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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______________
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 x 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 o 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.
2
Advantages
of the automated parking system include:
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·
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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.
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·
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Our
parking systems will fit onto a property footprint that is too small for a
ramp garage.
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·
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There
is greater automobile security inasmuch as vehicles are accessible only by
facility employees and are not accessible to patrons or the
public.
|
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·
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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.
|
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·
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The
necessity for extensive valet services is lessened resulting in reduced
labor and related expenses.
|
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·
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Vehicles
are parked and retrieved without the necessity for operating the
automobile’s engine, resulting in reduced emissions and lessened
ventilation requirements.
|
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·
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There
are no extensive lighting requirements except for the centralized
location.
|
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·
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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:
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·
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Every
storage container is ground floor and drive-up
accessible.
|
|
·
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readily
monitored for safety and security.
|
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·
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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.
|
|
·
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There
are no extensive lighting requirements except at the centralized access
location.
|
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·
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Patron
parking is centralized at the facility access point and requires a smaller
square footage,
|
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·
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Because
patron access is limited to a relatively small central area, compliance
with building and fire code requirements can be minimized,
and
|
|
·
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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:
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·
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public
garages
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·
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shopping
malls
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·
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casinos
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·
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hotels
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·
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airports
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·
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residential
apartments and condominiums
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·
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office
complexes
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·
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car
dealerships and service facilities
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·
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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.
3
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:
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·
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We
intend to keep our systems simple to build, operate and maintain, thereby
making the systems cost effective.
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·
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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.
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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.
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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.
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·
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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.
|
4
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.
5
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.
6
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.
7
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
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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.
Neither
our company nor any "affiliated purchaser," as defined in Rule 10b-18(a)(3)
purchased during the fiscal quarter ended September 30, 2009 any of our
securities that are registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended.
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.
10
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.
12
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
During
the two fiscal years ended September 30, 2009, we have not filed any Current
Report on Form 8-K reporting any change in accountants in which there was a
reported disagreement or event on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
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
We have
adopted a Code of Ethics that applies to our principal executive officer and
principal financial and accounting officer. A copy of our Code of Ethics was
filed as an exhibit to our Annual Report on Form 10-KSB for the fiscal year
ended September 30, 2003 and, as amended to our Current Report for December 28,
2009. We will provide to any person, without charge, upon request, a copy of
such Code of Ethics, as amended. Requests should be addressed to Mr. Joseph R.
Bellantoni, Chief Financial Officer at our address appearing on the cover page
of this Annual Report on Form 10-K.
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.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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. The following table provides information as of
September 30, 2009 with respect to our compensation plans (including individual
compensation arrangements), under which securities are authorized for issuance
aggregated as to (i) compensation plans previously approved by stockholders, and
(ii) compensation plans not previously approved by stockholders:
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