v2.4.1.9

DEBT | 3 Months Ended
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Dec. 31, 2014
Debt Disclosure [Abstract] |
DEBT | NOTE 7- DEBT Current Debt Effective February 6, 2008, the Company became indebted for an unsecured loan to a third party. As of December 31, 2014, the principal balance of this loan was $80,538. The loan is not collateralized, bears interest at an annual rate of 10% and is due on demand. As of December 31, 2014, the balance of the loan including accrued interest was $123,031. The Company entered into a twenty-four month capital lease secured by equipment with a third party commencing on January 1, 2013. The total principal balance of this lease was $315,000 at an annual rate of 6%. During the quarter ended December 31, 2014, the principal balance was paid down in full. Long-Term Debt Private Placement Offering – November/December 2011 In November and December 2011, the Company issued to subscribers 6% convertible promissory notes (“2011 Notes”) in the aggregate principal amount of approximately $11.6 million and warrants (“2011 Warrants”) to purchase an aggregate of approximately 2.7 million shares of Common Stock of the Company in three (3) closings of a private placement (the “2011 Offering”). The 2011 Notes are due five years after the respective date of issuance and were initially convertible into Common Stock at $4.25 per share, subject to weighted average adjustment for issuances of common stock or common stock equivalents below the conversion price, subject to certain exceptions. The Company valued the 2011 Warrants and the beneficial conversion features (“BCF”) of the 2011 Notes, and the resulting derivative liability, at $5,309,941 each for the 2011 Warrants and the BCF, for a total of $10,619,882 recorded as a discount to the convertible debt during the first quarter of fiscal 2012. This discount is being amortized over the life of the note or until such time as the note is repaid or converted, or upon exercise of the 2011 Warrants. The valuation of the 2011 Warrants, BCF, and the resulting derivative liability, were determined using the Black-Scholes option pricing model with the following weighted assumptions for all debt issuances: i) expected dividend rate of 0%, ii) expected volatility of 52.7%, iii) risk free interest rate of 0.9%, and iv) expected term of 5 years. During the three months ended December 31, 2014, the Company amortized $174,907 of the of debt discount. Following the Exchange Offer on October 31, 2014 (described below), the remaining principal amount of 2011 Notes was $200,000 and the related discount to the convertible debt was $125,452. The Company amortized $6,273 of the remaining debt discount during the three months ended December 31, 2014. As of September 30, 2014, the aggregate fair value of the derivative was $646,120. The revaluation of the derivative as of December 31, 2014 resulted in a derivative value of $17,331. The change in fair value of the derivative from September 30, 2014 to December 31, 2014 resulted in a gain on the fair value of the derivative liability of $628,789. Substantially all of the increase in the gain on the fair value of the derivative was due to the reduction of the principal amount of the convertible notes as a result of the Exchange Offer. The derivative liability was revalued on December 31, 2014 using the Black-Scholes option pricing model with the following weighted assumptions: i) expected dividend rate of 0% ii) expected volatility of 34.83% iii) risk free interest rate of 1.65%, iv) expected term of 1.85 years and v) market price of $2.15. In connection with the 2011 Offering, the Company issued warrants to the placement agent (the “Placement Agent Warrants”) to purchase shares of Common Stock. The Company issued an aggregate of 109,176 Placement Agent Warrants in November and December 2011 valued at $212,040. The Placement Agent Warrants were valued based on the Black-Scholes Model with assumptions similar to those used to value the 2011 Warrants issued to the purchasers of 2011 Notes in the 2011 Offering. The Placement Agent Warrants have similar terms to those issued to the convertible debt holders, including a reset provision included with the warrants if the Company should obtain equity financing at a price per share lower than that of the exercise price of the warrants. The Placement Agent Warrants, similar to the 2011 Warrants issued to the purchasers of 2011 Notes in the 2011 Offering, do not meet the definition of being indexed to the Company’s own stock in accordance with ASC 815-40. Accordingly, the Company has recorded a derivative liability for the value of the Placement Agent Warrants. The derivative liability valued at $12,896 at September 30, 2014 was revalued at $20,104 at December 31, 2014. The difference in valuation for the three months ended December 31, 2014 was $7,208, accounted for as a loss on the fair value of derivative. Substantially all of the increase in the gain on the fair value of the derivative was due to a change in methodology in measuring the market price of the Company’s common stock during the quarter ended March 31, 2014. The valuation at December 31, 2014 was valued based on the Black-Scholes Model with assumptions similar to those used to value the 2011 Warrants granted to the debt holders as of December 31, 2014. As a result of the issuance of shares of common stock in the Exchange Offer, the conversion price of the 2011 Notes was adjusted to $3.00. Private Placement Offering – June/July 2012 In June and July 2012, the Company issued to subscribers 6% convertible promissory notes due on June 14, 2017 (“2012 Notes”) in the aggregate principal amount of $6.2 million and warrants to purchase an aggregate of approximately 1.2 million shares of Common Stock (“2012 Warrants”) in a private placement (the “2012 Offering”). The 2012 Notes were initially convertible into Common Stock at $5.00 per share, subject to weighted average adjustment for issuances of common stock or common stock equivalents below the conversion price, subject to certain exceptions. Additionally, the conversion price may not be adjusted below $0.25. The Company valued the 2012 Warrants and the BCF at $1,956,517 each for a total of $3,913,034 recorded as a discount to the convertible debt during the third quarter of fiscal 2012. This discount is being amortized over the life of the 2012 Notes or until such time as the 2012 Notes are repaid or converted, or upon exercise of the 2012 Warrants. The valuation of the 2012 Warrants and BCF were determined using the Black-Scholes option pricing model with the following weighted assumptions for all debt issuances: i) expected dividend rate of 0% ii) expected volatility of 53.43% iii) risk free interest rate of 0.9% and expected term of 5 years. During the three months ended December 31, 2014, the Company amortized $63,322 of the of debt discount. Following the Exchange Offer on October 31, 2014 (described below), the remaining principal amount of 2012 Notes was $200,000 and the related discount to the convertible debt was $126,424. The Company amortized $6,321 of the remaining debt discount during the three months ended December 31, 2014. As a result of the issuance of shares of common stock in the Exchange Offer, the conversion price of the 2012 Notes was adjusted to $3.31. Private Placement Offering – December 2012 In December 2012 and March 2013, the Company issued to subscribers 6% convertible notes due on December 28, 2017 (the “December 2012 Notes”) in the aggregate principal amount of approximately $3.1 million and warrants to purchase an aggregate of 615,000 shares of Common Stock (the “December 2012 Warrants”) in a private placement (the “December 2012 Offering”). The December 2012 Notes were initially convertible into Common Stock at $5.00 per share, subject to full ratchet adjustment for issuances of Common Stock or Common Stock equivalents below the conversion price, subject to certain exceptions, and subject to weighted average anti-dilution adjustment for issuances of Common Stock as payment of interest on the Notes, the 2012 Notes and the December 2012 Notes. Additionally, the conversion price may not be adjusted below $0.25. The Company valued the December 2012 Warrants and the BCF at $962,904 each for a total of $1,925,808 recorded as a discount to the convertible debt during the first quarter of fiscal 2013. This discount is being amortized over the life of the December 2012 Notes or until such time as the December 2012 Notes are repaid or converted, or upon exercise of the December 2012 Warrants. The valuation of the December 2012 Warrants and BCF were determined using the Black-Scholes option pricing model with the following weighted assumptions for all debt issuances: i) expected dividend rate of 0% ii) expected volatility of 52.92% iii) risk free interest rate of 0.72% and expected term of 5 years. During the three months ended December 31, 2014, the Company amortized $32,124 of the of debt discount. The entire principal amount of the December 2012 Notes, plus accrued and unpaid interest on October 31, 2014, was exchanged as part of the Exchange Offer on October 31, 2014 (described below). Exchange Offer On October 31, 2014, the Company completed an offer to exchange outstanding 2011 Notes, 2012 Notes and December 2012 Notes and 2011 Warrants, 2012 Warrants and December 2012 Warrants listed above (the “Exchange Offer”), for the issuance of common stock at the rate of $2.15 per share in exchange for the entire balance (principal and interest) of the notes and warrants issued with the applicable note. The Company exchanged $20.5 million principal amount of the previously outstanding $20.9 million of convertible notes and 4,859,409 warrants for 9,583,384 shares of common stock in the exchange offer. Following the offer to exchange, $200,000 principal amount 2011 Notes and $200,000 principal amount 2012 Notes remain outstanding, at conversion ratios of $3.00 and $3.31 per share, respectively, and 66,667 2011 Warrants and 60,424 2012 Warrants remain outstanding with an exercise price of $3.00 and $3.31, respectively. Immediately prior to exchanging their notes in the Exchange Offer, holders of a majority of the principal amount of each of the 2011 Notes, 2012 Notes and December 2012 Notes consented to the Company (i) issuing debt from time to time on terms which may be approved by the Company’s Board of Directors, in an aggregate amount up to $100,000,000, which debt may be secured or unsecured and senior or subordinated to or pari passu with, the Notes, (ii) entering into transactions with its officers, directors, employees and affiliates on terms approved by a majority of the Company’s independent and disinterested directors from time to time, (iii) declaring and paying dividends and making distributions to its holders of common stock as may be approved by the Company’s Board of Directors from time to time and (iv) purchasing or acquiring shares of the Company’s common stock or other equity securities, including the notes and warrants, on terms as may be approved by the Company’s Board of Directors from time to time. The Company accounted for the Exchange Offer as an induced conversion under the criteria established in ASC 470-20-40. In accordance with ASC 470-20-40, the Company recognized an expense equal to the fair value of the shares issued in the Exchange Offer in excess of the fair value of shares issuable at the stated conversion rates of the 2011 Notes, 2012 Notes and December 2012 Notes. This resulted in a debt conversion expense of $9,350,726 for the three months ended December 31, 2014. June 2013 Loan and Security Agreement On June 11, 2013, the Company and its wholly-owned subsidiaries Boomerang Sub, Inc., Boomerang USA Corp. and Boomerang MP Holdings Inc. (collectively with the Company, the “Borrowers” and individually, a “Borrower”), entered into a Loan and Security Agreement (the “Loan and Security Agreement”) dated as of June 6, 2013 with lenders who became a lender party thereto (together with any party which subsequently becomes a lender party, the “Lenders” and, individually, a “Lender”) and the Agent (as defined in the Loan and Security Agreement). Pursuant to the Loan and Security Agreement, Lenders committed to fund $4,750,000 principal amount of loans to the Borrowers. The Loan and Security Agreement contemplated that the aggregate principal amount of borrowings may be increased to $10,000,000 through commitments from additional Lenders who subsequently become a party to the Loan and Security Agreement. On July 12, 2013 and August 6, 2013, the Borrowers entered into Amendments No. 1 (the “Amendment”) and No. 2 (the “2nd Amendment”) to the Loan and Security Agreement (collectively “the Amendments”). Pursuant to the Amendments, the additional Lenders committed to fund an additional $3,100,000 principal amount of loans to the Borrowers, bringing aggregate commitments under the Loan and Security Agreement to $7,850,000. On December 24, 2014, the Borrowers entered into Amendment No. 3 (the “3rd Amendment”). Pursuant to the 3rd Amendment, the maximum aggregate principal amount of borrowings under the Loan and Security Agreement was increased to $15,000,000. Additionally, Lenders and incremental lenders committed to fund an additional $7,050,000 principal amount of loans to the Borrowers, bringing aggregate commitments under the Loan and Security Agreement to $14,900,000. As of September 30, 2014, the Company drew down an aggregate of $6,485,540 under the Loan and Security Agreement. The Company drew down an additional $1,314,460 during the three months ended December 31, 2014, bringing the total amount of borrowings under the Loan and Security Agreement to $7,850,000 as of December 31, 2014. The notes bear interest at the rate of 15% per annum, payable upon maturity. The maturity date of the Notes is May 31, 2016, subject to earlier prepayment upon acceleration of the occurrence of an event of default (as defined in the Loan and Security Agreement); provided further that the Company may prepay the Notes at any time without penalty. The Company accrued $281,729 of interest expense during the three months ended December 31, 2014. Total accrued interest related to the Loan and Security Agreement was $1,183,811 as of December 31, 2014. Pursuant to the Loan and Security Agreement, the Borrowers assigned, pledged and granted to the Lenders a security interest in substantially all of their respective assets, including their respective intellectual property, accounts, receivables, general intangibles, equipment, inventory, all of the proceeds and products of the foregoing and the Company’s equity interests in the other Borrowers. As partial consideration for providing advances under the Loan and Security Agreement, the Company agreed to issue to each Lender warrants to purchase 20,000 shares of its common stock for each $100,000 advanced. The warrants are exercisable at $5.00 per share, subject to full-ratchet adjustment for issuance below the exercise price, subject to certain exceptions. The warrants expire on June 6, 2018. As a result of the issuance of shares of common stock in the Exchange Offer, the exercise price of the Loan and Security Agreement warrants was adjusted to $2.15 and the number of warrants issuable was adjusted to 46,512 for each $100,000 advanced. Pursuant to draws under the Loan and Security Agreement during the year ended September 30, 2014, the Company issued warrants to purchase an aggregate of 3,016,674 shares of common stock. The Company valued these warrants at $1,944,688, recorded as a discount to long-term debt. During the three months ended December 31, 2014, the Company amortized $174,118 of the debt discount. Pursuant to draws under the Loan and Security Agreement during the three months ended December 31, 2014, the Company issued warrants to purchase an aggregate of 634,508 shares of common stock. The Company valued these warrants at $160,793, recorded as a discount to long-term debt. This discount is being amortized over the life of the notes or until such time as the notes are repaid, or upon exercise of the warrants. The valuation of the warrants was determined using the Black-Scholes option pricing model with the following weighted assumptions: i) expected dividend rate of 0% ii) expected volatility of 35.05% iii) risk free interest rate of 1.39-1.63% and expected term of 3.55-3.66 years. During the three months ended December 31, 2014, the Company amortized $18,678 of the debt discount related to these warrants. The following officers, directors and 5% shareholders of the Company participated as Lenders in the Loan and Security Agreement:
|  |  |  | Amount Funded as of |  | Aggregate Number |  | Warrants Issued as of |
Name |  | Commitment |  | December 31, 2014 |  | of Warrants Issuable |  | December 31, 2014 |
The Estate of Gene Mulvihill(1) |  | $ | 500,000 |  | $ | 500,000 |  |  | 232,561 |  |  | 232,561 |
Sunset Marathon Partners LLC(2) |  | $ | 250,000 |  | $ | 250,000 |  |  | 116,281 |  |  | 116,281 |
MRP Holdings LLC(3) |  | $ | 400,000 |  | $ | 200,000 |  |  | 116,047 |  |  | 93,027 |
Burton I. Koffman and David Koffman(4) |  | $ | 750,000 |  | $ | 750,000 |  |  | 371,969 |  |  | 371,969 |
Anthony P. Miele III(5) |  | $ | 25,000 |  | $ | 25,000 |  |  | 11,631 |  |  | 11,631 |
Alexandria Equities, LLC(6) |  | $ | 700,000 |  | $ | 200,000 |  |  | 325,582 |  |  | 93,026 |
Albert Behler(7) |  | $ | 400,000 |  | $ | 200,000 |  |  | 116,047 |  |  | 93,026 |
Fox Hunt Wine Collectors, LLC(8) |  | $ | 1,000,000 |  | $ | - |  |  | 465,117 |  |  | - |
| (1) | Gail Mulvihill and Andrew Mulvihill, the co-administrators of the estate, exercise voting and investment power over the shares issuable upon exercise of the Warrants. Gail Mulvihill is a principal stockholder of the Company and mother of Christopher, the Company’s President and a principal stockholder of the Company. Andrew Mulvihill is a brother of Christopher Mulvihill.
| (2) | James Mulvihill, was a principal stockholder of the Company at the time we entered into the Loan and Security Agreement, has voting and investment power over the shares issuable upon exercise of the Warrants and is a brother of Christopher Mulvihill.
| (3) | MRP Holdings LLC is owned by Mark Patterson, the Chairman of the Board of Directors, a principal stockholder and the former Chief Executive Officer of the Company.
| (4) | Directly and indirectly through entities they control and by members of their families and entities they control, Burton Koffman and David Koffman are principal stockholders of the Company. In addition, David Koffman is a director of the Company.
| (5) | Anthony P. Miele, III is a director of the Company.
| (6) | Alexandria Equities, LLC was a principal stockholder of the Company at the time we entered into the Loan and Security Agreement.
| (7) | Albert Behler is a principal stockholder of the Company.
| (8) | Fox Hunt Wine Collectors, LLC, is managed by Peter Mulvihill, brother of Christopher Mulvihill.
A majority of the principal amount of each series of convertible notes (due 2016, June 2017 and December 2017) consented to the Company’s entering into the Loan Agreement and increasing the secured indebtedness under the Loan Agreement, and acknowledged that the secured indebtedness under the Notes is senior in right of payment and otherwise to the convertible notes.
|  | Principal |  |  |  |  |  |  |
|  | As of |  |  |  |  |  |  |
|  | 12/31/2014 |  | 9/30/2014 |  | Maturity Date |  | Interest Rate |  | Secured
|  | (unaudited) |  |  |  |  |  |  |  |  |
Current Debt- Third Party: |  |  |  |  |  |  |  |  |  |  |  |  |
Loan Payable- Third Party |  | $ | 80,538 |  | $ | 80,538 |  | Upon Demand |  |  | 10 | % | No
Equipment Note Payable (current portion) |  |  | - |  |  | 9,024 |  | 1/15/2015 |  |  | 6 | % | Yes
Total Current Debt- Third Party |  | $ | 80,538 |  | $ | 89,562 |  |  |  |  |  |  |
Long-Term Debt – Third Party: |  |  |  |  |  |  |  |  |  |  |  |  |
Long-Term Notes – June 2013 Loan Agreement |  |  | 5,725,300 |  |  | 4,729,866 |  | 5/31/2016 |  |  | 15 | % | Yes
Convertible Notes – 2011 Offering |  |  | - |  |  | 3,665,763 |  | 11/1/2016 |  |  | 6 | % | No
Convertible Notes – 2011 Offering |  |  | 200,000 |  |  | 1,250,000 |  | 11/18/2016 |  |  | 6 | % | No
Convertible Notes – 2011 Offering |  |  | - |  |  | 925,000 |  | 12/9/2016 |  |  | 6 | % | No
Convertible Notes – 2012 Offering |  |  | 200,000 |  |  | 4,065,000 |  | 6/14/2017 |  |  | 6 | % | No
Convertible Notes – Dec 2012 Offering |  |  | - |  |  | 1,230,000 |  | 12/28/2017 |  |  | 6 | % | No
Discount on Notes |  |  | (1,772,209) |  |  | (10,073,448) |  |  |  |  |  |  |
Amortization of Discount |  |  | 834,434 |  |  | 5,077,137 |  |  |  |  |  |  |
Total Long-Term Debt – Third Party |  | $ | 5,187,525 |  | $ | 10,869,318 |  |  |  |  |  |  |
Long-Term Debt- Related Party: |  |  |  |  |  |  |  |  |  |  |  |  |
Long-Term Notes – June 2013 Loan Agreement |  | $ | 2,124,700 |  | $ | 1,755,674 |  | 5/31/2016 |  |  | 15 | % | Yes
Convertible Notes – 2011 Offering |  |  | - |  |  | 5,683,757 |  | 11/1/2016 |  |  | 6 | % | No
Convertible Notes – 2011 Offering |  |  | - |  |  | 100,000 |  | 11/18/2016 |  |  | 6 | % | No
Convertible Notes – 2012 Offering |  |  | - |  |  | 2,135,000 |  | 6/14/2017 |  |  | 6 | % | No
Convertible Notes – Dec 2012 Offering |  |  | - |  |  | 1,845,000 |  | 12/28/2017 |  |  | 6 | % | No
Discount on Notes |  |  | (585,148) |  |  | (8,329,964) |  |  |  |  |  |  |
Amortization of Discount |  |  | 282,238 |  |  | 4,335,717 |  |  |  |  |  |  |
Total Long-Term Debt- Related Party |  | $ | 1,821,790 |  | $ | 7,525,184 |  |  |  |  |  |  |
The aggregate maturities of our long-term debt are as follows:
Twelve months ended |  |  |  |
December 31, 2016 |  | $ | 8,050,000 |
December 31, 2017 |  |  | 200,000 |
Total |  | $ | 8,250,000 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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