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EX-32.2 - Boomerang Systems, Inc.v171138_ex32-2.htm
EX-31.2 - Boomerang Systems, Inc.v171138_ex31-2.htm
EX-31.1 - Boomerang Systems, Inc.v171138_ex31-1.htm
EX-32.1 - Boomerang Systems, Inc.v171138_ex32-1.htm
EX-10.5 - Boomerang Systems, Inc.v171138_ex10-5.htm
EX-10.6 - Boomerang Systems, Inc.v171138_ex10-6.htm
 
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
FORM 10-K
 
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 
For the fiscal year ended September 30, 2009
 
OR
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EX CHANGE ACT OF 1934
 
For the Transition period from ____________to______________
 
Commission File Number 0-10176
 
Boomerang Systems, Inc.
 (Exact name of registrant as specified in its charter)

Delaware
22-2306487
(State or other jurisdiction of
(IRS Employer
Incorporation or organization)
Identification No.)
   
355 Madison Avenue, Morristown, New Jersey
07960
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code (973) 538-1194
 
Securities registered pursuant to Section 12(b) of the Act:
 
None
 
Securities registered pursuant to Section 12(g) of the Act:
 
Common Stock, $0.001 par value
 (Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o..No x.
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o..No x.
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes Noo
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 
Large accelerated filer  o
Accelerated filer  o
     
 
Non-accelerated filer  o
Smaller reporting company  þ
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No x
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.$36,622,891
 
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
 
91,879,425 as of December 21, 2009
 
DOCUMENTS INCORPORATED BY REFERENCE:    None

 

 
 
 
Item 1.  Business
 
General and Recent Activities

Our company, Boomerang Systems, Inc., is engaged in the design, development, marketing and sale of automated racking and retrieval systems for automobile parking, automated racking and retrieval systems for self-storage units, robotic systems for automobile parking and robotic systems for self-storage systems.  Four of its systems, considered by management to be pilot demonstration systems, have been built and are operating in Logan, Utah with two others currently being built.  One of these systems is the automated self-storage product, three are the automated parking product, one under construction is a robotic parking system and the other under construction is a robotic system anticipated for use in both parking and self-storage applications.  None of these facilities are intended to be sold.  Substantially all development work has been completed to enable the marketing and sale of systems based on the first four pilot systems.  We remain in the inception stage of our operations and have realized limited revenues from sales of these facilities.

References herein to “we”, “us”, and “our” refers to Boomerang Systems, Inc., a Delaware corporation, and its consolidated subsidiaries, unless the context should otherwise require.

Systems Design, Development and Operation

Our existing parking and self-storage system structures are configured as automated racking and retrieval systems designed to enable a motorized trolley or shuttle to quickly transport an automobile or storage container from a central receiving and delivery point within the facility to a pre-determined stall where the automobile is parked or the container is stored.  The trolley or shuttle is able to run horizontally and vertically along a clear aisle within the parking or storage structure and off-load the automobile or container into a given destination unit on either side of the aisle.  This design creates multiple levels and multiple units on each level while utilizing either side of the trolley or shuttle aisle and with the capability of storing items multiple units deep on either side of the aisle.

Storage facilities are designed to be capable of handling containers in sizes of 8 by 12 feet up to 8 by 20 feet with one or more doors enabling the storage containers to be subdivided into separate storage unit sizes as small as 8 by 3 feet.

Automobiles are stored and retrieved in substantially the same manner as storage containers.  Automobiles can be transported to a given pre-determined parking stall by the trolley or shuttle accessing the automobile and transporting it from the central receiving point through the central aisle and off-loading it into the pre-determined parking stall on any one of the several levels.

The systems can be integrated into an existing building structure or erected as a free-standing building to which steel siding and a steel roof or other exterior treatments may be affixed for aesthetic or weather protection purposes.  The free-standing building containing the vertical and horizontal racking is able to be erected to virtually any horizontal length and vertically up to as many levels high as is economically feasible including such matters as, the relative values of property in the locality where it is intended to construct a multi-level parking facility versus the cost and government approvals required to construct ground or other forms of parking.

The systems are automated so that, in the case of a storage container, the patron can enter either a credit card or personal identification number and the system will automatically and without further patron input move horizontally and vertically through the central aisle to the stall where the patron’s container is located, access the unit onto the trolley or shuttle and off-load the unit at the central receiving point where the patron gains physical access to his storage container and its contents.  The reverse process is used for the initial placement and subsequent return of the storage container to the facility.

Similarly, in the case of automated automobile parking, the patron’s automobile is positioned at the system access point and the trolley or shuttle, after the automobile is loaded onto a specifically-designed transporter, will move horizontally and vertically to an empty parking stall where the automobile will be off-loaded into the available empty stall.  In order to retrieve his or her automobile, after making payment for the parking privilege, the patron will enter, an individual identifying code at the control station and the trolley or shuttle will automatically locate the parking stall where the automobile was placed, remove it from the stall onto the transporter and return it to the patron at the access and departure point where the patron will drive his car from the facility.

Robotic versions of both the parking and self-storage system function in approximately the same manner, except instead of a trolley or shuttle moving automobiles or storage lockers from access locations to and from storage areas in a steel racking structure, an autonomous robot is used to pick up and move the automobiles and storage lockers throughout structures erected with concrete floors.
 
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Advantages of the automated parking system include:

 
·
Our automated parking systems are more-space efficient to the extent that approximately double the number of cars can be fit into the same cubic area as can be fit into a ramp garage.
 
·
Our parking systems will fit onto a property footprint that is too small for a ramp garage.
 
·
There is greater automobile security inasmuch as vehicles are accessible only by facility employees and are not accessible to patrons or the public.
 
·
There is greater patron security in that all automobile drop-off, access and departure is conducted at a centralized location within the facility which can be readily monitored for safety and security.
 
·
The necessity for extensive valet services is lessened resulting in reduced labor and related expenses.
 
·
Vehicles are parked and retrieved without the necessity for operating the automobile’s engine, resulting in reduced emissions and lessened ventilation requirements.
 
·
There are no extensive lighting requirements except for the centralized location.
 
·
A greater number of automobiles can be parked or stored in a given square footage footprint than in a ramp garage or other conventional parking facility.

The advantages of the self-storage system include:

 
·
Every storage container is ground floor and drive-up accessible.
 
·
readily monitored for safety and security.
 
·
There is substantially no ability for unauthorized persons to gain access to the storage units in their stalls and pilfer because the storage containers are not accessible to unauthorized patrons or the public.
 
·
There are no extensive lighting requirements except at the centralized access location.
 
·
Patron parking is centralized at the facility access point and requires a smaller square footage,
 
·
Because patron access is limited to a relatively small central area, compliance with building and fire code requirements can be minimized, and
 
·
Construction of these facilities is simplified compared to drive-up access storage facilities because of the smaller land area footprint involved.

Marketing

The automated parking facilities are marketed by personnel employed by us, as well as pursuant to distribution agreements into which we may enter.  We market our systems to the many facilities where patron parking is offered and where automobiles may be stored.  These facilities include, among other possibilities:

 
·
public garages
 
·
shopping malls
 
·
casinos
 
·
hotels
 
·
airports
 
·
residential apartments and condominiums
 
·
office complexes
 
·
car dealerships and service facilities
 
·
impound lots

The automated storage facilities are marketed by us primarily to the existing drive-up storage facility developers.  These prospects are reached through trade publications, such as Inside Self Storage (ISS), Mini Storage Messenger and the Self Storage Association (SSA), and through the several national trade shows, including the SSA Show, the ISS Show and the Mobile Self Storage Association.  There are also a number of regional and local drive-up storage association conferences where industry participants can be solicited.  These activities are supplemented by our website and by search engine advertising.  Direct mailings are also undertaken.
 
Marketing is currently conducted by an employed staff of four full-time salespeople and one full-time support person and in addition we outsource marketing to experienced third-party providers.

We envision that we will be able to provide mobile self-storage containers that facilitate the design of self-storage activities that enable patrons to transport storage units to their place of business or home and return it for storage in the automated storage system.
 
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             We believe that the nature of our business is such that we will not be materially dependent upon a single customer.  In addition, the nature of our business is that there are long lead times in securing an order and obtaining necessary government approvals for the construction of systems in response to orders and for customers to obtain financing for the project.
At present, we do not have a backlog of orders.

Abu Dhabi Marketing Affiliate.  In June 2009, we entered into a Shareholders Agreement with Tawreed Companies Representation (“Tawreed”), an entity established under the laws of the Emirate of Abu Dhabi and the United Arab Emirates, for the purpose of expanding our business into the Emirate of Abu Dhabi and possibly elsewhere.  Pursuant to the Agreement, the parties incorporated a company under the laws of the Emirate of Abu Dhabi with Tawreed holding 51% of its outstanding shares and with us holding 49% of the outstanding shares.  The Agreement provides that each shareholder designates two of the four Directors of the company and further provides our subsidiary with various additional negative control contractual rights.  To date the company’s activities have been mostly organizational and it has had no revenues.  The company organized has a five year duration subject to automatic extensions thereafter unless terminated by either party.

manufacturing

We are currently the tenant under leases for two manufacturing facilities located in Logan, Utah.  We manufacture the steel components for the structures, containers and platforms from raw materials supplied by local suppliers.  We also obtain the electrical and other control components from local suppliers.  The structural materials and other system components are configured by us into sub-assemblies and the materials are then shipped by us to the customer ready to be assembled under our supervision.  We also intend to provide, for an additional charge, construction services if requested.

The construction period for the system at its intended location will be dependent upon the size and configuration of the system.  Our customers will be responsible for obtaining all local and other governmental permits and approvals to construct the systems at their intended location.

inventory and working capital

At present, we do not have an inventory of completed parking or self-storage systems available for sale and only a limited partial inventory of certain of the components or sub-assemblies for these systems.  Establishing such a fuller inventory will be dependent upon establishing sales volume in the future.  Our working capital requirements at the present time are limited to having the funds necessary to support our marketing activities and administrative requirements.  We expect that we will require additional working capital during the year ended September 30, 2010.

We expect that once our production facilities are fully established and operating, approximately thirty days will be required to manufacture a system from the time an order is received and the components are shipped.  Additional time will be required for its assembly at the site.

Competition

We experience intense competition from others in the manufacturing and marketing of our automated parking and self-storage facilities.  Management believes that we have more than ten competitors engaged in the manufacture and marketing of automated parking facilities with a more limited number engaged in the manufacture and marketing of the self-storage facilities.  Many of our competitors are divisions of large multi-national enterprises and are better capitalized than we are.

Other automated parking and self-storage facilities are available from both domestic and foreign manufacturers, and it can be anticipated that others will seek to enter the market.  Manufacturers of automated materials handling warehouse systems may seek to manufacture systems in competition with us.

We intend to seek to attain a competitive advantage over other parking and self-storage facilities as follows:
 
 
·
We intend to keep our systems simple to build, operate and maintain, thereby making the systems cost effective.
 
·
We intend to focus our activities on automated parking and self-storage facilities so as to be more responsive than our competitors to the needs and requirements of our customer.
 
·
We will endeavor to establish Boomerang in the market for automated parking and retrieval systems ahead of others and thereby establish an early track record for our systems.
 
·
For the domestic market, we maintained our primary production facilities within the continental United States and thereby enhance our ability to deliver and construct systems with greater speed and fewer logistical issues and lower shipping costs.
 
·
We believe our newest version of robotic parking and storage systems represent a substantial functional leap forward in the automated parking and automated self storage technology and will provide us with a significant competitive advantage in performance, full system cost and an ability to provide developers with a system which is more easily approved by governmental entities.
 
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Employees
 
As of December 31, 2009, we had 25 full-time employees and 1 part-time employee.  Of these employees, seven full time persons and one part time person are in executive and general and administrative positions, 13 persons are engaged in design, manufacture and operations activities, and four full-time people and one full-time support person are engaged in sales activities.
 
Prior Activities

Boomerang Systems, Inc. (“Boomerang Utah”) was incorporated on December 6, 2006.  From inception through the first quarter of 2008, Boomerang Utah was a developmental stage company doing research and developmental on its automated racking parking and storage systems.
 
Organization

Our company was incorporated under the laws of the State of Delaware on October 11, 1979. On November 8, 2004, we amended our certificate of incorporation to change our corporate name to Digital Imaging Resources Inc. (“Digital”) from Dominion Resources Inc. On February 6, 2008, we filed an amendment to our Certificate of Incorporation with the State of Delaware, which effected a change in our corporate name to Boomerang Systems, Inc.

On February 6, 2008, we completed the acquisition (the “Acquisition”) of the business, assets and liabilities of Boomerang Systems Inc., a Utah corporation (“Boomerang Utah”), by the merger of the Boomerang Utah into a wholly owned subsidiary of ours. We issued as consideration for the acquisition 13,333,333 shares (on a post one-for-fifteen reverse split basis) of our Common Stock. Closing of the merger was subject to (i) the completion of a private placement of 2,000,000 post-split shares of our Common Stock pursuant to a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, (the “Securities Act”) resulting in net proceeds to us of approximately $1,700,000, (ii) the completion of a one-for-fifteen reverse stock split of our outstanding shares, and (iii) completion by us of all filing requirements under the Securities Exchange Act of 1934, as amended, and the passage of all notice periods.

On February 6, 2008, the Company effectuated a one-for-fifteen reverse stock split of their outstanding common shares. The Company's financial statements reflect this reverse split for all periods presented.

On February 6, 2008, our company was recapitalized to give effect to the Acquisition.  Under generally accepted accounting principles, our acquisition of Boomerang Utah is considered to be capital transactions in substance, rather than a business combination. That is, the acquisition is equivalent, to the acquisition by Boomerang Utah of our company, then known as Digital, with the issuance of stock by Boomerang Utah for our net monetary assets of the Company.  This transaction is reflected as a recapitalization, and is accounted for as a change in capital structure.  Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition. Under reverse acquisition accounting, our comparative historical financial statements, as the legal acquirer, are those of the accounting acquirer, Boomerang Utah.  The accompanying financial statements reflect the recapitalization of the stockholders’ equity as if the transactions occurred as of the beginning of the first period presented.  Thus, the 13,333,333 shares of common stock issued to the former Boomerang Utah stockholders are deemed to be outstanding for all periods reported prior to the date of the reverse acquisition.  As a result of the transaction effected by the Exchange Agreement, our business has become the business of the Boomerang Utah.

Subsequent to the Acquisition, the shareholders of Boomerang Utah owned approximately 80.9% of our then outstanding shares. As the Acquisition was a capital transaction, and not a business combination, there is no assigned goodwill or other intangible asset resulting from the Acquisition.

Concurrently with the closing of the acquisition, we changed its corporate name to Boomerang Systems, Inc.  The Company, through its wholly owned subsidiary, Boomerang Utah, which it acquired in February 2008, is engaged in the design, development, and marketing of automated racking and retrieval systems for automobile parking and automated racking and retrieval of containerized self-storage units.   The Company was a developmental stage company through the first quarter of fiscal 2008.

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Item 1A.  Risk Factors

An investment in our securities involves a high degree of risk, including, but not necessarily limited to, the risk factors described below. Each prospective investor should carefully consider the following risk factors inherent in and affecting our business before making an investment decision to purchase our securities.

We Have Had Limited Revenues and Have a Severe Shortage of Capital. We are in the early stage of developing our business plan and operations and have a very limited history of operations in the manufacture and marketing of our automated racking and retrieval systems for automobile parking and automated racking and retrieval of containerized self-storage units. During the fiscal year ended September 30, 2009 we had total revenue of $0 and during the fiscal year ended September 30, 2008 we had total revenue of $938,140.  Since the inception of these activities, through September 30, 2009, our only revenues were from the sale of one containerized self-storage system and one automobile parking system, which had contract prices of $788,140 and $150,000, respectively. As a result of this limited operating history, we have limited meaningful historical financial data upon which an evaluation of our current business plans and its prospects can be based.  Our anticipated expense levels in the future are based in part on our expectations as to the subjective views of our management as to the market for our automated parking and self-storage systems. We have a continuing severe shortage of working capital.  As of September 30, 2009, we had total current assets of approximately $1,300,000 and we had approximately $3,300,000 of current liabilities including accounts payable and indebtedness due on demand or classified as a current liability.  We require additional capital to continue our operations.

There are Questions As to Our Ability to Continue as a Going Concern; There is an Explanatory Paragraph in the Independent Auditors Report Concerning These Questions. Our financial statements have been prepared on a going-concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We had a loss in fiscal 2009 of $9,693,734. We had a working capital deficiency at September 30, 2009 of $2,019,738. We had a negative cash flow from operations during the fiscal year 2009 and in fiscal 2008 of $3,737,008 and $4,399,741, respectively. As of September 30, 2009, our liabilities exceeded our assets by $3,186,008. All the foregoing factors lead to questions concerning our ability to meet our obligations as they come due.  We have financed our activities using private debt and equity financings. As a result of the losses incurred and current negative working capital and other matters described above, there is no assurance that the carrying amounts of our assets will be realized or that liabilities will be liquidated or settled for the amounts recorded.

The independent auditors’ report on our financial statements as of and for the year ended September 30, 2009 includes an explanatory paragraph which states that we have no material revenues, have suffered recurring losses from operations, and have a net capital deficiency that raise substantial doubt about our ability to continue as a going concern.

Extended Sales Cycle in Procuring Signed Contracts and Revenues. Procuring signed contracts for the sale of our systems is characterized by extended periods of time until the buyer is able to obtain the necessary government approvals to construct the facility, obtain financing for the project, designs for the entire facility including, as part of the entire facility, the parking facility to be provided by us and entering into construction agreements with the numerous contractors involved. These extended periods can be expected to lead to delays in us entering into contracts, some of which may be for extended periods, our realization of material revenues from the project and cause us to be dependent upon our limited amounts of capital to fund our operations during these periods.  Additionally, our failure to receive revenues at the times we anticipate and have projected could materially adversely affect our financial condition.

Recent Introduction of Advanced System.  In March, 2009, our management determined to focus our activities on the design, manufacture and marketing of an advanced robotic version of both our parking and self-storage systems. The consequence of this decision was to redirect our efforts during the year 2009 onto these activities rather than on marketing our automated racking and retrieval systems.  This adversely affected our sales in fiscal 2009 and the first quarter of fiscal 2010.  Also, our presentation of an advanced prototype robotic version delayed our marketing efforts.  There can be no assurance that the consequences of this refocus of our marketing efforts will be fully overcome within the current year.

We May Never Become Profitable. There can be no assurance that we will have a significant or successful operating history. We may experience losses, limited or no potential for earnings, limited assets, negative net worth or other characteristics that are indicative of initial operating stage companies. There can be no assurance that our business can be operated so as to develop significant revenues and cash flow and become profitable.
 
We Need Additional Capital to Pursue Our Business Plans and We May be Unable to Raise that Capital. We had cash of $1,032,160 and current liabilities of $3,332,948 including accounts payable and accrued liabilities of $563,797 as of September 30, 2009. As of December 31, 2009, we had cash of $956,951 and liabilities in the amount of $3,016,738, including debt in the amount of $2,507,460 and accounts payable in the amount of $505,278. We expect to require further additional financing in order to fund our ongoing administrative and other expenses, including the funds to pursue our business plan. We intend to seek to raise this funding through the issuance of additional debt and/or equity securities. These funds might not be available or might not be available on terms acceptable to us and may result in material dilution to existing investors.  In addition, we may seek to restructure our existing liabilities and debt.
 
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Including the cash required in pursuing our business plan, we estimate that we will require up to an additional $1,500,000 during the fiscal year ending September 30, 2010 for repayment of debt and working capital.  Further, in the event we engage in any further material transactions during the fiscal year ending September 30, 2010, it can be expected that we will require additional funds.  As of December 31, 2009, we had made no firm arrangements to obtain these funds or to engage in any such material transactions and there can be no assurance that such funds can be obtained. However, we intend to seek to obtain such funds from further financings or sales of equity securities, including debt securities convertible into equity. There can be no assurance that we will be successful in this regard and our failure to obtain these funds can be expected to impair our ability to meet our business objectives.

Limited Management Experience in Manufacture and Marketing of Automated Parking and Self-storage Systems. We have only recently entered the business of manufacturing and marketing of automated parking and self-storage systems and our management has limited experience in the manufacturing and marketing of automated parking and self storage systems. This limited experience can be expected to possibly result in disruptions or inefficiencies in these activities which may adversely affect our activities and our operating results. Because of this limited experience, we may be unable to achieve our goals and objectives in sales of our systems which would result in disappointing revenues and operating results. Mr. Stanley J. Checketts, our Chief Executive Officer has various real estate and other interests to which he will devote a portion of his time. Such activities are not expected to interfere with his activities on our behalf.

Intense Competition. Management expects that we will experience intense competition. It can be expected that we will experience intense competition from others in the manufacturing and marketing of our automated parking and self-storage facilities. Management believes that we have more than ten competitors engaged in the manufacture and marketing of automated parking facilities and a more limited number engaged in the manufacture and marketing of the self-storage facilities. Management expects that many of its competitors will be divisions of large multi-national enterprises and be better capitalized than our company. Other automated parking and self-storage facilities are available from both domestic and foreign manufacturers, and it can be anticipated that others will seek to enter the market. Manufacturers of automated materials handling warehouse systems may seek to manufacture systems in competition with us.

Absence of Patent or Other Protection. We have not to date been granted any patent protection for our automated trolley-operated parking and self-storage systems and there can be no assurance that, if applied for, any significant patent protection would be granted. Accordingly, we may have limited protection to prevent others from entering into competition with us. There can be no assurance that our systems may not violate the patent or other proprietary rights of others. If such violations should occur, we could be subject to litigation seeking to enjoin the manufacture and sale of the systems, seeking to collect royalties or other monetary damages. The existence of such litigation or the threat of such litigation could disrupt and delay our ability to pursue our business plans.

Absence of Market Studies. Other than recent initial marketing efforts conducted by our employees, we have not obtained any market studies by outside consultants or others. Accordingly, there are no independent studies performed by non-affiliated persons to support the beliefs of our management as to the likely market for the automated systems we manufacture and market. There can be no assurance that the market for these systems will be significant.

The Requirements of Section 404 of the Sarbanes-Oxley Act of 2002 Require that We Undertake an Evaluation of Our Internal Controls That May Identify Internal Control Weaknesses. The Sarbanes-Oxley Act of 2002 imposes duties on us and our executives, directors, attorneys and independent registered public accounting firm. In order to comply with the Sarbanes-Oxley Act and rules adopted by the Securities and Exchange Commission (SEC), we are required to evaluate our internal controls systems to allow management to report on  our internal controls over financial reporting.  Under current SEC rules, we will be required to file an attestation report signed by our auditors, Liebman, Goldberg & Hymowitz, LLP, when we file our annual report for our fiscal year ending September 30, 2010. This annual report does not include such an attestation report by our auditors.  We anticipate being able to fully implement the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act  and all other aspects of Section 404 in a timely fashion. We have initiated the establishment of procedures to enable our auditors to perform the system and process evaluation and testing required to comply with the attestation requirement.  If we are not able to implement the reporting requirements of Section 404 in a timely manner or with adequate compliance, our auditors may not be able to render the required attestation concerning the effectiveness of the internal controls over financial reporting, we may be subject to investigation and/or sanctions by regulatory authorities, such as the Securities and Exchange Commission or the NASD, Inc., and our reputation may be harmed.  Any such action could adversely affect our financial results and the market price of our common stock.

Continued Control by Existing Management and a limited number of Shareholders. Our management and a limited number of shareholders retain significant control over our company and its business plans and investors may be unable to meaningfully influence the course of our actions. Our existing management and a limited number of shareholders are able to control substantially all matters requiring shareholder approval, including nomination and election of directors and approval or rejection of significant corporate transactions and other matters requiring shareholder approval. There is also a risk that the existing management of our company and a limited number of shareholders will pursue an agenda, which is beneficial to themselves at the expense of other shareholders.
 
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There Is No Assurance Of An Active Public Market For Our Common Stock And The Price Of Our Common Stock May Be Volatile. Given the relatively minimal public float and trading activity in our securities, there is little likelihood of any active and liquid public trading market developing for our shares. If such a market does develop, the price of the shares may be volatile. Since the shares do not qualify to trade on any national securities exchange, if they do actually trade, the only available market will continue to be through the "pink sheets".  It is possible that no active public market with significant liquidity will ever develop. Thus, investors run the risk that investors may never be able to sell their shares.

Possible Future Issuances of Additional Shares that are Authorized May Dilute the Interests of Stockholders. Our Certificate of Incorporation currently authorize our Board of Directors to issue up to 100,000,000 shares of Common Stock and 1,000,000 shares of undesignated Preferred Stock.  We have received stockholder approval to amend our Certificate of Incorporation so as to authorize us to issue up to 200,000,000 shares.   We expect to file this amendment with the State of Delaware before the end of January 2010.  Any additional issuances of any of our authorized but unissued shares will not require the approval of shareholders and may have the effect of further diluting the equity interest of shareholders.

Existence of Limited Market for Our Common Stock. There has been a very limited market for our Common Stock. Accordingly, although quotations for the Company’s Common Stock have been, and continue to be, published on the “pink sheets” published by the National Quotation Bureau, Inc., these quotations, in the light of our operating history, continuing losses and financial condition, are not necessarily indicative of the value of our company. Such quotations are inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.
 
Item 1B.  Un-resolved Staff Comments
 
As of September 30, 2009, we did not have any unresolved comments from the SEC that were received 180 or more days prior to year-end.
 
Item 2.  Properties
 
Our principal office, consisting of approximately 1,454 square feet, is located at 355 Madison Avenue, Morristown, NJ  07960.  This is also the location of our sales and marketing activities.  This office is under a five year lease with NYC Skyline Realty, LLC, a non-affiliated entity, at a base rent of $4,419 per month and common area impositions of $1,973 per month.  We are obligated to maintain the premises.

Manufacturing is undertaken at 324 West 2450 North, Logan, Utah 84341.  SB&G Properties, an entity owned by HSK Funding, Lake Isle Corp. and Venturetek, is the landlord under a lease entered into with our subsidiary, Boomerang Utah dated October 1, 2008, relating to these premises. The term of the lease is for one year with an annual rent of $260,610 plus real property and school taxes. This includes deferred rent of $176,610. In addition, Boomerang Utah is obligated to pay for all utilities and for repairs and maintenance to the property. The approximately 29,750 square foot leased premises are used for Boomerang Utah’s manufacturing activities.  At September 30, 2009 the total amount of deferred rent due is $267,480 recorded as due to related party on the balance sheet.  We are in the process of negotiating a new lease.

Stan Checketts Properties, L.C.(“SCP), whose sole owner is Mr. Stanley J. Checketts, an officer and Director of our company, is the landlord under a lease entered into with Boomerang Utah dated October 1, 2008 for premises located at 324 West 2450 North, Building B, Logan, Utah. The term of the lease is for one year at a fixed annual rent of $157,680 plus real property and school taxes. This includes deferred rent of $106,857.  In addition, Boomerang Utah is obligated to pay for all utilities and for repairs and maintenance to the property. The approximately 18,000 square foot leased premises are also used for Boomerang Utah’s manufacturing activities.  At September 30, 2009 the total amount of deferred rent due is $178,808 recorded as due to related party on the balance sheet.  We are in the process of negotiating a new lease.
 
Item 3. Legal Proceedings
 
We are not a defendant in any pending legal proceedings the outcome of which is expected to result in a material liability to us.
 
Item 4. Submission of Matters to a Vote of Security Holders
 
On July 30, 2009, we received the written consents, pursuant to Section 228 of the Delaware General Corporation Law, of the holders of a majority of our outstanding shares consenting to an amendment to our Certificate of Incorporation, as amended, to increase the authorized shares of Common Stock, $0.001 par value per share, we are authorized to issue from 35,000,000 shares to 100,000,000 shares.  The holders of 12,058,334 shares of Common Stock consented to the action taken and by virtue of obtaining that Consent; we were authorized to file the Certificate of Amendment.
 
8

 
 
 
Market for Common Equity and Dividends.

Given the relatively minimal public float and trading activity in our securities, there is little likelihood of any active and liquid public trading market developing for our shares. If such a market does develop, the price of the shares may be volatile. Since the shares do not qualify to trade on any national securities exchange, if they do actually trade, the only market currently available will continue to be in the "pink sheets". It is possible that no active public market with significant liquidity will ever develop. Thus, investors run the risk that investors may never be able to sell their shares.

Our Common Stock is quoted on the OTC “pink sheets” under the symbol BMER.  The following table sets fourth the quarterly high and low sales price as quoted and traded on the OTC Bulletin Board during the period commencing before July 1, 2007 through June 18, 2008 and as appearing in the “pink sheets” for each of our fiscal quarters during the period July 18, 2008 through September 30, 2009.
 
Quarter Ended
 
Bid
   
Asked
 
   
High
   
Low
   
High
   
Low
 
                         
December 31, 2007
  $ 0.09     $ 0.03     $ 0.10     $ 0.035  
March 31, 2008
  $ 1.10     $ 0.55     $ 1.50     $ 1.01  
June 30, 2008
  $ 1.30     $ 1.01     $ 2.00     $ 1.10  
September 30, 2008
  $ 1.50     $ 0.27     $ 7.60     $ 1.50  
                                 
December 31, 2008
  $ 0.28     $ 0.27     $ 1.99     $ 1.30  
March 31, 2009
  $ 0.28     $ 0.27     $ 1.34     $ 1.10  
June 30, 2009
  $ 0.27     $ 0.26     $ 1.30     $ 1.01  
September 30, 2009
  $ 0.81     $ 0.26     $ 1.10     $ 1.01  
As adjusted for a one for fifteen reverse stock split effective February 6, 2008.
 
Our shares of Common Stock were quoted and traded on the OTC Bulletin Board during the period commencing before October 1, 2006 through June 18, 2008 at which time they were removed from quotation on that market.  We are seeking approval to have our shares again traded on the OTC Bulletin Board.  There can be no assurance that we will meet the requirements to have our shares quoted on the OTC Bulletin Board at this time.
 
The above quotations represent prices between dealers and do not include retail mark-ups, mark-downs or commissions. They do not necessarily represent actual transactions.
 
As of December 21, 2009, the number of record holders our Common Stock was 213.  We have never paid a cash dividend on our Common Stock and anticipated capital requirements make it unlikely that any cash dividends will be paid on the Common Stock in the foreseeable future.
 
Securities Sold Without Registration During the Year Ended September 30, 2009

In May 2009 we issued non-statutory option to purchase 1,000,000 shares at an exercise price of $0.10 per share to three employees.  All such options expire on May 14, 2014.

During fiscal 2009, we entered into a private offering of our securities in three tranches which continued until December 14, 2009.  On June 12, 2009, we completed the sale of the First Tranche which involved the sale of an aggregate of 33,609 shares of our Series A Convertible Preferred Stock (“Preferred Stock”).  The aggregate offering price for these shares of Preferred Stock sold in the First Tranche was $3,360,900 or $0.10 per share, $1,895,000 in cash and $1,465,900 in forgiveness of debt.  As a consequence of filing in the State of Delaware a Certificate of Amendment to increase our authorized shares of Common Stock to 100,000,000 shares, under the terms of the Preferred Stock the 33,609 shares of Preferred Stock were automatically converted into 33,609,000 shares of our Common Stock.  On September 30, 2009, we completed the Second Tranche which involved the sale of an aggregate of 11,094,247 additional shares of Common Stock.  The aggregate offering price for these shares of Common Stock sold in the Second Tranche was $1,109,425 or $0.10 per share, of which $1,065,000 was paid in cash and $44,425 was paid by forgiveness of interest that had accrued on indebtedness that had been exchanged for shares of Preferred Stock in the First Tranche.  The Third Tranche of 13,905,753 shares of Common Stock was completed on December 14, 2009.  The 13,905,753 shares of Common Stock offered and sold in the Third Tranche were sold for cash in the amount of $1,390,575, also $0.10 per share.
 
9


The securities sold described above were sold in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded by Section 4(2) thereof.  Each of the certificates issued bears or will bear a legend stating that resale of the shares, including shares to be issued on exercise of options and warrants, is restricted without compliance with the registration requirements of the Securities Act or the availability of an exemption from such registration requirements and stop transfer instructions have been or will be placed with the transfer agent with respect to the transfer of the shares issued.
 
Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers.
 
Item 6.  Selected Financial Data

As a smaller reporting company, we are not required to respond to this Item.
 
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes appearing elsewhere in this report. This discussion and analysis contains forward looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward looking statements as a result of certain factors, including but not limited to the risks discussed in this report.

Our company, through its wholly owned subsidiary, Boomerang Utah which we acquired in February 2008, is engaged in the design, development, and marketing of automated racking and retrieval systems for automobile parking and automated racking and retrieval of containerized self-storage units.

Our revenues from manufacturing contracts are recognized using the percentage-of-completion method of accounting. Under this method, revenues earned are recorded based on the contract.  Contract costs include all direct material, labor, freight, and equipment costs, and those indirect costs related to contract performance such as indirect labor, overhead, supplies, shop, and tool costs. Selling, general, and administrative costs are charged to expense when incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, inclusive of those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income and will be recognized in the period in which the changes are determined. The asset "Costs and estimated earned profits in excess of billings on uncompleted contracts" represents revenues recognized in advance of amounts billed. The liability “Billings in excess of costs and estimated earned profits on uncompleted contracts" represents billings in advance of revenues recognized and contemplated losses on contracts in progress.

Liquidity and Capital Resources

During the year ended September 30, 2009, we had a net loss of $9,693,734. Included in net loss is depreciation of $41,290 and expenses relating to the issuance of stock options and warrants of $184,150 and $3,635,992, respectively, these three items are non-cash expenses.

During the year ended September 30, 2009, changes in assets and liabilities primarily included an increase in cash and cash equivalents resulting from a decrease in accounts receivable of $140,500, an increase in inventory of $100,402, a decrease in costs and estimated earned profits in excess of billings and completed contracts of $28,814, and a decrease in prepaid and other assets of $48,980, offset by an increase in cash resulting in an increase of accounts payable and accrued liabilities of $66,330, an increase in accured interest payable of $211,408, an increase in due to related party of $367,761 and an increase in deposit payable of $19,403. After reflecting the net changes in assets and liabilities, net cash used by operations was $3,737,008.
 
Cash used to purchase property, plant and equipment of $61,926, purchase of investments of $20,420 for a net cash used in investing activities of $82,346.
 
During the year ended September 30, 2009, financing activities provided cash from proceeds from private placement- preferred stock $1,895,000, proceeds from debt converted into preferred stock of $1,465,900 and proceeds from private placement- common stock of $1,065,000. Accordingly, net cash provided by financing activities totaled $4,425,900.

During the year ended September 30, 2009, our cash and cash equivalents increased by $606,546.

Commencing in May, 2009 through December 14, 2009, we issued and sold an aggregate of 75,389,062 shares of Common Stock at a price of $0.10 per share.  The shares were sold in three tranches.  The offer and sale of the shares was made in a transaction exempt from the registration requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) and Regulation D.
 
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Accordingly, since May, 2009 through December 14, 2009, we have issued an aggregate of 75,389,062 shares of our Common Stock for total consideration of $7,596,819, of which $6,086,494 was received in cash and $1,465,900 was received in exchange for outstanding indebtedness and $44,425 by forgiveness of accrued interest.  The proceeds from the sale of these securities were used to repay $3,246,244 of outstanding indebtedness, of which $2,089,272 was owing to HSK Funding, Inc. and Lake Isle Corp., shareholders of the company and the balance was used for working capital.

Also, pursuant to agreements entered into in December, 2009, we issued an aggregate of 16,780,065 shares in exchange for an aggregate of $1,500,000 principal amount of our 12% Promissory Notes and $235,919 of accrued interest on the Notes issued in 2008.  The shares were issued as exempt securities under Section 3(a)(9) of the Securities Act.

During the balance of the year ended September 30, 2010, we expect to require and intend to seek to raise, in addition to the funds described above, the sum of approximately $1,500,000 from the private sale of our debt or equity securities. The $1,500,000 is intended to be applied to the repayment of debt and working capital. It is presently intended that the securities will be offered in such jurisdictions where the offering may lawfully be made and to existing security holders. The foregoing is not and should not be considered to be an offering of our securities. The foregoing is for informational purposes only. The securities offered will not be and have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.

There can be no assurance that the capital we require to meet our operating needs will be raised as described above or any other terms and, if raised, that it will be sufficient to meet our requirements. If we are unsuccessful in raising this capital, we may be required to curtail our operations. In addition, we may seek to restructure its existing liabilities and debt.

Our financial statements have been prepared on a going-concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We recognized a substantial loss in fiscal 2009 and 2008 of $9,693,734 and $6,612,899, respectively. We had a working capital deficiency at September 30, 2009 of $2,019,738. We had a negative cash flow from operations in 2009 and 2008 of $3,737,008 and, $4,399,741 respectively. As of September 30, 2009, our liabilities exceeded our assets by $3,186,008.

These factors create uncertainty whether we can continue as a going concern. Our plans to mitigate the effects of the uncertainties on our continued existence are: 1) to raise additional equity capital; 2) to restructure our existing debt; and 3) to pursue our business plan and seek to generate positive operating cash flow. Management believes that these plans can be effectively implemented in the next twelve-month period. However, our ability to continue as a going concern is dependent on the implementation and success of these plans. The financial statements do not include any adjustments in the event we are unable to continue as a going concern.

Results of Operations
 
Fiscal Year 2009 Compared With Fiscal Year 2008

Our total revenues were $0 and $938,140 during the fiscal years ended September 30, 2009 and 2008, respectively. We had no sales during the fiscal year ended September 30, 2009 primarily because we concentrated on creating a prototype for the new retrieval system for the racks within the parking product.  We have entered into three contracts for the sale of our parking product which are contingent upon the purchaser obtaining all governmental approvals to commence construction.  There can be no assurance as to whether or when such approvals can be obtained.  At this time we do not consider such contracts to be a backlog of orders.

Our cost of goods sold was $0 and $1,002,552 during the fiscal years ended September 30, 2009 and 2008, respectively. The decrease is the result of there being no sales of systems during the fiscal year.

Our sales and marketing costs were $958,587 during the fiscal year ended September 30, 2009 compared with $1,052,147 during the fiscal year ended September 30, 2008, for a decrease of $93,560. The decrease is the result of reducing the marketing on the parking product until the new robotic retrieval system was operational.  The advertising expenses for fiscal year ended September 30, 2009 and 2008 were $213,225 and $382,707. In addition, we employed up to four full time salesmen and one full time sales support person in 2009 compared to the four full time salesmen employed in 2008, which is a sales and marketing expense.

Our general and administrative expenses were $5,749,247 during the fiscal year ended September 30, 2009 compared with $3,606,661 during the fiscal year ended September 30, 2008, for an increase of $2,142,586. This increase is primarily the result of issuing Post-Maturity Warrants by virtue of the default on the August 2008 Promissory Notes in the amount $3,635,992, which is a non-cash expense.  In addition, we employed two part-time and three full-time employees in 2009 compared to the two part-time and five full time employees employed in 2008, which are recorded under general and administrative expenses.
 
11


Our research and development expenses were $1,226,020 during the fiscal year ended September 30, 2009 compared with $1,575,619 during the fiscal year ended September 30, 2008, for a decrease of $349,599. This decrease is due to reduction in the workforce and expenditures.  In addition, we employed fourteen full time employees in 2009 compared to two part time and fifteen full time employees in 2008 that are recorded under research and development expense.

Depreciation and amortization expense was $41,290 during the year ended September 30, 2009 compared to $18,684 during the year ended September 30, 2008, for an increase of $22,606. This increase is the result of the purchase of additional assets in fiscal 2009 and the items being in use for a longer period of time.

Interest income was $4,186 during the year ended September 30, 2009, compared with $9,611 during the year ended September 30, 2008, for a decrease of $5,425 due to less funding monies in an interest bearing account for a shorter period of time.

Interest expense was $401,518 during the year ended September 30, 2009, compared with $123,945 during the year ended September 30, 2008, for an increase of $277,573. This increase is the result of additional borrowings outstanding in 2009.

Interest expense-debt discount was $1,312,500 during the year ended September 30, 2009, compared with $187,500 during the year ended September 30, 2008, for an increase of $1,125,000. This increase is the result of amortizing the debt discount over a longer time period.  Debt discount is a non-cash expense item.
 
Fiscal Year 2008 Compared With Fiscal Year 2007

Our total revenues were $938,140 and $0 during the fiscal years ended September 30, 2008 and 2007, respectively. The increase of our revenues is the result of the commencement of our activities in the sale of a racking and retrieval system for containerized self-storage units and a racking and retrieval system for automobiles in 2008, which contributed $788,140 and $150,000, respectively, to our revenues. Revenues are recognized using the percentage-of-completion method.  As of September 30, 2008, we recognized all of our revenues from a contract for the sale of a racking and retrieval system for containerized self-storage units and a contract for the sale of a racking and retrieval system for the automobiles.  No revenues were recognized in the fourth quarter ending September 30, 2008 because the revenues for both contracts were accrued in the prior quarters utilizing the percentage of completion method.

Our cost of goods sold was $1,002,552 and $0 during the fiscal years ended September 30, 2008 and 2007, respectively. The increase is the result of the direct cost associated with the sale of the racking and retrieval system for containerized self-storage units and the racking and retrieval system for automobiles in 2008. Expenses are recognized using the percentage-of-completion method. As of September 30, 2008, we recognized expenses on the contracts for the sale of the racking and retrieval system and the sale of the racking and retrieval system for automobiles utilizing the percentage-of-completion method which amounted to expenses of $852,552 (100%) and $150,000 (100%), respectively, for the two systems. For fiscal 2008, we recorded losses in the amount of $64,412 and $0, respectively, from these two contracts.

Our sales and marketing costs were $1,052,147 during the fiscal year ended September 30, 2008 compared with $104,747 during the fiscal year ended September 30, 2007, for an increase of $947,400. The increase is the result of the commencement of our racking and retrieval systems operations in the 2008 fiscal year, which included, among other items, advertising expenses of $382,707. In addition, during the fiscal year ended September 30, 2008, we employed up to four full time salesmen, which is a sales and marketing expense.

Our general and administrative expenses were $3,606,661 during the fiscal year ended September 30, 2008 compared with $396,129 during the fiscal year ended September 30, 2007, for an increase of $3,210,532. This increase is primarily the result of additional administrative expenses in connection with the development and construction of our automated racking and retrieval systems, including two part time and five full time employees.  It is also due to the $1,603,263 expense relating to the issuance of stock options and warrants.
Our research and development expenses were $1,575,619 during the fiscal year ended September 30, 2008 compared with $1,120,719 during the fiscal year ended September 30, 2007, for an increase of $454,900. This increase is a result of our research and development of racking and retrieval systems, which includes the development and construction of two automated racking and retrieval system prototypes for automobile parking and one automated racking and retrieval system prototype of containerized self-storage units. In addition, we employed two part time and up to fifteen full time employees who are recorded under research and development expense.

Depreciation and amortization expense was $18,684 during the year ended September 30, 2008 compared to $1,084 during the year ended September 30, 2007, for an increase of $17,600. This increase is the result of the purchase of additional assets in fiscal 2008.

Interest income was $9,611 during the year ended September 30, 2008, compared with $8,377 during the year ended September 30, 2007, for an increase of $1,234 due to holding funding monies in an interest bearing account.
 
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Interest expense was $311,445 during the year ended September 30, 2008, compared with $0 during the year ended September 30, 2007, for an increase of $311,445. This increase is the result of additional borrowings outstanding in 2008 and amortizing $187,500 for the debt discount, a non-cash expense item.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

Our financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires our management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  We continually evaluate the accounting policies and estimates we use to prepare the consolidated financial statements.  We base our estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances.  Actual amounts and results could differ from these estimates made by management.

We do not participate in, nor have we created, any off-balance sheet special purpose entities or other off-balance sheet financing.

We have identified the accounting policies below as critical to our business operations and the understanding of our results of operations.

Principles of consolidation The accompanying consolidated financial statements include the accounts of Boomerang Systems, Inc. and its wholly owned subsidiaries.  All significant inter-company transactions have been eliminated.

Cash – We maintain cash in bank accounts which may, at times, exceed federally insured limits.  We have not experienced any loss on these accounts.

Accounts receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

For the period ended September 30, 2009, the Allowance for Doubtful Accounts was $0.

Property and equipment Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred.  Costs of major additions and betterments are capitalized.  Depreciation is calculated on the straight-line method over the estimated useful lives of the respective assets.

Revenue recognition Revenues from manufacturing contracts are recognized using the percentage-of-completion method of accounting. Under this method, revenues earned are primarily recorded based on the contract. Measurement by the percentage of cost incurred to date to estimated total cost for each contract.  This method is used because management considers total cost to be the best available measure of progress on the contracts.  Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.

Contract costs include all direct material, labor, freight, and equipment costs, and those indirect costs related to contract performance such as indirect labor, overhead, supplies, shop, and tool costs. Selling, general, and administrative costs are charged to expense when incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined.  Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period.  The asset "Costs and estimated earned profits in excess of billings on uncompleted contracts" represents revenues recognized in advance of amounts billed. The liability “Billings in excess of costs and estimated earned profits on uncompleted contracts" represents billings in advance of revenues recognized and contemplated losses on contracts in progress.

Research and development – Pursuant to ASC 730 (formerly SFAS No. 2), research and development costs are expensed as incurred.

Inventories - Inventories consisting of parts, materials, and assemblies are stated at the lower of cost or market. Cost is determined using the weighted average cost method.

Stock-based compensation- We adopted ASC 718-10-25 (formerly FAS 123(R)), using the modified-prospective-transition method on February 7, 2008.  Under this method, we are required to recognize compensation cost for stock-based compensation arrangements with employees and directors based on their grant date fair value using the Black-Scholes option-pricing model, such cost to be expensed over the compensations’ respective vesting periods.  For awards with graded vesting, in which portions of the award vest in different periods, we recognize compensation costs over the vesting periods using the straight-line method.  For calculating the value for warrants, the Black-Sholes method is also used.

 
13

 
 
Inherent in determining the fair value of options are several judgments and estimates that must be made. These include determining the underlying valuation methodology for share compensation awards and the related inputs utilized in each valuation, such as our expected stock price volatility, expected term of the options granted to employees and consultants, expected dividend yield, the expected risk-free interest rate, the underlying stock price and the exercise price of the option. Changes to these assumptions could result in different valuations for individual share awards. The company uses the Black-Scholes option pricing model to determine the fair value of options granted to employees, non-employee directors and non-employee consultants.
 
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Exchange Act of 1934. These forward-looking statements are largely based on our current expectations and projections about future events and conditions affecting our business, the markets for our products and customer acceptance of our products and conditions in the construction industry. Such forward-looking statements include, in particular, projections about our future results included in our Exchange Act reports, statements about our plans, strategies, business prospects, changes and trends in our business and the markets in which we operate and intend to operate. These forward-looking statements may be identified by the use of terms and phrases such as “believes”, “can”, “could”, “estimates”, “expects”, “forecasts”, “intends”, “may”, “plans”, “projects”, “targets”, “will”, “anticipates”, and similar expressions or variations of these terms and similar phrases. Comments about our critical need for additional capital and our ability to raise such capital when and as needed and on acceptable terms are forward-looking statements. Additionally, statements concerning future matters such as the costs and expenses we expect to incur, our ability to realize material revenues, delays we may encounter in selling our products and gaining market acceptance for our products, the cost of the further development of our products, and achieving enhancements or improved technologies, achieving material sales levels, marketing expenses, projected cash flows, our intentions regarding raising additional capital and when additional capital may be required, and other statements regarding matters that are not historical are forward-looking statements. Management cautions that these forward-looking statements relate to future events or our future financial performance and are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance or achievements of our business or our industry to be materially different from those expressed or implied by any forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under Item 1A - Risk Factors, as well as those discussed elsewhere in this Annual Report. The cautionary statements should be read as being applicable to all forward-looking statements wherever they appear in this Annual Report and they should also be read in conjunction with the consolidated financial statements, including the related footnotes.

Neither management nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. All forward-looking statements in this Annual Report are made as of the date hereof, based on information available to us as of the date hereof, and subsequent facts or circumstances may contradict, obviate, undermine, or otherwise fail to support or substantiate such statements. We caution you not to rely on these statements without also considering the risks and uncertainties associated with these statements and our business that are addressed in this Annual Report. Certain information included in this Annual Report may supersede or supplement forward-looking statements in our other Exchange Act reports filed with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statement to conform such statements to actual results or to changes in our expectations, except as required by applicable law or regulation.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to respond to this Item.
 
Item 8. Financial Statements and Supplementary Data
 

Independent Auditors' Report
   
F-1
 
         
Consolidated Balance Sheets -September 30, 2009
   
F-2
 
         
Consolidated Statements of Operations years ended September 30, 2009 and 2008
   
F-3
 
         
Consolidated Statements of Stockholders' Deficit - years ended September 30, 2009 and 2008
   
F-4
 
         
Consolidated Statements of Cash Flows - years ended September 30, 2009 and 2008
   
F-5
 
         
Notes to Consolidated Financial Statements
   
F-6-24
 
 
14


Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
 
Item 9A. Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this annual report on Form 10-K for the fiscal year ended September 30, 2009 and Form 10-K/A Amendment No. 2 for the fiscal year ended September 30, 2008, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our CEO and CFO.

Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our CEO and CFO as appropriate, to allow timely decisions regarding required disclosure. Our management, including our CEO and CFO, do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based upon that evaluation, our company's Principal Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective because of the significant deficiency and the material weakness described below for September 30, 2008. Measures are being taken to include documentation of management oversight and review as part of the appropriate functional procedures.

Restatement of financial statements- The financial statements for the fiscal year ended September 30, 2008 have been restated to correct the accounting treatment previously accorded certain transactions.  Please see Note 2- Restatement and Correction of Error of Previously Issued Financial Statements under Notes to Consolidated Financial Statements. Other than the items discussed in Note 2 there have been no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Changes in Internal Controls- No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) occurred during the quarter ended September 30, 2009 and 2008. There was a material weakness for quarter ended September 30, 2008 due to the company using the incorrect comparative numbers and incorrect recording of issued stock options. The Company in their original filing had granted, and or, not accounted for stock options during the quarter ended September 30, 2008.

Management’s Report on Internal Controls over Financial Reporting- Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel, 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 and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
15

 
In making its assessment, our management, including the Chief Executive Officer and Chief Financial Officer, used the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management’s report in this annual report.

A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. We have identified material weaknesses in our internal controls over financial reporting as of the end of the fiscal year ended September 30, 2009 that do not required our financial statements to be restated. Since we are a small business issuer, we do not maintain a full staff of accounting personnel with full knowledge of the accounting treatment for all transactions which constitutes a material weakness in our internal controls over financial reporting. We’ve hired consultants from time to time as we believe necessary to provide the necessary experience in accounting for these types of transactions.

We have identified material weaknesses in our internal controls over financial reporting as of the end of the fiscal year ended September 30, 2008 that required our financial statements to be restated. These material weaknesses on internal controls include:

-
Financial statements – We failed to properly disclose the proper financials statements for the Company. We had entered into a merger agreement with Boomerang Systems, Inc. For accounting purposes this was a reverse merger.

-
Equity – We did not reflect the proper accounting and recording of a 1 for 15 stock split. We did properly account for stock options that were granted by the Company. We did not properly account for the issuance of warrants that accompanied promissory notes granted by the Company.

-
Debt - We did not maintain adequate procedures to properly record and classify debt, and the related debt discount on debt for the issuance of warrants that accompanies the promissory notes granted by the Company.

Based on the above factors management has concluded that our internal controls over financial reporting was not effective as of the end of the period covered by the Annual Report on Form 10-K/A No. 2 for the fiscal year ended September 30, 2008.

Accounting for the reverse merger and the transactions affecting our equity involved transactions we engaged in which were undertaken outside the usual and customary course of our company’s business. The warrants issued along with the promissory notes were accounted for, but with the incorrect accounting method. As a small business issuer, we do not maintain a full staff of accounting personnel with full knowledge of the accounting treatment for all transactions which constitutes a material weakness in our internal controls over financial reporting. Our plan is to supplement our accounting staff with consultants from time to time as we believe necessary to provide the necessary experience in accounting for these types of transactions. At this time, based on the stage of development of our company, we do not plan to add any further full-time accounting personnel in order to address the accounting for transactions outside the usual and customary course of our business which may lead to further material weaknesses in our internal controls over financial accounting. We have instituted oversight and monitoring of accounting procedures and review of our financial statements and footnote disclosures by an outside consultant. Measures are also being taken to include documentation of management oversight and review as part of the appropriate functional procedures. We believe that these changes will lead to a reduction of future material weaknesses.

There were no changes in our internal controls over financial reporting during the fourth quarter of the fiscal year ended September 30, 2009 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

The annual report on Form 10K for the fiscal year ended September 30, 2009 and Form 10-K/A No. 2 for the fiscal year ended September 30, 2008 does not include an auditor attestation report on our internal controls over financial reporting inasmuch as no attestation report was required under the rules of the Securities and Exchange Commission applicable to us as in effect at that time.

Stanley J. Checketts
Joseph R. Bellantoni
Chief Executive Officer
Chief Financial Officer

January 12, 2010

Item 9B. Other Information.
 
 
16

 
 
Item 10. Directors, Executive Officers, and Corporate Governance
 

Name
 
Title
 
Age
         
Stanley J. Checketts
 
Chief Executive Officer and Director
 
69
Christopher Mulvihill
 
President
 
39
Amichaim Abramson
 
Vice President
 
36
Joseph R. Bellantoni
 
Chief Financial Officer and Director
 
47
Guy Jardine
 
Vice President and Director
 
52
Maureen Cowell
 
Secretary and Director
 
43
Paul J. Donohue+
 
Director
 
74
Steven C. Rockefeller, Jr.
 
Director
 
49
 
(+) Member of the Audit Committee.
 
Directors and Executive Officers

Mr. Checketts was Chief Executive Officer of S&S Worldwide, Inc.(“S&S”) for over five years. S&S engaged in the design, development, marketing and sale of roller coasters and family thrill rides for the amusement industry and conducts its business activities both domestically and internationally.

Mr. Mulvihill has been employed as President and Manager of Sales and Marketing of our company since February 2008, and prior thereto served in such a capacity for Boomerang Utah. Prior thereto, from August 2005 to January 2007, he was employed by The Active Network, Inc. as the Director of Business Development for Golf. From January 2002 to July 2005, Mr. Mulvihill was employed by Tee Time King, Inc.

Mr. Abramson has been an independent financial consultant from December 2005 to the present. From September 2004 to December 2005, he was an educator at the Solomon Schechter Day School of Essex and Union, in West Orange, New Jersey. From September 2001 to May 2006, he was a student at the Jewish Theological Seminary, New York, New York. Mr. Abramson was Assistant Vice President, Corporate Finance, with Friedman, Billings, Ramsey & Co., Inc., Alexandria, Virginia from November 1997 to January 2001.

Mr. Bellantoni has been Chief Financial Officer and a Director of our company since January 12, 2007. Mr. Bellantoni previously joined our company as a Director and Treasurer in April 1995. Mr. Bellantoni remained a Director until November 8, 2004 and Chief Financial Officer until September 22, 2005. Mr. Bellantoni also is employed by North Jersey Management Services, Inc., a private company providing accounting and financial record-keeping services.

Since 1998, Mr. Jardine has been engaged as a private real estate developer. In 1998, Mr. Jardine sold his multi-location automobile maintenance and repair business to a national company. He has been semi-retired since that time.

Ms. Cowell has been the secretary of Boomerang since July 31, 2007, and a director of Boomerang since April 14, 2009.  Ms. Cowell is also employed as Vice President of North Jersey Management Services, Inc., a private company providing management consulting services to resort developments since 1992.

Mr. Donohue is retired. He was formerly employed by Ballyowen Golf Club as a Pro Shop Manager from March 1997 through December 2001. Prior to working at Ballyowen, Mr. Donahue was employed as a Bank Examiner with the State of Florida in 1994 and from 1990 through 1993; he was employed by Midlantic Bank as a Vice President. He was elected a Director in 1995.

Mr. Rockefeller was elected to the Board on December 29, 2009. He currently serves as a private consultant to a number of emerging companies in a variety of industries including real estate, renewable energy, lenticular printing and transdermal drug delivery. Prior to his work with early stage private equity, Mr. Rockefeller served as a Managing Director for Deutsche Bank Private Wealth Management. In that capacity, beginning in 1996, he developed a focus on micro-credit through the creation of Deutsche Bank Micro-credit Development Fund. This fund is a unique partnership between the bank and its clients to support micro-credit programs worldwide. Upon his election to the Board Mr. Rockefeller was granted a five year warrant to purchase 1,000,000 shares of our common stock exercisable at $0.10 per share issuable upon filing an Amendment to our Certificate of Incorporation with the State of Delaware.
 
17

 
No Director is a director of any other company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the requirements of Section 15(d) of that Act or any company registered as an investment company under the Investment Company Act of 1940.
 
Compliance with Section 16(a) of the Exchange Act
 
Based solely on a review of Forms 3 and 4 and any amendments thereto furnished to our company pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934, or representations that no Forms 5 were required, we believe that with respect to fiscal 2009, except as described in the following sentence, all Section 16(a) filing requirements applicable to our officers, directors and beneficial owners of more than 10% of our equity securities were timely complied with during the fiscal year ended September 30, 2009.
 
Code of Ethics
 
 
Audit Committee Financial Expert
 
We currently do not have an Audit Committee Financial Expert on our Board of Directors.

Item 11.        Executive Compensation

The following table sets forth the compensation of our principal executive officer and our other two most highly compensated executive officers who received total compensation exceeding $100,000 for the year ended September 30, 2009 and who served in such capacities at September 30, 2009.
 
18

 
SUMMARY COMPENSATION TABLE
Annual Compensation

Name and
Principal
Position
(a)
 
Year
(b)
 
Salary
($)
(c)
   
Bonus
($)
(d)
   
Stock
Awards
($)
(e)
   
Option
Awards
($) (1)
(f)
   
Non-Equity
Incentive Plan
Compensation-
sation
($)
(g)
   
Nonqualified
Deferred
Compensation-
station
 Earnings
($)
(h)
   
All Other
Compensation
($)
(i)
   
Total
($)
(j)
 
Stanley J.
 
2009
  $ 44,803       -0-       -0-       -0-       -0-       -0-           $ 44,803  
Checketts,
Chief Executive Officer(2) (3)
 
2008
  $ 100,008       -0-       -0-       -0-       -0-       -0-       -0-     $ 100,008  
Christopher
 
2009
  $ 150,000       -0-       -0-       -0-       -0-       -0-             $ 150,000  
Mulvihill,
President
 
2008
  $ 150,000       -0-       -0-       -0-       -0-       -0-       -0-     $ 150,000  

 
(1)
Represents the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with ASC 718-10-25 (formerly FAS 123R). See Notes 9 and 10 to Notes to Financial Statements for the year ended September 30, 2008.
 
(2)
Mr. Checketts is also a Director of our company; however he does not receive any additional compensation for serving in that capacity.
 
(3)
Messrs. Checketts and Mulvihill were elected to and commenced serving in these positions effective February 6, 2008.

Narrative Disclosure to Summary Compensation Table

Mr. Mulvihill is employed as our National Sales Manager pursuant to a five-year agreement expiring on October 31, 2011, whereby he receives a commission of 3% of the gross sales of our products, with a non-refundable advance against commissions of $150,000 per year. Mr. Mulvihill is a full-time employee.

Outstanding Equity Awards at September 30, 2009

Neither Messrs. Checketts nor Mulvihill, the only named two officers did not hold any equity awards as of September 30, 2009.
 
Director Compensation
Our Directors received no cash or other compensation during the year ended September 30, 2009. The compensation paid to our named executive officers who are also Directors is reflected in the Summary Compensation Table above.
 
Our Directors are reimbursed for their out-of-pocket expenses in attending meetings. Pursuant to the terms of our 2004 Stock Incentive Plan and as a consequence of reverse stock splits effected subsequent to the adoption of the Plan by the Board of Directors in September 2004, each non-employee Director automatically receives an option grant for 3,333 shares on the date such person joins the Board. In addition, on the date of each annual stockholder meeting, provided such person has served as a non-employee Director for at least six months, each non-employee Board member who is to continue to serve as a non-employee Board member will automatically be granted an option to purchase 333 shares. Each such option has a term of ten years, subject to earlier termination following such person's cessation of Board service, and is subject to certain vesting provisions. For the purposes of the automatic grant provisions of the Plan, Ms. Cowell, Mr. Donohue, and Mr. Rockefeller are considered a non-employee Board member.
 
 
The following table sets forth, as of December 21, 2009, information with respect to each person (including any "group" as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) who is known to us to be the beneficial owner of more than five percent of our Common Stock as well as the number of shares of Common Stock beneficially owned by all of our Directors, each of our named executive officers identified in the Summary Compensation Table (see Item 11 above), and all our Directors and executive officers as a group. The percentages have been calculated on the basis of treating as outstanding for a particular holder, all shares of our Common Stock outstanding on said date and all shares issuable to such holder in the event of exercise of outstanding options owned by such holder at said date. As of December 21, 2009, we had 91,879,425 shares of Common Stock outstanding.
 
19


Name of Beneficial Owner(1)(2)
 
Number of Shares
Beneficially Owned
   
Percentage of
Outstanding
Common Stock
 
             
Stanley J. Checketts
    6,666,667
(3)
    7.3 %
                 
Christopher Mulvihill
    6,899,999
(4)
    7.5 %
                 
Joseph R. Bellantoni
    367,271
(5)
    *  
                 
Amichaim Abramson
    350,000
(6)
    *  
                 
Guy Jardine
    200,000
(7)
    *  
                 
Maureen Cowell
    150,667
(8)
    *  
                 
Paul J. Donahue
    31,667
(9)
    *  
                 
Steven C. Rockefeller, Jr.
    0
(10)
    *  
                 
All Directors and Executive Officers as a Group (7 persons)
    14,666,270       14.8 %
                 
Certain Stockholders
               
                 
Gail Mulvihill
    21,265,757
(11)
    23.1 %
                 
Burton I. Koffman
    13,681,162
(12)
    14.5 %
Venturetek, LP
    11,558,368
(13)
    12.3 %
 

   
* Less than 1%
(1)
 
This tabular information is intended to conform with Rule 13d-3 promulgated under the Securities Exchange Act of 1934 relating to the determination of beneficial ownership of securities. Unless otherwise indicated, the tabular information gives effect to the exercise of warrants or options exercisable within 60 days of the date of this table owned in each case by the person or group whose percentage ownership is set forth opposite the respective percentage and is based on the assumption that no other person or group exercise their option.
(2)
 
Unless otherwise indicated, the address for each of the above is c/o Boomerang Systems, Inc., 355 Madison Avenue, Morristown, New Jersey 07960.
(3)
 
Includes 6,666,666 shares held by Stan Checketts Properties, L.C. Stanley J. Checketts is the natural person who exercises voting and investment control over the shares.
(4)
 
Includes shares held by Mr. Mulvihill of record and beneficially including shares of Great Delaware & American (400,000) of which Mr. Mulvihill exercises voting and investment control.
(5)
 
Includes 13,938 shares held by Mr. Bellantoni’s wife and 3,333 held by Mr. Bellantoni’s father as to which Mr. Bellantoni disclaims a beneficial interest as to both. Also includes 350,000 shares issuable on exercise of an option at an exercise price of $0.90 per share.
(6)
 
This is 350,000 shares issuable on exercise of an option exercisable at $0.90 per share,
(7)
 
Includes 150,000 shares issuable on full vesting and exercise of an option exercisable at $0.90 per share, as to which the option is currently exercisable with respect to 112,500 shares.. The option became exercisable with respect to 25% of the shares on August 6, 2008 and became exercisable with respect to an additional 25% of the shares each succeeding six months thereafter.
(8)
 
This is 150,667 shares issuable on exercise of an option at $0.90 shares.
(9)
 
Includes 25,000 shares issuable on exercise of an option at an exercise price of $.90 per share.
 
20

 
(10)
 
The Board of Directors elected Mr. Rockefeller to the Board on December 29, 2009.
(11)
 
Includes 4,623,339 shares held by Gail Mulvihill of record and beneficially, 14,158,149 shares held of record by Lake Isle Corp. and 2,484,000 shares held of record by Sail Energy LLC ., as to both of which Mrs. Mulvihill exercises voting and investment control and may be deemed the beneficial owner.
(12)
 
Includes shares held by Mr. Koffman of record and beneficially, directly and indirectly, including, among other entities, shares held by Public Loan Company (91,825 shares), The K-6 Family Limited Partnership (83,333 shares), Hardyston Associates (50,000 shares), Deerfield Place Associates (450,000 shares), 300 Plaza Drive Associates (400,000 shares), New Valu, Inc. (500,000 shares), and HSK Funding Inc. (9,929,385 shares) and includes five year warrants granted on various dates and expiring through September 2014 held by HSK Funding, Inc. to purchase 2,210,568 shares at a prices ranging from $0.69 to $1.25 as to all of which Mr. Koffman exercises voting and investment control and may be deemed the beneficial owner .
(13)
 
David Selengut is the natural person who exercises voting and investment control over the shares held by Venturetek, LP. Includes 1,878,982 in five year exercisable warrants.

Securities Authorized for Issuance Under Equity Compensation Plans. On November 8, 2004, our stockholders approved the adoption by our Board of Directors of a 2004 Stock Incentive Plan under which 1,000,000 shares of our Common Stock are reserved for the grant of options and issuance under the 2004 Stock Incentive Plan. As of February 6, 2008, upon the filing of a Certificate of Amendment to our Certificate of Incorporation effecting a one-for fifteen reverse stock split, the number of shares reserved for issuance under the Plan was reduced to 66,667 shares. The 2004 Stock Incentive Plan is described in our proxy statement dated October 12, 2004. As of December 15, 2009, no options had been granted under the 2004 Stock Incentive Plan.
 
 
Equity Compensation Plan Information As of September 30, 2009

   
(a)
   
(b)
   
(c)
 
               
Number of securities
 
   
Number of securities to
         
remaining available for
 
   
be issued upon exercise
   
Weighted-average exercise
   
future issuance under equity
 
   
of outstanding options,
   
price of outstanding
   
compensation plans
 
   
warrants and rights
   
options, warrants and
   
(excluding securities
 
Plan Category
 
(cumulative)
   
rights
   
reflected in column (a))
 
Equity compensation plans approved by security holders
    -0-       N/A       66,667 (1)
                         
Equity compensation plans not approved by security holders
    2,507,686 (2)   $ 0.58       -0-  
                         
Total
    2,507,686     $ 0.58       66,667  
 

(1) Shares reserved for issuance under our 2004 Stock Incentive Plan.

(2) On November 28, 2007, our Board of Directors granted options to purchase an aggregate of 1,507,686 shares of Common Stock to persons who were or became officers, Directors or consultants to our company. These options are exercisable at $0.90 per share. Such options have a term of ten years. The option price and number of shares issuable on exercise of the options are subject to anti-dilution adjustment under certain circumstances.

In February 2008, options to purchase 360,000 shares were also granted to four persons who became employees of our company following the completion of the acquisition of Boomerang Utah. Included among such persons is Mr. Guy Jardine, who became a Vice President and Director, and who was granted an option to purchase 150,000 shares. All 360,000 options have a term of five years and are subject to vesting, whereby the options become exercisable with respect to 25% of the shares subject to the options at the end of 18 months after the acquisition of Boomerang Utah was completed and with respect to an additional 25% at the end of each succeeding six-month period until such options are fully exercisable.
 
21

 
In May 2009, options to purchase 1,000,000 shares were also granted to three persons who are employees of our company. All 1,000,000 options have a term of five years and are subject to vesting, whereby the options become exercisable with respect to 25% of the shares subject to the options at the end of 18 months after the acquisition of Boomerang Utah was completed and with respect to an additional 25% at the end of each succeeding six-month period until such options are fully exercisable.

On October 15, 2009, options were granted to purchase common stock to three persons including, i) ten-year non-statutory options to purchase 20,000 shares exercisable at $0.10 per shares; ii) five-year non-statutory options to purchase 500,000 shares exercisable at $0.10 per share. The options to purchase 500,000 shares are subject to the following vesting schedule; 25% eighteen months after the grant date of October 15, 2009 and 25% every six months thereafter. These stock options are subject to forfeiture until service conditions associated with their grant are satisfied. These options are valued at $420,903.

On December 29, 2009, Steven C. Rockefeller, Jr. was elected to the Board of Directors. Upon his election to the Board Mr. Rockefeller was granted a five year warrant to purchase 1,000,000 shares of our common stock exercisable at $0.10 per share issuable upon filing an Amendment to our Certificate of Incorporation.

Our Board resolved to grant these options as an inducement for these persons to expend their efforts for the success of our company and to provide a means whereby such persons can obtain an equity interest in our company. We did not seek or obtain the approval of our stockholders as to the grant of these options.
 

Prior to and at the time of the completion of the acquisition of Boomerang Utah, the holder of Boomerang Utah’s outstanding capital stock was Boomerang Systems Holdings, Inc. (“Holdings”). Certain persons, who were formerly the beneficial holders of the outstanding stock of Holdings, are also members or stockholders of other entities that are parties to agreements with Boomerang Utah. HSK Funding, Inc., Lake Isle Corp., and Venturetek, LP, former stockholders of Holdings, are beneficial holders of shares of our company and certain of their members and stockholders are also the members of SB&G Properties, LC. (“SB&G”), which is the landlord under a lease with us.  Gail Mulvihill, the individual who exercises voting and investment control over Lake Isle Corp., is the mother of Christopher Mulvihill, our President.

SB&G Properties, an entity owned by HSK Funding, Lake Isle Corp. and Venturetek, is the landlord under a lease entered into with Boomerang Utah dated October 1, 2008, relating to premises located at 324 West 2450 North, Building A, Logan, Utah. The term of the lease is for one year with an annual rent of $260,610 plus real property and school taxes. This includes deferred rent of $176,610. In addition, Boomerang Utah is obligated to pay for all utilities and for repairs and maintenance to the property. The approximately 29,750 square foot leased premises are used for Boomerang Utah’s manufacturing activities. At September 30, 2009 the total amount of deferred rent due is $267,480 recorded as due to related party on the balance sheet. The Company is in the process of negotiating a new lease.

Stan Checketts Properties, L.C.(“SCP), whose sole owner is Mr. Stanley J. Checketts, is the landlord under a lease entered into with Boomerang Utah dated October 1, 2008 for premises located at 324 West 2450 North, Building B, Logan, Utah. The term of the lease is for one year at a fixed annual rent of $157,680 plus real property and school taxes. This includes deferred rent of $106,857. In addition, Boomerang Utah is obligated to pay for all utilities and for repairs and maintenance to the property. The approximately 18,000 square foot leased premises are also used for Boomerang Utah’s manufacturing activities. At September 30, 2009 the total amount of deferred rent due is $178,808 recorded as due to related party on the balance sheet. The Company is in the process of negotiating a new lease.

SB&G is obligated on a twenty-year promissory note owing to a non-affiliated bank in the principal amount of $841,891 as of September 30, 2009, bearing interest at 3.807% per annum and due August 1, 2027. The promissory note is collateralized by the real property that is the subject of the lease from SB&G to Boomerang Utah. Boomerang Utah, along with Messrs. Gene Mulvihill (“Mulvihill”), the father of Christopher Mulvihill, the President of our company, Checketts, and Burton Koffman (“Koffman”), are the joint and several guarantors of the promissory note.

Messrs. Mulvihill and Koffman are the guarantors of a financing lease entered into on September 1, 2007 between Boomerang Utah and a nonaffiliated bank. The lease relates to certain equipment used by Boomerang Utah in its manufacturing operations. The total cost of the equipment was approximately $900,000. The rental is payable in sixty monthly installments of approximately $12,750. Boomerang Utah has the option to purchase the equipment at the conclusion of the lease term for approximately $315,000 which amount is the parties’ pre-determined fair market value of the equipment at the conclusion of the lease.

J and A Financing, Inc., also affiliated with Messrs. Mulvihill and Koffman, has guaranteed two loans to Boomerang Utah from a non-affiliated bank, totaling $485,000, inclusive of $5,388 in accrued interest as of September 30, 2009 and maturing in May 2010.

In May 2008, we entered into a grid loan agreement with J&A Financing, a related party, for a maximum borrowing availability of $1,500,000 for which it has drawn down $1,000,000 with interest of 9%. The loan is not collateralized and is due on December 31, 2010.
 
22

 
Item 14. Principal Accountant Fees and Services
 
The following sets forth fees incurred by us during the two fiscal years ended September 30, 2009 for services provided by Liebman, Goldberg & Hymowitz, L.L.P., our independent public accountant at those year ends.

         
Audit Related
   
 
   
All Other
 
   
Audit Fees
   
Fees
   
Tax Fees
   
Fees
 
2009
  $ 54,933     $ 0     $ 4,750     $ 0  
2008
  $ 39,221     $ 0     $ 4,750     $ 0  
 
Our Board of Directors believes that the provision of the services during the two years ended September 30, 2009 is compatible with maintaining the independence of Liebman, Goldberg & Hymowitz, L.L.P. Our Board of Directors has not adopted any pre-approval policies and procedures for engaging an accountant to render audit or non-audit services that are subject to the pre-approval requirement.
 
23

 
 
Item 15. Exhibits and Financial Statement Schedules

3.1.1
 
Certificate of Incorporation of Registrant and Amendment No.1  thereto (1)
     
3.1.2
 
Certificate of Amendment dated June 24, 1992 to Certificate of  Incorporation reducing the authorized shares of Common Stock  to 25,000,000, increasing the par value to $.01 per share and  effecting a one-for-four reverse stock split (2)
     
3.1.3
 
Certificate of Amendment filed November 8, 2004 increasing  number of shares of Common Stock authorized (3)
     
3.1.4
 
Certificate of Amendment filed November 8, 2004 effecting,  among other things, a reduction in the par value of the shares  of Common Stock and a one-for-twenty reverse stock split (3)
     
3.1.5
 
Certificate of Amendment filed September 3, 2009 increasing number of Common Stock authorized (4)
     
3.2
 
By-laws of Registrant (1)
     
4.1
 
Specimen Common Stock Certificate, $0.001 par value
     
10.3
 
Form of 12% Promissory Note due August 14 and 20, 2009 (6)
     
10.4
 
Form of Warrant to Purchase Common Stock expiring August 2013 (7)
     
10.5
 
Morristown, NJ lease with Amendment (8)
     
10.6
 
Shareholders Agreement between Tawreed Companies Representation and Boomerang USA Corp. (9)
     
10.7
 
Steven C. Rockefeller elected to the Board of Directors (10)
     
14
 
Code of Ethics (5)
     
22.
 
Subsidiaries of the registrant (as of September 30, 2009):

 
State of Incorporation
Boomerang Sub, Inc.
 
Delaware
Dominion Cellular, Inc.
 
New Jersey
Diamond Leasing and Management Corp.
 
Delaware
 
Delaware
SwingStation, Inc.
 
Delaware
 
24


 
32.1 Certification of President, Chief Executive Officer and Chief Financial Officer Pursuant to Section 1350 (furnished, not filed)(7)
 

(1) Filed as an exhibit to the Registration Statement on Form S-1 (File No. 2-66471) of the Registrant and incorporated herein by reference.
 
(2) Filed as an exhibit to the Registrant's annual report on Form 10-KSB for the year ended September 30, 1992 and incorporated herein by reference.
 
(3) Filed as an exhibit to the Current Report on Form 8-K for November 8, 2004.
 
(4) Filed as an exhibit to the Current Report on Form 8-K for September 14, 2009.
 
(5) Filed an amendment as an exhibit to the Current Report on Form 8-K for December 28, 2009.
 
(6) Filed as an exhibit to the Registrant’s annual report on Form 10K/A for the fiscal year ended September 30, 2008; Form of Promissory Note issued in August 2008.
 
(7) Filed as an exhibit to the Registrant’s annual report on Form 10K/A for the fiscal year ended September 30, 2008; Form of Common Stock Purchase Warrant issued in August 2008.
 
(8) Filed as an exhibit to the Registrant’s annual report on Form 10K for the fiscal year ended September 30, 2009; Morristown, NJ lease.
 
(9) Filed as an exhibit to the Registrant’s annual report on Form 10K for the fiscal year ended September 30, 2009; Shareholders Agreement between Tawreed Companies Representation and Boomerang USA Corp.
 
(10) Filed as an exhibit to the Current Report on Form 8-K for January 4, 2010.
 
25

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Audit Committee
Boomerang Systems, Inc.
Morristown, New Jersey

We have audited the accompanying consolidated balance sheets of Boomerang Systems, Inc. and Subsidiaries as of September 30, 2009 and 2008, and the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the years in the two year period ended September 30, 2009.  Boomerang Systems Inc. and Subsidiaries management is responsible for these financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing   the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Company as of September 30, 2009 and 2008, and the results of its operations and cash flows for each of the years in the two year period ended September 30, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has no material revenues, has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Liebman Goldberg & Hymowitz, LLP
Garden City, New York

January 6, 2010

 
F-1

 

BOOMERANG SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
September 30,
   
September 30,
 
   
2009
   
2008
 
         
(Restated)
 
             
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 1,032,160     $ 425,614  
Accounts receivable
    37,000       177,500  
Investment
    20,420       -  
Costs and estimated earned profits in excess of billings on completed contracts
    -       28,814  
Inventories
    180,890       80,488  
Prepaid expenses and other assets
    42,740       91,720  
Total current assets
    1,313,210       804,136  
                 
Property, plant and equipment, net
    263,252       242,616  
                 
    $ 1,576,462     $ 1,046,752  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
               
Current liabilities:
               
Accounts payable and accrued liabilities
  $ 563,797     $ 541,892  
Due to related party
    446,288       763,961  
Deposit payable
    19,403          
Debt, current portion - net of discount
    2,303,460       1,116,012  
Debt - related party
    -       1,000,000  
Total current liabilities
    3,332,948       3,421,865  
                 
Long term liabilities:
               
Debt- less current portion
    429,522       93,062  
Debt- related party
    1,000,000       -  
Total long term liabilities
    1,429,522       93,062  
                 
Total liabilities
    4,762,470       3,514,927  
                 
Stockholders' deficit:
               
Common stock, $0.001 par value; authorized shares 100,000,000 and 35,000,000 respectively; 61,193,610 and 16,490,363 issued and outstanding
    61,193       16,490  
Additional paid in capital
    14,673,734       5,742,536  
Accumulated (deficit)
    (17,920,935 )     (8,227,201 )
Total stockholders' (deficit)
    (3,186,008 )     (2,468,175 )
                 
    $ 1,576,462     $ 1,046,752  

See accompanying notes.

 
F-2

 

BOOMERANG SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008

   
2009
   
2008
 
         
(Restated)
 
Revenues:
           
System sales
  $ -     $ 938,140  
Total revenues
    -       938,140  
                 
Cost of Goods Sold
    -       (1,002,552 )
Gross Loss
    -       (64,412 )
                 
Expenses:
               
Sales and marketing
    958,587       1,052,147  
General and administrative expenses
    5,749,247       3,606,661  
Research and development
    1,226,020       1,575,619  
Depreciation and amortization
    41,290       18,684  
Total expenses
    7,975,144       6,253,111  
                 
Loss from operations
    (7,975,144 )     (6,317,523 )
                 
Other income (expenses):
               
Interest income
    4,186       9,611  
Interest expense
    (401,518 )     (123,945 )
Interest expense- debt discount
    (1,312,500 )     (187,500 )
Debt discount
    -       4,225  
Debt write off
    -       7,798  
Total other income (expenses)
    (1,709,832 )     (289,811 )
                 
Loss before provision for income taxes
    (9,684,976 )     (6,607,334 )
Provision for income taxes
    8,758       5,565  
                 
Net loss
  $ (9,693,734 )   $ (6,612,899 )
                 
Net loss per common share - basic and diluted
  $ (0.53 )   $ (0.43 )
                 
Weighted average number of shares - basic and diluted
    18,239,873       15,377,640  

See accompanying notes.

 
F-3

 

BOOMERANG SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                           
Additional
             
   
Common Stock
   
Preferred Stock
   
Paid in
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Total
 
                                           
Balance at December 6, 2006 (Inception)
    13,333,333     $ 13,333                 $ 1,604,077     $ -     $ 1,617,410  
                                                     
Net loss
    -       -       -       -       -       (1,614,302 )     (1,614,302 )
                                                         
Balance September 30, 2007
    13,333,333       13,333                       1,604,077       (1,614,302 )     3,108  
                                                         
Recapitalization of the Company
    1,157,030       1,157                       (690,327 )     -       (689,170 )
Issuance of Common Stock - Private Placement
    2,000,000       2,000                       1,725,523       -       1,727,523  
Issuance of Stock Options for services
    -       -                       1,603,263       -       1,603,263  
Debt discount for warrants attached to promissory notes
                                    1,500,000               1,500,000  
Net loss
    -       -       -       -       -       (6,612,899 )     (6,612,899 )
Balance as of September 30, 2008
    16,490,363       16,490       -       -       5,742,536       (8,227,201 )     (2,468,175 )
                                                         
Options for services
                                    184,150               184,150  
S&S Forgiveness of Debt- 3/18/09
                                    685,434               685,434  
Issuance of Preferred Stock- Private Placement
                    18,950       190       1,894,810               1,895,000  
Issuance of Preferred Stock- Converison of Debt
                    14,659       146       1,465,754               1,465,900  
Convert Preferred to Common Stock
    33,609,000       33,609       (33,609 )     (336 )     (33,273 )             -  
Issuance of August 2009 Post-Maturity Warrants
                                    1,806,406               1,806,406  
Issuance of September 2009 Post-Maturity Warrants
                                    1,829,586               1,829,586  
Issuance of Common Stock- Private Placement
    10,650,000       10,650                       1,054,350               1,065,000  
Issuance of Common Stock- Converison of Interest (Debt)
    444,247       444                       43,981               44,425  
Net loss
                                            (9,693,734 )     (9,693,734 )
                                                         
Balance as of September 30, 2009
    61,193,610     $ 61,193       0     $ 0     $ 14,673,734     $ (17,920,935 )   $ (3,186,008 )

See accompanying notes.

 
F-4

 

BOOMERANG SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008

   
2009
   
2008
 
         
(Restated)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (9,693,734 )   $ (6,612,899 )
Adjustments to reconcile net loss operations to net cash (used in) operating activities:
               
Depreciation
    41,290       18,684  
Grant of options for services
    184,150       1,603,263  
Amortization of debt discount
    1,312,500       187,500  
Post-Maturity Warrants
    3,635,992       -  
Changes in assets and liabilities:
               
Decrease/ (increase) in accounts receivable
    140,500       (177,500 )
Decrease/ (increase)  in costs and estimated earned profits in excess of billings on completed contracts
    28,814       (28,814 )
Increase in inventories
    (100,402 )     (80,488 )
Decrease in prepaid expenses and other assets
    48,980       (50,066 )
Increase in accounts payable and accrued liabilities
    66,330       576,421  
Increase in accrued interest payable
     211,408        49,818  
Increase in due to related party
    367,761       114,340  
Increase in deposit payable
    19,403       -  
NET CASH (USED IN) OPERATING ACTIVITIES
    (3,737,008 )     (4,399,741 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of property, plant and equipment
    (61,926 )     (253,624 )
Purchase of Investment
     (20,420 )        
Cash of Digital upon reverse merger
    -       10,847  
NET CASH (USED IN) INVESTING ACTIVITIES
    (82,346 )     (242,777 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from loans payable
    0       4,175,000  
Repayment of loans payable
    0       (1,190,000 )
Proceeds from private placement- preferred stock
     1,895,000          
Proceeds from debt converted into preferred stock
     1,465,900          
Proceeds from private placement- common stock
     1,065,000        1,727,523  
NET CASH PROVIDED BY FINANCING ACTIVITIES
    4,425,900       4,712,523  
                 
INCREASE IN CASH AND CASH EQUIVALENTS
    606,546       70,005  
CASH AND CASH EQUIVALENTS - beginning of year
    425,614       355,609  
                 
CASH AND CASH EQUIVALENTS- end of year
  $ 1,032,160     $ 425,614  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:
               
Cash paid for:
               
Interest
  $ 28,387     $ 43,786  
Income taxes
  $ 8,758     $ 5,565  
                 
Non-cash investing and financing activities:
               
Discount on debt issued with warrants attached
  $ -     $ 1,500,000  
Shareholder forgiveness of debt contributed as capital
  $ 685,434     $ -  
Shareholder bridge loans interest converted to common stock
  $ 44,425     $ -  

See accompanying notes.

 
F-5

 
 
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008

Note 1- Summary of Significant Accounting Policies
 
Organization and Nature of Operations

Boomerang Systems, Inc. a Utah corporation (“Boomerang Utah”) was incorporated under the laws of the State of Utah on December 6, 2006.

On February 6, 2008, Boomerang entered into an agreement with Digital Resources, Inc, (“Digital”) (formerly Dominion Resources, Inc.), a Delaware corporation. Under the terms of the agreement (the “Acquisition”) Digital issued as consideration for all the business, assets and liabilities of Boomerang Utah 13,333,333 shares (on a post one-for-fifteen reverse split basis) of Digital. Subsequent to the Acquisition, Boomerang Utah became a wholly owned subsidiary of Digital, with the shareholders of Boomerang owing approximately 80.9% of Digital. Under generally accepted accounting principles, the acquisition by Digital of Boomerang Utah is considered to be capital transactions in substance, rather than a business combination. That is, the acquisition is equivalent, to the acquisition by Boomerang Utah of Digital. As the Acquisition was a capital transaction, and not a business combination, there is no assigned goodwill or other intangible asset resulting from the Acquisition.

This transaction is reflected as a recapitalization, and is accounted for as a change in capital structure.  Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition. Under reverse acquisition accounting, the comparative historical financial statements of Digital, as the legal acquirer, are those of the accounting acquirer, Boomerang Utah.  The accompanying financial statements reflect the recapitalization of the stockholders’ equity as if the transactions occurred as of the beginning of the first period presented.  Thus, the 13,333,333 shares of common stock issued to the former Boomerang Utah stockholders are deemed to be outstanding for all periods reported prior to the date of the reverse acquisition.  Hereinafter Digital or Boomerang Utah are to be referred to as the “Company”, unless specific reference is made to a particular company or a subsidiary of a company.

Concurrent with the Acquisition on February 6, 2008, and required as part of the Acquisition, the Company (i) a private placement of 2,000,000 post-split shares of our Common Stock pursuant to a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, (the “Securities Act”) resulting in net proceeds to us of approximately $1,700,000, (ii) the completion of a one-for-fifteen reverse stock split of our outstanding shares, and (iii) completion by the Company of all filing requirements under the Securities Exchange Act of 1934, as amended, and the passage of all notice periods.

Concurrently with the closing of the Acquisition, the Company changed its corporate name to Boomerang Systems, Inc.  The Company, through its wholly owned subsidiary, Boomerang Utah, is engaged in the design, development, and marketing of automated racking and retrieval systems for automobile parking and automated racking and retrieval of containerized self-storage units. The Company was a developmental stage company through the first quarter of fiscal 2008.

Our fiscal year end is September 30th.  We define fiscal year 2009 as the twelve month period ending September 30, 2009.
 
Principles of Consolidation
 
The accompanying consolidated financial statements include the accounts of Boomerang Systems, Inc. and the accounts of all majority-owned subsidiaries. The consolidated balance sheet is a classified presentation, which distinguishes between current and non-current assets and liabilities. The Company believes that a classified balance sheet provides a more meaningful presentation consistent with the business cycles of the Company's operations. All significant inter-company accounts and transactions have been eliminated in consolidation.

Codification of Accounting Standards

The issuance of FASB Accounting Standards Codificationtm (the “Codification”) on July 1, 2009 (effective for interim or annual reporting periods ending after September 15, 2009), changes the way that U.S. generally accepted accounting principles (“GAAP”) are referenced. Beginning on that date, the Codification officially became the single source of authoritative nongovernmental GAAP; however, SEC registrants must also consider rules, regulations, and interpretive guidance issued by the SEC or its staff. The switch affects the way companies refer to GAAP in financial statements and in their accounting policies. All existing standards that were used to create the Codification became superseded. Instead, references to standards will consist solely of the number used in the Codification’s structural organization.  Consistent with the effective date of the Codification, financial statements for periods ending after September 15, 2009, refers to the Codification structure, not pre-Codification historical GAAP.

 
F-6

 

Note 1- Summary of Significant Accounting Policies (continued)

Research and Development
 
Pursuant to ASC 730 (formerly SFAS No. 2), research and development costs are expensed as incurred.  Research and development costs for the years ended September 30, 2009 and 2008 were $1,226,020 and $1,575,619; respectively.

Going Concern

Our financial statements have been prepared on a going-concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We sustained a substantial loss in fiscal 2009 of $9,693,734. For the year ended September 30, 2008, we incurred a net loss of $6,612,899. We had negative cash flow from operations for the year ended September 30, 2009 and during the year ended September 30, 2008 in the amount of $3,737,008 and $4,399,741, respectively. For the year ended September 30, 2009 our liabilities exceeded its assets by $3,186,008 and at September 30, 2008, our liabilities exceeded our assets by $2,468,175.

These factors create uncertainty whether we can continue as a going concern. Our plans to mitigate the effects of the uncertainties on our continued existence are: 1) to raise additional equity capital; 2) to restructure our existing debt; and 3) to pursue our business plan and seek to generate positive operating cash flow. Management believes that these plans can be effectively implemented in the next twelve-month period. However, our ability to continue as a going concern is dependent on the implementation and success of these plans. The financial statements do not include any adjustments in the event we are unable to continue as a going concern.

Earnings Per Common Share
 
We adopted ASC 260 (formerly FASB No. 128, "Earnings per Share"). The statement established standards for computing and presenting earnings per share (“EPS”). It replaced the presentation of primary EPS with a basic EPS and also requires dual presentation of basic and diluted EPS on the face of the income statement. Basic income/ (loss) per share was computed by dividing our net income/(loss) by the weighted average number of common shares outstanding during the period. The weighted average number of common shares used to calculate basic and diluted income/(loss) per common share for the year ended September 30, 2009 and 2008 was 18,239,873 and 15,377,640 respectively.  The Company’s common stock equivalents, of outstanding options and warrants, have not been included as they are anti-dilutive. As of September 30, 2009, there were options outstanding for the purchase of 2,507,686 common shares and warrants for the purchase of 6,678,031 common shares, both of which could potentially dilute future earnings per share.
 
Revenue Recognition

Revenues from manufacturing contracts are recognized using the percentage-of-completion method of accounting. Under this method, revenues earned are primarily recorded based on the contract. Measurement by the percentage of cost incurred to date to estimated total cost for each contract.  This method is used because management considers total cost to be the best available measure of progress on the contracts.  Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.

Contract costs include all direct material, labor, freight, and equipment costs, and those indirect costs related to contract performance such as indirect labor, overhead, supplies, shop, and tool costs. Selling, general, and administrative costs are charged to expense when incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined.  Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period.   The asset "Costs and estimated earned profits in excess of billings on uncompleted contracts" represents revenues recognized in advance of amounts billed. The liability “Billings in excess of costs and estimated earned profits on uncompleted contracts" represents billings in advance of revenues recognized and contemplated losses on contracts in progress.
 
Cash Equivalents
 
For purposes of the statement of cash flows, we consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

 
F-7

 

Note 1- Summary of Significant Accounting Policies (continued)

Accounts Receivable and Allowance for Doubtful Accounts

Trade receivables are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.  We consider our accounts receivables to be favorably collectible.  Accordingly, we have not recorded an allowance for doubtful accounts at September 30, 2009 and 2008, respectively.

Inventory

Inventories consisting of parts, materials, and assemblies are stated at the lower of cost or market. Cost is determined using the weighted average cost method.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred. Costs of major additions and betterments are capitalized. Depreciation is calculated on the straight-line method over the estimated useful lives which range from three years to thirty-nine years. Depreciation and amortization for the years ended September 30, 2009 and September 30, 2008 was $41,290 and $18,684, respectively.
 
Income Taxes
 
We account for income taxes under ASC 740-10 (formerly SFAS No. 109, "Accounting for Income Taxes"). ASC 740-10 requires an asset and liability approach for financial reporting for income taxes. Under ASC 740-10, deferred taxes are provided for temporary differences between the carrying values of assets and liabilities for financial reporting and tax purposes at the enacted rates at which these differences are expected to reverse. The Company and its subsidiaries file a consolidated Federal income tax return.

Use of Estimates

Management of the Company has made estimates and assumptions relating to reporting of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates.
 
Impairment of Long-Lived Assets
 
We review the long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine if impairment exists, we compare the estimated future undiscounted cash flows from the related long-lived assets to the net carrying amount of such assets. Once it has been determined that an impairment exists, the carrying value of the asset is adjusted to the fair value. Factors considered in the determination of the fair value include current operating results, trends and the present value of estimated expected future cash flows.
 
Fair Value of Financial Instruments
 
The Company has adopted the required provisions of Topic 820, “Fair Value Measurements”. Those provisions relate to our financial assets and liabilities carried at fair value and our fair value disclosures related to financial assets and liabilities. Topic 820 defines fair value, expands related disclosure requirements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels of inputs to fair value measurements - Level 1, meaning the use of quoted prices for identical instruments in active markets; Level 2, meaning the use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable; and Level 3, meaning the use of unobservable inputs. Observable market data should be used when available.

The Company’s financial instruments are carried at fair value, including, cash equivalents. Virtually all of the Company’s valuation measurements are Level 1 measurements. The adoption of Topic 820 did not have a significant impact on the Company’s consolidated financial statements.
 
Advertising Expense

Advertising costs amounted to $213,225 and $382,707 for the years ended September 30, 2009 and 2008, respectively. Advertising costs are expensed as incurred.

 
F-8

 

Note 1- Summary of Significant Accounting Policies (continued)

Stock-Based Compensation

The analysis and computation was performed based on our adoption of ASC 718-10-25 (formerly FAS No. 123R, share-based payment), which requires the recognition of the fair value of stock-based compensation.  For the fiscal year-ended September 30, 2009, we conducted an outside independent analysis and our own review, and based on the results, we recognized $184,150 in share-based payments related to non-vested stock options that were issued during fiscal year 2009.
 
Reclassification

Certain fiscal year ended September 30, 2008 items have been reclassified to conform with the fiscal year ended September 30, 2009 presentation.
 
Recent Accounting Pronouncements
 
EITF Issue No. 07-5 (ASC 815), “Determining Whether an Instrument (or embedded Feature) is Indexed to an Entity’s Own Stock” (EITF 07-5) was issued in June 2008 to clarify how to determine whether certain instruments or features were indexed to an entity’s own stock under EITF Issue No. 01-6 (ASC 815), “The Meaning of “Indexed to a Company’s Own Stock” (EITF 01-6) (ASC 815),. EITF 07-5(ASC 815), applies to any freestanding financial instrument (or embedded feature) that has all of the characteristics of a derivative as defined in FAS 133, for purposes of determining whether that instrument (or embedded feature) qualifies for the first part of the paragraph 11(a) scope exception. It is also applicable to any freestanding financial instrument (e.g., gross physically settled warrants) that is potentially settled in an entity’s own stock, regardless of whether it has all of the characteristics of a derivative as defined in FAS 133 (ASC 815), for purposes of determining whether to apply EITF 00-19 (ASC 815). EITF 07-5(ASC 815) does not apply to share-based payment awards within the scope of FAS 123(R), Share-Based Payment (FAS 123(R) (ASC 718)). However, an equity-linked financial instrument issued to investors to establish a market-based measure of the fair value of employee stock options is not within the scope of FAS 123(R) and therefore is subject to EITF 07-5(ASC 815).

-
In January 2009, the FASB issued FSP EITF 99-20-1 (ASC 325), to amend the impairment guidance in EITF Issue No. 99-20 (ASC 325) in order to achieve more consistent determination of whether an other-than-temporary impairment (“OTTI”) has occurred. This FSP amended EITF 99-20 (ASC 325) to more closely align the OTTI guidance therein to the guidance in Statement No. 115 (ASC 320, 10-35-31). Retrospective application to a prior interim or annual period is prohibited. The guidance in this FSP was considered in the assessment of OTTI for various securities at December 31, 2008.

-
On June 5, 2003, the United States Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-9072 on October 13, 2009. Commencing with its annual report for the year ending March 31, 2011, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement of:

 
-
management’s responsibility for establishing and maintaining adequate internal control over its financial reporting;
 
-
management’s assessment of the effectiveness of its internal control over financial reporting as of year end; and
 
-
the framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting.

Furthermore, it is required to file the auditor’s attestation report separately on the Company’s internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting. 
 
-  
In June 2009, the FASB approved the “FASB Accounting Standards Codification” (the “Codification”) as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. The Codification is effective for interim and annual periods ending after September 15, 2009. 

F-9

-
In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-04 “Accounting for Redeemable Equity Instruments - Amendment to Section 480-10-S99” which represents an update to section 480-10-S99, distinguishing liabilities from equity, per EITF Topic D-98, Classification and Measurement of Redeemable Securities. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.
 
 
-
In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-05 “Fair Value Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair Value”, which provides amendments to subtopic 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. This update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1. A valuation technique that uses: a. The quoted price of the identical liability when traded as an asset b. Quoted prices for similar liabilities or similar liabilities when traded as assets. 2. Another valuation technique that is consistent with the principles of topic 820; two examples would be an income approach, such as a present value technique, or a market approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. The amendments in this update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The amendments in this update also clarify that both a quoted price in an active market for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows. 
 
 
-
In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-08 “Earnings Per Share – Amendments to Section 260-10-S99”,which represents technical corrections to topic 260-10-S99, Earnings per share, based on EITF Topic D-53, Computation of Earnings Per Share for a Period that includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.
 
 
-
In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-09 “Accounting for Investments-Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees”. This update represents a correction to Section 323-10-S99-4, Accounting by an Investor for Stock-Based Compensation Granted to Employees of an Equity Method Investee. Additionally, it adds observer comment Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees to the Codification. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

-  
In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-12 “Fair Value Measurements and Disclosures Topic 820 – Investment in Certain Entities That Calculate Net Assets Value Per Share (or Its Equivalent)”, which provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this update permit, as a practical expedient, a reporting entity to measure the fair value of an investment that is within the scope of the amendments in this update on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner consistent with the measurement principles of Topic 946 as of the reporting entity’s measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with Topic 820. The amendments in this update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this update, such as the nature of any restrictions on the investor’s ability to redeem its investments at the measurement date, any unfunded commitments (for example, a contractual commitment by the investor to invest a specified amount of additional capital at a future date to fund investments that will be make by the investee), and the investment strategies of the investees. The major category of investment is required to be determined on the basis of the nature and risks of the investment in a manner consistent with the guidance for major security types in U.S. GAAP on investments in debt and equity securities in paragraph 320-10-50-1B. The disclosures are required for all investments within the scope of the amendments in this update regardless of whether the fair value of the investment is measured using the practical expedient. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.
 
  
A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.
 
Note 2- Restatement and Correction of Error of Previously Issued Financial Statements for Year Ended September 30, 2008

The financial statements for the fiscal years ended September 30, 2008 have been restated to correct the accounting treatment previously accorded certain transactions.
·
In February 2008, Digital entered into a merger agreement with Boomerang Systems, Inc.  For accounting purposes this was a reverse merger.  Originally the Company had used the beginning balances for the fiscal year of the legal acquirer not the accounting acquirer.  The Company has recapitalized the accounting acquiree, Digital.
·
The Company’s Consolidated Statement of Stockholders’ Deficit did not reflect the 13,333,333 shares of common stock from the merger and the 1 for 15 stock split retroactively.  This has been corrected as of this Amendment.
·
During the fourth quarter of fiscal 2008, the Company issued warrants that accompanied promissory notes for $1,500,000.  The warrants were valued at $2,245,596 using the Black-Scholes valuation model and expensed.    The Company has recorded a debt discount with regards to these warrants to their maximum proportional value relative to the debt of $1,500,000.  This discount is to be amortized over the life of the loan, twelve months.  The Company amortized $187,500, with regards to the debt discount for the year ended September 30, 2008.  A total of $1,312,500 has not been amortized as of September 30, 2008.  The general and administration expense for this fiscal year has been reduced by $2,245,596.

 
F-10

 

Note 2- Restatement and Correction of Error of Previously Issued Financial Statements for Year Ended September 30, 2008 (continued)

 
·
During the second quarter of fiscal year 2008, the Company granted stock options that have a vesting provision, for which the corresponding expense for the vesting that occurred during the year ended September 30, 2008 was not recognized. During the year ended September 30, 2008 we have now recognized $53,904, as it relates to the expense for these vesting options.
 
·
During the year ended September 30, 2008, the Company incorrectly recorded an expense of $67,360 for warrants associated with the equity sale of 2,000,000 shares of the Company’s common stock on February 6, 2008. These warrants were issued as fees with this exclusive equity cash raise for the Company.  There is no expense associated with the granting of warrants in connection with the sale of this equity.

Balance Sheet components of the restatement data as of September 30, 2008 are as follows:

Assets
 
As Filed
   
Restated
   
Change
 
Cash
    425,614       425,614       -  
Accounts Receiveable
    177,500       177,500       -  
Excess Billings
    28,814       28,814       -  
Inventories
    80,488       80,488       -  
Prepaid
    91,720       91,720       -  
Property Plant
    242,616       242,616       -  
Total Assets
    1,046,752       1,046,752          
                         
Liabilitites
                       
Accounts Payable
    1,191,513       1,305,853       (114,340 )
Debt-current
    3,542,852       2,116,012       1,426,840  
Debt-long term
    93,062       93,062       -  
Total Liabilties
    4,827,427       3,514,927          
                         
Stockholders' Deficit
                       
Common Stock
    16,490       16,490       -  
Additional Paid in Capital
    4,899,178       5,742,536       (843,358 )
Accumulated Deficit
    (8,696,343 )     (8,227,201 )     (469,142 )
Total Stockholders' Deficit
    (3,780,675 )     (2,468,175 )        
Total Liabilities & Stockholders' Deficit
    1,046,752       1,046,752          

 
F-11

 

Note 2- Restatement and Correction of Error of Previously Issued Financial Statements for Year Ended September 30, 2008 (continued)

Details/Adjustments on Changes to the Balance Sheet
       
Category
 
As Filed
   
Note
   
Change
   
Restated
 
Accounts Payable
    1,191,513                   1,191,513  
           
(a)
      114,340       114,340  
                      114,340       1,305,853  
                                 
Debt-current
    3,542,852                       3,542,852  
           
(a)
      (114,340 )     (114,340 )
           
(b)
      (1,500,000 )     (1,500,000 )
           
(c)
      187,500       187,500  
                      (1,426,840 )     2,116,012  
                                 
Additional Paid in Capital
    4,899,178                       4,899,178  
           
(b)
      1,500,000       1,500,000  
           
(d)
      (2,245,596 )     (2,245,596 )
           
(e)
      53,904       53,904  
           
(f)
      (67,360 )     (67,360 )
           
(g)
      1,602,410       1,602,410  
                      843,358       5,742,536  
                                 
Accumulated Deficit
    (8,696,343 )                     (8,696,343 )
           
(c)
      (187,500 )     (187,500 )
           
(d)
      2,245,596       2,245,596  
           
(e)
      (53,904 )     (53,904 )
           
(f)
      67,360       67,360  
           
(g)
      (1,602,410 )     (1,602,410 )
                      469,142       (8,227,201 )

 
F-12

 

Note 2- Restatement and Correction of Error of Previously Issued Financial Statements for Year Ended September 30, 2008 (continued)

Statements of Operations components of the restatement data for the year ended September 30, 2008 are as follows:

   
As Filed
   
Restated
   
Change
 
 System Sales
    938,140       938,140       -  
                         
 COGS
    (1,002,552 )     (1,002,552 )     -  
                         
 Gross (Loss)
    (64,412 )     (64,412 )        
                         
 Expenses
                       
 Other Operations
    -       -       -  
 Sales & Marketing
    1,052,147       1,052,147       -  
 General & Administrative
    5,865,713       3,606,661       2,259,052  
 Research & Development
    1,575,619       1,575,619       -  
 Depreciation & Amortization
    18,684       18,684       -  
 Total Expenses
    8,512,163       6,253,111          
                         
 (Loss) from Operations
    (8,576,575 )     (6,317,523 )     (2,259,052 )
                         
 Other Income(Expenses)
                       
 Interest Income
    9,611       9,611       -  
 Interest Expense
    (123,945 )     (311,445 )     187,500  
 Debt Discount
    4,225       4,225       -  
 Debt Write Off
    7,798       7,798       -  
 Total Other Income(Expenses)
    (102,311 )     (289,811 )        
                         
 (Loss) Before Provision for Income Taxes
    (8,678,886 )     (6,607,334 )     (2,071,552 )
 Provision for Income Taxes
    5,565       5,565       -  
                         
 Net (Loss)
    (8,684,451 )     (6,612,899 )     (2,071,552 )

 
F-13

 

Note 2- Restatement and Correction of Error of Previously Issued Financial Statements for Year Ended September 30, 2008 (continued)

Details/Adjustments on Changes to the Statement of Operations
             
Category
 
As Filed
   
   Note
   
Change
   
Restated
 
General & Administrative
    5,865,713                   5,865,713  
           
(d)
      (2,245,596 )     (2,245,596 )
           
(e)
      53,904       53,904  
           
(f)
      (67,360 )     (67,360 )
                      (2,259,052 )     3,606,661  
                                 
Interest Expense
    123,945    
(c)
      187,500       311,445  
                                 
                                 
Net Loss
    (8,684,451 )                     (8,684,451 )
           
(d)
      2,245,596       2,245,596  
           
(e)
      (53,904 )     (53,904 )
           
(f)
      67,360       67,360  
           
(c)
      (187,500 )     (187,500 )
                      2,071,552       (6,612,899 )
                                 
Earnings Per Share:
                               
Basic Net Loss per Common Share
    (0.78 )  
(h)
      0.35       (0.48 )
Diluted Net Loss per Common Share
    (0.78 )  
(h)
      0.35       (0.48 )
                                 
Weighted Average Number of Shares- Basic
    11,127,886    
(i)
      4,249,754       15,377,640  
Weighted Average Number of Shares- Diluted
    11,127,886    
(i)
      4,249,754       15,377,640  

(a)-
Reclassification deferred rent to accounts payable and accured expenses from debt-current.
(b)-
Recording the debt discount for the warrants that accompany the promissory notes to their maximum proportional value relative to the debt.
(c)-
Recording the amortization for the debt discount for the quarter and year ended September 30, 2008.
(d)-
To reverse the initial entry to record the value of the warrants that accompanied the promissiory notes.
(e)-
To record expenses for vested portion for granted options that vest over three years in accordance with FAS No. 123 (R).
(f)-
To reverse an expense recorded for warrants granted in connection with the sale of common stock in a private placement.  There should be no expense associated with regards to the warrants.
(g)-
To adjust the capital and accumulated deficit accounts to reflect an acquisition that is the equivalent of the acquisition by Boomerang Utah of Digital. The transaction is reflected as a recapitalization, and is accounted for as a change in capital structure.  The accounting for the aquisition is identical to that resulting from a reverse aquisition.  This entry is made to properly reflect the historical equity of Boomerang Utah.
(h)-
As a result of the above entries that effected earnings, the earnings per share are affected based on the cummulative effect of these entries.
(i)-
To correct weighting of shares as a result of the recapitalization and the change in capital structure.

 
F-14

 
 
Note 3- Investments

The Company made a minimum capital investment of $20,420 in the United Arab Emirates “UAE” joint venture, Boomerang Systems Middle East, LLC.  This investment was part of the application process in obtaining a commercial license in the UAE.  This license was granted on October 26, 2009. Boomerang Systems Middle East, LLC is owned by Boomerang Systems USA Corp. (49%), a subsidiary of Boomerang Systems, Inc., and Tawreed Companies Representation (51%), a UAE company.
 
Note 4- Cost in Excess of Billings/Billings of Excess Costs

We entered into contracts for the construction of Racking and Retrieval Systems and generally recognize revenue on the percentage of completion method. We entered into two contracts for $938,140 in 2008.

Information with respect to uncompleted contracts for the year ended September 30, 2009 and 2008 are as follows:
 
   
2009
   
2008
 
Earnings on Completed contracts
  $ 0     $ 938,140  
Less Billings      (0 )     (909,326 )
                 
Included in the accompanying consolidated Balance sheets under the following captions:
               
                 
Costs and estimated earned profits in excess Of billings on uncompleted contracts
    28,814       28,814  
Billings in excess of costs and estimated Earned profits on uncompleted contracts
    (28,814 )     0  
Net Costs to Billings
  $ 0     $ 28,814  

Note 5- Inventory

The components of inventories as of September 30, 2009 and 2008 were respectively:
 
   
2009
   
2008
 
Raw materials (parts and assemblies)
  $ 180,890     $ 80,488  
Work-in-process
    0       0  
Finished goods
    0       0  
Total inventories
  $ 180,890     $ 80,488  
 
Note 6- Property, Plant and Equipment

Property, plant and equipment consist of the following at September 30, 2009 and 2008:
 
   
2009
   
2008
 
Computer equipment
  $ 132,128     $ 84,545  
Machinery and equipment
    96,855       94,492  
Furniture and fixtures
    32,858       30,476  
Leasehold improvements
    62,469       52,871  
      324,310       262,384  
Less: Accumulated depreciation
    61,058       19,768  
    $
263,252
     $ 242,616    
 
F-15


Note 7- Accounts Payable and Accrued Liabilities
 
Accounts payable and other liabilities at September 30, 2009 and 2008 consist of the following:
 
   
2009
   
2008
 
Accounts payable - trade
  $ 423,174     $ 289,562  
Accrued interest and other expenses
    140,623       252,330  
Total
  $ 563,797     $ 541,892  
 
Note 8- Income Taxes
 
The tax expense (benefit) for the years ended September 30, 2009 and 2008 consists of the following components:
 
   
2009
   
2008
 
             
Current
  $ -0-     $ -0-  
Federal
    -0-       -0-  
State
    8,758       5,565  
Deferred
               
Federal
    -0-       -0-  
State
    -0-       -0-  
                 
    $ 8,758     $ 5,565  
 
The income tax benefit for the year does not bear the expected relationship between pretax loss and the Federal corporate income tax rate of 34% because of the direct effect of state and local income taxes.
 
The income tax benefit for the year does not bear the expected relationship between pretax loss and the federal corporate income tax rate of 34% because of the direct effect of state and local income taxes.
 
The reconciliation between the actual and expected federal tax is as follows:
 
   
2009
   
2008
 
Federal corporate tax rate of 34% and applicable AMT applied to pretax loss
  $ -0-     $ -0-  
State and local taxes, net of federal benefit
    8,758       5,565  
Effect of non-deductible entertainment
    -0-       -0-  
Effect of tax vs. book depreciation
    -0-       -0-  
Effect of capital loss carry forward
    -0-       -0-  
Effect of NOL limitation
    -0-       -0-  
Total tax expense (benefit)
  $ 8,758     $ 5,565  
 
Deferred income taxes consists of the following at September 30, 2009 and 2008:
 
   
2009
   
2008
 
             
Deferred tax assets
  $ 858,500     $ 568,089  
Deferred tax liabilities
    -0-       -0-  
Valuation allowance
    (858,500 )     (568,089 )
Total
  $ 0     $ 0  
 
As of September 30, 2009 the Company had net operating losses (NOL) of approximately $2,525,000. This amount is available to be carried forward to offset future taxable income. The carry forwards begin to expire for the year ended September 30, 2027.  The company has provided a full 100% valuation allowance on the deferred tax assets at September 30, 2009 and 2008 to reduce such deferred income tax assets to zero as it is the management’s belief that realization of such amounts do not meet the criteria required by generally accepted accounting principles. Management will review the valuation allowance required periodically and make adjustments as warranted.
 
F-16

 
Note 8- Income Taxes (continued)
 
Under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), the utilization of net operating loss carry forwards is limited under the change in stock ownership rules of the Code. As a result of ownership changes, which occurred February 6, 2008, the Company's operating loss carry forwards are subject to these limitations. Future ownership changes could also further limit the utilization of any net operating loss carry forwards as of that date.

Note 9- Debt

Effective February 6, 2008, subsequent to the reverse merger, the Company was indebted for an unsecured loan with a third party.  The loan is not collateralized and bears interest of 10%.  As of September 30, 2009 the loan is due on demand.  The balance of the loan including interest at September 30, 2009 is $72,904.
 
On April 30, 2009, a third party lender has agreed to extend the loan maturity date to December 31, 2010, originally it was due on demand. The interest rate remains the same at 12%. The total amount due as of the period ended September 30, 2009 is $363,053. There has been no forgiveness of debt of this loan. This unsecured loan was classified as current debt as of September 30, 2008, is now classified as long-term debt.
 
S&S Worldwide, Inc. (“S&S”), has, since Boomerang’s inception, provided Boomerang with consulting services and purchased for resale to Boomerang the parts and components used in the manufacture and construction of the two existing Boomerang automated parking and self-storage pilot systems and utilized in Boomerang’s research and development activities. The services, parts, components and other activities of S&S have been charged by S&S to Boomerang based on the actual cost to S&S of the time and materials plus an override of 5%. During March 2009, S&S has forgiven $692,697 of this debt. This is being considered as a capital contribution due to Mr. Checketts, our CEO, was S&S’s CEO at the time.  This is recorded in additional paid in capital.

Through our wholly owned subsidiary Boomerang Utah, we renewed two loan agreements with a non-affiliated bank.  A $200,000 loan had a maturity date of February 16, 2009 with an interest rate of 5.05%.  This loan has been extended to May 16, 2010 with an interest rate of 3.50%.  A $285,000 loan had a maturity date of March 14, 2009 with an interest rate of 4.71%. This loan has also been extended to May 14, 2010 with an interest rate of 3.341%.  With each extension on the stated loans we paid the interest that was accrued to the maturity date and the interest rates were updated to reflect the current market rates. The Company does not view these loans as being substantially modified, but rather having been rolled over into new loans.  There has been no forgiveness of debt under these loans.  Both of these loans are secured by a related party.
 
On April 30, 2009, the J and A Financing Inc. loan agreement, originally due on demand, has been amended to provide a maturity date of December 31, 2010. The interest rate remains the same at 9% and the principle amount due at September 30, 2009 is $1,000,000. There has been no forgiveness of debt on this loan. This loan was classified as current debt as of September 30, 2008, is now classified as long-term debt- related party and is unsecured.
 
During the fourth quarter of fiscal 2008, we issued the August 2008 Promissory Notes , which included $1,500,000 principal amount of the Company’s promissory notes due twelve months from issuance or in August 2009 with interest accruing at the rate of 12% per annum payable currently at 1% per month. Issued with the promissory notes were five-year common stock purchase warrants exercisable at $1.25 per share to purchase an aggregate of 1,500,000 shares of Common Stock, or one warrant for each $1.00 of notes purchased. The promissory notes went into default on August 31, 2009.  In the event the promissory notes and any accrued but unpaid interest were not paid at maturity, the holder of the notes is to be issued additional five-year common stock purchase warrants exercisable at a per common share exercise price equal to 80% of the average of the last sale prices for the Company’s Common Stock during the most recent ten trading days prior to the date of issuance of the warrants and, in the event last sale prices are unavailable for a full ten trading days, such additional number of trading days immediately prior to such ten trading day period so as to total the most recent ten trading days during which last sale prices are available. The warrants are issued at the rate of warrants to purchase 1.5 shares for each dollar of principal and accrued interest that remains unpaid for each 30-day period after maturity of the notes. The Company used the Black-Scholes Method to calculate the value of these warrants.  As of September 11, 2009; the Company has decided to use its’ resources for Research and Development and has elected not to pay these Notes when due.  Through September 30, 2009, we have issued Post-Maturity or Default warrants to purchase an aggregate of 5,128,031 shares of the Company’s Common Stock of which warrants to purchase 2,551,681 shares are exercisable at $0.72 and warrants to purchase 2,576,350 shares are exercisable at $0.69.  The Company is using the Black Scholes Method to calculate the value of these warrants as well.  Please see Note 15- Subsequent Events for additional information.

The value of the initial warrants has been allocated based on their fair value to entire debt. The Company valued the warrants to their maximum value in proportion to the entire of the $1,500,000 in debt. The warrants were valued at $2,245,596 using a Black-Scholes valuation model with the following assumptions were used to calculate the fair value of the warrants: dividend yield of 0%; expected volatility of 272.9%; risk-free interest rate of 1.61%; an expected life of five years; fair value of the stock on the date of the debt agreement was $1.50 per share.  The Company has recorded a debt discount with regards to these warrants to their maximum proportional value relative to the debt of $1,500,000. This discount is to be amortized over the life of the loan. The Company has fully amortized the $1,500,000 of the debt discount by the year ended September 30, 2009.  There is no unamortized portion of the debt discount as of September 30, 2009.
 
F-17

 
Note 9- Debt (continued)
 
   
Principal
           
   
As of September 30,
     
Interest
   
   
2009
   
2008
 
Maturity Date
 
Rate
 
Secured
Loan Payable- Third Party
    72,904       70,961  
Due Upon Demand
    10 %
No
Loan Payable- Third Party
            325,428  
Due Upon Demand as of 9/30/2008
    15 %
No
Promissory Notes- Third Party
    1,718,963       1,522,188  
Past Due
    12 %
No
Note Payable- Bank
    200,000       200,000  
5/16/2010
    3.50 %
Yes
Note Payable- Bank
    285,000       285,000  
5/14/2010
    3.341 %
Yes
Loan Payable- Third Party
            1,000,000  
Due Upon Demand as of 9/30/2008
    9 %
No
Lease Payable- Bank (current portion)
    26,593        24,935  
9/30/2010
    6.448 %
No
Sub-total:
    2,303,460       3,428,512              
                             
Debt Discount at September 30, 2008
    (1,312,500 )     (1,500,000 )            
Less: Amortized Debt Discount for Year Ended September 30, 2009
    1,312,500       187,500              
Unamortized Debt Discount at September 30, 2009
    (0 )     (1,312,500 )            
Total:
  $ 2,303,460       2,116,012              
 
F-18

 
Note 10- Long-Term Debt

Long-term debt at September 30, 2009 consisted of the following:

At September 30, 2009
 
Principal
 
Maturity Date
 
Interest Rate
 
Secured
Loan Payable- Third Party
    363,053  
12/31/2010
    12 %
No
Lease Payable- Bank
    66,469  
12/31/2012
    6.448 %
No
                                                           Sub-total:
    429,522              
                     
Loan Payable- Related Party
    1,000,000  
12/31/2010
    9 %
No
                                                                 Total:
  $ 1,429,522              
 
   
2009
   
2008
 
Capital lease payable to bank, payable in monthly installments of $2,651 including interest at  6.448%, final payment due December 1, 2012, secured by equipment
  $ 93,062     $ 117,998  
Less: current maturities
    (26,593 )     (24,936 )
Total long-term debt
  $ 66,469     $ 93,062  

Aggregate maturities required on long-term debt at September 30, 2009, are as follows:

2010
    26,593  
2011
    1,391,410  
2012
    30,243  
2013
    7,869  
Subtotal
    1,456,114  
Less current:
    (26,593 )
Total long term
    1,429,522  
 
Note 11 - Equity

On June 23, 2009 the Company amended their certificate of incorporation and increased their authorized common shares to 100,000,000 shares of common stock, with a par value of $0.001 per share. In addition, the Company designated 1,000,000 shares of Preferred Stock, with a par value of $0.01 per share.

Preferred Stock:

-
During the quarter ended June 30, 2009, a private placement offering of their Preferred Stock. A Unit, under the private placement, consisted of 500 shares of Class A Preferred Stock, $0.01 par value, (the “Preferred Stock”), offered at a subscription price of $50,000 per Unit.  Each share of Preferred Stock is convertible at any time, subject to the Company increasing their total authorized Common Stock, into 1,000 shares of Common Stock, par value $0.001 per share, subject to anti-dilution adjustment, or an aggregate of 16,000,000 shares of Common Stock issuable on conversion of all 16,000 shares of Class A Preferred Stock included in the 32 Units of the private placement.  The Units were offered and sold on a best-efforts basis. The sale of the Units is not subject to any minimum subscriptions to an aggregate number of Units sold or other conditions other than customary closing conditions.  The offering was over-subscribed by $295,000 for 2,950 shares of preferred.  The total amount of preferred shares sold under the private placement was 18,950 shares, for proceeds of $1,895,000.  The shares of Preferred Stock are mandatorily convertible into shares of our Common Stock upon the filing of a Certificate of Amendment to our Certificate of Incorporation increasing the number of shares of Common Stock we are authorized to issue.

-
During the nine months ended June 30 2009, two of our shareholders, HSK Funding Inc. and Lake Isle Corp. advanced funds of $287,500 and $1,178,400, respectively, to the Company in the form of unsecured bridge loans accruing interest at 9% per annum. In June 2009, the principal on these loans were converted into 2,875 and 11,784 shares of the Company Class A Preferred stock, respectively.

F-19


Note 11- Equity (continued)

Common Stock:

 
-
During the quarter ended September 30, 2009, the Class A Preferred Stock of 33,609 was automatically converted into 33,609,000 shares of Common Stock when the Certificate of Amendment of the Certificate of Incorporation was filed with the State of Delaware.
 
-
During the quarter ended September 30, 2009, the Company sold 10,650,000 shares of their common stock at $0.10 per share for proceeds of $1,065,000
 
-
During the quarter ended September 30, 2009, the Company issued 444,247 shares of their common stock at $0.10 per share, for repayment of accrued interest payable of $44,425.

Options
 
During the first quarter of fiscal 2008, we granted options to purchase common stock, comprised of the following: (i) ten-year non-statutory options granted to employees and consultants to purchase 1,147,686 shares of common stock exercisable at $0.90 per share; (ii) five-year non-statutory options to purchase 360,000 shares exercisable at $0.90 per share. The fair value of common shares on the date of grant for the 1,147,686 and the 360,000 options was $1.35 per share, for a total value of $2,035,491. The first category of 1,147,686 shares is fully vested as of the grant date of February 6, 2008 with a term of ten years. These have a value of $1,549,359 and have been fully expensed during the year ended September 30, 2008. The other category of options of 360,000 shares is subject to the following vesting schedule; 25% eighteen months after the grant date of February 6, 2008 and 25% every six months thereafter. These stock options are subject to forfeiture until service conditions associated with their grant are satisfied; these options are valued at $485,133. The Company has recognized $107,807 and $53,904 in expense with regards to these options during the year ended September 30, 2009 and 2008, respectively, in accordance with ASC 718-10-25 (formerly FAS 123 (R)).

We granted five-year non-statutory options to purchase 1,000,000 shares of common stock exercisable at $0.10 per share. The market value of these shares on the grant date of May 15, 2009 was $1.10 per share. These options of 1,000,000 shares are subject to the following vesting schedule; 25% of such options become exercisable eighteen months after the grant date and an additional 25% every six months thereafter. These stock options are subject to forfeiture until service conditions associated with their grant are satisfied. The options are valued at $1,099,320. The Company has recognized $76,343 in expense with regards to these options during the year ended September 30, 2009 in accordance with ASC 718-10-25 (formerly FAS 123 (R)).

On February 6, 2008, we adopted ASC 718-10-25 (formerly FAS 123 (R)), which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including stock options and employee stock purchases based on estimated fair values. The following table summaries stock-based compensation expenses under ASC 718-10-25 (formerly FAS 123 (R)) for the fiscal year ended September 30, 2009.
 
Recognized Expense for Vested Options for Year Ended September 30, 2008          

General and administrative
  $ 1,182,138  
Consulting fees
    168,748  
Legal fees
    198,473  
Total recognized expense for vested options
  $ 1,549,359  

Recognized Expense for Non-Vested Options for Year Ended September 30, 2009

General and administrative
  $ 184,150  

Recognized Expense for Non-Vested Options for Year Ended September 30, 2008

General and administrative
  $ 53,904  

Schedule of the Expense Recognition for the Non-Vested Options:                        

2010
  $ 425,786  
2011
    599,979  
2012
    320,635  
Total
  $ 1,346,400  
 
F-20

 
Note 11- Equity (continued)

We use the Black-Scholes option pricing model (“BSM”) to estimate the grant date fair value of stock option awards.  The total value of all options granted to employee and consultants for the year ended September 30, 2009 and 2008 was approximately $1,099,320 and $2,034,000, respectively, and the weighted average exercise price is $0.10 and $0.10, using the BSM with the following weighted average assumptions:
 
Year Ended September 30,
 
2009
   
2008
 
Expected volatility
    272.9 %     272.9 %
Risk-free interest rate
    2.650 %     2.650 %
Expected term (in years)
    8.81       8.81  
Dividend Rate
    0.0 %     0.0 %
 
The volatility assumption for fiscal 2009 was based on the weighted average for the most recent year and long term volatility measures of our stock as well as certain of our peers.

The expected term of the employee stock options represents the actual term.  We have no historical data to make any assumptions from.  In the upcoming years we will adjust the expected term once historical data becomes available.

A stock-based compensation expense recognized in the accompanying consolidated statement of operations for the fiscal year ended September 30, 2009 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.  ASC 718-10-25 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  Currently we have no historical data to use for estimating out forfeitures.

The following table summarizes option activity for the years ended September 30, 2009 and 2008:
 
   
Options
   
Weighted
Average
Exercise Price
 
Outstanding as of September 30, 2007
    -       -  
Granted
    1,507,686     $ 0.90  
Exercised
    -       -  
Forfeitures
    -       -  
Outstanding as of September 30, 2008
    1,507,686     $ 0.90  
Granted
    1,000,000     $ 0.10  
Exercised
    -       -  
Forfeitures
    -       -  
Outstanding as of September 30, 2009
    2,507,686     $ 0.58  
 
The following table summarizes information about stock option outstanding and exercisable as of September 30, 2009:
 
Range of Exercise
Price
 
Number
Outstanding
   
Weighted
Average 
Remaining
Life in Years
   
Weighted
Average
Exercise
Price
   
Number
Exercisable
   
Weighted
Average
Exercise
Price
Exercisable
Options
   
Weighted
Average 
Remaining Life
in Years
Exercisable
Options
 
$0.10-$0.90
    2,507,686       6.19     $ 0.58       1,237,686     $ 0.90       7.23  

Warrants

In connection with 2,000,000 shares of common stock sold in the private placement the Company granted warrants for the exercise of 50,000 shares at $1.20 per share. The private placement was required to occur in-order for the Acquisition to be completed. These warrants were part of the transaction cost to sell the 2,000,000 shares. There is no expense associated with these warrants.

In connection with issuance of $1,500,000 in debt the Company granted one warrant for each $1.00 of debt purchased, at an exercise price of $1.25 per share. These warrants have a five year life from their date of grant. The Company valued the 1,500,000 warrants to their maximum value in proportion to the entire of the $1,500,000 in debt at $1,500,000. The Company has classified the $1,500,000 warrant valuation as a discount on the debt to be amortized over the life of the debt. The Company amortized $1,312,500 and $187,500, with regards to the debt discount in the year ended September 30, 2009 and 2008.   There is no unamortized portion of the debt discount as of September 30, 2009.
 
F-21

 
Note 11- Equity (continued)
 
During September 2009, we decided to use our resources for research and development and elected not to pay the $1,500,000 in Promissory Notes, which constituted a default on the Promissory Notes.  As a consequence of the default and under the terms of the Promissory Notes, we have issued Post-Maturity or Default Warrants in the aggregate to purchase of 5,128,031 shares of the Company’s Common Stock of which warrants to purchase 2,551,681 shares are exercisable at $0.72 and warrants to purchase 2,576,350 shares are exercisable at $0.69.  The Company is using the Black Scholes Method to calculate the value of these warrants as well.  The Company recognized $3,635,992 in expense with regards to these warrants during fiscal year ended September 30, 2009.  Please see Note 15- Subsequent Events for additional information.

   
Warrants
   
Weighted
Average
Exercise Price
 
Outstanding as of September 30, 2007
    -       -  
Granted
    1,550,000     $ 1.25  
Exercised
    -       -  
Forfeitures
    -       -  
Outstanding as of September 30, 2008
    1,550,000     $ 1.25  
Granted
    5,128,031     $ 0.70  
Exercised
    -       -  
Forfeitures
    -       -  
Outstanding as of September 30, 2009
    6,678,031     $ 0.83  

Note 12- Related Party Transactions
 
In January 2007, we sold in a private sale of its securities $150,000 principal amount of its 6% unsecured promissory notes due July 31, 2007.  Of the $150,000 promissory notes sold, $50,000 in aggregate was sold to K-6 Family Limited Partnership and Milton Koffman.  On July 31, 2007, these notes were converted into shares of common stock and the Company has issued 1,250,000 shares to the K-6 Family Ltd. Partnership and 1,250,000 shares to Milton Koffman.

Prior to and at the time of the completion of the acquisition of Boomerang Utah, the holder of Boomerang Utah’s outstanding capital stock was Boomerang Systems Holdings, Inc. (“Holdings”). Certain persons, who were formerly the beneficial holders of the outstanding stock of Holdings, are also members or stockholders of other entities that are parties to agreements with Boomerang Utah.  HSK Funding, Inc., Lake Isle Corp., and
Venturetek, LP, former stockholders of Holdings, are beneficial holders of shares of our company and certain of their members and stockholders are also the members of SB&G Properties, LC. (“SB&G”), which is the landlord under a lease with us.   Gail Mulvihill, the individual who exercises voting and investment control over Lake Isle Corp., is the mother of Christopher Mulvihill, our President.

SB&G Properties, an entity owned by HSK Funding, Lake Isle Corp. and Venturetek, is the landlord under a lease entered into with Boomerang Utah dated October 1, 2008, relating to premises located at 324 West 2450 North, Building A, Logan, Utah. The term of the lease is for one year with an annual rent of $260,610 plus real property and school taxes. This includes deferred rent of $176,610. In addition, Boomerang Utah is obligated to pay for all utilities and for repairs and maintenance to the property. The approximately 29,750 square foot leased premises are used for Boomerang Utah’s manufacturing activities.  At September 30, 2009 the total amount of deferred rent due is $267,480 recorded as due to related party on the balance sheet.  The Company is in the process of negotiating a new lease.

Stan Checketts Properties, L.C.(“SCP), whose sole owner is Mr. Stanley J. Checketts, is the landlord under a lease entered into with Boomerang Utah dated October 1, 2008 for premises located at 324 West 2450 North, Building B, Logan, Utah. The term of the lease is for one year at a fixed annual rent of $157,680 plus real property and school taxes. This includes deferred rent of $106,857.  In addition, Boomerang Utah is obligated to pay for all utilities and for repairs and maintenance to the property. The approximately 18,000 square foot leased premises are also used for Boomerang Utah’s manufacturing activities.  At September 30, 2009 the total amount of deferred rent due is $178,808 recorded as due to related party on the balance sheet.  The Company is in the process of negotiating a new lease.

SB&G is obligated on a twenty-year promissory note owing to a non-affiliated bank in the principal amount of $841,891 as of September 30, 2009, bearing interest at 3.807% per annum and due August 1, 2027. The promissory note is collateralized by the real property that is the subject of the lease from SB&G to Boomerang Utah. Boomerang Utah, along with Messrs. Mulvihill, Checketts, and Burton Koffman (“Koffman”), are the joint and several guarantors of the promissory note.
 
F-22


Note 12- Related Party Transactions (continued)
 
Messrs. Mulvihill and Koffman are the guarantors of a financing lease entered into on September 1, 2007 between Boomerang Utah and a nonaffiliated bank. The lease relates to certain equipment used by Boomerang Utah in its manufacturing operations. The total cost of the equipment was approximately $900,000. The rental is payable in sixty monthly installments of approximately $12,750. Boomerang Utah has the option to purchase the equipment at the conclusion of the lease term for approximately $315,000 which amount is the parties’ pre-determined fair market value of the equipment at the conclusion of the lease.
 
J and A Financing, Inc., also affiliated with Messrs. Mulvihill and Koffman, has guaranteed two loans to Boomerang Utah from a non-affiliated bank, totaling $485,000, inclusive of $5,388 in accrued interest as of September 30, 2009 and maturity in May 2010.

In May 2008, we entered into a grid loan agreement with J&A Financing for a maximum borrowing availability of $1,500,000 for which it has drawn down $1,000,000 with interest of 9%.  The loan is not collateralized and is due on December 31, 2010.

Note 13- Commitments & Contingencies

SB&G is obligated on a twenty-year promissory note owing to a non-affiliated bank in the principal amount of $841,891, bearing interest at 3.807% per annum and due August 1, 2027. The promissory note is collateralized by the real property that is the subject of the lease from SB&G to Boomerang Utah. Boomerang Utah, along with Messrs. Mulvihill, Checketts, and Koffman, are the joint and several guarantors of the promissory note.
 
The lease on our principal office is for a term of five years with a 4% annual increase on the prior year’s base rent.  The two renewal terms are for four years each with 4% annual increases on the prior year’s base rent.  The Company has the option to terminate the lease thirty-six months after the Commencement Date of January 1, 2009.
 
The aggregate future minimum annual rental payments, exclusive of escalation payments for taxes and operating costs, under operating leases are as follows:
 
Fiscal Year Ending September 30,
 
         
2010
  $ 79,001  
2011
    82,161  
2012
    85,447  
2013
    88,865  
2014
    92,420  
Total
  $ 427,894  
 
Note 14- Concentration of Risk

Financial instruments, which potentially expose the Company to concentrations of risk, consist primarily of cash and trade accounts receivable.  The Company maintains some of its cash balances in accounts, which exceed federally insured limits.  At September 30, 2009, cash deposits exceeded federally insured limits by approximately $569,934.  It has not experienced any losses to date resulting from this policy.  Certain vendors to the Company also accounted for a large representation of its purchases.  The purchases from four vendors were in excess of 5% of purchases.  The Company routinely assesses the financial strength of its customers, and as a consequence believes the concentration of these credit risks are limited.

Note 15- Subsequent Events

On October 15, 2009, we granted options to purchase common stock, i) ten-year non-statutory options to purchase 20,000 vested shares exercisable at $0.10 per shares; ii) five-year non-statutory options to purchase 500,000 shares exercisable at $0.10 per share.  The options of 500,000 shares are subject to the following vesting schedule; 25% eighteen months after the grant date of October 15, 2009 and 25% every six months thereafter.  These stock options are subject to forfeiture until service conditions associated with their grant are satisfied.

F-23

 
Note 15- Subsequent Events (continued)

The last tranche of the private placement was completed on December 14, 2009.  The 13,905,753 shares of Common Stock sold in the Third Tranche were sold for cash in the amount of $1,390,575.

On December 23, 2009, a holder of warrants to purchase 1,766,020 shares agreed to waive its’ rights to exercise its warrants until our Certificate of Incorporation is amended with the State of Delaware to increase our authorized common shares from 100,000,000 to 200,000,000 so as to enable sufficient authorized shares to be available for the full exercise of warrants.  The anticipated completion date of this Amendment is January 31, 2010.  The warrants will become exercisable as of the actual date that the Amendment is filed with the State of Delaware.
 
Our Board of Directors has also approved the issuance of ten year stock options exercisable at $0.10 per share to purchase 800,000 shares of Common Stock and five year warrants exercisable at $0.10 per share to purchase 1,000,000 share of Common Stock at such time as the Amendment to the Certificate of Incorporation is filed with the State of Delaware.

On October 26, 2009, the United Arab Emirates (“UAE”) granted a Commercial License to Boomerang Systems Middle East, LLC, the UAE joint venture between Boomerang Systems USA Corp., a subsidiary of Boomerang Systems, Inc., and Tawreed Companies Representation, a UAE company.

Subsequent to September 30,2009 and through October 31, 2009, the holders of $1,450,000 principle amount of  the Company’s 12% promissory notes issued in the fourth quarter of fiscal 2008 exchanged their principal and accrued interest into the Company’s common stock at an exchange ratio of $ $0.10 of principle and interest for each share of common stock.  This transaction was completed on November 30, 2009 and $1,678,038 of principle and accrued interest was exchanged for 16,780,065 common shares.  In December 2009, we repaid the one note that was not converted.
 
 
F-24

 

Signatures
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
BOOMERANG SYSTEMS INC.

Dated: January 12, 2010
By:
/s/ STANLEY J. CHECKETTS
   
Stanley J. Checketts, Chief Executive Officer
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Signature
Title
Date
     
/s/ STANLEY J. CHECKETTS
Chief Executive Officer
January 12, 2010
 
and Director
 
Stanley J. Checketts
   
     
/s/ JOSEPH R. BELLANTONI
Chief Financial Officer
January 12, 2010
 
and Director
 
Joseph R. Bellantoni
   
     
/s/ GUY JARDINE
Chief Operating Officer
January 12, 2010
 
and Director
 
Guy Jardine
   
     
/s/ MAUREEN COWELL
Secretary and
January 12, 2010
 
Director
 
Maureen Cowell
   
     
/s/ PAUL J. DONAHUE
Director
January 12, 2010
     
Paul J. Donahue
   
     
/s/ STEVEN C. ROCKEFELLER, JR.
Director
January 12, 2010
     
Steven C. Rockefeller, Jr.
   
 
26