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EXCEL - IDEA: XBRL DOCUMENT - Teleconnect Inc.Financial_Report.xls
10-K - FORM 10-K - Teleconnect Inc.v330446_10k.htm
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EX-31.1 - EXHIBIT 31.1 - Teleconnect Inc.v330446_ex31-1.htm
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EX-31.2 - EXHIBIT 31.2 - Teleconnect Inc.v330446_ex31-2.htm
v2.4.0.6
BUSINESS COMBINATION
12 Months Ended
Sep. 30, 2012
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]

5. BUSINESS COMBINATION

 

On October 15, 2010, the Company completed its acquisition of 100% of Wilroot and its wholly owned subsidiary HEM (Wilroot/HEM). Previously Wilroot/HEM and the Company agreed, for the purpose of the transaction, to transfer effective control of Wilroot/HEM to the Company as of October 1, 2010. The Company issued 675,505 shares of its restricted common stock valued at $709,280 along with the assumption of debt and other liabilities of $7,740,102 for a total purchase consideration of $8,449,382.

 

HEM developed the age validation system “Ageviewers”. The Company’s existing subsidiaries MediaWizz and Giga are important parts of the Ageviewers system supply chain and combining them with Wilroot/HEM allows further integration of the system.

 

The acquisition was accounted for as a purchase transaction. As required by the applicable guidance in effect at the time of the acquisition, the Company valued all assets and liabilities acquired at their fair values on the date of acquisition. An independent valuation expert assisted the Company in determining these fair values. Accordingly, the assets and liabilities of the acquired entity were recorded at their estimated fair values at the date of the acquisition. The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed, and based on their estimated fair values.

 

    Wilroot/HEM  
       
Current assets   $ 411,480  
Amount due from Teleconnect,  Inc     1,631,768  
Amount due from MediaWizz     456,744  
Total current assets     2,499,992  
Ageviewers software     3,257,659  
Property and equipment     350,485  
Terminal and kiosk hardware design     690,347  
Patents and processes     2,003,044  
Tradenames     1,082,549  
Net assets     9,884,076  
         
Purchase consideration     8,449,382  
         
Excess of net assets over purchase consideration (bargain purchase)   $ 1,434,694  

 

In connection with the acquisition the Company acquired the Ageviewers software and the terminal and kiosk hardware designs. The Company valued the Ageviewers software based on replacement cost of development using current observable market rates for software engineers which resulted in a fair market value of $3,257,659. The terminal and kiosk hardware designs were valued based on replacement cost of development using current observable market rates for engineers which resulted in a fair market value of $690,347. The software and designs will be amortized over a useful life of 5 years.

 

The Company also acquired patents and processes associated with the Ageviewers system as well as its trade name. The patents and processes were valued by the Company using the relief from royalty valuation technique which resulted in a fair market value of $2,003,044. The Ageviewers trade name was also valued by the Company using the relief from royalty valuation technique which resulted in a fair market value of $1,082,549. The patents, processes and trade name are being amortized over a 10 year remaining life.

 

The fair value of the net assets acquired was in excess of the consideration paid by the Company, resulting in a "bargain purchase gain." Upon the determination that the Company was going to recognize a gain related to the bargain purchase, the Company reassessed its valuation assumptions utilized as part of the acquisition accounting. No adjustments to the acquisition accounting valuations were identified as a result of management’s reassessment. The bargain purchase gain is included in the other income (expenses) in the consolidated financial statements for the year ended September 30, 2011. The events and circumstances allowing the Company to acquire Wilroot/HEM at a bargain were related to the ability of Wilroot/HEM to have access to public equity markets to raise funding for the rollout of Ageviewers in The Netherlands and the liquidity provided to the stockholders of Wilroot/HEM by gaining stock in the Company.

 

There is $38,940 of revenues and $1,757,522 of operating losses from Wilroot/HEM included in the consolidated financial statements for the period October 15, 2010 to September 30, 2011.