Quarterly report pursuant to sections 13 or 15(d)

NOTE 5 - BUSINESS COMBINATION

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NOTE 5 - BUSINESS COMBINATION
9 Months Ended
Sep. 30, 2012
Business Combination Disclosure [Text Block]
NOTE 5 – BUSINESS COMBINATION

In June 2012, the Company’s wholly-owned subsidiary, SWK Technologies, Inc., acquired certain assets of HighTower Inc. for total consideration of $741,598, including $441,964 in cash and noncash portion assumption of deferred revenue obligation of $299,634. The preliminary purchase price was primarily allocated based on their estimated fair value to intangible assets. Upon completion of an independent valuation the purchase price allocated to the tangible and identifiable intangible assets acquired and liabilities assumed will be modified according to their respective estimated fair values, with the excess purchase consideration, if any, being allocated to goodwill at the closing of the transaction.
 

The Company’s condensed consolidated financial statements for the three months and nine months September 30, 2012 include the results of Hightower since date of acquisition. The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisition occurred on January 1, 2011, nor is the financial information indicative of the results of future operations.  The unaudited pro forma financial information includes the depreciation and amortization expense related to the acquisition.

The following table represents the unaudited consolidated pro forma results of operations for the nine months ended September 30, 2012 and 2011 as if the acquisition occurred on January 1, 2011.  Operating expenses have been increased for the estimated amortization expense associated with the fair value adjustment as of September 2012 of expected definite lived intangible assets, for a net adjustment of $111,000 in the nine months ended September 30, 2012 and 2011

   
Pro – Forma
 
   
Nine Months Ended
September 30, 2012
   
Nine Months Ended
September 30, 2011
 
Net sales
 
$
10,043,620
   
$
10,418,752
 
Operating expenses
   
4,824,622
     
3,159,836
 
Income (loss) before taxes
   
(1,108,354
)
   
2,258,226
 
Net income (loss)
 
$
(1,108,354
)
 
$
2,258,226
 
Basic income (loss) per common share
 
$
(0.01
)
 
$
0.50
 
Diluted income (loss) per common share
 
$
(0.01
)
 
$
0.02
 

For the quarter ended September 30, 2012, the HighTower operations contributed approximately $159,000 in net income, which consisted of approximately $366,000 in revenues and $207,000 in expenses.  For the nine months ended September 30, 2012, the HighTower operations contributed approximately $350,000 in net income, which consisted approximately of $768,000 in revenues and $418,000 in expenses. These revenues were generated in combination with HighTower and SWK personnel, and likely would not have been achieved if HighTower was a standalone business.