended June 30, 2016 differs from the federal statutory income tax rate principally due to non-deductible expenses and state and local income taxes. At June 30, 2016, the Company had a net deferred tax asset of $11,801,000, principally comprised of net operating loss carryforwards. Management believes that is more likely than not that its deferred tax assets will be realized and, accordingly, has not provided a valuation allowance against such amount. |
SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION The Company has two reportable segments. The brokerage and advisory services segment includes broker-dealer and investment advisory services, the sale of insurance products and licensed mortgage brokerage services provided by the Broker-Dealer Subsidiaries, NAM, National Insurance, Prime Financial and GC. The tax and accounting services segment includes tax preparation and accounting services provided by Gilman. The Corporate pre-tax loss consists of certain expenses that have not been allocated to reportable segments. Segment information for the three and nine months ended June 30, 2016 and 2015 is as follows:
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AGREEMENT AND PLAN OF MERGER |
9 Months Ended |
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Jun. 30, 2016 | |
Business Combinations [Abstract] | |
Agreement and Plan of Merger | AGREEMENT AND PLAN OF MERGER Merger Agreement; Tender Offer On April 27, 2016, the Company, Fortress Biotech, Inc. (“Fortress”), and FBIO Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of Fortress (“Acquisition Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) providing for the acquisition of the Company by Acquisition Sub. As per the merger agreement, Fortress agreed to cause Acquisition Sub to commence a tender offer (the “Offer”) as promptly as practicable and in no event later than 30 days after the date the Financial Industry Regulatory Authority (“FINRA”) declares the application required under NASD Rule 1017 regarding the potential change of control of the broker-dealer subsidiaries of the Company as substantially complete, for all of the issued and outstanding shares of the Company’s common stock, par value $0.02 per share (the “Shares”), at a purchase price of $3.25 per Share in cash, net to the seller in cash but subject to any required withholding of taxes (the “Offer Price”). The Company’s board of directors has approved the Merger Agreement and is remaining neutral and making no recommendation to the Company stockholders as to whether to accept the Offer and tender their Shares pursuant to the Offer. The obligation of Fortress and Acquisition Sub to consummate the Offer is subject to a number of conditions, including (i) no denial by FINRA of the application regarding the potential change of control of the broker-dealer subsidiaries of the Company or no imposition by FINRA of any material restrictions or limitations on the broker-dealer subsidiaries of the Company as a result of the transactions contemplated by the Merger Agreement; (ii) the absence of a material adverse effect with respect to the Company; and (iii) certain other customary conditions. The consummation of the Offer is not subject to any financing condition or any condition regarding any minimum number of Shares being validly tendered in the Offer. Following the completion of the Offer and subject to the terms and conditions of the Merger Agreement,including the condition that there shall have been, as of the expiration of the Offer, or the subsequent offering period, if applicable, validly tendered and not withdrawn in accordance with the terms of the Offer, a number of Shares that, together with the Shares then owned by Fortress and its controlled affiliates, representing at least 80% of all then-outstanding Shares (the “Merger Condition”), Acquisition Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Fortress (the “Merger”), pursuant to the procedure provided for under Section 251(h) of the Delaware General Corporation Law (the “DGCL”) without any additional stockholder approvals. If the Merger Condition is satisfied, the Merger will be effected as promptly as practicable following the purchase by Acquisition Sub of Shares validly tendered and not withdrawn in the Offer. At the effective time of the Merger, if any, each Share outstanding immediately prior to the effective time of the Merger (excluding those Shares that are held by (i) Fortress, Acquisition Sub or any other direct or indirect wholly owned subsidiary of Fortress, (ii) the Company or any direct or indirect wholly owned subsidiary of the Company, and (iii) stockholders of the Company who properly exercised their dissenters’ rights under the DGCL) will have the right to receive the Offer Price. The Company and Fortress have made customary representations, warranties and covenants in the Merger Agreement, including covenants (i) to promptly effect all registrations, filings and submissions required pursuant to any required governmental approvals, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other applicable laws with respect to the Offer and the Merger; and (ii) to use their reasonable best efforts to take all appropriate action to consummate and effectuate the Offer, the Merger (if applicable) and the other transactions contemplated by the Merger Agreement. The Company would be responsible for a termination fee of $1,820,281 and Fortress would be responsible for a termination fee of $4,375,000 if the Merger Agreement is terminated under certain circumstances as indicated in the Merger Agreement. The Company and Fortress would also be responsible to reimburse the other party for certain transaction expenses up to a maximum of $750,000 if the Merger Agreement is terminated under certain circumstances as indicated in the Merger Agreement. Pursuant to the Merger Agreement, in the event the Merger Condition is not satisfied, the Company will remain a publicly-traded company. In such event, the Company’s stockholders, post-tender offer, will receive from the Company a five year warrant per held Share to purchase an additional Share at a purchase price of $3.25 per Share. The Company will distribute the warrants to its stockholders of record as of a date not later than 90 days following the closing of the Offer. The Company’s stockholders who do not tender their Shares pursuant to the Offer and remain stockholders of record as of such date will receive warrants. The warrants will be issued under a warrant agreement, substantially in the form attached as Exhibit A to the Merger Agreement. If, upon closing of the Offer, the Merger Condition is not satisfied, the size of the board of directors of the Company will be reduced from eleven directors to seven directors, all of the members of the board of directors of the Company will resign except for Messrs. Fagenson and Goldwasser, each a current member of the board of directors of the Company, and Fortress will be entitled to appoint five members to the board of directors of the Company. If the Merger Condition is satisfied, then (x) upon the closing of the Offer, (i) the size of the board of directors of the Company will be reduced from eleven directors to five directors, (ii) all of the members of the board of directors of the Company will resign, except for Messrs. Fagenson and Goldwasser, and (iii) Fortress will be entitled to appoint three members to the board of directors of the Company and (y) upon closing of the Merger, (i) Messrs. Fagenson and Goldwasser will resign from the board of directors of the Company and (ii) Fortress will be entitled to appoint two members to the board of directors of the Company. In connection with the execution and delivery of the Merger Agreement, the Company has provided Fortress signed, irrevocable letters of resignation from all current members of the board of directors of the Company that will become effective based on the circumstances set forth above. Additionally, the Company has provided Fortress resolutions of the board of directors of the Company appointing the individuals selected by Fortress into the vacancies created on the board of directors of the Company as a result of the resignations described above. The commencement of the Offer, and the consummation of the transactions contemplated by the Merger Agreement (including the Merger), are subject to the terms and conditions set forth in the Merger Agreement. Thus, there can be no assurance that the Offer will be commenced, or that the transactions contemplated by the Merger Agreement, including the Merger, will be consummated. In addition, since the Merger Agreement and the agreements executed and delivered in connection therewith contemplate that Acquisition Sub may purchase Shares in the Offer even if the Merger Condition is not satisfied, and that Fortress will have the right to appoint a majority of the members of the Company’s Board of Directors in that instance, it is possible that the Company will remain a publicly-traded company with a Board of Directors that is controlled by appointees of Fortress following the completion of the Offer. Recent Management Developments On June 24, 2016, Mark Goldwasser provided National Holdings Corporation (the “Company”) with notice of his decision not to extend the term of his Employment Agreement, dated as of July 1, 2008, as amended (the “Goldwasser Agreement”). The Goldwasser Agreement terminated pursuant to its terms on June 30, 2016. On June 29, 2016, the Company and Robert B. Fagenson entered into a sixth amendment (the “Fagenson Amendment”) to his Co-Executive Chairman Compensation Plan, dated June 7, 2013, as amended (the “Fagenson Agreement”), pursuant to which, among other things, the term of the Fagenson Agreement will end on September 30, 2016, following which the term of the Fagenson Agreement may be extended for successive 30 day periods on the terms set forth therein. Mr. Fagenson will continue to serve as Executive Chairman and Chief Executive Officer of the Company and replaced Mr. Goldwasser as President of the Company. In addition, Mr. Fagenson will serve as President and Chief Executive Officer of National Securities Corporation, a wholly-owned subsidiary of the Company. |
SUBSEQUENT EVENT |
9 Months Ended |
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Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Event | SUBSEQUENT EVENT Amendment to Merger Agreement On August 12, 2016, the Company, Fortress and Acquisition Sub entered into Amendment No. 1 to the Merger Agreement (the “Amendment”), which, among other things, (i) removes the covenant that requires Fortress to place in a segregated account prior to the launch of the Offer the funds necessary to complete the Offer and the Merger, (ii) clarifies that in the event that as of the closing of the Offer, Acquisition Sub (together with certain affiliates of Fortress) owns less than 25% of the all then outstanding Shares and FINRA directs the Company to withdraw the 1017 Application, the Company will withdraw the application and (iii) extends the Termination Date (as defined in the Merger Agreement) from August 29, 2016, to September 30, 2016, and the possible extension of the Termination Date for purposes of satisfying a certain condition by mutual consent of the parties from September 29, 2016, to October 28, 2016. Additionally, the parties agreed that Fortress would cause Acquisition Sub to commence the Offer within one hour after the parties have executed the Amendment; otherwise, the Amendment would be null and void and be of no further force or effect. Acquisition Sub commenced the Offer on August 12, 2016. Fortress and Acquisition Sub have filed a tender offer statement on Schedule TO, including an offer to purchase, a letter of transmittal and related documents with the SEC, and the Company has filed a solicitation/recommendation statement on Schedule 14D-9 with respect to the Offer with the SEC. The offer to purchase the Shares will only be made pursuant to the offer to purchase, the letter of transmittal and related documents filed as a part of the Schedule TO. |
NEW ACCOUNTING GUIDANCE (Policies) |
9 Months Ended |
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Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
New Accounting Guidance | NEW ACCOUNTING GUIDANCE In July 2013, the Financial Accounting Standards Board ("FASB") issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The update requires the netting of unrecognized tax benefits against a deferred tax asset for the loss or other carryforward that would apply in settlement of the uncertain tax positions. The new guidance was effective for the Company beginning October 1, 2014. The adoption did not have any impact on the Company’s financial statements. In April 2014, the FASB issued ASU 2014-8, which changes the requirement for reporting discontinued operations. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on an entity's operations and financial results. ASU 2014-08, which is to be applied prospectively to all new disposals of components and new classifications as held for sale, will become effective in annual periods beginning on or after December 15, 2014 and interim periods within those annual periods with early adoption allowed. The Company adopted ASU 2014-08 on October 1, 2015 which did not have any impact on its financial statements. In May 2014, the FASB issued an accounting standard update on revenue recognition. The new guidance creates a single, principle-based model for revenue recognition and expands and improves disclosures about revenue. The new guidance is effective for the Company beginning October 1, 2018, and must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. The Company is currently evaluating the potential impact of this standard on its financial statements. In June 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation (Topic 718), which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 will become effective for the Company beginning after October 1, 2016 and early adoption is permitted. The Company does not anticipate that the adoption of ASU 2014-12 will have a material impact on its financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for the Company beginning October 1, 2019 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is currently assessing the impact that the adoption of ASU 2016-02 will have on its financial statements. |
FORGIVABLE LOANS RECEIVABLE (Tables) |
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Jun. 30, 2016 | |||||||||||||||||||||||||
Investments in and Advances to Affiliates, Schedule of Investments [Abstract] | |||||||||||||||||||||||||
Schedule of Forgivable Loan Activity | Forgivable loan activity for the nine months ended June 30, 2016 is as follows:
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SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET PURCHASED AT FAIR VALUE (Tables) |
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Schedule of Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Securities Owned and Sold, Not yet Purchased | Classification of securities are as follows: Fair Value Measurements
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FIXED ASSETS (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fixed Assets | Fixed assets as of June 30, 2016 and September 30, 2015 consist of the following:
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INTANGIBLE ASSETS (Tables) |
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite and Indefinite-lived Intangible Assets Acquired | The following table presents the carrying amounts of intangible assets as of June 30, 2016, principally acquired in the Company's acquisition of Gilman in October 2013, and their estimated useful lives:
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Schedule of Estimated Future Amortization Expense | The estimated future amortization expense of the above intangible assets for the next five fiscal years and thereafter is as follows:
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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses as of June 30, 2016 and September 30, 2015 consist of the following:
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PER SHARE DATA (Tables) |
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Basic and Diluted Common Shares | A reconciliation of basic and diluted common shares used in the computation of per share data follows:
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Schedule of Potential Common Share Equivalents | The following potential common share equivalents are not included in the above diluted computation because to do so would be anti-dilutive:
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COMMITMENTS AND CONTINGENCIES (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Lease Payments | The Company leases office space in various states expiring at various dates through April 2025, and as of June 30, 2016, is committed under operating leases for future minimum lease payments as follows:
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STOCK BASED COMPENSATION (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Activity | Information with respect to stock option activity during the nine months ended June 30, 2016 follows:
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SEGMENT INFORMATION(Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Information | Segment information for the three and nine months ended June 30, 2016 and 2015 is as follows:
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BASIS OF PRESENTATION (Details) |
1 Months Ended |
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Feb. 28, 2015 | |
Common Stock | |
Class of Stock [Line Items] | |
Reverse stock split ratio | 0.1 |
RECEIVEABLES FROM BROKER-DEALERS AND CLEARING ORGANIZATIONS AND OTHER RECEIVABLES (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Sep. 30, 2015 |
---|---|---|
Brokers and Dealers [Abstract] | ||
Receivables from broker-dealers and clearing organizations | $ 3,610 | $ 3,078 |
Other receivables, net | 3,852 | 3,709 |
Allowance for doubtful accounts | $ 646 | $ 573 |
FORGIVABLE LOANS RECEIVABLE - Narrative (Details) - USD ($) |
9 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Sep. 30, 2015 |
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Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Forgiveness of loans balance | $ 493,000 | $ 262,000 | |
Loans Receivable | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for doubtful accounts receivable | $ 0 | $ 0 | |
Maximum | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Interest rate | 9.00% |
FORGIVABLE LOANS RECEIVABLE - Forgivable Loan Activity (Details) $ in Thousands |
9 Months Ended |
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Jun. 30, 2016
USD ($)
| |
Forgivable Loan Activity [Roll Forward] | |
Beginning balance | $ 3,709 |
Ending balance | 3,852 |
Advances to Registered Representatives | |
Forgivable Loan Activity [Roll Forward] | |
Beginning balance | 1,368 |
Additions | 933 |
Amortization | (493) |
Ending balance | $ 1,808 |
FIXED ASSETS - Schedule of Fixed Assets (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Sep. 30, 2015 |
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Property, Plant and Equipment [Line Items] | ||
Property plant and equipment | $ 2,221 | $ 1,751 |
Less accumulated depreciation and amortization | (1,384) | (1,039) |
Fixed assets – net | 837 | 712 |
Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property plant and equipment | $ 755 | 539 |
Estimated Useful Lives | 5 years | |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property plant and equipment | $ 166 | 162 |
Estimated Useful Lives | 5 years | |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property plant and equipment | $ 648 | 598 |
Capital leases (primarily composed of computer equipment) | ||
Property, Plant and Equipment [Line Items] | ||
Property plant and equipment | $ 652 | $ 452 |
Estimated Useful Lives | 5 years |
FIXED ASSETS - Narrative (Details) - USD ($) $ in Thousands |
9 Months Ended | |
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Jun. 30, 2016 |
Jun. 30, 2015 |
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Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization | $ 345 | $ 238 |
INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||
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Feb. 28, 2015 |
Jun. 30, 2016 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Sep. 30, 2015 |
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Business Acquisition [Line Items] | |||||
Other | $ 1,877 | $ 1,877 | $ 2,667 | ||
Increase in fair value of contingent consideration payable | 12 | ||||
Amortization expense | 553 | $ 624 | |||
Certain Assets of a Tax Preparation and Accounting Business | |||||
Business Acquisition [Line Items] | |||||
Other | $ 569 | ||||
Earn-out period | 48 months | ||||
Maximum contingent consideration payable | $ 640 | ||||
Increase in fair value of contingent consideration payable | 4 | 12 | |||
Payments on contingent consideration | $ 44 | $ 89 | |||
Certain Assets of a Tax Preparation and Accounting Business | Customer relationships | |||||
Business Acquisition [Line Items] | |||||
Weighted average useful life | 7 years |
INTANGIBLE ASSETS - Intangible Assets Subject to Amortization (Details) $ in Thousands |
9 Months Ended |
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Jun. 30, 2016
USD ($)
| |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Fair Value | $ 8,919 |
Accumulated Amortization | 2,141 |
Carrying Value | 6,778 |
Customer relationships | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Fair Value | 6,969 |
Accumulated Amortization | 1,845 |
Carrying Value | $ 5,124 |
Customer relationships | Minimum | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Estimated Useful Life (years) | 7 years |
Customer relationships | Maximum | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Estimated Useful Life (years) | 10 years |
Non-compete | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Fair Value | $ 296 |
Accumulated Amortization | 296 |
Carrying Value | $ 0 |
Estimated Useful Life (years) | 2 years |
Brands | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Fair Value | $ 1,654 |
Carrying Value | $ 1,654 |
INTANGIBLE ASSETS - Intangible Assets Estimated Future Amortization Expense (Details) $ in Thousands |
Jun. 30, 2016
USD ($)
|
---|---|
Year ending September 30, | |
Carrying Value | $ 6,778 |
Gilman | |
Year ending September 30, | |
2016 | 183 |
2017 | 721 |
2018 | 721 |
2019 | 721 |
2020 | 721 |
Thereafter | 2,057 |
Carrying Value | $ 5,124 |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Sep. 30, 2015 |
---|---|---|
Payables and Accruals [Abstract] | ||
Legal | $ 1,663 | $ 807 |
Audit | 200 | 552 |
Telecommunications | 222 | 201 |
Data services | 291 | 384 |
Regulatory | 433 | 640 |
Settlements | 794 | 817 |
Contingent consideration payable | 457 | 534 |
Other | 1,877 | 2,667 |
Total | $ 5,937 | $ 6,602 |
PER SHARE DATA - Basic Net Loss Per Share (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Basic weighted-average shares (in shares) | 12,440,035 | 12,446,365 | 12,442,059 | 12,446,365 |
Diluted weighted-average shares (in shares) | 12,440,035 | 12,491,170 | 12,442,059 | 12,495,475 |
Options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Effect of dilutive securities (in shares) | 0 | 8,284 | 0 | 18,912 |
Warrants | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Effect of dilutive securities (in shares) | 0 | 36,521 | 0 | 30,198 |
PER SHARE DATA - Anti-Dilutive Common Shares (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities (in shares) | 1,267,616 | 1,392,676 | 1,354,283 | 1,392,676 |
Options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities (in shares) | 1,224,500 | 1,328,000 | 1,311,167 | 1,328,000 |
Warrants | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities (in shares) | 43,116 | 64,676 | 43,116 | 64,676 |
COMMITMENTS AND CONTINGENCIES - Future Minimum Lease Payments (Details) $ in Thousands |
Jun. 30, 2016
USD ($)
|
---|---|
Rental Payments | |
2016 | $ 950 |
2017 | 2,648 |
2018 | 1,855 |
2019 | 1,057 |
2020 | 885 |
Thereafter | 900 |
Total | 8,295 |
Less, Sublease Income | |
2016 | 35 |
2017 | 84 |
2018 | 0 |
2019 | 0 |
2020 | 0 |
Thereafter | 0 |
Total | 119 |
Net | |
2016 | 915 |
2017 | 2,564 |
2018 | 1,855 |
2019 | 1,057 |
2020 | 885 |
Thereafter | 900 |
Total | $ 8,176 |
COMMITMENTS AND CONTINGENCIES - Narrative (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016
USD ($)
Letter_of_credit
|
Jun. 30, 2015
USD ($)
|
Jun. 30, 2016
USD ($)
Letter_of_credit
|
Jun. 30, 2015
USD ($)
|
Sep. 30, 2015
USD ($)
|
|
Loss Contingencies [Line Items] | |||||
Rent expense | $ 2,880 | $ 2,973 | |||
Sublease income | 106 | 204 | |||
Pending Litigation | Professional Fees | |||||
Loss Contingencies [Line Items] | |||||
Legal fees | $ 584 | $ 566 | $ 1,734 | $ 1,466 | |
Letter of Credit | |||||
Loss Contingencies [Line Items] | |||||
Number of letters of credit, outstanding | Letter_of_credit | 3 | 3 | |||
Maximum borrowing capacity | $ 353 | $ 353 | |||
Accounts Payable and Other Liabilities | Pending Litigation | |||||
Loss Contingencies [Line Items] | |||||
Estimate of possible loss | $ 794 | $ 794 | $ 817 |
STOCK BASED COMPENSATION - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Oct. 31, 2017 |
Jul. 31, 2017 |
Oct. 31, 2016 |
Jul. 31, 2016 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of warrants outstanding (in shares) | 43,116 | |||||
Exercise price of warrants (in dollars per share) | $ 5.00 | |||||
Subsequent Event | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of warrants to expire (in shares) | 20,087 | |||||
Forecast | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of warrants to expire (in shares) | 1,471 | 1,471 | 20,087 | |||
Options | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Compensation expense | $ 125 | $ 470 | ||||
Unamortized compensation costs | $ 76 |
SHARE REPURCHASE (Details) - USD ($) |
9 Months Ended | 11 Months Ended | |
---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2016 |
Aug. 31, 2015 |
|
Share Repurchase Agreements [Abstract] | |||
Authorized amount of repurchase plan (up to) | $ 2,000,000 | ||
Number of shares repurchased (in shares) | 33,933 | 80,576 | |
Value of shares repurchased | $ 86,000 | $ 231,000 |
INCOME TAXES (Details) $ in Thousands |
Jun. 30, 2016
USD ($)
|
---|---|
Income Tax Disclosure [Abstract] | |
Deferred tax assets, net of valuation allowance | $ 11,801 |
SEGMENT INFORMATION - Narrative (Details) |
9 Months Ended |
---|---|
Jun. 30, 2016
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
SEGMENT INFORMATION - Segment Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Sep. 30, 2015 |
|
Segment Reporting Information [Line Items] | |||||
Revenues | $ 46,342,000 | $ 42,335,000 | $ 127,997,000 | $ 126,451,000 | |
Pre-tax income (loss) | (285,000) | 357,000 | (313,000) | 1,409,000 | |
Assets | 62,273,000 | 65,061,000 | 62,273,000 | 65,061,000 | $ 63,382,000 |
Depreciation and amortization | 302,000 | 294,000 | 898,000 | 862,000 | |
Interest | 13,000 | 6,000 | 16,000 | 12,000 | |
Capital expenditures | 203,000 | 21,000 | 470,000 | 232,000 | |
Corporate | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 0 | 0 | 0 | 0 | |
Pre-tax income (loss) | (2,224,000) | (1,396,000) | (3,885,000) | (3,153,000) | |
Assets | 18,469,000 | 18,038,000 | 18,469,000 | 18,038,000 | |
Depreciation and amortization | 73,000 | 70,000 | 197,000 | 299,000 | |
Interest | 13,000 | 5,000 | 15,000 | 4,000 | |
Capital expenditures | 155,000 | 6,000 | 389,000 | 6,000 | |
Brokerage and Advisory Services | Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 43,956,000 | 39,577,000 | 120,775,000 | 119,166,000 | |
Pre-tax income (loss) | 1,741,000 | 916,000 | 3,173,000 | 3,153,000 | |
Assets | 40,798,000 | 43,077,000 | 40,798,000 | 43,077,000 | |
Depreciation and amortization | 185,000 | 202,000 | 569,000 | 522,000 | |
Interest | 0 | 1,000 | 1,000 | 7,000 | |
Capital expenditures | 48,000 | 0 | 53,000 | 199,000 | |
Tax and Accounting Services | Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 2,386,000 | 2,758,000 | 7,222,000 | 7,285,000 | |
Pre-tax income (loss) | 198,000 | 837,000 | 399,000 | 1,409,000 | |
Assets | 3,006,000 | 3,946,000 | 3,006,000 | 3,946,000 | |
Depreciation and amortization | 44,000 | 22,000 | 132,000 | 41,000 | |
Interest | 0 | 0 | 0 | 1,000 | |
Capital expenditures | $ 0 | $ 15,000 | $ 28,000 | $ 27,000 |
SUBSEQUENT EVENT - Merger Agreement (Details) - Subsequent Event |
Aug. 12, 2016 |
---|---|
Subsequent Event [Line Items] | |
Percentage ownership threshold, termination (less than) | 25.00% |
Timing of offering commencement following execution of Amendment | 1 hour |
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